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Tyco International Reports Second Quarter 2012 Earnings from Continuing Operations Before Special Items of $0.86 Per Share and GAAP Earnings of $0.71 Per Share

Switzerland April 26, 2012

  • $4.4 billion
  • Operating income before special items grows 15% and the operating margin improves 70 basis points to 12.6%
  • Diluted EPS from continuing operations before special items increases 18%
  • Proposed separation of Tyco remains on track for completion at the end of September

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

($ millions, except per-share amounts)

Q2 2012

Q2 2011

% Change

Revenue

$4,354

$3,992

9%

Income from Continuing Operations

$   334

$   319

5%

Diluted EPS from Continuing Operations

$  0.71

$  0.67

6%

Special Items

$(0.15)

$(0.06)

Income from Continuing Ops Before Special Items

$   403

$   350

15%

Diluted EPS from Continuing Ops Before Special Items

$  0.86

$  0.73

18%

$0.71 $0.86 $4.4 billion

Ed Breen

"We are making good progress on our separation activities including the filing earlier this month of our Form 10 Registration Statement for ADT and we expect to announce the filings for both Flow Control and Fire & Security within the next week. With these steps, we remain on track to complete the proposed transactions including the merger of the flow control business with Pentair, Inc. at the end of September," Breen added.

www.tyco.com

SEGMENT RESULTS

North America North America Mexico

Fire & Security

Q2 2012

Q2 2011

% Change

Revenue

$2,551

$2,420

5%

Operating Income

$286

$264

8%

Operating Margin

11.2%

10.9%

Special Items

$23

$13

Operating Income Before Special Items

$309

$277

12%

Operating Margin Before Special Items

12.1%

11.4%

$2.6 billion $4.7 billion

$286 million $23 million $309 million

ADT

Q2 2012

Q2 2011

% Change

Revenue

$807

$768

5%

Operating Income

$194

$187

4%

Operating Margin

24.0%

24.3%

Special Items

$5

$6

Operating Income Before Special Items

$199

$193

3%

Operating Margin Before Special Items

24.7%

25.1%

$807 million

$194 million $5 million $199 million

Flow Control

Q2 2012

Q2 2011

% Change

Revenue

$996

$804

24%

Operating Income

$111

$86

29%

Operating Margin

11.1%

10.7%

Special Items

$3

$5

Operating Income Before Special Items

$114

$91

25%

Operating Margin Before Special Items

11.4%

11.3%

$996 million $1.9 billion

$111 million $114 million North America $4 million $10 million

OTHER ITEMS

  • $1.1 billion $716 million $326 million $76 million $402 million $415 million
  • $75 million
  • $63 million $30 million
  • The tax rate before special items was 17.2%.
  • $100 million
  • March 28, 2012
  • April 10, 2012 www.sec.gov www.tyco.com

ABOUT TYCO INTERNATIONAL

$17.4 billion www.tyco.com

CONFERENCE CALL AND WEBCAST

8:00 a.m. ET

  • http://investors.tyco.com
  • the United States the United States
  • 10:30 a.m. (ET) April 26, 2012 11:59 p.m. (ET) May 3, 2012 the United States the United States

NON-GAAP MEASURES

Organic revenue, free cash flow (outflow) (FCF), and income from continuing operations, earnings per share (EPS) from continuing operations, operating income, operating margin and corporate expense, in each case "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). The Company’s organic growth / decline calculations incorporate an estimate of prior year reported revenue associated with any acquired entities that have been fully integrated within the first year, 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 are 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 that 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,
  • dealer generated accounts and bulk 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 dealer generated and bulk 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. In addition, from time to time the company may present adjusted free cash flow, which is free cash flow, adjusted to exclude the cash impact of the special items highlighted below. This number provides information to investors regarding the cash impact of certain items management believes are useful to identify, as described below.

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 and adjusted FCF.

The company has presented its income and EPS from continuing operations, operating income and margin, and its corporate expense before special items. Special items include charges and gains related to divestitures, acquisitions, restructurings, impairments, certain changes to accounting methodologies, 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 these measures 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. The Company also presents its effective tax rate as adjusted for special items for consistency. One or more of these measures may be used as components in the company’s incentive compensation plans. These measures are useful for investors because they may 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 the special items noted above on the applicable GAAP measure. 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. 30, 2011

OTHER IMPORTANT INFORMATION

BEFORE MAKING ANY VOTING DECISION, TYCO’S STOCKHOLDERS AND INVESTORS ARE URGED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. http://www.sec.gov/ Washington DC

Tyco and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed transactions. Information concerning the interests of Tyco’s participants in the solicitation is set forth in Tyco’s proxy statements and Annual Reports on Form 10-K, previously filed with the SEC, and in the proxy statement relating to the transactions when it becomes available.

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