RNS Number:0840O
Tyco International Ld
29 July 2003
FOR IMMEDIATE RELEASE
TYCO INTERNATIONAL REPORTS THIRD QUARTER RESULTS
Company Reports EPS of $0.27
Cash From Continuing Operating Activities of $1.5 Billion; Free Cash Flow
of $844 Million
Company Achieves Quarterly Revenues of $9.4 Billion
Pembroke, Bermuda, July 29, 2003 -- Tyco International Ltd. (NYSE-TYC, BSX-TYC, LSE-TYI) today reported earnings of
$0.27 per share for its third quarter, compared to a restated loss of $0.20 per share from continuing operations in
the third quarter of 2002. The historical results presented in this press release are restated as filed today with
the Securities and Exchange Commission on Form 10-K/A for the period ended September 30, 2002 and on Forms 10-Q/A for
the periods ended December 31, 2002 and March 31, 2003.
Chairman and Chief Executive Officer Ed Breen said: "We made fundamental progress in the third quarter toward
positioning our operations for long-term success. During the period, we generated strong cash flow, delivered solid
revenue, and strengthened our balance sheet. At the same time, I am confident we can and must improve our profit
performance, and I am committed to aggressively implementing the operating discipline necessary to achieve this."
Financial highlights of the quarter:
* Earnings from continuing operations for the third quarter include the impact of the Company's retirement of certain
debt securities as disclosed on June 16, which reduced earnings per share by $0.07. In addition, the Company settled
certain tax matters that increased EPS by $0.02. Including these items, earnings per share for the quarter were $0.27
per share. For the first three quarters, earnings were $0.61 per share on a restated basis compared to a restated
loss of $0.73 per share for the same period in the prior year.
* Revenues were $9.4 billion, up 3.4% from $9.1 billion in the third quarter of last year, due to favorable changes
in foreign currency rates. For the nine months ended June 30, 2003, revenues were $27.3 billion, a 4.2% increase over
the same period last year, again because of favorable changes in foreign currency rates.
* Cash from continuing operating activities was $1.5 billion, up 38% from last year's third quarter. For the first
three quarters, cash from continuing operating activities was $3.6 billion, essentially unchanged from the same
period last year. Free cash flow from continuing operations in the third quarter was $844 million compared to $73
million in the same period last year. For the first three quarters of 2003, free cash flow was $1.8 billion, compared
to $131 million of cash outflow for the same period last year. Free cash flow is a non-GAAP financial measure and is
described below. For a reconciliation of cash from operating activities to free cash flow, see the attached table.
Mr. Breen added: "The results for our Engineered Products and Plastics and Adhesives businesses were adversely
impacted by a soft global industrial economy and higher raw material commodity prices. Fire & Security continues to
be in a turnaround situation under new management and delivered good cash flow performance. Our Healthcare and
Electronics businesses continued to deliver solid performance this quarter."
Mr. Breen concluded: "Our leadership team is intensely focused on the operating challenges and opportunities faced by
each of our businesses. I am more confident than ever in our strategy and our team, and I am convinced that we are
making the right decisions to transform Tyco into a high-performing operating company."
QUARTERLY OPERATING RESULTS
The financial results presented in the tables below are in accordance with generally accepted accounting principles
(GAAP). All dollar amounts are stated in millions. All comparisons are to the quarter ended June 30, 2002 unless
otherwise stated.
Electronics
June 30, 2003 June 30, 2002
Net revenues $2,668.3 $2,650.7
Operating profit (loss) $ 368.4 ($272.3)
Margins 13.8% (10.3%)
Revenues increased $18 million, driven by a $178 million increase from foreign currency, partially offset by a $110
million revenue decline in TyCom.
The loss in the third quarter of 2002 included $611 million in charges related primarily to the impairment of
goodwill at TyCom. The remaining increase in operating profit was mostly driven by foreign currency. Tyco Electronics
experienced strength in its automotive business, offset by softness in certain industrial markets.
