Jan 28 2010
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%.
SOURCE Tyco International Ltd.