ADT 2006 Annual Report Download - page 104

Directors and strong corporate governance standards. We expect to file Registration Statements in
connection with the Proposed Separation during the second quarter of 2007.
In connection with the Proposed Separation, the Company continues to estimate that the net
economic cost to complete the transaction is expected to approximate $1.0 billion, largely for tax
restructuring, debt refinancing, professional services and employee-related costs. Depending on
prevailing market conditions through the date of the Proposed Separation, the Company anticipates
that the corresponding income statement charges would be larger than net economic cost to complete
the Proposed Separation. The difference between the income statement charges and the estimated net
economic cost is expected to result from costs to retire, refinance or reassign debt, as well as non-cash
charges. During 2006, the Company incurred $169 million of costs related to the Proposed Separation
primarily related to legal, accounting and consulting work associated with executing the transaction.
Consummation of the Proposed Separation is subject to certain conditions, including final approval
by the Tyco Board of Directors, receipt of certain tax rulings, necessary opinions of counsel, the filing
and effectiveness of registration statements with the Securities and Exchange Commission (‘‘SEC’’) and
the completion of any necessary debt refinancings. Approval by the Company’s shareholders is not
required as a condition to the consummation of the Proposed Separation. Tyco has received an initial
private letter ruling from the Internal Revenue Service (‘‘IRS’’) regarding the U.S. federal income tax
consequences of the Proposed Separation noting it will qualify for favorable tax treatment.
We are focused on growing profitability within each of these companies before and after the
Proposed Separation, so that each may be well positioned for long-term growth as independent entities.
Following the Proposed Separation, we expect that all three companies will be dividend-paying
companies. As we prepare for the Proposed Separation, we remain committed to returning excess cash
to shareholders. During 2006, we repurchased 95 million of our common shares for $2.5 billion under
our share repurchase programs. We completed the $1.5 billion share repurchase program previously
approved by the Board of Directors with the repurchase of 45 million of our common shares for
$1.2 billion and we repurchased an additional 50 million of our common shares for $1.3 billion under
the new $2.0 billion share repurchase program approved by the Board of Directors in May 2006. We
have $659 million remaining on the $2.0 billion share repurchase program which we expect to complete
prior to the Proposed Separation.
During 2006, holders of Tyco International Group S.A., a wholly-owned subsidiary of the Company
organized under the laws of Luxembourg (‘‘TIGSA’’) Series A 2.75% convertible senior debentures due
2018 with a 2008 put option converted $1.2 billion of these debentures into 54 million Tyco common
shares and redeemed the remaining $1 million principal amount outstanding with cash. Additionally, we
utilized $1.0 billion in cash for a scheduled repayment of public notes and terminated one of our
synthetic lease facilities for a total cash payment of $203 million, reducing principal debt and minority
interest by $191 million and $10 million, respectively. In October 2006, we exercised our right to buy
five cable laying sea vessels that were previously included under an off-balance sheet leasing
arrangement for $280 million.
During 2006, we completed the sale of our Plastics and Adhesives segment. Our Plastics, Adhesives
and Ludlow Coated Products businesses were sold for net proceeds of $882 million and the A&E
Products Group was sold for net proceeds of $2 million. During 2006, the Company also recorded a
$30 million receivable due from the purchaser of the Plastics, Adhesives and Ludlow Coated Products
businesses based on the decline of average resin prices during fiscal year 2006, as contemplated in the
definitive sale agreement. This amount is payable to Tyco no later than January 2007. Additionally, we
entered into a definitive agreement to sell Printed Circuit Group (‘‘PCG’’), a Tyco Electronics business
and leading manufacturer of high-technology printed circuit boards for the military, aerospace and
commercial markets, for $226 million. This transaction was completed on October 27, 2006 and a gain
on sale of approximately $45 million is expected. As such, the operations of our Plastics and Adhesives
42 2006 Financials