TYCO INTERNATIONAL LTD /BER/ - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002

OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

001-13836
(Commission File Number)

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TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)

BERMUDA 04-2297459
(Jurisdiction of Incorporation) (IRS Employer Identification No.)

THE ZURICH CENTRE, SECOND FLOOR, 90 PITTS BAY ROAD, PEMBROKE HM 08, BERMUDA
(Address of registrant's principal executive office)

441-292-8674
(Registrant's telephone number)

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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Shares, Par Value $0.20 New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III or this Form 10-K or any
amendment to this Form 10-K. / /.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act
Rule 12b-2) Yes /X/ No / /.

The aggregate market value of voting common shares held by nonaffiliates of
registrant was $30,277,630,426 as of December 27, 2002.

The number of common shares outstanding as of December 20, 2002 was
1,995,888,624.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement filed within 120 days of the
close of the registrant's fiscal year in connection with the registrant's 2003
annual shareholders' meeting are incorporated by reference into Part III of this
Form 10-K.

See pages 31 to 34 for the exhibit index.

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TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

INTRODUCTION

Tyco International Ltd. ("we" or "Tyco") is a diversified manufacturing and
service company that, through its subsidiaries:

- designs, manufactures, installs, monitors and services electronic security
and fire protection systems;

- designs, manufactures and distributes electrical and electronic
components, and designs, manufactures, installs, operates and maintains
undersea fiber optic cable communications systems;

- designs, manufactures and distributes medical devices and supplies and
other specialty products; and

- designs, manufactures, distributes and services engineered products
including industrial valves and controls and steel tubular goods and
provides environmental consulting services.

See Notes 3 and 4 to the Consolidated Financial Statements for certain
segment and geographic financial data relating to our business.

CIT Group, Inc., ("CIT"), which comprised the operations of the Tyco Capital
(financial services) business segment, was sold in an initial public offering in
July 2002. See Note 11 to the Consolidated Financial Statements for information
regarding the discontinued operations of this former business segment.

Tyco's operating strategy is to be a low-cost, high-quality producer and
provider in each of the markets we serve. We promote our leadership position by
investing in existing businesses and developing new markets. Although
acquisitions of complementary businesses have been an important part of Tyco's
growth in recent years, our current business strategy and near-term actions
focus on enhancing internal growth within existing Tyco businesses. We plan to
achieve this goal through new product innovation, increased market share,
increasing the service and repair components of our existing businesses and
continued geographic expansion. While we may continue to make selected
complementary acquisitions, we anticipate that the amount of acquisition
activity will be significantly reduced for the foreseeable future. Leveraging
the strengths of our existing operations, we seek to enhance value for our
shareholders through operational excellence and maximization of cash flows. We
are also striving to establish the highest standards of corporate governance so
that we can earn the respect and confidence of our shareholders, employees,
suppliers and customers and the financial community.

I. FIRE AND SECURITY SERVICES

Tyco is the world's leading provider of both electronic security services
and fire protection services. With fiscal 2002 revenues of $10,637.6 million,
our Fire and Security Services businesses comprise approximately 30% of our
total revenues from continuing operations. The group's products and services
include:

- designing, manufacturing, installing, monitoring and servicing electronic
security systems;

- designing, manufacturing, installing and servicing a broad line of fire
detection, suppression systems, and manufacturing and servicing of fire
extinguishers and related products; and

- providing fully integrated solutions that integrate both electronic
security, fire protection and fire detection systems.

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ELECTRONIC SECURITY SERVICES

We are the world's leading provider of electronic security products and
services and event monitoring, which includes the monitoring of burglar alarms,
fire alarms, heating systems, medical alert systems, such as our Personal
Emergency Response Systems, and other activities where around-the-clock
monitoring and response is required. We offer regular inspection and maintenance
services to ensure that systems will function properly and can be upgraded as
technology or risk profiles change. We are also a leading supplier of electronic
security solutions to the retail, commercial and industrial market places,
through electronic article surveillance, video surveillance, access control,
electronic asset protection and security management systems, products and
services. These and other security services are provided principally under the
ADT trade name.

Electronically monitored security systems are tailored to our customers'
specific needs and involve the installation and use on a customer's premises of
devices designed for intrusion detection and access control, as well as reaction
to various occurrences or conditions, such as movement, fire, smoke, flooding,
environmental conditions, industrial processes and other hazards. These
detection devices are connected to microprocessor-based control panels which
communicate to a monitoring center, located remotely from the customer's
premises, where alarm and supervisory signals are received and recorded. In most
systems, control panels can identify the nature of the alarm and the areas
within a building where the sensor was activated. Depending upon the type of
service for which the subscriber has contracted, monitoring center personnel
respond to alarms by relaying appropriate information to the local fire or
police departments, notifying the customer or taking other appropriate action,
such as dispatching employees to the customer's premises. In some instances, the
customer may monitor the system at its own premises or the system may be
connected to local fire or police departments.

Whether systems are monitored by the customer at its premises or connected
to one of our monitoring centers, we usually provide support and maintenance
through service contracts. Systems installed at commercial customers' premises
may be owned by us or by our customer. We usually retain ownership of standard
residential systems, but more sophisticated residential systems are normally
purchased by our customers.

We market our electronic security services to commercial and residential
customers through both a direct sales force and an authorized dealer network.
During fiscal 2002, we refocussed our authorized dealer program, encouraging
growth in some geographic areas while curtailing activities in others, as part
of an enhanced focus on return on investment. A separate national accounts sales
force services most commercial customers. We also utilize advertising,
telemarketing and direct mail to market our services.

Our commercial customers include financial institutions, industrial and
commercial businesses, federal, state and local governments, defense
installations, and health care and educational facilities. We provide
residential electronic security services primarily in North America and Europe,
with a growing presence in the Asia-Pacific region. Our customers are often
prompted to purchase security systems by their insurance carriers, which may
offer lower insurance premium rates if a security system is installed or require
that a system be installed as a condition to coverage. It has been our
experience that commercial and residential contracts are generally renewed after
their initial terms. Contract discontinuances occur principally as a result of
customer relocation or closure.

We out-source most of the electronic components we install. We manufacture
certain alarm, detection and activation devices and central monitoring station
equipment both for installation by us and for sale to other installers.

The security business in North America is highly competitive, with a number
of major firms and some 12,000 smaller regional and local companies. Similarly,
Tyco competes with several national companies and several thousand regional and
local companies in Europe, the Middle East, the Asia-Pacific region, Latin
America and South Africa. Competition is based primarily on price in

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relation to quality of service. We believe that the quality of our electronic
security services is higher than that of many of our competitors and, therefore,
our prices may be higher than those charged by our competitors.

FIRE PROTECTION CONTRACTING AND SERVICES

We design, fabricate, install and service automatic fire sprinkler systems,
fire alarm and detection systems and special hazard suppression systems in
buildings and industrial plants, as well as respiratory systems and other
life-saving devices. Tyco's fire protection businesses utilize a worldwide
network of sales offices, operating globally under various trade names including
SimplexGrinnell, Wormald, Mather & Platt, Total Walther, O'Donnell Griffin, Dong
Bang, Zettler, Ansul, Scott and Tyco.

We install fire protection systems in both new and existing structures. Our
fire protection systems are purchased by owners, architects, construction
engineers and mechanical or general contractors. In recent years, the
retrofitting of existing buildings has grown as a result of legislation
mandating the installation of fire protection systems, especially in hotels,
healthcare facilities, educational establishments and other buildings accessible
to the general public. We continue to focus on system maintenance and
inspection, which have become more significant parts of our business.

The majority of the fire suppression systems installed by Tyco are
water-based. However, we are also the world's leading provider of custom
designed special hazard fire protection systems which incorporate specialized
extinguishing agents such as foams, dry chemicals and gases. These are often
especially suited to fire protection in certain manufacturing, power generation,
petrochemical, offshore oil exploration, transportation, telecommunications,
mining and marine applications.

In Australia, New Zealand and Asia, Tyco engages in the installation of
electrical equipment in new and existing structures and provides specialized
electrical contracting services, including applications for railroad and bridge
construction, primarily through its O'Donnell Griffin division.

The majority of the mechanical components (and, in North America, a high
proportion of the pipe) used in our fire protection systems are manufactured by
Tyco's Engineered Products and Services division. We use computer-aided-design
technology that reduces the time required to design systems for specific
applications and coordinates the fabrication and delivery of system components.
We also have fabrication plants worldwide that cut, thread and weld pipe, which
is then shipped with other prefabricated components to job sites for
installation.

Our Ansul subsidiary manufactures and sells various lines of dry chemical,
liquid and gaseous portable fire extinguishers and related products for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry and confined industrial and commercial spaces housing electronic and
other delicate equipment. Ansul also manufactures spill control products
designed to absorb, neutralize and solidify spills of hazardous materials.

Competition in the fire protection contracting business varies by region. In
North America, Tyco competes with hundreds of smaller contractors on a regional
or local basis for the installation of fire protection, alarm and detection
systems. In Europe, Tyco competes with many regional or local contractors on a
country-by-country basis. In Australia, New Zealand and Asia, we compete with a
few large fire protection contractors, as well as with many smaller regional or
local companies. Tyco competes for fire protection systems contracts primarily
on the basis of price, service and quality.

II. ELECTRONICS

Tyco is the world's leading supplier of passive electronic components and a
leading provider of undersea fiber optic networks and services. With fiscal 2002
revenues of $10,528.0 million, our

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Electronics businesses comprise approximately 30% of our total revenues from
continuing operations. The group's products and services include:

- designing, engineering and manufacturing electronic connector systems,
fiber optic components, wireless devices, heat shrink products, circuit
protection devices, magnetic devices, wire and cable, relays, sensors,
touch screens, smart card components, identification and labeling
products, energy systems, power products, printed circuit boards and
assemblies, electronic modules, application tooling, switches and battery
assemblies; and

- designing, manufacturing, installing, operating and maintaining undersea
fiber optic cable communications systems through Tyco Telecommunications
and selling bandwidth on our own cable network.

TYCO ELECTRONICS

Tyco Electronics designs, manufactures and markets a broad range of
electronic, electrical and electro-optic passive and active devices and a number
of interconnection systems and connector-intensive assemblies, as well as
wireless products including radar sensors, global positioning satellite systems
components, silicon and gallium arsenide semiconductors and microwave
sub-systems. Tyco Electronics' products have potential uses wherever an
electronic, electrical, computer or telecommunications system is involved. Tyco
Electronics manufactures and sells more than 500,000 parts in over 750 global
product lines, including power systems, terminals, fiber optic components,
printed circuit board and cable connectors and assemblies, cable and cabling
systems, and related application tools and application tooling equipment.
Products are sold under the AMP, Agastat, Axicom, Augat, Buchanon, Critchley,
Dulmison, Elo-Touch, M/A-COM, Potter & Brumfield, Raychem, Schrack and Tyco
Electronics tradenames, among others.

