Morgan Sanley Global Indusrials CEOs Unplugged Conference Ed Ardie Sr. Vice Presiden, Sraegy & Invesor Relaions George Oliver Presiden, Safey Producs Sepember 11, 2008
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Forward-Looking Saemen/ Non-GAAP Measures This presenaion conains cerain forward-looking saemens wihin he meaning of he Unied Saes Privae Securiies Liigaion Reform Ac of 1995. These saemens are based on managemen s curren expecaions and are subjec o risks, uncerainy and changes in circumsances, which may cause acual resuls, performance or achievemens o differ maerially from anicipaed resuls, performance or achievemens. All saemens conained herein ha are no clearly hisorical in naure are forwardlooking and he words opporuniies, anicipae, believe, expec, esimae, plan and similar expressions are generally inended o idenify forward-looking saemens. The forward-looking saemens in his presenaion may include saemens addressing he following subjecs: fuure financial condiion and operaing resuls, economic, business, compeiive and/or regulaory facors affecing Tyco s business. Any of he following facors may affec Tyco s fuure resuls: overall economic and business condiions; he demand for Tyco s goods and services; compeiive facors in he indusries in which Tyco compees; changes in ax requiremens (including ax rae changes, new ax laws and revised ax law inerpreaions); resuls and consequences of Tyco s inernal invesigaion and governmenal invesigaions concerning he Company s governance, managemen, inernal conrols and operaions including is business operaions ouside he Unied Saes; he oucome of liigaion and governmenal proceedings; effec of income ax audi selemens; he raings on our deb and our abiliy o repay or refinance our ousanding indebedness as i maures; our abiliy o operae wihin he limiaions imposed by financing arrangemens; ineres rae flucuaions and oher changes in borrowing coss; oher capial marke condiions, including currency exchange rae flucuaions; availabiliy of and flucuaions in he prices of key raw maerials, including seel and copper; economic and poliical condiions in inernaional markes, including governmenal changes and resricions on he abiliy o ransfer capial across borders; he abiliy o achieve cos savings in connecion wih he Company s sraegic resrucuring and Six Sigma iniiaives; poenial furher impairmen of our goodwill and/or our long-lived asses; he impac of flucuaions in he price of Tyco common shares; changes in U.S. and non-u.s. governmenal laws and regulaions; and he possible effecs on Tyco of fuure legislaion in he Unied Saes ha may limi or eliminae poenial U.S. ax benefis resuling from Tyco s incorporaion in Bermuda or deny U.S. governmen conracs o Tyco based upon is incorporaion in Bermuda. These are examples of facors, among ohers, ha could cause acual resuls o differ maerially from hose described in he forward-looking saemens. In addiion, Tyco s pre-separaion financial informaion is no necessarily represenaive of he resuls i would have achieved absen is healhcare and elecronics businesses and may no be a reliable indicaor of is fuure resuls. Tyco is under no obligaion o (and expressly disclaims any such obligaion o) updae or aler is forward-looking saemens wheher as a resul of new informaion, fuure evens or oherwise. More deailed informaion abou hese and oher facors is se forh in Tyco s Annual Repor on Form 10-K for he fiscal year ended Sepember 28, 2007 and Quarerly Repor on Form 10-Q for he quarer ended June 27, 2008. Organic revenue growh, operaing income before special iems, Adjused EBITDA, Free Cash Flow, Reurn On Invesed Capial, and Earnings Per Share from Coninuing Operaions Before Special Iems are non-gaap financial measures and are described in he Appendix. 1 Tyco Inernaional Highlighs A diverse porfolio of marke-leading businesses in elecronic securiy, fire, safey services and producs, valves and conrols, and oher indusrial producs Srong global business in aracive, growing markes Large service revenue base Significan earnings growh opporuniies Operaional execuion Porfolio refinemen Appropriae use of capial Srong cash flow generaion and financial flexibiliy 2 1
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 We Have a Diverse Porfolio of Marke-Leading Businesses 2007 Revenue = $18.5B Elecrical & Meal Producs $2.0B Flow Conrol $3.8B ADT WW $7.6B Safey Producs $1.7B Fire Proecion Services $3.4B Solid Plaforms for Growh 3 We Have a Srong Presence in Developed Markes wih Upside in High-Growh Economies 2007 Revenue = $18.5B Oher Americas 8% Asia Pacific 15% Europe 29% US 48% >50% of our revenue is generaed ouside of he Unied Saes Emerging markes represen a large growh opporuniy We operae in more han 60 counries 118,000 employees Emerging Markes Provide Revenue and Earnings Diversificaion 4 2
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Approximaely 36% of Toal Revenue Is Comprised of Monioring and Service Revenue 2007 Revenue = $18.5B $6.7B 36% $11.8B 64% Produc & Insallaion Service ADT generaes $4.9B of revenue from monioring and service aciviies Fire generaes $1.6B of service and mainenance revenue A Large, Sable Base of Recurring Revenue 5 We Are Well-Posiioned in Aracive Markes Tha Are Growing and Fragmened Global Elecronic Securiy Indusry Global Fire Indusry Global Indusrial Valves & Conrols Indusry $65+B Marke Expeced Marke Growh = 5-7% Thousands of Ohers ~75% Tyco 11% Secom Siemens UTC $30+B Marke Expeced Marke Growh = 3-4% Thousands of Ohers ~75% Tyco 12% UTC Honeywell GE Siemens $38+B Marke Expeced Marke Growh = 4-5% Tyco 5% 0 Emerson Cameron Flowserve Thousands of ohers ~85% Indusry Growh + Marke Share Growh Opporuniies 6 Source: Freedonia, McIlvaine, Indusry and Managemen Esimaes 3