Fire and Security Services
June 30, 2003 June 30, 2002
Net revenues $2,857.2 $2,711.7
Operating profit $ 188.3 $ 76.4
Margins 6.6% 2.8%
Revenues increased $146 million driven by a $168 million impact from foreign currency. Aside from currency changes,
modest revenue growth in the Security business was offset by weakness in non-residential construction and pricing
pressure in the Fire Protection business.
Operating profit in the third quarter of 2002 included $166 million in charges, primarily related to impairment of
long-lived assets and restructuring charges. The resulting $54 million operating profit decline is attributable to
weak performance at Continental Europe Security and lower margins in Fire Protection.
Healthcare
June 30, 2003 June 30, 2002
Net revenues $2,212.7 $2,042.1
Operating profit $ 563.7 $ 420.2
Margins 25.5% 20.6%
Revenues increased $171 million, partially driven by a $94 million increase from foreign currency. The remaining
revenue increases were driven by growth in the Medical and Pharmaceutical businesses.
Operating profit was driven by favorable sales performance in Medical and Pharmaceutical and a continued focus on
optimizing operating expenses. Third quarter 2002 profits included a $33 million restructuring charge.
Engineered Products and Services
June 30, 2003 June 30, 2002
Net revenues $1,185.0 $1,211.0
Operating profit (loss) $ 92.1 $ (74.3)
Margins 7.8% (6.1%)
Revenues declined $26 million, despite a $77 million benefit from foreign currency, due to lower volumes in Flow
Control and Infrastructure Services. Flow Control suffered from weak economic conditions and softness in
non-residential construction.
The operating loss in the third quarter of 2002 included a $252 million charge, primarily for goodwill impairment.
The resulting $86 million year-over-year decrease in operating profit was the result of lower volumes at Flow
Control, as well as increased raw material costs at Electrical and Metal Products.
Plastics and Adhesives
June 30, 2003 June 30, 2002
Net revenues $ 489.4 $ 483.9
Operating profit $ 54.1 $ 71.4
Margins 11.1% 14.8%
Revenues increased 1%, or $6 million, driven by an $11 million increase from favorable changes in foreign currency.
Revenue growth in the Films business was more than offset by weakness in the division's other three businesses.
Operating profit declined 24%, or $17 million year-over-year, due to the impact of higher resin costs, less favorable
sales mix and lower volumes.
Other Items
* Net interest expense was $248 million, down 1% from $250 million in the same period a year ago.
* The effective tax rate was 29.8%. This rate includes the impact of the $152 million charge for debt retirement, which
was not tax deductible. In addition, the tax rate was favorably impacted by a prior-year tax settlement of $22
million. This settlement also resulted in $19 million of interest income.
* The Company had cash on hand of $3.9 billion at June 30, 2003, compared to approximately $4.0 billion and $5.7
billion, respectively, at March 31, 2003 and December 31, 2002.
* Tyco's debt-to-capitalization ratio was 44.3% as of June 30, 2003, compared with 46.2% at March 31, 2003, and 50.1%
at September 30, 2002. The Company adopted FASB Interpretation No. ("FIN") 46, "Consolidation of Variable Interest
Entities," as of July 1, 2003, in connection with its synthetic leases. As a result, the Company will increase total
debt by $517 million and record a non-cash cumulative effect accounting charge to pre-tax income estimated at
$110-$125 million in its fourth quarter. The ongoing annual negative impact on pre-tax income is estimated to be
$25-$30 million.
* As noted, the Company retired all of its 6.25% Dealer Remarketable Securities due in 2013. The portion of the payment
in excess of par ($152 million) was recorded as an expense in the third quarter and reduced earnings per share by
$0.07.
OUTLOOK
Based on current economic conditions and the operating issues in some Tyco businesses, the Company expects earnings
in the fourth quarter to be $0.32-$0.35 per share. This does not include the impact of the adoption of FIN 46, as
mentioned above.
