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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 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
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)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.50 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. X .
---
The aggregate market value of voting common stock held by nonaffiliates of
registrant was $4,592,748,188 as of September 1, 1995.
The number of shares of common stock outstanding as of September 15, 1995
was 76,366,995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement which has been filed with the
Commission within 120 days after the close of the fiscal year are incorporated
by reference into Part III.
See pages 15 and 16 for the exhibit index.
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PART I
ITEM 1. BUSINESS
Tyco International Ltd. (the "Company"), through its divisions and operating
subsidiaries, maintains strong leadership positions in each of its segments of
its respective markets for disposable medical supplies and other specialty
products, fire protection systems, flow control products and electrical and
electronic components. The disposable and specialty products segment includes
Kendall International, Inc. ("Kendall"), which was acquired during fiscal 1995
through a merger that has been accounted for using the pooling of interests
method of accounting. See Notes 1 and 2 to the Consolidated Financial Statements
for a further description of this transaction. See Notes 13 and 14 to the
Consolidated Financial Statements for certain consolidated segment and
geographic financial data relating to the Company's businesses.
DISPOSABLE AND SPECIALTY PRODUCTS
Tyco's Disposable and Specialty Products Group consists of Kendall, Ludlow
Corporation ("Ludlow") and Armin Plastics ("Armin"). Kendall manufactures,
markets and distributes medical supplies and adhesive products and tapes. In
addition, Kendall markets and distributes home health care products. Ludlow is a
manufacturer of disposable medical products, technical products, laminated and
coated products, extrusion coated polyester yarns and woven fabrics, and
deep-drawn metal parts. Armin is a leading independent manufacturer of
polyethylene film and packaging products.
Kendall
Tyco acquired Kendall during October 1994. Kendall conducts its operations
through four business units: Kendall Healthcare, Kendall International
("International"), Futuro and Polyken. Kendall's products are manufactured at 18
locations in North America, the United Kingdom, Germany, Mexico, China, Thailand
and Malaysia.
In each of its business units, Kendall competes with a number of other
companies, including a number of larger well-established companies. Kendall
relies on its reputation for excellent quality and dependable service, together
with its low cost manufacturing and innovative products, to compete in its
markets.
Kendall Healthcare. The Kendall Healthcare business unit markets a broad
range of wound care, vascular therapy, urological care, incontinence care,
anesthetic care and other products to U.S. and Canadian hospitals and alternate
site health care customers. Kendall Healthcare leads the industry in gauze
production with its Kerlix(R) and Curity(R) brands. Kendall Healthcare's other
core domestic product category consists of its vascular therapy products,
principally anti-embolism stockings marketed under the T.E.D.(R) brand name,
sequential pneumatic compression devices sold under the SCDTM brand name and a
venous plexus foot pump marketed under the A-V Impulse System(R) brand name.
Kendall Healthcare pioneered the pneumatic compression form of treatment and
continues to be the dominant participant in the pneumatic compression and
elastic stocking segments of the vascular therapy market.
Kendall Healthcare distributes its products both directly through its sales
force and through a network of over 250 independent distibutors. Kendall
Healthcare's sales force is divided into two groups, one promoting its vascular
therapy products and the other promoting its wound care and other health care
products. Most of the U.S. distributors also sell similar products made by
Kendall's competitors, a practice common in the industry.
Kendall's Superior Healthcare Group, Inc., manufactures a broad line of
disposable medical supplies including respiratory, urology and nursing care
products. In October 1994, Kendall acquired
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Sheridan Catheter Corporation, a manufacturer of airway managment, temperature
monitoring and specialty products serving patients in anesthesia, critical care
and emergency medicine.
International. International is responsible for the manufacturing,
marketing, distribution and export of Kendall products in numerous countries
worldwide. International's operations are organized primarily into three
geographic regions--Europe, Latin America and the Far East. International
generally markets a range of products, similar to those of Kendall Healthcare
and, to a lesser extent, Futuro, although the mix of product lines varies from
country to country. International markets directly to hospital and medical
professionals and through independent distributors.
Futuro. The Futuro business unit manufactures and distributes Kendall's home
health care products to retail consumers and professional health care providers.
The unit has a broad first-aid line sold under the Curity(R) and Curad(R) brand
names, including products such as Curad(R) adhesive bandages, Telfa(R) pads and
"kids size" bandages with character themes utilizing various licensed trade
names. Other home health care products include elastic supports and braces,
graduated compression hosiery, ambulation aids and patient aids such as canes
and crutches.
Futuro markets its home health care products primarily through a nationwide
distributor network to more than 35,000 pharmacies and retail outlets, including
food and mass merchandisers. Futuro's direct sales force is responsible for
pharmacy sales and selected key accounts outside the retail pharmacy market. A
separate network of broker sales representatives handles all other sales.
Polyken. The Polyken division manufactures and markets specialty adhesive
products and tapes for industrial applications including external corrosion
protection tape products for oil, gas and water pipelines. Other industrial
applications include tapes used in the automotive industry for wire harness
wraps, sealing and other purposes, and tapes used in the aerospace and heating
and air conditioning (HVAC) industries. Polyken also produces duct, packaging
and electrical tapes for consumer applications and bandages and medical tapes
for Kendall's healthcare product units and for others.
Polyken generally markets its pipeline products directly, working with local
manufacturing representatives, international engineering and construction
companies, and the owners and operators of pipeline transportation facilites.
Polyken sells its other industrial products either directly to major end users
or through diverse distribution channels, depending on the industry being
served.
Ludlow
Technical Products Division. Ludlow's Technical Products division
manufactures and sells a variety of disposable medical products, specialized
paper and film products. These products include recording chart papers for
medical and industrial instrumentation, disposable electrodes for medical
devices, hydrogels, high quality facsimile paper, adhesive tapes and pressure
sensitive coated papers and films used for business forms and in printing
applications. These products are marketed primarily by the division's internal
sales force. The division's manufacturing plants are located in Massachusetts
and Washington. Competitors vary from small regional firms to larger firms that
compete with Ludlow on a national basis. Competition is on the basis of price
and quality.
In December 1993, the Company acquired the businesses of Uni-Patch, Inc. and
Classic Medical Products, both manufacturers and distributors of medical
electrodes and related products. Uni-Patch manufactures and distributes
transcutaneous electrical nerve simulation ("TENS") electrodes and related
products which are used primarily in physical therapy and other forms of
rehabilitation medicine. Classic manufactures medical electrodes for EKGs and
similar diagnostic tests. In March 1994, Tyco purchased the Promeon electrode
gel business from Medtronics, Inc. Promeon is a leading manufacturer of gels
which are used with medical electrodes for testing and other monitoring
purposes. All of these businesses have been integrated into Ludlow's existing
facilities except for Uni-Patch, which maintains a manufacturing facility in
Minnesota. In fiscal 1995, the Company acquired
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LMI, a manufacturer of medical electrodes and Cambrex, which produces hydrogel
wound care products.
Laminating and Coating Division. Ludlow's Laminating and Coating division
produces protective packaging and other materials made of coated or laminated
combinations of paper, polyethylene and foil. Coated packaging materials provide
barriers against grease, oil, light, heat, moisture, oxygen and other
contaminants that could damage the contained products. The division produces
structural coated and laminated products such as plastic coated kraft,
linerboard and bleached boards for rigid urethane insulation panels, automotive
components and wallboard panels. Other applications include packaging for
photographic film, frozen foods, health care products, electrical and metallic
components, agricultural chemicals, cement and specialty resins. The division
competes with numerous specialized competitors in its various markets. The
division has two manufacturing plants located in Louisiana and Mississippi.
Ludlow markets its laminated and coated products through its internal sales
force and independent manufacturers' representatives. The Company competes with
many large manufacturers of laminated and coated products on the basis of price,
service, marketing coverage and custom application engineering.
Twitchell. The Twitchell division of Ludlow manufactures extrusion coated
polyester yarns and woven fabrics and woven and knit paper fabrics. These
fabrics are sold by Twitchell's internal sales force to manufacturers for use
principally in outdoor furniture, awnings, housewares and other specialty
products. Non-woven coated fabric is manufactured and sold for use as disposable
medical clothing. The division's plant is located in Alabama. Competition is on
the basis of price, quality and service. Twitchell competes with a number of
U.S. and foreign manufacturers in the sale of extrusion coated polyester yarns.
Accurate Forming. Ludlow's Accurate Forming division manufactures deep-drawn
metal parts, primarily barrels, caps and clips for pens and pencils and
containers, caps and closures for cosmetics, pharmaceutical packaging and
automotive applications. Accurate sells its products on a direct basis through
its internal sales force and also utilizes manufacturers' representatives. The
Company competes with many small, independent deep-drawn metal manufacturers and
plastic extruders, several of which have manufacturing locations in the Far
East. Competition is on the basis of price. Accurate's facility is located in
New Jersey.
Ludlow's backlog amounted to $40 million at June 30, 1995 and $33 million at
June 30, 1994.
Armin
Armin manufactures polyethylene film and packaging products in a wide range
of size, gauge, construction strength, stretch capacity, clarity and color.
Armin extrudes low density, high density and linear low density polyethylene
film from resin purchased in pellet form. Polyethylene film is flexible and
malleable. Armin also uses such additives as coloring, slip and anti-block
chemicals. Examples of Armin's product mix include plastic supermarket
packaging, greenhouse sheeting, shipping covers and liners and a variety of
other packaging configurations for the aerospace, agricultural, automotive,
construction, cosmetics, electronics, food processing, healthcare,
pharmaceutical and shipping industries. Armin also manufactures a number of
other polyethylene products, such as reusable plastic pallets, transformer pads
for electric utilities, and a large variety of disposable gloves for the
cosmetic, medical, foodhandling and pharmaceutical industries. A majority of all
sales are generated through Armin's internal sales force. Armin serves over
6,000 customers in the United States and has 11 plants in New Jersey, Oklahoma,
California, South Carolina, North Carolina and Georgia.
Armin competes with a wide range of manufacturers including some vertically
integrated companies that manufacture polyethylene resins for their own use.
Armin competes in many market segments
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by emphasizing product innovation, specialization and customer service. Armin's
backlog amounted to $16 million at June 30, 1995 and $20 million at June 30,
1994.
FIRE PROTECTION
The Company engages in fire protection contracting and in the manufacture
and distribution of fire protection products and equipment.
The Company's Grinnell subsidiary ("Grinnell"), which was founded in 1850,
is the largest installer, manufacturer and supplier of automatic sprinkler and
fire protection and detection systems in North America. Wormald International
Limited ("Wormald") which was founded in 1889, operates as a major fire
protection company with contracting, manufacturing and distribution operations
throughout Western Europe and Asia-Pacific. The combination of Grinnell and
Wormald has resulted in creating the largest fire protection company in the
world, forming a network of over 200 offices on five continents.
Contracting
As the largest fire protection contractor in the world, the Company designs,
fabricates, installs and services automatic sprinkler and fire suppression
systems in buildings and other installations. Grinnell's fire protection
contracting business in North America operates through a network of offices
located in the United States, Canada, Mexico and Puerto Rico. Internationally,
the Company engages in fire protection contracting through a network of offices
in the United Kingdom, Ireland, France, Spain, Belgium, the Netherlands,
Germany, Italy, Austria, Switzerland, Denmark, Norway, Sweden, United Arab
Emirates, Saudi Arabia, Australia, New Zealand, Hong Kong, Singapore, Taiwan,
Malaysia, Thailand and Indonesia.
The Company installs fire protection systems in both new and existing
structures. Typically, the contracting businesses bid on contracts for fire
protection installation which are let by owners, architects, construction
engineers and mechanical or general contractors. In recent years, the business
of retrofitting existing buildings in the United States and Canada has grown as
a result of local and state legislation requiring installation of fire
protection systems and reduced insurance premiums available on structures with
automatic sprinkler systems. The retrofitting and servicing of fire protection
systems in existing buildings represented approximately 60% of Grinnell's North
American contracting sales in fiscal 1995.
A majority of the fire suppression systems installed by the Company are
water-based, but the Company is also the world's leader in providing custom
designed special hazard fire protection systems which incorporate various
specialized non-water agents such as foams, dry chemicals and gases. Systems
using agents other than water are suited for fire protection in certain
manufacturing, power generation, petrochemical, offshore oil exploration,
transportation, telecommunications, mining and marine applications. The Company
holds exclusive manufacturing and distribution rights in several regions of the
world for INERGEN(R) fire suppression products. INERGEN(R), an alternative to
the ozone depleting agent known as halon, consists of a mixture of three inert
gases designed to effectively extinguish fires without polluting the environment
or damaging costly equipment.
The Company also services, maintains, repairs and inspects fire suppression
systems installed by the Company and other contractors. In Australia, New
Zealand and Asia, the Company, through its O'Donnell Griffin division, also
engages in the installation of electrical wire and related electrical equipment
in new and existing structures and offers specialized electrical contracting
services in these markets including applications for railroad and bridge
construction.
Substantially all the mechanical components (and, in North America, most of
the pipe) used in the fire protection systems installed by the Company are
manufactured in the Company's own facilities.
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The Company also has fabrication plants worldwide that cut, thread and weld
pipe, which is then shipped with other prefabricated components to job sites for
installation. The Company also installs alarms, detection and activation devices
and centralized monitors. The Company has developed its own
computer-aided-design technology that reduces the time required to design
systems for specific applications and coordinates fabrication and delivery of
system components.
In its fire protection contracting business, the Company employs both
non-union and union employees in North America, Europe and Asia-Pacific. Many of
the union employees are employed on an hourly basis for particular jobs. In
North America, the largest number of union employees is represented by a number
of local unions affiliated with the United Association of Plumbers and
Pipefitters ("UAP"). During fiscal 1994, Grinnell's contracts with a number of
locals of the UAP were not renewed following lengthy negotiations. Employees in
those locations, representing 64% of those employees represented by the UAP
unions, went on strike. Grinnell has continued to operate with former union
members who have crossed over and with replacement workers. The labor action has
not had, and is not expected to have, any material adverse effect on Grinnell's
business or results of operations.
Generally, competition in the fire protection business varies by geographic
location. In North America, Grinnell competes with hundreds of smaller
contractors on a regional or local basis for the installation of fire
suppression and alarm and detection systems. Many of the regional and local
competitors employ non-union labor. In Europe, the Company competes with many
regional or local contractors on a country by country basis. In Australia, New
Zealand and Asia, the Company competes with a few large fire protection
contractors as well as with many smaller regional or local companies. The
Company competes for fire protection contracts primarily on the basis of price,
service and quality.
Manufacturing and Distribution
The Company manufactures most of the components used in its own fire
protection contracting business, as well as a variety of products for sale to
other fire protection contractors. In North America, the Company manufactures
pipe and pipe fittings, fire hydrants, sprinkler heads and substantially all of
the mechanical sprinkler components used in an automatic fire suppression
system. In the United Kingdom, France, Germany and Asia-Pacific, the Company
manufactures and sells sprinkler heads, specialty valves, fire doors and
electronic panels for use in fire detection systems. In Mexico, the Company
manufactures fire extinguishers, fire hose and related equipment.