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Significan Opporuniies o Improve Earnings Growh Operaional Execuion Organic Growh Focus Resrucuring Programs Operaional Excellence Long-Term Corporae Expense Reducion Tax Rae Reducion Earnings Growh Porfolio Refinemen Divesiures Selecive Acquisiions Appropriae Use of Capial Disciplined Invesmen in our Businesses Reurn Capial o Shareholders 7 Operaional Execuion Plans ADT Worldwide Fire Proecion Services Safey Producs Flow Conrol Elecrical & Meal Producs Tyco Revenue Growh Disciplined growh in NA Faser growh in emerging markes Increasing service revenue Invesmen in echnology Gaining share in rapidly growing markes Mainain marke leading posiion in core produc lines Income Growh Resrucure / Improve margin in EMEA Operaional execuion Operaional execuion Operaional Excellence Resrucuring Operaional Excellence Produciviy hrough reduced conversion coss Corporae cos reducion Tax Planning 8 4
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Porfolio Refinemen Divesiures: Significan progress in divesing businesses ha do no fi wihin our porfolio Divesiure of non-core businesses in 2008 has generaed $1.0 billion in proceeds Addiional $55 million of proceeds expeced Acquisiions: We will coninue o make selecive acquisiions in areas ha srenghen our exising businesses, primarily echnologically and geographically Acquired FirsService (a leader in commercial securiy sysems inegraion) ha srenghened our ADT business Acquired our wo larges Sensormaic franchises, which provide us direc access o our cusomer base in cerain erriories, while reducing operaing expenses Acquired InelliVid (a leading developer of video analyics) o srenghen our elecronic securiy business and Triden-Tek (a leading developer of video surveillance soluions) ha srenghened he video and access produc group Driving Cash and Margin Improvemen 9 We Generae A Subsanial Amoun of Free Cash Flow Inves in profiable organic revenue growh iniiaives Fund cos reducion and operaional improvemen opporuniies wihin our businesses Make selecive acquisiions o enhance our marke leadership posiions Reurn capial o our shareholders Which Provides Significan Financial Flexibiliy 10 Free Cash Flow is a non-gaap measure. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. 5
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 ADT Worldwide Overview ADT Worldwide A A Glance 2007 Financial Summary Revenue of $7.6B Operaing Income before Special Iems*of $971M and Adjused EBITDA* of $1.9B Global provider of residenial and commercial securiy sysems Marke leadership posiion 7.1 million cusomers globally Large sable recurring revenue base (~$4 billion) Opporuniies Disciplined growh and operaional execuion focus in NA Improving operaing margin in EMEA Faser growh in emerging markes 12 * Adjused EBITDA and Operaing Income before special iems are Non-GAAP measures. For a reconciliaion o he mos comparable GAAP measures, please see Appendix. 6
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 ADT Worldwide - Good Mix of Commercial and Residenial Business 2007 Recurring Revenue 2007 Revenue Composiion Accouns Residenial Residenial Accouns Revenue 75% 33% 7.1M $7.6B Commercial Accouns 25% Commercial Revenue 67% Two Differen Business Models Boh Provide Aracive Reurns 13 ADT Worldwide Approximaely 50% of Revenue is Conracual and Recurring 2007 ADT Worldwide Revenue $7.6B Insall & Produc Revenue 35% of Toal $2.7B Recurring Monhly Revenue 49% of Toal $3.7B Oher Service/Mainenance 16% of Toal $1.2B Large Base of Sable Recurring Revenue 14 7
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Recurring Revenue is Predicable and Has Been Improving Recurring Revenue ($B) 2004-2007 YTD Resuls $3.8 $3.6 $3.4 $3.2 $3.0 $3.73 $3.60 $3.57 $3.59 2004 2005 2006 2007 $3.0 $2.8 $2.5 $2.3 $2.0 $1.8 $1.5 $1.3 $1.0 $2.78 6.8% $2.97 Q3YTD07 Q3YTD08 Organic Growh NA (2.2)% 0.6% 2.3% 2.3% 4.7% Solid Progress Globally 15 ADT Worldwide Approximaely 50% of Revenue is Non-Recurring 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Non-Recurring Revenue ($B) CAGR 5.1% $3.9B $3.4B 0.5 1.8 1.6 2004 2005 2006 2007 Norh America EMEA Res of World (ROW) Sysems insallaion and service revenues Primarily commercial Geographically diverse Faser growh in ROW Lower margin han recurring, requires less capial Non-Recurring Revenue Provides Solid Reurns on Invesed Capial 16 8
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Sysems Insallaion and Service Revenue is Diversified Across End Markes 2007 Sysem Insallaion & Service Revenue $3.9B Residenial Banking Gov Oil & Gas Oher Comm/Indus Reailer 33% Middle Marke Diversified Revenue wih Srong Reailer Presence 17 Global Reailer Secor is an Imporan Cusomer Focus Area 2007 Reailer Revenue $1.3B Norh America 49% EMEA 31% Res of World 20% Inruder/Fire Sysems EAS* Sysems 15% Video/Access 27% Conrol 20% EAS* Tags and Labels 38% Carefully Monioring Cusomer Expansion Plans 18 * Elecronic Aricle Surveillance (EAS) 9
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Our Major Areas of Focus for Sysem Insallaion and Service Aciviies Growh Indusry verical sraegies and global accoun managemen Invesing in emerging markes Leveraging echnology Capure recurring revenue and service Produciviy Resrucuring, primarily in Europe Projec execuion Playbook Pricing discipline Operaional Excellence 19 ADT Worldwide Regional Overview 10
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 ADT Worldwide A Global And Local Business wih Differen Opporuniies by Region 25% 2007 Resuls Operaing Margin % before special iems* 20% 15% 10% 5% 0% NA Toal OI = 12.7% EMEA ROW 0% 5% 10% Organic Revenue Growh* NA - larges and mos profiable marke wih growh and earnings upside EMEA - improving wih margin upside Res of he World (ROW) - good reurns and srong growh opporuniies 21 * Organic Revenue Growh and Operaing Margin before special iems are Non-GAAP measures. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. ADT Norh America Disciplined Growh and Improving Operaional Efficiency 2007 Revenue $7.6B 2007 ADT Norh America Commercial Residenial Toal NA EMEA 34% Revenue % Recurring $1.8B 86% $2.3B 41% $4.1B 61% ROW 13% Norh America 53% Op Inc* % Margin $433M 23.6% $267M 11.8% $700M 17.1% Adjused EBITDA* $918M $508M $1,426M EBITDA % 50.1% 22.5% 34.8% Our Larges, Mos Profiable Marke wih Growh + Earnings Upside 22 * Adjused EBITDA, Operaing Income before special iems and Operaing Margin before special iems are Non-GAAP measures. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. 11
