ADT 2008 Annual Report Download - page 146

Operating Results
Net revenue, operating income (loss) and net income (loss) for the years ended September 26,
2008, September 28, 2007 and September 29, 2006 were as follows ($ in millions):
2008 2007 2006
Revenue from product sales .......................... $13,064 $11,816 $10,731
Service revenue ................................... 7,135 6,661 6,335
Net revenue ...................................... $20,199 $18,477 $17,066
Operating income (loss) ............................. $ 1,941 $ (1,732) $ 1,355
Interest income .................................... 110 104 46
Interest expense ................................... (396) (313) (279)
Other expense, net ................................. (224) (255) —
Income (loss) from continuing operations before income taxes
and minority interest .............................. 1,431 (2,196) 1,122
Income taxes ..................................... (335) (324) (304)
Minority interest ................................... (1) (4) (1)
Income (loss) from continuing operations ................ 1,095 (2,524) 817
Income from discontinued operations, net of income taxes .... 458 782 2,787
Income (loss) before cumulative effect of accounting change . . . 1,553 (1,742) 3,604
Cumulative effect of accounting change, net of income taxes . . . — — (14)
Net income (loss) .................................. $ 1,553 $ (1,742) $ 3,590
Net revenue increased $1.7 billion, or 9.3%, for 2008 as compared to 2007 as a result of growth in
all of our segments led by solid year over year increases in Flow Control, ADT Worldwide and
Electrical and Metal Products. The increase in net revenue in Flow Control resulted from volume
growth due to continued strength in most industrial end markets with significant project growth in the
valves business. In addition, net revenue growth in ADT Worldwide was attributable to growth in all
geographic regions, as well as growth in its North American recurring revenue base. Electrical and
Metal Products experienced growth primarily due to selling price increases partially offset by a decrease
in volume. Foreign currency exchange rates positively affected 2008 by $772 million while the net
impact of acquisitions, divestitures and other activity positively affected 2008 by $35 million.
Operating income increased $3.7 billion for 2008. Operating loss in 2007 included the class action
settlement charge of $2.862 billion while 2008 operating income included a class action benefit of
$10 million. Strong year over year income growth in all segments led by Flow Control, ADT Worldwide
and Electrical and Metal Products, as well as lower corporate expenses contributed to the increase in
operating income. Operating income was also favorably impacted as a result of lower Separation
related costs and goodwill impairment charges. Separation related costs impacted operating income by
$4 million and $105 million and goodwill impairment charges impacted operating income by $9 million
and $46 million in 2008 and 2007, respectively. Additionally, operating income was negatively impacted
by restructuring, asset impairment and divestiture charges, net of $248 million for 2008 and
$210 million for 2007.
Net revenue increased $1.4 billion, or 8.3%, for 2007 as compared to 2006 as a result of growth in
all of our segments. The increase in net revenue was largely driven by Flow Control as a result of
volume growth from continued strength in most industrial end markets. In addition, ADT Worldwide
had strong growth in Asia and Latin America, as well as growth in its recurring revenue base and
systems installation and service in North America. Fire Protection Services experienced continued
growth in electronic and mechanical contracting. Foreign currency exchange rates positively affected
2007 by $580 million while the net impact of acquisitions and divestitures negatively affected 2007 by
$48 million.
2008 Financials 43