ADT 2006 Annual Report Download - page 122

Capitalization
Shareholders’ equity was $35.4 billion or $17.78 per share, at September 29, 2006, compared to
$32.5 billion or $16.14 per share, at September 30, 2005. This increase was due primarily to net income
of $3.7 billion, the exchange of convertible debt due 2018 of $1.2 billion, and favorable changes in
foreign currency exchange rates of $619 million. These increases were partially offset by the repurchase
of common shares by a subsidiary of $2.5 billion as previously mentioned and dividends declared of
$807 million.
At September 29, 2006, total debt decreased $2.3 billion to $10.2 billion, as compared to
$12.5 billion at September 30, 2005. Total debt as a percentage of total capitalization (total debt and
shareholders’ equity) was 22% at September 29, 2006 and 28% at September 30, 2005. Our debt levels
significantly decreased as compared to September 30, 2005 primarily due to the redemption of
$1.2 billion of our Series A 2.75% convertible senior debentures due 2018 with a 2008 put option, and
the scheduled $1.0 billion repayment of our 6.375% public notes. Also, as mentioned, we repaid and
terminated one of our synthetic lease facilities reducing our principal debt by $203 million.
Our cash balance decreased to $2.9 billion at September 29, 2006, as compared to $3.2 billion at
September 30, 2005. The decrease in cash was primarily due to the repurchase of shares under the
previously-announced programs, and the scheduled debt repayments referred to above, capital
expenditures, and to a lesser extent, dividend payments. The majority of these decreases were partially
offset by cash flows from operations.
TIGSA holds a $1.0 billion 5-year revolving credit facility expiring on December 16, 2009. TIGSA
also holds a $1.5 billion 3-year revolving bank credit facility which was amended during 2006 to extend
the maturity date from December 22, 2006 to December 21, 2007. Additionally, TIGSA holds a
$500 million 3-year unsecured letter of credit facility expiring on June 15, 2007. At September 29, 2006,
letters of credit of $475 million have been issued under the $500 million facility and $25 million
remains available for issuance. Also, during 2006, TIGSA borrowed $700 million under its $1.5 billion
3-year revolving bank credit facility, with the entire proceeds used to repay its 5.8% public notes due
2006 at their maturity on August 1, 2006. There were no amounts borrowed under the other credit
facilities at September 29, 2006.
The Company’s bank credit agreements contain a number of financial covenants, such as a limit on
the ratio of debt to earnings before interest, income taxes, depreciation, and amortization and
minimum levels of net worth, and limits on the incurrence of liens. The Company’s outstanding
indentures contain customary covenants including limits on negative pledges, subsidiary debt and sale/
leaseback transactions. None of these covenants are presently considered restrictive to the Company’s
operations. The Company is currently in compliance with all of its debt covenants.
As previously discussed, in May 2006, the Board of Directors approved a new $2.0 billion share
repurchase program. Pursuant to the new program, we may repurchase Tyco shares from time to time
in open market purchases at prevailing market prices, in negotiated transactions off the market, or
pursuant to an approved 10b5-1 trading plan in accordance with applicable regulations. A Rule 10b5-1
trading plan permits the Company to repurchase its shares during periods when the Company would
not normally be active in the trading market due to insider trading laws, provided the plan is adopted
when the Company is not aware of material non-public information. Under a Rule 10b5-1 trading plan,
we would be unable to repurchase shares above a pre-determined price per share. Additionally, the
maximum number of shares that we may purchase each day would be governed by Rule 10b-18.
On December 9, 2004, the Board of Directors approved an increase in the quarterly dividend on
our common shares from $0.0125 to $0.10 per share. As a result, dividend payments were $806 million
in 2006. Following the Proposed Separation, we expect that all three companies will be dividend-paying
companies.
60 2006 Financials