Tyco reports revenue of $4.5 billion for fourth quarter 2010

Nov 9 2010

• 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.