ADT 2006 Annual Report Download - page 206

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Retirement Plans (Continued)
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
$64 million at September 30, 2005.
20. 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 29, 2006 and September 30, 2005. 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 and May 2006, Tyco’s Board of Directors approved share
repurchase programs of $1.5 billion and $2.0 billion, respectively. During 2006, the Company
repurchased 45 million of common shares for $1.2 billion completing the $1.5 billion share repurchase
program and 50 million of common shares for $1.3 billion under the $2.0 billion share repurchase
program. During 2005, the Company repurchased 10 million of common shares for $300 million.
21. Share Plans
As previously mentioned, the Company recorded compensation amounts for prior periods related
to errors in the Company’s stock option accounting and in the recognition of expense under the
Company’s employee stock purchase program in the United Kingdom. As such, the reported results for
prior periods have been restated to reflect the impact of such additional stock-based compensation
expense.
Effective October 1, 2005, the Company adopted the provisions of SFAS No. 123R using the
modified prospective transition method. Under this transition method, the compensation cost
recognized beginning October 1, 2005 includes compensation cost for (i) all share-based payments
granted prior to, but not yet vested as of October 1, 2005, based on the grant-date fair value estimated
in accordance with the original provisions of SFAS No. 123, and (ii) all share-based payments granted
subsequent to September 30, 2005 based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123R. Compensation cost is generally recognized ratably over the requisite
service period or period to retirement eligibility, if shorter. Prior period amounts have not been
restated for the adoption of SFAS No. 123R.
144 2006 Financials