The following discussion and analysis of the Company's financial condition and results of operations should be read together with our Consolidated Financial Statements and the related notes included in this Quarterly Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The Company's actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those under the headings "Risk Factors" and "Forward-Looking Information."

Introduction

The unaudited Consolidated Financial Statements include the consolidated results of Tyco International Ltd., a company organized under the laws of Bermuda, and its subsidiaries (hereinafter collectively referred to as "we," the "Company" or "Tyco") and have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States ("GAAP").

The Company operates in the following business segments:

º •
º ADT Worldwide designs, sells, installs, services and monitors electronic security systems for residential, commercial, industrial and governmental customers.

º •
º Flow Control designs, manufactures, sells and services valves, pipes, fittings, valve automation and heat tracing products for the water and wastewater markets, the oil, gas and other energy markets along with general process industries.

º •
º Fire Protection Services designs, sells, installs and services fire detection and fire suppression systems for commercial, industrial and governmental customers.

º •
º Electrical and Metal Products designs, manufactures and sells galvanized steel tubing, armored wire and cable and other metal products for non-residential construction, electrical, fire and safety and mechanical customers.

º •
º Safety Products designs, manufactures and sells fire protection, security and life safety products, including fire suppression products, breathing apparatus, intrusion security, access control and video management systems. In addition, Safety Products manufactures products installed and serviced by ADT Worldwide and Fire Protection Services.

We also provide general corporate services to our segments and these costs are reported as Corporate and Other.

References to the segment data are to the Company's continuing operations. Prior period amounts have been reclassified to exclude the results of discontinued operations. Additionally, the Company has realigned certain business operations as of September 27, 2008, which resulted in certain prior period segment amounts being recast. See Note 13.

Overview and Outlook

Net revenue for the quarter ended December 26, 2008 decreased $411 million from $4.8 billion in the quarter ended December 28, 2007 to $4.4 billion in the quarter ended December 26, 2008. The significant appreciation of the U.S. dollar against most major currencies year over year negatively impacted our revenue by approximately $424 million, as nearly 50% of our revenue is generated outside of the United States. If the U.S. dollar continues to appreciate against the currencies that we have significant exposure to, our reported net revenue can be expected to be adversely affected. Operating income for the quarter ended December 26, 2008 declined $80 million to $413 million and was negatively impacted by $48 million due to changes in foreign currency exchange rates. Other decreases in operating income in our Electrical and Metal Products, Fire Protection Services and ADT

Worldwide segments were primarily the result of lower volumes due to the slowing commercial market as well as a decrease in water projects in our Flow Control segment. Operating margins in our Electrical and Metal Products segment decreased 1.9 percentage points to 6.5% which was largely the result of volume declines on steel products. Volatility of copper and steel prices may affect operating margins in future periods. In addition, commercial activity in our ADT Worldwide segment continued to decline in the first quarter primarily within North America and EMEA, which resulted in flat operating margins during the first quarter of 2009. We expect continued weakness in the commercial market to negatively impact our results in the ADT Worldwide segment.

We expect to continue our initiatives to improve our efficiency, manage our working capital effectively and prudently allocate our capital. We expect internal investments to fund growth and productivity in our businesses to continue to be our first priority. As in prior years, we expect to remain active in making bolt-on acquisitions as we continually assess the strategic fit and value of businesses that have potential for success within our existing framework. During the quarter ended December 26, 2008, our Safety Products segment acquired Vue Technology, Inc., a provider of radio frequency identification (RFID) technology, for $43 million to strengthen the technology portfolio offered to retailers through its Sensormatic business.

Finally, we continue to focus on operational execution. To further improve operating efficiency, during the first quarter of 2007, we launched a restructuring program across all of our segments, including the corporate organization, designed to streamline some of our businesses and reduce our operational footprint. As of December 26, 2008 we substantially completed the program. Upon initiation of the program, we expected to incur aggregate charges related to the program of approximately $350 million to $400 million primarily through calendar 2008. Since the inception of this program through December 26, 2008, the Company has incurred charges of $395 million related to this program. We have identified additional opportunities for cost savings through restructuring activities in fiscal 2009 and expect to incur restructuring charges of approximately $100 to $150 million in fiscal 2009, of which $1 million were incurred during the first quarter of 2009. We believe this restructuring activity will strengthen our competitive position over the long term.