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 # of Accouns (000s) ADT Norh America Drive Disciplined Growh in Residenial 850 800 750 700 650 600 550 500 NA Residenial Accouns (000s) Ariion Unis New Unis 2003 2004 2005 2006 2007 $38.00 $36.00 $34.00 $32.00 $30.00 $28.00 $26.00 $24.00 Monhly Revenue per New Residenial Cusomer FY'03 FY'04 FY'05 FY'06 FY'07 Base Burglar Alarm QSP Mainenance Smoke/Hea/CO Flood/Temp Securiy Link Cellguard Video View Touchpad Paging Ne Accoun Growh + ARPU Growh => Recurring Revenue Growh 23 ADT Europe, Middle Eas & Africa Improve Operaing Margin 2007 EMEA Revenue $2.6B 34% of Toal ADT EMEA ADT NA Coninenal Europe $1.1B UK $1.0B Revenue Resi/Comm Spli % Recurring Op Inc* % Margin $2.6B 15%/85% 30% $152M 5.9% $4.1B 44%/56% 61% $700M 17.1% Middle Eas & Africa $0.5B Adjused EBITDA* EBITDA % Targe 10% Operaing Margin in 2010 $264M 10.3% $1,426M 34.8% 24 * Adjused EBITDA, Operaing Income before special iems and Operaing Margin before special iems are Non-GAAP measures. For a reconciliaion, please see Appendix. 12
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 ADT Europe, Middle Eas & Africa Focused on Resrucuring, Improved Execuion & Mix Unis (K) $M 250 200 150 100 $850 $800 $750 $700 $650 2008 A Year of Transiion and Rebuilding in Europe Accoun Growh Ariion New Accouns 2004 2005 2006 2007 2008F Recurring Revenue 2004 2005 2006 2007 2008F Resrucuring Program Reduce Headcoun by 20-25% Redefine erriories and operaions based on populaion densiy Back office raionalizaion Sandardize pricing and execuion across projecs Rebuild our recurring revenue base implemen cusomer reenion ceners Making Good Progress on Our Iniiaives 25 ADT Res of World Grow Faser in Emerging Markes Asia 2007 Revenue = $533M; Organic revenue growh* of 12% Srong presence across he region Marke leadership in Korea, Hong Kong and Singapore China and India markes are sill small bu represen growing opporuniies for us Opened firs foreign-owned licensed monioring cener in China in 2007 Reail cusomers represen a significan opporuniy boh in China and India Lain America 2007 Revenue = $264M; Organic revenue growh* of 12% Srong presence and marke leadership >25% marke share across he region Mexico, Brazil, Chile and Argenina represen our larges markes Building our base of accouns hroughou he region Focus on opporuniies for growh across all markes Securing Our Posiion in Faser Growh Markes 26 * Organic revenue growh is a Non-GAAP measure. For a reconciliaion, please see Appendix. 13
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 ADT Worldwide Summary The global securiy marke is very aracive and ADT is well posiioned o win in his marke Half of our revenue is recurring, which provides a sable and predicable revenue base Sysems insallaion and service revenue is less predicable han recurring revenue and is balanced in erms of end markes and geographies Our business is global bu opporuniies vary by region NA: Disciplined growh and operaing improvemen EMEA: Margin improvemen hrough resrucuring and improving mix Res of World: Faser growh in emerging markes 27 Flow Conrol Overview 14
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Flow Conrol A A Glance 2007 Financial Summary Revenue of $3.8B Operaing Income before Special Iems* of $486M Global leader in valves, conrols and relaed producs Well-known brands wih srong posiions Geographic and end marke diversiy Srong macro-economic rends driving srong growh Opporuniies Gain marke share in srong growh markes Grow hermal conrols business Operaing leverage and Operaional Excellence 29 * Operaing Income before special iems is a Non-GAAP measure. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. Flow Conrol - A Srong Global Business Americas 2007 Revenue $936M Lines of Business: Valves & Auomaion, Hea Tracing EMEA 2007 Revenue $1,555M Lines of Business: Valves & Auomaion, Waer, Hea Tracing Asia 2007 Revenue $432M Lines of Business: Valves & Auomaion, Hea Tracing Pacific 2007 Revenue $844M Lines of Business: Waer, Valves & Auomaion Approximaely 80% of Revenue Is From Ouside he U.S. 30 15
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Flow Conrol Balanced Across End Markes End Markes Served Sorage Transmission Disribuion Trends Aging infrasrucure hroughou Europe driving need for upgrades Increasing poable waer demand for developing counries Waer Process Energy Chemical & Pharma Marine Food & Beverage Mining & Minerals Oil and Gas Refining Power Generaion Trends Need for new capaciy has been driving srong demand for valves and conrols Thermal Conrols expeced o benefi from large refinery expansion projecs Subsea Srong Growh Driven by Macro-Economic Trends 31 Flow Conrol Three Business Plaforms World s larges provider of flow conrol producs and services Produc range includes valves, acuaors and conrols Delivery and conrol of liquids, powders and gases for energy and processing indusries 2007 Revenue: ~$2.0B Srong regional presence wih producs and services for waer sysems Delivery, ranspor, sorage and reamen of waer Involved in waer needs for governmen, residenial, agriculure and indusrial use from dam o he household 2007 Revenue: ~$1.2B Global leader in hearacing soluions Indusrial, global projec services Commercial and residenial producs for floor warming, snow meling and de-icing 2007 Revenue: ~$550M 32 16