Tyco Electronics markets via direct sales and distributors to customers
including original equipment manufacturers ("OEMs") and their subcontractors,
utilities, government agencies, value-added resellers and those who install,
maintain and repair equipment. For the fiscal year ended September 30, 2002,
direct sales represent 86% of revenue while the remaining revenue is via
distributors. These customers are found in the automotive, communications,
computer, aerospace, military, household appliance, industrial machinery and
equipment, consumer electronics, commercial energy and networking industries. In
total, Tyco Electronics serves over 250,000 customers located in over 55
countries, and maintains a strong local presence in the geographic areas in
which it operates, including the Americas, Europe and the Asia-Pacific region.

The markets that Tyco Electronics operates in are highly competitive. Tyco
Electronics faces competition across its product lines from other companies
ranging in size from large, diversified manufacturers to small, highly
specialized manufacturers. Competition is on the basis of breadth of product
offering, product innovation, price, quality and service.

TYCO TELECOMMUNICATIONS

Tyco Telecommunications is a leading provider of undersea fiber optic
networks and services. Tyco Telecommunications' products and services include:
designing, manufacturing and installing undersea cable communications systems;
servicing and maintaining major undersea cable networks; and designing,
manufacturing and installing a global undersea fiber optic network, known as the
Tyco Global Network-TM- ("TGN"). Tyco Telecommunications operates, maintains and
sells bandwidth capacity on the TGN. In the near term, due to market conditions
in the telecommunications industry, the focus of Tyco Telecommunications is on
maintenance services on existing systems and selling bandwidth capacity on the
TGN.

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III. HEALTHCARE AND SPECIALTY PRODUCTS

Tyco is a world leader in the medical products industry and has a strong
leadership position in the plastics industry. With fiscal 2002 revenues of
$9,777.4 million, our Healthcare and Specialty Products businesses comprise
approximately 27% of our total revenues from continuing operations. The group's
products include:

- a wide variety of medical devices and supplies, including laparoscopic
instruments; sutures and surgical staplers; electro-surgical instruments;
pulse oximeters; ventilators; imaging reagents; needles and syringes;
products for vascular therapy and wound care; bulk and unit dose
pharmaceuticals; and retail brand adult incontinence care, infant care and
feminine hygiene products; and

- polyethylene film and film products such as flexible plastic packaging;
plastic bags and sheeting; coated and laminated packaging materials; tapes
and adhesives; plastic garment hangers; disposable dinnerware; and
pipeline coatings for the oil, gas and water distribution industries.

TYCO HEALTHCARE GROUP

The Tyco Healthcare Group consists of seven primary business units: Medical,
Surgical, Respiratory, Imaging, Pharmaceutical, Retail and International.

The Medical Division consists primarily of Kendall, Sherwood and Ludlow
Technical Products. Tyco Healthcare's Medical Division manufactures and markets
a broad range of wound care products; needles and syringes; sharps disposables;
vascular therapy products; electrodes; operating room kits and trays; urological
care products; enteral feeding products; incontinence care products; and nursing
care products to hospitals, surgi-centers, alternate care facilities and homes.

The Medical Division consists of many market-leading brands such as KERLIX
and CURITY wound care dressings, WINGS adult incontinence products, SCD
compression devices, T.E.D. anti-embolism stockings, MONOJECT needles and
syringes, SHARPSAFETY needle stick prevention products and KANGAROO enteral
feedings systems. Ludlow Technical Products' significant brands are DEVON O.R.
surgical kits, and MEDI-TRACE diagnostic and monitoring electrodes.

The Surgical Division comprises the following companies: United States
Surgical, Davis & Geck ("USS/DG"), Valleylab and Radionics. This group of
companies develops, manufactures and markets a broad spectrum of widely
recognized surgical products that are used in operating rooms worldwide. Some of
these products are also used in emergency rooms, surgi-centers and physician
offices.

U.S. Surgical is a market leader in innovative wound closure products and
advanced surgical devices. Its Auto Suture division offers a complete line of
surgical devices and laparoscopic instruments for general and specialty
procedures. Its USS/DG division offers a fully integrated suture line that
combines U.S. Surgical's reputation as an innovator with Davis & Geck's century
of specialized suture experience. Leading brand names for U.S. Surgical include
ENDO GIA and VITAL VUE endoscopic instruments, DEXON sutures and PREMIUM skin
staplers.

Valleylab is a leading manufacturer and marketer of a wide array of
electro-surgical and ultrasonic devices, as is Radionics, which produces devices
for neurosurgery, neurological pain treatment and radiation therapy. Among
Valleylab and Radionics' leading brand names are the FORCE FX electro-surgical
generator; the LIGASURE vessel occlusion system; the CUSA EXCEL ultrasonic
surgical system; and the COOL-TIP RF system.

Tyco Healthcare's Respiratory Group consists of the Nellcor, Mallinckrodt
Critical Care and Puritan Bennett businesses. This division develops and markets
an extensive line of products and services that: help facilitate and monitor
anesthesia; diagnose and treat respiratory disease; and provide life support for
critically ill patients. These products are sold around the world and are used
in the hospital and the home.

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Nellcor continues to drive advancements in pulse oximetry technology with
the recent introduction of the OXIMAX pulse oximetry system. For critically ill
patients or for those undergoing surgery, the MALLINCKRODT endotracheal, the
SHILEY tracheostomy tubes and the DAR breathing systems are industry leaders.
Puritan Bennett is known around the world for its critical care ventilators, and
recently released HELIOS liquid oxygen system for patients in need of oxygen
therapy at home.

Mallinckrodt Imaging is devoted to improving the diagnostic sciences of
X-ray, MRI and Nuclear medicine. By developing, manufacturing, and marketing
contrast agents, radiopharmaceuticals and delivery systems, Mallinckrodt Imaging
helps enhance the utility and quality of images obtained via these procedures.
For nearly a century, Mallinckrodt Imaging has partnered with radiologists,
cardiologists, urologists and nuclear medicine physicians to improve the quality
of diagnosis in multiple disease states through well known branded products
including CONRAY and OPTIRAY X-ray contrast media agents, OPTIMARK MRI contrast
media agents and thallium and MAG3 radiopharmaceutical agents. The Mallinckrodt
family of imaging products is sold into hospitals, radiopharmacies and alternate
site imaging centers throughout the world.

Tyco Healthcare's Mallinckrodt Pharmaceutical Division comprises three
businesses--Bulk Pharmaceuticals (active pharmaceutical ingredients), Dosage
Pharmaceuticals and Specialty Chemicals. These businesses are connected by
common chemical manufacturing technology and shared facilities. The Bulk
Pharmaceuticals business is the largest producer of narcotics in the United
States and of acetaminophen worldwide. Ninety-five percent of these products are
used within the pharmaceutical industry to manufacture dosage form drugs. The
Dosage Pharmaceuticals segment has three distinct segments: generic narcotic
pharmaceuticals, branded central nervous systems products and contract
pharmaceutical manufacturing for third parties. These products are sold to major
wholesalers and drug store chains. The Specialty Chemicals business includes a
wide array of specialty chemicals targeted at: research and development and
analytical laboratories; process materials used to manufacture
biopharmaceuticals; and specialty chemicals used to manufacture semiconductor
chips, many of which are sold under the J.T. Baker name.

The Retail Division of Tyco Healthcare consists of the Confab and Paragon
Trade Brands businesses. This division develops, manufactures and markets a wide
variety of retail brand products for the United States and Canadian retail
markets. The Retail Division supplies a broad majority of retail mass
merchandisers, food stores and drug stores in these markets. The division is
recognized within continental North America as the industry leader for retail
brand adult incontinent care, infant care and feminine hygiene products. Through
our "first-to-market" approach, Tyco Healthcare's Retail Division helps
retailers such as Wal-Mart, Target, Kroger, Albertson's, CVS, Walgreens, Loblaw
and Toys R Us manage their categories and build their own store brand presence
with the high-quality products consumers demand.

Tyco Healthcare International is responsible for the marketing, distribution
and export of all Tyco Healthcare Group products (excluding pharmaceuticals)
outside of the United States. Tyco Healthcare International markets directly to
hospitals and medical professionals, as well as through independent
distributors, with a worldwide presence. Although the mix of product lines
offered varies from country to country, its operations are organized primarily
into four geographic regions: Europe, Japan, the Asia-Pacific region and Latin
America.

Tyco Healthcare's competitors include Johnson & Johnson, Becton Dickinson
and C.R. Bard, among others, and competition is based on breadth of product
offerings, quality of product, service and price.

TYCO PLASTICS AND ADHESIVES

Tyco Plastics & Adhesives consists of Tyco Plastics, A&E Products, Tyco
Adhesives and Ludlow Coated Products.

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Tyco Plastics manufactures polyethylene-based film, packaging products, bags
and sheeting in a wide range of sizes, gauges, strengths, stretch capacities,
clarities and colors. Tyco Plastics' products include: RUFFIES, a national brand
consumer trash bag sold to mass merchants, grocery chains and other retail
outlets, and FILM-GARD, a leading plastic sheeting product sold to consumers and
professional contractors through Do-It-Yourself outlets, home improvement
centers and hardware stores. FILM-GARD products are produced in various sizes
for a variety of uses, including painting, renovation, construction, landscaping
and agriculture. Additionally, in the United States, Tyco Plastics is the
largest producer of stretch film, the largest producer of can liners for the
away-from-home market, and a leading supplier of custom packaging products used
for primary food packaging and the beverage industries. Tyco Plastics sells its
products directly to retailers for resale, to distributors for resale or
directly to end-users. Tyco Plastics competes with other nationally recognized
brands as well as many smaller regional producers on the basis of price,
delivery, breadth of product line and specialized product capabilities.
Manufacturing facilities are located throughout the United States, Canada and
the United Kingdom to ensure superior customer service and competitive
transportation costs.

A&E Products is the leading manufacturer of plastic garment hangers
worldwide, operating from over 50 distribution points in 30 countries. A&E
Products also operates hanger-recycling facilities in the United States and
Europe. The reused hangers are purchased from various retailers and then sorted,
processed and packaged for sale back to the apparel market. A&E Products'
Catering division manufactures and markets disposable dinnerware products to the
retail and foodservice industries. The Catering division markets their many
product lines under brand names including SCROLLWARE, PRESTIGE, LEGACY and their
newest line, OPULENCE.

