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 Switzerland, 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

Primarily as a result of changes in foreign currencies and volume decreases in our Electrical and Metal Products business, net revenue for the quarter ended March 27, 2009 decreased $713 million from $4.9 billion for the comparable period ended March 28, 2008 to $4.2 billion in the quarter ended March 27, 2009. Net revenue for the six months ended March 27, 2009 decreased $1.1 billion from $9.7 billion for the comparable period ended March 28, 2008 to $8.6 billion in the quarter ended March 27, 2009. During the second quarter of 2009, the U.S. dollar continued to appreciate against most major currencies in which we operate, but most notably the Euro and British Pound. The significant appreciation of the U.S. dollar against most major currencies for the quarter and six months ended March 27, 2009 over the comparable periods ended March 28, 2008 negatively impacted our revenue by approximately $494 million and $917 million, respectively, 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.

All of our reportable segments experienced declines in operating income for both the quarter and six months ended March 27, 2009. On a consolidated basis, operating income for the quarter and six months ended March 27, 2009 declined $3.0 billion to $(2.6) billion and $3.1 billion to $(2.1) billion, respectively, primarily as a result of goodwill and intangible asset impairments of $2.7 billion, a provision of $101 million related to unresolved legacy securities litigation matters and lower sales volume of steel products at our Electrical and Metal Products segment. The quarter and six months ended March 27, 2009, were negatively impacted by $9 million and favorably impacted by $57 million, respectively, due to changes in foreign currency exchange rates.

In response to the economic downturn, cost containment actions have been initiated across all of our businesses and corporate. We are also pursuing cost savings through restructuring activities in fiscal 2009 and expect to incur restructuring and restructuring related charges of approximately $200 million in fiscal 2009, of which $74 million and $75 million was incurred during the quarter and six months ended March 27, 2009. We believe these restructuring activities will strengthen our competitive position over the long term.

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. For example during the first half of fiscal year 2009, the Company's 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.

Goodwill and Intangible Asset Impairments

Annually, in the fiscal fourth quarter, and more frequently if triggering events occur, the Company tests goodwill and indefinite-lived intangible assets for impairment by comparing the fair value of each reporting unit or indefinite-lived intangible assets with its carrying amount.

The Company began to experience a decline in revenue during the first quarter of 2009 in its ADT Worldwide, Fire Protection Services and Safety Products segments as a result of a slowdown in the commercial markets, including the retailer end market as well as a decline in sales volume at its Electrical Metal Products segments. Although we considered and concluded that these factors did not constitute triggering events during the first quarter of 2009, the continued existence of these conditions during the second quarter of 2009, along with downward revisions to forecasted results, restructuring actions and weaker industry outlooks, caused us to conclude that sufficient indicators of impairment existed. Reporting units within ADT Worldwide, Fire Protection Services and Safety Products segments continued to be negatively impacted as a result of a slowdown in the commercial markets including the retailer end market. Additionally, the Company's Electrical Metal Products reporting unit continued to be negatively impacted by a decline in sales volume and due to the downturn in the non-residential construction market. The Company determined that these underlying events and circumstances constituted triggering events for six reporting units where such events would more likely than not reduce the fair value below their respective carrying amounts. Specifically, the Company concluded that its EMEA Security and EMEA Fire reporting units within the ADT Worldwide and Fire Protection Services segments, respectively, Electrical and Metal Products reporting unit within the Electrical and Metal Products segment and ACVS, Life Safety and SRS reporting units within the Safety Products segment experienced triggering events. Based on the underlying events and circumstances described as well as the continued deterioration of the business environment related to the retailer end market of

the Company's ADT Worldwide and Safety Products segments the Company determined that certain indefinite-lived intangible assets required impairment testing. As a result of the triggering events, the Company performed long-lived asset, goodwill and intangible asset impairment tests for these reporting units and the Company's Safety Products Sensormatic tradename as well as ADT Worldwide franchise rights relating to Winner and SSC.