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Valves & Conrols - Flow Conrol s Larges Business World Leader in Producs & Services Tha Conrol he Flow of Fluids or Gases in Wide Range of Environmens Buerfly Valves Gae Valves Valve Acuaors Cryogenic condiions (-425 F) Check Valves Exreme hea (1,500 F) High pressure and low pressure Remoe, isolaed locaions Ball Valves Safey Relief Valves Valve Posiioners & Conrols Conrol Valves 33 Valves & Conrols - Serves a Broad Range of Indusries and Cusomers Energy $ 1+ Billion in Sales Oil & Gas Refining Power Generaion Process $1+ Billion in Sales Mining & Mineral Processing Chemical & Pharmaceuical Food & Beverage Marine Kellogg Brown & Roo 34 17
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Valves & Conrols - Well Posiioned in a Large and Fragmened Marke Valves & Conrols Marke Revenue ~ $38B Ohers Tyco 2007 Revenue: ~$2.0B Tyco Nex 9 Compeiive Posiion One of he broades porfolios of valves, acuaors, conrols and associaed services Sales and service locaions across he globe Very well posiioned o execue complex global projecs Serve muliple indusries which leverages our knowledge and provides growh and diversificaion 35 Source: McIlvaine, Managemen Esimaes Valves & Conrols - Srong Hisorical Growh and Posiioned Well for he Fuure Toal Sales ($B) Focus Areas $1.4 CAGR = 13% $1.6 $1.8 $2.0 Maximize global projecs opporuniy Enhance cusomer service via reduced lead-imes Srenghen porfolio in core produc families and argeed indusries Increase working capial urns Opimize our cos srucure 2004 2005 2006 2007 36 18
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Tyco Waer - A Diverse Se of Producs and Services Municipal and indusrial waer reamen plans Waer ransmission neworks Irrigaion sysems Sorage sysems Municipal and indusrial wasewaer reamen plans Waer polluion monioring Waer disribuion Wasewaer ransmission neworks Emissions monioring Hydro power generaion Pipes Tanks Hydrans Fiings, flanges and couplings Pumps Valves Meers and insrumens Broad Capabiliies and Proven Technology 37 Tyco Waer Well Posiioned wih Srong Presence in Asia Pacific and EMEA Ohers Pacific Global Waer Marke Revenue ~ $18B Top 3 Tyco 2007 Revenue: ~$1.2B Asia US EMEA Tyco Flow Conrol Nex 5 Asia Pacific Regional leader across hree broad segmens Transmission & disribuion Process & conrol Environmenal & waer managemen Expansive line of producs and services buil around core of pipes and valves Europe, Middle Eas and Africa Porfolio more focused on hydrans, valves, fiings, and couplings 38 Source: McIlvaine, Managemen Esimaes 19
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Tyco Waer - Srong Hisorical Growh Combined wih Projec Spikes Toal Sales ($M) $1,179 $761 CAGR = 16% 37% CAGR Pacific pipeline business doubled beween 2005 and 2007 due o srong projec aciviy $562 2004 2005 2006 2007 Waer (ex Pacific Pipe) $674 Pacific Pipe Business 6% CAGR Pacific pipeline business expeced o decline modesly Challenging YOY Revenue Comparison ino 2009 39 Tyco Waer - Posiioning for Expansion Focus Areas Focus on mos profiable segmens of waer marke Expand geographic base from core businesses in Europe and Pacific Develop pipe and valve adjacencies including pumping and environmenal sysems Simplify business hrough produc and porfolio raionalizaion 40 20
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Thermal Conrols A Broad Se of Indusrial Hea Managemen Producs and Services Seam Powered & Elecrically Powered Hea Delivery Sysems Tank Heaing Sysems Pipe and Tank Corrosion Prevenion Pipe, Vessel & Tank Thermal Insulaion Sysems Hea Tracing Power Disribuion Sysems Leak Deecion Sysems Fire Performance Mineral Insulaed and Polymeric cables Hea Traced Tubing Bundles and Insrumen Winerizaion Oudoor Pipe and Valve Freeze Proecion Ramp Heaing Temperaure Conrol and Monioring Sysems 41 Thermal Conrols Evoluion From Producs o Soluion Provider Lowering oal life cycle cos of hea $4 of revenue for every $1 of produc sale Hea racing sysems Projec managemen Turnkey soluion Single poin of responsibiliy Insallaion Supplying high qualiy producs Hea racing producs 1970 s Engineering Precise, reliable hea racing producs Improved Cusomer Saisfacion Through Projec Managemen Soluions 1980 s 1990 s 2000 s 42 21
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Thermal Conrols Inegral o Flow Conrol s Fuure Focus Areas Execue curren mega oil and gas projecs Srenghen Norh America services model o ensure scalabiliy and exend projec pipeline Replicae services model in Europe and Asia $346 Toal Sales ($M) CAGR = 16% $370 $466 $543 2004 2005 2006 2007 Expeced o grow o near $1B over nex few years 43 Flow Conrol Srong Revenue and Operaing Income Growh Oulook Revenue and Income Poenial Srong end marke demand paricularly energy and waer Operaing income improvemen produciviy improvemens higher volume pricing $ in 000s 2006 2007 Q308 Revenue $3,135 $3,766 $1,132 Organic Revenue Growh* Operaing Income Before Special Iems* Operaing Income Growh Operaing Margin Before Special Iems* 13.3% 14.4% 5.3% $356 $486 $155 6% 36% 23% 11.4% 12.9% 13.7% 44 * Organic revenue growh, Operaing Income before special iems and Operaing Margin before special iems are Non-GAAP measures. For a reconciliaion, please see Appendix. 22
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Flow Conrol - Backlog Coninues o Be Srong $616 Toal Backlog ($M) $1,579 CAGR = 38% $1,115 $771 $2,072 Coninued srengh in oil and gas bookings for boh Valves & Conrols and Thermal Conrols plaforms Process indusries coninue o provide solid growh in boh developed and emerging markes Beginning o execue on mega projecs for Thermal Conrols wih pull hrough in Valves & Conrols 2004 2005 2006 2007 2008 Q3 45 Flow Conrol - Summary Global leader in he markes we serve Balanced porfolio wih diverse end markes Srong macro rends driving growh wih srengh in infrasrucure and emerging markes Well posiioned o execue mega projecs Significan operaional improvemen has been achieved more opporuniies exis 46 23
