tyco investor meeting -...

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Ed ArditteEd ArditteSenior Vice President, Investor RelationsSenior Vice President, Investor Relations

Tyco Investor MeetingTyco Investor Meeting

Forward Looking StatementForward Looking Statement

This presentation and/or the accompanying presentation materialsThis presentation and/or the accompanying presentation materials may contain may contain certain "forwardcertain "forward--looking statements" looking statements" within the meaning of the United States Private within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are bSecurities Litigation Reform Act of 1995. These statements are based on ased on management's current expectations and are subject to risks, uncemanagement's current expectations and are subject to risks, uncertainty and changes rtainty and changes in circumstances, which may cause actual results, performance orin circumstances, which may cause actual results, performance or achievements to achievements to differ materially from anticipated results, performance or achiediffer materially from anticipated results, performance or achievements. All vements. All statements contained herein that are not clearly historical in nstatements contained herein that are not clearly historical in nature are forwardature are forward--looking and the words "anticipate," "believe," "expect," "estimalooking and the words "anticipate," "believe," "expect," "estimate," "plan," and te," "plan," and similar expressions are generally intended to identify forwardsimilar expressions are generally intended to identify forward--looking statements. looking statements. The forwardThe forward--looking statements in this release include statements addressinglooking statements in this release include statements addressing the the following subjects: future financial condition and operating resfollowing subjects: future financial condition and operating results. Economic, ults. Economic, business, competitive and/or regulatory factors affecting Tyco'sbusiness, competitive and/or regulatory factors affecting Tyco's businesses are businesses are examples of factors, among others, that could cause actual resulexamples of factors, among others, that could cause actual results to differ materially ts to differ materially from those described in the forwardfrom those described in the forward--looking statements. Tyco is under no obligation looking statements. Tyco is under no obligation to (and expressly disclaims any such obligation to) update or alto (and expressly disclaims any such obligation to) update or alter its forwardter its forward--looking looking statements whether as a result of new information, future eventsstatements whether as a result of new information, future events or otherwise. More or otherwise. More detailed information about these and other factors is set forth detailed information about these and other factors is set forth in Tyco's Annual in Tyco's Annual Report on Form 10Report on Form 10--K for the fiscal year ended Sept. 30, 2004, and TycoK for the fiscal year ended Sept. 30, 2004, and Tyco’’s Quarterly s Quarterly Report on Form 10Report on Form 10--Q for the quarterly period ended December 31, 2004.Q for the quarterly period ended December 31, 2004.

*Presentation materials can be found at tyco.com

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Upcoming Events…Upcoming Events…

Site Visits This SpringSite Visits This Spring

Next Investor MeetingNext Investor Meeting

““Meet and GreetMeet and Greet”” With Chris CoughlinWith Chris Coughlin

FeedbackFeedback

Tyco InternationalTyco International

2004 Revenue2004 Revenue 2004 Operating Income2004 Operating Income

$40 billion

$11.8B$11.8B

Eng ProdsEng Prods ElectronicsElectronics$6.0B$6.0B

$9.1B$9.1BHealthcareHealthcare

Plastics &AdhesivesPlastics &Adhesives

$1.7B$1.7B

$11.4B$11.4B

Fire &SecurityFire &

Security

$5.3 billion

$900M$900M

Fire &SecurityFire &

Security

$1,749M$1,749MElectronicsElectronics

Eng ProdsEng Prods$620M$620M

$2,365M$2,365MHealthcareHealthcare

Plastics &AdhesivesPlastics &Adhesives

$69M$69M

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AgendaAgenda

Healthcare ReviewSegment Update Rich Meelia, President - Tyco HealthcareInternational Update Joe Almeida - President, InternationalNew Product Overview Mark Thom - Group President, Respiratory and Imaging

Scott Drake - President, Valleylab

Operational Excellence Naren Gursahaney, Senior VP, Operational Excellence

Fire & Security ReviewSegment Update Dave Robinson, President - Tyco Fire & SecurityCommercial Update Bob Dale - VP, Commercial Sales ADT North AmericaFire Update Dean Seavers - President, SimplexGrinnell

Q&A Roundtable Breen, Meelia, Robinson, Gursahaney, Coughlin

Buffet Lunch Available

Tyco HealthcareInvesting for Growth

Rich Rich MeeliaMeeliaPresident, Tyco HealthcarePresident, Tyco Healthcare

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AgendaAgenda

Segment OverviewSegment OverviewRich Rich MeeliaMeelia –– President, Tyco HealthcarePresident, Tyco Healthcare

International Growth OpportunitiesInternational Growth OpportunitiesJoe AlmeidaJoe Almeida –– President, International DivisionPresident, International Division

New Product Development OverviewNew Product Development OverviewMark ThomMark Thom –– Group President, Respiratory & Imaging DivisionsGroup President, Respiratory & Imaging DivisionsScott DrakeScott Drake –– President, President, ValleylabValleylab DivisionDivision

Tyco Healthcare is…Tyco Healthcare is…

A large global healthcare companyA large global healthcare company

Strongly positioned in chosen segmentsStrongly positioned in chosen segments

Poised for accelerated growth Poised for accelerated growth ––present & futurepresent & future

Highly efficient and productiveHighly efficient and productive

Committed to sustaining strong margins andcash flows while making investments for growth

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Medical Device Company RankingsMedical Device Company Rankings

Johnson & JohnsonJohnson & Johnson $45.9B$45.9B

AbbottAbbott $19.6B$19.6B

MedtronicMedtronic $ 9.6B$ 9.6B

BaxterBaxter $ 9.4B$ 9.4B

Tyco HealthcareTyco Healthcare $ 9.1B$ 9.1B

Source: Last 12 months as of 9/30/04 Public Filings, Medtronics last 12 months thru 10/29/04

A Worldwide CompanyA Worldwide Company

US/CanadaRest of World

Total Tyco Healthcare Excluding Retail & Pharma

Sales $ 9,110Sales $ 9,110 Sales $ 7,124Sales $ 7,124

($ Millions)

Actual Sales 2004

31%

69%

40%

60%

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MallinckrodtMallinckrodt J.T. BakerJ.T. Baker

NellcorNellcor PuritanBennettPuritanBennett

MallinckrodtImaging

MallinckrodtImaging

U.S. Surgical Valleylab

Tyco Health-Care Retail

Tyco Health-Care Retail

Patient CareKendall

Patient CareKendall

SharpSafetyKendall

SharpSafetyKendall

Vasc. TherapyKendall

Vasc. TherapyKendall

Critical CareKendall

Critical CareKendall LudlowLudlow

Business Platforms / Operating UnitsBusiness Platforms / Operating Units

Medical$2,458

Surgical$2,329

Respiratory$1,328

Imaging$1,009

Retail$912

Pharma$1,074

Actual 2004 $ Millions

Strong Leadership PositionsStrong Leadership Positions

#1#1 #2#2OximetryOximetry Syringes & NeedlesSyringes & NeedlesWound CareWound Care StaplingStapling

Vascular CompressionVascular Compression LaparoscopyLaparoscopyIncontinent CareIncontinent Care SuturesSutures

ElectrosurgeryElectrosurgeryAirway TubesAirway Tubes

VentilatorsVentilatorsElectrodesElectrodes

Sharps ContainersSharps Containers

Source: IMS, HPIS, Internal Data, US Markets

Represents Over 80% Of Total Sales

Nuclear MedicineNuclear Medicine

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Healthcare Management StructureHealthcare Management StructurePresidentPresident

Roles & ResponsibilitiesRoles & ResponsibilitiesROW Sales, ROW Sales, MktgMktg, Dist, DistManage Local BusinessManage Local Business

Roles & ResponsibilitiesRoles & ResponsibilitiesPolicies & ControlsPolicies & ControlsOperational ExcellenceOperational ExcellenceIntegrationsIntegrationsStrategic Planning/M&AStrategic Planning/M&A

Roles & ResponsibilitiesRoles & ResponsibilitiesU.S. Sales, U.S. Sales, MktgMktg, , Dist, Dist, OperationsOperationsGlobal StrategyGlobal StrategyGlobal R&DGlobal R&D

K. GouldK. Gould CorporateCorporateM. CollinsM. CollinsJ. AlmeidaJ. Almeida

MedicalMedicalSurgicalSurgical

RespiratoryRespiratoryImagingImagingRetailRetail

EMEAJapan

Asia PacificLatin America

PharmaceuticalsPharmaceuticals

FinanceFinance

LegalLegalManufacturingManufacturing

LogisticsLogisticsHuman Res.Human Res.

RAQARAQABusiness Dev.Business Dev.

Info SystemsInfo Systems

Roles & ResponsibilitiesGlobal Management

2004 Accomplishments2004 Accomplishments

Financial HighlightsOrganic Sales Growth 4.8%Operating Margin 26%Cash Flow $2.2 billion

Operational Excellence HighlightsSix Sigma $150 millionSourcing $90 millionFootprint Reduction Reduced 354K sq ft

1.5% of Total SpaceWorking Capital

AR Days (7 days)Inventory Days (4 days)

Financial HighlightsOrganic Sales Growth 4.8%Operating Margin 26%Cash Flow $2.2 billion

Operational Excellence HighlightsSix Sigma $150 millionSourcing $90 millionFootprint Reduction Reduced 354K sq ft

1.5% of Total SpaceWorking Capital

AR Days (7 days)Inventory Days (4 days)

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2005 Outlook2005 Outlook

Financial TargetsOrganic Sales Growth 5-7%Operating Margin 26%+Cash Flow $2.5B+

Operational Excellence TargetsProduct Cost Reduction 1.2%Planned Footprint Reduction Reduce 1.2M sq ft

or 5% of Total SpaceWorking Capital

AR DaysInventory Days

Financial TargetsOrganic Sales Growth 5-7%Operating Margin 26%+Cash Flow $2.5B+

Operational Excellence TargetsProduct Cost Reduction 1.2%Planned Footprint Reduction Reduce 1.2M sq ft

or 5% of Total SpaceWorking Capital

AR DaysInventory Days

Tyco Healthcare’s Growth DriversTyco Healthcare’s Growth Drivers

DemographicsDemographics

Major Product RevitalizationMajor Product Revitalization

Investments for GrowthInvestments for Growth

Focus on Product DevelopmentFocus on Product Development

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Selling & Marketing, Cap Ex and R&D Spending TrendsSelling & Marketing, Cap Ex and R&D Spending Trends

Investing for GrowthInvesting for Growth

0

200

400

600

800

1,000

1,200

1,400

1,600

2003 2004 2005ESelling & Marketing Cap Ex - Capacity & New Products R&D

$ Millions$ Millions

Investing for GrowthInvesting for Growth

2003 2004 2005E 2006E 2007E

5,7285,728 5,9825,9826,6366,636

7,1027,102 7,3567,356Sales & Marketing HeadcountSales & Marketing Headcount

International U.S.

