ADT 2007 Annual Report Download - page 237

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Retirement Plans (Continued)
Defined Benefit Pension Plans—The Company has a number of noncontributory and contributory
defined benefit retirement plans covering certain of its U.S. and non-U.S. employees, designed in
accordance with conditions and practices in the countries concerned. Net periodic pension benefit cost
is based on periodic actuarial valuations which use the projected unit credit method of calculation and
is charged to the Consolidated Statements of Operations on a systematic basis over the expected
average remaining service lives of current participants. Contribution amounts are determined based on
the advice of professionally qualified actuaries in the countries concerned. The benefits under the
defined benefit plans are based on various factors, such as years of service and compensation. The
following tables exclude amounts related to discontinued operations for all periods presented.
In connection with the Separation, the Company legally separated certain pension plans that
included participants of Tyco Healthcare, Tyco Electronics and other subsidiaries. As a result, the
Company remeasured the assets and projected benefit obligation of the separated pension plans. The
impact of the remeasurement on continuing operations was immaterial. Also, during 2007, the
Company completed the merger of certain pension plans in the United Kingdom, which resulted in an
increase to the minimum pension liability with a corresponding decrease to accumulated other
comprehensive income of $10 million, net of income taxes.
The net periodic benefit cost for all U.S. and non-U.S. defined benefit pension plans for 2007,
2006 and 2005 is as follows ($ in millions):
U.S. Plans Non-U.S. Plans
2007 2006 2005 2007 2006 2005
Service cost ...................................... $ 9 $11 $ 8 $48 $39 $37
Interest cost ...................................... 47 43 42 74 61 60
Expected return on plan assets ......................... (56) (55) (51) (74) (61) (50)
Amortization of initial net asset obligation ................ — — — (1) (1) (1)
Amortization of prior service cost (credit) ................ 1 1 1 (3) (2) (1)
Amortization of net actuarial loss ....................... 12 18 14 30 25 23
Plan settlements, curtailments and special termination benefits . — — — 2 1 —
Net periodic benefit cost ........................... $13 $18 $14 $76 $62 $68
Weighted-average assumptions used to determine net pension cost
during the period:
Discount rate ..................................... 6.0% 5.3% 6.0% 4.9% 4.8% 5.3%
Expected return on plan assets ......................... 8.0% 8.0% 8.0% 7.0% 7.1% 7.0%
Rate of compensation increase ......................... 4.0% 4.0% 4.3% 4.1% 3.9% 3.9%
The estimated net loss and prior service cost for U.S. pension benefit plans that will be amortized
from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year
are expected to be $6 million and $1 million, respectively.
The estimated net loss and prior service credit for non-U.S. pension benefit plans that will be
amortized from accumulated other comprehensive income into net periodic benefit cost over the next
fiscal year are expected to be $20 million and $3 million, respectively.
2007 Financials 145