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Fire Proecion Services A A Glance 2007 Financial Summary Revenue of $3.4B Operaing Income before Special Iems* of $281M Global provider of elecronic and mechanical fire sysems Service represens almos half of he oal revenue Srong global presence NA is he larges marke and has been seadily improving profiabiliy Opporuniies Increase service revenue Operaional execuion sandardizing operaions across he business 47 * Operaing Income before special iems is a Non-GAAP measure. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. Safey Producs Overview 24
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Safey Producs A A Glance Marke leading provider of: Fire Suppression Elecronic Securiy Life Safey producs Srong marke posiion wih leading echnologies Aracive markes wih good growh and profi opporuniies 2007 Financial Summary Revenue of $1.7B Operaing Income before Special Iems* of $313M Opporuniies Inves in Technology Operaional Excellence/ Resrucuring o improve produciviy Global expansion 49 * Operaing Income before special iems is a Non-GAAP measure. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. Safey Producs Has Srong Well-Known Brands Fire Suppression Elecronic Securiy Life Safey Ansul fire suppression producs help proec 75% of he op 100 refineries DSC and Benel inrusion securiy producs proec 5 million residenial homes CEM and Sofware House producs proec over 300 inernaional airpors and housands of public buildings worldwide Sco Airpaks are used by 15,000 fire deparmens and proec more han 1 million firefighers around he world 50 25
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Safey Producs Paricipaes in Aracive Markes wih Srong Financial Reurns Fire Suppression & Building Producs Marke: ~6B Expeced Marke Growh: 3-5% Elecronic Securiy Marke: ~10.1B Expeced Marke Growh: 8-10% Life Safey Marke: ~3.2B Expeced Marke Growh: 3% Safey Producs Marke Share Tyco 2007 Revenue: $957M Organic Growh* 9.6% Tyco 2007 Revenue: $422M Organic Growh* (0.9)% Tyco 2007 Revenue: $341M Organic Growh* (8.6)% Operaing Margin in he Mid o High Teens 51 Source: Fros & Sullivan, JP Freeman, Freedonia and Managemen Esimaes * Organic revenue growh is a Non-GAAP measure. For a reconciliaion o he mos comparable GAAP measure, please see Appendix.. Expanding R&D Ceners in High Growh Regions Core Technologies Fire suppression chemisry and mechanics Maerials and sysems for exreme duy in firs responder applicaions Elecronic fire monioring and safey sysems meeing regional and global sandards Sofware-based sysems for securiy and surveillance markes R&D Invesmen ($M)* $109 CAGR = 9% $128 $134 $141 2004 2005 2006 2007 R&D Ceners Exising R&D Ceners New R&D Ceners in India and China Fuure Trends Expansion of R&D, sourcing and regional assembly operaions in emerging markes New R&D ceners planned o leverage regional experise and knowledge base 52 *Includes engineering and developmen expenses 26
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Fire Suppression & Building Producs Marke Share* ~$6B Marke 3-5% marke growh rae Eng. Sysems 8% Foam 7% 2007 Revenue $957M Oher 7% Non- Res Sprinkler 23% Porable 14% Residenial 8% Pre- Fire Grooved Safey Producs Marke Share Engineered Mechanical & Valves Sraegic Opporuniies 9% 12% 12% High growh in niche markes; e.g., perochemical, mining & warehousing Residenial sprinklers driven by code Inegraed Soluions Asia, Easern Europe and Lain America growh Mechanical non-fire Environmenally friendly fire fighing agens 53 *Source: Fros & Sullivan, JP Freeman and Managemen Esimaes Elecronic Securiy Marke Share* 2007 Revenue $422M ~$10.1B Marke 8-10% marke growh rae Access Conrol 20% Oher 14% Video 25% Safey Producs Marke Share Inrusion Securiy 41% Sraegic Opporuniies Inerne-based building managemen sysems enerprise inegraion Video analyics Convergence of physical and logical securiy Process conrol applicaions 54 *Source: Freedonia and Managemen Esimaes 27
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Life Safey Producs Marke Share* 2007 Revenue $341M ~$3.2B Marke 3% marke growh rae Insrumens Compressors 4% 2% Personal Proecion 14% Safey Producs Marke Share Air Purificaion 24% Self-Conained Breahing Apparaus 56% Sraegic Opporuniies High growh in miliary, perochemical and mining markes Emerging markes focus on worker safey Growh marke in he Middle Eas 55 *Source: Fros & Sullivan and Managemen Esimaes 3 Key Iniiaives o Accelerae Growh and Profiabiliy Commercial Excellence Verical markes Global cusomers Emerging markes Global sales force Technology Leadership Inegraed echnology plaforms Global ceners of excellence Value re-engineering/six Sigma Innovaion/sraegic acquisiions Operaional Excellence Lean/Six Sigma Reducion in oal produc cos Business Simplificaion Manufacuring and back-office consolidaion Cusomer saisfacion/on-ime delivery 56 28
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Safey Producs Summary Well posiioned in aracive growh markes Srong marke posiion wih indusry leading brands Proven echnology leadership in fire suppression, life safey and elecronic securiy Deep echnology pipeline Expanding manufacuring, disribuion and sales coverage Posiioning for srong growh in he emerging markes Driving Srong Organic Growh & Operaional Excellence 57 Elecrical & Meal Producs Overview 29
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Elecrical & Meal Producs A A Glance 2007 Financial Summary Revenue of $2.0B Operaing Income before Special Iems* of $166M Marke leader in seel ubes and pipes, armored cable and elecrical condui producs Srong, well known brands Purchases and processes over one million ons of seel per year Profi is dependen on meal spreads primarily seel and copper Opporuniies Operaional Excellence improve produciviy and reduce conversion coss Consolidae faciliies 59 * Operaing Income before special iems is a Non-GAAP measure. For a reconciliaion o he mos comparable GAAP measure, please see Appendix. Three Major Lines of Business Business Lines Elecrical Infrasrucure Soluions Seel Tubular & Roll Formed Producs Meal Framing Soluions Producs Cusomers Elecrical Wholesale Disribuion; Home Improvemen Reailers Wholesale Disribuion; OEMs; Meal Service Ceners Wholesale Disribuion; General Conracors: OEMs Norh America Norh America & Brazil Global 60 30