At Ansul, Incorporated (Wisconsin) and Total Parsch (Mexico), the Company
manufactures and sells various lines of dry chemical, liquid and gaseous
portable fire extinguishers and related agents for industrial, government,
commercial and consumer applications. These operating units also manufacture and
sell special hazard fire suppression systems designed for use in restaurants,
earth moving equipment, marine applications, mining applications, the
petrochemical industry, confined industrial spaces and commercial spaces housing
delicate and electronic equipment. Ansul Incorporated also manufactures spill
control products designed to absorb, neutralize and solidify spills of various
hazardous materials.
Fire protection products are sold through the Company's flow control
products distribution network discussed in "Flow Control", below, and through
independent distributors.
Backlog
Fire protection contracting backlog amounted to $558 million at June 30,
1995 and $439 million at June 30, 1994. The increase in backlog is due to
increases in North America, Europe and Asia.
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FLOW CONTROL PRODUCTS
The Company is a manufacturer and distributor of flow control products in
North America, Europe and Asia-Pacific. Flow control products include pipe,
fittings, valves, meters and related products which are used to transport,
control and measure the flow of liquids and gases. Products are manufactured at
22 plants in North America, the United Kingdom, Germany and Switzerland, and
distributed through the Company's own worldwide distribution network and through
independent distributors. The Company's Flow Control Group includes Allied Tube
& Conduit Corporation ("Allied"), Mueller Co. ("Mueller") and Tyco's worldwide
flow control operations.
Manufacturing
In North America the Company manufactures and distributes a wide range of
flow control products, including pipe and pipe fittings, tubing, forged steel
fittings and valves, meters, couplings, pipe hangers, strut and related
components. These products are used in plumbing, heating, ventilation and air
conditioning (HVAC) systems, mechanical contracting, power generation, water and
gas utilities, oil and gas exploration, petrochemical and numerous other
industrial applications. The Company also manufactures certain related products
such as steel tubing, custom iron castings, malleable iron pipe fittings and
fencing materials. In Europe the Company manufactures Teflon lined specialty
valves for use in highly corrosive environments and specialty high performance
butterfly valves and ball valves that are used principally in the oil and gas,
chemical and processing industries.
Allied is the leading North American manufacturer of pipe and other tubular
products. Allied manufactures a full line of steel pipe for the fire protection
and construction industries and for commercial, residential and institutional
markets. Its mechanical tube division offers steel tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications.
Allied's fence division is a leader in the manufacture of products for the
residential and industrial/commercial fence market.
In 1995, the Company acquired Tectron Tube, a U.S. based manufacturer of
welded steel tubing for the automotive, furniture, bicycle and various other
markets. The Company also acquired Unistrut International Corp., a manufacturer
of metal framing systems used in the construction, industrial and OEM markets.
Mueller, a manufacturer of water and gas distribution products, manufactures
fire hydrants, iron butterfly and gate valves, service line brass valves and
fittings, gas valves and meter bars, water meters, backflow preventers and
related products for sale to independent distributors and, to a lesser extent,
directly to waterworks contractors, municipalities and gas companies throughout
the United States and Canada.
Distribution
The Company operates through a 49 branch distribution network for the sale
of flow control and fire protection products in North America. Three Regional
Distribution Centers ("RDC's") are strategically located in Georgia, Illinois
and California to support the branches' product needs and to ship directly to
customers. Each RDC stocks over 8,500 products. The Company also stocks and
sells products through various distribution centers in Europe, Australia, New
Zealand, the Middle East and Asia. In Europe, the Company distributes fire
protection products through warehouses located in the Netherlands, the United
Kingdom, Germany and France. Products are sold principally to distributors and
to fire protection contractors and in some instances to mechanical and
industrial contractors. In the Asia-Pacific region, the Company distributes fire
protection and flow control products through warehouses located in Australia,
New Zealand and Singapore. Products are sold directly to fire protection and
other contractors as well as to mechanical and industrial contractors and
independent distributors. Through the various distribution channels, the Company
offers its products to distributors and sprinkler contractors and, to a lesser
extent, mechanical and industrial contractors and original equipment
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manufacturers. While distribution patterns vary, most centers stock an extensive
line of valves, fittings, pipe and other products for fire protection systems,
components for HVAC installations and water and gas distribution, and
specialized valves and piping for the chemical, food and beverage processing
industries. Products manufactured by the Company accounted for approximately 77%
of its North American distribution sales in fiscal 1995.
Grinnell's North American distribution network competes with independent
manufacturers' representatives and other manufacturers and to a lesser extent
with local and regional supply houses, all of which carry lines of other
domestic or foreign manufacturers. Grinnell competes on the basis of price, the
breadth of its product line, delivery and quality. Grinnell competes for the
sale of gray iron pipe fittings, malleable iron fittings and other flow control
products and fire protection sprinklers and devices principally with other
domestic producers. Grinnell uses an internal sales force for the sale of
certain other iron castings sold direct to OEMs and other end users.
Allied competes for the sale of steel pipe, which is sold through Grinnell's
distribution network discussed above, with pipe from other domestic and foreign
producers. Competition for the sale of pipe is based on price, service and
breadth of product line. Fence and other specialized industrial tubing is sold
to wholesalers, original equipment manufacturers and other distributors.
Competition for the sale of fence products is principally from national and
regional domestic producers and to a lesser extent from foreign companies, on
the basis of price, service and distribution. The Company competes with many
small regional manufacturers for sales of specialized industrial tubing on the
basis of price and breadth of product line.
Mueller's water and natural gas distribution flow control products are sold
through independent distributors, and, to a lesser extent, directly to
utilities, municipalities and gas distribution companies. The Company competes
for the sale of these products on the basis of product quality, service, breadth
of product line and conformity with municipal codes and other engineering
standards. The Company competes with several other manufacturers in the United
States and Canada for the sale of iron and brass flow control devices for water
and natural gas distribution systems.
Backlog
Backlog of the Flow Control group amounted to $82 million at June 30, 1995
and $58 million at June 30, 1994.
ELECTRICAL AND ELECTRONIC COMPONENTS
The Company's electrical and electronic components group consists of Simplex
Technologies, Inc. ("Simplex"), the Company's Printed Circuit Group and Allied's
Electrical Conduit division. Simplex manufacturers underwater communications
cable and cable assemblies. The Printed Circuit Group manufactures printed
circuit boards and assembles backplanes for the electronics industry. Allied
manufactures and distributes electrical conduit and related components used in
commercial electrical installations.
Simplex
Simplex is the largest U.S. manufacturer of undersea fiber optic
telecommunications cables. Simplex also manufacturers cable and cable assemblies
for the U.S. Navy, underwater electric power cable for use by power authorities
and utilities, and electro-mechanical cable for unique field applications.
Simplex's principal customer is AT&T, which accounted for approximately 86% of
its revenues in fiscal 1995.
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Under a multi-year engineering development program, Simplex and AT&T Bell
Laboratories, Inc. have developed a proprietary encapsulation process for AT&T
supplied optic fibers used in underwater telecommunications cables. Simplex
manufactures the cable and performs system assembly and has proprietary rights
to the encapsulation process. From 1986 through June 30, 1995, Simplex
manufactured in excess of 100,000 kilometers of undersea optical cable deployed
by AT&T. In fiscal 1995 Simplex delivered the first of a new generation of high
capacity undersea systems. These systems have enhanced operating capabilities
including much greater data rates, increased capacity and a new fiber design.
Simplex's encapsulation and systems' assembly and testing processes are being
adapted to incorporate the new requirements.
For more than thirty years, Simplex has been the primary supplier of cable
and cable assemblies to the U.S. Navy for use in data-gathering systems. Cable
for U.S. Navy systems is manufactured under various types of contracts including
cost-plus-incentive fee, time and material and fixed-price.
Simplex, usually in conjunction with AT&T, competes on a worldwide basis
primarily against two other entities: Alcatel-Alsthom, located in France along
with its subsidiary, Standard Telephone Co. ("STC"), located in England; and
KDD, located in Japan. Alcatel/STC is vertically integrated and produces its own
cable, whereas AT&T utilizes Simplex in the manufacture of its underwater cable
and KDD utilizes a Japanese cable manufacturer.
Simplex owns a special-purpose 500,000 square foot manufacturing facility on
a deep river site in New Hampshire, with direct access to the Atlantic Ocean.
Simplex's backlog was approximately $336 million at June 30, 1995 and $191
million at June 30, 1994. Simplex normally sells cable under long-term
multi-million dollar contracts, and the amount of its backlog as of any date is
affected by contract issuance for major systems and by timing of completion of
such underwater communications cable systems. During the first quarter of fiscal
1995, Simplex received a $250 million order extension on a multi-year contract.
Printed Circuit Group
Tyco's Printed Circuit Group of companies (the "Group") is one of the
largest independent manufacturers of multi-layered printed circuit boards and
assemblers of backplanes in the United States. Printed circuit boards are used
in the electronics industry to mount and interconnect components to create
electronic systems. They are categorized by the number of sides or layers that
contain circuitry, which could be single-sided, double-sided or multi-layer. In
general, single and double-sided boards are less advanced. Multi-layer boards
provide greater interconnection density while decreasing the number of separate
printed circuit boards which are required to accommodate powerful and
sophisticated components. Backplanes include printed circuit boards and are
assemblies of connectors and other electronic components which distribute power
and interconnect printed circuit boards, power supplies and other system
elements.
The Group manufactures highly sophisticated double-sided, mass molded boards
of up to eight layers, precision tooled, custom laminated multi-layer boards of
up to 28 layers and sophisticated flex-rigid circuit boards for use in
environmentally demanding conditions. The majority of the Group's sales are
derived from its high-density multi-layer boards. The Company's backplanes
facility produces fully assembled units utilizing press-fit or soldered
connection technology, custom pin grid array sockets and surface mounted
assembly. The printed circuit boards and backplanes manufactured by the Company
are designed by customers and are manufactured on a job order basis to the
customers' specifications. Backplane sales, inclusive of board content, were 39%
of the Group's sales in fiscal 1995.
The Group markets its products mainly through independent manufacturers'
representatives and to a lesser extent through its own internal sales
organization. The Group's customers are generally original equipment
manufacturers in the telecommunications, aircraft, computer, military and other
industrial and consumer electronics industries. The Company competes with
several large companies
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which manufacture less complex single-sided and double-sided printed circuit
boards in the United States, as well as with many companies that have their own
in-house manufacturing capabilities. The Company believes that far fewer
competitors manufacture the more complex, high-density double-sided and
multi-layer boards. The Group competes on the basis of quality, price,
reliability and timeliness of delivery.
As a manufacturer of sophisticated products at the high technological end of
the market, the Company invests as required in state-of-the-art manufacturing
equipment. The Group uses computer-aided-design equipment, numerically
controlled drilling machines and routers, automated gold plating, computerized
electrical testing and automated optical inspection in its manufacturing
operations.
The Group backlog amounted to $13 million at June 30, 1995 and $14 million
at June 30, 1994.
Allied
Allied's electrical conduit division is one of the leading producers of
steel electrical conduit in the United States. Electrical conduit is galvanized
steel tubing designed to contain current-carrying electrical wires both inside
and outside building structures. Steel conduit also serves as an electrical
ground which ensures proper operation of circuit interruptors and provides a
channel into which additional wires can be inserted or removed as electrical
needs change. The division manufactures a full line of electrical conduit at
plants in Illinois and Pennsylvania. The division also manufactures metal
framing and other products at a plant in Michigan.
The division's electrical conduit and related products are sold to wholesale
electrical distributors through Allied's distribution facilities by an internal
sales force and a network of commissioned sales agents. The division competes
for the sale of electrical products primarily with several other large domestic
manufacturers. Competition in the electrical conduit industry is primarily based
upon price, quality, delivery and breadth of product line.
Allied's electrical backlog amounted to $3 million at June 30, 1995 and $8
million at June 30, 1994.
SALES AND BACKLOG
At June 30, 1995, the Company had a backlog of unfilled orders of
approximately $1,048 million, compared to a backlog of approximately $763
million as of June 30, 1994. The increased backlog at June 30, 1995 is due to
increases in each of the Companys business segments, most notably at Simplex,
worldwide Fire Protection and Allied. The Company expects that approximately 78%
of its backlog at June 30, 1995 will be filled during the year ending June 30,
1996.
Backlog by industry segment is as follows (in millions of dollars):
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Disposable and Specialty Products................................. $ 56 $ 53
Fire Protection................................................... 558 439
Flow Control Products............................................. 82 58
Electrical and Electronic Components.............................. 352 213
------------- -----
$ 1,048 $ 763
------------- -----
------------- -----
</TABLE>
Sales to agencies of the United States government or for governmental use
have not been significant for the Company.
9
<PAGE>
PROPERTIES
The Company owns approximately 13.5 million square feet and leases
approximately 9.1 million square feet of floor space. These facilities house
manufacturing and warehousing operations as well as sales, engineering and
administrative offices.
A summary of floor space used by industry segment follows (in millions of
square feet):
<TABLE>
<CAPTION>
OWNED LEASED TOTAL
----- ------ -----
<S> <C> <C> <C>
Disposable and Specialty Products...................................... 2.7 2.7 5.4
Fire Protection........................................................ 3.1 3.8 6.9
Flow Control Products.................................................. 6.4 2.5 8.9
Electrical and Electronic Components................................... 1.3 .1 1.4
--
----- -----
13.5 9.1 22.6
----- -- -----
----- -- -----
</TABLE>
In the opinion of management, the Company's properties and equipment
generally are in good operating condition and are adequate for its present
needs. The Company does not anticipate difficulty in renewing existing leases as
they expire or in finding alternative facilities. See Notes to Consolidated
Financial Statements for a description of the Company's rental obligations. The
locations of the Company's principal manufacturing facilities are included in
the discussion of each business in Item 1.
RESEARCH AND DEVELOPMENT
The amounts expended for research and development during each of the three
years in the period ended June 30, 1995 were as follows (in millions of
dollars):
<TABLE>
<CAPTION>
COMPANY CUSTOMER
FISCAL YEAR SPONSORED FUNDED TOTAL
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
1995 $32.0 $1.4 $33.4
1994 $31.7 $0.5 $32.2
1993 $29.4 $0.9 $30.3
</TABLE>
Approximately 325 full-time scientists, engineers and other technical
personnel are engaged in product research and development activities.
Research activity in fire protection and flow control products is related to
improvements in hydraulic design which controls the motion of fluids resulting
in new flow control products and sprinkler devices. Major activity at Simplex
involves the continuing development of the encapsulation process for underwater
fiber optic cable with AT&T Bell Laboratories, Inc. Activity at Ludlow involves
new product applications while Allied and the Printed Circuit Group are
principally involved with process development. Kendall focuses on acquiring
rights to new products and technologies to complement existing product lines and
applying expertise to refine and successfully commercialize such products and
technologies.
RAW MATERIALS
The Company is one of the largest buyers of steel in the United States.