Free cash flow is expected to remain strong, and as a result, the Company is raising its outlook for free cash flow
for FY 2003 to a range of $2.2-$2.5 billion. This guidance excludes any voluntary pension contribution, which the
Company is considering making in the fourth quarter. Cash flow from continuing operating activities is expected to
range from $4.4-$4.7 billion. The difference between the outlook for free cash flow and cash flow from continuing
operating activities is about $2.2 billion, which reflects net capital expenditures, acquisition of dealer accounts,
cash paid for holdbacks and purchase accounting, Tyco Global Network spending, dividends paid, and the impact from
accounts receivable programs.
ABOUT FREE CASH FLOW
"Free cash flow" is a non-GAAP metric used by the Company to measure its ability to meet its future debt obligations,
and is also one component of measurement used in the Company's compensation plans. The Company believes that free
cash flow is an important measure of the Company's management of cash flow and resulting performance. This metric is
used by investors, analysts and others to make investment decisions. The measure should be used in conjunction with
other GAAP financial measures and is not presented as an alternative measure of cash flow as determined in accordance
with accounting principles generally accepted in the United States of America. Free cash flow as presented herein may
not be comparable to similarly titled measures reported by other companies. Free cash flow has limitations due to the
fact that it does not represent the residual cash flow available for discretionary expenditures. For example, it does
not exclude payments made on capital lease obligations. See the accompanying table to this press release for a cash
flow statement presented in accordance with GAAP and a reconciliation presenting the components of free cash flow.
CONFERENCE CALL AND WEBCAST
The company will discuss third quarter results on a conference call for investors today at 8:30 am EDT. Interested
parties may access the conference call live today, or by replay through August 5, 2003, at the following website:
investors.tyco.com/medialist.cfm.
The telephone dial-in number to participate in the question and answer session of the call for participants in the
United States is: (888) 428-4480. The telephone dial-in number for participants in International locations is: (651)
291-5254.
The telephone dial-in number to participate in a "listen-only" mode for participants in the United States is: (866)
254-5938. The telephone dial-in number for participants in International locations is: (612) 326-1008. The
participants' code for all callers is: 687288. Investors who do not intend to ask questions should dial this number
directly.
The replay is scheduled to be available at 3:30 pm on July 29, 2003 until 11:59 PM on August 5, 2003. The dial-in
numbers for the replay are as follows: Domestic (U.S.) (800) 475-6701. International: (320) 365-3844. The replay
access code for all callers is: 687286.
ABOUT TYCO INTERNATIONAL
Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer
and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and
servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire
protection systems and electronic security services and the world's largest manufacturer of specialty valves. Tyco
also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more
than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion.
FORWARD-LOOKING INFORMATION
This release contains certain "forward-looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to
risks, uncertainty and changes in circumstances, which may cause actual results, performance or achievements to
differ materially from anticipated results, performance or achievements. All statements contained herein that are not
clearly historical in nature are forward looking and the words "anticipate," "believe," "expect," "estimate,"
"project," and similar expressions are generally intended to identify forward-looking statements. The forward-looking
statements in this release include statements addressing future financial condition and operating results.
Economic, business, competitive and/or regulatory factors affecting Tyco's businesses are examples of factors, among
others, that could cause actual results to differ materially from those described in the forward-looking statements.
More detailed information about these and other factors is set forth in Tyco's Annual Report on Form 10-K for the
fiscal year ended September 30, 2002, as amended, and its Quarterly Report on Form 10-Q for the quarter ended March
31, 2003, as amended. Tyco is under no obligation to (and expressly disclaims any such obligation to) update or alter
its forward-looking statements whether as a result of new information, future events or otherwise.
See 4 tables attached
CONTACTS: Media: Gary Holmes, 212-424-1314
Investor Relations: Ed Arditte, 212-424-1390
TYCO INTERNATIONAL LTD.