The Tyco Adhesives division manufactures and markets specialty adhesive
products and tapes for industrial applications, including external corrosion
protection products for oil, gas and water pipelines. Tyco Adhesives also
produces duct, foil, strapping, packaging and electrical tapes and spray
adhesives for industrial and consumer markets worldwide, and manufactures cloth
and medical tapes for Tyco Healthcare and others. Products are sold under the
MANULI tapes, POLYKEN, NASHUA tape, RAYCHEM, BETHAM, NATIONAL and PATCO brand
names.

Ludlow Coated Products produces a variety of specialty laminates and coated
products principally derived from paper, film, foil and fabrics. Ludlow markets
its specialty laminates and coated products through its own sales force and
through independent manufacturers' representatives. Ludlow competes with many
large manufacturers of laminates and coated products on the basis of price,
service, marketing coverage and custom application engineering, and sells its
products to manufacturers, producers and converters. It has various specialized
competitors in different markets.

IV. ENGINEERED PRODUCTS AND SERVICES

Tyco is the world's leading manufacturer of industrial valves and controls.
With fiscal 2002 revenues of $4,700.7 million, our Engineered Products and
Services businesses comprise approximately 13% of our total revenues from
continuing operations. The group's products and services include:

- manufacturing and servicing valves and related devices, as well as other
engineered products solutions;

- manufacturing steel pipe and tubular goods and electrical raceway
products, including steel conduit, pre-wired armored cable, flexible
conduit, steel support systems and fasteners, cable tray and cable ladder;

- providing a broad range of consulting, engineering and construction
management and operating services for water, wastewater, environmental,
transportation and infrastructure markets; and

- manufacturing and distributing of fire sprinkler devices, valves, steel
pipe and fittings and pipe couplings used in commercial, residential and
industrial fire protection systems.

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Tyco Engineered Products and Services comprises four primary business units:
Tyco Flow Control, Tyco Electrical & Metal Products, Tyco Infrastructure
Services and Tyco Fire & Building Products.

TYCO FLOW CONTROL

Tyco Flow Control manufactures both standard and highly specialized gate,
globe, check, butterfly, ball, safety relief and other valves in a wide variety
of configurations, body types, materials, pressure ratings and sizes. We also
manufacture related equipment, instrumentation and products such as valve
actuators, gauges, positioners, valve control systems and vapor control
products. These products are manufactured in Tyco's facilities located in North
America, Europe, South America and the Asia-Pacific region. The group's products
are used in various applications including power generation, chemical,
petrochemical, oil and gas, water distribution, wastewater, pulp and paper,
commercial irrigation, mining, industrial process, food and beverage, plumbing
and HVAC. Tyco Flow Control also provides engineering, design, inspection,
maintenance, repair and commissioning services.

Tyco's valves and related products are sold under many trade names,
including Keystone, Grinnell, Hindle, KTM, Flow Control Technologies, Gachot,
Richards, Sapag, Winn, Vanessa, Raimondi, Fasani, Sempell, Descote, Klein,
Biffi, Morin Actuators, Westlock Controls, Crosby, Anderson Greenwood, Yarway,
Valvtron, Neotecha, Belucci, Intecva, Bayard, Belgicast, Whessoe Varec, Bailey
Birkett, Cash, Erhard, Schmieding and Frischhut.

We sell valves and related products in most geographic areas directly
through our internal sales force and in some geographic areas through a network
of independent distributors and manufacturers' representatives. The valve
industry is highly fragmented and we compete against a number of international,
national and local manufacturers as well as against specialized manufacturers on
the basis of price, delivery, breadth of product line and specialized product
capability.

In Australia, Tyco Flow Control also manufactures ductile iron and steel
pipe, steel pipe fittings, valves and related products primarily for the water
industry at several locations under the trade name Tyco Water. We also
manufacture a line of plastic pipe and fittings in Australia and Malaysia.

Tyco Thermal Controls manufactures and sells self-regulating and polymeric
heaters, mineral insulated heaters and cable products, specialty heaters and
related controllers and instrumentation. These products are sold under the
Raychem HTS, Pyrotenax and Isopad brand names on a worldwide basis. Our Tracer
Industries unit provides turnkey design, installation and service of industrial
heat tracing systems.

TYCO ELECTRICAL & METAL PRODUCTS

Tyco Electrical & Metal Products manufactures electrical raceway and related
products primarily in North America and Europe. Our products include steel
electrical conduit, pre-wired armored cable, flexible electrical conduit, metal
framing systems, cable tray and cable ladder and related products utilized in
the construction, industrial and original equipment markets. In North America,
Allied Tube & Conduit ("Allied") is the leading manufacturer of steel electrical
conduit, and AFC Cable Systems is the leading manufacturer of steel and aluminum
pre-wired armored cable. Georgia Pipe manufactures plastic conduit. Allied
manufactures metal framing and support systems and electrical cable tray and
cable ladders in North America and sells them under the Powerstrut, Unistrut and
T.J. Cope trade names.

Allied manufactures and distributes welded steel tube products in North
America and in the United Kingdom. In the United Kingdom, welded and drawn steel
tubing is manufactured under the trade names of Newman Monmore, Newman Phoenix,
Tyco Tube Components and HUB LeBas. We manufacture and distribute specialty
steel strip products in the United Kingdom under the JB&S Lees, Firth Cleveland
Steel Strip and Ductile Stourbridge trade names. In Brazil, tube is manufactured
and sold under the trade names of Frefer and Dinaco. These businesses serve a
wide spectrum of customers

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and applications ranging from automotive, fire protection, security and safety
containment, recreational equipment, commercial construction and traffic control
systems. Products compete on the basis of price, availability and breadth of
product line.

TYCO FIRE & BUILDING PRODUCTS

Tyco Fire & Building Products manufactures and sells a wide variety of
products to fire protection contractors and fabricators of fire protection
systems. These products include a complete line of fire sprinkler devices,
specialty valves, plastic pipe and pipe fittings and ductile iron pipe
couplings. We manufacture these products in the United States, the United
Kingdom, Germany, China and Malaysia and sell them under the GEM, Star, Central,
Grinnell and Central Spraysafe brand names. In North America, a complete line of
sprinkler pipe is manufactured by our metal products unit (Allied), thus
enabling us to offer a complete line of fire protection systems and services.
Tyco also produces a complete line of specialty fastening products for the
building industry that are manufactured in the United Kingdom under the trade
names of Lindapter and Ancon and metal framing and support products that are
manufactured in the United Kingdom and Germany.

Central Sprinkler maintains a network of distribution facilities in the
United States that stock and sell a full line of fire protection products
directly to contractors and installers. GEM Sprinkler and Star Sprinkler sell
fire protection products through a network of independent distributors. In
Canada, Central America, South America and the Asia-Pacific region, we sell fire
protection products through independent distribution and in some cases directly
to fire protection contractors. In Europe and the Middle East, we operate a
number of company-owned distribution facilities which stock and sell a full line
of fire protection, mechanical, building products and other flow control
products. Competition for the sale of fire products is based on price, delivery,
breadth of product line and specialized product capability. The principal
competitors are specialty products manufacturing companies based in the United
States, with other smaller competitors in Europe and Asia.

TYCO INFRASTRUCTURE SERVICES

Tyco Infrastructure Services provides a broad range of environmental,
consulting and engineering services through its Earth Tech business. Earth
Tech's principal services consist of a full-spectrum of water, wastewater,
environmental and hazardous waste management services. We also provide
infrastructure and transportation design and construction services for
institutional, civic, commercial and industrial clients; design, construction
management, project financing and facility operating services for water and
wastewater treatment facilities for municipal and industrial clients; and
transportation engineering and consulting. Earth Tech operates through a network
of offices in the United States, Canada, the United Kingdom, Ireland, Mexico,
Brazil, Germany, Portugal, Sweden, China, Australia and Thailand. Earth Tech
competes with a number of international, national, regional and local companies
on the basis of price and the breadth and quality of services.

BACKLOG

At September 30, 2002, we had a backlog of unfilled orders of
$11,591.3 million, compared to a backlog of $11,174.2 million at September 30,
2001. We expect that approximately 79% of our backlog

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at September 30, 2002 will be filled during fiscal 2003. Backlog by reportable
industry segment is as follows ($ in millions):

Backlog for Fire and Security Services includes recurring "revenue in
force," which represents one year's fees for security monitoring and maintenance
services under contract. The amount of recurring revenue in force at
September 30, 2002 and 2001 is $3,492.0 million and $3,099.6 million,
respectively. Within the Fire and Security Services segment, backlog increased
primarily due to an increase in recurring revenue in force as a result of growth
in certain geographies in ADT's dealer program, offset in part by the
curtailment, and in certain end-markets, the termination of the ADT dealer
program. Backlog also increased due to growth at our U.K. Fire Protection
business and the acquisition of Sensormatic, which resulted in an addition of
approximately $57 million to backlog.

Backlog for Engineered Products and Services increased primarily due to
acquisitions completed in fiscal 2002. Fiscal 2001 backlog for this segment has
been increased by $175.1 million as a result of certain long term contracts not
previously reported offset by an adjustment to reflect net revenues instead of
gross revenues at Tyco Infrastructure Services. Of the $643.4 million decrease
within the Electronics segment, backlog decreased approximately $500 million as
there were no new contracts for undersea cable communication systems signed in
fiscal 2002 as a result of the downturn in the telecommunications industry.
Backlog also decreased in the electronics components group due to the
cancellation and/or delay of orders by customers primarily in end-markets
including the communications, computer and consumer electronics industries.
Backlog in the Healthcare and Specialty Products segment represents unfilled
orders, which, in the nature of the business, are normally shipped shortly after
purchase orders are received. We do not view backlog in the Healthcare and
Specialty Products segment to be a significant indicator of the level of future
sales activity.

PROPERTIES

Our operations are conducted in facilities throughout the world aggregating
approximately 126.5 million square feet of floor space, of which approximately
69.5 million square feet are owned and approximately 57.0 million square feet
are leased. These facilities house manufacturing, distribution and warehousing
operations, as well as sales and marketing, engineering and administrative
offices.