Other principal materials include scrap iron of various types and grades,
copper, brass, plastic, polyethylene resin and film, polypropylene, electronic
components, chemicals and additives, thin and flexible copper clad materials,
paper, ink, foil, adhesives, cloth, wax, cotton and latex. A portion of Fire
Protection and Flow Control Products' materials, principally certain valves and
fittings, are purchased for distribution or for installation in fire protection
systems. Materials are purchased both in the United States and abroad from a
large number of independent sources. There have been no shortages in materials
which have had a material adverse effect on the Company's business.
10
<PAGE>
PATENTS
The Company owns a number of patents (principally relating to cable
manufacture, pipe and tubing manufacture, flow control products, fire protection
devices, healthcare and specialty products) and trademarks, and is a licensee
under a number of patents. In addition, Kendall sells certain products under
tradenames owned by its suppliers and packages certain products under customer
trademarks and labels. Although these have been of value and are expected to
continue to be of value in the future, in the opinion of management, the loss of
any single patent or group of patents would not materially affect the conduct of
the business in any of the Company's segments. The patents and licenses have
remaining lives of from one to seventeen years.
EMPLOYEES
The Company employed approximately 34,000 persons at June 30, 1995 of whom
approximately 9,200 were employed outside of North America. The Company has
collective bargaining agreements with labor unions covering approximately 5,600
employees at certain of its Grinnell, Mueller, Allied, Ludlow, Kendall and Armin
operations and 4,000 employees in its European and Asia-Pacific businesses. The
Company believes that while its relations with the labor unions and with its
employees are generally satisfactory, a number of local unions affiliated with
the UAP, representing 64% of Grinnell Fire Protection North American union
employees, are on strike. See discussion under "Fire Protection" above.
ENVIRONMENTAL MATTERS
Tyco makes a substantial effort to operate its facilities in compliance with
federal, state and local laws relating to the protection of the environment.
Compliance in any fiscal year has not had and is not expected to have a material
adverse effect upon the capital expenditures, earnings or competitive position
of the Company.
The Company believes that, consistent with applicable laws and regulations,
it exercises due care and takes appropriate precautions in the management of
wastes. The Company has received notification from the U.S. Environmental
Protection Agency and certain state environmental agencies that conditions at a
number of sites where hazardous wastes were disposed of by the Company and other
persons require cleanup and other possible remedial action.
The Company also has a number of projects underway at several of its
manufacturing facilities in order to comply with environmental laws. In
addition, the Company remains responsible for certain environmental issues at
manufacturing locations sold by the Company. These projects relate to a variety
of activities, including solvent and metal contamination clean up, oil spill
containage and clean up, containment area upgrades, feasibility studies and
equipment upgrades and replacement. These projects, certain of which are
voluntary and certain of which are required under applicable law, involve both
remediation expenses and capital improvements.
The ultimate cost of site cleanup is difficult to predict given the
uncertainties regarding the extent of the required cleanup, the interpretation
of applicable laws and regulations and alternative cleanup methods. Based upon
the Company's experience with the foregoing environmental matters, the Company
has concluded that there is at least a reasonable possibility that remedial
costs will be incurred with respect to these issues in the aggregate amount in a
range of $13 million to $48 million. At June 30, 1995 the Company has concluded
that the most probable amount which will be incurred within this range is $24
million and such amount is included in the caption "accrued expenses" in the
accompanying consolidated balance sheet. Based upon information available to the
Company, at those sites where there has been an allocation of the share of
cleanup and such liability could be joint and several, management believes it is
probable that other responsible parties will fully pay the cost apportioned to
them, except with respect to one site for which the Company has assumed that one
of the identified
11
<PAGE>
responsible parties will be unable to pay the cost apportioned to it and that
such party's cost will be reapportioned among the remaining responsible parties.
In view of the Company's financial position and reserves for environmental
matters of $24 million, the Company has concluded that its payment of such
estimated amounts will not have a material adverse effect on its consolidated
financial position or results of operations.
ITEM 2. PROPERTIES
See "Business--Properties" for information relating to Tyco's owned and
leased property.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
See also the discussion under Item 1--Environmental Matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
L. Dennis Kozlowski, age 48, Chairman of the Board since January 1993, Chief
Executive Officer since July 1992 and President and Chief Operating Officer of
Tyco since December 1989; President of Grinnell Corporation since 1984;
President of Ludlow Corporation from 1981 to 1984 and has been associated with
the Company since 1975.
David P. Brownell, age 51, Vice President since May 1993, Executive Vice
President of Grinnell Flow Control Division from 1991 to May 1993, Executive
Vice President of Grinnell Supply Sales from 1989 to 1991, Vice
President--Marketing of Grinnell Corporation from 1988 to 1989 and Regional Vice
President of Grinnell Fire Protection Systems from 1986 to 1988. Mr. Brownell
has been associated with the Company since 1984.
John J. Guarnieri, age 45, Vice President--Corporate Controller since May
1993. Mr. Guarnieri was Corporate Controller of Tyco from 1991 to 1993 and
Corporate Controller of Grinnell Corporation from 1988 to 1991. Mr. Guarnieri
has been associated with the Company since 1982.
Robert P. Mead, age 44, Vice President since August 1993, President of the
Flow Control Division of Grinnell Corporation since May 1993, Executive Vice
President of Allied Tube and Conduit Corp. from July 1992 to May 1993, Managing
Director of Asia-Pacific region from April 1991 to July 1992, Executive Vice
President--Manufacturing Division of Grinnell Corporation from January 1989 to
April 1991, Vice President--Finance of Grinnell Corporation from February 1985
to January 1989. Mr. Mead has been associated with the Company since 1973.
Barbara S. Miller, age 46, Treasurer since May 1993 and associated with the
Company since 1989 as Assistant Corporate Controller. Ms. Miller was a Senior
Manager with Price Waterhouse prior to 1989.
Robert F. Sharpe, Jr., age 43, Vice President since June 1994, Vice
President, Secretary and Assistant General Counsel of RJR Nabisco Holdings Corp.
from 1989 to 1994.
Mark H. Swartz, age 35, Vice President--Chief Financial Officer since
February 1995, Director of Mergers and Acquisitions from 1993 to 1995 and
Assistant Corporate Controller from 1991 to 1993. Mr. Swartz was a Senior
Manager with Deloitte & Touche prior to 1991.
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The approximate number of registered holders of the Company's common stock
at September 1, 1995 was 6,100.
The Company's Common Stock is listed on the New York Stock Exchange. The
quarterly high and low sales prices of the Common Stock and the quarterly
dividends per share declared on the Common Stock were as follows:
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1994
------------------------------------------ -------------------------------------------
MARKET PRICE RANGE MARKET PRICE RANGE
------------------------------------------ -------------------------------------------
DIVIDEND DIVIDEND
QUARTER HIGH LOW PER SHARE HIGH LOW PER SHARE
----------------------------- ------------- ------------ --------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
First........................ $ 48 3/8 42 1/2 $ .10 $ 46 7/8 $ 38 3/4 $ .10
Second....................... 50 1/8 43 5/8 .10 51 3/4 41 1/2 .10
Third........................ 53 5/8 46 1/2 .10 55 1/4 48 7/8 .10
Fourth....................... 58 1/4 51 .10 50 1/8 44 .10
--- ---
$ .40 $ .40
--- ---
--- ---
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of the Company for the five years in the period ended June 30, 1995. This
selected financial information should be read in conjunction with the Company's
consolidated financial statements and related notes appearing on pages 21 to 41
of this Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
------------------------------------------------------------------
1995(2) 1994 1993(3)(4) 1992(5) 1991(6)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Income Data:
Sales........................ $4,534,651 $4,076,383 $3,919,357 $3,066,485 $3,107,891
Income before extraordinary
item and cumulative effect
of accounting changes.......... $ 216,593 $ 189,191 $ 94,458 $ 95,266 $ 117,485
Net income................... $ 213,993 $ 189,191 $ 20,602 $ 95,266 $ 117,485
Income Per Share:
Before extraordinary item and
cumulative effect of
accounting changes............. $ 2.87 $ 2.56 $ 1.30 $ 2.06 $ 2.57
Extraordinary item........... (.03) -- (.04) -- --
Cumulative effect of
accounting changes............. -- -- (.98) -- --
---------- ---------- ---------- ---------- ----------
Net Income................... $ 2.83 $ 2.56 $ .28 $ 2.06 $ 2.57
Cash Dividends Per Common
Share.......................... $ .40 $ .40 $ .38 $ .36 $ .35
Consolidated Balance Sheet
Data:
Working capital.............. $ 367,186 $ 329,918 $ 341,154 $ 274,278 $ 252,021
Total assets................. $3,381,461 $3,144,598 $3,164,966 $2,451,537 $2,392,966
Long-term debt............... $ 506,417 $ 588,491 $ 812,585 $ 534,951 $ 609,255
Shareholders' equity......... $1,634,681 $1,367,026 $1,138,786 $1,040,551 $ 905,151
</TABLE>
(Footnotes on following page)
13
<PAGE>
(Footnotes for preceding page)
------------
(1) The selected financial data reflects the combined results of operations and
financial position of Tyco and Kendall for all periods subsequent to June
30, 1992. The selected financial data at and for the years ended June 30,
1992 and 1991 reflect only the results of operations and financial position
of Tyco. (See Note 1 to the Consolidated Financial Statements).
(2) Fiscal 1995 results include a charge of $31.2 million after-tax for fees and
expenses related to the merger and integration of the combined companies,
and an extraordinary item of $2.6 million after-tax resulting from the early
extinguishment of $100 million of Kendall debt. (See Notes 2 and 5 to the
Consolidated Financial Statements).
(3) Effective July 1, 1992 the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 109 "Accounting for Income Taxes"
and SFAS 106 "Employers' Accounting for Post-Retirement Benefits Other Than
Pensions." Kendall adopted SFAS 109 and SFAS 106 effective with the Kendall
Restructuring (See Note 1 to the Consolidated Financial Statements) and,
accordingly, there is no cumulative effect reflected in the Consolidated
Financial Statements.
(4) Fiscal 1993 included restructuring and severance charges of $27.3 million
after-tax, a non-recurring inventory charge of $22.5 million before and
after-tax, a reduction in tax expense of $6.7 million attributable to
revisions in previous tax estimates, incremental income tax expense due to
tax rate changes of $7.8 million and a special pension charge of $1.2
million after-tax.
(5) Fiscal 1992 included restructuring and severance charges of $14.9 million
after-tax and a reduction in tax expense of $16.9 million attributable to
revisions in previous tax estimates in previous tax estimates.
(6) Fiscal 1991 included the results of operations of Wormald from the date of
its acquisition, August 2, 1990.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OPERATING RESULTS
Management's Discussion and Analysis of Financial Condition and Operating
Results appears on pages 42 to 46 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and schedules are filed as part of this
Annual Report:
Financial Statements:
Reports of Independent Accountants
Consolidated Balance Sheets--June 30, 1995 and 1994
Consolidated Statements of Income for each of the three years in the
period ended June 30, 1995
Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended June 30, 1995
Consolidated Statements of Cash Flows for each of the three years in the
period ended June 30, 1995
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Reports of Independent Accountants on Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
All other financial statements and schedules have been omitted since the
information required to be submitted has been included in the financial
statements and related notes or because they are either not applicable or not
required under the rules of Regulation S-X.
See Notes to Consolidated Financial Statements for Summarized Quarterly
Financial Data (unaudited).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Directors of the Registrant is hereby
incorporated by reference to the Registrant's definitive proxy statement which
will be filed with the Commission within 120 days after the close of the fiscal
year.
ITEM 11. MANAGEMENT REMUNERATION
Information concerning management remuneration is hereby incorporated by
reference to the Registrant's definitive proxy statement which will be filed
with the Commission within 120 days after the close of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference to the Registrant's definitive
proxy statement which will be filed with the Commission within 120 days after
the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
hereby incorporated by reference to the Registrant's definitive proxy statement
which will be filed with the Commission within 120 days after the close of the
fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
(a) (1) and (2) Financial Statements and Schedules--see Item 8.
(a) (3) Listing of Exhibits.
(3) Articles of Organization and Bylaws.
i) Articles of Organization. (Incorporated by reference to Form
10-K for the year ended May 31, 1987.)
ii) Bylaws. (Incorporated by reference to Form 10-K for the year
ended June 30, 1991.)
(4) Instruments defining the rights of security holders, including
indentures.
a) Rights of common shareholders and preferred shareholders are
defined in the Articles of Organization.
b) Action to Elect to Opt-Out of Requirement for Staggered Board
of Directors Terms. (Incorporated by reference to Form 10-K
for the year ended June 30, 1991.)
c) Indenture dated April 30, 1992 between Tyco Laboratories, Inc.
and Security Pacific National Trust Company (New York).
(Incorporated by reference to Form 10-Q for the period ended
March 31, 1992.)
d) First Supplemental Indenture dated April 30, 1992 between Tyco
Laboratories, Inc. and Security Pacific National Trust Company
(New York). (Incorporated by reference to Form 10-Q for the
period ended March 31, 1992.)
15
<PAGE>
e) Second Supplemental Indenture, dated as of March 8, 1993,
between Tyco Laboratories, Inc. and BankAmerica National Trust
Company, as Trustee. (Incorporated by reference to Form 8-K
filed on March 8, 1993.)
(10) Material Contracts.
Purchase Agreement dated May 28, 1990, as amended, for the purchase of
substantially all the fire protection systems and related businesses conducted
by Wormald International Limited. (Incorporated by reference to Form 8-K dated
August 17, 1990.)
Credit Agreement dated July 22, 1993. (Incorporated by reference to Form
10-K for the year ended June 30, 1993.)
1983 Restricted Stock Ownership Plan for Key Employees. (Incorporated by
reference to Shareholders' Proxy Statement for Annual Meeting of Shareholders on
October 18, 1983.)
1978 Restricted Stock Ownership Plan for Key Employees. (Incorporated by
reference to Shareholders' Proxy Statement for Annual Meeting of Shareholders on
November 21, 1978.)
1983 Key Employee Loan Program. (Incorporated by reference to Form 10-K for
the year ended May 31, 1983.)
1981 Key Employee Loan Program. (Incorporated by reference to Form 10-K for
the year ended May 31, 1982.)
1994 Restricted Stock Ownership Plan for Key Employees. (Incorportated by
reference to Shareholders' Proxy Statement for Annual Meeting of Shareholders on
October 19, 1994.)
1983 Key Employee Loan Program, as amended December 9, 1993 (Incorporated by
reference to Form 10-K for the year ended June 30, 1994.)
Tyco Incentive Compensation Plan. (Incorporated by reference to Form 10-K
for the year ended June 30, 1994.)
Agreement and Plan of Merger, dated as of July 13, 1994, by and among the
Company, T Acquisition Corp. and Kendall International, Inc. (Incorporated by
reference to Form 8-K filed July 26, 1994).
Credit Agreement dated October 17, 1994 (Incorporated by reference to Form
10-Q for the quarter ended September 30, 1994).
Tyco International Ltd. Supplemental Executive Retirement Plan (Filed
herewith).
(11) Earnings Per Share Computation. (Filed herewith.)
(12) Ratio of Earnings to Fixed Charges. (Filed herewith.)
(21) Subsidiaries of the registrant. (Filed herewith.)
(23)(A) Consent of Coopers & Lybrand L.L.P. (Filed herewith.)
