ADT 2006 Annual Report Download - page 106

$48 million of income resulting from a reduction in our estimated workers’ compensation liabilities
primarily due to favorable claims experience. In addition, foreign currency exchange rates negatively
affected operating income by $52 million.
Net revenue increased $1.3 billion, or 3.5%, for 2005 as compared to 2004, which resulted from
growth in all segments. Foreign currency exchange rates favorably affected 2005 by $873 million while
the impact of divestitures and acquisitions negatively impacted the period by $689 million.
Operating income increased $622 million, or 12.1%, for 2005 while operating margin increased
1.1 percentage point to 14.7%. Operating income for 2005 was favorably impacted by the gain on the
sale of the TGN business of $301 million. In addition, the year was unfavorably impacted by charges
related to an adverse decision by the United States Court of Appeals for the Federal Circuit on a
patent dispute in the Healthcare segment of $277 million, a charge related to an SEC enforcement
action of $50 million and a charge relating to former executives’ employment of $70 million. Foreign
currency exchange rates favorably affected operating income by $142 million.
Results by Geographic Area
Net revenue by geographic area for the years ended September 29, 2006, September 30, 2005 and
2004 was as follows ($ in millions):
2006 2005 2004
Net revenue:
United States ..................................... $19,985 $19,298 $19,254
Other Americas ................................... 2,494 2,202 2,103
Europe .......................................... 11,498 11,407 10,830
Asia-Pacific ...................................... 6,983 6,398 5,773
Net revenue(1) ................................... $40,960 $39,305 $37,960
(1) Revenue from external customers is attributed to individual countries based on the reporting entity that records the
transaction.
Segment Results
The segment discussions that follow describe the significant factors contributing to the changes in
results for each segment included in continuing operations.
Electronics
Net revenue, operating income and operating margin for Electronics for the years ended
September 29, 2006, September 30, 2005 and 2004 were as follows ($ in millions):
2006 2005 2004
Revenue from product sales .......................... $12,515 $11,620 $10,921
Service revenue ................................... 209 154 450
Net revenue ...................................... $12,724 $11,774 $11,371
Operating income .................................. $ 1,808 $ 1,849 $ 1,744
Operating margin .................................. 14.2% 15.7% 15.3%
Net revenue for Electronics increased $950 million or 8.1% in 2006 as compared to 2005, including
a 7.7% increase in product revenue. The increase in net revenue reflects broad-based volume growth
across most customer end markets, especially premise wiring, industrial machinery and equipment,
consumer electronics, communications equipment manufacturing and communication service provider
markets. These increases were partially offset by the impact of unfavorable changes in foreign currency
exchange rates of $148 million.
44 2006 Financials