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Elecrical, Seel Tubular and Meal Framing Markes Served Are Over $11B Annually Elecrical NA Marke Size: $2.9B Seel Tube NA Marke Size: $5.6B Meal Framing NA Marke Size: $3.1B Key Marke Drivers Commercial and residenial consrucion New OEM applicaions for seel ube; producs ligher ye sronger Changes in fire codes and regulaions requiring sprinklers New producs o address conracor produciviy Seel and copper pricing Elecrical & Meal Producs Marke Share 61 Source: Preson Pipe Repors, MFMA, SFA, CPTI 2006 Annual Repor and Managemen Esimaes and Elecrical Wholesaling Magazine Profiabiliy Is Dependen on Meal Spreads, Primarily Seel and Copper Spread = Selling Price per on Cos per on Selling Price Acual Cos Y $ per on X 60-90 days Y Spread = Y - X X 60-90 days Spread = Y - X Falling Price Rising Price Environmen Environmen Lower Spread and Operaing Profi/on Higher Spread and Operaing Profi/on 62 31
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Margin Raes Vary wih Meal Spreads $M 2002 2003 2004 2005 2006 2007 YTD 6/29 2007 YTD 6/27 2008 Revenues 1,258 1,163 1,579 1,798 1,949 1,974 1,441 1,681 Growh % 5.0% (7.6%) 35.8% 13.9% 8.4% 1.3% 0.9% 16.7% Operaing Income* 222 120 371 295 319 166 114 266 Margin % 17.6% 10.3% 23.5% 16.4% 16.4% 8.4% 7.9% 15.8% 63 * Operaing Income before special iems is a Non-GAAP measure. For a reconciliaion, please see preceding ables. Elecrical & Meal Producs Summary Despie volailiy of meal spreads, Elecrical & Meal Producs is a very aracive business hrough he cycle Srong marke posiion for seel ube business in Norh America wih significan scale advanages Good growh opporuniies in OEM marke, providing ubular soluions for consrucion marke, and inernaional produc offerings Addiional opporuniy exiss o opimize conversion coss TEMP Generaes Srong Operaing Margin on Average and Srong Cash Flow 64 32
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Tyco In l Q3 Resuls Delivering Earnings Growh ($ in millions, excep EPS) Q308 Q307 % Change Revenue $5,215 $4,702 11% Organic Revenue Growh* 6.2% 5.0% Operaing Income before special iems* 632 425 49% Operaing Margin before special iems* 12.1% 9.0% EPS from Con. Ops. before special iems* $0.88 $0.51 73% Organic revenue growh of 6.2% Operaing income improvemen across each of he businesses Significan reducion in corporae expense EPS from Coninuing Ops before Special Iems increased 73% year over year Coninued Srengh in 2008; FY 2008 Guidance Increased o $2.97 - $2.99 65 * Organic revenue growh is a non-gaap measure. Operaing income, operaing margin and EPS from coninuing operaions before special iems are non-gaap measures. Please refer o Appendix for a reconciliaion o he mos comparable GAAP measures. Summary A diverse porfolio of marke-leading businesses in elecronic securiy, fire, safey services and producs, valves and conrols, and oher indusrial producs Srong global business in aracive, growing markes Large service revenue base Significan earnings growh opporuniies Operaional execuion Porfolio refinemen Appropriae use of capial Srong cash flow generaion and financial flexibiliy Posiioned for a Sronger Fuure 66 33
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Appendix We Generae Srong Incremenal Reurns on Invesed Capial ADT Worldwide 2007 Reurn on Invesed Capial* Fire Proecion Services Safey Producs Flow Conrol Elecrical & Meal Producs Toal Tyco 0% 20% 40% 60% 80% 100% 120% ROIC ROIC (Excluding Goodwill) 68 *ROIC is a non-gaap financial measure. Please see he following ables for a descripion of how ROIC is calculaed. 34
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Reurn on Invesed Capial (Including Goodwill) $M 2007 Op Inc* Afer Tax 2007 Avg Invesed Capial 2007 ROIC ADT Worldwide $701 $8,703 8% Fire Proecion $203 $1,965 10% Flow Conrol $351 $3,086 11% Safey Producs $226 $3,085 7% Elec. & Meal $120 $1,829 7% Oher - $28 0% Corporae ($501) ($1,551) NM Toal $1,100 $17,145 6% 69 * Operaing Income is before special iems which is a Non-GAAP measure. For a reconciliaion, please see he following ables. Reurn on Invesed Capial (Excluding Goodwill) $M 2007 Op Inc* Afer Tax 2007 Avg Invesed Capial 2007 ROIC ADT Worldwide $701 $4,061 17% Fire Proecion $203 $249 82% Flow Conrol $351 $1,238 28% Safey Producs $226 $913 25% Elec. & Meal $120 $759 16% Oher - - 0% Corporae ($501) ($1,366) NM Toal $1,100 $5,854 19% 70 * Operaing Income is before special iems which is a Non-GAAP measure. For a reconciliaion, please see he following ables. 35
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 2006 Organic Growh $M 2005 Rev Acq/Disp FX Organic Growh 2006 Rev Organic % ADT Worldwide 7,104 (19) (35) 155 7,205 2.2% Flow Conrol 2,806 - (43) 372 3,135 13.3% Fire Proecion 3,053 (39) (12) 148 3,150 4.9% Elecrical & Meal 1,798-15 136 1,949 7.6% Safey Producs 1,621 (56) (2) 61 1,624 3.8% Corporae & Oher 3 - - - 3 0.0% Toal 16,385 (114) (77) 872 17,066 5.3% 71 2007 Organic Growh $M 2006 Rev Acq/Disp & Oher FX Organic Growh 2007 Rev Organic % ADT Worldwide 7,205 (24) 213 254 7,648 3.5% Flow Conrol 3,135 (16) 197 450 3,766 14.4% Fire Proecion 3,150 (30) 101 145 3,366 4.6% Elecrical & Meal 1,949 1 20 4 1,974 0.2% Safey Producs 1,624-49 46 1,719 2.8% Corporae & Oher 3 - - 1 4 33.3% Toal 17,066 (69) 580 900 18,477 5.3% 72 36