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R&D Spending TrendsR&D Spending Trends

Focus on Product DevelopmentFocus on Product Development

0

50

100

150

200

250

300

350

2002 2003 2004 2007E0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

% of G

lobal Revenues

% of G

lobal Revenues

Dollars in Millions Expense % of Sales


R&D: New Product Pipeline OverviewR&D: New Product Pipeline Overview

ProjectsActive 132Potential 146Terminated 17

Launch ScheduleLaunched 162005E 532006E 762007E 52

ProjectsActive 132Potential 146Terminated 17

Launch ScheduleLaunched 162005E 532006E 762007E 52

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Incremental R&D InvestmentIncremental R&D Investment

Pipeline is Being Re-Directed Toward Higher Value Products That Meet Customer Needs

20022002 2005E2005E7%7%

11%11%

22%22%

60%60%

18%18%

31%31%40%40%

11%11%

Research Breakthrough Platform Derivative

Confidence in FutureConfidence in Future

Steady and Continuing Investments for GrowthSteady and Continuing Investments for Growth

Beginning to See PaybackBeginning to See Payback

TycoTyco’’s Focus on Op Ex Enhances s Focus on Op Ex Enhances HealthcareHealthcare’’s Existing Strategys Existing Strategy

Demonstrated Ability to Fund Investments Demonstrated Ability to Fund Investments and Maintain Marginand Maintain Margin

Universally Clear on Company DirectionUniversally Clear on Company Direction

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Tyco HealthcareInternational Growth Strategies

Joe Almeida Joe Almeida President, Tyco Healthcare InternationalPresident, Tyco Healthcare International

Managing the Business Through Four RegionsManaging the Business Through Four Regions

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International OverviewInternational Overview

3,4003,400Sales and MarketingSales and Marketing

10,00010,000Total EmployeesTotal Employees

158158Countries sold toCountries sold to

$2.8 Billion$2.8 BillionSalesSales

Total International

(as of December 2004)(as of December 2004)

Growth in Our International Business Growth in Our International Business

5.8% 5.6% (1.1%) 7.2%Organic Organic Revenue Revenue GrowthGrowth


$2,063$2,063$2,184$2,184

$2,409$2,409

$2,838$2,838

20012001 20022002 20032003 20042004

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Diversified Sales MixDiversified Sales Mix

SegmentSegmentRegionRegion10%10%

46%46%19%19%

25%25%

5%5%

66%66%

9%9%

20%20%

EMEA Japan APAC LATAM Surgical Medical Respiratory Imaging

2004 Revenue - $2.8 Billion

International StrategyInternational Strategy

Developed Markets (90% of revenue)

Emerging Markets (10% of revenue)

Developed Markets (90% of revenue)

Emerging Markets (10% of revenue)

Sales force expansionNew market opportunitiesNew product development

Geographical expansion into new markets Go directSell locally produced products

Sales force expansionNew market opportunitiesNew product development

Geographical expansion into new markets Go directSell locally produced products

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Investing In Our International Sales ForceInvesting In Our International Sales Force

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2003 2004 2005E

Developed MarketsDeveloped Markets Emerging MarketsEmerging Markets

2,6432,643 2,9132,913

3,3483,348

365365 468468 569569

Capitalizing on a Shifting Healthcare LandscapeCapitalizing on a Shifting Healthcare Landscape

StrategyStrategy

Increased Product Increased Product OfferingOffering

Creating a separate Creating a separate PanPan--European European organization solely organization solely focused on Nonfocused on Non--Hospital Hospital business business

Develop a distribution Develop a distribution network to service the network to service the home healthcare markethome healthcare market

Issue: Growth in NonIssue: Growth in Non--Hospital SalesHospital Sales

2004 2007E

12%CAGR175175

250250

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Focused Energy in Emerging MarketsFocused Energy in Emerging Markets

26% 25%

19%

BrazilBrazil IndiaIndia ChinaChina

Go direct – Imaging / SurgicalBrazil India China

New markets through distributors

Poland / Russia / Turkey – Imaging

New sales offices opening in 2005

HungaryCzech RepublicSlovakiaVietnam

Go direct – Imaging / SurgicalBrazil India China

New markets through distributors

Poland / Russia / Turkey – Imaging

New sales offices opening in 2005

HungaryCzech RepublicSlovakiaVietnam

2001 2001 –– 2004 CAGR2004 CAGR

Tyco Clinical InstituteTyco Clinical Institute

Cutting edge training facility Cutting edge training facility for surgeonsfor surgeons

Showcase Tyco HealthcareShowcase Tyco Healthcare’’s s full line of medical products full line of medical products and services to Chinese and services to Chinese healthcare market healthcare market

Gain customer recognition Gain customer recognition

Provide internal sales and Provide internal sales and management training management training ‘‘in China for Chinain China for China’’

Commitment to Long Term Growth

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Tyco Healthcare ChinaTyco Healthcare China

Convert sales through Convert sales through distributors to a more distributors to a more direct sales force modeldirect sales force model

Create an R&D center Create an R&D center by 2006by 2006

Increase market share Increase market share for new and existing for new and existing products through Tyco products through Tyco Clinical InstituteClinical Institute

2004 2007E

44%CAGR

$100M

$33M

Opportunity: A Rapidly Growing Middle ClassOpportunity: A Rapidly Growing Middle Class

SummarySummary

Diversified growth strategyDiversified growth strategy

Significant investment in our sales forceSignificant investment in our sales force

Focused on developed markets and Focused on developed markets and emerging high growth economiesemerging high growth economies

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Tyco HealthcareGrowth from New Products

Mark ThomMark ThomGroup President, Mallinckrodt Imaging & RespiratoryGroup President, Mallinckrodt Imaging & RespiratoryScott DrakeScott DrakePresident, President, ValleylabValleylab

Oximetry

Critical Care Systems

Ventilation

Sleep

Oxygen

Puritan BennettNellcor

RESPIRATORY2 Divisions2 Divisions

2005E Revenue2005E Revenue

2005E Growth2005E Growth

Market OpportunityMarket Opportunity

$1.1B

8%

$6.1B

$1.4B

$4.2B

A Global Business A Global Business -- 60% US / 40% ROW60% US / 40% ROW

Segment Overview – Imaging & RespiratorySegment Overview – Imaging & Respiratory

Contrast Media & Delivery Systems

Nuclear Medicine

Mallinckrodt

IMAGING

7 Segments7 Segments

5%

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Puritan BennettNellcorMallinckrodtIMAGING RESPIRATORY

• New x-ray / CT contrast agents

• MRI contrast indications

• “Smart” contrast delivery

• Infection imaging• Nuclear oncology• Nuclear cardiology

• Mobile / wireless patient monitoring

• New monitoring parameters

• Patient airway solutions

• Lower acuity ventilation

• Portable oxygen therapies

• Sleep interfaces (masks)

• Diagnostics for sleep disorders

• Patient friendly sleep therapies

Targeted Areas of Investment –Imaging / RespiratoryTargeted Areas of Investment –Imaging / Respiratory

New Product Development Cycle: 18 Months to 7 Years

A Global Business A Global Business -- 40% US / 60% ROW40% US / 60% ROW

U.S. SURGICALU.S. SURGICAL VALLEYLABVALLEYLAB2 Divisions2 Divisions

4 Segments4 Segments

2005E Revenue2005E Revenue

2005E Growth2005E Growth

Market OpportunityMarket Opportunity

EndomechanicalEndomechanicalSuturesSutures

ElectrosurgeryElectrosurgeryVessel SealingVessel Sealing

12%12%

$6.5B$6.5B

$2.5B$2.5B

Segment Overview – SurgicalSegment Overview – Surgical

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BiosurgerytechnologyEndo stapling –enhanced clinical outcomes / technology developmentGlobal expansion of suture business

BiosurgerytechnologyEndo stapling –enhanced clinical outcomes / technology developmentGlobal expansion of suture business

LigaSure™• Platform

expansion• Breakthrough /

organ repairHardware platform advancementRF Ablation clinical outcomes

LigaSure™• Platform

expansion• Breakthrough /

organ repairHardware platform advancementRF Ablation clinical outcomes

U.S. SURGICAL VALLEYLAB

Targeted Areas of Investment – SurgicalTargeted Areas of Investment – Surgical

New Product Development Cycle: 18-36 months

NeutroSpec™ Imaging AgentNeutroSpec™ Imaging Agent

Radiolabels white blood Radiolabels white blood cells to diagnose equivocal cells to diagnose equivocal appendicitis in patients appendicitis in patients 5 and older5 and olderRapidRapid –– 1 hour infection 1 hour infection diagnosis helps prevent diagnosis helps prevent unnecessary unnecessary appendectomies appendectomies SafeSafe –– Requires no Requires no blood handlingblood handlingSimpleSimple –– quick and easy quick and easy ““singlesingle--injectioninjection”” prep kitprep kit

Industry’s First Major Radionuclide in 9 Years

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2005E 2006E 2007E

NeutroSpec™ Imaging AgentNeutroSpec™ Imaging Agent

Sales OutlookSales Outlook

$31M$31M$31M

$22M$22M$22M

$11M$11M$11M

Market Opportunity:Equivocal Appendicitis $70M

Ex Vivo Infection Imaging $100M

“…“…NeutroSpecNeutroSpec……could make could make it easier to diagnose it easier to diagnose appendicitis. Thatappendicitis. That’’s good s good news, because accurate news, because accurate diagnosis is a problemdiagnosis is a problem……In trials, the technique In trials, the technique diagnosed nearly 100% diagnosed nearly 100% of appendicitis cases within of appendicitis cases within an hour.an hour.””

Time Magazine, Time Magazine, ““Your Time/ HealthYour Time/ Health””July 19, 2004July 19, 2004

LigaSure™ VLigaSure™ V

Seals and divides up to Seals and divides up to 7 mm vessels7 mm vesselsJaws designed to Jaws designed to optimize tissue optimize tissue dissectiondissection5 mm shaft size 5 mm shaft size ––half the size of half the size of current technologycurrent technologyIntegrated hand Integrated hand switching switching –– increased increased surgeon control surgeon control and safetyand safety

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$300M Market Opportunity

2004 2005E 2006E

$41M$41M$41M

$29M$29M$29M

$13M$13M$13M

LigaSure™ VLigaSure™ V


LigaSure™LigaSure™

LigaSureLigaSureTMTM PlatformPlatform

Generator and Generator and 9 disposable 9 disposable products availableproducts availableSix products in developmentSix products in development

GrowthGrowthMarket Market –– 19%19%U.S. Surgical / U.S. Surgical / ValleylabValleylab –– 70% 70%

2003 sales $25M2003 sales $25M2005E $200M2005E $200M

“I believe the LigaSure™ System is the most significant advance in surgical instruments since the introduction of the stapler 40 years ago.”- Nadeem Abu-Rustum, M.D.

