WIXLIB

TycoInternational2011 AnnualReport

chairman’s letteREdward D. BreenChairman and Chief Executive OfficerTyco International Ltd.To Our Stakeholders:I am pleased to report thatTyco International delivered strongperformance in fiscal 2011.We achieved solid growth in ourrevenue, operating margin andearnings while further strengtheningour core security, fire protectionand flow control businesses.Our progress in 2011 and over the four previous years positionedus to take an important step to promote future growth and valuecreation. In September 2011, we announced plans to separateTyco International into three independent, publicly-tradedcompanies. Following a thorough assessment by our Board ofDirectors and senior leadership, we concluded that creating threecompanies from our current portfolio of businesses was the bestway to unlock the full potential of Tyco International.Before discussing these exciting plans in further detail,let me highlight some of our company’s many accomplishmentsduring 2011.Business PerformanceFiscal 2011 revenue of 17.4 billion grew 9%, excluding the resultsof our electrical and metal products business. Our organicrevenue (which excludes the impact of acquisitions, divestituresand foreign currency) grew 4%, reflecting improving conditionsin a number of our end markets. Operating margins expanded160 basis points to 11.9%. This strong revenue and marginexpansion helped drive earnings sharply higher. Income fromcontinuing operations grew 39% to 1.6 billion, or 3.27 perdiluted share, from 1.1 billion, or 2.31 per diluted share. Excludingspecial items, income from continuing operations totaled 3.24per diluted share for 2011 compared to 2.68 for 2010—a 21% gain.We continued to generate strong cash flow, finishing the yearwith 1.4 billion in cash.Operational and Strategic AccomplishmentsWe continued to invest in growth opportunities last year byincreasing our capital spending 12%. We also increased ourresearch and development spending by 12% to support the workof our R&D teams around the world in developing new technologyand innovative solutions for our customers. Additionally, weincreased our sales and marketing spending by 5%, focusing onstrengthening our presence in key vertical and emerging marketsand building awareness around product offerings.One such offering is ADT Pulse, our interactive security platformthat we introduced in the North American residential marketin fiscal 2010. We are now introducing ADT Pulse to our smallbusiness customers to strengthen our position in this importantsegment of the security industry. ADT Pulse makes it possiblefor anyone with a web-enabled device to remotely access andcontrol not only a security system, but also lights, thermostats,video cameras and other appliances in their home or smallbusiness. In our fire protection business, we launched the Simplex4100ES (eServices) fire alarm system, a product featuringInternet-based technology that’s designed to simplify installation,improve serviceability and reduce life-cycle costs for engineersand end-user customers. Groundbreaking features includeremote service diagnostics, remote program downloads overthe customer’s IT network, and mass storage of vital system datawithin the system’s panel. The Simplex 4100ES represents oneof our most important fire alarm system launches in recent yearsand has been well received by our customers.1

Our investment in growth opportunities also included severalstrategic acquisitions. In our security solutions segment,we purchased Signature Security to strengthen our sales,installation and service capabilities in Australia and New Zealand.Additionally, we acquired Visonic Ltd., a leader in developingadvanced wireless technology for the security industry. Visonichas a strong presence in Europe, the Middle East and Africa. In ourfire protection segment, we added Chemguard, Inc., broadeningour global fire suppression offerings while augmenting ourpresence in the Middle East and Latin America. And in the flowcontrol segment, we acquired a 75% stake in KEF Holdings,gaining a local valve manufacturing presence in the Middle East,while broadening our product and service offerings in that region.Meanwhile, we took a further step to streamline our portfoliowith the sale of a majority stake in our electrical and metalproducts business. Through these portfolio moves, westrengthened our competitive position in our core platforms whileincreasing our recurring and service revenues that are sourcesof consistency and stability. These revenues grew to 45% of totalrevenues last year.During the year, we continued to focus on improving productivitythrough cost-containment initiatives and restructuring programs.In recent quarters, productivity gains—in conjunction with thegradual upturn in the global economy and the resulting increasesin organic growth—have fueled the improvement in ouroperating margin.We also made very good progress last year in the area of capitalallocation. In addition to funding organic growth and acquisitions,we continued to return excess cash to shareholders. We used 1.3 billion of cash to repurchase 6% of our outstanding sharesand increased our annual dividend by approximately 20% duringfiscal 2011.Positioning Tyco for the FutureWe are on track with our plan to separate Tyco International intothree independent, publicly-traded companies, consisting of astandalone ADT North America residential and small businesssecurity company; a standalone flow control company; and astandalone fire protection and security company. Each will havehighly-skilled employees and talented, experienced leaders. Allthree will have industry-leading positions in large and fragmentedindustries. Importantly, the new companies will have greaterflexibility to pursue their own strategies to achieve growth—bothorganically and through acquisitions—than they would underTyco’s current corporate structure. Pages 5 to 7 in this reportprovide overviews of the proposed new companies.Each company will have its own independent board of directors.We expect that a number of current Tyco board members willserve on the boards of the three companies. Upon completion ofthe transaction, I expect to become non-executive chairman ofthe fire protection and security company, a director of the flowcontrol company and a consultant to the ADT North Americacompany. In addition, current Tyco directors are expected toserve as non-executive chairmen of the flow control companyand the ADT North America company.2“ We strengthenedour competitive positionin our core platformswhile increasing ourrecurring and servicerevenues.”With all three businesses well positioned to operate as separateentities, we expect the transition to proceed smoothly andseamlessly. The separation of Tyco International into threeseparate companies requires your approval. We plan to holda special general meeting of shareholders in the fourth quarter of2012; pending your approval, the new companies are expectedto begin operations by October 2012.In ClosingTyco’s separation into three standalone companies should trulyunlock the potential of our businesses. I am proud of the progresswe have made on many fronts since I came on board in 2002.It was difficult then to envision what this company has becometoday—a global leader in all of its businesses with a reputationfor transparency, honesty and integrity. That progress wouldnot have been possible without the passion, hard work andcommitment of our more than 100,000 employees around theworld. To our dedicated employees and all Tyco stakeholders,I offer my most sincere thanks for your continued and loyalsupport of our company.Edward D. BreenChairman and Chief Executive Officer

