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Tyco International Reports First Quarter Earnings from Continuing Operations Before Special Items of $0.75 Per Share and GAAP Earnings of $1.00 Per Share

Switzerland Jan. 27, 2011

  • Company reports 5% revenue increase with organic revenue growth of 4%
  • Diluted EPS from continuing operations before special items increases 17%
  • Operating margin before special items improves 130 basis points to 11.3%

(Income and EPS amounts are attributable to Tyco common shareholders)

($ millions, except per-share amounts)

Q1 2011

Q1 2010

% Change

Revenue

$4,379

$4,155

5%

Income from Continuing Operations

$   490

$   296

66%

Diluted EPS from Continuing Operations

$  1.00

$  0.62

61%

Special Items

$  0.25

($0.02)

Income from Continuing Ops Before Special Items

$   367

$   306

20%

Diluted EPS from Continuing Ops Before Special Items

$  0.75

$  0.64

17%

$1.00 $0.75 $4.4 billion

Ed Breen

www.tyco.com

SEGMENT RESULTS

The financial results presented in the tables below are in accordance with GAAP unless otherwise indicated.  Effective in the first fiscal quarter of 2011, the company reorganized its reportable segments to more closely align with certain portfolio refinement actions taken in fiscal 2010.  Under the new reporting structure, the former Safety Products segment has been split between the former ADT Worldwide and former Fire Protection Services segments. The new Tyco Security Solutions segment consists of the former ADT Worldwide segment and the portion of the Safety Products segment that manufactures electronic security products. The new Tyco Fire Protection segment consists of the former Fire Protection Services segment and the remaining portion of the Safety Products segment consisting of the fire suppression and life safety businesses.  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 2010 unless otherwise indicated.

Security Solutions

Q1 2011

Q1 2010

% Change

Revenue

$2,107

$1,914

10%

Operating Income

$347

$268

29%

Operating Margin

16.5%

14.0%

Special Items

($5)

($5)

Operating Income Before Special Items

$352

$273

29%

Operating Margin Before Special Items

16.7%

14.3%

$2.1 billion

$347 million $352 million

Fire Protection

Q1 2011

Q1 2010

% Change

Revenue

$1,099

$1,112

(1%)

Operating Income

$88

$109

(19%)

Operating Margin

8.0%

9.8%

Special Items

($39)

$1

Operating Income Before Special Items

$127

$108

18%

Operating Margin Before Special Items

11.6%

9.7%

$1.1 billion $1.2 billion

$88 million $39 million $127 million

Flow Control

Q1 2011

Q1 2010

% Change

Revenue

$826

$832

(1%)

Operating Income

$100

$102

(2%)

Operating Margin

12.1%

12.3%

Special Items

($6)

Operating Income Before Special Items

$100

$108

(7%)

Operating Margin Before Special Items

12.1%

13.0%

$826 million $1.5 billion

$100 million $5 million

Electrical and Metal Products

Q1 2011

Q1 2010

% Change

Revenue

$347

$297

17%

Operating Income

$7

$23

(70%)

Operating Margin

2.0%

7.7%

Special Items

($6)

Operating Income Before Special Items

$13

$23

(43%)

Operating Margin Before Special Items

3.7%

7.7%

$347 million

$7 million $13 million

December 22, 2010 $713 million $259 million

OTHER ITEMS

  • $246 million $63 million $35 million $2.1 billion
  • $97 million
  • $0.25 $0.32 $0.07
  • $37 million
  • The tax rate before special items was 17%.
  • January 26, 2011 $793 million $1 billion
  • December 9, 2010 $0.84 to $1.00 March 9

ABOUT TYCO INTERNATIONAL

$17 billion www.tyco.com

CONFERENCE CALL AND WEBCAST

9:00 a.m. EST

  • http://investors.tyco.com
  • the United States the United States
  • 11:00 a.m. (ET) January 27, 2011 11:59 p.m. (ET) February 3, 2011 the United States the United States

NON-GAAP MEASURES

"Organic revenue," "free cash flow (outflow)" (FCF), "income from continuing operations before special items," "earnings per share (EPS) from continuing operations before special items," "operating income before special items" and "operating margin before special items" are non-GAAP measures and should not be considered replacements for GAAP results.

Organic revenue is a useful measure used by the company to measure the underlying results and trends in the business. The difference between reported net revenue (the most comparable GAAP measure) and organic revenue (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures, and other changes that do not reflect the underlying results and trends (for example, revenue reclassifications). Effective the first quarter of fiscal 2011, the Company’s organic growth / decline calculations incorporate an estimate of prior year reported revenue associated with acquired entities that have been fully integrated within the first year (such as Broadview Security), and exclude prior year revenues associated with entities that do not meet the criteria for discontinued operations which have been divested within the past year. The rate of organic growth or decline is calculated based on the adjusted number to better reflect the rate of growth or decline of the combined business, in the case of acquisitions, or the remaining business, in the case of dispositions.  The rate of organic growth or decline for acquired businesses that are not fully integrated within the first year will continue to be based on unadjusted historical revenue.  Organic revenue and the rate of organic growth or decline as presented herein may not be comparable to similarly titled measures reported by other companies.

