SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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1-5482
(Commission File Number)
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TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2297459
(State of Incorporation) (IRS Employer
Identification Number)
One Tyco Park, Exeter, New Hampshire 03833
(Address of registrant's principal executive office)
603-778-9700
(Registrant's telephone number)
-----------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
The number of shares of common stock outstanding as of November 7, 1995,
adjusted for a two-for-one stock split, was 152,781,438.
<PAGE>
TYCO INTERNATIONAL LTD.
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements -
Consolidated Balance Sheets - September 30, 1995 and
June 30, 1995 1-2
Consolidated Statements of Income for the First Quarters
ended September 30, 1995 and 1994 3
Consolidated Statements of Changes in Shareholders'
Equity for the First Quarters ended September 30,
1995 and 1994 4
Consolidated Statements of Cash Flows for the First
Quarters ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Operating Results 9
Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K 11
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
ASSETS
- ---------------------------------------------------------------------------
(unaudited)
(in thousands) September 30, 1995 June 30, 1995
- ---------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 57,058 $66,021
Receivables, less allowance for doubtful
accounts of $31,343 in fiscal 1996 and
$29,554 in fiscal 1995 557,889 527,946
Contracts in process 117,491 104,526
Inventories 612,503 592,158
Deferred income taxes 102,800 108,118
Prepaid expenses and other current assets 76,336 53,132
---------- ----------
1,524,077 1,451,901
---------- ----------
Property, Plant and Equipment:
Land 33,645 33,842
Buildings 288,497 286,839
Machinery and equipment 808,628 784,737
Leasehold improvements 17,821 17,881
Construction in progress 50,566 46,178
Accumulated depreciation (533,459) (511,006)
---------- ----------
665,698 658,471
---------- ----------
Goodwill and Other Intangible Assets 1,037,984 1,004,463
Reorganization Value in Excess of
Identifiable Assets 107,201 108,801
Deferred Income Taxes 96,437 101,678
Other Assets 48,313 56,147
---------- ----------
Total Assets $3,479,710 $3,381,461
========== ==========
See notes to consolidated financial statements.
1
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------
(unaudited)
(in thousands except per share data) September 30, 1995 June 30, 1995
- ------------------------------------------------------------------------------
Current Liabilities:
Loans payable and current maturities of
long-term debt $ 144,478 $ 84,387
Accounts payable 387,613 417,395
Accrued expenses 412,258 423,387
Contracts in process - billings
in excess of costs 72,800 75,546
Income taxes 89,867 72,370
Deferred income taxes 11,295 11,630
---------- ----------
1,118,311 1,084,715
---------- ----------
Deferred Income Taxes 9,585 9,599
Long-term Debt 507,312 506,417
Other Liabilities 153,882 146,049
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $1 par value, authorized
2,000,000 shares; none outstanding - -
Common stock, $.50 par value, authorized
180,000,000 shares; outstanding 76,379,771
shares in fiscal 1996 and 76,365,001
shares in fiscal 1995, net of reacquired
shares of 7,960,740 in fiscal 1996 and
in fiscal 1995 38,190 38,183
Capital in excess of par value, net of
deferred compensation of $20,420 in
fiscal 1996 and $21,636 in fiscal 1995 619,419 620,633
Currency translation adjustment (10,331) (9,451)
Retained earnings 1,043,342 985,316
---------- ----------
1,690,620 1,634,681
---------- ----------
Total Liabilities and Shareholders' Equity $3,479,710 $3,381,461
========== ==========
See notes to consolidated financial statements.