Director, Minimally Invasive Surgery, Memorial Sloan Kettering Cancer Center

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OptiVantage™ DH Dual Head Injector OptiVantage™ DH Dual Head Injector

Major enhancement to Major enhancement to ““Delivery SystemDelivery System”” strategystrategy

Helps grow/defend $400M xHelps grow/defend $400M x--ray ray contrast media franchisecontrast media franchise

Saline Saline ““pushpush”” follows contrast follows contrast injection to optimize image qualityinjection to optimize image quality

Fully programmable powerhead Fully programmable powerhead provides improved technologist provides improved technologist control and patient safetycontrol and patient safety

OptiBolusOptiBolus™™ software software (released 11/04) dramatically (released 11/04) dramatically enhances image qualityenhances image quality

Only compatible with our Only compatible with our UltrajectUltraject®® prefilledprefilled and / or and / or disposable syringes disposable syringes

Growth Via ‘Smart’ DeliveryGrowth Via ‘Smart’ Delivery

Injector Technology Fueling Pre-filled Growth

2005E 2006E 2007E

$43M$43M$43M$39M$39M$39M$35M$35M$35M

Sales OutlookSales OutlookTotal Injectors / DisposablesTotal Injectors / Disposables

2005E 2006E 2007E

Sales OutlookSales OutlookTotal PreTotal Pre--Filled SyringesFilled Syringes

$131M$131M$131M$152M$152M$152M

$175M$175M$175M

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Endo GIA™ IV StaplerEndo GIA™ IV Stapler

Vastly improved access Vastly improved access via 90via 90°° articulation articulation (current technology 45(current technology 45°°))

360360°° rotation allows for rotation allows for improved surgeon improved surgeon ergonomicsergonomics

Directional Stapling Directional Stapling Technology improves Technology improves staple formation staple formation and sealing and sealing

“Takes lap gastric bypass to the next level.”Dr. Phil Schauer, Cleveland Clinic

Market Opportunity $350M

Endo GIA™ IV StaplerEndo GIA™ IV Stapler


$36M$36M$36M

$24M$24M$24M

$14M$14M$14M

Market OpportunityMarket Opportunity$780M Total Market Opportunity$780M Total Market Opportunity

U.S. Surgical50%

U.S. SurgicalU.S. Surgical50%50%

Ethicon50%

EthiconEthicon50%50%

2007E2007E2007E2006E2006E2006E2005E2005E2005E

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Sleep Apnea Diagnosis / TreatmentSleep Apnea Diagnosis / Treatment

Cornerstone of Puritan Bennett Cornerstone of Puritan Bennett Homecare businessHomecare businessGrowing 40% year over yearGrowing 40% year over year7 new products over 13 months7 new products over 13 months

DiagnosticsDiagnosticsSandman EliteSandman Elite®®

SandmanSandman®® EXpressEXpress™™TherapeuticsTherapeutics

BreezeBreeze®® SleepgearSleepgear®® maskmaskGoodKnightGoodKnight®® 425 Bi425 Bi--LevelLevel®®Humidification chamberHumidification chamberDreamFitDreamFit™™ mask (2/05)mask (2/05)RoyalRoyal™™ mask (9/05)mask (9/05)

Design features promote user Design features promote user compliance and portabilitycompliance and portability

Sleep Apnea Diagnosis / TreatmentSleep Apnea Diagnosis / Treatment

2005E 2006E 2007E

$183M$183M$183M

$146M$146M$146M

$114M$114M$114M


Market Opportunity $1.1BMarket Growth 18%

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“…ablation will be the standard of care for cancer treatment for liver, lung and kidney tumors.”

“…ablation will be the standard of care for cancer treatment for liver, lung and kidney tumors.”

- Damian Dupuy M.D.Professor and Director of Minimally Invasive Therapy

and Ultrasound at Rhode Island Hospital

- Damian Dupuy M.D.Professor and Director of Minimally Invasive Therapy

and Ultrasound at Rhode Island Hospital

Valleylab RadioFrequency AblationValleylab RadioFrequency Ablation

Switching GeneratorSwitching Generator

Designed to treat larger Designed to treat larger lesionslesions

Provides capability to treat Provides capability to treat multiple lesions multiple lesions simultaneouslysimultaneously

Decreases procedure timeDecreases procedure time

Simplified customer Simplified customer interfaceinterface

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Valleylab RadioFrequency AblationValleylab RadioFrequency Ablation

2005E 2006E 2007E

$58M$58M$58M

$40M$40M$40M

$28M$28M$28M


2007 Market Size - $250M2015 Market Size - $700M - $1.5B

Operational ExcellenceBecoming Part of Tyco DNAOperational ExcellenceBecoming Part of Tyco DNA

Naren Naren GursahaneyGursahaneySVP, Operational ExcellenceSVP, Operational Excellence

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Operational Excellence – 2004 ResultsOperational Excellence – 2004 Results

Six SigmaTrained 2,400+ employees and delivered $272MExited 390 facilities totaling 7M Sq. Ft.

One Tyco SourcingOver 110 active teams, generated $318M

Working Capital8 day improvement, ~$900M impact

Six SigmaTrained 2,400+ employees and delivered $272MExited 390 facilities totaling 7M Sq. Ft.

One Tyco SourcingOver 110 active teams, generated $318M

Working Capital8 day improvement, ~$900M impact

Six Six SigmaSigma

Working Working CapitalCapital

One Tyco One Tyco SourcingSourcing

On Track to Exceed $3B by 2006

Roadmap to $3 Billion +Roadmap to $3 Billion +

Raising 2006 Target To >$4B

StatusStatus

N/A$332M$203M““To GoTo Go”” in 2006in 2006

3+ days$350M$250M$400M2005 Target2005 Target

8 days$900M$318M$272M20042004

7 days$700M$100M$125M20032003

CalculationCalculation MethodMethod

WorkingCapital

StrategicSourcingSix Sigma

Operating income Operating income benefit, net of benefit, net of incremental incremental investmentinvestment

Savings net of Savings net of commodity price commodity price

increases not passed increases not passed on to customerson to customers

Improvement in Improvement in working capital working capital velocity (days)velocity (days)

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2003 2004 2005E 2006E

$125M

$272M

$400M

$480M

Savings ImpactSavings Impact

Six Sigma – Foundation of Operational ExcellenceSix Sigma – Foundation of Operational Excellence

Manufacturing ExcellenceManufacturing Excellence(Operational Six Sigma)(Operational Six Sigma)

Process ExcellenceProcess Excellence(Transactional Six Sigma)(Transactional Six Sigma)

Design ExcellenceDesign Excellence(Design for Six Sigma)(Design for Six Sigma)

Waste ReductionWaste Reduction(Lean Manufacturing)(Lean Manufacturing)

Impacting All Aspects of Our Business

$1.25B+ by 2006

Six Sigma – Manufacturing ExcellenceSix Sigma – Manufacturing Excellence

Profile variance results in a trim loss Profile variance results in a trim loss of 1 to 1of 1 to 1--1/21/2”” of resin on each edge of of resin on each edge of polymer curtainpolymer curtainRising resin costs compound impactRising resin costs compound impact

Major drivers of edge bead Major drivers of edge bead profile variation:profile variation:•• Plug positionPlug position•• Blade positionBlade position•• Plug Plug –– Blade combinationBlade combination

Air gap & melt temperature not significantAir gap & melt temperature not significant

Implemented new process Implemented new process parameters and operating window parameters and operating window (minimal bead width)(minimal bead width)Established bead control databaseEstablished bead control database……Owned by shift supervisorsOwned by shift supervisorsOperators trained in new process Operators trained in new process and toolsand tools

Ludlow Coated Products Project ExampleLudlow Coated Products Project ExampleIssueIssue

LearningsLearnings

Impact/Control PlanImpact/Control Plan

$140k of Savings … $500k Translation Opp’ty

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Large variation in the level of Time & Large variation in the level of Time & Material (T&M) services discountingMaterial (T&M) services discounting•• $61.52/ticket average in West Region$61.52/ticket average in West Region•• $46.24/ticket average for others$46.24/ticket average for others

Lost revenues and profitsLost revenues and profits

Billing expectations are established Billing expectations are established at the time of scheduling the visitat the time of scheduling the visitTechnician knowledge and training is Technician knowledge and training is key to driving consistent results key to driving consistent results Numerous billing oversights, driven Numerous billing oversights, driven by inconsistent processby inconsistent process

Increase of $5.35/ticketIncrease of $5.35/ticketKey improvements:Key improvements:•• Performance management reportsPerformance management reports•• Standardized dispatch processStandardized dispatch process•• New web based trainingNew web based training

Six Sigma – Process Excellence Six Sigma – Process Excellence

$6.5M of Increased Revenue/Profit To Date

$3 5

$4 0

$4 5

$50

$55

$6 0

$6 5

$70

$75

Fiscal M ont h

$0

$1

$2

$3

$4

$5

$6

$7

Monthly Gain Cumulative Gain 6 Sigma Goal FY03 T&M/Ticket FY04 T&M/Ticket

IssueIssue Impact/Control PlanImpact/Control PlanADT North America ExampleADT North America Example

LearningsLearnings

Six Sigma – Design ExcellenceSix Sigma – Design Excellence

New enteral feeding platformNew enteral feeding platform……$400M global market opportunity$400M global market opportunityAggressive cost target ($100 below Aggressive cost target ($100 below current levels)current levels)Pump and disposables being developedPump and disposables being developed

Voice of Customer interviews helped Voice of Customer interviews helped identify key design characteristics:identify key design characteristics:•• Accurate volume delivery ratesAccurate volume delivery rates•• Connection port fitConnection port fit•• Minimal clogging of pump sets/tubesMinimal clogging of pump sets/tubes•• Cleaning time and effortCleaning time and effort•• Pump size and weightPump size and weight

Met all product development targetsMet all product development targets……Schedule, budget, cost, performance Schedule, budget, cost, performance $3M annual cost savings, $3M annual cost savings, 75% reduction in build times75% reduction in build timesDesign validation: 86% liked product Design validation: 86% liked product better than current offeringsbetter than current offerings

Revenues 83% Above Target, Costs 4% Below

Tyco Healthcare Project ExampleTyco Healthcare Project ExampleOpportunityOpportunity

LearningsLearnings

Impact/Control PlanImpact/Control Plan

31

Six Sigma – Waste ReductionSix Sigma – Waste Reduction

IssueIssue Impact/Control PlanImpact/Control PlanManufacture of cash valves moved from Manufacture of cash valves moved from Cullman, AL to Black Mountain, NCCullman, AL to Black Mountain, NCNumerous issues in Cullman Numerous issues in Cullman …… Large Large batch sizes, poor quality and deliverybatch sizes, poor quality and deliveryProcess flow includes offProcess flow includes off--site warehousesite warehouse