Condensed Consolidated Statements of Cash Flows
(in millions)
Preliminary - Subject to Adjustments
(Unaudited)
For the Quarters Ended For the Nine Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
(restated) (restated)
Cash flows from operating
activities:
Income (loss) from continuing $ 566.5 $ (395.9) $ 1,256.7 $ (1,443.1)
operations
Adjustments to reconcile net
income (loss) from continuing
operations
to net cash provided by
operating activities:
Non-cash restructuring and other (14.1) 2.5 (47.8) 269.5
(credits) charges, net
Charges for the impairment of 0.1 125.2 87.3 2,514.9
long-lived assets
Goodwill Impairment - 844.4 - 844.4
Write-off of purchased - 13.4 - 13.4
in-process R&D
Loss on investments - 6.5 75.6 147.5
Depreciation 357.7 366.8 1,084.5 1,097.4
Amortization of intangible 179.4 176.7 548.2 456.2
assets
Income taxes - deferred and 84.0 45.0 500.8 (63.9)
payables
Cash spent on restructuring (80.6) (177.9) (370.7) (359.9)
Proceeds in (decrease in) the 40.6 (85.6) (55.9) (113.6)
sale of accounts receivable
programs
Changes in working capital and 329.6 135.5 491.1 230.0
other
Net cash provided by operating 1,463.2 1,056.6 3,569.8 3,592.8
activities, continuing
operations
Net cash provided by operating - 538.3 20.0 1,462.9
activities, discontinued
operations
Net cash provided by operating 1,463.2 1,594.9 3,589.8 5,055.7
activities
Cash flows from investing
activities:
Capital expenditures, net (282.1) (408.5) (848.2) (1,387.6)
Purchase of previously leased (55.9) - (55.9) -
TyCom ship
Tyco Global Network spending (29.4) (165.2) (118.4) (982.6)
Acquisition of businesses, net - (17.7) (34.6) (1,682.2)
of cash acquired
Acquisition of dealer accounts (147.9) (325.5) (506.2) (871.7)
Cash paid for purchase (37.8) (144.4) (227.3) (520.8)
accounting and holdback/earn-out
liabilities
All other (38.4) 96.2 (485.9) (94.4)
Net cash used in investing (591.5) (965.1) (2,276.5) (5,539.3)
activities, continuing
operations
Net cash provided by investing - 433.1 - 2,684.3
activities, discontinued
operations
Net cash used in investing (591.5) (532.0) (2,276.5) (2,855.0)
activities
Cash flows from financing
activities:
Net (repayments of) proceeds (947.6) (1,367.6) (3,608.1) 3,814.1
from debt
Dividends paid (25.2) (25.3) (75.6) (75.0)
Proceeds from options exercises 5.2 5.0 7.8 186.3
Repurchase of shares (0.8) (23.3) (1.2) (789.1)
All other (1.5) (22.4) (6.5) (207.4)
Net cash (used in) provided by (969.9) (1,433.6) (3,683.6) 2,928.9
financing activities, continuing
operations
Net cash used in financing - (1,111.8) - (2,874.6)
activities, discontinued
operations
Net cash (used in) provided by (969.9) (2,545.4) (3,683.6) 54.3
financing activities
Effect of currency translation 59.7 63.3 111.3 32.3
on cash
Net (decrease) increase in cash (38.5) (1,419.2) (2,259.0) 2,287.3
and cash equivalents
Tyco Capital's cash and cash - 178.7 - (1,272.6)
equivalents transferred to
discontinued operations
Cash and cash equivalents at 3,965.2 4,035.3 6,185.7 1,780.1
beginning of period
Cash and cash equivalents at end $ 3,926.7 $ 2,794.8 $ 3,926.7 $ 2,794.8
of period
RECONCILIATION TO "FREE CASH
FLOW":
Net cash provided by operating $ 1,463.2 $ 1,056.6 $ 3,569.8 $ 3,592.8
activities, continuing
operations
Sale of accounts receivable (40.6) 85.6 55.9 113.6
programs
Capital expenditures, net (282.1) (408.5) (848.2) (1,387.6)
Purchase of previously leased (55.9) - (55.9) -
TyCom ship
Tyco Global Network spending (29.4) (165.2) (118.4) (982.6)
Dividends paid (25.2) (25.3) (75.6) (75.0)
"FREE CASH FLOW" - OLD 1,030.0 543.2 2,527.6 1,261.2
DEFINITION
Acquisition of dealer accounts (147.9) (325.5) (506.2) (871.7)
Cash paid for purchase (37.8) (144.4) (227.3) (520.8)
accounting and holdback/earn-out
liabilities
"FREE CASH FLOW" - NEW $ 844.3 $ 73.3 $ 1,794.1 $ (131.3)
DEFINITION
Free cash flow is a non-GAAP metric used by the Company to measure its ability to meet its future debt obligations
and is also one component of measurement used in the Company's compensation plans.