2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------------------------------
For the First Quarter ended September 30,
(in thousands except per share data) 1995 1994
- -------------------------------------------------------------------------------
Sales $1,216,202 $1,054,192
---------- ----------
Costs and Expenses:
Cost of sales 895,928 767,637
Selling, general and administrative 192,604 176,172
Interest 15,423 16,683
---------- ----------
1,103,955 960,492
---------- ----------
Income before income taxes 112,247 93,700
Income taxes (46,583) (40,315)
---------- ----------
Net income $ 65,664 $ 53,385
========== ==========
Net Income Per Share $ .43 $ .36
========== ==========
Cash dividends per common share $ .05 $ .05
========== ==========
Common equivalent shares 152,740 148,622
========== ==========
See notes to consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
For the First Quarters ended September 30, 1995 and 1994
- --------------------------------------------------------------------------------
Capital in Currency
Common Stock Excess of Translation Retained
(in thousands) $.50 Par Value Par Value Adjustment Earnings
- --------------------------------------------------------------------------------
Balance at June 30, 1994 $35,542 $567,476 $(40,874) $ 804,882
Net income 53,385
Dividends (4,635)
Restricted stock grants,
cancellations, tax
benefits and other 103 314
Warrants, options exercised 55 989
Currency translation adjustment 15,058
Amortization of deferred
compensation 1,273
---------- ---------- ---------- ----------
Balance at
September 30, 1994 $35,700 $570,052 $(25,816) $ 853,632
========== ========== ========== ==========
Balance at June 30, 1995 $38,183 $620,633 $ (9,451) $ 985,316
Net income 65,664
Dividends (7,638)
Restricted stock grants,
cancellations, tax
benefits and other 4 (3,174)
Warrants, options exercised 3 90
Currency translation adjustment (880)
Amortization of deferred
compensation 1,870
---------- ---------- ---------- ----------
Balance at
September 30, 1995 $38,190 $619,419 $(10,331) $1,043,342
========== ========== ========== ==========
See notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
For the First Quarter ended September 30,
(in thousands) 1995 1994
- --------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income $ 65,664 $ 53,385
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 23,851 22,302
Amortization 11,652 10,679
Deferred income taxes 10,225 2,489
Provision for losses on accounts receivable
and inventory writedowns 6,700 5,357
Changes in assets and liabilities net of the
effects of acquisitions and divestitures:
Increase in accounts receivable
and contracts in process (49,189) (7,675)
Increase in inventory (20,712) (2,257)
Decrease in accounts payable and
accrued expenses (47,315) (53,352)
Increase in income taxes payable 17,499 13,320
Other (13,101) 7,486
-------- ----------
Net cash provided by operating activities 5,274 51,734
-------- ----------
Cash Flows From Investing Activities:
Capital expenditures (29,855) (31,793)
Purchases of businesses, net of cash acquired (38,334) (2,776)
-------- ----------
Net cash used in investing activities (68,189) (34,569)
-------- ----------
Cash Flows From Financing Activities:
Proceeds from (payments on) long-term debt and
lines of credit 61,486 (44,190)
Dividends paid (7,627) (4,628)
Issuance of stock and warrants 93 1,043
-------- ----------
Net cash provided by (used in) financing
activities 53,952 (47,775)
-------- ----------
Decrease in cash and cash equivalents (8,963) (30,610)
Cash and cash equivalents at beginning of quarter 66,021 75,843
-------- ----------
Cash and cash equivalents at end of quarter $ 57,058 $ 45,233
======== ==========
Supplementary cash flow disclosure:
Interest paid $ 11,608 $ 13,118
======== ==========
Income taxes paid $ 13,117 $ 12,779
======== ==========
See notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. These statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Form 10-K for the year ended June 30, 1995.
The accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management such financial
statements include all adjustments, consisting only of normal
recurring adjustments, necessary to summarize fairly the Company's
financial position and results of operations.
2. On October 11, 1995, the Company's Board of Directors authorized a
two-for-one stock split to be effected in the form of a stock
dividend. One additional share of common stock was distributed on
November 14, 1995 for each share of common stock of the Company held
by shareholders of record on October 30, 1995. The Company will
reclassify $38,195 from the capital in excess of par value account to
the common stock account on the effective date of the split.
Earnings per share, common equivalent shares and cash dividends per
share have been restated to reflect the stock split.
3. Long-term debt is as follows:
------------------------------------------------------------------------
September 30, June 30,
(in thousands) 1995 1995
------------------------------------------------------------------------
Credit agreements $ - $ -
Uncommitted lines of credit 51,800 -
Insurance company note 55,000 55,000
8.125% public notes due 1999 144,907 144,901
6.375% public notes due 2004 104,323 104,301
9.5% public debentures due 2022 199,580 199,575
8.0% public debentures due 2023 49,959 49,959
Other 46,221 37,068
-------- --------
651,790 590,804
Less current portion and loans payable 144,478 84,387
-------- --------
$507,312 $506,417
======== ========
Under the Company's credit agreement with a group of commercial
banks, the Company has the right to borrow $300 million or a portion
thereof until October 1999 for its general corporate purposes. The
principal amount then outstanding will be due and payable at that
time. Interest payable on borrowings is variable based upon the
Company's option of selecting either a Eurodollar rate plus 0.325%, a
certificate of deposit rate plus 0.45% or a base rate, as defined.
6
<PAGE>
The Company's uncommitted lines of credit are borrowings from
commercial banks on an "as offered" basis. The borrowings and
repayments occur daily and contain no specific terms other than due
dates and interest rates. The due dates generally range from
overnight to 90 days and interest rates approximate those available
under the credit agreement.
Under its various loan agreements, the Company is required to meet
certain covenants, none of which is considered restrictive to the
operations of the Company.
4. The Company has an agreement under which it sells participating
interests in a defined pool of trade accounts receivable. The
proceeds of sale are less than the face amount of accounts receivable
sold by an amount which approximates the purchaser's financing cost
of issuing its own commercial paper backed by these accounts
receivable. The discount from the face amount was $3.4 and $1.8
million during the first quarter of fiscal 1996 and fiscal 1995,
respectively, and has been included in selling, general and
administrative expense in the Company's Consolidated Statement of
Income.
5. Selected information for the Company's four industry segments follows
(in thousands):
First Quarter Ended
September 30,
------------------------------
1995 1994
------------- ------------
Sales:
Disposable and Specialty Products $ 354,153 $ 329,583
Fire Protection 458,927 379,549
Flow Control Products 287,958 243,068
Electrical and Electronic Components 115,164 101,992
---------- ----------
$1,216,202 $1,054,192
========== ==========
Income Before Income Taxes:
Disposable and Specialty Products $ 63,591 $ 58,328
Fire Protection 25,038 18,184
Flow Control Products 26,555 21,162
Electrical and Electronic Components 20,430 18,101
---------- ----------
Total operations 135,614 115,775
Interest expense (15,423) (16,683)
Corporate and other amounts (7,944) (5,392)
---------- ----------
$ 112,247 $ 93,700
========== ==========
7
<PAGE>
6. Inventories are classified as follows (in thousands):
September 30, 1995 June 30, 1995
------------------ -------------
Purchased materials and
manufactured parts $158,388 $161,243
Work in process 109,668 98,193
Finished goods 344,447 332,722
-------- --------
$612,503 $592,158
======== ========
7. In the normal course of business, the Company is liable for contract
completion and product performance. In addition, the Company is in
receipt of notifications from various environmental agencies that
conditions at a number of sites where hazardous wastes were disposed of
by the Company and other persons may require cleanup and other possible
remedial action. In the opinion of management, these obligations will
not materially affect the Company's financial position or results of
operations.
8
<PAGE>
Item 2 - Management's Discussion and Analysis of
Financial Condition and Operating Results
Overview
Net income per share was $.43 for the first quarter of fiscal 1996 as compared
to $.36 for the first quarter of fiscal 1995. The increase was attributable to
increased income from operations in each of the Company's four business
segments. On October 11, 1995, the Company's Board of Directors authorized a
two-for-one stock split to be effected in the form of a stock dividend. One
additional share of common stock was distributed on November 14, 1995 for each
share of common stock of the Company held by shareholders of record on October
30, 1995. Per share amounts have been restated to reflect the stock split.
Results of Operations
First Quarter of Fiscal 1996 Compared to First Quarter of Fiscal 1995:
Sales increased 15% during the first quarter of fiscal 1996 to $1.22 billion
from $1.05 billion in the first quarter of fiscal 1995. Sales of the Disposable
and Specialty Products group increased $24.6 million to $354.2 million, or 7%,
with fiscal 1996 reflecting higher sales at Kendall and Ludlow. Sales of the
Fire Protection group increased $79.4 million to $458.9 million, or 21%. Sales
increased in Europe by $36.9 million, including an $8.4 increase resulting from
the change in average foreign currency exchange rates on non U.S. dollar
denominated sales in the first quarter of fiscal 1996 as compared to the first
quarter of fiscal 1995 due to the weakening of the U.S. dollar versus certain
foreign currencies. Sales in the Asia Pacific region increased $27.3 million.
Sales of the Flow Control Products group increased $44.9 million to $288.0
million, or 18%, primarily as a result of increased sales at Allied's pipe and
tubular products businesses, including businesses acquired in the second half of
fiscal 1995. Sales also increased in Grinnell's North American distribution
operations and at Mueller. Sales of the Electrical and Electronic Components
group increased $13.2 million to $115.2 million, or 13%, resulting principally
from increased sales at Simplex, where sales are affected by the timing of
deliveries under a long-term contract for underwater communication cable
systems.
Pre-tax income for the first quarter of fiscal 1996 was $112.2 million, as
compared to the $93.7 million earned in the first quarter of fiscal 1995, an
increase of 20%. Interest expense decreased slightly during the first quarter
of fiscal 1996 from the first quarter of fiscal 1995 primarily due to lower
average debt levels and the effect of increased sales of accounts receivable
(see Note 4 to the consolidated financial statements), partially offset by
slightly higher interest rates.
For the first quarter of fiscal 1996 as compared to the first quarter of fiscal
1995, operating profits of the Disposable and Specialty Products group increased
$5.3 million to $63.6 million, or 9%, reflecting higher earnings at Kendall and
Ludlow partially offset by decreased earnings at Armin where profits were
adversely affected by changes in raw material costs. Fire Protection group
profits increased $6.8 million to $25.0 million, or 38%, due to improved
profitability in the North American, European and Asia Pacific contracting
operations. The effect of the average foreign
9
<PAGE>
exchange rates during the first quarter of fiscal 1996 as compared to the first
quarter of fiscal 1995 was not material. Operating profits for the Flow Control
group increased $5.4 million to $26.6 million, or 25%, due principally to
increased earnings in Allied's pipe and tubular products businesses, including
businesses acquired in the second half of fiscal 1995, and at Mueller.