(23)(B) Consent of Price Waterhouse LLP (Filed herewith).
(27) Financial Data Schedule (Filed herewith.)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the last quarter of
fiscal 1995.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TYCO INTERNATIONAL LTD.
By /s/ MARK H. SWARTZ
...................................
Mark H. Swartz
Vice President--Chief Financial
Officer
(Principal Financial and Accounting
Officer)
Date: September 20, 1995
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------------------------------- ----------------------------------- ------------------
<S> <C> <C>
/s/ L. DENNIS KOZLOWSKI Chairman of the Board, Chief
................................... Executive Officer, President and
L. Dennis Kozlowski Director (Principal Executive
Officer)
/s/ JOSHUA M. BERMAN Director
...................................
Joshua M. Berman
/s/ RICHARD S. BODMAN Director
...................................
Richard S. Bodman
/s/ JOHN F. FORT Director
................................... September 20, 1995
John F. Fort
/s/ STEPHEN W. FOSS Director
...................................
Stephen W. Foss
/s/ RICHARD A. GILLELAND Director
...................................
Richard A. Gilleland
/s/ PHILIP M. HAMPTON Director
...................................
Philip M. Hampton
/s/ MARK H. SWARTZ Vice President--Chief Financial
................................... Officer
Mark H. Swartz
/s/ FRANK E. WALSH, JR. Director
...................................
Frank E. Walsh, Jr.
</TABLE>
17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
TYCO INTERNATIONAL LTD.
We have audited the consolidated balance sheets of Tyco International Ltd.
as of June 30, 1995 and 1994 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the two years in the period
ended June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tyco
International Ltd. at June 30, 1995 and 1994, and the consolidated results of
operations and cash flows for each of the two years in the period ended June 30,
1995, in conformity with generally accepted accounting principles.
The financial statements give retroactive effect to the merger of Tyco
International Ltd. and Kendall International, Inc. on October 19, 1994, which
has been accounted for as a pooling of interests as described in Note 2 to the
consolidated financial statements. We have audited the consolidated statements
of income and cash flows of Kendall International, Inc. and subsidiaries for the
year ended June 30, 1993, prior to their restatement for the 1994 pooling of
interests. The contribution of Kendall International, Inc. and subsidiaries to
total revenues and net income before cumulative effect of accounting changes
represented 21 percent and 21 percent of the respective restated totals.
Separate financial statements of Tyco International Ltd. included in the 1993
restated consolidated statements of income and cash flows were audited and
reported on separately by other auditors. We also audited the combination of the
accompanying consolidated statements of income and cash flows for the year ended
June 30, 1993, after restatement for the 1994 pooling of interests; in our
opinion, such consolidated statements have been properly combined on the basis
described in Note 1 of notes to consolidated financial statements.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 1, 1995
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
TYCO INTERNATIONAL LTD.
formerly Tyco Laboratories, Inc.
In our opinion, the consolidated statements of income, of cash flows and of
changes in stockholders' equity of Tyco International Ltd., formerly Tyco
Laboratories, Inc., and its subsidiaries (not presented separately herein)
present fairly, in all material respects, the results of their operations and
their cash flows for the year ended June 30, 1993 (prior to the retroactive
restatement to account for the pooling of interests), in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Tyco International Ltd. for any period
subsequent to June 30, 1993.
As discussed in Notes 1, 8 and 12, the Company changed its method of
accounting for income taxes and for post-retirement benefits other than pensions
in fiscal 1993.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 3, 1993
20
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT JUNE 30,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
(IN THOUSANDS, EXCEPT SHARE
DATA)
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 66,021 $ 75,843
Receivables, less allowance for doubtful accounts of $29,554
in 1995 and $29,311 in 1994................................. 527,946 515,160
Contracts in process.......................................... 104,526 79,475
Inventories................................................... 592,158 517,068
Deferred income taxes......................................... 108,118 105,614
Prepaid expenses.............................................. 53,132 54,904
---------- ----------
1,451,901 1,348,064
---------- ----------
Property, Plant and Equipment, Net.............................. 658,471 609,873
Goodwill and Other Intangible Assets............................ 1,004,463 918,791
Reorganization Value in Excess of Identifiable Assets........... 108,801 115,201
Deferred Income Taxes........................................... 101,678 112,691
Other Assets.................................................... 56,147 39,978
---------- ----------
Total Assets.............................................. $3,381,461 $3,144,598
---------- ----------
---------- ----------
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt........ $ 84,387 $ 163,164
Accounts payable.............................................. 417,395 332,004
Accrued expenses.............................................. 423,387 382,576
Contracts in process--billings in excess of costs............. 75,546 63,324
Income taxes.................................................. 72,370 73,301
Deferred income taxes......................................... 11,630 3,777
---------- ----------
1,084,715 1,018,146
---------- ----------
Deferred Income Taxes........................................... 9,599 13,698
Long-Term Debt.................................................. 506,417 588,491
Other Liabilities............................................... 146,049 157,237
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 76,365,001 shares in 1995 and 71,084,293 shares
in 1994, net of reacquired shares of 7,960,740 in 1995 and
7,600,747 in 1994............................................... 38,183 35,542
Capital in excess of par value, net of deferred compensation
of $21,636 in 1995 and $9,318 in 1994....................... 620,633 567,476
Currency translation adjustment............................... (9,451) (40,874)
Retained earnings............................................. 985,316 804,882
---------- ----------
1,634,681 1,367,026
---------- ----------
Total Liabilities and Shareholders' Equity................ $3,381,461 $3,144,598
---------- ----------
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
SALES.................................................. $4,534,651 $4,076,383 $3,919,357
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales........................................ 3,313,301 3,003,194 2,909,947
Nonrecurring inventory charge........................ -- -- 22,485
Selling, general and administrative.................. 735,917 682,568 682,520
Merger and transaction related costs................. 37,170 -- --
Restructuring and severance charges.................. -- -- 39,325
Interest............................................. 63,385 62,431 85,785
---------- ---------- ----------
4,149,773 3,748,193 3,740,062
---------- ---------- ----------
Income before income taxes, extraordinary item and
cumulative effect of accounting changes.............. 384,878 328,190 179,295
Income taxes........................................... 168,285 138,999 84,837
---------- ---------- ----------
Income before extraordinary item and cumulative effect
of accounting changes................................ 216,593 189,191 94,458
Extraordinary item, net of taxes....................... (2,600) -- (2,816)
---------- ---------- ----------
Income before cumulative effect of accounting
changes.............................................. 213,993 189,191 91,642
Cumulative effect of accounting changes................ -- -- (71,040)
---------- ---------- ----------
Net Income............................................. $ 213,993 $ 189,191 $ 20,602
---------- ---------- ----------
---------- ---------- ----------
INCOME PER SHARE:
Before extraordinary item and cumulative effect of
accounting changes................................. $ 2.87 $ 2.56 $ 1.30
Extraordinary item................................... (.03) -- (.04)
Cumulative effect of accounting changes.............. -- -- (.98)
---------- ---------- ----------
Net Income............................................. $ 2.83 $ 2.56 $ .28
---------- ---------- ----------
---------- ---------- ----------
Common equivalent shares............................... 75,509 73,770 72,316
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED JUNE 30, 1995
----------------------------------------------------
COMMON CAPITAL IN CURRENCY
STOCK, $.50 EXCESS OF TRANSLATION RETAINED
PAR VALUE PAR VALUE ADJUSTMENT EARNINGS
----------- ---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at June 30, 1992......................... $23,503 $ 377,634 $ 7,735 $631,679
Effect of Kendall Merger....................... 12,301 190,077
Net income..................................... 20,602
Dividends...................................... (18,052)
Management equity compensation................. 2,126
Restricted stock grants, cancellations, tax
benefits and other........................... (82) 3,015
Purchase of treasury stock..................... (260) (16,705)
Currency translation adjustment................ (97,121)
Amortization of deferred compensation.......... 2,334
----------- ---------- ----------- --------
Balance at June 30, 1993......................... 35,462 558,481 (89,386) 634,229
Net income..................................... 189,191
Dividends...................................... (18,538)
Management equity compensation................. 1,273
Restricted stock grants, cancellations, tax
benefits and other........................... 15 2,409
Warrants, options exercised.................... 65 2,215
Purchase of warrant............................ (600)
Currency translation adjustment................ 48,512
Amortization of deferred compensation.......... 3,698
----------- ---------- ----------- --------
Balance at June 30, 1994......................... 35,542 567,476 (40,874) 804,882
Net income..................................... 213,993
Dividends...................................... (27,462)
Restricted stock grants, cancellations, tax
benefits and other........................... 844 16,766
Warrants, options exercised.................... 1,975 47,272
Purchase of treasury stock..................... (178) (19,139)
Currency translation adjustment................ 31,423
Minimum pension liability adjustment........... (6,097)
Amortization of deferred compensation.......... 8,258
----------- ---------- ----------- --------
Balance at June 30, 1995......................... $38,183 $ 620,633 $(9,451) $985,316
----------- ---------- ----------- --------
----------- ---------- ----------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $213,993 $189,191 $ 20,602
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary item........................................ 2,600 -- 2,816
Cumulative effect of accounting changes................... -- -- 71,040
Depreciation.............................................. 88,106 83,027 79,076
Amortization of intangibles............................... 45,056 41,853 49,273
Provision for management equity plans..................... -- 6,325 7,256
Non-recurring inventory charge............................ -- -- 22,485
Deferred income taxes..................................... 21,019 31,459 (2,547)
Provision for losses on accounts receivable and inventory
writedowns.............................................. 14,819 14,823 12,663
Changes in assets and liabilities net of effects from
acquisitions:
Decrease (increase) in accounts receivable.............. 27,819 108,847 (28,040)
(Increase) decrease in contracts in process............. (9,368) 12,471 (8,016)
(Increase) decrease in inventory........................ (51,396) (11,766) 1,204
Increase (decrease) in accounts payable and accrued
expenses.............................................. 36,987 (26,189) 47,277
(Decrease) increase in income taxes payable............. (43) 15,389 (3,588)
Other, net.............................................. 7,029 26,998 8,543
-------- -------- --------
Net cash provided by operating activities................. 396,621 492,428 280,044
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................ (119,048) (89,802) (94,399)
Purchases of businesses, net of cash acquired............... (130,256) (72,640) (72,008)
Proceeds from sales of acquired assets...................... -- 18,054 --
-------- -------- --------
Net cash used in investing activities..................... (249,304) (144,388) (166,407)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt................................ 144,889 104,628 49,955
Payments on long-term debt and lines of credit.............. (307,623) (409,692) (126,960)
Purchase of treasury stock and warrant...................... (19,317) (600) (16,965)
Dividends paid.............................................. (24,335) (18,510) (17,640)
Financial restructuring and financing fees paid............. -- (344) (5,631)
Issuance of stock and warrants.............................. 49,247 2,280 --
-------- -------- --------
Net cash used in financing activities..................... (157,139) (322,238) (117,241)
-------- -------- --------
Net change in cash and cash equivalents..................... (9,822) 25,802 (3,604)
Cash and cash equivalents at beginning of year.............. 75,843 50,041 32,135
Kendall cash and cash equivalents at beginning of year...... -- -- 21,510
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 66,021 $ 75,843 $ 50,041
-------- -------- --------
-------- -------- --------
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Interest paid............................................... $ 64,638 $ 69,053 $ 82,952
-------- -------- --------
-------- -------- --------
Income taxes paid (net of refunds).......................... $ 97,025 $ 73,751 $ 55,112
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The consolidated financial statements include the
accounts of Tyco International Ltd. ("Tyco" or the "Company") and its
subsidiaries. As described more fully in Note 2, on October 19, 1994 a wholly
owned subsidiary of Tyco merged with Kendall International, Inc. ("Kendall").
These consolidated financial statments have been prepared following the pooling
of interests method of accounting and reflect the combined financial position,
operating results and cash flows of Tyco and Kendall as if they had been
combined for all periods presented.
During the first half of calendar 1992, Kendall undertook a financial
restructuring (the "Restructuring") which reduced its debt and associated
interest expense to a level supportable by its operations. The Restructuring was
consummated through a prepackaged plan of reorganization under Chapter 11 of the
U.S. Bankruptcy Code. For accounting purposes, the Restructuring was effective
as of June 30, 1992, the date Kendall adopted "fresh-start" accounting pursuant
to the American Institute of Certified Public Accountants Statement of Position
No. 90-7 ("SOP 90-7"). As of that date, Kendall's assets and liabilities were
adjusted to their reorganization or fair market values, and a new reporting
entity was created with no retained earnings or accumulated deficit.
Cash equivalents--All highly liquid investments purchased with a maturity of
three months or less are considered to be cash equivalents.
Inventories and Contracts--Inventories are recorded at the lower of cost
(first-in, first-out) or market. The non-recurring inventory charge reflected in
the accompanying consolidated statement of income for the year ended June 30,
1993 represents the cost of sales impact of the inventory write-up required by
the asset valuation requirements of fresh-start reporting at Kendall.
Contract sales for installation of fire protection systems and other
construction related projects are recorded on the percentage-of-completion
method. Profits recognized on contracts in process are based upon estimated
contract revenue and related cost at completion. Revisions in cost estimates as
contracts progress have the effect of increasing or decreasing profits in the
current period. Provisions for anticipated losses are made in the period in
which they first become determinable. Sales of underwater cable systems are also
recorded on the percentage-of-completion method.
Accounts receivable include amounts not yet billed because of retainage
provisions for fire protection contracts. Retention balances of $18.4 million at
June 30, 1995 which become due upon contract completion and acceptance are
expected to be substantially collected during fiscal 1996.
Property, Plant and Equipment--Property, plant and equipment are principally
recorded at cost, except that, in accordance with fresh-start reporting, all
property, plant and equipment of Kendall was restated to reflect reorganization
value on June 30, 1992, which approximated fair value on a continued use basis.
Maintenance and repair expenditures are charged to expense when incurred. The
straight-line method of depreciation is used over the estimated useful lives of
the related assets, which range from 2 to 45 years.
Goodwill and Other Intangible Assets--Goodwill is being amortized on a
straight-line basis over 40 years. Accumulated amortization amounted to $138.4
million at June 30, 1995 and $112.5 million at June 30, 1994. Impairment of
goodwill, if any, is measured on the basis of whether anticipated undiscounted
operating cash flows generated by the acquired businesses will recover the
recorded goodwill balances over the remaining amortization period. At June 30,
1995 and 1994, no impairment of such assets was indicated.
Other intangible assets include patents, trademarks and other items, which
are being amortized on a straight line basis over lives ranging from 2 to 30
years. At June 30, 1995 and 1994, accumulated amortization amounted to $17.2
million and $12.7 million respectively.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Reorganization Value in Excess of Identifiable Assets--The reorganization
value of Kendall was determined based on the purchase price paid for new Kendall
common stock issued as part of Kendall's Restructuring (See Basis of
Presentation above). Based on the allocation of reorganization value in
conformity with procedures specified by SOP 90-7, the portion of reorganization
value which could not be attributed to specific tangible or identifiable
intangible assets has been reported as reorganization value in excess of
identifiable assets.