Within the Fire and Security Services segment, the fire protection
contracting and service business operates through a network of offices located
in North America, Central America, South America, Europe, the Middle East and
the Asia-Pacific region. Fire protection components are manufactured at
locations in North America, the United Kingdom, Germany, Australia, New Zealand,
South Korea and Japan. The electronic security services business operates
through a network of monitoring centers and sales and service offices and other
properties in North America, Europe, the Asia-Pacific region, Latin America and
South Africa. The Fire and Security Services segment occupies approximately
27.5 million square feet, of which 5.7 million square feet are owned and
21.8 million square feet are leased.

The Electronics segment has manufacturing facilities in North America,
Central and South America, Europe, Asia and Australia. The group occupies
approximately 34.6 million square feet, of which 22.5 million square feet are
owned and 12.1 million square feet are leased.

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The Healthcare and Specialty Products segment has manufacturing facilities
in North America, Europe and Asia. The group occupies approximately
35.3 million square feet, of which 22.5 million square feet are owned and
12.8 million square feet are leased.

The Engineered Products and Services segment has manufacturing, warehouses
and distribution centers throughout North America, Europe, the Asia-Pacific
region and Central and South America. The group occupies approximately
28.8 million square feet, of which 18.8 million square feet are owned and
10.0 million square feet are leased.

In the opinion of management, our properties and equipment are in good
operating condition and are adequate for our present needs. We do not anticipate
difficulty in renewing existing leases as they expire or in finding alternative
facilities. See Note 20 to Consolidated Financial Statements for a description
of our rental obligations.

RESEARCH AND DEVELOPMENT

The amounts expended for Tyco-sponsored research and development during
fiscal 2002, fiscal 2001 and fiscal 2000 were $633.4 million, $572.0 million and
$527.5 million, respectively. Customer-funded research and development
expenditures were $20.4 million, $40.4 million and $18.6 million, respectively.

Approximately 5,842 full-time scientists, engineers and other technical
personnel were engaged in our product research and development activities as of
September 30, 2002.

Research activity at Tyco Electronics focuses specifically on new product
development and a continuous expansion of technical capabilities. Tyco
Healthcare focuses on technologies to complement existing product lines and
applying expertise to refine and successfully commercialize such products and
technologies and on acquiring rights to new products. Research activity in Fire
and Security Services relates mostly to the design of fire and intrusion alarm
products and emergency alarm systems, as well as products related to electronic
article surveillance. The Engineered Products and Services segment focuses on
improvements in hydraulic design which controls the motion of fluids, resulting
in new fire protection devices and flow control products.

RAW AND OTHER PURCHASED MATERIALS

We are a large buyer of steel and plastic resin in the United States. We are
also a large buyer of copper, brass, gold, electronic components, chemicals and
additives, thin and flexible copper clad materials, zinc, paper, ink, foil,
adhesives, cloth, wax, pulp and cotton. Certain of the components used in the
Fire Protection business, principally certain valves and fittings, are purchased
for installation in fire protection systems or for distribution. Our electronic
security systems are purchased from suppliers and are manufactured to our
specification. Materials are purchased from a large number of independent
sources around the world. There have been no shortages in materials which have
had a material adverse effect on our businesses. We actively manage our exposure
to prices in base and precious metals by the usage of forward contracts with
banks that have at least an A+/A1 credit rating by S & P and Moody's. In
addition, long-term supply contracts, using fixed or variable pricing are
entered into in order to manage our exposure to potential supply disruptions.

PATENTS AND TRADEMARKS

We own a portfolio of patents, which principally relate to electrical and
electronic products, healthcare and specialty products, fire protection devices,
electronic security systems, flow control products, pipe and tubing manufacture
and cable manufacture. We also own a portfolio of trademarks and are a licensee
under various patents. Although these have been of value and are expected to
continue to be of value in the future, in the opinion of management the loss of
any single patent or group of patents would not materially affect the conduct of
the business in any of our segments. In several cases, one product may be sold
under more than one tradename, which also helps minimize risk. In addition,
management believes that the likelihood of losing key patents or trademarks is
remote. The patents and licenses have estimated useful lives ranging from 5 to
40 years. As of September 30, 2002, we had approximately $140.1 million of
trademarks not subject to amortization.

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EMPLOYEES

Tyco employed approximately 267,500 people at September 30, 2002, of which
approximately 113,600 are employed in the United States and 153,900 are outside
the United States. We have collective bargaining agreements with labor unions
covering approximately 66,900 employees at certain of our North American,
European and Asia-Pacific businesses. We believe that our relations with the
labor unions are generally satisfactory. In April 1994, following lengthy
negotiations, contracts between our Grinnell subsidiary and a local union of the
United Association of Plumbers and Pipefitters was not renewed. Employees in
those locations, representing 64% of Grinnell Fire Protection's North American
union employees at the time, went on strike. The strike ended in January 2001.
In January 2002, Grinnell Fire Protection and Simplex Time Recorder Co. began
doing business as SimplexGrinnell LP (an indirect wholly-owned subsidiary of
Tyco). SimplexGrinnell has reinstated relevant terms of the expired collective
bargaining agreement and has resumed negotiations with the local union over a
new agreement. SimplexGrinnell is currently participating in a proceeding to
determine what payments are necessary to compensate certain employees
(approximately 2% of SimplexGrinnell's employee population) for losses they may
have experienced as a result of changes in their wages and benefits that
Grinnell implemented in 1994. The action has not had, and is not expected to
have, any material adverse effect on our business or results of operations.

PROPOSED LEGISLATION

In the normal course of business, we provide services and sell products to
various government agencies. Changes in legislation or governmental policies can
have an impact on our worldwide operations. We are currently assessing the
potential impact of various legislative proposals that would deny U.S. federal
government contracts to U.S. companies that move their corporate location
abroad. Tyco became a Bermuda-based company as a result of the 1997 business
combination of Tyco International Ltd., a Massachusetts corporation, and ADT
Limited (a public company that had been located in Bermuda since the 1980's with
origins dating back to the United Kingdom since the early 1900's). Currently,
Tyco's revenues related to U.S. federal government contracts account for less
than 3% of net revenues for the fiscal year ended September 30, 2002. In
addition, various state and other municipalities in the U.S. have proposed
similar legislation. There is also other similar proposed tax legislation which
could substantially increase our corporate income taxes and, consequently,
decrease future net income and increase our future cash outlay for taxes. We are
unable to predict, with any level of certainty, the likelihood or final form in
which any proposed legislation might become law, or the nature of regulations
that may be promulgated under any such future legislative enactments. As a
result of these uncertainties, we are unable to assess the impact on us of any
proposed legislation in this area.

See Item 3. "Legal Proceedings" for a description of investigations
initiated by certain government agencies.

ENVIRONMENTAL MATTERS

We are subject to numerous foreign, federal, state and local environmental
protection and health and safety laws governing, among other things, the
generation, storage, use and transportation of hazardous materials; emissions or
discharges into the ground, air or water; and the health and safety of our
employees. Compliance with environmental laws, however, has not had, and based
on current information and applicable laws, is not expected to have, a material
adverse effect upon our capital expenditures, earnings or competitive position.
See Item 3. "Legal Proceedings" for a description of a pending legal proceeding
regarding alleged Clean Water Act violations involving one of our businesses
within the Electronics segment.

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Certain environmental laws assess liability on current or previous owners or
operators of real property for the cost of removal or remediation of hazardous
substances at their properties or at properties at which they have disposed of
hazardous substances. In addition to clean-up actions brought by governmental
authorities, private parties could bring personal injury or other claims due to
the presence of or exposure to hazardous substances. We have received
notification from the United States Environmental Protection Agency, and from
state environmental agencies, that conditions at a number of sites where we and
others disposed of hazardous wastes require cleanup and other possible remedial
action and may be the basis for monetary sanctions. We have projects underway at
several current and former manufacturing facilities to investigate and remediate
environmental contamination resulting from past operations.

The ultimate cost of cleanup at disposal sites and manufacturing facilities
is difficult to predict given uncertainties regarding the extent of the required
cleanup, the interpretation of applicable laws and regulations and alternative
cleanup methods. Based upon our experience, current information and applicable
laws, we believe that it is probable that we will incur remedial costs in the
range of approximately $160 million to $460 million. As of September 30, 2002,
we believe that the best estimate within this range is approximately
$248 million, of which $221 million is included in accrued expenses and other
current liabilities and $27 million is included in other long-term liabilities
on the Consolidated Balance Sheet. Included within the $248 million is
$193 million related to the acquisition of Mallinckrodt. In view of our
financial position and reserves for environmental matters of $248 million, we
believe that any potential payment of such estimated amounts or additional
monetary sanctions will not have a material adverse effect on our consolidated
financial position, results of operations or liquidity.

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE INVESTING IN
OUR PUBLICLY-TRADED SECURITIES. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES
FACING US. OUR BUSINESS IS ALSO SUBJECT TO THE RISKS THAT AFFECT MANY OTHER
COMPANIES, SUCH AS COMPETITION, TECHNOLOGICAL OBSOLESCENCE, LABOR RELATIONS,
GENERAL ECONOMIC CONDITIONS, GEOPOLITICAL CHANGES AND INTERNATIONAL OPERATIONS.
ADDITIONAL RISKS NOT CURRENTLY KNOWN TO US OR THAT WE CURRENTLY BELIEVE ARE
IMMATERIAL ALSO MAY IMPAIR OUR BUSINESS OPERATIONS AND OUR LIQUIDITY.

RISKS RELATING TO RECENT DEVELOPMENTS AT TYCO

CONTINUING NEGATIVE PUBLICITY MAY ADVERSELY AFFECT OUR BUSINESS.

As a result of actions taken by our former senior management, Tyco has been
the subject of continuing negative publicity focusing on former senior
management's actions. Some of these press reports have suggested that the
accounting treatment of several of our prior acquisitions may have been
improper, that certain of our operating companies may have improperly conducted
business or recorded revenues and assets and that information may have been
withheld from the SEC in connection with an inquiry into our accounting
practices. As a result of this negative publicity, the prices of our publicly
traded securities have declined significantly and we have experienced reluctance
on the part of certain customers and suppliers to continue working with us on
customary terms. A number of suppliers have requested letters of credit to
support our purchase orders. We also believe that many of our loyal employees
are operating under stressful conditions. Continuing negative publicity could
have a material adverse effect on our results of operations and liquidity and
the market price of our publicly traded securities.

PENDING LITIGATION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR LIQUIDITY AND
FINANCIAL CONDITION.