Operating profits of the Electrical and Electronic Components group increased
$2.3 million to $20.4 million, or 13%, due primarily to higher earnings at
Simplex and at Allied's electrical conduit operations.
Liquidity and Capital Resources
As presented in the Consolidated Statement of Cash Flows, net cash provided by
operating activities was $5.3 million during the first quarter of fiscal 1996.
Accounts receivable and contracts in process increased $49.2 million, inventory
increased $20.7 million and accounts payable and accrued expenses decreased
$47.3 million. Net changes in other working capital accounts were not
significant during the period. The impact of changes in foreign exchange rates
did not materially affect working capital during the quarter.
During the first quarter of fiscal 1996, the Company used cash to (i) acquire a
German disposable and specialty products company, a U.S. fire protection
company, two European flow control companies and a U.S. flow control company for
an aggregate of $38.3 million; (ii) purchase $29.9 million of property, plant
and equipment; and (iii) pay dividends of $7.6 million.
At September 30, 1995 the Company's total debt was $651.8 million as compared to
$590.8 million at June 30, 1995.
Shareholders' equity was $1.69 billion, or $11.07 per share, at September 30,
1995, compared to $1.63 billion, or $10.70 per share, at June 30, 1995. The
increase in shareholders' equity was due primarily to net income of $65.7
million. Total debt as a percent of total capitalization (total debt and
shareholders' equity) was 28% at September 30, 1995 and 27% at June 30, 1995.
The Company believes that its funding sources are adequate for its anticipated
requirements through expected cash flows from operations and established
financing arrangements.
Working capital requirements for the remainder of fiscal 1996 are not expected
to significantly exceed fiscal 1995 levels. The level of capital expenditures
is not expected to substantially increase in fiscal 1996 as compared to fiscal
1995, and the source of funds for such expenditures is expected to be cash from
operations.
Backlog
The backlog of unfilled orders was approximately $1.13 billion at September 30,
1995 as compared to $1.05 billion at June 30, 1995. Backlog increased in all
regions of the Fire Protection businesses, as well as in each business in the
Electrical and Electronic Components segment.
10
<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
11 - Earnings Per Share Computation
27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TYCO INTERNATIONAL LTD.
/s/ Mark H. Swartz
-------------------------------------------
Mark H. Swartz
Vice President - Chief Financial Officer
(Principal Accounting and Financial Officer)
Date: November 14, 1995
12
<PAGE>
TYCO INTERNATIONAL LTD.
INDEX TO EXHIBITS
Exhibit No.
- -----------
11 Earnings Per Share Computation
27 Financial Data Schedule
13
TYCO INTERNATIONAL LTD.
EXHIBIT 11
Earnings Per Share Computation
(In thousands, except per share amounts)
Three Months Ended
September 30,
---------------------
1995 1994
--------- --------
Calculation of earnings per share:
Primary:
Weighted average common shares outstanding
during the period 152,796 142,470
Dilutive effect of the restricted stock plan, stock
options and warrants using the treasury stock
method (56) 6,152
-------- --------
Total common equivalent shares 152,740 148,622
======== ========
Net income $ 65,664 $ 53,385
======== ========
Earnings per share $ 0.43 $ 0.36
======== ========
Fully Diluted(1):
Weighted average common shares outstanding
during the period 152,796 142,470
Dilutive effect of the restricted stock plan, stock
options and warrants using the treasury stock
method 73 6,295
-------- --------
Total common equivalent shares 152,868 148,765
======== ========
Net income $ 65,664 $ 53,385
======== ========
Earnings per share $ 0.43 $ 0.36
======== ========
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by Footnote 2 to Paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT OF TYCO INTERNATIONAL LTD. AS OF AND FOR THE QUARTER
ENDED SEPTEMBER 30, 1995 AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 57,058
<SECURITIES> 0
<RECEIVABLES> 582,991
<ALLOWANCES> 31,343
<INVENTORY> 612,503
<CURRENT-ASSETS> 1,524,077
<PP&E> 1,199,157
<DEPRECIATION> (533,459)
<TOTAL-ASSETS> 3,479,710
<CURRENT-LIABILITIES> 1,118,311
<BONDS> 507,312
<COMMON> 38,190
0
0
<OTHER-SE> 1,652,430
<TOTAL-LIABILITY-AND-EQUITY> 3,479,710
<SALES> 1,216,202
<TOTAL-REVENUES> 1,216,202
<CGS> 895,928
<TOTAL-COSTS> 895,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,714
<INTEREST-EXPENSE> 15,423
<INCOME-PRETAX> 112,247
<INCOME-TAX> 46,583
<INCOME-CONTINUING> 65,664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,664
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
