Income before non-recurring charges and credits and extraordinary items for the nine months of fiscal 2000 rose to $2.63 billion, or $1.54 per diluted share, a 44 percent increase over last year's diluted per share earnings of $1.07. After giving effect to acquisition related and other non-recurring charges and credits, diluted earnings per share before extraordinary item were $1.52, or $2.61 billion for the first nine months of fiscal 2000 compared to 17 cents, or $286.9 million, in fiscal 1999. Revenues for the nine months increased to $21.13 billion, 30 percent higher than last year's $16.27 billion.
"The results we reported for our third quarter reflected solid organic revenue growth and strong operating margins in each of our business segments. This has created free cash flow of over $900 million in the quarter. Free cash flow in the first nine months of fiscal 2000 was $1.9 billion, which exceeds the free cash flow generated for all of fiscal year 1999," said L. Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer.
"The integration of the acquisitions we completed this year have served to enhance our performance, and will provide for continued improvements as we complete this fiscal year and move into fiscal year 2001. The completion of the acquisition of the Electronics OEM business of Thomas & Betts in July and the announced acquisition of Mallinckrodt will create additional positive impact going forward. In addition, our balance sheet will be enhanced by the closing of the ADT Automotive divestiture, expected to be completed in mid-August, and the completion of the Mallinckrodt acquisition, expected in October," he added.
The quarterly operating profits and margins for the Company's four business segments that are presented in the discussions below are stated before charges and credits for merger, restructuring and other non-recurring charges, charges for impairment of long-lived assets, and goodwill amortization. All dollar amounts are in millions.
TELECOMMUNICATIONS AND ELECTRONICS
June 30, 2000 June 30, 1999
Sales $ 3,245.6 $ 1,959.0
Operating profits $ 811.7 $ 356.8
Operating margins 25.0% 18.2%
The 66 percent increase in sales resulted from both acquisitions and strong organic growth. Acquisitions included Temasa and Raychem in fiscal 1999 and Siemens Electromechanical Components and Praegitzer in fiscal 2000. Tyco Electronics organic revenues were up as a result of general industry trends as well as strong market penetration due to its increasingly broad product offering. Volume growth was driven by the influx of new products such as high-speed connectors, passive and active fiber optic components, and wireless components.
Operating profits more than doubled due to higher margins at Tyco Electronics as both volume and pricing continued to improve and the benefits from rationalizing acquired facilities were realized.
HEALTHCARE AND SPECIALTY PRODUCTS
June 30, 2000 June 30, 1999
Sales $1,645.8 $1,449.0
Operating profits
$384.4 $376.1
Operating margins
23.4% 26.0%
At Tyco Healthcare sales increased worldwide aided by growth in Japan and Asia Pacific, as well as the launch of a number of new product lines. Tyco Plastics and Adhesives also produced higher revenue as its line of consumer products gained further penetration and new tape offerings were introduced into the automotive and pipeline markets.
The increase in operating profits was driven primarily by sales increases, continuing plant consolidation, and implementation of supply chain management initiatives in healthcare.
FIRE AND SECURITY SERVICES
June 30, 2000 June 30, 1999
Sales $1,517.9 $1,435.6
Operating profits
$255.6 $228.6
Operating margins
16.8% 15.9%
Tyco Fire and Security Services achieved an increase in sales, driven primarily by new account generation in U.S. security and by international fire protection businesses. In addition, the start up of our security dealer programs in Korea, Singapore and Malaysia is helping drive increased sales as these economies continue to improve. Growing awareness of the need for fire protection has created additional demand for Tyco's fire detection and suppression systems.
Operating profits increased by 12 percent, a result of the reorganization of our dealer program and internal sales force. Additionally, the high level of service revenues generated a strong operating margin.
FLOW CONTROL PRODUCTS AND SERVICES
June 30, 2000 June 30, 1999
Sales $1,008.5 $976.2
Operating profits
$196.7 $167.7
Operating margins
19.5% 17.2%
The demand for Tyco Flow Control's industrial valve and controls products continued to be strong, especially in the North American and European markets, leading to increased third quarter sales. Additionally, shipments of pipe and tubular products continued at strong levels and Earth Tech's water products and service business in the Pacific region added to the improved performance.
Operating profits increased 17 percent as a result of increased penetration of valve products worldwide and the continued integration of AFC Cable. These increases are net of a reduction in operating profits as a result of the sale of Grinnell Supply Sales and Mueller last year, which was partially offset by royalty and licensing fee income from certain intellectual property associated with these divested businesses.
FREE CASH FLOW
Tyco management refers to the net amount of cash generated from operating activities less capital expenditures and dividends as "free cash flow." Free cash flow was in excess of $900 million in the third quarter of fiscal 2000. For the first nine months of fiscal 2000, free cash flow was $1.9 billion compared to just over $800 million in the first nine months of fiscal 1999. Included as a reduction of operating cash flows in the quarter is $24 million related to cash spending on restructurings.
In addition, the Company paid out $158.9 million during the quarter in cash related to purchase accounting spending. Free cash flow is calculated before these expenditures.
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Tyco International Ltd., a diversified manufacturing and service company, is the world's largest manufacturer and servicer of electrical and electronic components and undersea telecommunications systems, the world's largest manufacturer, installer, and provider of fire protection systems and electronic security services, has strong leadership positions in disposable medical products, plastics, and adhesives, and is the largest manufacturer of flow control valves. The Company operates in more than 80 countries around the world and has expected fiscal 2000 revenues in excess of $28 billion.
The company will discuss second quarter results on a conference call for investors today at 11:00 am (EST). The conference call can be accessed at the following website: investors.tycoint.com/medialist.cfm