Change of Domicile

On December 10, 2008 we announced that our Board of Directors approved proposals to move Tyco's jurisdiction of incorporation from Bermuda to Switzerland (the "Change of Domicile"). The Change of Domicile, along with a number of organizational matters necessary to accomplish it, is subject to approval by the Company's shareholders. These proposals will be voted on at a Special General Meeting of shareholders scheduled for March 12, 2009. We believe the Change of Domicile will produce important economic and operational benefits for Tyco and will help ensure our continued competitiveness in global markets by, among other things, allowing us to take advantage of Switzerland's well-established and long-standing network of commercial and tax treaties and improving our ability to maintain a competitive worldwide effective corporate tax rate. If approved, we expect the Change of Domicile to take effect as soon as practicable following the Special General Meeting. We do not expect that the Change of Domicile will have a material impact on how we conduct our day-to-day operations or on the Company's financial position, results of operations and cash flows.

Legal Settlements

On December 2, 2008, the Company reached an agreement in principle with the Commonwealth of Massachusetts Pension Reserves Investment Management Board, an entity that was not included in the June 2007 securities class-action settlement, to settle all of its claims in respect of the subject matter of the class-action settlement for a payment of $11 million. The settlement is subject to the terms of the Separation and Distribution Agreement, which results in the Company being responsible for approximately $3 million out of the aggregate settlement amount.

Operating Results

    Net revenue, operating income and net income were as follows ($ in
millions):

                                                 For the Quarters Ended
                                             December 26,     December 28,
                                                 2008             2007
          Revenue from product sales           $     2,768      $     3,096
          Service revenue                            1,658            1,741

          Net revenue                          $     4,426      $     4,837

          Operating income                     $       413      $       493
          Interest income                               12               58
          Interest expense                             (73 )           (117 )
          Other income, net                              4               52

          Income from continuing
          operations before income taxes
          and minority interest                        356              486
          Income taxes                                 (84 )           (125 )
          Minority interest                              -               (1 )

          Income from continuing
          operations                                   272              360
          Income from discontinued
          operations, net of income taxes                5                3

          Net income                           $       277      $       363

Net revenue decreased $411 million, or 8.5%, for the quarter ended December 26, 2008 as compared to the quarter ended December 28, 2007. The decrease is primarily driven by changes in foreign currency exchange rates which negatively affected the first quarter by $424 million. In addition to foreign currency impacts, revenues were positively affected by $55 million for acquisitions, primarily in our ADT Worldwide business. The remaining change in revenue was driven primarily by lower volume of steel products in our Electrical and Metal Products business.

Operating income decreased $80 million for the quarter ended December 26, 2008 as compared to the quarter ended December 28, 2007. Changes in foreign currency exchange rates negatively affected operating income by $48 million. Additionally, lower volumes in our Electrical and Metal Products, ADT Worldwide and Fire Protection Services segments and fewer water projects in our Flow Control business negatively impacted operating income. Operating income for the quarter ended December 26, 2008 included legacy legal settlement charges of $8 million as well as restructuring, asset impairment and divestiture charges, net of $4 million. Operating income for the quarter ended December 28, 2007 included Separation related costs of $9 million and restructuring, asset impairment and divestiture charges, net of $11 million.

Segment Results:

The segment discussions that follow describe the significant factors contributing to the changes in results for each of our segments included in continuing operations.

Quarter Ended December 26, 2008 Compared to Quarter Ended December 28, 2007

     ADT Worldwide

    Net revenue, operating income and operating margin for ADT Worldwide were as
follows ($ in millions):

                                              For the Quarters Ended
                                          December 26,     December 28,
                                              2008             2007
             Revenue from product sales     $       619      $       667
             Service revenue                      1,173            1,261

             Net revenue                    $     1,792      $     1,928

             Operating income               $       231      $       246
             Operating margin                      12.9 %           12.8 %

Net revenue by geographic area for ADT Worldwide was as follows ($ in millions):

                                                    For the Quarters Ended
                                                December 26,     December 28,
                                                    2008             2007
      North America                               $     1,065      $     1,040
      Europe, Middle East and Africa ("EMEA")             471              603
      Rest of World                                       256              285

                                                  $     1,792      $     1,928

Net revenue for ADT Worldwide decreased $136 million, or 7.1%, during the quarter ended December 26, 2008, as compared to the quarter ended December 28, 2007. Revenue from product sales decreased 7.2% and service revenue decreased 7.0%. This decrease was primarily driven by the unfavorable impact of changes in foreign currency exchange rates of $169 million. In addition to foreign currency impacts, revenues were positively affected by $54 million for the net impact of acquisitions and divestitures. Revenue from product sales includes sales and installation of electronic security and other systems. Service revenue is comprised of electronic security services and maintenance, including the monitoring of burglar alarms, fire alarms and other life safety systems as well as services related to retailer anti-theft systems. Approximately 50% of ADT's total net revenue is contractual and is considered recurring revenue. Recurring revenue declined 5.5% during the first quarter of 2009 while systems installation and service revenue declined 8.6%. Geographically, North America grew 2.4%, resulting largely from growth in recurring revenue which was partially offset by continued weakness in the retail and commercial markets. Revenue in the EMEA region decreased $132 million, or 21.9% largely as a result of foreign currency exchange rates which had an unfavorable impact of $90 million. The remaining decrease in EMEA was primarily a result of a decline in systems installation and service revenue due to weakness in the retailer end market as well as commercial softness primarily across the United Kingdom and continental Europe. The 10.2% decline in the Rest of World geographies was primarily due to the unfavorable impact of changes in foreign currency exchange rates of $64 million, which more than offset growth in recurring revenue and systems, installation and service revenue.

Attrition rates for customers in our ADT Worldwide business increased to an average of 13.2% on a trailing 12-month basis as of December 26, 2008, as compared to 12.9% as of September 26, 2008 and 12.2% as of December 28, 2007. The increased attrition was primarily in the U.S. commercial and residential businesses driven by adverse macroeconomic factors.

Operating income decreased $15 million, or 6.1%, in the quarter ended December 26, 2008 from the same period in the prior year. This decrease is primarily related to the unfavorable impact of changes in foreign currency exchange rates of $18 million as well as lower volumes and increased

selling, general and administrative expenses. The same period in the prior year included net expenses of $24 million to convert customers from analog to digital signal transmissions in North America. There were no charges related to converting customers during the first quarter of fiscal 2009. Additionally, North America benefited from continued growth in recurring revenue, partially offset by continued declines in the retailer end market. Operating margin increased to 12.9% in the quarter ended December 26, 2008 from 12.8% for the same period in the prior year.

     Flow Control

    Net revenue, operating income and operating margin for Flow Control were as
follows ($ in millions):

                                             For the Quarters Ended
                                          December 26,     December 28,
                                              2008             2007
            Revenue from product sales     $        892     $      1,030
            Service revenue                          67               44

            Net revenue                    $        959     $      1,074

            Operating income               $        137     $        171
            Operating margin                       14.3 %           15.9 %

Net revenue for Flow Control decreased $115 million, or 10.7%, in the quarter ended December 26, 2008 compared to the quarter ended December 28, 2007. The decrease in net revenue was largely driven by the unfavorable impact of changes in foreign currency exchange rates by $124 million and, to a lesser extent, reduced project activity in the water business, partially offset by growth in the thermal business primarily within North America. Additionally, the net impact of acquisitions, divestitures and other activity positively affected revenue by $1 million.

The decrease in operating income of $34 million, or 19.9%, in the quarter ended December 26, 2008, as compared to the same period in the prior year, was primarily due to the unfavorable impact of changes in foreign currency exchange rates of $22 million as well as unfavorable volume from the water business.

     Fire Protection Services

    Net revenue, operating income and operating margin for Fire Protection
Services were as follows ($ in millions):

                                             For the Quarters Ended
                                         December 26,      December 28,
                                             2008              2007
            Revenue from product sales      $      438        $      470
            Service revenue                        413               430

            Net revenue                     $      851        $      900

            Operating income                $       58        $       76
            Operating margin                       6.8 %             8.4 %

Net revenue for Fire Protection Services decreased $49 million, or 5.4%, during the quarter ended December 26, 2008 compared to the quarter ended December 28, 2007. This decrease was due to the impact of unfavorable changes in foreign currency exchange rates of $82 million, which more than offset growth in both our North America SimplexGrinnell business and international businesses. Revenue from product sales includes sales and installation of fire protection and other systems. Service revenue consists of inspection, maintenance, service and monitoring of fire detection and suppression systems.

     Electrical and Metal Products

    Net revenue, operating income and operating margin for Electrical and Metal
Products were as follows ($ in millions):

                                             For the Quarters Ended
                                         December 26,      December 28,
                                             2008              2007
            Revenue from product sales      $      415        $      486
            Service revenue                          1                 1

            Net revenue                     $      416        $      487

            Operating income                $       27        $       41
            Operating margin                       6.5 %             8.4 %

Net revenue for Electrical and Metal Products decreased $71 million, or 14.6%, in the quarter ended December 26, 2008 compared to the quarter ended December 28, 2007. The decrease in revenue was primarily driven by volume declines for both steel and armored cable products. Changes in foreign currency exchange rates had an unfavorable impact of $16 million.

