ADT 2008 Annual Report Download - page 143

first-out basis. As a result, in a declining price environment like the one we are in today, operating
margins are likely to contract as higher priced inventory is processed and sold at lower prices. Third,
we have recently seen a decline in commercial construction activity, both in the United Kingdom and
the U.S. We expect continued weakness in the commercial construction market to negatively impact our
results in the ADT Worldwide segment.
Operationally, in 2009, we expect to continue our initiatives to improve our efficiency, manage our
working capital effectively, refine our portfolio and prudently allocate our capital. We expect internal
investments to fund growth and productivity in our businesses to continue to be our first priority. As in
prior years, we expect to remain active in making bolt-on acquisitions as we continually assess the
strategic fit and value of businesses that have potential for success within our existing framework.
During 2008, our ADT Worldwide segment acquired FirstService Security to strengthen its systems
integration capabilities. In addition, during 2008, ADT acquired two Sensormatic franchisees: Winner
Security Services LLC and Sensormatic Security Corp. At the same time that we selectively pursue
acquisitions, we will consider divestitures where businesses do not align with our long term strategy. In
fiscal 2008, as part of our portfolio refinement efforts, we sold a subsidiary that makes and sells fire
protection products in Japan, a European manufacturer of building products for the construction
industry, a European manufacturer of public address and acoustic systems, and substantially all of our
Infrastructure Services business. These divestitures resulted in cash proceeds of approximately
$1.0 billion. The results of these businesses are included in discontinued operations for all periods
presented.
In addition to using cash flow to fund internal investments and make selective acquisitions, we
expect to have excess cash to return to our shareholders. During 2008, we completed the $1.0 billion
share repurchase program approved by the Board of Directors in September 2007, which resulted in
the purchase of approximately 5% of our outstanding shares during the program. In addition, during
2008, we paid dividends of $292 million to shareholders, and on September 9, 2008 our Board of
Directors approved an increase in the quarterly dividend on our common shares to $0.20 per share
from $0.15 per share, which was paid on November 3, 2008 to shareholders of record on October 1,
2008. On July 10, 2008, our Board of Directors approved a new $1.0 billion share repurchase program,
which we intend to use to repurchase additional shares depending on credit market conditions,
macroeconomic factors and our expectations regarding future cash flows.
Finally, we continue to focus on operational execution to drive earnings growth. To further improve
operating efficiency, during the first quarter of 2007, we launched a restructuring program across all of
our segments, including the corporate organization, designed to streamline some of our businesses and
reduce our operational footprint. Since the inception of this program through the end of fiscal 2008, we
have incurred charges of approximately $395 million. We have identified additional opportunities for
cost savings from restructuring activities in fiscal 2009 and expect to incur restructuring charges of
approximately $50 million in fiscal 2009. We believe this restructuring activity will strengthen our
competitive position over the long term.
Legal Settlements
In connection with the settlement of litigation related to our outstanding public debt, on June 3,
2008 we, along with our finance subsidiary TIFSA, Tyco International Finance S.A. (‘‘TIFSA’’), a
wholly-owned subsidiary of the Company and successor company to Tyco International Group S.A.
(‘‘TIGSA’’), a wholly-owned subsidiary of the Company organized under the laws of Luxembourg,
consummated consent solicitations and exchange offers related to certain series of debt issued under
the Company’s consent payments totaling $250 million, and we recorded a $222 million charge to other
expense, net as a loss on extinguishment of debt. We also terminated our unsecured bridge loan facility
entered into on November 27, 2007 in connection with the settlement of the Indenture Trustee
40 2008 Financials