The Company utilizes a discounted cash flow model for determining the fair value of each of the reporting unit's goodwill. Based on the factors described above, actual and anticipated reductions in demand for the reporting unit's products and services as well as increased risk due to current economic uncertainty, the estimates of future cash flows used in the second quarter of 2009 discounted cash flow analyses were revised downward from the Company's most recent test conducted during the fiscal fourth quarter of 2008. The results of the goodwill impairment tests indicated that the implied goodwill amount was less than the carrying amount of goodwill for each of the aforementioned reporting units. The Company recorded an aggregate non-cash impairment charge of $2.6 billion ($2.6 billion after-tax) which was recorded in goodwill and intangible asset impairments in the Company's Consolidated Statement of Operations for the quarter ended March 27, 2009.

Indefinite-lived intangible assets consisting primarily of trade names are tested for impairment using either a relief from royalty method or excess earnings method. Based on these factors and uncertainties and factors described above, estimates of future cash flows used in determining the fair value of the Company's Safety Products Sensormatic tradename as well as ADT Worldwide franchise rights relating to Winner and SSC during the second quarter of 2009 were revised downward relative to the estimates used in the Company's most recent test during the fourth quarter of 2008. The results of the impairment test indicated that the Safety Products Sensormatic tradename and ADT Worldwide Winner and SSC franchise rights estimated fair values were less than their respective carrying amounts. As such, the Company recorded an aggregate non-cash impairment charge of $64 million ($40 million after-tax) which was recorded in goodwill and intangible asset impairments in the Company's Consolidated Statement of Operations for the quarter ended March 27, 2009.

Legal Settlements

In the first half of fiscal 2009, the Company settled a number of legal matters stemming from alleged violations of federal securities laws committed by former senior management, including three lawsuits from plaintiffs that had opted out of the June 2007 class action settlement, for an aggregate of approximately $90 million. Pursuant to the Separation and Distribution Agreement, the Company's share of this amount is approximately $24 million, with Covidien and Tyco Electronics responsible for approximately $38 million and $28 million, respectively.

In light of the settlements in the second quarter and other recent settlement activity, the Company has concluded that its best estimate of probable loss for its unresolved legacy securities matters to be $375 million. Due to the fact that any payments ultimately made in connection with these matters would be subject to the sharing provisions of the Separation and Distribution Agreement, the Company has also recorded receivables from Covidien and Tyco Electronics in the amounts of $158 million and $116 million, respectively. As a result, the Company recorded a charge of $101 million during the quarter ended March 27, 2009 in selling, general, and administrative expenses related to these unresolved matters. Although the Company has reserved its best estimate of probable loss related to unresolved legacy securities claims, their ultimate resolution could differ from the estimate which could have a material adverse effect on the Company's financial position, results of operations or cash flows.

Results of Operations:

                                  For the Quarters Ended         For the Six Months Ended
                                 March 27,       March 28,      March 27,        March 28,
                                   2009            2008            2009             2008
Revenue from product sales      $      2,518     $    3,108    $       5,286     $     6,204
Service revenue                        1,632          1,755            3,290           3,496

Net revenue                     $      4,150     $    4,863    $       8,576     $     9,700

Operating (loss) income         $     (2,554 )   $      442    $      (2,141 )   $       935
Interest income                           11             25               23              83
Interest expense                         (78 )         (115 )           (151 )          (232 )
Other income, net                          7              -               11              52

(Loss) income from
continuing operations before
income taxes and minority
interest                              (2,614 )          352           (2,258 )           838
Income taxes                              60            (79 )            (24 )          (204 )
Minority interest                         (1 )           (1 )             (1 )            (2 )

(Loss) income from
continuing operations                 (2,555 )          272           (2,283 )           632
(Loss) income from
discontinued operations, net
of income taxes                          (12 )            8               (7 )            11

Net (loss) income               $     (2,567 )   $      280    $      (2,290 )   $       643

Net revenue decreased $713 million, or 14.7%, for the second quarter and $1.1 billion, or 11.6%, for the first six months of 2009 as compared to the same periods last year. The decreases in both periods are primarily driven by changes in foreign currency exchange rates, which negatively affected the quarter and six months ended March 27, 2009 by $494 million and $917 million, respectively. The remaining decrease in revenue was driven primarily by lower volume of steel products in our Electrical and Metal Products segment and weakness in commercial markets, including the retailer end market which negatively impacted our ADT Worldwide and Safety Products segments. Revenues were positively affected by $59 million and $121 million for acquisitions, primarily in our ADT Worldwide segment for the quarter and six months ended March 27, 2009, respectively.