Value Stream Mapping Value Stream Mapping –– 126 days of cycle 126 days of cycle time, only 68 minutes of processingtime, only 68 minutes of processingLarge batch sizes drove long queue times Large batch sizes drove long queue times and excess inventoryand excess inventoryLean implementation could reduce floor Lean implementation could reduce floor space needs by 20%space needs by 20%

Implemented kanbans/pull system for Implemented kanbans/pull system for all raw materialsall raw materialsDesigned manufacturing cells, Designed manufacturing cells, including support resourcesincluding support resourcesProduction output measured on an Production output measured on an hourly basishourly basisDaily crossDaily cross--functional meetings to functional meetings to resolve issuesresolve issues

Big Impact on Inventory and Customer Response

LearningsLearnings

95%43/hr22/hrUnits / hr44%38 min68 minProcess Time19%$1.3M$1.6MProduct Cost68%325 ft1005 ftTravel Distance35%82d126dLead Time33%$2M$3MInventory

Impr.%AfterBeforeMeasurement

Tyco Flow Control Project ExampleTyco Flow Control Project Example

Six Sigma Staffing – Investing In Our PeopleSix Sigma Staffing – Investing In Our People

2003 2004 2005E 2006E

975

2,423 2,500 2,500

2003 2004 2005E 2006E

Employee Training Employee Training Six Sigma HeadcountSix Sigma Headcount

1,450

3,650

5,4006,150

>2% of Target Population in Full-Time Roles By 2006

GB BB MBB

32

Six Sigma – Real EstateSix Sigma – Real Estate

Reduced Footprint and Better Management of Real Estate Assets

Reduced footprint by 390 Reduced footprint by 390 facilities and 7M sq ft in 2004facilities and 7M sq ft in 2004

Additional 6M+ sq ft actively Additional 6M+ sq ft actively listed with brokers at listed with brokers at year endyear end

New policies and procedures New policies and procedures rolled out globallyrolled out globally

Rationalized real estate Rationalized real estate broker relationshipsbroker relationships

4188 39583568

3300

2002 2003 2004 2005E

131M125M

118M110M

Sq ft # facilities

Touching Every Part of Tyco’s Business

Six Sigma – Tyco-Wide ApproachSix Sigma – Tyco-Wide Approach

Language Translation (7)

“Transactional”- Administration- Commercial- Service

Lean(Waste elimination)

EMEAAsia

Latin America

Fire & SecurityEngineered ProductsPlastics & Adhesives

Corporate

2004“Expand the Core”

Green BeltTraining(100%)

CustomersSuppliers

2006+“Sustain the

Gains”

AwarenessTraining(100%)

Common Curriculum

(DMAIC, DFSS)Training

New ProductDevelopment

“Operational”- ManufacturingScope

Design for Six Sigma

(Efficient design)

Six Sigma(Variation/defect

reduction)Tools

North AmericaGeographies

Healthcare ElectronicsSegments

2005“Build the

Foundation”

2003“Build the

Foundation”

33

Strategic Sourcing – Leveraging our SpendStrategic Sourcing – Leveraging our Spend

Volume leverage/ Volume leverage/ ““One TycoOne Tyco”” TeamsTeams

eAuctionseAuctions

Low cost country Low cost country sourcingsourcing

ElectronicsElectronics

HealthcareHealthcareFire & Fire & SecuritySecurity

Engineered Engineered Products & Products &

ServicesServices

Plastics & Plastics & AdhesivesAdhesives

Spend by SegmentTotal = $19.4 B

Spend by SegmentTotal = $19.4 B

$6.0B$6.0B

$4.7B$4.7B$3.5B$3.5B

$2.6B$2.6B

$1.4B$1.4B

Corporate & Corporate & OtherOther$1.2B$1.2B

Capitalizing on the Total Buying Power of Tyco

Key StrategiesKey Strategies

Gross Headwind Net

$435M $115M$320M

Original PlanOriginal Plan

Strategic Sourcing – 2005 Update and Recovery PlanStrategic Sourcing – 2005 Update and Recovery Plan

Launched new teams to address $800M of additional spendLaunched new teams to address $800M of additional spend

Challenged existing teams to deliver incremental savingsChallenged existing teams to deliver incremental savings

Aggressively working to delay / mitigate increasesAggressively working to delay / mitigate increases

Working to Offset $100M+ of Additional Headwind

Gross Headwind Net

$435M $220M

$215M

Latest ViewLatest View

$250M

Key Recovery ActionsKey Recovery Actions

Recovery Actions

34

Strategic Sourcing – “One Tyco” TeamsStrategic Sourcing – “One Tyco” Teams

22 Category Teams, 110+ Initiatives

North AmericaNorth America••Capital Equipment Capital Equipment ••ChemicalsChemicals••Commercial PrintCommercial Print••ElectronicsElectronics••EnergyEnergy••FacilitiesFacilities••FleetFleet••HRHR••ITIT••LegalLegal••Metal FormingMetal Forming••Molded PlasticsMolded Plastics••MROMRO••Office EquipmentOffice Equipment••Office SuppliesOffice Supplies••PackagingPackaging••Resins Resins ••TelecomTelecom••Temporary LaborTemporary Labor••ToolingTooling••TransportationTransportation••TravelTravel

Latin AmericaLatin America••EnergyEnergy••FleetFleet••MROMRO••PackagingPackaging••TelecomTelecom••Temporary LaborTemporary Labor••TransportationTransportation••TravelTravel

EMEAEMEA••Capital EquipmentCapital Equipment••ElectronicsElectronics••EnergyEnergy••FleetFleet••Metal FormingMetal Forming••MROMRO••Office SuppliesOffice Supplies••PackagingPackaging••ResinsResins••TelecomTelecom••Temporary LaborTemporary Labor••TransportationTransportation••TravelTravel AsiaAsia

••ElectronicsElectronics••FleetFleet••PackagingPackaging••TelecomTelecom••Temporary LaborTemporary Labor••ToolingTooling••TransportationTransportation••TravelTravel

Strategic Sourcing – Electronics TeamStrategic Sourcing – Electronics Team

Capacitors: Second time through processCapacitors: Second time through process$27M addressed$27M addressed

$13.5M sourced via eAuction, balance was awarded via eRFQs$13.5M sourced via eAuction, balance was awarded via eRFQsIncumbent savings of $5M (18%)Incumbent savings of $5M (18%)

No switching requiredNo switching required

35% savings total opportunity (some offset by switching costs) 35% savings total opportunity (some offset by switching costs) Reduced supply base by 50%Reduced supply base by 50%

$1,200M

$70M$650M

Annual Savings

AddressableTotal Annual Spend

$39M

$5M$27M

Annual Savings

AddressedTotal Annual Spend

Total Electronics SpendTotal Electronics Spend Capacitor SpendCapacitor Spend

27% Price Reduction … 60+ Days Terms

35

2004 2005E 2006E

$0.5B

$1.0B

$1.2B

eAuction VolumeeAuction Volume

Strategic Sourcing – eAuctionsStrategic Sourcing – eAuctions

Dedicated resources in every Dedicated resources in every Segment and CorporateSegment and Corporate

Global deployment of Global deployment of eSourcing toolseSourcing tools

Ensuring Low Cost Country Ensuring Low Cost Country suppliers participationsuppliers participation

Compressed negotiation cycleCompressed negotiation cycle

Key Part of Strategic Sourcing Toolkit

Strategic Sourcing – eAuctionsStrategic Sourcing – eAuctions

11,000 freight lanes bid in 11,000 freight lanes bid in 4 events:4 events:

Pan EuropeanPan EuropeanBenelux/GermanyBenelux/GermanyItaly/SpainItaly/SpainFranceFrance

Multi Segment participation Multi Segment participation in analysisin analysis

aAuction generated 9% aAuction generated 9% additional savings over additional savings over initial bidsinitial bids

Excellent carrier participationExcellent carrier participation

EMEA Road FreightEMEA Road FreightFrance Standard > 1 tonFrance Standard > 1 ton

New Deals Delivering ~$12M USD of Savings

36

20032003 20042004

$0.8B

$1.4B

$1.9B

$2.3B

LCC SpendLCC Spend

Strategic Sourcing – Low Cost Country SourcingStrategic Sourcing – Low Cost Country Sourcing

% of Dir. Mat’l: 10 17 23 28

% of Dir. Mat’l: 10 17 23 28

Good Start in 2004 … Big Opportunity Ahead

2004 Focus on Asia 2004 Focus on Asia …… International International Purchasing Organizations established Purchasing Organizations established in China and India:in China and India:

ToolingToolingElectronicsElectronicsMetal formingMetal formingChemicalsChemicals

Expanding to Eastern Europe, Latin Expanding to Eastern Europe, Latin America & Southeast Asia in 2005America & Southeast Asia in 2005Developing local talent via ongoing Developing local talent via ongoing training training …… Sourcing, Integrity, Sourcing, Integrity, Trade ComplianceTrade ComplianceRaising awareness & overcoming Raising awareness & overcoming internal resistance in high cost countries internal resistance in high cost countries ““One TycoOne Tyco”” strategic sourcing teams in strategic sourcing teams in Latin America, China, India & Singapore Latin America, China, India & Singapore to focus on indirectto focus on indirect

2005E2005E 2006E2006E

Butterfly Valves Butterfly Valves Tyco Flow ControlTyco Flow Control

Global Sourcing Enabling Organic Growth

Objective: Reduce costs and improve market position/share in a highly competitive product line

From: Houston, Texas

To: Chennai, India

Results:29% cost reduction on 8 models$636k of annual savingsSales up 20%

Objective: Reduce costs and improve market position/share in a highly competitive product line

From: Houston, Texas

To: Chennai, India

Results:29% cost reduction on 8 models$636k of annual savingsSales up 20%

Strategic Sourcing – Low Cost Country SourcingStrategic Sourcing – Low Cost Country Sourcing

37

Strategic Sourcing RoadmapStrategic Sourcing Roadmap

Expanding Toolkit and Scope

eSourcingLeadership Training

“One Tyco”22 Teams/110+ Sub-Teams

Begin Global Expansion

Volume LeverageeSourcing

Low Cost Country Sourcing

EMEAChinaIndia

Latin America

Fire & SecurityEngineered ProductsPlastics & Adhesives

Corporate

2004“Expand the Core”

Six Sigma (Training)New Product Development

Supplier Development

Emerging MarketExpansion

2006+“Sustain the

Gains”

Trade ComplianceIT Contract

Six Sigma Sourcing7 Step Sourcing

ProcessTraining

“Global Sourcing”Continue Global

Expansion55% Spend Addressed

“Segment Specific”- 10 Teams- Limited Spend

Scope

Indirect ComplianceWorking Capital (DPO)

Traditional “Purchasing”Strategies

Eastern EuropeNorth AmericaGeographies

Healthcare ElectronicsSegments

2005“Build the

Foundation”

2003“Build the

Foundation”

Working Capital – Good Progress, More to AccomplishWorking Capital – Good Progress, More to Accomplish