As a result of actions taken by our former senior management, Tyco and
certain members of our former senior management are named defendants in a number
of purported class actions alleging

13

violations of the disclosure provisions of the federal securities laws, a number
of derivative actions and several ERISA claims, and are subject to an SEC
inquiry and investigations by the District Attorney of New York County and the
U.S. Attorney for the District of New Hampshire. We recently signed a consent
agreement with the State of New Hampshire Bureau of Securities Regulation that
resolved the Bureau's investigation into the conduct of Tyco's previous
management, pursuant to which we agreed to pay a total of $5 million as an
administrative settlement to the State of New Hampshire and paid $100,000 to
cover the cost of the Bureau's investigation. We may be obliged to indemnify our
directors and our former directors and officers who also are named as defendants
in some or all of these matters. In addition, our insurance carrier may decline
coverage, or such coverage may be insufficient to cover our expenses and
liability, if any, in some or all of these matters. We believe that we have
meritorious defenses and we are vigorously defending these matters. However, we
are currently unable to estimate what our ultimate liability, if any, in these
matters may be, and it is possible that we will be required to pay judgments or
settlements and incur expenses in aggregate amounts that are material.

OUR SENIOR MANAGEMENT TEAM IS NEW TO TYCO AND IS REQUIRED TO DEVOTE
SIGNIFICANT ATTENTION TO MATTERS ARISING FROM ACTIONS OF PRIOR MANAGEMENT.

In the past few months, we have replaced our senior management team with
entirely new members and our entire board of directors determined not to stand
for reelection at our next annual general meeting of shareholders. It will take
some time for our new management team and our new board of directors to learn
about our various businesses and to develop strong working relationships with
our cadre of operating managers at our various subsidiary companies. Our new
senior management team's ability to complete this process is hindered by their
need to spend significant time and effort dealing with internal and external
investigations, developing effective corporate governance procedures,
strengthening reporting lines and reviewing internal controls. During this
period and in order to complete this process, our new executives will be in part
dependent on advisors, including certain former directors. We cannot assure you
that this major restructuring of our board of directors and senior management
team will not adversely affect our results of operations, at least in the near
term, especially in light of the significant attention they are required to
devote to such other matters.

CONTINUED SCRUTINY RESULTING FROM ONGOING GOVERNMENT INVESTIGATIONS MAY HAVE
AN ADVERSE EFFECT ON OUR BUSINESS.

We and others have received various subpoenas and requests from the SEC, the
District Attorney of New York County, the U.S. Attorney for the District of New
Hampshire and others seeking the production of voluminous documents in
connection with various investigations into our governance, management,
operations, accounting and related controls. We cannot predict when these
investigations will be completed, nor can we predict what the results of these
investigations may be. It is possible that we will be required to pay material
fines, consent to injunctions on future conduct, lose the ability to conduct
business with government instrumentalities or suffer other penalties, each of
which could have a material adverse effect on our business. We cannot assure you
that the effects and result of these various investigations will not be material
and adverse to our business, financial condition and liquidity.

Tyco and its subsidiaries' income tax returns are routinely examined by
various regulatory tax authorities. In connection with such examinations, tax
authorities, including the Internal Revenue Service, have raised issues and
proposed tax deficiencies. We are reviewing the issues raised by the tax
authorities and are contesting such proposed deficiencies. Amounts related to
these tax deficiencies and other tax contingencies that management has assessed
as probable and estimable have been accrued through the income tax provision. We
believe but cannot assure you that ultimate resolution of these tax deficiencies
and contingencies will not have a material adverse effect on our results of
operations, financial position or cash flows.

14

ONGOING SEC STAFF REVIEW

As of the filing date of this Form 10-K, we continue to be engaged in a
dialogue with the SEC's Division of Corporation Finance, as part of a routine
review of our periodic filings. While we believe that we have resolved the
material accounting issues prior to filings there can be no assurance that the
resolution of the remaining comments issued by the Staff will not necessitate
one or more amendments to this or prior periodic reports.

INSTANCES OF BREAKDOWNS IN OUR INTERNAL CONTROLS AND PROCEDURES COULD HAVE
AN ADVERSE EFFECT ON US.

We learned of instances of breakdowns of certain internal controls during
fiscal 2002. This began in January 2002 when our Board of Directors learned of
an unauthorized payment to our former Lead Director, Frank E. Walsh, and
eventually led to the Board replacing our senior management team. These
instances included abuse of our employee relocation loan programs, unapproved
bonuses, attempted unauthorized credits to employee loans, undisclosed
compensation arrangements, unreported perquisites, self-dealing transactions and
other misuses of corporate trust, and have been widely reported in the press. We
believe the publicity resulting from such instances negatively impacted our
results of operations and cash flow in fiscal 2002. In addition, such publicity
contributed to a deterioration in our financial condition as we lost access to
the commercial paper market and credit ratings on our term debt declined during
fiscal 2002 from ratings as of the end of fiscal 2001. See Item 14. "Controls
and Procedures".

RISKS RELATING TO OUR BUSINESS

CYCLICAL INDUSTRY AND ECONOMIC CONDITIONS HAVE AFFECTED AND MAY CONTINUE TO
ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Our operating results in some of our markets can be affected adversely by
the general cyclical pattern of those industries. For example, in our Fire and
Security Services segment, demand for our products and services is significantly
affected by levels of new home and commercial construction and consumer and
business discretionary spending. Most importantly, our core electronics business
is heavily dependent on the end markets it serves and therefore has been
affected by the weak demand and declining capital investment in the
communications, computer, consumer electronics, industrial machine and aerospace
industries. This cyclical impact can be amplified because some of our business
segments purchase products from other business segments. For example, our
Fire and Security Services segment purchases sprinkler and other components for
fire protection systems from our Engineered Products and Services segment.
Therefore, a drop in demand for our fire prevention products, due to lower new
residential or office construction or other factors, can cause a drop in demand
for certain of our engineered products.

OUR OPERATIONS EXPOSE US TO THE RISK OF MATERIAL ENVIRONMENTAL LIABILITIES.

We are subject to numerous foreign, federal, state and local environmental
protection and health and safety laws governing, among other things: the
generation, storage, use and transportation of hazardous materials; emissions or
discharges into the ground, air or water; and the health and safety of our
employees. Certain environmental laws assess liability on current or previous
owners or operators of real property for the cost of removal or remediation of
hazardous substances at their properties or at properties at which they have
disposed of hazardous substances. In addition to clean-up actions brought by
governmental authorities, private parties could bring personal injury or other
claims due to the presence of or exposure to hazardous substances. In addition,
we remain responsible for certain environmental issues at manufacturing
locations sold by us. As described under "Business--Environmental Matters", we
are involved in a number of projects to investigate and remediate environmental
contamination at hazardous waste disposal sites and various current and former
manufacturing facilities.

15

The ultimate cost of cleanup at disposal sites and manufacturing facilities
is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and
alternative cleanup methods. Based upon our experience, current information and
applicable laws, we believe that it is probable that we will incur remedial
costs in the range of approximately $160 million to $460 million. As of
September 30, 2002, we believe that the best estimate within this range is
approximately $248 million, of which $221 million is included in accrued
expenses and other current liabilities and $27 million is included in other
long-term liabilities on the Consolidated Balance Sheet. We can not assure you
that the cost of cleanup will not exceed our estimates or that we will not be
subject to additional environmental claims for personal injury or cleanup in the
future based on our past, present or future business activities. The Office of
the U.S. Attorney for the District of Connecticut initiated in June 2001 an
investigation of one of the subsidiaries in our Electronics segment.
Subsequently, we were notified that the subsidiary was the target of a federal
Grand Jury investigation concerning alleged Clean Water Act violations. We
understand that the government investigation concerns manufacturing facilities
in Manchester and Stafford, Connecticut. We also understand that employees at
these plants are subjects of the investigation. A former supervisor at the
Manchester plant (who is no longer an employee) has pleaded guilty to a felony
violation of the Clean Water Act. We do not believe that the investigation will
have a material impact on the financial condition of our company and its
subsidiaries, taken as a whole. We are cooperating fully in the investigation.

WE MAY BE REQUIRED TO RECOGNIZE ADDITIONAL IMPAIRMENT CHARGES IN CONNECTION
WITH TYCO TELECOMMUNICATIONS.

The undersea cable network industry continues to experience massive
overcapacity, extensive system underutilization and very competitive pricing. We
expect that the insolvency of various industry participants will create further
downward pressure on prices. We periodically review the carrying value of Tyco
Telecommunication's systems to determine if it exceeds their fair value. As a
result of these reviews we recorded a charge of $2.5 billion in fiscal 2002
related to the impairment of the Tyco Global Network. We cannot assure you that
continuing pricing pressure, or technological advances that may cause Tyco
Telecommunication's systems to become obsolete, will not require us to recognize
further impairments in the future. The amount of the TGN remaining on the
balance sheet as of September 30, 2002 was $581.6 million.

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.

We are highly leveraged. As of September 30, 2002, our total indebtedness
was $24,205.8 million, our shareholders' equity was $24,790.6 million and our
ratio of debt to equity was 1 to 1. We must repay $7,719.0 million of debt
maturing within the next fiscal year. Based on our current projected cash flows,
we believe that we have sufficient funds to repay debt maturing within the next
fiscal year. However, we intend to refinance a portion of our indebtedness. Our
ability to refinance this indebtedness will depend, in part, on events beyond
our control, including the results of ongoing litigation and governmental
investigations and actions taken by rating agencies. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

Our substantial indebtedness could have important consequences. For example,
it could:

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general corporate
purposes;

- increase our vulnerability to general adverse economic and industry
conditions;

- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;

16

- restrict us from making strategic acquisitions, introducing new
technologies or exploiting business opportunities; and

- increase the difficulty or cost to us of refinancing such indebtedness.

WE MAY NOT BE ABLE TO GROW OUR BUSINESS AT THE SAME RATE AS WE HAVE IN THE
RECENT PAST DUE TO REDUCED ACQUISITION ACTIVITY AND CAPITAL CONSTRAINTS.

Acquisitions of complementary products and businesses have been an important
part of Tyco's growth in recent years. Our current business strategy and
near-term actions will focus on conserving cash and enhancing internal growth
within our existing businesses. Our business requires substantial capital
expenditures for new technology and product innovation, expansion or replacement
of facilities and equipment, compliance with environmental laws and regulations
and other operations. In addition, we will require access to significant capital
in order to repay substantial indebtedness which matures in fiscal 2003 and in
future periods. This reduction in acquisition activity and concentration of
available capital resources to repay indebtedness, combined with our reduced
share price, will limit our ability to make acquisitions of other companies and
to purchase new contracts under ADT's dealer program. As a result, we anticipate
that we will not experience growth in the foreseeable future that is comparable
to the growth we experienced in the recent past.

