Tyco International Reports Fourth Quarter Earnings from Continuing Operations Before Special Items of $0.74 Per Share and GAAP Earnings of $0.55 Per Share

SCHAFFHAUSEN, Switzerland, Nov. 9, 2010 /PRNewswire-FirstCall/ --

• Diluted EPS from continuing operations before special items increased 25% in the quarter
• Operating margin improves 120 basis points in the quarter
• Full year 2010 EPS increases 15% with free cash flow up 16%
• Company completes $1 billion share repurchase program; new $1 billion program announced

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

($ millions, except per-share amounts)

Tyco International Ltd. (NYSE: TYC) today reported $0.55 in diluted earnings per share (EPS) from continuing operations for the fiscal fourth quarter of 2010 and diluted EPS from continuing operations before special items of $0.74 per share.  Revenue in the quarter was $4.5 billion with organic revenue growth of 2% year-over-year.  Cash from operating activities was $963 million and free cash flow was $598 million.  These amounts included $39 million of cash outflows related to restructuring activities and acquisition-related costs.  

For full year 2010, the company reported $2.31 in diluted EPS from continuing operations and diluted EPS from continuing operations before special items of $2.68 per share. Revenue increased 1% to $17.0 billion.  Cash from operating activities was $2.63 billion. Free cash flow of $1.38 billion included cash payments of $198 million primarily for restructuring.

Commenting on Tyco's results, Chairman and Chief Executive Officer Ed Breen said: "Looking at the quarter, we are encouraged by strengthening business conditions, continued operating margin improvement and strong earnings and cash flow.  Our integration of Broadview Security is proceeding on track and contributed to our growth in the quarter.  We finished the year in sound financial condition with a strong balance sheet and the financial flexibility to invest in the future growth of our businesses."

"For the full year, we increased our earnings per share 15% reflecting a sustained reduction in our overall cost structure. At the same time, we strengthened the focus of our portfolio around our core security, fire and flow control platforms through a series of transactions highlighted by the Broadview acquisition and our decision to pursue a disposition of our Electrical & Metal Products business."

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 Fourth Quarter Review slides can be found at www.tyco.com on the Investor Relations portion of Tyco's website.  Certain tables in this press release contain the symbol "-", where the percentage change is not meaningful.

SEGMENT RESULTS

The financial results presented in the tables below are in accordance with GAAP unless otherwise indicated.  Beginning in the first quarter of fiscal 2010, certain businesses and overhead costs were realigned, resulting in changes to historical segment performance.  Additionally, beginning in the third quarter the company classified its European Waterworks business as a discontinued operation in connection with Tyco’s sale of the business, which was completed on September 30, 2010.  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 fourth quarter or full year 2009 unless otherwise indicated.

ADT Worldwide

Revenue of $1.95 billion increased 8% in the quarter with organic revenue growth of 3%.  Recurring revenue continued to grow, increasing 5% organically on a global basis. Systems installation and service revenue grew 1% driven by growth in the Asia-Pacific and Latin America region.  

Operating income was $270 million in the quarter and the operating margin was 13.8%. Special items of $36 million resulted primarily from restructuring activities and acquisition costs.  Operating income before special items was $306 million and the operating margin improved 150 basis points to 15.7%.  The operating margin improvement resulted from the continued benefit of restructuring and cost reduction activities, stronger operational performance in the commercial business, growth in ADT’s higher-margin recurring revenue business and the contribution of the Broadview acquisition.

Full year revenue of $7.4 billion increased 4% year-over-year.  Operating income was $1.06 billion and included $48 million of special items.  Operating income before special items was $1.10 billion and the operating margin before special items improved 180 basis points to 15.0%.  The operating margin improvement benefited from growth in ADT’s higher-margin recurring revenue business, improvement in the commercial business in all geographic regions and the continued benefit of restructuring and cost reduction activities.

