ADT 2005 Annual Report Download - page 110

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be
read together with the Selected Financial Data and our Consolidated Financial Statements and the
related notes included elsewhere in this Annual Report. This discussion and analysis contains forward-
looking statements that involve risks, uncertainties and assumptions. Our actual results may differ
materially from those anticipated in these forward-looking statements due to many factors, including
but not limited to those under the headings ‘‘Risk Factors’’ and ‘‘Forward-Looking Information.’’
Introduction
The Consolidated Financial Statements include the consolidated accounts of Tyco
International Ltd., a company organized under the laws of Bermuda, and its subsidiaries (hereinafter
collectively referred to as ‘‘we,’’ the ‘‘Company’’ or ‘‘Tyco’’) and have been prepared in United States
dollars, and in accordance with accounting principles generally accepted in the United States
(‘‘GAAP’’).
The Company operates in the following business segments:
• Fire and Security designs, manufactures, installs, monitors and services electronic security and
fire protection systems;
• Electronics designs, manufactures and distributes electrical and electronic components;
• Healthcare designs, manufactures and distributes medical devices and supplies, imaging agents,
pharmaceuticals and adult incontinence and infant care products; and
• Engineered Products and Services designs, manufactures, distributes and services engineered
products, including industrial valves and controls, as well as steel tubular goods, and provides
environmental and other industrial consulting services.
Unless otherwise indicated, references in this Annual Report to 2005, 2004 and 2003 are to Tyco’s
fiscal years ended September 30, 2005, 2004 and 2003, respectively.
Overview
Our business strategy focuses on enhancing internal growth and operational efficiency for existing
Tyco businesses. We achieve this goal primarily through new product innovation, increased market
share, and continued geographic expansion. We have implemented and will continue to implement
additional Six Sigma initiatives across our business segments to achieve best-in-class operating practices.
The Company has engaged in a series of restructuring programs since November 2003 through
which we have made our operations more efficient, including exiting certain non-core businesses or
business lines and streamlining general operations. The impact of these restructuring programs on the
Company’s operations is discussed in ‘‘Operating Results’’ and ‘‘Segment Results.’’ Also, during the
fourth quarter of 2005, the Company committed to a plan to sell its Plastics and Adhesives segment. As
such, the operations of our Plastics and Adhesives segment are reflected as discontinued operations in
the accompanying consolidated financial statements. Details related to the Company’s divestiture
program and the related discontinued operations are discussed in ‘‘Divestitures and Discontinued
Operations.’’ We are continuing to assess the strategic fit of our various businesses and are considering
additional divestitures where businesses do not align with our long term vision.
In 2005, we continued to utilize cash to fund internal growth, strengthen the balance sheet and
return capital to shareholders. During 2005, we utilized $3.0 billion to repurchase our convertible
debentures prior to their scheduled maturities. In total, these repurchases reduced our diluted share
count by approximately 88.9 million shares on an annualized basis with the added benefit of reducing
our debt and interest expense. In addition, we utilized $2.0 billion in cash for scheduled repayments of
debentures. Also, in July 2005, Tyco’s Board of Directors approved a $1.5 billion share repurchase
34 2005 Financials