12%

16%

20%

24%

Tyco 200

2

Tyco 2

003

Tyco 200

4

Tyco 2

005E GE 3M

Honeywell

Emerson

Danah

er UTX

Working Capital DaysWorking Capital Days

2003 2004 2005E

19.1% Peer Group Avg

$900M Of Cash Freed Up In 2004

Working Capital as a % of SalesWorking Capital as a % of Sales

60

70

80

90

100

2002

2004 WC: $8.1 Billion

38

Working Capital – ReceivablesWorking Capital – Receivables

Receivable DaysReceivable Days

Strong Momentum on Receivable Days

Champion: Keller Arnold Champion: Keller Arnold –– VP, Financial Planning VP, Financial Planning & Analysis& Analysis5 day improvement 5 day improvement in 2004in 2004Created TycoCreated Tyco--wide wide forum for best practice forum for best practice sharing within credit and sharing within credit and collectionscollections2003 2004 2005E

50

60

70

80

2002

2004 A/R: $6.5 Billion

Working On All Drivers of Inventory

Working Capital – InventoryWorking Capital – Inventory

Executive Champion: Naren Executive Champion: Naren Gursahaney Gursahaney –– SVP, Op ExSVP, Op Ex

10 Day improvement in 2004, 10 Day improvement in 2004, across all segmentsacross all segments

Developed playbook of Developed playbook of internal and external internal and external best practicesbest practices

Currently rolling out Currently rolling out playbook across all business playbook across all business segments globallysegments globally

Inventory DaysInventory Days

2003 2004 2005E

60

70

80

90

2002

2004 Inventory: $4.4 Billion

39

2003 2004 2005E

30

40

50

60

2002

2004 A/P: $2.7 Billion

Payable DaysPayable Days

Aggressively Working to Improve Payment Terms

Working Capital – Accounts PayableWorking Capital – Accounts Payable

Champion: Shelley Stewart Champion: Shelley Stewart –– VP, Supply Chain VP, Supply Chain DPO declined by 2 days DPO declined by 2 days in 2004in 2004Program in place to Program in place to standardize terms standardize terms Guidelines for balancing Guidelines for balancing payment terms with payment terms with discountsdiscounts

SummarySummary

Continuing to make progress on all Continuing to make progress on all fronts, in all businessesfronts, in all businesses

Expanding toolkit to address new Expanding toolkit to address new opportunities and broaden reachopportunities and broaden reach

Investing in training to fill skill gapsInvesting in training to fill skill gaps

Roadmaps in place to continue to deliver Roadmaps in place to continue to deliver impact across Tycoimpact across Tyco

Op Ex Becoming Part Of Tyco DNA

40

Progress Report

Dave RobinsonDave RobinsonPresident, Tyco Fire & SecurityPresident, Tyco Fire & Security

Helping Make the World SaferHelping Make the World Safer

Electronic Security Services and ProductsElectronic Security Services and Products

Sales Design Installation Monitoring Maintenance

Access Control

VideoSurveillance RFID Intrusion

Security

ElectronicArticle

Surveillance

41

Helping Make the World SaferHelping Make the World Safer

Fire Protection Services and ProductsFire Protection Services and Products

ProtectiveEquipment

FireSuppression

Fire Detection

Special Hazards

BreathingSystems

Sales Design Installation Monitoring Maintenance

Europe,Europe,Middle East Middle East

& Africa& Africa29%29%

Australia / NZAustralia / NZ5%5%

AsiaAsia7%7%

U.S. / CanadaU.S. / Canada58%58%

Latin America Latin America 2%2%

Strong Presence in Developed Markets Upside in High-Growth Economies

Broad Geographic CoverageBroad Geographic Coverage

2004 Revenue $11.4B2004 Revenue $11.4B

42

Global Leadership Position

Worldwide Fire MarketWorldwide Fire Market$30B$30B

TycoTyco

Worldwide Electronic Security MarketWorldwide Electronic Security Market$50B$50B

TycoTyco

$80B global fire & electronic security market$80B global fire & electronic security market

#1 player in both markets#1 player in both markets

Strong Position in Attractive Markets

3- 4%Growth

7- 10% Growth

Competitive Landscape

0

500

1,000

1,500

2,000

2,500

Tyco Brinks ProtectionOne

Monitronics0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Tyco UnitedTech./Kidde

Siemens Honeywell

Security Monitoring(US Only)

Fire Products & Services (Global)

Recurring Annual Revenue($ Millions)

7x larger than 7x larger than nearest U.S. nearest U.S. competitorcompetitor

Over 2x larger Over 2x larger than nearestthan nearestcompetitorcompetitor

Key Competitors Are 20,000+ Small Local Players

($ Millions)Annual Revenue

43

2004 Revenue 2004 Revenue $11.4 Billion $11.4 Billion

Our Business Emphasis is ServicesOur Business Emphasis is Services

56%56%

32%32%

12%12%

Worldwide FireWorldwide FireServicesServices

Worldwide Security ServicesWorldwide Security Services

$11.4B Revenue$11.4B Revenue

ResidentialResidential CommercialCommercial

8.3M Customers8.3M Customers

Most of Our Business Is Commercial

82%82%

18%18%

64%64%

36%36%

Serving 90% of Fortune 500 Companies

44

“Current Status” – 2004 Presentation“Current Status” – 2004 Presentation

Strong position in attractive markets Strong position in attractive markets

New business models to improve returnsNew business models to improve returns

Working as a teamWorking as a team……integrating & integrating & improved controlsimproved controls

Driving Operational ExcellenceDriving Operational Excellence

Gaining traction in financial performanceGaining traction in financial performance

Solid longSolid long--term growth opportunitiesterm growth opportunities

2004 Presentation2004 Presentation 2005 Perspective2005 Perspective

Progress Continues on TrackProgress Continues on Track

Markets & positionMarkets & positionNew business modelsNew business modelsTeamwork & controlsTeamwork & controls

Operational excellenceOperational excellenceFinancial performance Financial performance tractiontractionLongLong--term growthterm growth

Still attractive & strongStill attractive & strong

In place & working wellIn place & working well

StrongerStronger

Delivering resultsDelivering results

Strong cash, Strong cash, improving profitsimproving profits

Investing for futureInvesting for future

45

($Millions)($Millions)

(400)(400)

00

400400

800800

1,2001,200

1,6001,600

2,0002,000

Free Cash Flow ImprovementFree Cash Flow Improvement

$778$778

20022002 20032003

$1,496$1,496

20042004

* “Free cash flow” is a non-GAAP measure , see Appendix for cash flow reconciliation.

>> $1.5 Billion Better Run Rate in 2 Years

20042004

Worldwide Security Worldwide Security (excl. Cont. Europe)(excl. Cont. Europe)

Margin Improvement – Lines of BusinessMargin Improvement – Lines of Business

15%15%

2%2%

18%18%

10%

20032003

5%5%

13%13%

(7%)(7%)

8%

5%5%

10%10%

16%16%

4%4%

19%19%

12%

7%7%

2005 2005 TargetTarget

**Excludes Restructuring and Divestment CostsExcludes Restructuring and Divestment Costs

ADT Cont. EuropeADT Cont. Europe

Tyco Safety ProductsTyco Safety Products

Worldwide FireWorldwide Fire

Total Fire & Security*Total Fire & Security*

46

1141143,2043,204

RevenueRevenue $11,447$11,447Gross ProfitGross Profit 4,3724,372 38.2%38.2%Selling Selling 1,3111,311

G&A G&A 1,7791,779Intangible AmortizationIntangible AmortizationOperating ExpensesOperating Expenses

Operating Income*Operating Income* $1,168$1,168 10.2%10.2%

15.5%15.5%

($ Millions)($ Millions)

*See Appendix for reconciliation to GAAP Operating Income

1211213,2613,261

$10,832$10,8324,1154,115 38.0%38.0%1,2561,256

1,8841,884

$854$854 7.9%7.9%

17.4%17.4%

20032003 20042004 2005 2005

Good Progress in P&L Focus AreasGood Progress in P&L Focus Areas

Operational Excellence Driving Initial Gains

7.7%7.7%1.4%1.4% 0.6%0.6%

1.8%1.8%1.8%1.8% 1.4%1.4% 0.9%0.9%

0%0%

5%5%

10%10%

15%15%

20%20%

2003* Restructuring Fix Cont.EuropeSecurity

Sourcing Six Sigma Other G&A

OrganicGrowth

Contingency

0.4%0.4%

2006 Target

1.0%1.0% 15.0%15.0%

Divestitures

Operational Excellence FocusOperational Excellence Focus

On Track

Update on Key Margin Improvement DriversUpdate on Key Margin Improvement Drivers

*See Appendix for reconciliation to GAAP Operating Income

14% 14% --16%16%

47

Restructuring & Divestiture UpdateRestructuring & Divestiture Update

Completed major restructuring programCompleted major restructuring program$240M of cost in 2003$240M of cost in 2003--20042004Headcount reduction of 5,900Headcount reduction of 5,900Facility reduction of 164Facility reduction of 164Redefined Tyco Safety Products roleRedefined Tyco Safety Products role$180M of annualized savings in 2005 & beyond$180M of annualized savings in 2005 & beyond

25+ businesses divested, $380M proceeds25+ businesses divested, $380M proceedsTotal revenues $900M, operating income margin 4%Total revenues $900M, operating income margin 4%

10+ non10+ non--core businesses remain to be soldcore businesses remain to be soldTotal revenues <$200M, breakevenTotal revenues <$200M, breakeven

2004 Operational Excellence Results

$28Million

$59Million

$90Million

$177Million

++ ++ ==

Real Estate Six Sigma Strategic Sourcing

304 properties 304 properties exitedexited

233 Black Belts233 Black Belts563 Green Belts563 Green Belts

Exceeded targetExceeded targetof $75 Millionof $75 Million

Total Savings

Targeting $200 Million in 2005 Operational Excellence Savings

48

Driving our Worldwide Security BusinessDriving our Worldwide Security Business

Key economic leversKey economic levers

Business models Business models

Legacy challengesLegacy challenges

Residential securityResidential security

Commercial securityCommercial security

AttritionAttrition

Key Levers Improvement OutlookKey Levers Improvement Outlook

2002/2003

Revenue per UnitRevenue per Unit

Operating ExpensesOperating Expenses

Subscriber Subscriber Acquisition CostAcquisition Cost

2004 2005 Longer Term

Clear Positive Trends While Working Through Legacy Challenges

49

20022002 20032003 20042004

Accounts Acquired (000)Accounts Acquired (000)

00

500500

1,0001,000

1,5001,500

2,0002,000

2,5002,500

DealerDealer Leased SystemsLeased Systems Outright Sales Outright Sales

Percent of Accounts AcquiredPercent of Accounts Acquired

10%10%

20%20%

30%30%

40%40%

50%50%

60%60%

70%70%

20022002 20032003 2004 2004 0%0%

ADT Worldwide Acquired AccountsADT Worldwide Acquired Accounts

More Disciplined Approach

Security Account Attrition CurveSecurity Account Attrition CurveAnnual Attrition RateAnnual Attrition Rate

