"Each of Tyco's segments reported solid gains in revenue, operating profits and cash flow, even in the face of a turning economic environment. The strongest growth was recorded by Tyco Electronics, where double-digit organic growth was enhanced by the successful integration of the Thomas & Betts OEM division," said L. Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer.
"Although we face an uncertain economic environment, we remain comfortable with Tyco's outlook for the remainder of 2001. We have in place a very deliberate strategy to focus each of the businesses on recurring and other sources of revenue and earnings that are less sensitive to economic cycles. Based on current business trends, we believe that although some parts of our business will see slower growth, overall Tyco's results will be in line with our expectations. We will benefit from the integration of the acquisitions we have recently completed, particularly from the resulting synergies," he added.
The quarterly operating profits and margins for the Company's five business segments that are presented in the discussions below are stated before non-recurring items and goodwill amortization. All dollar amounts are stated in millions.
ELECTRONICS
December 31, 2000 December 31, 1999
Sales $2,934.1 $2,117.1
Operating profits
$768.1 $ 470.5
Operating margins
26.2% 22.2%
Tyco Electronics had another record quarter with robust double-digit growth in both sales and operating profits. Sales increased by almost 39 percent with growth coming from a variety of areas, including the communications, computer and consumer, networking systems, instrumentation, industry machinery and equipment, and automotive markets. Growth was especially notable in Europe, supported by a better economic climate, as well as the implementation of new sales initiatives. Market share gains were achieved in all regions and across all industries. Tyco Electronics continued to introduce many new products including high-speed connectors; fiber optic components; relays for telecommunications, automotive and industrial applications; magnetic components; and wireless components including GaAs chip technology.
The recently completed acquisition of the Power Systems business from Lucent will provide Tyco Electronics with further expansion into the communications, computer and data communications markets. The product portfolio acquired substantially expands the product offering with a large number of complementary applications.
Operating profits were up 63 percent with higher margins due to organic business growth, volume increases, improvements in manufacturing processes and cycle times, and cost reductions resulting from the integration of acquisitions.
HEALTHCARE AND SPECIALTY PRODUCTS
December 31, 2000 December 31, 1999
Sales $2,000.9 $1,563.8
Operating profits
$423.2 $362.1
Operating margins
21.2% 23.2%
Tyco Healthcare, including Mallinckrodt, achieved an increase in sales of 28 percent, with particularly strong results in the United States, Japan and Latin America. Sales for the same quarter last year included the results of ADT Automotive, which was divested in October of 2000.
Operating profits increased by 17 percent but decreased as a percent of sales primarily as a result of the inclusion of Mallinckrodt, whose margins are lower than the segment average, and the divestiture of ADT Automotive, whose margins in the same period last year were greater than the segment average. The integration of Mallinckrodt began during the quarter, with the consolidation of administrative and manufacturing functions worldwide. These consolidations coupled with other cost saving, manufacturing and system integration opportunities will reduce expenses and improve profitability and margins going forward.
FIRE AND SECURITY SERVICES
December 31, 2000 December 31, 1999
Sales $1,559.9 $1,449.7
Operating profits
$269.7 $244.1
Operating margins
17.3% 16.8%
Increased sales at Tyco Fire and Security Services were due to continued strong demand for security products and services worldwide, particularly in the United States and Canada. Europe continues to build a solid recurring revenue base, which has driven not only top line growth but also an increase in operating profits. The Company's recently completed acquisition of Simplex Time Recorder complements our service business, and provides an opportunity to leverage its international infrastructure to enhance penetration of Simplex products and services in key geographic markets.
Operating profits grew by almost 11 percent, a result of the continuing emphasis on the growth of recurring revenues. Additionally, continued focus on reducing costs had positive effects at this segment.
FLOW CONTROL PRODUCTS AND SERVICES
December 31, 2000 December 31, 1999
Sales $1,002.2 $886.1
Operating profits
$177.2 $170.7
Operating margins
17.7% 19.3%
Sales in this segment increased 13 percent. Worldwide demand for Tyco Flow Control's broad offering of industrial valve and control products remained strong. Sales in the Power Generation and Water/Wastewater segments were higher than a year earlier, resulting from the strength in Europe and the Pacific Region. Additionally, the Company benefited from the increased demand from the oil and gas industries, which use many Tyco Flow Control products.
Earth Tech's water/wastewater business continues to capitalize on the opportunities to bid for the design, building, ownership, and operation of privatization projects. The operating contracts associated with these projects provide a stream of recurring revenue.
Product offerings were added worldwide for municipal water and wastewater, power generation, mining, industrial process and electrical raceway markets.
The operating profit increases were offset by reduced royalty income on product sales at Mueller and Grinnell Supply Sales and Manufacturing, which were sold by the Company in 1999, and higher steel prices at Allied. Additionally, margins as a percent of sales were negatively impacted by strong growth in Earth Tech sales which have margins lower than the segment average.
TELECOMMUNICATIONS
December 31, 2000 December 31, 1999
Sales $523.2 $622.1
Operating profits
$92.8 $106.2
Operating margins
17.7% 17.1%
The decrease in TyCom's sales reflects its transition from solely a supplier of undersea systems to also an owner-supplier of the TyCom Global Network ("TGN"). Sales to third parties declined from a year ago as manufacturing capacity was allocated to TGN deployment. To date, TyCom has agreements in place for circuit capacity on its network in both the Atlantic and Pacific, and expects that a portion of this circuit capacity will be generate revenue later in the fiscal year.
FREE CASH FLOW
Tyco refers to the net amount of cash generated from operating activities less capital expenditures and dividends as "free cash flow." Free cash flow exceeded $490 million (before spending of approximately $270 million related to the TyCom Global network) in the first quarter of fiscal 2001, compared to approximately $431 million in the first quarter of fiscal 2000. Historically, the first quarter is the lowest generator of free cash flow, primarily due to the payment of year end cash bonuses to employees based on the results of the fiscal year just ended. Included as a reduction of operating cash flow in the quarter is $11 million, related to cash spending on restructuring and other non-recurring items.
In addition, the Company paid out $165 million during the quarter, in cash related to purchase accounting spending. Free cash flow is calculated before these expenditures.
SALE OF ADT AUTOMOTIVE
In the quarter, Tyco completed the previously announced sale of ADT Automotive for cash of $1.0 billion.
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Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services; and the world's largest manufacturer of flow control valves. Tyco also holds strong leadership positions in disposable medical products, diagnostic imaging, bulk pharmaceutical, wound closure, plastics and adhesives. Tyco operates in more than 100 countries and has expected fiscal 2001 revenues in excess of $34 billion.
The Company will discuss first quarter results on a conference call for investors today at 9:00 am EST. The conference call can be accessed at the following website: investors.tycoint.com/medialist.cfm
FORWARD LOOKING INFORMATION
This release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements in this release include statements addressing the following subjects: future financial and operating results and timing and benefits of acquisitions.
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.
More detailed information about these factors is set forth in Tyco's filings with the Securities and Exchange Commission, including Tyco's Annual Report on Form 10-K, for the fiscal year ended September 30, 2000, and Tyco's Annual Report to Shareholders. 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