Reorganization value is being amortized using the straight line method over
20 years. Accumulated amortization amounted to $23.4 million and $17.0 million
at June 30, 1995 and 1994, respectively.
Research and Development--Company funded research and development
expenditures are expensed when incurred.
Translation of Foreign Currency--Assets and liabilities of the Company's
foreign subsidiaries, other than those operating in highly inflationary
environments, are translated into U.S. dollars using year-end exchange rates.
Revenues and expenses of foreign subsidiaries are translated at the average
exchange rates effective during the year. Foreign currency translation gains and
losses are included as a separate component of shareholders' equity. For
subsidiaries operating in highly inflationary environments, inventories and
property, plant and equipment, including related expenses, are translated at the
rate of exchange in effect on the date the assets were acquired, while other
assets and liabilites are translated at year-end exchange rates. Translation
adjustments for these operations are included in net income.
Gains and losses resulting from foreign currency transactions, the amounts
of which are not significant, are included in net income.
Interest Rate Swaps, Currency Options and Other Contracts--The Company
enters into a variety of interest rate swaps, currency options, cross currency
swaps and other contracts in its management of interest costs and foreign
currency exposures.
The interest rate swaps, which hedge interest rates on certain indebtedness,
involve the exchange of fixed and floating rate interest payment obligations
over the life of the related agreement without the exchange of the notional
payment obligation. The differential to be paid or received is accrued as
interest rates change and recognized over the life of the agreement as an
adjustment to interest expense.
Foreign currency options, acquired for the purpose of hedging foreign
operating income generally for periods not exceeding twelve months, are marked
to market with any realized and unrealized gains or losses reflected in selling,
general and administrative expense. The Company also enters into forward
exchange contracts to hedge certain foreign currency transactions for periods
consistent with the terms of the underlying transactions. The forward exchange
contracts generally have maturities that do not exceed one year. Gains and
losses on contracts qualifying as hedges are deferred and included in the
measurement of the related foreign currency transaction. Losses are not deferred
if it is estimated that deferral would lead to recognizing losses in a later
period. Under the Company's cross currency swap, which hedges certain net
foreign investments, changes in valuation are recorded in the currency
translation adjustment account. The interest differentials from this swap are
recorded in interest expense.
Income Per Share--Net income per share is calculated on the basis of the
weighted average number of shares outstanding plus common equivalent shares
arising from the effect of stock options and warrants using the treasury stock
method.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Accounting Changes--Effective July 1, 1992 Tyco adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") 109 "Accounting for Income
Taxes" and SFAS 106 "Employers' Accounting for Post-Retirement Benefits Other
Than Pensions" (see Notes 8 and 12, respectively, to the Consolidated Financial
Statements). At July 1, 1992 the cumulative effect of the accounting changes was
to reduce net income by $71.0 million ($.98 per share). Kendall adopted SFAS 109
and SFAS 106 effective with its Restructuring (See Basis of Presentation,
above), and accordingly there is no cumulative effect reflected in the financial
statements.
Reclassifications--Certain prior year amounts have been reclassified to
conform with current year presentation.
2. THE MERGER
On October 19, 1994, a wholly owned subsidiary of Tyco merged with Kendall.
Shareholders of Kendall received 1.29485 shares of Tyco common stock for each
share of Kendall common stock. The transaction qualified for pooling of
interests accounting treatment, which is intended to present as a single
interest common shareholder interests which were previously independent.
Accordingly, the historical financial statements for periods prior to the
consummation of the combination are restated as though the companies had been
combined during such periods. Revenues and net income for the quarter ended
September 30, 1994 (the most recent interim period prior to the pooling) were
$827.6 million and $32.6 million, respectively, for Tyco and $226.6 million and
$20.7 million, respectively, for Kendall.
All fees and expenses related to the merger and to the integration of the
combined companies have been expensed as required under the pooling of interests
accounting method. Such fees and expenses amounted to $37.2 million ($31.2
million after-tax). The charge includes $18.6 million for financial advisory,
legal, accounting and other direct transaction fees, $14.9 million for payments
under severance and employment agreements and other costs associated with
certain compensation plans, and $3.7 million for other acquisition related and
integration costs.
3. ACQUISITIONS
During fiscal 1995, the Company acquired five flow control companies, three
disposable and specialty products companies and two European fire protection
companies for an aggregate of $130.3 million. During fiscal 1994, the Company
acquired five disposable and specialty products companies, two flow control
companies and one fire protection company for an aggregate of $72.6 million in
cash and a note payable of $3.6 million. Also during fiscal 1994, the Company
sold certain of its European fire products manufacturing and distribution
businesses for cash proceeds of $18.1 million and notes receivable of $14.8
million. During fiscal 1993, the Company acquired three flow control companies
and five fire protection companies for an aggregate of $72.0 million. The
acquisitions were accounted for by the purchase method, and the results of
operations have been consolidated with the Company's results from their
respective acquisition dates. The effect of these transactions on the Company's
financial position and earnings in the year of acquisition was not significant.
4. RESTRUCTURING AND SEVERANCE CHARGES
During fiscal 1993, the Company recorded restructuring and severance charges
of $39.3 million ($27.3 million after-tax). These charges include severance
costs, facilities consolidation costs, writedown of assets to net realizable
value, and professional fees and other costs associated with the restructurings.
The charges were principally for personnel reductions in the European and
Australian
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RESTRUCTURING AND SEVERANCE CHARGES--(CONTINUED)
fire protection contracting businesses, as well as severance and excess
facilities costs associated with the reorganization of Grinnell flow control
distribution operations into regional distribution centers in the United States
to reduce inventory levels, lower operating costs and improve customer service.
The charges also included a loss provision associated with the Company's
determination to dispose of a U.S. flow control pipe manufacturing facility and
severance and other costs associated with the shutdown of a printed circuit
board facility. As of June 30, 1995 the restructuring was substantially
complete.
5. INDEBTEDNESS
Long-term debt is as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Credit agreements...................................................... $ -- $ 94,447
Uncommitted lines of credit............................................ -- 22,000
Insurance company notes................................................ 55,000 135,000
8.125% public notes due 1999........................................... 144,901 --
8.25% subordinated notes due 2003...................................... -- 100,000
6.375% public notes due 2004........................................... 104,301 104,236
9.5% public debentures due 2022........................................ 199,575 199,559
8% public debentures due 2023.......................................... 49,959 49,957
Other.................................................................. 37,068 46,456
-------- --------
Total debt............................................................. 590,804 751,655
Less current portion................................................... 84,387 163,164
-------- --------
Long-term debt......................................................... $506,417 $588,491
-------- --------
-------- --------
</TABLE>
Under a credit agreement with a group of commercial banks, Tyco had the
right until July 1997 to borrow $200 million or a portion thereof for its
general corporate purposes. Kendall also had a $300 million revolving credit
facility which was available through July 1999. In October 1994, the Company
replaced those agreements with a new credit agreement which gives the Company
the right to borrow $300 million or a portion thereof until October 1999. 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 a
Eurodollar rate plus 0.325%, a certificate of deposit rate plus 0.45% or a base
rate, as defined.
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 Company's credit agreement.
The insurance company note of $55 million is due in June 1996 and bears
interest at a rate of 8.90%.
In November 1994, the Company issued $145 million principal amount of 8.125%
notes due 1999. The net proceeds from the issuance of the notes were used, in
part, to refinance $100 million principal amount of Kendall's subordinated notes
due 2003. The balance was used to refinance, in part, $80 million of insurance
company notes that were due in January, 1995.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INDEBTEDNESS--(CONTINUED)
In connection with the refinancing of Kendall's subordinated notes, the
Company recorded a charge of $4.3 million ($2.6 million after-tax), representing
unamortized debt issuance fees and a call premium, as an extraordinary loss
during fiscal 1995.
In January 1994, the Company issued $105 million principal amount of 6.375%
notes due 2004. In March 1993, the Company issued $50 million principal amount
of 8% debentures due 2023. In April 1992, the Company issued $200 million
principal amount of 9.5% debentures due 2022. The net proceeds of the issuances
were used to refinance existing debt.
At June 30, 1995, the Company had interest rate swap agreements with a
number of financial institutions having a total notional amount of $255 million,
which effectively convert fixed rate debt to variable rate debt. Under these
agreements, the Company will receive payments at an average fixed rate of 5.90%
and will make payments based on six month LIBOR which, at June 30, 1995, was
5.93%. These agreements expire in the amounts of $55 million in February 1996,
$50 million in April 1996, $100 million in April 1997 and $50 million in March
1998. The impact of the Company's hedging activities on its weighted average
borrowing rate was an increase of 0.1% and decreases of 1.1% and 0.8% for fiscal
1995, 1994 and 1993, respectively. The impact on reported interest was expense
of $1.0 million and income of $7.0 million and $6.1 million for fiscal 1995,
1994 and 1993, respectively.
During fiscal 1993, Kendall refinanced certain notes and borrowings
outstanding under its bank facilities. In connection with the refinancing, the
Company recorded a charge of approximately $4.6 million ($2.8 million
after-tax), representing unamortized bank fees and original issue discount, as
an extraordinary loss.
Under its various loan and credit agreements the Company is required to meet
certain covenants, none of which is considered restrictive to the operations of
the Company.
The aggregate amounts of total debt maturing during the next five fiscal
years are as follows: $84.4 million in fiscal 1996, $4.2 million in fiscal l997,
$0.6 million in fiscal 1998, $0.6 million in fiscal 1999 and $145.4 million in
fiscal 2000.
6. SALE OF ACCOUNTS RECEIVABLE
The Company has an agreement under which it sells participating interests in
a defined pool of trade accounts receivable. As collections reduce accounts
receivable included in the pool, the Company sells participating interests in
new receivables to bring the amount sold up to the maximum permitted by the
agreement. In June 1995, the Company increased the maximum permitted under the
agreement to $225 million from $150 million. Under the terms of the agreement
the Company has retained substantially the same risk of credit loss as if the
receivables had not been sold and, accordingly, the full amount of the allowance
for doubtful accounts has been retained. The Company sold $75 million and $150
million of accounts receivable in fiscal 1995 and 1994, respectively. The
proceeds from the sales were used to reduce borrowings under uncommitted lines
of credit and are reported as operating cash flows in the Company's consolidated
statement of cash flows and a reduction of receivables in the Company's
consolidated balance sheet in fiscal 1995 and 1994. 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 $8.2
million and $4.1 million during the years ended June 30, 1995 and
1994,respectively, and has been included in selling, general and administrative
expense in the Company's consolidated statement of income. The Company, as
servicing agent for the purchaser, retains collection and administrative
responsibilities for the participating interests in the defined pool.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt. The Company also has
foreign currency options (notional amount of $76.0 million), forward exchange
contracts ($10.7 million) as well as interest rate swaps. In addition, the
Company has entered into a cross currency swap through July 1997 under which it
has exchanged $50.0 million of U.S. dollar debt for Deutsche mark denominated
debt. At June 30, 1995 the fair value of forward exchange contracts approximated
settlement value, the fair value of interest rate swaps was a $0.3 million
asset, and the fair value of long-term debt was approximately $540.8 million
(book value of $506.4 million), based on current interest rates. The fair value
of financial instruments in working capital approximated book value.
None of the Company's financial instruments represent a concentration of
credit risk as the Company deals with a variety of major banks worldwide and its
accounts receivable are spread among a number of major industries, customers and
geographic areas. None of the Company's off-balance sheet financial instruments
would result in a significant loss to the Company if the counterparty failed to
perform according to the terms of its agreement.
In May 1993, the Financial Accounting Standards Board issued SFAS 114,
"Accounting by Creditors for Impairment of a Loan." This standard was adopted by
the Company in fiscal 1995. Adoption of this standard did not have an impact on
the Company's financial position or results of operations.
8. INCOME TAXES
Provision for income taxes and differences between the provision at the
federal statutory rate and the amounts provided are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at statutory rate.................................. $134,707 $114,866 $60,961
State income taxes........................................... 15,972 11,511 5,783
Non-deductible merger and transaction related costs.......... 7,009 -- --
Depreciation and amortization under purchase accounting...... 11,430 10,787 11,281
Foreign earnings taxed at different rates.................... 6,873 6,723 4,202
Revision of certain tax estimates............................ -- -- (6,739)
Effect of rate changes....................................... (3,900) (3,649) 7,752
Research and Development and Foreign Sales Corporation
benefits..................................................... (4,200) (2,710) (500)
Other........................................................ 394 1,471 2,097
-------- -------- -------
Provision for income taxes on earnings before cumulative
effect of accounting changes............................... 168,285 138,999 84,837
Benefit of cumulative effect of accounting changes........... -- -- (12,273)
-------- -------- -------
Provision for income taxes................................... 168,285 138,999 72,564
Deferred provision........................................... (28,409) (21,113) (7,011)
-------- -------- -------
Current provision............................................ $139,876 $117,886 $65,553
-------- -------- -------
-------- -------- -------
</TABLE>
In the normal course, the Company's federal income tax returns are examined
by the Internal Revenue Service ("IRS") and, in connection with such
examinations, significant assessments could arise. During the year, the IRS
examined the Company's 1991 and 1992 United States income tax
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES--(CONTINUED)
returns. In connection with such examination, one item is currently under review
by the IRS National Office which could result in a significant assessment.
Ultimate resolution of this matter is not expected to have a material adverse
effect on the Company's financial position or results of operations.
The provisions for fiscal 1995, 1994 and 1993 include $21.7 million, $23.9
million and $14.3 million, respectively, for foreign income taxes. The foreign
component of income (loss) before income taxes was $38.7 million, $35.7 million
and $(1.9) million, for fiscal 1995, 1994 and 1993, respectively.
Generally, no provision has been made for U.S. or additional foreign income
taxes on the undistributed earnings of foreign subsidiaries as such earnings are
expected to be permanently reinvested. A liability has been recorded for U.S.
taxes attributable to certain undistributed earnings in selected jurisdictions
where repatriation to the U.S. may be desirable. It is not practicable to
estimate the additional taxes related to the permanently reinvested earnings.
Effective July 1, 1992 Tyco adopted the provisions of SFAS 109. At July 1,
1992 the cumulative effect of adopting this standard was to reduce net income by
$16.1 million ($0.22 per share). The impact on fiscal 1993's results was to
reduce net income by $3.5 million ($0.05 per share). Kendall had adopted the
provisions of SFAS 109 effective with its Restructuring (see Note 1 to the
Consolidated Financial Statements), and, accordingly, there is no cumulative
impact reflected in the financial statements.
The deferred income tax balance sheet accounts result from temporary
differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. The components of the net deferred income
tax asset at June 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities and reserves..................................... $111,014 $122,382
Accrued post-retirement benefit obligation........................... 34,276 35,248
Tax loss carryforwards............................................... 180,115 182,954
Other................................................................ 747 3,142
-------- --------
326,152 343,726
-------- --------
Deferred tax liabilities:
Property, plant and equipment........................................ (69,114) (72,954)
Contracts............................................................ (10,557) (9,027)
Accrued liabilities and reserves..................................... (3,450) (6,793)
Other................................................................ (10,506) (7,960)
-------- --------
(93,627) (96,734)
-------- --------
Net deferred income tax asset before valuation allowance............... 232,525 246,992
Valuation allowance.................................................... (43,958) (46,162)
-------- --------
Net deferred income tax asset.......................................... $188,567 $200,830
-------- --------
-------- --------
</TABLE>
As of June 30, 1995 the Company had approximately $209.4 million of net
operating loss carryforwards in certain foreign jurisdictions. Of these, $187.3
million have no expiration, and the remaining $22.1 million will expire in the
years 1996 to 2003. Domestic operating loss carryforwards at June 30, 1995 were
approximately $242.4 million and will expire in the years 1996 to 2006. A
valuation allowance has been provided for operating loss carryforwards which are
not expected to be utilized.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. KEY EMPLOYEE LOAN PROGRAMS
Loans are made to employees under the 1983 Key Employee Loan Program for the
payment of taxes upon the vesting of shares granted under the Company's
Restricted Stock Ownership Plans. The loans are unsecured and bear interest,
payable annually. The loans bear interest at a rate which approximates the
Company's incremental short-term borrowing rate. Loans are generally repayable
in ten years, except that earlier payments are required under certain
circumstances. Loans under this program were $8.4 million and $6.4 million at
June 30, 1995 and 1994, respectively.
10. CAPITAL STOCK
In July 1994, the Company's Board of Directors authorized the repurchase of
up to 2.9 million of its common shares. No shares have been repurchased under
such authorization.
In April and May, 1995 the Company repurchased 217,535 and 148,778 shares
respectively, of its common stock from the President of Kendall at $52.94 and
$52.44 per share, respectively, their then fair market value, for an aggregate
purchase price of $19.3 million to provide for required income tax withholdings
as permitted in the underlying Kendall restricted stock grant agreement. In
August 1992, the Company repurchased 520,000 shares of its common stock at
$32.625 per share from its former Chairman of the Board for an aggregate
purchase price of $17.0 million. The total cost of reacquired shares at June 30,
1995 and 1994 was $89.3 million and $70.0 million, respectively.
In June 1994, the Company repurchased for $600,000 a warrant which entitled
the holder, Tyco Investments (Australia) Limited, formerly Wormald International
Limited, to purchase five million Tyco shares at a price of $70 per share.
The Company's 1978 Restricted Stock Ownership Plan (the "1978 Plan")
provided for the award of 2,400,000 shares of common stock to key employees
through November 30, 1988. Under the 1978 Plan, 2,392,000 shares were granted,
net of surrenders. The 1983 Restricted Stock Ownership Plan (the "1983 Plan")
provided for the award of 3,400,000 shares of common stock to key employees
through October 18, 1993. Under the 1983 Plan, 2,918,533 shares were awarded,
net of surrenders. The Company's 1994 Restricted Stock Ownership Plan (the "1994
Plan") provides for the award of an initial amount of shares of common stock
plus an amount equal to one-half of one percent of the total shares outstanding
at the beginning of each fiscal year. At June 30, 1995, there were 700,299
shares available, of which 418,800 shares had been granted. Common shares are
awarded subject to certain restrictions with vesting varying over periods of one
to ten years.
For grants which vest through passage of time, the fair market value of the
shares at the time of the grant is amortized (net of tax benefit) to expense
over the period of vesting. The unamortized portion of deferred compensation
expense is recorded as a reduction of shareholders' equity. For grants which
vest based on certain specified performance criteria, the fair market value of
the shares at the date of vesting is expensed over the period the performance
criteria are measured. Recipients of all restricted shares have the right to
vote such shares and receive dividends. Income tax benefits resulting from the
vesting of restricted shares, including a deduction for the excess, if any, of
the fair market value of restricted shares at the time of vesting over their
fair market value at the time of the grant and from the payment of dividends on
unvested shares, are credited to capital in excess of par value.
In connection with the Restructuring, Kendall issued to holders of its
equity securities, in exchange for such securities, warrants to purchase common
stock at per share exercise prices of $15.46 (the "A Warrants") and $20.62 (the
"B Warrants" and together with the A Warrants, the "Warrants"). As a result of
the Merger, these Warrants became exercisable for the Company's stock at per
share prices of $11.94 and $15.92, respectively. The Warrants expire on July 7,
1999. During fiscal 1995, 1,299,614 A
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. CAPITAL STOCK--(CONTINUED)
Warrants and 1,359,717 B Warrants were exercised. At June 30, 1995, 78,913 A
Warrants and 54,604 B Warrants were issued and outstanding.
Kendall maintained a number of stock incentive plans under which its
officers, directors and key employees were granted options and other awards to
purchase common stock, generally at prices equal to at least 100% of the market
price on the date of grant. As a result of the Merger, these options became
exercisable for the Company's stock. Transactions under these plans during
fiscal 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE
---------- ------------
<S> <C> <C>
Outstanding June 30, 1992.......................................... 1,285,139 $ 7.96
Granted............................................................ 51,794 19.89
---------- ------------
Outstanding June 30, 1993.......................................... 1,336,933 7.96-19.89
Granted............................................................ 329,539 18.63-39.19
Exercised.......................................................... (78,986) 7.96
Cancelled.......................................................... (31,076) 7.96
---------- ------------
Outstanding June 30, 1994.......................................... 1,556,410 7.96-39.19
Exercised.......................................................... (1,481,956) 7.96-39.19
Cancelled.......................................................... (59,822) 18.63-34.37
---------- ------------
Outstanding June 30, 1995.......................................... 14,632 $ 18.63
---------- ------------
Exercisable June 30, 1995.......................................... 14,632 $ 18.63
---------- ------------
---------- ------------
</TABLE>
During fiscal 1995 the Company established a stock option plan under which
certain employees, excluding officers and directors, have been granted options
to purchase common stock at a price equal to fair market value on the date of
grant. The options vest on a pro-rata basis over five years, with 50% becoming
exercisable at the end of the third year and the remaining exercisable at the
end of the fifth year. The Company has reserved 4,000,000 shares of the
company's common stock for issuance under the plan. During fiscal 1995, options
for 1,491,000 shares were granted, for periods generally not in excess of ten
years, at a price of $53.375 per share. All options were outstanding at June 30,
1995, however none were exercisable.
Kendall had a restricted stock grant agreement which provided for the
issuance of up to 1,000,000 shares of its common stock to its President. As a
result of the Merger, up to 1,294,850 shares of the Company's common stock
became issuable under the agreement. As of June 30, 1995 all shares under the
grant agreement had vested. As discussed above, the Company repurchased 366,313
of such shares. Compensation expense of $0.6 million, $1.3 million and $2.1
million was recorded for the grant during fiscal 1995, 1994 and 1993,
respectively.
Tyco paid cash dividends of $0.40 per share in fiscal 1995 and 1994,
respectively, and $0.38 per share in fiscal 1993. Kendall did not pay dividends
to its shareholders.
11. COMMITMENTS AND CONTINGENCIES
The Company occupies certain facilities under leases which expire at various
dates through the year 2021. Rental expense under these leases and leases for
equipment was $71.3 million, $60.4 million and $63.7 million for fiscal 1995,
1994 and 1993, respectively. At June 30, 1995 the minimum lease payments under
noncancellable leases were as follows: $51.6 million in fiscal 1996, $40.0
million in
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
fiscal 1997, $30.0 million in fiscal 1998, $20.9 million in fiscal 1999, $16.0
million in fiscal 2000 and $83.7 million in fiscal years 2001 through 2021.
In the normal course of business, the Company is liable for contract
completion and product performance. In the opinion of management, such
obligations will not significantly affect the Company's financial position or
results of operations.
The Company is involved in various stages of investigation and cleanup
related to environmental remediation matters. The ultimate cost of site cleanup
is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and
alternative cleanup methods. Based upon the Company's experience with the
foregoing environmental matters, the Company has concluded that there is at
least a reasonable possibility that remedial costs will be incurred with respect
to these sites in the aggregate amount in a range of $13.3 million to $47.8
million. At June 30, 1995, the Company has concluded that the most probable
amount which will be incurred within this range is $24.3 million, and such
amount is included in the caption accrued expenses in the accompanying
consolidated balance sheet. Based upon information available to the Company, at
those sites where there has been an allocation of the share of cleanup and such
liability could be joint and several, management believes it is probable that
other responsible parties will fully pay the cost apportioned to them, except
with respect to one site for which the Company has assumed that one of the
identified responsible parties will be unable to pay the cost apportioned to it
and that such party's cost will be reapportioned among the remaining responsible
parties. In view of the Company's financial position and reserves for
environmental matters of $24.3 million, the Company has concluded that its
payment of such estimated amounts will not have a material adverse effect on its
financial position or results of operations.
12. RETIREMENT PLANS
The Company has a number of noncontributory defined benefit retirement plans
covering certain of its domestic and foreign employees. The Company's funding
policy is to make annual contributions to the extent such contributions are tax
deductible as actuarially determined. The benefits under the defined benefit
plans are based on years of service and compensation.
The net periodic pension cost for all defined benefit pension plans include
the following components:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................. $ 12,708 $ 12,523 $ 11,451
Interest cost................................................ 28,675 26,747 26,426
Actual return on assets...................................... (40,349) (7,717) (50,675)
Net amortization and deferral................................ 11,486 (19,454) 24,467
-------- -------- --------
Net periodic pension cost.................................... $ 12,520 $ 12,099 $ 11,669
-------- -------- --------
-------- -------- --------
</TABLE>
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. RETIREMENT PLANS--(CONTINUED)
Accrued (prepaid) pension cost at June 30, 1995 for defined benefit plans is
as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS TOTAL
------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested................................................ $ 230,670 $ 127,254 $357,924
Non-vested............................................ 9,458 9,744 19,202
------------- ------------- --------
Total............................................. 240,128 136,998 377,126
Effect of future salary increases....................... 5,282 4,998 10,280
------------- ------------- --------
Projected benefit obligations........................... 245,410 141,996 387,406
Plan assets at fair value............................... 266,750 79,102 345,852
------------- ------------- --------
Plan assets (in excess of) less than projected benefit
obligations........................................... (21,340) 62,894 41,554
Unrecognized transition asset (liability)............... 271 (1,037) (766)
Unrecognized prior service cost......................... (547) (7,047) (7,594)
Additional minimum liability............................ -- 17,252 17,252
Unrecognized net loss................................... (19,316) (6,867) (26,183)
------------- ------------- --------
Accrued (prepaid) pension cost.......................... $ (40,932) $ 65,195 $ 24,263
------------- ------------- --------
------------- ------------- --------
</TABLE>
Accrued (prepaid) pension cost at June 30, 1994 for defined benefit plans is
as follows:
<TABLE>
<CAPTION>
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS TOTAL
------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested................................................ $ 87,847 $ 223,462 $311,309
Non-vested............................................ 4,012 13,039 17,051
------------- ------------- --------
Total............................................. 91,859 236,501 328,360
Effect of future salary increases....................... 7,214 11,831 19,045
------------- ------------- --------
Projected benefit obligations........................... 99,073 248,332 347,405
Plan assets at fair value............................... 113,597 185,976 299,573
------------- ------------- --------
Plan assets (in excess of) less than projected benefit
obligations........................................... (14,524) 62,356 47,832
Unrecognized transition asset (liability)............... 292 (1,096) (804)
Unrecognized prior service cost......................... (617) (7,583) (8,200)
Additional minimum liability............................ -- 15,545 15,545
Unrecognized net loss................................... (14,953) (17,115) (32,068)
------------- ------------- --------
Accrued (prepaid) pension cost.......................... $ (29,802) $ 52,107 $ 22,305
------------- ------------- --------
------------- ------------- --------
</TABLE>
Pursuant to the provisions of SFAS 87, "Employers' Accounting for Pensions,"
the company recorded, in other liabilities, an additional minimum pension
liability adjustment of $17.3 million as of June 30, 1995 representing the
amount by which the accumulated benefit obligation exceeded the fair value of
plan assets plus accrued amounts previously recorded. The additional liability
has been offset by an intangible asset, included in goodwill and other
intangible assets, to the extent of previously unrecognized prior service cost.
The amount in excess of previously unrecognized prior service cost is
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. RETIREMENT PLANS--(CONTINUED)
recorded, net of the related deferred tax benefit, as a reduction of
shareholders' equity in the amount of $6.1 million.
In fiscal 1995 and 1994, the Company terminated certain defined benefit
pension plans and distributed the plans' assets to the participants. Also in
fiscal 1994, in connection with the sale of the European fire products
businesses as described in Note 3, there was a settlement of a pension plan in
Germany. Gains and losses resulting from the above were not material.
Of the total plan obligations, 59% relate to domestic plans and 41% relate
to foreign plans. The average discount rate used in determining the actuarial
present value of the projected benefit obligation, weighted in relation to plan
obligations, was 7.8% and 8.5%, respectively, at June 30, 1995 and 1994. The
average rate of increase in future compensation levels was 5.1% and 5.7% at June
30, 1995 and 1994. The weighted average long-term rate of return on assets was
10.2% and 9.4%, respectively, at June 30, 1995 and 1994. Plan assets are
invested principally in equity and fixed income instruments.
The Company also has several defined contribution plans. Pension expense for
the defined contribution plans is computed as a percentage of participants'
compensation and was $15.6 million, $15.6 million and $14.7 million for fiscal
1995, 1994 and 1993, respectively. During fiscal 1995, the Company established
an unfunded Supplemental Executive Retirement Plan ("SERP"). This plan is
nonqualified and restores the employer match that certain employees lose due to
Internal Revenue Service limits on eligible compensation under the defined
contribution plans. Expense related to the SERP was $0.4 million in fiscal 1995.
The Company also participates in a number of multi-employer defined benefit
plans on behalf of certain employees. Pension expense related to multi-employer
plans was $2.5 million, $6.7 million and $6.9 million for fiscal 1995, 1994 and
1993, respectively.
Effective July 1, 1992 the Company adopted the provisions of SFAS 106. SFAS
106 requires the accrual method of accounting for post-retirement health care
and life insurance benefits based on actuarially determined costs. The Company
generally does not provide post-retirement benefits other than pensions for its
employees. Certain of the Company's acquired operations provide these benefits
to employees who were eligible at the date of acquisition. As of July 1, 1992
the Company recognized the full amount of its estimated accumulated
post-retirement benefit obligation. The effect on the date of adoption was to
reduce fiscal 1993 earnings by $54.9 million ($84.5 pre-tax) or $0.76 per share.
The charge has been reflected as a cumulative effect of an accounting change.
Net periodic post-retirement benefit cost for the years ended June 30, 1995,
1994 and 1993 reflects the following components:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................................... $ 361 $ 372 $ 389
Interest cost.................................................... 4,739 5,822 7,635
Net amortization and deferral.................................... (2,857) (1,275) --
------- ------- ------
Net periodic post-retirement benefit cost........................ $ 2,243 $ 4,919 $8,024
------- ------- ------
------- ------- ------
</TABLE>
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. RETIREMENT PLANS--(CONTINUED)
Presented below are the components of the accrued post-retirement benefit
obligation, all of which are unfunded:
<TABLE>
<CAPTION>
JUNE 30
------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees............................................................... $44,829 $46,347
Fully eligible active plan participants................................ 9,469 10,986
Other active plan participants......................................... 6,618 5,905
------- -------
60,916 63,238
Unrecognized prior service benefit....................................... 23,887 25,648
Unrecognized net gain (loss)............................................. 14,627 10,715
------- -------
Accrued post-retirement benefit cost..................................... $99,430 $99,601
------- -------
------- -------
</TABLE>
For measurement purposes, in fiscal 1995 a 10.4% composite annual rate of
increase in the per capita cost of covered health care benefits was assumed. The
rate was assumed to decrease gradually to 4.75% by the year 2008 and remains at
that level thereafter. The health care cost trend rate assumption may have a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by a percentage point would increase the
accumulated post-retirement benefit obligation as of June 30, 1995 by $3.9
million and the aggregate of the service and interest cost component of net
periodic post-retirement benefit cost for the year then ended by $0.4 million.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.5%, 8.3% and 7.3% at June 30, 1995,
1994 and 1993, respectively.
In fiscal 1994 the Company amended certain of its post-retirement health
care programs, principally to adjust the cost-sharing provisions. The amendment
resulted in a reduction of the Company's accumulated post-retirement benefit
obligation of $27.8 million, which created an unrecognized prior service
benefit. The unrecognized prior service benefit is being amortized over
approximately 16 years.
In November 1992, the Financial Accounting Standards Board issued SFAS 112
"Employers' Accounting for Post-Employment Benefits." The Company adopted SFAS
112 in the first quarter of fiscal 1995. The effect of adoption of this standard
did not materially affect the Company's financial position or results of
operations.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATED SEGMENT DATA
Selected information by industry segment is presented below.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Disposable and Specialty Products.............. $1,386,781 $1,199,163 $1,173,063
Fire Protection................................ 1,703,412 1,525,906 1,526,079
Flow Control Products.......................... 1,014,357 914,430 806,915
Electrical and Electronic Components........... 430,101 436,884 413,300
---------- ---------- ----------
$4,534,651 $4,076,383 $3,919,357
---------- ---------- ----------
---------- ---------- ----------
Income before income taxes, extraordinary item
and cumulative effect of accounting changes:
Disposable and Specialty Products.............. $ 261,154 $ 191,669 $ 126,280(2)
Fire Protection................................ 86,512 70,171 43,190(3)
Flow Control Products.......................... 90,368 74,125 44,638(3)
Electrical and Electronic Components........... 76,397 72,510 68,401(3)
---------- ---------- ----------
Income from operations......................... 514,431 408,475 282,509
Interest expense............................... (63,385) (62,431) (85,785)
Corporate and other amounts.................... (66,168)(1) (17,854) (17,429)(3)
---------- ---------- ----------
$ 384,878 $ 328,190 $ 179,295
---------- ---------- ----------
---------- ---------- ----------
Total assets:
Disposable and Specialty Products.............. $ 843,557 $ 886,759 $ 863,197
Fire Protection................................ 1,256,526 1,138,905 1,180,123
Flow Control Products.......................... 1,030,364 861,362 890,134
Electrical and Electronic Components........... 165,615 178,336 192,919
Corporate assets, including cash............... 85,399 79,236 38,593
---------- ---------- ----------
$3,381,461 $3,144,598 $3,164,966
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization:
Disposable and Specialty Products.............. $ 39,877 $ 40,618 $ 48,278
Fire Protection................................ 31,795 29,513 30,975
Flow Control Products.......................... 41,866 39,409 34,225
Electrical and Electronic Components........... 10,997 11,313 10,889
Corporate...................................... 8,627 4,027 3,982
---------- ---------- ----------
$ 133,162 $ 124,880 $ 128,349
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Disposable and Specialty Products.............. $ 46,402 $ 26,341 $ 22,281
Fire Protection................................ 24,429 17,445 24,931
Flow Control Products.......................... 36,618 33,941 37,667
Electrical and Electronic Components........... 10,941 11,728 9,278
Corporate...................................... 658 347 242
---------- ---------- ----------
$ 119,048 $ 89,802 $ 94,399
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(Footnotes on following page)
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. CONSOLIDATED SEGMENT DATA--(CONTINUED)
(Footnotes for preceding page)
------------
(1) Fiscal 1995 includes a charge of $37.2 million for merger and transaction
related costs associated with the Kendall merger. See Notes 1 and 2 to the
Consolidated Financial Statements.
(2) Fiscal 1993 includes a non-recurring inventory charge of $22.5 million
related to the asset valuation requirements of fresh-start reporting. See
Note 1 to the Consolidated Financial Statements.
(3) Fiscal 1993 includes restructuring and severance charges of $16.0 million,
$19.0 million, $0.7 million and $3.6 million, for Fire Protection, Flow
Control Products, Electrical and Electronic Components and Corporate,
respectively. See Note 4 to the Consolidated Financial Statements.
14. CONSOLIDATED GEOGRAPHIC DATA
Selected information by geographic area for the three years in the period
ended June 30, 1995 are presented below. Fiscal 1993 income from operations
includes restructuring and severance charges of $20.9 million, $8.5 million and
$6.3 million for North America, Europe and Asia-Pacific, respectively, and a
non-recurring inventory charge of $22.5 million for North America.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
North America........................................ $3,284,982 $3,011,678 $2,878,686
Europe............................................... 756,988 705,240 714,536
Asia-Pacific......................................... 492,681 359,465 326,135
---------- ---------- ----------
$4,534,651 $4,076,383 $3,919,357
---------- ---------- ----------
---------- ---------- ----------
Income From Operations:
North America........................................ $ 468,466 $ 362,764 $ 256,940
Europe............................................... 28,564 34,519 24,620
Asia-Pacific......................................... 17,401 11,192 949
---------- ---------- ----------
$ 514,431 $ 408,475 $ 282,509
---------- ---------- ----------
---------- ---------- ----------
Total Assets:
North America........................................ $2,172,851 $2,106,729 $2,232,463
Europe............................................... 802,231 687,947 664,859
Asia-Pacific......................................... 320,980 270,686 229,051
Corporate assets, including cash..................... 85,399 79,236 38,593
---------- ---------- ----------
$3,381,461 $3,144,598 $3,164,966
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUPPLEMENTARY BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
JUNE 30
----------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Purchased materials and manufactured parts......................... $ 161,243 $ 145,965
Work in process.................................................... 98,193 92,786
Finished goods..................................................... 332,722 278,317
--------- ---------
$ 592,158 $ 517,068
--------- ---------
--------- ---------
Property, Plant and Equipment:
Land............................................................... $ 33,842 $ 33,235
Building........................................................... 286,839 257,485
Machinery and equipment............................................ 784,737 647,058
Leasehold improvements............................................. 17,881 15,166
Construction in progress........................................... 46,178 42,648
Accumulated depreciation........................................... (511,006) (385,719)
--------- ---------
$ 658,471 $ 609,873
--------- ---------
--------- ---------
Accrued payroll and payroll related costs............................ $ 112,749 $ 100,082
--------- ---------
--------- ---------
</TABLE>
16. SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs........................................ $76,796 $71,498 $71,388
------- ------- -------
------- ------- -------
Research and development....................................... $33,375 $32,170 $30,268
------- ------- -------
------- ------- -------
</TABLE>
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1995
----------------------------------------------------
1ST 2ND(1) 3RD 4TH
---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales...................................... $1,054,192 $1,097,703 $1,135,100 $1,247,656
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Gross profit............................... $ 286,555 $ 292,714 $ 304,260 $ 337,821
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income before extraordinary item........... $ 53,385 $ 26,624 $ 64,955 $ 71,629
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income................................. $ 53,385 $ 24,024 $ 64,955 $ 71,629
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income per share before extraordinary
item....................................... $ .72 $ .35 $ .85 $ .94
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income Per Share....................... $ .72 $ .32 $ .85 $ .94
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1994
----------------------------------------------------
1ST 2ND 3RD 4TH
---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales...................................... $ 999,598 $ 998,073 $1,003,730 $1,074,982
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Gross profit............................... $ 259,133 $ 259,687 $ 260,327 $ 294,042
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income................................. $ 42,068 $ 43,402 $ 49,516 $ 54,205
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income Per Share....................... $ .57 $ .59 $ .67 $ .73
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
-------------------
(1) Included in the second quarter are after-tax merger and transaction related
costs of $31.2 million ($.41 per share) and an extraordinary item resulting
from the early extinquishment of certain Kendall debt of $2.6 million ($.03
per share).
Income per share amounts are calculated independently for each of the
quarters presented. The sum of the quarters may not equal the full year earnings
per share amounts.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
On October 19, 1994, Tyco, through a wholly-owned subsidiary, merged with
Kendall. The Merger was accounted for as a pooling of interests, and the
historical results of Tyco and Kendall have been combined for all periods
presented after June 30, 1992, the effective date of the Kendall Restructuring.
Accordingly, the Consolidated Financial statements for the three years in the
period ended June 30, 1995 reflect the combined financial position and results
of operations and cash flows of Tyco and Kendall. See Notes 1 and 2 to the
Consolidated Financial Statements.
RESULTS OF OPERATIONS
Information for all periods presented below reflects the grouping of the
Company's businesses into four industry segments consisting of Disposable and
Specialty Products, Fire Protection, Flow Control Products and Electrical and
Electronic Components. Additionally, state income tax expense, previously
included in selling, general and administrative expense, has been reclassified
to the provision for income taxes for all periods presented.
OVERVIEW
Income before extraordinary item was $216.6 million, or $2.87 per share, for
fiscal 1995 compared with $189.2 million, or $2.56 per share, for fiscal 1994.
Excluding the $31.2 million ($0.41 per share) after-tax charge for merger and
transaction related costs related to the Merger (see Note 2 to the Consolidated
Financial Statements), income before extraordinary item rose 31% to $247.8
million, or $3.28 per share. The increase was attributable to strong operating
results in the Disposable and Specialty Products group as well as increased
income in each of the Company's other business segments.
SALES
Sales increased 11% during fiscal 1995 to $4.53 billion from $4.08 billion
in fiscal 1994. Sales of the Disposable and Specialty Products group increased
$187.6 million to $1.39 billion, or 16%, due to increased sales at Kendall,
Armin and Ludlow. Sales of the Fire Protection group increased $177.5 million to
$1.70 billion, or 12%, due primarily to increased sales in the Asia-Pacific and
North American operations. Sales were slightly higher in Europe, where the
impact of the sale of certain fire products operations in the fourth quarter of
fiscal 1994 was offset by the impact of changes in average foreign exchange
rates on non-U.S. dollar denominated sales. Had average foreign currency
exchange rates during fiscal 1995 remained constant with the averages during
fiscal 1994, and excluding the effect of the fire products sale, the increase in
Fire Protection group sales would have been approximately $27.0 million lower
than reported above. Sales of the Flow Control group increased $100.0 million to
$1.01 billion, or 11%, reflecting higher volume and, in some cases, higher unit
selling prices at Grinnell's distribution operations, Allied's pipe and tube
business, Mueller and the Company's European flow control businesses. Sales of
the Electrical and Electronic Components group decreased $6.8 million to $430.1
million, or 2%, resulting principally from slightly lower sales at Allied's
electrical conduit operations, lower sales of underwater communications cable
systems at Simplex and lower sales at the printed circuit businesses.
Sales increased 4% during fiscal 1994 to $4.08 billion from $3.92 billion in
fiscal 1993. Sales of the Disposable and Specialty Products group increased
$26.1 million to $1.20 billion, or 2%, due to increased sales at Armin, Kendall
and Ludlow, including the disposable medical products businesses acquired by
Ludlow during fiscal 1994. Sales of the Fire Protection group were approximately
the same from year to year, as increases in the Asia-Pacific and North American
contracting businesses were offset by a decrease in the European contracting
business. The lower sales in Europe reflect the result of changes in average
foreign currency exchange rates on non U.S. dollar denominated sales in fiscal
1994
42
<PAGE>
as compared to fiscal 1993, which changes reduced sales in U.S. dollars for the
year by approximately $53.1 million. This reduction, due to the strengthening of
the U.S. dollar versus European currencies, primarily in the first quarter of
fiscal 1994, was partially offset by increased sales in local currencies in the
European contracting businesses. Sales of the Flow Control group increased
$107.5 million to $914.4 million, or 13%, reflecting increased volume at Allied,
Mueller and Grinnell's distribution operations, as well as sales of a U.K. based
manufacturer of specialty high performance butterfly valves and ball valves
("Winn-Hindle") acquired by the Company during the fourth quarter of fiscal
1993. Sales of the Electrical and Electronic Components group increased $23.6
million to $436.9 million, or 6%, resulting principally from higher sales of
electrical conduit at Allied and higher sales of underwater communications cable
systems at Simplex, partially offset by decreased sales at the Company's printed
circuit operations.
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES
Pre-tax income before extraordinary item was $384.9 million in fiscal 1995
and $328.2 million in fiscal 1994. Fiscal 1995 results include pre-tax charges
of $37.2 million for merger and transaction related costs associated with the
Merger. See Note 2 to the Consolidated Financial Statements.
Operating profits of the Disposable and Specialty Products group increased
$69.5 million to $261.2 million, or 36%, reflecting increased volume and higher
margins principally at Kendall, Armin and, to a lesser extent, Ludlow. Operating
profits of the Fire Protection group rose $16.3 million to $86.5 million, or
23%, due principally to higher margins at the North American and Asia-pacific
contracting and manufacturing businesses, partially offset by lower margins at
the European businesses. The operating profits of the Flow Control group
increased $16.3 million to $90.4 million, or 22%, resulting principally from
increased earnings at Grinnell's North American distribution operations, Allied,
Mueller and European flow control businesses. Operating profits of the
Electrical and Electronic Components group increased $3.9 million to $76.4
million, or 5%, due to higher margins at Allied's electrical conduit operations
and increased earnings at Simplex. Operating profits at the printed circuit
operations were relatively unchanged.
The impact on the consolidated results of operations from changes in average
foreign exchange rates for fiscal 1995 as compared to fiscal 1994 was not
material.
Corporate and other amounts for fiscal 1995 include the $37.2 million charge
for merger and transaction related costs noted above. Also included is expense
of $8.2 million, as compared to $4.1 million for fiscal 1994, related to the
Company's sales of accounts receivable. See Note 6 to the Consolidated Financial
Statements.
Pre-tax income was $328.2 million in fiscal 1994 and $179.3 million in
fiscal 1993. The results for fiscal 1993 include pre-tax charges for
restructuring of $39.3 million, a non-recurring inventory charge of $22.5
million and a special pension charge of $2.0 million. Excluding these charges,
pre-tax income in fiscal 1994 increased $85.1 million, or 35%. The restructuring
charges related to operational and organizational changes in certain of the
Company's businesses. See Notes 1 and 4 to the Consolidated Financial Statements
and a further description of the restructuring charges by segment below.
Management believes that the fiscal 1993 restructuring charges were sufficient
to make the required operational and organizational changes and does not
anticipate additional charges.