Predictable Pattern…Significant Retention Challenge After 36 Months

YearsYears11 22 33 44 55 66 77 88 99 1010

50

ADT New Unit Production ADT New Unit Production New Units in ThousandsNew Units in Thousands

20022002 20032003 2004200400

100100200200300300400400500500600600700700800800Subscriber Acquisition Cost (SAC)Subscriber Acquisition Cost (SAC)

Q2'03Q2'03Q1'03Q1'03Q1'01Q1'01 Q2'01Q2'01 Q3'01Q3'01 Q4'01Q4'01 Q1'02Q1'02 Q2'02Q2'02 Q3'02Q3'02 Q4'02Q4'02 Q3'03Q3'03 Q4'03Q4'03 Q1'04Q1'04 Q2'04Q2'04 Q3'04Q3'04 Q4'04Q4'04

100100

200200

300300

400400

500500

600600

Dealer UnitsDealer Units Direct UnitsDirect Units

Today Minus 36 MonthsToday Minus 36 Months

Q1'05Q1'05

On Track to Reduce Attrition Below 14% for 2006

Attrition Rate Trends – Trailing 12 MonthsAttrition Rate Trends – Trailing 12 Months

20032003--Q1Q1 20032003--Q4Q4 20042004--Q1Q1 20042004--Q4Q4 20052005--Q1Q1

US ResidentialUS Residential 13.8% 16.9% 17.6% 14.3% 14.0%

US DealerUS Dealer 15.8% 17.0% 16.7% 18.0% 19.0%

US CommercialUS Commercial 13.8% 13.1% 13.0% 13.1% 12.9%

US TotalUS Total 14.2% 15.5% 15.6% 14.9% 14.9%

ROWROW 12.3% 16.8% 15.9% 15.4% 16.5%

WorldwideWorldwide 13.6% 15.9% 15.7% 15.0% 15.4%

51

Total AccountsTotal Accounts

$3.6B $3.6B

Increased RPU Offsets Account DeclineIncreased RPU Offsets Account Decline

7,000,0007,000,000

7,200,0007,200,000

7,400,0007,400,000

7,600,0007,600,000

7,800,0007,800,000

20032003 20042004

$42$42

$41$41

$40$40

$39$39

$38$38

$37$37

Total AccountsTotal Accounts Monthly Revenue Per UserMonthly Revenue Per User Annual Monitoring RevenueAnnual Monitoring Revenue

$ RPU$ RPU

Replacing the Monitoring Revenue Decline Replacing the Monitoring Revenue Decline

3,6073,607

687687

123123

219219167167

102102 2828

2,0002,000

2,2002,200

2,4002,400

2,6002,600

2,8002,800

3,0003,000

3,2003,200

3,4003,400

3,6003,600

3,8003,800

2003 AMR2003 AMR AttritionAttrition ResalesResales ResidentialResidential CommercialCommercial RPURPUIncreaseIncrease

FX/OtherFX/Other 2004 AMR2004 AMR

3,5593,559

Annual Monitoring Revenue (AMR) ($ Millions)Annual Monitoring Revenue (AMR) ($ Millions)

52

Residential Sales Rep ProductivityResidential Sales Rep Productivity

0x0x

1x1x

2x2x

3x3x

4x4x

5x5x

6x6x

7x7x

8x8x

< 6 < 6 MosMos 6 6 MosMos -- 1 Yr1 Yr 1 Yr 1 Yr -- 2 Yrs2 Yrs > 3 Yrs> 3 Yrs

34%34%of Repsof Reps




2,000 U.S. Residential Sales Reps, January 2005 2,000 U.S. Residential Sales Reps, January 2005

Units Booked / Residential Sales RepUnits Booked / Residential Sales Rep

Sales Rep Effectiveness Improves Dramatically Over Time

Sale

s R

ep P

rodu

ctiv

itySa

les

Rep

Pro

duct

ivity

Home and Away PackageMonthly Monitoring

Burglary Monitoring - Including ADT’s Quality Service Plan(Maintenance Program)

Life Safety Monitoring1

(Fire, Carbon Monoxide or Both)

Two-Way Voice

Cellular Backup

MobileSafety™ GPS

$__

$__

$__

$__

$__

Total $__

Package Total $__

Package Savings Per Month $19

FamilyPackageMonthly Monitoring

Burglary Monitoring - Including ADT’s Quality Service Plan (Maintenance Program)



Two-Way Voice

Cellular Backup

Companion Services®2

$__

$__

$__

$__

$__

Total $__

Package Total $__


Family PlusPackageMonthly Monitoring

Burglary Monitoring - Including ADT’s Quality Service Plan(Maintenance Program)



Two-Way Voice

Cellular Backup

Companion Services®2

$__

$__

$__

$__

$__

Total $__

Package Total $__


MobileSafety™ GPS $__

Residential RPU InitiativesResidential RPU Initiatives

53

ADT U.S. Monitoring CentersOperating Expense ProductivityADT U.S. Monitoring CentersOperating Expense Productivity

Building On Our Competitive Strength

8686888890909292949496969898

100100

20032003 20042004 Q1 2005Q1 2005

Expe

nse

per

Expe

nse

per

Mon

itore

d C

usto

mer

Mon

itore

d C

usto

mer

(Indexed to 100)(Indexed to 100)

Preparing the Foundation for GrowthPreparing the Foundation for Growth

20032003 20042004 20052005 20062006

Build Foundation for GrowthBuild Foundation for Growth

Operational ExcellenceOperational Excellence

Restructuring & DivestituresRestructuring & Divestitures

Business Model ChangesBusiness Model Changes

Control & IntegrationControl & Integration……Teamwork & CultureTeamwork & Culture

54

Increasing Sales Force to Drive GrowthIncreasing Sales Force to Drive Growth

Sales HeadcountSales Headcount

6,5006,500

7,5007,500

8,5008,500

9,5009,500

10,50010,500

11,50011,500

12,50012,500

13,50013,500

Sept '03Sept '03 Sept '04Sept '04 Jan '05Jan '05

WW WW SecuritySecurity (ex. Cont. Europe)(ex. Cont. Europe)Continental Europe SecurityContinental Europe Security

WW FireWW Fire

1,0001,000

2,0002,000

3,0003,000

4,0004,000

5,0005,000

Sep '03Sep '03 Sep '04Sep '04 Jan '05Jan '05

ADT U.S. "Feet on the Street"ADT U.S. "Feet on the Street"

ResidentialResidential CommercialCommercial

Combined With Focus on Quality & Productivity

Summary of Top Growth InitiativesSummary of Top Growth Initiatives

Expand and upgrade sales force while Expand and upgrade sales force while increasing sales force productivityincreasing sales force productivity

Increase revenue per customerIncrease revenue per customer

Provide industryProvide industry--best service packages, best service packages, leveraging technologiesleveraging technologies

Residential securityResidential security

Commercial securityCommercial security

Fire alarmsFire alarms

55

Worldwide Fire BusinessWorldwide Fire Business

38%

35%35%

45%

26%26%

Revenue $3.7BRevenue $3.7B Gross Profit $1.0BGross Profit $1.0B

20042004

13%13% 14%14%

14%14% 15%15%

Sprinkler Sprinkler ElectronicElectronic SuppressionSuppression OtherOther

Worldwide Security BusinessWorldwide Security Business

39%39%

Revenue $6.4BRevenue $6.4B20042004

34%34%

27%27%

ROW SecurityROW Security ADT North America ResidentialADT North America ResidentialADT North America CommercialADT North America Commercial

ROW SecurityROW Security$2.5B$2.5B

ADT North AmericaADT North America$3.9B$3.9B

56

Commercial SecurityBuilding on Our Strong Foundation

Bob DaleBob DaleVice President, Commercial SalesVice President, Commercial SalesADT North AmericaADT North America

39%39%

34%34%

27%27%

ROW SecurityROW Security$2.5B$2.5B

ADT North AmericaADT North AmericaResidential Residential

$1.8B$1.8B

ADT North AmericaADT North AmericaCommercialCommercial

$2.1B$2.1B

2004 Worldwide Security Business - $6.4B2004 Worldwide Security Business - $6.4B

57

ADT Commercial StrengthsADT Commercial Strengths

Clear market leadershipClear market leadership…… Peace of MindPeace of MindRevenueRevenueCustomersCustomers

ContinentContinent--wide sales and service organizationwide sales and service organization

BrandBrand…… Always ThereAlways There

Unique integration of products and servicesUnique integration of products and services

240+ Offices240+ Offices2,500+ Sales Reps2,500+ Sales Reps 6,700+ Technicians6,700+ Technicians

Commercial Sales OrganizationCommercial Sales Organization

Small Business Small Business Middle Market Middle Market National AccountsNational Accounts

RetailerRetailerGovernment Government Financial ServicesFinancial ServicesCommercial / IndustrialCommercial / Industrial

8 of 10 Top National Banks

80% of Top 100 Retailers

850 Federal Courthouses

WeWe’’re Aligned To Best Serve Our Customersre Aligned To Best Serve Our Customers’’ NeedsNeeds

90% of Fortune 500

58

National Accounts

56%

ADT North America — Commercial SecurityADT North America — Commercial Security

Middle Middle MarketMarket

35%35%

RetailerRetailer56%56%

Commercial Commercial IndustrialIndustrial

25%25%

Government Government InstitutionsInstitutions

10%10%Financial Financial ServicesServices

9%9%

Small Small BusinessBusiness

9%9%

National Accounts Breakdown

2004 Revenue: $2.1 Billion2004 Revenue: $2.1 Billion

A Growing Commercial Business A Growing Commercial Business

5% Three-Year Compound Annual Growth

1.81.8

2.02.0

2.22.2

2.42.4

20022002 20032003 20042004 2005E2005E

($ Billions)($ Billions)

ADT North America Commercial RevenueADT North America Commercial Revenue

59

National Accounts Program – A Core StrengthNational Accounts Program – A Core Strength

Dedicated, specially trained Dedicated, specially trained resourcesresources

Monitoring centerMonitoring center

Special Operations CenterSpecial Operations Center

Program Management OfficeProgram Management Office

Account specific service and Account specific service and installation delivery installation delivery

Prioritized service deliveryPrioritized service delivery

Early adopters of technologyEarly adopters of technology

Loyal customer baseLoyal customer base

Organic Growth InitiativesOrganic Growth Initiatives

Increase revenue per user (RPU)Increase revenue per user (RPU)

Improve sales force effectivenessImprove sales force effectiveness

Focus on new vertical marketsFocus on new vertical markets

60

Increase Revenue Per User Through…Increase Revenue Per User Through…InnovationIntegrating monitoring services with digital video technologyVideo Verification, Guard Tours, Video Auditing

