other non-recurring credits, charges, gain and extraordinary item. After giving effect to restructuring and other non-recurring credits, charges and gain, diluted earnings per share before extraordinary item for the fourth
quarter of fiscal 2000 were $1.12, or $1.91 billion, compared to 46 cents, or $780.8 million, in the fourth quarter of fiscal 1999.
For fiscal 2000, income before restructuring and other non-recurring credits, charges, gain and extraordinary item rose to $3.73 billion, or
$2.18 per diluted share, a 42 percent increase over last year's diluted per share earnings of $1.53. After giving effect to restructuring and other non-recurring credits, charges and gain, diluted earnings per share before extraordinary item were $2.64, or $4.52 billion for fiscal 2000 compared to 64 cents, or $1.07 billion, in fiscal 1999. Revenues for the twelve months increased to $28.93 billion, 29 percent higher than last year's $22.50 billion.
"Tyco continues to show no signs of slowing down," said L. Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer. "Organic growth remained strong across the board. We continued to expand our operating margins to record levels. Backlog is up in virtually every usiness, which in addition to reflecting the current strength of these businesses gives us good
visibility on the coming year. We generated free cash flow of over $1.4 billion in the quarter and in excess of our target of $3.3 billion for the full year, even after spending nearly $200 million
related to the TyCom Global Network.
"During the quarter, we generated additional net cash proceeds of over $2.1 billion from the issuance of shares by TyCom Ltd. in an initial public offering. Substantially all of these proceeds will be used to build and deploy the TyCom Global Network. This transaction resulted in a gain, before tax, of $1.8 billion reported in our fourth quarter. Subsequent to
the end of the fiscal year, we completed the sale of ADT Automotive for $1 billion in cash. These cash proceeds, together with the free cash flow
generated by our businesses, provide a strong balance sheet and significant resources for future growth and acquisition opportunities.
"As all these factors indicate, Tyco is nticipating another solid year in 2001. The rapid integration of the Thomas & Betts Electronics acquisition is producing strong growth opportunities for that business. We closed our acquisition of Mallinckrodt last week and are already capitalizing on the exciting new growth potential Mallinckrodt gives us in our worldwide healthcare business. Fire and Security's recurring revenue base continues
to increase, providing us with a more predictable and profitable revenue and earnings stream. And, worldwide demand for Tyco Flow Control's broad
offering of industrial valve and control products continues to strengthen and we see further demand in the areas of power generation, water and
wastewater markets," 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 credits and charges for merger, estructuring and other non-recurring charges, charges for impairment of long-lived assets, gain on issuance of common shares by a subsidiary and goodwill amortization. All dollar amounts
are in millions.
ELECTRONICS
September 30, 2000 September 30, 1999
Sales $2,850.1 $1,720.3
Operating profits $746.8 $441.6
Operating margins 26.2% 25.7%
Tyco Electronics achieved a 66 percent increase in sales resulting from strong organic growth, as well as the successful integration of acquisitions, most notably Raychem, Siemens EC and the electronic OEM division of Thomas & Betts. Organic growth was driven by the influx of new products such as high-speed connectors, passive and active fiber optic components, wireless components, GaAs chip technology and radar sensors for the automotive industry. The acquisition of Thomas & Betts provided Tyco
Electronics with the opportunity to integrate its technical portfolio of products, which now includes the most advanced interconnection technology, Metallized Particles Interconnect (MPI). This technology is a significant
enhancement to our product line, particularly in its application to the high growth area of high frequency components.
Operating profits were up 69 percent with higher margins due to an increase in volume, improved pricing, synergies achieved as a result of acquisition integrations and realized fficiencies in manufacturing processes.
TELECOMMUNICATIONS
September 30, 2000 September 30, 1999
Sales $587.5 $ 502.3
Operating profit $144.2 $74.0
Operating margin 24.5% 14.7%
TyCom experienced continued increasing demand for third-party sales of TyCom systems, independent of the TyCom Global Network ("TGN") build. This
provides increasing revenues from all of TyCom's factories and fleet. As more new customer networks come online, in particular where TyCom has provided turnkey contracts (supply, operations, and maintenance), the revenue for these value-added services continues to grow. Factors that drove growth and demand at TyCom include: a deficit in undersea capacity with
respect to terrestrial capacity; the need for new capacity/systems and upgrades to existing systems to support growing global bandwidth demand;
telecommunication deregulation in many markets; internet usage fed by the proliferation of access technologies such as cable and DSL; and, strength of the global economy and the Asian economic recovery.
The revenue and operating profit in the quarter reflects the utilization of a portion of TyCom's capacity to the build-out of TGN, projected to be the world's largest undersea fiber optic network. Even with this build-out, revenue was up 17 percent and operating profits increased 95% versus the same period last year.