TYCO INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
For the Quarters Ended For the Nine Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
(restated) (restated)
Net revenues $ 9,412.6 $ 9,099.4 $ 27,328.5 $ 26,217.0
Cost of sales 6,013.7 5,813.8 17,601.2 16,650.5
Selling, general and 2,200.1 2,073.2 6,819.0 5,856.4
administrative expenses
Restructuring and other (9.5) 180.4 (72.6) 549.1
(credits) charges, net
Charges for the impairment of 0.1 125.2 87.3 2,514.9
long-lived assets
Goodwill impairment - 844.4 - 844.4
Write-off of purchased - 13.4 - 13.4
in-process research and
development
Operating income 1,208.2 49.0 2,893.6 (211.7)
Other expense, net (151.8) (6.5) (211.8) (154.2)
Interest expense, net (247.9) (250.3) (789.1) (665.1)
Income (loss) from continuing 808.5 (207.8) 1,892.7 (1,031.0)
operations before income taxes
and minority interest
Income taxes (241.1) (187.4) (633.4) (411.3)
Minority interest (0.9) (0.7) (2.6) (0.8)
Income (loss) from continuing 566.5 (395.9) 1,256.7 (1,443.1)
operations
Loss from discontinued - (2,235.3) 20.0 (6,293.6)
operations of Tyco Capital, net
of tax
Net income (loss) $ 566.5 $ (2,631.2) $ 1,276.7 $ (7,736.7)
Basic income (loss) per common
share:
Income (loss) from continuing $ 0.28 $ (0.20) $ 0.63 $ (0.73)
operations
Loss from discontinued - (1.12) 0.01 (3.17)
operations of Tyco Capital, net
of tax
Net income (loss) per common 0.28 (1.32) 0.64 (3.89)
share
Diluted income (loss) per common
share:
Income (loss) from continuing $ 0.27 $ (0.20) $ 0.61 $ (0.73)
operations
Loss from discontinued - (1.12) 0.01 (3.17)
operations of Tyco Capital, net
of tax
Net income (loss) per common 0.27 (1.32) 0.62 (3.89)
share
Weighted-average number of
common shares outstanding:
Basic 1,995.0 1,993.9 1,994.7 1,986.7
Diluted 2,203.8 1,993.9 2,126.2 1,986.7
TYCO INTERNATIONAL LTD.