Product ExpansionBuilding on anti-theft solutions (EAS)Alarm Management, People Counting

LeadershipCapturing new markets and capitalizing on new regulationsVisible Source Tag for soft good customersNew retailer requirements and potential new regulations

InnovationIntegrating monitoring services with digital video technologyVideo Verification, Guard Tours, Video Auditing

Product ExpansionBuilding on anti-theft solutions (EAS)Alarm Management, People Counting

LeadershipCapturing new markets and capitalizing on new regulationsVisible Source Tag for soft good customersNew retailer requirements and potential new regulations

Centrally MonitoredCentrally MonitoredVideo Guard ToursVideo Guard Tours

People CountingPeople Counting Visible SourceVisible SourceTaggingTagging

Video AlarmVideo AlarmVerificationVerification

Organic Growth Through Our Sales TeamsOrganic Growth Through Our Sales Teams

Focused recruiting efforts Focused recruiting efforts Enhanced sales trainingEnhanced sales training

Introduced Introduced ‘‘model sales callmodel sales call’’Restructured commercial Restructured commercial sales organizationsales organizationAligned sales compensationAligned sales compensationDramatic improvement in Dramatic improvement in quality of sales repsquality of sales reps

Sales Rep Productivity by TenureSales Rep Productivity by Tenure

Strong Focus on Growing and Retaining Our Sales Force

0x0x1x1x2x2x3x3x4x4x5x5x6x6x7x7x8x8x

< 6 < 6 MosMos 6 6 MosMos -- 1 Yr1 Yr 1 Yr 1 Yr -- 2 Yrs2 Yrs > 3 Yrs> 3 Yrs





Units Booked / Commercial Sales RepUnits Booked / Commercial Sales Rep

Sale

s R

ep P

rodu

ctiv

ity

61

Organic Growth Through New Vertical MarketsOrganic Growth Through New Vertical Markets

Core Markets Emerging Opportunities

Financial ServicesFinancial Services

Retailer Supply ChainRetailerRetailer

Food ProcessingFleet ManagementCommercial / IndustrialCommercial / Industrial

Homeland SecurityWater

TransportationEducation

GovernmentGovernment

Small BusinessSmall Business

Transportation Transportation

The OpportunityAnnualized physical and electronic security spending estimated at $900 millionIncreases in Department of Homeland Security funding

Our Unique PositionProminent industry-specific experience

2/3 of the nation’s largest airports6 major seaportsWMATA (Washington DC mass transit system)

Strong project and program management capabilitiesProprietary products and services

The OpportunityAnnualized physical and electronic security spending estimated at $900 millionIncreases in Department of Homeland Security funding

Our Unique PositionProminent industry-specific experience

2/3 of the nation’s largest airports6 major seaportsWMATA (Washington DC mass transit system)

Strong project and program management capabilitiesProprietary products and services

Demonstrated Competency in Growth Market

62

EducationEducation

The OpportunityAnnualized public schools physical and electronic security spending estimated at $200 million

Increased pressure to provide “safe schools”

Our Unique PositionSchool Security Expert leading our program

Prominent industry-specific experience Protecting more than 6,000 locations

Robust product and service offering through integrated monitoring solutions

The OpportunityAnnualized public schools physical and electronic security spending estimated at $200 million

Increased pressure to provide “safe schools”

Our Unique PositionSchool Security Expert leading our program

Prominent industry-specific experience Protecting more than 6,000 locations

Robust product and service offering through integrated monitoring solutions

Uniquely Positioned to Capitalize on National Standards Executed Locally

Monroe County Schools, GeorgiaMonroe County Schools, Georgia

Food ProcessingFood Processing

The OpportunityAnnualized market estimated at $300 millionFocus on food safety

New Market – New Services – New Applications

Our Unique PositionStrong service delivery platformUnique product and service offering

Combine traditional security applicationswith video auditing servicesExpand applications outside of security

Early adopters have chosen ADT standard

The OpportunityAnnualized market estimated at $300 millionFocus on food safety

New Market – New Services – New Applications

Our Unique PositionStrong service delivery platformUnique product and service offering

Combine traditional security applicationswith video auditing servicesExpand applications outside of security

Early adopters have chosen ADT standard

Innovative Applications Leveraging Core Competencies

63

Retail Supply Chain - RFID SolutionsRetail Supply Chain - RFID Solutions

The OpportunityRFID market expected to grow at 32% thru 2010Driven by Wal-Mart, Target and DoD

Our Unique PositioningSolid foundation through source tagging experience Leader in physical layer deployment solutions

Tags, readers, antennas, servicesSuccessful projects outside retail supply chain

TransportationAsset TrackingPharmaceuticals

The OpportunityRFID market expected to grow at 32% thru 2010Driven by Wal-Mart, Target and DoD

Our Unique PositioningSolid foundation through source tagging experience Leader in physical layer deployment solutions

Tags, readers, antennas, servicesSuccessful projects outside retail supply chain

TransportationAsset TrackingPharmaceuticals

Sustainable Competitive Advantage In Supply Chain Solutions

Commercial SummaryCommercial Summary

Leader in attractive and growing marketsLeader in attractive and growing markets

Strong sales and service organizationStrong sales and service organization

Moving into new vertical markets Moving into new vertical markets

Expanding beyond traditional security applicationsExpanding beyond traditional security applications

Strong Foundation For Growth

64

Dean Dean SeaversSeaversPresident, President, SimplexGrinnellSimplexGrinnell

SimplexGrinnellRepositioning for Higher Growth and Improved Profitability

2004 Fire Business Revenue2004 Fire Business Revenue

38%

35%35%

Worldwide Worldwide $3.7B$3.7B

13%13%

14%14%

Sprinkler Sprinkler ElectronicElectronic SuppressionSuppression OtherOther

57%57%

34%34%

9%9%

SimplexGrinnellSimplexGrinnell(North America)(North America)

$1.7B$1.7B

65

WorldwideWorldwide$3.7B$3.7B

Emphasizing High Recurring Margins

55%55%45%45%

Service Installation

Our Business Emphasis is ServicesOur Business Emphasis is Services

SimplexGrinnellSimplexGrinnell(North America)(North America)

$1.7B$1.7B

52%52% 48%48%

SimplexGrinnell OverviewSimplexGrinnell Overview

150150--Year Industry Leadership in Life Safety SolutionsYear Industry Leadership in Life Safety Solutions

IndustryIndustry’’s Largest Service Organizations Largest Service Organization11,500+ Employees11,500+ Employees117 Sales & Service Offices117 Sales & Service Offices3,600+ Service Technicians3,600+ Service Technicians

Uniquely Positioned to Service Multi-site Customers with a Local Presence

MarketDesign Installation Service Position

Fire Alarm X X X #1Sprinkler X X X #1Suppression X X X #1

66

Market DynamicsMarket Dynamics

Commercial construction recovery continuesCommercial construction recovery continuesIncreased retroIncreased retro--fit and upgrade opportunitiesfit and upgrade opportunities

Fire codes drive demandFire codes drive demandRhode Island nightclubsRhode Island nightclubsIllinois college dormitoriesIllinois college dormitories

Source: McGraw-Hill Construction. (Non-residential)

+ 9%+ 10%+ 3%2006E2005E2004

2006E2005E2004Targeted Verticals

7%4%9%Healthcare6%13%4%Government7%13%- 8%Education

North American NonNorth American Non--Residential Construction SpendingResidential Construction Spending

Strategy: Service Market LeadershipStrategy: Service Market Leadership

Fire AlarmFire Alarm SprinklerSprinkler SuppressionSuppression

Gain installation Gain installation market sharemarket shareIncrease conversion Increase conversion to serviceto serviceFire code mandatedFire code mandated

Maximize product Maximize product mix marginsmix marginsBalance installation Balance installation and service and service Fire code mandated Fire code mandated

CrossCross--sell to existing sell to existing customerscustomersOffer full portfolio to Offer full portfolio to new customersnew customersFire code mandatedFire code mandated

Low Capital Investment Produces High Incremental ROIC

67

Significant Repositioning in 2004 Significant Repositioning in 2004

Restructured & Aligned OrganizationRestructured & Aligned OrganizationCentralized Business PracticesCentralized Business PracticesCenters of ExcellenceCenters of ExcellenceConsolidation of Back Office SystemsConsolidation of Back Office Systems

Operational ExcellenceOperational ExcellenceInstitutionalizing Best PracticesInstitutionalizing Best PracticesSix Sigma led Process ImprovementSix Sigma led Process ImprovementStandardized Business Model & Measurement Standardized Business Model & Measurement

Before AfterField Offices 152 117Finance Centers 4 1Headcount 12,300+ 11,500+

Measuring for Future Success Measuring for Future Success

TOP FIVE SERVICE INDICATORS Total 60 days 90 Days 120 DaysDISTRICT RATIO Sprinkler X X X X

BENCHM ARK ACTUAL PERCENTAGE Fire Alarm X X X XSuppresion X X X X

SERVICE GROW TH - DOLLAR X X X Natl Accts X X X XAVERAGED REVENUE PER TR X X X Total X X X XM ARGIN PERCENTAGE X X XCRIF RETENTION PERCENTAGE X X X YTD2004 YTD2003 Variance BnchmrkCUSTOM ER SATISFACTION RATIO X X X X X X X Days

CUSTOM ER SATISFACTION 2004 2003 Variance Bnchmrk

DISTRICT RATIO M TH X X X XBENCHM ARK ACTUAL PERCENTAGE YTD X X X X

DSO in Days X X X 2004 2003 Variance BnchmrkCancellations Im puted X X X MTH X X X XA/R over 90 X X X YTD X X X XPast due Insp X X X

Total X X X 2004 2003 Variance PercentM TH X X X XYTD X X X X

2004 2003 Variance Bnchmrk T&M Fixed PM A Total %PM AAvg Rev per TR X X X X M ONTH X X X X XAvg Cost per TR X X X X YTD X X X X XCost vs Rev % X X X XAvg T&M Call X X X X Actual Credit Variance BnchmrkAvg Deficiency X X X X M ONTH X X X X XAvg Inspection X X X X YTD X X X X X

# TRsCurrent Month YTD Current M onth X Current M onth Prior Year

Beginning CRIF X X Prior M onth X $ % of Base $ % Net increases X X YTD Average X PM A X X X XNet decreases X X TR Utilization X Inspections X X X XNet RIF gain/loss X X Benchmark X Total X X X XEnding CRIF X X Em ployee Turnover XRIF Gain/loss X X Benchmark X

SERVICE DAYS SALES OUTSTANDING (DSO)

PM A CANCELLATION RATE

SERVICE M ARGIN GROW TH

PAST DUE SPECIAL ACTION

Daily Technician Productivity OVERTIME

W ARRANTY

CRIF ANALYSIS STAFFING PAST DUE INSPECTION REVENUE

Score Card across Disciplines

2004 2003 Variance BnchmrkAvg Rev per TR X X X XAvg Cost per TR X X X XCost vs Rev % X X X XAvg T&M Call X X X XAvg Deficiency X X X XAvg Inspection X X X X

Daily Technician Productivity

68

Capturing Recurring RevenueCapturing Recurring Revenue

Customer Retention ValueCustomer Retention ValueLarge project service capture rate at 60%Large project service capture rate at 60%Average 10Average 10--year cycle of service revenueyear cycle of service revenueTotal project profit 9.8 times greater than original projectTotal project profit 9.8 times greater than original project’’ss

Response & RecoveryResponse & Recovery

Customer Retention& Loyalty

Customer Retention& Loyalty

Employee MarketingCampaign

Employee MarketingCampaign

Customer Retention

Unique Product and Service OfferingsUnique Product and Service Offerings

Footprint Installation Service Installation Service Installation ServiceSimplexGrinnell National X X X X X XLocal Competitors Local X X X X X XNotifier Dealers X XSiemens Dealers X XEST Dealers X XJCI National X XS.A. Comunale Regional X X X XWestern States (API) Regional X X X XF.E. Moran Regional X X X XCOSCO Regional X X X X

Fire Alarm Sprinkler Suppression

Local Players are Fiercest Competitors

69

Providing Continent-wide Service Across the Full Portfolio

Unique Product and Service OfferingsUnique Product and Service Offerings

Footprint Installation Service Installation Service Installation ServiceSimplexGrinnell National X X X X X XLocal Competitors Local X X X X X XNotifier Dealers X XSiemens Dealers X XEST Dealers X XJCI National X XS.A. Comunale Regional X X X XWestern States (API) Regional X X X XF.E. Moran Regional X X X XCOSCO Regional X X X X

Fire Alarm Sprinkler Suppression

Organic Growth DriversOrganic Growth Drivers

Architects & Engineers Program Architects & Engineers Program

Legislative SymposiumsLegislative Symposiums

New Products and ServicesNew Products and Services

70

Architects & Engineers ProgramArchitects & Engineers Program

Increase market demandIncrease market demand

Promote SimplexGrinnell as Promote SimplexGrinnell as preferred sourcepreferred source

Conduct product and code Conduct product and code training seminarstraining seminars

Legislative SymposiumsLegislative Symposiums

Market leadership initiative Market leadership initiative Focus on emerging regulationsFocus on emerging regulations

Multiple statewide symposiumsMultiple statewide symposiums

Position Position SimplexGrinnellSimplexGrinnell as the safe choiceas the safe choice

71

Voice Intelligibility ProgramVoice Intelligibility ProgramEmerging market for audibility testingEmerging market for audibility testing

Service ProgramService ProgramHealthcare market drivenHealthcare market driven

Maintenance ProgramMaintenance ProgramBuilding customer retention and loyaltyBuilding customer retention and loyalty

New Products & ServicesNew Products & Services

SummarySummary

Repositioned for margin expansion and Repositioned for margin expansion and longlong--term growthterm growth

Focused on growing market share and Focused on growing market share and recurring servicesrecurring services

Strategy is in place & execution is Strategy is in place & execution is the prioritythe priority

72

2005 Outlook2005 Outlook

20042004 20052005OutlookOutlook

RevenueRevenue $11.4$11.4 $11.7 $11.7 –– $12.0$12.0

Operating MarginOperating Margin 10%10% 12%+12%+

Free Cash FlowFree Cash Flow $1.5$1.5 $1.5+$1.5+

($ Billions)($ Billions)

SummarySummary

Business changes driving strong cash flowBusiness changes driving strong cash flow

Expanding margins through Expanding margins through Operational ExcellenceOperational Excellence

Working through the effects of legacy modelsWorking through the effects of legacy models

Positioned for accelerated organic growthPositioned for accelerated organic growth

Execution is keyExecution is key

73

AppendixAppendix

Non-GAAP Measures

Cash Flow Reconciliation

Organic Growth Reconciliation

Fire & Security Operating Income Reconciliation

Non-GAAP Measures - EarningsNon-GAAP Measures - Earnings

“EPS from continuing operations excluding charges” is a non-GAAP measures and should not be considered replacements for GAAP results.

The company has forecast its EPS from continuing operations results excluding divestiture charges and charges relating to early retirement of debt to give investors additional perspective on the underlying business results. Because the company cannot predict the amount and timing of divestitures or debt retirement and the associated charges or gains that will be taken, it is difficult to accurately include the impact of those items in the forecast. The company has forecast its cash flow results excluding any voluntary pension contribution because it has not yet made a determination about the amount and timing of any such contribution.

74

Non-GAAP Measures - CashNon-GAAP Measures - Cash

“Cash flow excluding voluntary pension contributions” and “free cash flow” (FCF) are non-GAAP measures and should not be considered replacements for GAAP results.

The difference between cash flows from operating activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash outflows that the company believes are useful to identify. FCF permits management and investors to gain insight into the number that management employs to measure cash that is free from any significant existingobligation. It is also a significant component in the company’s incentive compensation plans. The difference reflects the impact from:• the sale of accounts receivable programs, • net capital expenditures, • acquisition of customer accounts (ADT dealer program), • cash paid for purchase accounting and holdback/earn-out liabilities and• dividends paid.

The impact from the sale of accounts receivable programs is added or subtracted from the GAAP measure because this activity is driven by economic financing decisions rather than operating activity. Capital expenditures, the ADT dealer program and dividends are subtracted because they represent long-term commitments. Cash paid for purchase accounting and holdback/earn-out liabilities is subtracted from Cash Flow from Operating Activities because these cash outflows are not available for general corporate uses.

The limitation associated with using FCF is that it subtracts cash items that are ultimately within management’s and the Board of Directors’ discretion to direct and that therefore may imply that there is less or more cash that is available for the company's programs than the most comparable GAAP measure. This limitation is best addressed by using FCF in combination with the GAAP cash flow numbers.

FCF as presented herein may not be comparable to similarly titled measures reported by other companies. The measure should be used in conjunction with other GAAP financial measures. Investors are urged to read the company’s financial statements as filed with the Securities and Exchange Commission, as well as the accompanying tables to this press release that shows all the elements of the GAAP measures of Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flows from Financing Activities and a reconciliation of the company's total cash and cash equivalents for the period.

Non-GAAP Measures - GrowthNon-GAAP Measures - Growth

“Organic Revenue Growth” is a non-GAAP measures and should not be considered replacements for GAAPresults.

“Organic revenue growth” is an important measure used by the company to measure the underlying results and trends in the business. The difference between reported net revenue growth (the most comparable GAAP measure) and organic revenue growth (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures, and other changes that do not reflect the underlying results and trends (for example, revenue reclassifications and changes to the fiscal year).

Organic revenue growth is an important measure of the company’s performance because it excludes items that: i) are not completely under management’s control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying growth of the company, such as acquisition and divestiture activity, or revenue reclassification. It is also a component of the company’s compensation programs. The limitation of this measure is that it excludes items that have an impact on the company’s revenue. This limitation is best addressed by using organic revenue growth in combination with the GAAP numbers. See the accompanying tables to this press release for the reconciliation presenting the components of organic revenue growth.

75

Cash Flow Reconciliation - 2004Cash Flow Reconciliation - 2004

Year Ended September 30, 2004(in millions)

F&S Electronics Healthcare TEPS P&A Corp Total

Net cash provided by (used in) operating activities 2,019$ 2,147$ 2,493$ 749$ 189$ (2,213)$ 5,384$

Capital expenditures, net (335) (370) (239) (45) (28) 2 (1,015)

Dividends paid - - - - - (100) (100)

Decrease in sale of accounts receivable programs 97 20 112 - - 700 929

Acquisition of customer accounts (ADT dealer program) (254) - - - - - (254)

Cash paid for purchase acccounting and holdback/earn-out liabilities (31) (48) (12) (14) (2) - (107)

Free Cash Flow 1,496$ 1,749$ 2,354$ 690$ 159$ (1,611)$ 4,837$

Cash Flow Reconciliation – 2003Cash Flow Reconciliation – 2003


F&S Electronics Healthcare TEPS P&A Corp Total

Net cash provided by (used in) operating activities 1,930$ 1,890$ 2,480$ 330$ 287$ (1,608)$ 5,309$

Capital expenditures, net (508) (405) (191) (46) (19) (105) * (1,274)

Dividends paid - - - - - (101) (101)

Decrease in sale of accounts receivable programs 34 7 58 - - 20 119

Acquisition of customer accounts (ADT dealer program) (597) - - - - - (597)

Cash paid for purchase acccounting and holdback/earn-out liabilities (81) (67) (53) (66) (5) - (272)

Free Cash Flow 778$ 1,425$ 2,294$ 218$ 263$ (1,794)$ 3,184$

* Includes $113M related to the construction of TGN

76

Organic Revenue Growth ReconciliationOrganic Revenue Growth Reconciliation

Divestiture Divestiture and Other and Other

ImpactImpact

Foreign Foreign Currency Currency

ImpactImpact

Organic Organic Revenue Revenue GrowthGrowth 9/30/20039/30/2003

Revenue Revenue Revenue Revenue 9/30/20049/30/2004

(2) Revenue relates to the TGN Business held for sale.Revenue relates to the TGN Business held for sale.

(%) (%)526$ 5.0 (82)$ (0.9)560 5.5 (34) (0.7)292 3.5 (5) (0.1)

298 6.6 759 16.89 0.5 - 0.0

- NM - NM

10,832$ 10,4928,420

4,4981,731

1435,987$ 1,685$ 4.8 638$ 1.6

(%)171 1.6804 7.9403 4.8

452 10.12 0.1

11 NM1,843$ 5.2

(%)11,447$ 5.711,822 12.79,110 8.2

6,007 33.61,742 0.7

2540,153$ 11.6

NM

(1)

Fire and SecurityElectronicsHealthcareEngineered Products

and ServicesPlastics and AdhesivesCorporate and OtherTotal Net Revenues

(2)

Amount consists of $739M related to a revenue reclassification at Infrastructure Services for certain subcontract costs previouslytreated as pass through to customers and $18M of Infrastructure Services revenue which resulted from the consolidation of several joint ventures under FIN 46 during Fiscal 2004.

(1)


Fire & Security Operating Income ReconciliationFire & Security Operating Income Reconciliation($Millions)($Millions)

U.S. GAAP Operating IncomeGAAP Operating Margin

$8997.9%

Intensified Internal Audit Process 0

Impairments 34

Restructuring 180

Policy Conformance, Principally Bad Debt 0

$1,168$1,16810.2%10.2%

Adjusted Operating IncomeAdjusted Operating Margin

$3423.2%

266

143

10

93

$854$8547.9%7.9%

200420042003*2003*

Gain/(Loss) On Divestitures 550

*2003 results reclassified to exclude discontinued operations

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