Operating income decreased $3.0 billion, to an operating loss of $2.6 billion for the quarter ended March 27, 2009. Operating income decreased $3.1 billion, to an operating loss of $2.1 billion for the first six months ended March 27, 2009. The operating loss included an aggregate goodwill impairment charge of $2.6 billion relating to reporting units in Electrical and Metal Products, ADT Worldwide, Fire Protection Services and Safety Products and intangible asset impairment charges of $64 million relating to assets at ADT Worldwide and Safety Products for both the quarter and six months ended March 27, 2009. Additionally, lower volumes primarily in Electrical and Metal Products, ADT Worldwide and Safety Products negatively impacted operating income. The operating loss included legal settlement charges of $102 million as well as restructuring, asset impairment and divestiture charges, net of $106 million for the quarter ended March 27, 2009. The six months ended March 27, 2009 included legacy legal settlement charges of $110 million as well as restructuring, asset impairment and divestiture charges, net of $113 million. Operating income for the quarter ended March 28, 2008 included Separation related credits of $5 million, and restructuring, asset impairment and divestiture charges, net of $43 million. The six months ended March 28, 2008 included Separation related costs of $5 million, and restructuring, asset impairment and divestiture charges, net of $57 million. Changes in foreign currency exchange rates negatively affected operating income by $9 million and positively affected operating income by $57 million for the quarter and six months ended March 27, 2009.

Quarter Ended March 27, 2009 Compared to Quarter Ended March 28, 2008

     ADT Worldwide

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

                                                     For the Quarters Ended
                                                   March 27,         March 28,
                                                     2009              2008
      Revenue from product sales                   $      528         $     635
      Service revenue                                   1,166             1,260

      Net revenue                                  $    1,694         $   1,895

      Goodwill and intangible asset impairments    $      635         $     -(1 )
      Operating (loss) income                            (457 )             220
      Operating margin                                      - (1)          11.6 %


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

                                                    For the Quarters Ended
                                                  March 27,       March 28,
                                                     2009            2008
       North America                              $     1,027     $     1,031
       Europe, Middle East and Africa ("EMEA")            439             581
       Rest of World                                      228             283

                                                  $     1,694     $     1,895

Net revenue for ADT Worldwide decreased $201 million, or 10.6%, during the quarter ended March 27, 2009, as compared to the quarter ended March 28, 2008. Revenue from product sales decreased 16.9% and service revenue decreased 7.5%. This decrease was primarily driven by the unfavorable impact of changes in foreign currency exchange rates of $192 million. Revenue was positively affected by $55 million for the net impact of acquisitions. 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 55% of ADT's total net revenue is contractual and is considered recurring revenue. Recurring revenue declined 5.7% during the second quarter of 2009, primarily as a result of changes in foreign exchange rates which unfavorably impacted recurring revenue by 9.7%, while systems installation and service revenue declined 16.0%. Geographically, revenue in EMEA decreased $142 million, or 24.4%, largely as a result of foreign currency exchange rates, which had an unfavorable impact of $106 million. The remaining decrease in EMEA was primarily a result of a decline in systems installation and service revenue due to continued weakness in the commercial market, including the retailer end market primarily across the United Kingdom and continental Europe. Revenue declined $55 million, or 19.4% in the Rest of World geographies, which was primarily due to the unfavorable impact of changes in foreign currency exchange rates of $70 million. Revenue in North America declined slightly, largely as a result of reduced spending in the commercial markets, partially offset by acquisition activity as well as an increase in revenue in our residential business.

Attrition rates for customers in our ADT Worldwide business increased to an average of 13.6% on a trailing 12-month basis as of March 27, 2009, as compared to 13.2% as of December 26, 2008 and 12.9% as of September 26, 2008. The increased attrition was primarily due to adverse market

conditions in the U.S. and United Kingdom commercial businesses partially offset by a slight improvement in the North American residential business.

Operating income decreased $677 million in the quarter ended March 27, 2009 from the same period in the prior year. Based on the deterioration within the commercial markets including the retailer end market discussed above, the Company recorded a goodwill impairment charge of $613 million related to its ADT EMEA reporting unit and intangible asset impairment charges of $22 million related to certain franchise rights within North America. The decrease was also related to the unfavorable impact of changes in foreign currency exchange rates of $10 million as well as lower sales volume and increased bad debt charges primarily resulting from weakness experienced in the commercial markets including the retailer end market and adverse global economic conditions, respectively. Margins were also negatively impacted by restructuring charges, net of $43 million. The same period in the prior year included restructuring and asset impairment charges of $10 million as well as expenses of $27 million primarily to convert customers from analog to digital signal transmissions in North America. There were no charges related to converting customers to digital signal during the second quarter of fiscal 2009.

     Flow Control

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

                                              For the Quarters Ended
                                            March 27,       March 28,
                                              2009            2008
              Revenue from product sales    $      868     $        980
              Service revenue                       59               44

              Net revenue                   $      927     $      1,024

              Operating income              $      133     $        143
              Operating margin                    14.3 %           14.0 %

Net revenue for Flow Control decreased $97 million, or 9.5%, in the quarter ended March 27, 2009 compared to the quarter ended March 28, 2008. The decrease in net revenue was driven by the unfavorable impact of changes in foreign currency exchange rates of $150 million and, to a lesser extent, reduced project activity in the water business primarily in Australia and EMEA. The decrease in revenue was partially offset by an increase in the valves business primarily related to increased project activity in the energy end market in EMEA and Asia. The net impact of acquisitions positively impacted net revenue by $3 million.

The decrease in operating income of $10 million, or 7.0%, in the quarter ended March 27, 2009, 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 $24 million as well as decreased volume in the water and thermal business offset by margin improvements in the valves business. Margins were negatively impacted by restructuring and divestiture charges of $8 million. There were no restructuring and divestiture charges during the second quarter of 2008.

     Fire Protection Services

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

                                                     For the Quarters Ended
                                                   March 27,         March 28,
                                                     2009               2008
      Revenue from product sales                   $      415          $    488
      Service revenue                                     402               444

      Net revenue                                  $      817          $    932

      Goodwill and intangible asset impairments    $      180          $      -
      Operating (loss) income                            (122 )              79
      Operating margin                                      - (1)           8.5 %


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Net revenue for Fire Protection Services decreased $115 million, or 12.3%, during the quarter ended March 27, 2009 compared to the quarter ended March 28, 2008. This decrease was primarily due to the impact of unfavorable changes in foreign currency exchange rates of $95 million as well as a decline in volume resulting from lower systems installation and upgrade activity in the U.S. and Europe. 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. Geographically, revenue in our international fire businesses decreased by $89 million largely due to the impact of unfavorable changes in foreign currency exchange rates discussed above. Additionally, revenue in our North America SimplexGrinnell business decreased by $26 million primarily due to a decline in systems installation and upgrade activity.

Operating income decreased $201 million in the quarter ended March 27, 2009 as compared to the same period in the prior year. The Company recorded a goodwill impairment charge of $180 million related to its EMEA Fire reporting unit based on the factors discussed above. The decrease was also driven by restructuring charges of $11 million in the quarter ended March 27, 2009, as compared to restructuring charges, net of $2 million in the prior year. In addition, margins were negatively affected by the sales volume decline discussed above.

     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
                                                  March 27,         March 28,
                                                     2009              2008
      Revenue from product sales                   $     329         $     541
      Service revenue                                      1                 1

      Net revenue                                  $     330         $     542

      Goodwill and intangible asset impairments    $     935         $       -
      Operating (loss) income                           (962 )              72
      Operating margin                                     - (1)          13.3 %


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