ADT 2005 Annual Report Download - page 207

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Retirement Plans (Continued)
In December 2003, the US enacted into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the ‘‘Act’’). The Act introduces a prescription drug benefit under Medicare
(Medicare Part D), as well as a federal subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to Medicare Part D. Certain of the Company’s
retiree medical programs already provided prescription drug coverage for retirees over age 65 that were
at least as generous as the benefits provided under Medicare. This Act reduces the Company’s
obligation in these instances. The Company included the effects of the Act in the Consolidated
Financial Statements by reducing net periodic benefit cost by $12 million for 2005, and reflecting an
actuarial gain which reduced its accumulated post retirement benefit obligation by approximately
$61 million at September 30, 2005.
19. Shareholder’s Equity
Preference Shares—Tyco has authorized 125,000,000 preference shares, par value of $1 per share,
none of which were issued and outstanding at September 30, 2005 or 2004. Rights as to dividends,
return of capital, redemption, conversion, voting and otherwise with respect to the preference shares
may be determined by Tyco’s Board of Directors on or before the time of issuance. In the event of the
liquidation of the Company, the holders of any preference shares then outstanding would be entitled to
payment to them of the amount for which the preference shares were subscribed and any unpaid
dividends prior to any payment to the common shareholders.
Dividends—On December 9, 2004, the Board of Directors approved an increase in the quarterly
dividend on the Company’s common shares from $0.0125 to $0.10 per share. Tyco paid a quarterly cash
dividend of $0.0125 in the first quarter of 2005 and $0.10 thereafter. Prior to that, Tyco paid a quarterly
cash dividend of $0.0125 per common share.
Shares Owned by Subsidiaries—Shares owned by subsidiaries are treated as treasury shares and are
recorded at cost.
Share Repurchase Program—In July 2005, Tyco’s Board of Directors approved a $1.5 billion share
repurchase program. As of September 30, 2005, the Company has repurchased 10.5 million of common
shares for $300 million.
20. Share Plans
During 2004, the Tyco International Ltd. 2004 Stock and Incentive Plan (the ‘‘2004 Plan’’)
effectively replaced the Tyco International Ltd. Long Term Incentive Plan, as amended as of May 12,
1999 (the ‘‘LTIP I Plan’’), the Tyco International Ltd. Long Term Incentive Plan II (the ‘‘LTIP II
Plan’’), as well as the Tyco International Ltd. 1994 Restricted Stock Ownership Plan for Key Employees
(the ‘‘1994 Plan’’) for all awards effective on and after March 25, 2004. The 2004 Plan provides for the
award of stock options, stock appreciation rights, annual performance bonuses, long term performance
awards, restricted units, restricted stock, deferred stock units, promissory stock and other stock-based
awards (collectively, ‘‘Awards’’).
2005 Financials 131