financialhighlightsselected financial data201120102009(IN US MILLIONS EXCEPT PER SHARE DATA) 17,355Net revenue 17,016 16,882Income (loss) from continuing operations attributable toTyco common shareholders1,565 1,125 (1,845)Income from continuing operations before special items*1,552 1,308 1,106Net income (loss) attributable to Tyco common shareholders1,733 1,132 (1,798)Diluted earnings (loss) per share from continuing operationsattributable to Tyco common shareholders Diluted earnings per share from continuing operationsbefore special items*3.27 2.31 (3.90)3.24 2.68 2.33* These are Non-GAAP Financial Measures. See GAAP reconciliations on page 8.2011 revenue by region(In US Billions) 8.3United States 4.0europe,middle east,Africa 3.2 1.8asia pacificother americas2011 revenue by segment(In US Millions)BA Tyco Security SolutionsAB Tyco Fire Protection4,743C Tyco Flow Control3,639D Electrical and Metal Products*C 8,626Net revenue347 17,355D* Tyco sold a majority interest in this business on December 22, 2010.3 3

Creating three Independent companiesTyco International is pursuinga plan to separate into threeindependent public companies.These standalone companies—all with leading positions in largeand growing industries—will havegreat flexibility to pursue theirown focused strategies and createsignificant value for shareholders.On the following pages, weintroduce the three proposedcompanies and their leaders.

ADT North AmericaResidential andSmall BusinessMarket leaderin North Americaresidentialsecurity servicesBusiness Strengthskey products and servicesLeading provider of securitysystems in the U.S. andCanadaResidential security systems,installation and monitoring6.4 million customers, morethan 7 times the nearestcompetitor26% market share in the U.S.Strong brand recognition138-year legacySustained growth of customerbase and revenue per userHighly profitable subscriberbased business modelSmall business securitysystems, installation andmonitoringPremise control andmanagement servicesPersonal emergency responsesystem and home healthserviceskey brandsADTADT Companion ServiceADT Custom Home ServicesADT Pulse InteractiveServicesvalue driversIncrease customer penetrationthrough broad distributionchannels (direct and indirect)and expanding channelpartnersImprove retention byenhancing the customerexperience at all key customertouch pointsLeverage operationalexcellence and informationtechnology initiatives toreduce subscriber acquisitioncosts and improve recurringmarginsBalance key levers to optimizereturn on investment forsubscriber-based businessContinue to grow revenueper user by offering new,innovative solutions such asADT PulseDeliver consistent and stableresults via recurring revenuebaserevenue* in billionscontract type90%recurringrevenue 3.1 2.6 2.210%non-recurringrevenueNaren Gursahaney at the ADT sales and serviceoffice in Jacksonville, Florida.“ We want to build a growthcompany fueled by great peoplewho are passionate about ourmission of Creating Customersfor Life.”091011revenue per user* per monthcustomer base* in millions 37.11 35.67 35.946.36.410114.8— Naren GursahaneyChief Executive Officer09101109* Results for 2010 and 2011 reflect Tyco’s acquisition of Broadview Securitycompleted on May 14, 2010.5