THE PRICE OF TYCO COMMON SHARES HAS DECLINED CONSIDERABLY IN THE LAST YEAR
AND MAY FLUCTUATE WIDELY IN THE FUTURE.

The market price of the Tyco common shares has declined considerably over
the past year. During the same period, there have been disclosures regarding
allegations of breach of fiduciary duties, fraud and other wrongful conduct on
the part of certain former officers and directors of Tyco. See "Price Range of
Common Shares and Dividends." In addition, our common shares, and the global
stock markets generally, have experienced significant price and volume
fluctuations over the past year. We cannot assure you that the price of our
common shares will not decline further or will not continue to experience
significant price and volume fluctuations. In addition, we believe that factors
such as quarterly fluctuations in financial results, earnings below analysts'
estimates and financial performance and other activities of other publicly
traded companies in our industries could cause the price of the common shares to
fluctuate substantially.

PROPOSED LEGISLATION AND NEGATIVE PUBLICITY REGARDING BERMUDA COMPANIES
COULD INCREASE OUR TAX BURDEN AND AFFECT OUR OPERATING RESULTS.

Several members of the United States Congress have introduced legislation
relating to the tax treatment of U.S. companies that have undertaken certain
types of expatriation transactions, which could be deemed to cover our merger in
1997 with ADT, as a result of which Tyco became a Bermuda company. If enacted,
any such legislation could have the effect of substantially reducing or
eliminating the tax benefits of our structure and materially increasing our
future tax burden or otherwise adversely affecting our business. Other federal
and state legislative proposals, if enacted, could limit or even prohibit our
eligibility to be awarded U.S. or state government contracts. We are unable to
predict the likelihood or final form in which any proposed legislation might
become law or the nature of regulations that may be promulgated under any such
future legislative enactments. As a result of these uncertainties, we are unable
to assess the impact on us of any proposed legislation in this area.

There has recently been negative publicity regarding, and criticism of, U.S.
companies' use of, or relocation to, offshore jurisdictions, including Bermuda.
As a Bermuda company this negative publicity could harm our reputation and
impair our ability to generate new business if companies or government agencies
decline to do business with us as a result of the negative public image of
Bermuda companies or the possibility of our clients receiving negative media
attention from doing business with a Bermuda company.

17

AVAILABLE INFORMATION

Our Internet website is HTTP://INVESTORS.TYCOINT.COM/EDGAR.CFM. We make
available free of charge on our website our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports as soon as reasonably practicable after we electronically file or
furnish such materials to the SEC.

ITEM 2. PROPERTIES

See Item 1. "Business--Properties" for information relating to our owned and
leased properties.

ITEM 3. LEGAL PROCEEDINGS

SECURITIES CLASS ACTIONS

As previously reported in our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002, Tyco and certain of our current and former
directors and officers have been named as defendants in more than two dozen
securities class actions.

All but two of the securities class actions assert causes of action under
Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated
thereunder, and Section 20(a) of the Securities Exchange Act of 1934. The
plaintiffs in each of these actions seek class certification, declaratory
relief, compensatory damages, rescission, disgorgement and attorneys' fees and
expenses. These complaints allege that the defendants are responsible for Tyco
making materially false and misleading statements and omissions concerning,
among other allegations, the following: the earnings performance of certain
companies that we acquired and our accounting therefor; the impact of a new
accounting standard (SAB 101, promulgated in 1999) on our earnings performance;
undisclosed sales of Tyco stock by certain former executives of Tyco; our
undisclosed payment of $20 million to one of our directors; and the fact that
our former Chief Executive Officer was under criminal investigation. All of
these securities class actions are now pending in the United States District
Court for the District of New Hampshire, by virtue of certain orders of the
Judicial Panel on Multidistrict Litigation that transferred to that court for
coordinated or consolidated pretrial proceedings the securities class actions
that had been filed in other courts.

The remaining securities class actions are BRAZEN V. TYCO
INTERNATIONAL LTD. ET AL, which was filed in June 2002 in the Circuit Court of
Cook County, Illinois, and PREMUROSO V. TYCO INTERNATIONAL LTD., ET AL., which
was filed in November 2002, in the Circuit Court for Palm Beach County, Florida.
Plaintiffs in each of these actions assert claims under the Securities Act of
1933, and seek class certification, compensatory damages and attorneys' fees and
expenses. The BRAZEN complaint purports to bring suit on behalf of persons who
exchanged their Mallinckrodt Inc. stock for shares of Tyco in connection with
the October 17, 2000 merger of the two companies. This complaint alleges that
the registration statement filed in connection with the Mallinckrodt acquisition
contained false and misleading statements concerning, among other things,
financial disclosures concerning certain of our mergers and acquisitions and
accounting therefor. The PREMUROSO complaint purports to bring suit on behalf of
persons who exchanged their Sensormatic Electronics Corp. stock for shares of
Tyco in connection with our acquisition of Sensormatic in November 2001. This
complaint alleges that the registration statement filed in connection with the
Sensormatic acquisition contained false and misleading statements concerning,
among other things, financial disclosures concerning our mergers and
acquisitions and the accounting therefor, and omitted disclosure of improper
conduct by former officers of Tyco.

The defendants removed the BRAZEN action from state court to the United
States District Court for the Northern District of Illinois. In December 2002,
the Judicial Panel on Multidistrict Litigation issued an order transferring the
action to the United States District Court for the District of New Hampshire.
The plaintiff in BRAZEN has also made a motion to remand the action to state
court in Illinois. The

18

defendants filed a motion to remove the PREMUROSO action from state court to
United States District Court for the District of New Hampshire. The plaintiff
has not yet responded to the defendants' motion. However, the plaintiff in the
PREMUROSO action subsequently voluntarily dismissed their case without
prejudice.

In December 2002, a new class action complaint, SCHULDT LIMITED PARTNERSHIP
V. TYCO INTERNATIONAL LTD., ET AL., was filed in the Circuit Court for Palm
Beach County, Florida. The allegations in SCHULDT are identical to those in the
previously-dismissed PREMUROSO complaint. The defendants have removed the
SCHULDT action from state court to the United States District Court for the
Southern District of Florida. The plaintiffs have not yet responded to
defendants' motion.

SHAREHOLDER DERIVATIVE LITIGATION

As previously reported in our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002, Tyco and certain of our current and former
directors are defendants in four pending actions purporting to bring suit
derivatively on behalf of Tyco against certain former officers and certain
current and former directors of Tyco and against Tyco as a nominal defendant.

Each of these actions asserts causes of action that include breach of
fiduciary duty, gross mismanagement, waste of corporate assets and/or
conversion. The actions allege that individual defendants engaged in, permitted
and/or acquiesced in the following alleged improper conduct of former officers
of Tyco: the use of our funds for personal benefit, including misappropriation
of funds from our Key Employee Loan Program and relocation programs; engaging in
improper self-dealing real estate transactions involving our assets; entering
into improper undisclosed retention agreements; and/or filing false and
misleading financial statements with the Securities and Exchange Commission that
were based on improper accounting methods, including the use of reserves to
improperly increase earnings after acquisitions. Plaintiffs seek money damages
and, in one case, an order enjoining the payment of any severance benefits to
one of our former officers.

Two of the actions are pending in the United States District Court for the
District of New Hampshire. The Judicial Panel on Multidistrict Litigation has
issued a conditional transfer order transferring a third action to the United
States District Court for the District of New Hampshire, to which the plaintiff
has objected. The matter has been fully briefed and a decision is expected from
the Judicial Panel in the near future. The fourth derivative action is pending
in the Supreme Court of the State of New York (New York County). Plaintiffs in
that action have agreed to stay the action and join with the plaintiffs in New
Hampshire in prosecuting one derivative action.

ERISA LITIGATION AND INVESTIGATION

As previously reported in our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002, Tyco, and certain of our current and
former directors, have been named as defendants in putative class action
litigation brought under the Employee Retirement Income Security Act ("ERISA").
The complaints purport to bring claims on behalf of participants in the Tyco
International (US) Inc. Retirement Savings and Investment Plans and/or the
retirement plans of the companies that Tyco acquired.

Eight such ERISA actions, six of which were transferred by the Judicial
Panel on Multidistrict Litigation, are pending and have been consolidated in the
United States District Court for the District of New Hampshire. The complaints
allege failure to disclose material information regarding the financial status
of Tyco, including alleged misreporting of revenues, improper accounting
practices, and manipulation of accounting rules with respect to mergers and
acquisitions. The complaints further allege breach of ERISA's fiduciary duty of
prudence. The plaintiffs seek to recover losses they allegedly experienced due
to their investments, through the plans, in our stock.

19

We and certain of our current and former executives have received requests
from the United States Department of Labor for information concerning the
administration of the Tyco International (US) Inc. Retirement Savings and
Investment Plans. The current focus of the Department's inquiry concerns losses
allegedly experienced by the plans due to investments in our stock. The
Department of Labor has authority to bring suit on behalf of the plans and their
participants against those acting as fiduciaries to the plans for recovery of
losses and additional penalties, although it has not informed us of any
intention to do so.

TYCO LITIGATION AGAINST FORMER SENIOR MANAGEMENT AND DIRECTOR

TYCO INTERNATIONAL LTD V. MARK A. BELNICK, UNITED STATES DISTRICT COURT,
SOUTHERN DISTRICT OF NEW YORK, FILED JUNE 17, 2002. As previously reported in
our Current Report on Form 8-K filed on September 17, 2002, we have filed a
civil complaint against our former Executive Vice President and Chief Corporate
Counsel for breach of fiduciary duty and other wrongful conduct. The action
alleges that the defendant: solicited and accepted cash and stock bonuses
without Board approval; took interest-free loans from our relocation program
without Board approval; failed to disclose to the Board and to the SEC his
Retention Agreement and compensation; failed to advise the Board of the improper
conduct of other officers; refused to cooperate with internal investigations;
and engaged in other improper conduct. The action asserts causes of action for
breach of fiduciary duty, inducement to breach fiduciary duty, conspiracy to
breach fiduciary duty, fraud and other wrongful conduct and seeks to recover
compensation and profits received from employment at Tyco, repayment of all
loans fraudulently procured, with interest, damages for the harm caused to us,
and punitive damages. Discovery in this action has been stayed as a result of a
motion by the New York County District Attorney's Office to delay discovery
until after the completion of its prosecution of Mr. Belnick and other former
Tyco officers.