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Q307 Organic Growh $M Q3FY06 Revenues Acq/Disp & Oher FX Organic Growh Q3FY07 Revenues Organic % ADT Worldwide 1,806 (20) 50 73 1,909 4.0% Flow Conrol 806 (3) 54 125 982 15.5% Fire Proecion 797 (4) 27 28 848 3.5% Elecrical & Meal 527-6 (14) 519 (2.7%) Safey Producs 421 1 12 8 442 1.9% Corporae & Oher 2 - - - 2 0.0% Toal 4,359 (26) 149 220 4,702 5.0% 73 Q308 Organic Growh $M Q3FY07 Revenues Acq/Disp & Oher FX Organic Growh Q3FY08 Revenues Organic % ADT Worldwide 1,909 1 55 35 2,000 1.8% Flow Conrol 982 5 93 52 1,132 5.3% Fire Proecion 848-35 36 919 4.2% Elecrical & Meal 519-12 121 652 23.3% Safey Producs 442 (1) 22 48 511 10.9% Corporae & Oher 2 - - (1) 1 (50.0)% Toal 4,702 5 217 291 5,215 6.2% 74 37
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 2006 Operaing Income Before Special Iems Fire Elecrical ADT Flow Proecion & Meal Safey Corporae Worldwide Conrol Services Producs Producs and Oher Revenue Revenue $7,205 $3,135 $3,150 $1,949 $1,624 $3 $17,066 Fire Elecrical ADT Flow Proecion & Meal Safey Corporae Operaing Worldwide Conrol Services Producs Producs and Oher Income Operaing Income $907 $356 $241 $319 $196 ($664) $1,355 - Separaion coss - -(1) - - 50 49 Losses on divesiures - 2 - - - 2 Reducion in esimaed worker s compensaion liabiliy (48) (48) Volunary Replacemen Program - - - 100 - - 100 Former Managemen Selemen - - - - (72) - (72) Operaing Income Before Special Iems $909 $356 $240 $319 $296 ($734) $1,386 75 2007 Operaing Income Before Special Iems ADT Flow Fire Proecion Elecrical & Safey Corporae Worldwide Conrol Services Meal Producs Producs and Oher Revenue Revenue $7,648 $3,766 $3,366 $1,974 $1,719 $4 $18,477 Fire Elecrical ADT Flow Proecion & Meal Safey Corporae Operaing Worldwide Conrol Services Producs Producs and Oher Income Operaing Income $842 $457 $258 $159 $274 ($3,722) ($1,732) Resrucuring charges in cos of sales and SG&A - 6 1 - - - 7 Class acion selemen, ne - - - - - 2,871 2,871 Separaion coss - 1 - - - 117 118 Losses on divesiures - 3 1 - - - 4 Resrucuring and asse impairmen charges, ne 83 19 21 7 29 40 199 Goodwill impairmen 46 - - - - - 46 Volunary Replacemen Program - - - - 10-10 Operaing Income Before Special Iems $971 $486 $281 $166 $313 ($694) $1,523 76 38
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Q3 07 Operaing Income Before Special Iems ADT Flow Fire Proecion Elecrical & Safey Corporae Worldwide Conrol Services Meal Producs Producs and Oher Revenue Revenue $1,909 $982 $848 $519 $442 $2 $4,702 Income Dilued EPS from Fire Elecrical Ineres from Coninuing ADT Flow Proecion & Meal Safey Corporae Operaing Expense, Oher Income Minoriy Coninuing Operaions Worldwide Conrol Services Producs Producs and Oher Income ne Expense, ne Taxes Ineres Operaions Operaing Income $205 $124 $58 $47 $72 ($3,087) ($2,581) ($49) ($259) ($163) ($2) ($3,054) ($6.17) Resrucuring charges in cos of sales and SG&A 1 1 2 2 0.00 Class acion selemen, ne 2,884 2,884 2,884 5.83 Separaion coss 28 28 259 56 343 0.69 Losses on divesiures 1 1 1 0.00 Resrucuring and asse impairmen charges, ne 11 1 11 8 14 45 (13) 32 0.07 Goodwill impairmen 46 46 46 0.09 Operaing Income Before Special Iems $262 $126 $71 $47 $80 ($161) $425 ($49) $0 ($120) ($2) $254 $0.51 77 Q3 08 Operaing Income Before Special Iems ADT Flow Fire Proecion Elecrical & Safey Corporae Worldwide Conrol Services Meal Producs Producs and Oher Revenue Revenue $2,000 $1,132 $919 $652 $511 $1 $5,215 Income Dilued EPS from Fire Elecrical Ineres from Coninuing ADT Flow Proecion & Meal Safey Corporae Operaing Expense, Oher Income Minoriy Coninuing Operaions Worldwide Conrol Services Producs Producs and Oher Income ne Expense, ne Taxes Ineres Operaions Operaing Income $239 $152 $97 $141 $79 ($131) $577 ($75) ($257) ($45) ($1) $199 $0.41 Resrucuring charges in cos of sales and SG&A 2 (1) 2 3 6 (1) 5 0.01 Class acion selemen, ne (7) (7) - (7) (0.01) Separaion coss - 17 258 (83) 192 0.39 Losses on divesiures 1 1 1 0.00 Resrucuring and asse impairmen charges, ne 31 1 1 3 9 1 46 (16) 30 0.06 Legacy Legal Selemen 9 9-9 0.02 Operaing Income Before Special Iems $270 $155 $97 $146 $91 ($127) $632 ($58) $1 ($145) ($1) $429 $0.88 78 39
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 2007 Adjused EBITDA Reconciliaion $M ADT Worldwide ADT NA ADT EMEA Revenue $ 7,648 $ 4,093 $ 2,574 Operaing Income $ 842 $ 692 $ 81 Resrucuring and asse impairmen charges, ne $ 83 $ 8 $ 71 Goodwill impairmen $ 46 Operaing Income Before Special Iems $ 971 $ 700 $ 152 Depreciaion & Amorizaion $ 925 $ 726 $ 112 Adjused EBITDA $ 1,896 $ 1,426 $ 264 Adjused EBITDA Margin 24.8% 34.8% 10.3% 79 Non-GAAP Measures Organic revenue growh, free cash flow, operaing income before special iems, operaing margin before special iems, earnings per share (EPS) from coninuing operaions before special iems, adjused earnings before ineres, axes, depreciaion and amorizaion (Adjused EBITDA), and reurn on invesed capial (ROIC) are non-gaap measures and should no be considered replacemens for GAAP resuls. Organic revenue growh is a useful measure used by he company o measure he underlying resuls and rends in he business. The difference beween repored ne revenue growh (he mos comparable GAAP measure) and organic revenue growh (he non-gaap measure) consiss of he impac from foreign currency, acquisiions and divesiures, and oher changes ha do no reflec he underlying resuls and rends (for example, revenue reclassificaions and changes o he fiscal year). Organic revenue growh is a useful measure of he company s performance because i excludes iems ha: i) are no compleely under managemen s conrol, such as he impac of foreign currency exchange; or ii) do no reflec he underlying growh of he company, such as acquisiion and divesiure aciviy. I may be used as a componen of he company s compensaion programs. The limiaion of his measure is ha i excludes iems ha have an impac on he company s revenue. This limiaion is bes addressed by using organic revenue growh in combinaion wih he GAAP numbers. See he accompanying ables o his presenaion for he reconciliaion presening he componens of organic revenue growh. FCF is a