Flow Control

Revenue of $868 million declined 5% in the quarter with an organic revenue decline of 5%.  An 8% growth in Thermal Controls and a 9% growth in Water was more than offset by a 12% decline in the Valves business.  Orders increased 5% in the quarter, excluding the impact of foreign currency and a large Australian desalination project in the Pacific water business recorded last year.  Backlog of $1.5 billion decreased 5% on a quarter sequential basis, excluding the impact of foreign currency, primarily due to a decrease in Pacific water.

Operating income was $104 million in the quarter and the operating margin was 12.0%.  Special items of $7 million resulted from restructuring activities. Operating income before special items was $111 million and included a charge of $9 million on a project retained from the 2008 divestiture of Earth Tech. The impact of volume declines was partially offset by the benefits of cost-containment actions and restructuring activities, resulting in an operating margin before special items of 12.8%.  

Full year revenue of $3.4 billion decreased 3.5% with an organic revenue decline of 10%.  Operating income was $410 million and the operating margin was 12.2%.  Operating income before special items was $435 million and the operating margin before special items was 12.9%.

Fire Protection Services

Revenue of $893 million declined 1% in the quarter with an organic revenue decline of 1%.  Growth of 4% in service revenue was more than offset by a 6% decline in installation revenue.  Orders increased 4% year-over-year, excluding the impact of foreign currency.  Due to normal seasonal decline, backlog decreased 4% to $1.2 billion on a quarter sequential basis, excluding the impact of foreign currency.

Operating income was $66 million in the quarter and the operating margin was 7.4%. Special items of $25 million resulted from restructuring activities.  Operating income before special items was $91 million and the operating margin was 10.2%.

Full year revenue of $3.4 billion decreased 2% with an organic revenue decline of 5%.  Operating income was $272 million and the operating margin was 8.1%.  Despite the organic revenue decline, operating income before special items of $306 million increased $11 million due to the benefit of restructuring and cost containment actions.  

Safety Products

Revenue of $406 million increased 9% in the quarter.  Organic revenue grew 13% due to higher volume across the Fire Suppression, Electronic Security and Life Safety businesses.  

Operating income was $57 million in the quarter and the operating margin was 14.0%.  Special items of $6 million resulted from restructuring activities.  Operating income before special items was $63 million and the operating margin before special items improved 100 basis points to 15.5% due to increased volume and the benefit of cost-containment actions and restructuring activities.  

Full year revenue of $1.5 billion remained flat and operating income was $221 million, which included $12 million of special items.  Operating income before special items was $233 million.

Electrical and Metal Products  

Revenue of $376 million increased 15% in the quarter with organic revenue growth of 11%.  The revenue increase was driven by better pricing for both steel and copper products.

Operating income was $13 million in the quarter.  Special items of $11 million resulted primarily from restructuring activities.  Operating income before special items of $24 million increased $3 million, as higher selling prices for steel and copper products were offset by higher material costs.  The operating margin before special items was 6.4%.

Full year revenue of $1.4 billion increased 1% and operating income was $100 million which included $14 million of special items.  Operating income before special items increased $95 million to $114 million due to better steel spreads.

OTHER ITEMS

• Corporate expense was $117 million in the quarter and included special items of $7 million.
• The effective tax rate for the quarter before special items was 13.6%.
• During the quarter the company completed a $1 billion share repurchase program announced in 2008 and announced the authorization of a new $1 billion program. For the full year, the company purchased 24 million shares.
• Early in the first quarter of fiscal 2011, the company completed the sale of its European Waterworks business for proceeds of $267 million.

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 2010 revenue of approximately $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 fourth quarter results for 2010 and outlook for fiscal 2011 during a conference call and webcast today beginning at 8:30 a.m. ET.  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 (800) 857-9797.  The telephone dial-in number for participants outside the United States is (517) 308-9262.  The participant code is TYCO.  
• An audio replay of the conference call will be available beginning at 10:00 a.m. on November 9, 2010 and ending at 11:59 p.m. ET on November 16, 2010. The dial-in number for participants in the United States is (866) 498-5464. For participants outside the United States, the replay dial-in number is (203) 369-1796. The participant code is: 8236.

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 in subsequent filings with the Securities and Exchange Commission.

SOURCE Tyco International Ltd.