RESULTS OF SEGMENTS
(in millions, except per share data)
(Unaudited)
For the Quarters Ended For the Nine Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
(restated) (restated)
NET REVENUES
Fire and Security Services $ 2,857.2 $ 2,711.7 $ 8,386.1 $ 7,762.3
Electronics 2,668.3 2,650.7 7,698.6 7,898.0
Healthcare 2,212.7 2,042.1 6,355.3 5,780.8
Engineered Products and 1,185.0 1,211.0 3,459.9 3,374.5
Services
Plastics and Adhesives 489.4 483.9 1,428.6 1,401.4
Total Net Revenues 9,412.6 9,099.4 27,328.5 26,217.0
OPERATING PROFIT (LOSS)
Fire and Security Services 188.3 76.4 227.1 681.4
Electronics 368.4 (272.3) 1,017.6 (2,357.3)
Healthcare 563.7 420.2 1,531.8 1,346.5
Engineered Products and 92.1 (74.3) 285.2 197.7
Services
Plastics and Adhesives 54.1 71.4 139.4 211.9
Total Profit (Loss) 1,266.6 221.4 3,201.1 80.2
Corporate Expenses (58.4) (172.4) (307.5) (291.9)
Operating Income (loss) 1,208.2 49.0 2,893.6 (211.7)
Other Expense, Net (151.8) - (136.2) (6.7)
Loss on Investments - (6.5) (75.6) (147.5)
Interest Expense, Net (247.9) (250.3) (789.1) (665.1)
(Loss) Income from Continuing 808.5 (207.8) 1,892.7 (1,031.0)
Operations Before Taxes and
Minority Interest
Income Taxes (241.1) (187.4) (633.4) (411.3)
Minority Interest (0.9) (0.7) (2.6) (0.8)
Net Gain on Sale of Shares of a
Subsidiary
INCOME (LOSS) FROM CONTINUING $ 566.5 $ (395.9) $ 1,256.7 $ (1,443.1)
OPERATIONS
BASIC COMMON SHARES OUTSTANDING
EPS from Continuing Operations 1,995.0 1,993.9 1,994.7 1,986.7
$0.28 ($0.20) $0.63 ($0.73)
DILUTED COMMON SHARES
OUTSTANDING
EPS from Continuing Operations 2,203.8 1,993.9 2,126.2 1,986.7
$0.27 ($0.20) $0.61 ($0.73)
Tyco International Ltd.
Condensed Consolidated Balance Sheet
(in millions)
Preliminary - Subject to Adjustments
(Unaudited) (Unaudited)
June 30, March 31, September 30,
2003 2003 2002
(restated) (restated)
Current Assets:
Cash and cash equivalents $ 3,926.7 $ 3,965.2 $ 6,185.7
Restricted cash 210.9 460.3 196.2
Accounts receivables, net 5,898.3 5,827.4 5,831.9
Inventories 4,555.6 4,660.7 4,607.9
Deferred income taxes 913.0 1,023.0 1,356.0
Other current assets 2,140.6 1,797.8 1,461.7
Total current assets 17,645.1 17,734.4 19,639.4
Tyco Global Network, Net 667.6 644.5 581.6
Property, Plant and Equipment, Net 10,009.7 9,835.7 9,861.0
Goodwill 26,301.8 26,031.2 26,020.5
Intangible Assets, Net 5,889.9 5,844.6 5,805.8
Other Assets 3,837.9 3,614.2 3,549.2
Total Assets $ 64,352.0 $ 63,704.6 $ 65,457.5
Current Liabilities:
Loans payable and current maturities of long-term debt $ 3,639.9 $ 4,386.8 $ 7,719.0
Accounts payable 2,763.1 2,824.2 3,173.8
Accrued expenses and other current liabilities 4,529.9 4,653.1 5,296.5
Contracts in process - billings in excess of cost 464.3 477.7 523.6
Deferred revenue 810.9 760.2 758.5
Income taxes payable 2,293.5 2,327.5 2,219.1
Total current liabilities 14,501.6 15,429.5 19,690.5
Long-Term Debt 17,567.7 17,442.7 16,486.8
Other Long-Term Liabilities 5,620.7 5,384.4 5,156.1
Total Liabilities 37,690.0 38,256.6 41,333.4
Minority Interest 29.4 30.1 42.8
Shareholders' Equity 26,632.6 25,417.9 24,081.3
Total Liabilities and Shareholders' Equity $ 64,352.0 $ 63,704.6 $ 65,457.5
This information is provided by RNS
The company news service from the London Stock Exchange
END
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