TYCO INTERNATIONAL LTD V. FRANK E. WALSH, JR., UNITED STATES DISTRICT COURT,
SOUTHERN DISTRICT OF NEW YORK, FILED JUNE 17, 2002. As previously reported in
our Current Report on Form 8-K filed on September 17, 2002, we have filed a
civil complaint against a former director for breach of fiduciary duty, inducing
breaches of fiduciary duty, and related wrongful conduct involving a
$20 million payment in connection with a 2001 acquisition by Tyco. The action
alleges causes of action for restitution, breach of fiduciary duty and inducing
breach of fiduciary duty, conversion, unjust enrichment, and a constructive
trust, and seeks recovery for all of the losses suffered by us as a result of
the defendant director's conduct. Discovery in this action has not yet begun. On
December 17, 2002, Mr. Walsh paid $20 million in restitution to Tyco as a result
of a plea bargain agreement with the New York County District Attorney. See
"--Subpoenas and document requests from Governmental Entities". Our claims
against Mr. Walsh are still pending. The New York County District Attorney's
Office has filed a motion to stay all discovery until after the completion of
its pending prosecution of several former Tyco officers. A decision is expected
in the near future.

TYCO INTERNATIONAL LTD. V. L. DENNIS KOZLOWSKI, UNITED STATES DISTRICT
COURT, SOUTHERN DISTRICT OF NEW YORK, FILED SEPTEMBER 12, 2002. As previously
reported in our Current Report on Form 8-K filed on September 17, 2002, we have
filed a civil complaint against our former Chairman and Chief Executive Officer
for breach of fiduciary duty and other wrongful conduct. The action alleges that
the defendant misappropriated millions of dollars from our Key Employee Loan
Program and relocation program; awarded millions of dollars in unauthorized
bonuses to himself and certain other Tyco employees; engaged in improper
self-dealing real estate transactions involving our assets; and conspired with
certain other former Tyco employees in committing these acts. The action alleges
causes of action for breach of fiduciary duty, fraud, unjust enrichment, breach
of contract, conversion, a constructive trust, and other wrongful conduct. The
action seeks recovery for all of the losses suffered by us as a result of the
former director's conduct. Discovery in this action has not yet begun. The New
York County District Attorney's Office has filed a motion to stay all discovery
until after the completion of its

20

pending prosecution of Mr. Kozlowski and other former Tyco officers. A decision
is expected in the near future.

TYCO INTERNATIONAL LTD. V. MARK H. SWARTZ, AMERICAN ARBITRATION ASSOCIATION
ARBITRATION PROCEEDING, FILED OCTOBER 7, 2002. As previously reported in our
Current Report on Form 8-K filed on October 8, 2002, we have filed an
arbitration claim against Mark H. Swartz, our former Chief Financial Officer.
The action alleges that the defendant breached his fiduciary duties and
otherwise engaged in wrongful conduct relating to this employment by Tyco and
misappropriated Tyco funds and other assets and seeks to recover from
Mr. Swartz all damages suffered by Tyco as a result of such breach, wrongful
conduct and misappropriation. The Demand was filed with the American Arbitration
Association in New York City, New York. Discovery in this action has not yet
begun.

TYCO INTERNATIONAL, LTD V. L. DENNIS KOZLOWSKI AND MARK H. SWARTZ, UNITED
STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK, FILED DECEMBER 6, 2002. We
have filed a civil complaint against our former Chairman and Chief Executive
Officer and our former Chief Financial Officer pursuant to Section 16(b) of the
Securities Exchange Act of 1934 for disgorgement of short-swing profits from
prohibited transactions in our common shares believed to exceed $40 million. The
action seeks disgorgement of profits, interest, attorneys' fees and costs.

SUBPOENAS AND DOCUMENT REQUESTS FROM GOVERNMENTAL ENTITIES

We and others have received various subpoenas and requests from the SEC, the
District Attorney of New York County, the U.S. Attorney for the District of New
Hampshire and others seeking the production of voluminous documents in
connection with various investigations into our governance, management,
operations, accounting and related controls. We are cooperating fully with these
investigations and are complying with these requests.

On October 23, 2002, we signed a consent agreement with the Bureau of
Securities Regulation of the State of New Hampshire that resolved the Bureau's
investigation into the conduct of Tyco's previous management. Under the terms of
the consent agreement, we will pay a total of $5 million as an administrative
settlement to the State of New Hampshire and have paid $100,000 to cover the
cost of the Bureau's investigation. We signed the consent agreement without
admitting any wrongdoing with respect to the Bureau's allegations.

On December 17, 2002, Frank E. Walsh, Jr., a former director of Tyco,
pleaded guilty to a felony violation of New York law in the Supreme Court of the
State of New York (New York County) and settled a civil action for violation of
federal securities laws brought by the Securities and Exchange Commission in
United States District Court for the Southern District of New York. Both the
felony charge and the civil action were brought against Mr. Walsh based on a $20
million payment by Tyco, $10 million of which went to Mr. Walsh with the balance
going to a charity of which Mr. Walsh is trustee. The payment was purportedly
made for Mr. Walsh's assistance in arranging our acquisition of The CIT
Group, Inc. The felony charge accused Mr. Walsh of intentionally concealing
information concerning the payment from Tyco's directors and shareholders while
engaged in the sale of Tyco securities in the State of New York. The SEC action
alleged that Mr. Walsh knew that the registration statement covering the sale of
Tyco securities as part of the CIT acquisition contained a material
misrepresentation concerning fees payable in connection with the acquisition.
Pursuant to the plea, Mr. Walsh agreed to pay $20 million in restitution to Tyco
and to pay other fines to the State of New York. Pursuant to the settlement,
Mr. Walsh consented to an order permanently enjoining him from violating
provisions of the federal securities laws, requiring him to pay restitution to
Tyco and permanently barring him from serving as an officer or director of a
publicly held company. Tyco received Mr. Walsh's restitution payment of $20
million on December 17, 2002.

21

INTELLECTUAL PROPERTY LITIGATION

APPLIED MEDICAL RESOURCES CORP. V. U.S. SURGICAL CORP. is a patent
infringement action in which U.S. Surgical Corp., a subsidiary of Tyco, is the
defendant. In February 2002, the U.S. District Court for the Central District of
California held that U.S. Surgical's VERSASEAL universal seal system, contained
in certain surgical trocar and access devices manufactured by U.S. Surgical,
infringed certain of the plaintiff's patents. The court entered a permanent
injunction against U.S. Surgical, based upon infringement of one of the three
patents involved in the suit, the appeal of which is pending in the U.S. Court
of Appeals for the Federal Circuit. A trial on invalidity of the other two
patents and on damages is currently scheduled for April 2003. If there is
ultimately a determination of liability, the amount of damages will be strongly
contested by us. We estimate that damages could range from $32 million to
$83 million, with the possibility of enhanced damages up to treble damages if
there is a finding of willful infringement. We currently do not expect, however,
to incur losses beyond what we have already accrued.

ENVIRONMENTAL INVESTIGATION

As previously reported in our Annual Report on Form 10-K for the year ended
September 30, 2001, the Office of the U.S. Attorney for the District of
Connecticut initiated in June 2001 an investigation of one of the subsidiaries
in our Electronics segment. Subsequently, we were notified that the subsidiary
was the target of a federal Grand Jury investigation concerning alleged Clean
Water Act violations. We understand that the government investigation concerns
manufacturing facilities in Manchester and Stafford, Connecticut. We also
understand that employees at these plants are subjects of the investigation. A
former supervisor at TPCG's Manchester plant (who is no longer an employee) has
pleaded guilty to a felony violation of the Clean Water Act. We do not believe
that the investigation will have a material impact on the financial condition of
Tyco and its subsidiaries, taken as a whole. We are cooperating fully in the
investigation.

See also the discussions under Item 1. "Business--Environmental Matters" and
"--Risk Factors"

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Tyco's executive officers and executive officers of certain subsidiaries are
as follows:

Edward D. Breen, age 46, Chairman and Chief Executive Officer since
July 2002. Prior to joining Tyco, Mr. Breen was President and Chief Operating
Officer of Motorola from January 2002 to July 2002; Executive Vice President and
President of Motorola's Networks Sector from January 2001 to January 2002;
Executive Vice President and President of Motorola's Broadband Communications
Sector from January 2000 to January 2001; Chairman, President and Chief
Executive Officer of General Instrument Corporation ("GI") from December 1997 to
January 2000; and, prior to December 1997, President of GI's Broadband Networks
Group. Mr. Breen also serves as a director of McLeod USA Incorporated.

Jerry R. Boggess, age 58, President of Tyco Fire and Security Services since
August 1993. Mr. Boggess has been Vice President of Tyco since February 1996;
and associated with Tyco and its predecessors since 1968 (except from 1983 to
1989 when he was President of Cosco Fire Protection, a division of Zurn
Industries).

David J. FitzPatrick, age 48, Executive Vice President and Chief Financial
Officer since September 2002. Prior to joining Tyco, Mr. FitzPatrick was Senior
Vice President and Chief Financial

22

Officer of United Technologies Corporation from June 1998 to September 2002; and
Vice President and Corporate Controller for Eastman Kodak Company from
March 1995 to May 1998.

Juergen W. Gromer, age 57, President of Tyco Electronics since April 1999.
Mr. Gromer was Senior Vice President, Worldwide Sales and Service, of AMP
Incorporated (acquired by Tyco in April 1999) from 1998 to April 1999;
President, Global Automotive Division, and Corporate Vice President of AMP from
1996 to 1998; and Vice President and General Manager of various divisions of AMP
from 1990 to 1996.

William B. Lytton, age 54, Executive Vice President and General Counsel
since September 2002. Prior to joining Tyco, Mr. Lytton was Senior Vice
President and General Counsel for International Paper Company ("IP") from
January 1999 to September 2002; and Vice President and General Counsel for IP
from 1996 to 1999.

Robert P. Mead, age 52, President of Tyco Engineered Products and Services
since April 2002; Vice President of Tyco and its predecessors since
August 1993. Mr. Mead was President of the Flow Control Products segment from
May 1993 to May 2001; and has been associated with Tyco and its predecessors
since 1973.

Richard J. Meelia, age 53, President of Tyco Healthcare and Specialty
Products since 1995. Mr. Meelia has been Vice President of Tyco since June 2000
and was Group President of Kendall Healthcare Products Company (acquired by Tyco
in October 1994) from January 1991 to 1995.