HEALTHCARE AND SPECIALTY PRODUCTS
September 30, 2000 September 30, 1999
Sales $1,673.8 $1,555.8
Operating profits $404.3 $372.1
Operating margins 24.2% 23.9%
Tyco Healthcare showed strong growth worldwide, especially in the United States, Japan and Europe. New product sales were strong as a result of offerings from ValleyLab, Confab and Ludlow Technical Products.
Operating profits increased by 9 percent as a result of the continuing efforts of productivity improvement and cost reduction, including facility
rationalization and implementation of a new supply chain management system.
The completion of the acquisition of Mallinckrodt subsequent to the end of the fiscal year, makes Tyco Healthcare the leader in the fast growing global respiratory care arena, with products such as Mallinckrodt endotracheal tubes, Shiley tracheostomy tubes, Nellcor pulse oximeters, Puritan-Bennett ventilators, and new technologies including the recently launched OxiFirst
fetal oxygen monitor and HELiOS liquid oxygen system. Mallinckrodt also is a leader in developing new products in the growing alternate care markets for home oxygen therapy, sleep therapy and portable ventilation. In
diagnostic imaging, Mallinckrodt has leadership positions in imaging contrast agents and radiopharmaceuticals, including Opitray and OptiMark. Pharmaceutical products include leadership positions in bulk pharmaceuticals
and a rapidly growing dosage product line.
The combined strength of Mallinckrodt's products, Tyco Healthcare's current offerings and Tyco's global sales and service organization will allow Tyco Healthcare to leverage its international infrastructure and enhance penetration in key geographic markets. Mallinckrodt's strong positions in the respiratory, pharmaceuticals and diagnostic imaging segments will provide
Tyco with excellent platforms for future acquisitions and licensing agreements.
FIRE AND SECURITY SERVICES
September 30, 2000 September 30, 1999
Sales $1,642.1 $1,532.4
Operating profits $307.5 $253.2
Operating margins 18.7% 16.5%
Tyco Fire and Security Services' increase in sales was due to a strong demand for security products and services worldwide, particularly in Asia and Latin America. A sales force reorganization initiative in the US Security division continued to provide both top line growth as well as an increase in operating profits. Tyco Fire and Security Services continues to sign up record numbers of new electronically monitored security and fire
protection inspection customers. Focusing on service inspection and monitoring, combined with a reduced emphasis on large contracting jobs, led
to an increase in the recurring revenue stream.
Operating profits increased by 22 percent, a result of the business mix shift toward service and recurring revenues. Additionally, the installation recovery for new customers has improved, leading to higher account
profitability and a reduction in the payback period for new accounts.
FLOW CONTROL PRODUCTS AND SERVICES
September 30, 2000 September 30, 1999
Sales $1,051.9 $913.7
Operating profits $200.3 $175.8
Operating margins 19.0% 19.2%
The worldwide demand for Tyco Flow Control's broad offering of industrial valve and controls products continued to strengthen during the fourth
quarter. In North America, a new state of the art gate valve manufacturing facility was opened which will serve to enhance the Company's ability to meet customer requirements. Earth Tech strengthened its presence in the fast growing transportation and microelectronics markets. New product offerings in the areas of heat tracing and lightweight armored cable also contributed to sales growth.
Operating profits increased 14 percent as a result of cost reductions and productivity gains, enhanced by our robust worldwide revenue growth and the realization of synergies from the AFC Cable and Glynwed acquisitions.
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 was in excess of $1.4 billion in the fourth quarter of fiscal 2000 and over
$3.3 billion for the fiscal year, after spending of nearly $200 million related to the TyCom Global Network. This $3.3 billion free cash flow
represents 89 percent of income before structuring and other non-recurring charges, credits, gain, and extraordinary item, an increase of 94 percent over last year. Included as a reduction of operating cash flows in the
quarter is $38.9 million, and in the fiscal year is $155.2 million, related to cash spending on restructuring and other non-recurring items.
In addition, the Company paid out $143.2 million during the quarter, and $544.4 during the fiscal year, in cash related to purchase accounting
spending. Free cash flow is calculated before these expenditures.
TYCOM OFFERING AND SALE OF ADT AUTOMOTIVE
During the quarter, TyCom Ltd. issued pproximately 70.3 million shares in an initial public offering, priced at $32 per share. The shares were listed on the New York Stock Exchange under the ticker symbol TCM. This resulted
in net cash proceeds of over $2.1 billion. For the fourth fiscal quarter, Tyco recorded a gain on issuance of these shares of $1.8 billion, before tax. Tyco retains ownership of approximately 86% of TyCom Ltd. The contribution to Tyco of TyCom's sales and earnings are included in the attached table within its own segment line. In addition, the minority
interest of TyCom is presented as a reduction to Tyco's income below the income taxes line item.
Subsequent to the end of the fiscal year, Tyco completed the previously announced sale of ADT Automotive for $1 billion in cash.
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