Organic revenue is a useful measure of the company’s performance because it excludes items that: i) are not completely under management’s control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying results of the company’s businesses, such as acquisitions and divestitures.  It may be used as a component of the company’s compensation programs. The limitation of this measure is that it excludes items that have an impact on the company’s revenue. This limitation is best addressed by using organic revenue in combination with the GAAP numbers. See the accompanying tables to this press release for the reconciliation presenting the components of organic revenue.

FCF is a useful measure of the company’s cash which is free from any significant existing obligation. The difference between Cash Flows from Operating Activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash flows that the company believes are useful to identify. FCF permits management and investors to gain insight into the number that management employs to measure cash that is free from any significant existing obligation. It, or a measure that is based on it, may be used as a component in the company’s incentive compensation plans. The difference reflects the impact from:

  • net capital expenditures,
  • accounts purchased by ADT,
  • cash paid for purchase accounting and holdback liabilities, voluntary pension contributions, and
  • the sale of accounts receivable programs.

Capital expenditures and accounts purchased by ADT are subtracted because they represent long-term commitments. Cash paid for purchase accounting and holdback liabilities is subtracted because these cash outflows are not available for general corporate uses. Voluntary pension contributions and the impact from the sale of accounts receivable programs are added or subtracted because this activity is driven by economic financing decisions rather than operating activity.

The limitation associated with using FCF is that it adjusts for cash items that are ultimately within management’s and the Board of Directors’ discretion to direct and therefore may imply that there is less or more cash that is available for the company’s programs than the most comparable GAAP measure. This limitation is best addressed by using FCF in combination with the GAAP cash flow numbers.

FCF as presented herein may not be comparable to similarly titled measures reported by other companies. The measure should be used in conjunction with other GAAP financial measures. Investors are urged to read the company’s financial statements as filed with the Securities and Exchange Commission, as well as the accompanying tables to this press release that show all the elements of the GAAP measures of Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flows from Financing Activities and a reconciliation of the company’s total cash and cash equivalents for the period. See the accompanying tables to this press release for a cash flow statement presented in accordance with GAAP and a reconciliation presenting the components of FCF.

The company has presented its income and EPS from continuing operations before special items and operating income and margin before special items. Special Items include charges and gains related to divestitures, acquisitions, restructurings, impairments, legacy legal and tax charges and other income or charges that may mask the underlying operating results and/or business trends of the company or business segment, as applicable. The company utilizes income and EPS from continuing operations before special items and operating income and margin before special items to assess overall operating performance and segment level core operating performance, as well as to provide insight to management in evaluating overall and segment operating plan execution and underlying market conditions. They may be used as components in the company’s incentive compensation plans. Operating income, operating margin, and income and EPS from continuing operations before special items are useful measures for investors because they permit more meaningful comparisons of the company’s underlying operating results and business trends between periods. The difference between income and EPS from continuing operations before special items and income and EPS from continuing operations (the most comparable GAAP measures) consists of the impact of charges and gains related to divestitures, acquisitions, restructurings, impairments, legacy legal and tax charges and other income or charges that may mask the underlying operating results and/or business trends. Operating income and margin before special items do not reflect any additional adjustments that are not reflected in income from continuing operations before special items. The limitation of these measures is that they exclude the impact (which may be material) of items that increase or decrease the company’s reported operating income and margin and operating income and EPS from continuing operations. This limitation is best addressed by using the non-GAAP measures in combination with the most comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease on reported results.

Tyco provides general corporate services to its segments and those costs are reported in the "Corporate and Other" segment. This segment’s operating income (loss) is presented as "Corporate Expense."

FORWARD-LOOKING STATEMENTS

Sept. 24, 2010

TYCO INTERNATIONAL LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)

Quarters Ended

December 24,

December 25,

2010

2009

Net revenue

$            4,379

$            4,155

Cost of sales

2,750

2,616

Selling, general and administrative expenses

1,137

1,123

Restructuring, asset impairment and divestiture (gain) charges, net

(214)

11

  Operating income

706

405

Interest income

9

9

Interest expense

(62)

(75)

Other income, net

9

Income from continuing operations before income taxes

653

348

Income tax expense

(163)

(51)

  Income from continuing operations

490

297

Income from discontinued operations, net of income taxes

169

6

  Net income

659

303

Less: noncontrolling interest in subsidiaries net income

1

  Net income attributable to Tyco common shareholders

$               659

$               302

Amounts attributable to Tyco common shareholders:

Income from continuing operations

$               490

$               296

Income from discontinued operations

169

6

Net income attributable to Tyco common shareholders

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