Eric M. Pillmore, age 49, Senior Vice President of Corporate Governance
since August 2002. Prior to joining Tyco, Mr. Pillmore was Senior Vice
President, Chief Financial Officer and Secretary of Multilink Technology
Corporation from July 2000 to August 2002. From April 2000 to May 2000,
Mr. Pillmore was Senior Vice President of Finance and Chief Financial Officer of
McData Corporation. From January 2000 to April 2000, Mr. Pillmore was Senior
Vice President of Finance and Director of Motorola's Broadband Communications
Sector. From December 1997 to January 2000, Mr. Pillmore was Chief Financial
Officer of GI.

23

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SECURITY HOLDER
MATTERS

The number of registered holders of Tyco's common shares at December 20,
2002 was 44,884.

Tyco common shares are listed and traded on the New York Stock Exchange
("NYSE") and the Bermuda Stock Exchange under the symbol "TYC," and on the
London Stock Exchange under the symbol "TYI." The following table sets forth the
high and low sales prices per Tyco common share as reported by the NYSE, and the
dividends paid on Tyco common shares, for the quarterly periods presented below.

DIVIDEND POLICY

We may from time to time enter into financing agreements that contain
financial covenants and restrictions, some of which may limit the ability of
Tyco to pay dividends. Future dividends on our common shares, if any, will be at
the discretion of Tyco's board of directors and will depend on, among other
things, our results of operations, cash requirements and surplus, financial
condition, contractual restrictions and other factors that the board of
directors may deem relevant.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial information
of Tyco as, at and for the fiscal years ended September 30, 2002, 2001, 2000,
1999 and 1998. This selected financial information should be read in conjunction
with Tyco's Consolidated Financial Statements and related notes. The selected
financial data reflect the combined results of operations and financial position
of Tyco, United States Surgical Corporation ("U.S. Surgical") and AMP
Incorporated ("AMP"). During fiscal 1999,

24

subsidiaries of Tyco merged with U.S. Surgical and AMP. Both merger transactions
were accounted for under the pooling of interests accounting method.

- ------------------------------

(1) Loss from continuing operations in the fiscal year ended September 30, 2002
includes net restructuring and other unusual charges of $1,954.3 million (of
which $635.4 million is included in cost of sales and $115.0 million is
included in selling, general and administrative expenses), charges of
$3,489.5 million for the impairment of long-lived assets, goodwill
impairment charges of $1,343.7 million, charges related to prior years of
$261.6 million and a charge for the write-off of purchased research and
development of $17.8 million. In addition, loss from continuing operations
for the fiscal year ended September 30, 2002 includes a loss on investments
of $270.8 million, a net gain on the sale of businesses of $7.2 million and
$30.6 million of income relating to the early retirement of debt. Net (loss)
income also includes a $6,282.5 million loss from discontinued operations of
Tyco Capital and a $58.8 million loss on sale of Tyco Capital for the year
ended September 30, 2002. See Notes 5, 6, 7, 8, 11 and 16 to the
Consolidated Financial Statements. As further described in Note 1 to the
Consolidated Financial Statements, during the fourth quarter of fiscal 2002,
we identified various adjustments relating to prior year financial
statements. The effects of these adjustments are not material individually
or in the aggregate to any prior year, and therefore prior year financial
statements have not been restated. Instead, these adjustments that aggregate
$261.6 million on a pre-tax income from continuing operations basis or
$199.7 million on an after-tax income from continuing operations basis have
been recorded effective October 1, 2001. The pre-tax adjustments and the
fiscal years in which they arose are as follows: $125.4 million in fiscal
2001, $79.9 million in fiscal 2000, $63.4 million in fiscal 1999, ($8.1)
million in fiscal 1998, and $1.0 million in fiscal 1997.

(2) In fiscal 2001, we changed our revenue recognition accounting policy to
conform to the requirements of Staff Accounting Bulletin No. 101 issued by
the Staff of the Securities and Exchange Commission, as more fully described
in Note 12 to the Consolidated Financial Statements. As a result, Tyco
recorded a cumulative effect adjustment of $653.7 million, net of tax. Pro
forma amounts for the periods prior to fiscal 2001 have not been presented
since the effect of the change in accounting principles for these periods
could not be reasonably determined. Tyco also recorded a cumulative effect
adjustment of

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

25

(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

$29.7 million, net of tax, in accordance with the transition provisions of
SFAS No. 133, also discussed in Note 12 to the Consolidated Financial
Statements.

(3) Income from continuing operations in the fiscal year ended September 30,
2001 includes a net charge of $418.5 million, of which $184.9 million is
included in cost of sales, for restructuring and other unusual charges, a
charge for the write-off of in-process research and development of
$184.3 million and charges of $120.1 million for the impairment of
long-lived assets. Income from continuing operations for the fiscal year
ended September 30, 2001 also includes a net gain on sale of businesses of
$410.4 million, a loss on investments of $133.8 million, a loss of
$26.3 million relating to the early retirement of debt and a net gain on the
sale of common shares of a subsidiary of $64.1 million. Net (loss) income
includes $252.5 million of income from discontinued operations of Tyco
Capital for the year ended September 30, 2001. See Notes 5, 6, 7, 8, 9 and
11 to the Consolidated Financial Statements.

(4) Income from continuing operations in the fiscal year ended September 30,
2000 includes a net charge of $176.3 million, of which $1.0 million is
included in cost of sales, for restructuring and other unusual charges, and
charges of $99.0 million for the impairment of long-lived assets. Income
from continuing operations for the fiscal year ended September 30, 2000 also
includes a pre-tax gain of $1,760.0 million related to the sale by a
subsidiary of its common shares, and a loss of $0.3 million relating to the
early retirement of debt. See Notes 5, 6, 8 and 9 to the Consolidated
Financial Statements.

(5) Income from continuing operations in the fiscal year ended September 30,
1999 includes charges of $1,035.2 million for merger, restructuring and
other unusual charges, of which $106.4 million is included in cost of sales,
and charges of $507.5 million for the impairment of long-lived assets
related to the mergers with U.S. Surgical and AMP and AMP's profit
improvement plan. Income from continuing operations in the fiscal year ended
September 30, 1999 also includes a loss of $63.7 million relating to the
early retirement of debt.

(6) Income from continuing operations in the fiscal year ended September 30,
1998 includes charges of $80.5 million related primarily to costs to exit
certain businesses in U.S. Surgical's operations and restructuring charges
of $12.0 million related to the continuing operations of U.S. Surgical. In
addition, AMP recorded restructuring charges of $185.8 million in connection
with its profit improvement plan and a credit of $21.4 million to
restructuring charges representing a revision of estimates related to its
1996 restructuring activities. Income from continuing operations in the
fiscal year ended September 30, 1998 also includes a net loss of
$3.6 million relating to the early retirement of debt.

(7) Per share amounts have been retroactively restated to give effect to the
mergers with U.S. Surgical and AMP; and two-for-one stock splits on
October 22, 1997 and October 21, 1999, both of which were effected in the
form of a stock dividend.

(8) Tyco has paid a quarterly cash dividend of $0.0125 per common share for all
periods presented. U.S. Surgical paid quarterly dividends of $0.04 per share
in the year ended September 30, 1998. AMP paid dividends of $0.27 per share
in the first two quarters of the year ended September 30, 1999, and $0.26
per share in the first quarter and $0.27 per share in the last three
quarters of the year ended September 30, 1998. The payment of dividends by
Tyco in the future will depend on business conditions, Tyco's financial
condition and earnings and other factors.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

See Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears on pages 123 to 160 of this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears on pages 123 to 160 of this Form 10-K.

26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements and schedule are filed as
part of this Annual Report:

Financial Statements:

Management's Responsibility for Financial Statements

Report of Independent Accountants

Consolidated Statements of Operations for the fiscal years ended
September 30, 2002, 2001 and 2000

Consolidated Balance Sheets at September 30, 2002 and 2001

Consolidated Statements of Shareholders' Equity for the fiscal years
ended September 30, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the fiscal years ended
September 30, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

Financial Statement Schedule:

Schedule II--Valuation and Qualifying Accounts

All other financial statements and schedules have been omitted since the
information required to be submitted has been included in the consolidated
financial statements and related notes or because they are either not applicable
or not required under the rules of Regulation S-X.

See Notes to Consolidated Financial Statements for Summarized Quarterly
Financial Data (unaudited).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

27

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning the Directors and Executive Officers is hereby
incorporated by reference to our definitive proxy statement, which will be filed
with the Commission within 120 days after the close of our fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation is hereby incorporated by
reference to our definitive proxy statement, which will be filed with the
Commission within 120 days after the close of our fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference to our definitive proxy
statement, which will be filed with the Commission within 120 days after the
close of our fiscal year.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of September 30, 2002 with
respect to Tyco's common shares issuable under our equity compensation plans:

- ------------------------------

(1) The Tyco International Ltd. Long Term Incentive Plan ("LTIP") allows for the
granting of share options and other equity or equity-based grants to Board
members, officers and non-officer employees. LTIP II allows for the granting
of share options and other equity or equity-based grants to employees who
are not officers of Tyco. See Note 23 to Consolidated Financial Statements.

(2) Excludes 21,606,501 outstanding share options assumed in connection with
acquisitions at a weighted-average exercise price of $46.45. No additional
options may be granted under those assumed plans. Includes 1,700,000
Deferred Stock Units.

28

(3) 1994 Restricted Stock Ownership Plan for Key Employees ("1994 Restricted
Stock Plan") provides for the issuance of restricted share grants to
officers and non-officer employees. The number of shares available for
issuance under the 1994 Restricted Stock Plan was reduced to 999,524 in
October 2002, but will automatically increase by 0.05% of the total common
shares outstanding on each of October 1, 2003 and October 1, 2004. See
Note 23 to Consolidated Financial Statements.

(4) This table includes an aggregate of 5,367,199 shares available for future
issuance under the Tyco Employee Stock Purchase Plan ("ESPP") and the Tyco
International (Ireland) Employee Share Scheme ("Irish Bonus Plan"), which
represents the number of remaining shares registered for issuance under
these two plans. All of the shares delivered to participants under the ESPP
and Irish Bonus Plan are purchased in the open market. All shares delivered
to participants under the Irish Bonus Plan are purchased on a pre-tax basis.
See Note 23 to Consolidated Financial Statements.

(5) Tyco International Ltd. UK Savings Related Share Option Plan ("SAYE") is an
Inland Revenue approved plan for UK employees that grants employees options
to purchase shares at the end of three years of service at a 15% discount
off the market price at time of grant. Employees make monthly contributions
which are at the election of the employee used for the purchase price or
returned to the employee. See Note 23 to Consolidated Financial Statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships