Tyco International Reports First Quarter Earnings From Continuing Operations Before Special Items of $0.65 Per Share and GAAP Earnings of $0.63 Per Share

SCHAFFHAUSEN, Switzerland, Jan. 28 /PRNewswire-FirstCall/ --

(Income and EPS amounts are attributable to Tyco common shareholders)

($ millions, except per-share amounts)

Tyco International Ltd. (NYSE: TYC) today reported $0.63 in diluted earnings per share (EPS) from continuing operations for the fiscal first quarter of 2010 and diluted EPS from continuing operations before special items of $0.65 per share.  Revenue in the quarter of $4.25 billion declined 4% versus the prior year with an organic revenue decline of 9.6%.  

Cash from operating activities was $379 million and free cash flow was $79 million.  These amounts include $50 million of cash outflows primarily related to restructuring activities.  In the prior year, cash from operating activities was $56 million and free cash flow was negative $215 million, each of which included a cash outflow of $25 million primarily related to restructuring activities.

Tyco Chairman and Chief Executive Officer Ed Breen said, "Our operating results for the first quarter reflect moderately higher revenue than expected as well as the benefits of our actions to reduce our cost structure in this challenging economic environment.  Despite the soft economy, we continue to grow our service and recurring revenue which now represent 40% of total revenue."

"We were very pleased to announce our agreement to acquire Broadview Security last week, which we intend to combine with our ADT security business.  This acquisition will provide us with an opportunity to strengthen our position in the fragmented and highly competitive residential and commercial security industry," Breen added.

Organic revenue, free cash flow and operating income, operating margin, income and diluted EPS from continuing operations before special items are non-GAAP financial measures and are described below.  For a reconciliation of these non-GAAP measures, see the attached tables.  Additional schedules as well as First Quarter Review slides can be found at www.tyco.com on the Investor Relations portion of Tyco's website.  

SEGMENT RESULTS

The financial results presented in the tables below are in accordance with GAAP unless otherwise indicated.  Beginning this quarter, certain businesses and overhead costs were realigned, resulting in changes to historical segment performance.  The revenue and operating income results shown below have been adjusted to reflect these changes.  All dollar amounts are pre-tax and stated in millions.  All comparisons are to the fiscal first quarter of 2009 unless otherwise indicated.

ADT Worldwide

Revenue of $1.8 billion increased 1% in the quarter with an organic revenue decline of 3%.  Recurring revenue grew 5% organically on a global basis.  Systems installation and service revenue declined 13% organically, mostly due to weakness in North America and Europe, as a result of lower sales to commercial customers.

Operating income was $259 million and the operating margin was 14.1%. Operating income before special items was $264 million and the operating margin before special items improved 180 basis points to 14.4%. The benefits from restructuring activities and cost-containment actions and growth in higher-margin recurring revenue more than offset the impact of the organic revenue decline in systems installation and service.

Flow Control

Revenue of $923 million declined 4% in the quarter with an organic revenue decline of 14%.  Organic revenue declined 15% in the Valves business, 10% in Water and 14% in Thermal Controls.  Backlog of $1.7 billion decreased 3% on a quarter sequential basis (a 2% decline excluding the impact of foreign currency).

Operating income was $112 million and the operating margin was 12.1%.  Operating income before special items was $118 million and the operating margin before special items was 12.8% as the benefits from cost-containment actions and restructuring activities were more than offset by the impact of the organic revenue decline and product mix.  

Fire Protection Services

Revenue of $833 million declined 1% in the quarter with an organic revenue decline of 6%.  Service revenue declined 2% organically and installation revenue declined 10% driven primarily by softness in the North American and EMEA regions.  Backlog of $1.2 billion decreased 1% on a quarter sequential basis.

Operating income was $64 million and the operating margin was 7.7%.  There were no special items in the quarter.

Electrical and Metal Products  

Revenue of $297 million declined 29% in the quarter with an organic revenue decline of 30%.   The decline was primarily due to lower selling prices for both steel and copper products.  

Operating income was $23 million and the operating margin was 7.7%.  Operating income before special items decreased $6 million, despite a $119 million revenue decline as lower volume was almost fully offset by better steel spreads.  The operating margin before special items was 7.7%.

Safety Products

Revenue of $358 million declined 11% in the quarter.  Organic revenue declined 14% due to lower volume in the Fire Suppression and Electronic Security businesses resulting from weaker demand in their end markets.  

Operating income was $54 million and the operating margin was 15.1%. Operating income before special items was $53 million and the operating margin before special items was 14.8%.  The benefits from cost-containment actions and restructuring activities were more than offset by the impact of the organic revenue decline and product mix.

OTHER ITEMS

• On January 18, 2010, Tyco announced a definitive agreement to acquire Brinks Home Security Holdings, Inc., now operating as Broadview Security, in a transaction valued at approximately $2.0 billion.  The transaction is expected to close in the second half of Tyco's 2010 fiscal year.
• On January 15, 2010, the company announced that its Board of Directors recommended shareholder approval of an annual Swiss Franc dividend equal to $0.84 per share at the company's annual general meeting of shareholders to be held on March 10, 2010.  The proposed dividend represents a five percent increase over the $0.80 per share approved by shareholders in 2009.
• On December 14, 2009, Tyco's Flow Control business acquired two Brazilian valve companies in a move to expand its product and service offerings in Brazil and South America.
• Corporate expense was $98 million in the quarter and included special items of $2 million.  
• The company incurred pre-tax charges of $11 million in the quarter related to restructuring activities.
• Other income in the quarter of $9 million resulted from the increase in receivables from Covidien and Tyco Electronics related to tax liabilities for periods prior to Tyco's separation into three companies in 2007.  
• The tax rate for the quarter was 14.9%.

ABOUT TYCO INTERNATIONAL

Tyco International Ltd. (NYSE: TYC) is a diversified company that provides vital products and services to customers around the world.  Tyco is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products.  Tyco had 2009 revenue of more than $17 billion and has more than 100,000 employees worldwide.  More information on Tyco can be found at www.tyco.com.

CONFERENCE CALL AND WEBCAST

Management will discuss the company's first quarter results for 2010 and outlook for the second quarter and full year during a conference call and webcast today beginning at 8:30 a.m. EST.  Today's conference call for investors can be accessed in the following ways:  

• At Tyco's website: http://investors.tyco.com.  
• By telephone: For both "listen-only" participants and those participants who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the United States is (888) 455-5685.  The telephone dial-in number for participants outside the United States is (773) 799-3896.  The participant code is TYCO.  
• An audio replay of the conference call will be available beginning at 11:00 a.m. on January 28, 2010 and ending on February 4, 2010. The dial-in number for participants in the United States is (866) 395-9155. For participants outside the United States, the replay dial-in number is (203) 369-0497.

NON-GAAP MEASURES

"Organic revenue," "free cash flow (outflow)" (FCF), "income from continuing operations before special items", "earnings per share (EPS) from continuing operations before special items", "operating income before special items" and "operating margin before special items" are non-GAAP measures and should not be considered replacements for GAAP results.

Organic revenue is a useful measure used by the company to measure the underlying results and trends in the business. The difference between reported net revenue (the most comparable GAAP measure) and organic revenue (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures, and other changes that do not reflect the underlying results and trends (for example, revenue reclassifications and changes to the fiscal year). Organic revenue is a useful measure of the company's performance because it excludes items that: i) are not completely under management's control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying results of the company's existing businesses, such as acquisitions and divestitures. It may be used as a component of the company's compensation programs. The limitation of this measure is that it excludes items that have an impact on the company's revenue. This limitation is best addressed by using organic revenue in combination with the GAAP numbers. See the accompanying tables to this press release for the reconciliation presenting the components of organic revenue.

FCF is a useful measure of the company's cash which is free from any significant existing obligation. The difference between Cash Flows from Operating Activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash flows that the company believes are useful to identify. FCF permits management and investors to gain insight into the number that management employs to measure cash that is free from any significant existing obligation. It, or a measure that is based on it, may be used as a component in the company's incentive compensation plans. The difference reflects the impact from:

• net capital expenditures,
• accounts purchased by ADT,
• cash paid for purchase accounting and holdback liabilities,
• voluntary pension contributions, and
• the sale of accounts receivable programs.

Capital expenditures and accounts purchased by ADT are subtracted because they represent long-term commitments. Cash paid for purchase accounting and holdback liabilities is subtracted because these cash outflows are not available for general corporate uses. Voluntary pension contributions and the impact from the sale of accounts receivable programs are added or subtracted because this activity is driven by economic financing decisions rather than operating activity.

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

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

The company has presented its income and EPS from continuing operations before special items and operating income and margin before special items. Special Items include charges and gains related to divestitures, acquisitions, restructurings, impairments, legacy legal and tax charges and other income or charges that may mask the underlying operating results and/or business trends of the company or business segment, as applicable. The company utilizes income and EPS from continuing operations before special items and operating income and margin before special items to assess overall operating performance and segment level core operating performance, as well as to provide insight to management in evaluating overall and segment operating plan execution and underlying market conditions. They may be used as components in the company's incentive compensation plans. Operating income, operating margin, and income and EPS from continuing operations before special items are useful measures for investors because they permit more meaningful comparisons of the company's underlying operating results and business trends between periods. The difference between income and EPS from continuing operations before special items and income and EPS from continuing operations (the most comparable GAAP measures) consists of the impact of charges and gains related to divestitures, acquisitions, restructurings, impairments, legacy legal and tax charges and other income or charges that may mask the underlying operating results and/or business trends. Operating income and margin before special items do not reflect any additional adjustments that are not reflected in income from continuing operations before special items.  The limitation of these measures is that they exclude the impact (which may be material) of items that increase or decrease the company's reported operating income and margin and operating income and EPS from continuing operations. This limitation is best addressed by using the non-GAAP measures in combination with the most comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease on reported results. Tyco provides general corporate services to its segments and those costs are reported in the "Corporate and Other" segment. This segment's operating income (loss) is presented as "Corporate Expense."

FORWARD-LOOKING STATEMENTS

This release may contain 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 and in accompanying conference calls or webcasts that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. The forward-looking statements in this release and accompanying conference calls generally include, but are not limited to, statements addressing Tyco's future financial condition and operating results, as well as its acquisition, divestiture and capital activities. 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. 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. 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 Sept. 25, 2009 and Quarterly Report on Form 10-Q for the quarterly period ended December 25, 2009.

SOURCE Tyco International Ltd.