ADT 2007 Annual Report Download - page 142

of less than one Covidien or Tyco Electronics common share. The distribution was structured to be
tax-free to Tyco shareholders except to the extent of cash received in lieu of fractional shares. As a
result of the distribution, the operations of Tyco’s former Healthcare and Electronics businesses are
now classified as discontinued operations in all periods presented.
Additionally, on the distribution date, the Company, as approved by its Board of Directors,
effected a reverse stock split of Tyco’s common shares, at a split ratio of one for four. Shareholder
approval for the reverse stock split was obtained at the March 8, 2007 Special General Meeting of
Shareholders. Share and per share data for all periods presented have been adjusted to reflect the
reverse stock split.
We have and will continue to incur separation costs related to debt refinancing, tax restructuring,
professional services and employee-related costs. We currently estimate that the total income statement
charges will be approximately $1.4 billion, after-tax, much of which will be reflected as discontinued
operations. During 2007 and 2006, the Company incurred pre-tax costs related to the Separation,
including the $647 million loss on early extinguishment of debt in 2007, of $1,083 million and
$169 million, respectively. Of this amount, $105 million and $49 million is included in separation costs,
$259 million and $0 million related to loss on early extinguishment of debt is included in other expense,
net and $719 million and $120 million is included in discontinued operations, respectively. Most of the
remaining charges are expected to be incurred during the first six months of fiscal 2008.
Additionally, 2007 includes tax charges related to the Separation primarily for the write-off of
deferred tax assets that will no longer be realizable of $183 million, of which $95 million is included in
income taxes and $88 million is included in discontinued operations.
On April 27, 2007, in connection with the Separation, Tyco and certain of its subsidiaries that are
issuers of its corporate debt commenced tender offers to purchase for cash substantially all of its
outstanding U.S. dollar denominated public debt. Additionally, on April 30, 2007, Tyco International
Group S.A., a wholly-owned subsidiary of the Company (‘‘TIGSA’’), commenced tender offers to
purchase for cash all of its outstanding Euro and Pound Sterling denominated public debt. In
connection with the debt tender offers, Tyco incurred a pre-tax charge for the early extinguishment of
debt of approximately $647 million, for which no tax benefit is available.
In connection with the Separation, during the third quarter of 2007 we reorganized to a new
management and segment reporting structure. As part of these organizational changes, we assessed new
reporting units, assigned goodwill to the new reporting units and tested goodwill for impairment. As a
result, we recognized a goodwill impairment of $46 million in 2007 in the ADT Worldwide segment.
We remain committed to returning excess cash to shareholders. In September 2007, Tyco’s Board
of Directors approved a new $1.0 billion share repurchase program under which, we repurchased
1.3 million of our common shares for $56 million. During 2007 we also completed the $2.0 billion share
repurchase program approved by the Board of Directors in May 2006. Additionally, during 2006 we
completed the $1.5 billion share repurchase program approved by the Board of Directors in July of
2005. During 2007, we paid dividends of $791 million to shareholders. On September 13, 2007 Tyco’s
Board of Directors approved a quarterly dividend on the Company’s common shares of $0.15 per share
payable on November 1, 2007 to shareholders of record of Tyco International Ltd. post Separation on
October 1, 2007.
During 2007, we sold Aquas Industriales de Jose, C.A. (‘‘AIJ’’), a joint venture that was majority
owned by Infrastructure Services, for $42 million in net cash proceeds and a pre-tax gain of $19 million
was recorded. AIJ met the held for sale and discontinued operations criteria and has been included in
discontinued operations in all periods presented.
We are continuing to assess the strategic fit of our various businesses and are considering
additional divestitures where businesses do not align with our long term vision. Tyco will explore a
50 2007 Financials