useful measure of he company s cash which is free from any significan exising obligaion. The difference beween cash flows from operaing aciviies (he mos comparable GAAP measure) and FCF (he non-gaap measure) consiss mainly of significan cash ouflows ha he company believes are useful o idenify. FCF permis managemen and invesors o gain insigh ino he number ha managemen employs o measure cash ha is free from any significan exising obligaion. I may also be a significan componen in he company s incenive compensaion plans. The difference reflecs he impac from: he sale of accouns receivable programs, ne capial expendiures, acquisiion of cusomer accouns (ADT dealer program), cash paid for purchase accouning and holdback liabiliies, and volunary pension conribuions. The impac from he sale of accouns receivable programs and volunary pension conribuions is added or subraced from he GAAP measure because his aciviy is driven by economic financing decisions raher han operaing aciviy. Capial expendiures and he ADT dealer program are subraced because hey represen long-erm commimens. Cash paid for purchase accouning and holdback liabiliies is subraced from Cash Flow from Operaing Aciviies because hese cash ouflows are no available for general corporae uses. The limiaion associaed wih using FCF is ha i subracs cash iems ha are ulimaely wihin managemen s and he Board of Direcors discreion o direc and ha herefore may imply ha here is less or more cash ha is available for he company's programs han he mos comparable GAAP measure. This limiaion is bes addressed by using FCF in combinaion wih he GAAP cash flow numbers. 80 40
Tyco_Inernaional_SHOW_FILE_FINAL.pp Sepember 8, 2008 Non-GAAP Measures The company has presened operaing income and margin before special iems and EPS from coninuing operaions before special iems. Special Iems include charges and gains relaed o divesiures, acquisiions, resrucurings (including ransacion coss relaed o he separaions of Tyco Elecronics and Covidien ino separae public companies), and oher income or charges ha may mask he underlying operaing resuls and/or business rends of he company or business segmen, as applicable. The company uilizes EPS and operaing income and margin before special iems o assess overall operaing performance, segmen level core operaing performance and o provide insigh o managemen in evaluaing overall and segmen operaing plan execuion and underlying marke condiions. They may also be significan componens in he company s incenive compensaion plans. Operaing income, operaing margin, and EPS from coninuing operaions before special iems are useful measures for invesors because hey permi more meaningful comparisons of he company s underlying operaing resuls and business rends beween periods. The difference beween EPS, operaing income and margin before special iems versus EPS, operaing income and operaing margin (he mos comparable GAAP measures) consiss of he impac of charges and gains relaed o divesiures, acquisiions, resrucurings (including ransacion coss relaed o he separaions of Tyco Elecronics and Covidien ino separae public companies), and oher income or charges ha may mask he underlying operaing resuls and/or business rends. The limiaion of hese measures is ha hey exclude he impac (which may be maerial) of iems ha increase or decrease he company s repored EPS and operaing income and margin. This limiaion is bes addressed by using EPS, operaing income and margin before special iems in combinaion wih he mos comparable GAAP measures in order o beer undersand he amouns, characer and impac of any increase or decrease on repored resuls. Adjused earnings before ineres, axes, depreciaion and amorizaion (Adjused EBITDA) is a non-gaap financial measure which represens earnings, excluding cerain iems such as depreciaion and amorizaion, ineres and financing expenses ne of any ineres income and income axes and special iems excluded from operaing income. The difference beween repored operaing income (he mos comparable GAAP measure) and Adjused EBITDA (he non-gaap measure) consiss of he impac of depreciaion and amorizaion, ineres and financing expenses ne of any ineres income and income axes and special iems excluded from operaing income. Managemen considers Adjused EBITDA as an imporan measure of our operaions and financial performance as Adjused EBITDA is reflecive of our operaing effeciveness and financial performance. Use of Adjused EBITDA, in conjuncion wih our GAAP resuls, provides ransparency o invesors and enhances period-o-period comparabiliy of our operaions and financial performance. The limiaion of his measure is ha i excludes iems ha have an impac on he GAAP operaing income resuls. This limiaion is bes addressed by using Adjused EBITDA in combinaion wih operaing income. 81 Non-GAAP Measures Reurn on invesed capial (ROIC) is a non-gaap measure ha managemen believes provides useful supplemenal informaion for managemen and he invesor. ROIC is a ool by which we rack how much value we are creaing for our shareholders. ROIC is a useful measure of he company s performance because i quanifies he effeciveness of managemen s capial invesmen aciviies. Managemen calculaes annual ROIC, boh wih and wihou he impac of goodwill, as a percenage, by dividing afer-ax operaing income (before special iems) by he amoun of capial invesed across he business segmen. We believe ha ROIC provides our managemen wih a means o analyze and improve heir business, measuring segmen profiabiliy in relaion o ne asse invesmens. The limiaion associaed wih using ROIC is ha is i is dependen on iems ha are ulimaely wihin managemen s and he Board of Direcors discreion and herefore may imply ha here is beer or worse invesmen reurn over a given ime period. In addiion, ROIC may no be calculaed he same way by every company. We compensae for his limiaion by monioring and providing o he reader a full GAAP income saemen and balance shee. 82 41