Operating income decreased $14 million, or 34.1%, in the quarter ended December 26, 2008 as compared to the same period in the prior year. The decrease in operating income was primarily due to volume declines on both steel and armored cable products, as well as the impact of unfavorable changes in foreign currency exchange rates, which were partially offset by favorable spreads on armored cable products.

     Safety Products

    Net revenue, operating income and operating margin for Safety Products were
as follows ($ in millions):

                                              For the Quarters Ended
                                          December 26,      December 28,
                                              2008              2007
            Revenue from product sales     $        404      $        443
            Service revenue                           4                 4

            Net revenue                    $        408      $        447

            Operating income               $         74      $         86
            Operating margin                       18.1 %            19.2 %

Operating income decreased $12 million, or 14%, during the quarter ended December 26, 2008 compared to the same period in the prior year. The decline is primarily attributable to decreased sales volume, specifically within the electronic security business and within the life safety business, partially offset by the impact of cost savings from operational excellence initiatives. Operating income also decreased by $6 million due to unfavorable changes in foreign currency exchange rates.

Corporate expense in the quarter ended December 26, 2008 was $13 million lower compared to the same period in the prior year. Corporate expense for the quarter ended December 26, 2008 included an $8 million charge for legacy legal settlements. Corporate expense for the quarter ended December 28, 2007 included Separation related costs of $9 million.

Interest income was $12 million and $58 million during the quarters ended December 26, 2008 and December 28, 2007, respectively. The decrease in interest income is primarily related to interest earned on the class action escrow settlement account in the prior year.

Interest expense was $73 million in the quarter ended December 26, 2008 compared to $117 million in the quarter ended December 28, 2007. The decrease in interest expense is primarily related to interest on the class action liability in the prior year.

Other income, net was $4 million in the quarter ended December 26, 2008 compared to $52 million during the quarter ended December 28, 2007. Other income, net during the quarter ended December 28, 2007, includes $40 million recorded in connection with the adoption of FIN No. 48 with a corresponding increase to the receivable from Covidien and Tyco Electronics under the Tax Sharing Agreement. In addition, $10 million for other activity was recorded in the first quarter of 2008 in accordance with the Tax Sharing Agreement in other income, net.

Our effective income tax rate was 23.6% and 25.7% during the quarters ended December 26, 2008 and December 28, 2007, respectively. The decrease in the effective tax rate was primarily the result of decreased profitability in operations in higher tax rate jurisdictions partially offset by lower releases of deferred tax valuation allowances during the quarter ended December 26, 2008. At December 26, 2008, the Company had recorded deferred tax assets of $1.6 billion, net of valuation allowances of $745 million. At each balance sheet date, management evaluates whether the Company's deferred tax assets are more likely than not of being realized and if sufficient future taxable income will be available by assessing current period and projected operating results and other pertinent data. If current economic conditions persist or worsen future taxable income of entities with deferred tax assets could be negatively impacted, which may require additional valuation allowances to be recorded in future

In connection with the spin-offs of Covidien and Tyco Electronics from Tyco, Tyco entered into a Tax Sharing Agreement that generally governs Covidien's, Tyco Electronics' and Tyco's respective rights, responsibilities, and obligations after the distribution with respect to taxes, including ordinary course of business taxes and taxes, if any, that may be incurred as a result of any failure of the distribution of all of the shares of Covidien or Tyco Electronics to qualify as a tax-free distribution for U.S. federal income tax purposes within the meaning of Section 355 of the Code or certain internal transactions undertaken in anticipation of the spin-offs to qualify for tax-favored treatment under the Code.

Under the Tax Sharing Agreement, the Company shares responsibility for certain of Tyco's, Covidien's and Tyco Electronics' income tax liabilities based on a sharing formula for periods prior to and including June 29, 2007. More specifically, Tyco, Covidien and Tyco Electronics share 27%, 42% and 31%, respectively, of shared income tax liabilities that arise from adjustments made by tax authorities to Tyco's, Covidien's and Tyco Electronics' U.S. and certain non-U.S. income tax returns. All costs and expenses associated with the management of these shared tax liabilities are shared equally among the parties. At December 26, 2008 and September 26, 2008, Tyco has recorded a net receivable from Covidien and Tyco Electronics of $124 million and $126 million, respectively, of which $117 million and $113 million, respectively, are included . . .