In comparing the results, excluding restructuring charges and the
non-recurring inventory charge, of each of the Company's operating segments for
fiscal 1994 and 1993, operating profits of the Disposable and Specialty Products
group increased $42.9 million to $191.7 million, or 29%, reflecting increased
earnings principally at Kendall and, to a lesser extent, Armin and Ludlow,
including the earnings of the disposable medical products businesses acquired by
Kendall and Ludlow during fiscal 1994. Operating profits of the Fire Protection
group increased $11.0 million to $70.2 million, or 19%. This was principally due
to higher volume and margins in North America. The impact on the
43
<PAGE>
consolidated results of operations from changes in average foreign exchange
rates for fiscal 1994 as compared to fiscal 1993 was not significant. The
operating profits of the Flow Control Products group increased $10.5 million to
$74.1 million, or 16%. Improvements in margins at Grinnell's distribution
operations and earnings from Winn-Hindle were partially offset by decreased
margins at Allied's pipe operations. Operating profits of the Electrical and
Electronic Components group increased $3.4 million to $72.5 million, or 5%, due
to increased earnings reflecting higher margins at Simplex and to a lesser
extent the electrical conduit operations at Allied, slightly offset by a
decrease in profits at the Company's printed circuit operations. Included in
Corporate and other amounts for fiscal 1994 is expense of $4.1 million related
to the Company's sale of accounts receivable. See Note 6 to the Consolidated
Financial Statements.
INTEREST EXPENSE
Interest expense increased $1.0 million to $63.4 million during fiscal 1995
due to higher average interest rates partially offset by lower average debt
levels.
Interest expense decreased $23.4 million during fiscal 1994 due to lower
average interest rates and lower average debt levels.
EXTRAORDINARY ITEM
During fiscal 1995, the Company refinanced $100 million principal amount of
Kendall's subordinated notes due 2003. In connection with the refinancing, the
Company recorded a charge of $4.3 million ($2.6 million after-tax) representing
unamortized debt issuance fees and a call premium, as an extraordinary loss.
During fiscal 1993, Kendall refinanced certain notes and borrowings under
its bank facilities. In connection with the refinancing, the Company recorded a
charge of $4.6 million ($2.8 million after-tax) representing unamortized bank
fees and original issue discount, as an extraordinary loss.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
Effective July 1, 1992, Tyco adopted two new accounting pronouncements
related to income taxes (SFAS 109) and post-retirement health benefits (SFAS
106). The cumulative effect of these accounting changes was an after-tax charge
of $71.0 million comprised of $16.1 million for SFAS 109 and $54.9 million
($84.5 million pre-tax) for SFAS 106. In addition to the cumulative effect of
the accounting changes, SFAS 109 and SFAS 106 resulted in a fiscal year 1993
reduction in income of $5.1 million after-tax, comprised of $7.8 million of
nonrecurring tax rate changes in certain foreign jurisdictions and $1.6 million
related to additional post-retirement medical costs partially offset by $4.3
million of tax benefits. Kendall adopted SFAS 109 and SFAS 106 effective with
the Kendall Restructuring (see Note 1 to the Consolidated Financial Statements),
and accordingly there is no cumulative effect reflected in the Consolidated
Financial Statements.
INCOME TAX EXPENSE
Income tax expense before extraordinary item was $168.3 million in fiscal
1995 and was $139.0 million in fiscal 1994. The higher income tax expense in
fiscal 1995 reflects increased pre-tax income in fiscal 1995. An analysis of
income taxes and the effective income tax rate is presented in Note 8 to the
Consolidated Financial Statements.
44
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As presented in the Consolidated Statement of Cash Flows, net cash provided
by operating activities was $396.6 million in fiscal 1995. The significant
changes in working capital were a $27.8 million decrease in accounts receivable,
a $9.3 million increase in contracts in process, a $37.0 million increase in
accounts payable and accrued expenses and a $51.4 million increase in inventory.
The decrease in accounts receivable was due to the sale of an additional $75.0
million of accounts receivable (see Note 6 to the Consolidated Financial
Statements) offset by an increase in trade accounts receivable. The impact
during fiscal 1995 of a weakened dollar on foreign currency denominated net
working capital was not material. Working capital requirements are not
anticipated to increase substantially in fiscal 1996.
During fiscal 1995, the Company used cash of $130.3 million to acquire
companies in the flow control, fire protection and disposable medical and
specialty products businesses, $119.0 million to purchase property, plant and
equipment, and $24.3 million to pay dividends to shareholders.
The level of capital expenditures is not expected to increase substantially
in fiscal 1996, and the source of funds for such expenditures is expected to be
cash from operations.
Expenditures for environmental matters are not expected to have a material
effect on the Company in fiscal 1996. See Note 11 to the Consolidated Financial
Statements.
At June 30, 1995 the Company's total debt was $590.8 million as compared to
$751.7 million at June 30, 1994. In June 1995, the Company amended its agreement
pursuant to which it sold a percentage ownership interest of up to an additional
$75.0 million of a defined pool of trade accounts receivable, and the proceeds
were used to reduce the Company's debt (see Note 6 to the Consolidated Financial
Statements). In November 1994, the Company issued $145 million principal amount
of 8.125% notes due 1999. The proceeds were used, in part, to refinance $100
million principal amount of Kendall's subordinated notes due 2003. The balance
was used to refinance, in part, $80 million of insurance company notes that were
paid in January, 1995. In October 1994, the Company replaced its credit
agreements with a new credit agreement which gives the Company the right to
borrow $300 million or a portion thereof until October 1999 (see Note 5 to the
Consolidated Financial Statements). The Company believes that its funding
sources are adequate for its anticipated requirements through expected cash flow
from operations and established financing arrangements.
Shareholders' equity was $1,634.7 million, or $21.41 per share, at June 30,
1995 compared to $1,367.0 million, or $19.23 per share, at June 30, 1994. The
increase is due principally to fiscal 1995 net income, the exercise of stock
options and warrants and an increase of $31.4 million resulting from translation
of assets, principally goodwill, and liabilities of foreign operations into U.S.
dollars. Because the dollar was weaker against foreign currencies at June 30,
1995 than at June 30, 1994, the net assets recorded in local currencies
translated into a greater amount of U.S. dollars, resulting in an increase in
the various asset accounts as well as shareholders' equity.
Total debt as a percent of total capitalization (total debt and
shareholders' equity) was 27% at June 30, 1995 and 35% at June 30, 1994. The
decrease in fiscal 1995 was the result of the decrease in debt and increase in
shareholders' equity as described above.
BACKLOG
Backlog at June 30, 1995 amounted to $1.05 billion, compared to $763 million
at June 30, 1994. The increased backlog at June 30, 1995 is due to an increase
in each of the Company's business segments, most notably in Electrical and
Electronic Components reflecting an increase of $144.8 million at Simplex, where
backlog was increased primarily by an order extension on a multi-year contract
for the manufacture of underwater communication cable systems.
45
<PAGE>
ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS 112, "Employer's Accounting for Post-Employment
Benefits," in the first quarter of fiscal 1995. The effect of adoption of this
standard did not materially affect the Company's financial position or results
of operations. SFAS 114, "Accounting by Creditors for Impairment of a Loan," and
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," were adopted by the Company in fiscal 1995. Adoption
of these standards did not have an impact on the Company's financial position or
results of operations.
46
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
TYCO INTERNATIONAL LTD.
Our report on the consolidated financial statements of Tyco International
Ltd. for the years ended June 30, 1995 and 1994 is included in this Form 10-K.
In connection with our audits of such financial statements, we have also audited
the related consolidated financial statement schedule for the years ended June
30, 1995 and 1994.
In our opinion, the financial statement schedule for the years ended June
30, 1995 and 1994 referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
We have also audited the component of the financial statement schedule of
Kendall International, Inc. ("Kendall") for the year ended June 30, 1993. The
contribution of Kendall to total valuation and qualifying accounts is 6 percent
of the 1993 total. The financial statement schedule data of Tyco International
Ltd. included in the June 30, 1993 financial statement schedule was audited and
reported on separately by other auditors. We also audited the combination of the
accompanying financial statement schedule for the year ended June 30, 1993 after
restatement for the 1994 pooling of interests. In our opinion, such financial
statement schedule has been properly combined on the basis described in Note 1
of notes to the related consolidated financial statements.
COOPERS & LYBRAND L.L.P.
Boston Massachusetts
August 1, 1995
S-1
<PAGE>
REPORT OF INDENPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of
TYCO INTERNATIONAL LTD.
(formerly Tyco Laboratories, Inc.)
Our audit of the consolidated financial statements referred to in our report
dated August 3, 1993 appearing on page 20 of this Form 10-K also included an
audit of the Financial Statement Schedule II prior to the retroactive
restatement to account for the pooling of interests (not presented separately
herein). In our opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. We have not
audited the consolidated financial statements of Tyco International Ltd. for any
period subsequent to June 30, 1993.
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 3, 1993
S-2
<PAGE>
TYCO INTERNATIONAL LTD.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED ACQUISITIONS BALANCE AT
DESCRIPTION OF YEAR TO INCOME AND OTHER DEDUCTIONS END OF YEAR
------------------------------------ ---------- --------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1993:
Allowances for doubtful
accounts(1)(2).................. $ 30,591 $ 11,140 $ (1,744) $ 11,006(3) $28,981
Product warranty.................. 11,765 4,540 (2,395) 3,442 10,468
Year Ended June 30, 1994:
Allowances for doubtful
accounts(2)..................... 28,981 7,884 (1,163) 6,391(3) 29,311
Product warranty.................. 10,468 1,725 (671) 1,810 9,712
Year Ended June 30, 1995:
Allowances for doubtful
accounts(2)..................... 29,311 7,407 (785) 6,379(3) 29,554
Product warranty.................. 9,712 1,695 2,115 1,694 11,828
</TABLE>
------------
(1) Opening balance has been adjusted to include Kendall.
(2) Deducted from assets.
(3) Write-off of accounts receivable considered uncollectible.
S-3
Exhibit 10
TYCO INTERNATIONAL LTD.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PLAN DOCUMENT
1. Introduction.
------------
(a) The name of this plan is the Tyco International Ltd. Supplemental
Executive Retirement Plan. The Plan is intended to make up for contributions
that cannot be made on behalf of certain key employees under the Savings Plan by
reason of the Limitations. The Plan shall be construed consistent with the
purposes described herein, including without limitation, the anti-conditioning
rules of Section 401(k)(4) of the Code.
(b) The Plan is intended to be "a plan which is unfunded and is
maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees"
within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
2. Definitions. Wherever used herein, the following terms have the
-----------
meanings set forth below, unless a different meaning is clearly required by the
context. Any capitalized term not defined herein shall have the meaning given
to it in the Savings Plan.
(a) "Account" means the bookkeeping account maintained for each
Participant to which amounts credited on behalf of the Participant under Section
3 shall be recorded.
(b) "Affiliated Entity" means any entity considered to be in the same
controlled group (within the meaning of Section 302(d)(8)(C) of ERISA) as Tyco
International Ltd.
(c) "Beneficiary" means the individual(s) designated by the
Participant to receive any benefits due upon or after his or her death pursuant
to Section 8. In the absence of an effective Beneficiary designation at the
time of the Participant's death, the Participant's Beneficiary shall be his or
<PAGE>
her spouse, or if the Participant does not have a spouse at the date of his or
her death, then to the Participant's executors or administrators.
(d) "Board of Directors" means the Board of Directors of Tyco
International Ltd.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and
any successor code, and related rules, regulations and interpretations.
(f) "Company" means Tyco International Ltd. and any successor to all
or a major portion of its assets or business which assumes the obligations of
Tyco International Ltd.
(g) "Compensation" means, with respect to any Participant, direct
cash compensation paid during the calendar year to that Participant by the
Company or an Affiliated Entity for services rendered, including salaries,
commissions and bonuses, in each case as determined by the Committee, and
including any amount which would have been paid to the Participant but for an
election under the Savings Plan or the Company's Deferred Compensation Plan, or
a cafeteria plan under Section 125 of the Code, but excludes any amounts paid
from this Plan or the Company's Deferred Compensation Plan, income from the
exercise of non-qualified stock options or from the disqualifying disposition of
incentive stock options, income realized when restricted stock becomes fully
transferable or is no longer subject to a substantial risk of forfeiture,
reimbursement for moving expenses and other relocation expenses, mortgage
interest differentials, payment for reimbursement for taxes, international
assignment premiums, allowances and any other reimbursements.
(h) "Committee" means the Company's Retirement Committee.
2
<PAGE>
(i) "Disability" means a Participant's permanent and total incapacity
of engaging in any employment for the Company or any Affiliated Entity for
physical or mental reasons. Disability shall be deemed to exist only when such
Participant meets either the requirements for disability benefits under the
Social Security law then in effect, or the requirements for disability benefits
under a long-term disability plan maintained by the Company or an Affiliated
Entity.
(j) "Eligible Employee" means each employee of the Company or an
Affiliated Entity with Compensation equal to the limit imposed by Section
401(a)(17) of the Code ($150,000 for 1995) or greater. With regard to the credit
provided by the Section 3(c), the term "Eligible Employee" also means each
Kendall employee who is precluded from receiving the supplemental employer
matching contributions under the terms of the Savings Plan. Notwithstanding the
foregoing, the term "Eligible Employee" does not include an employee who is
covered by an agreement that provides for supplemental retirement benefits or an
employee who is covered by an agreement which provides for severance from
employment.
(k) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended and any successor statute, and related rules, regulations and
interpretations.
(l) "Kendall" means The Kendall Company.
(m) "Kendall Plan" means The Kendall Employees' Savings and
Investment Plan.
(n) "Limitations" means the limitations imposed under Sections
401(a)(17) and 415 of the Code.
3
<PAGE>
(o) "Participant" means any Eligible Employee designated by the
Committee to participate in the Plan. Notwithstanding the foregoing, any
individual who was a Participant in a prior Plan Year but who ceases to be an
Eligible Employee shall continue to be a Participant so long as amounts remain
credited to his or her Account, but he or she shall cease to be a Participant
for purposes of receiving Participant Credits under Section 3.
(p) "Plan" means the Tyco International Ltd. Supplemental Executive
Retirement Plan.
(q) "Plan Year" means the twelve-month period ending on each
December 31st.
(r) "Quarter" means each of the three-month periods ending on March,
June, September and December in each Plan Year.
(s) "Retirement" or "Retires" shall mean severance from employment
from the Company and all Affiliated Entities for any reason other than a leave
of absence or death on or after the earlier of the attainment of (i) age 65 or
(ii) age 55 and ten Years of Service.
(t) "Savings Plan" means the Tyco International Ltd. Retirement
Savings and Investment Plan.
(u) "Year of Service" means each "Year of Vesting Service" credited
to the Participant under the Savings Plan.
3. Participant Credits.
-------------------
(a) Effective as of the last day of each Quarter, the Company shall
credit to each Participant's Account an amount equal to the maximum employer
4
<PAGE>
matching contributions which would have been credited to the account of the
Participant under the Savings Plan pursuant to the plan formula contained
therein, but utilizing the definition of "Compensation" used in this Plan and
disregarding the Limitations, regardless of the Participant's actual level of
participation in the Savings Plan, less the maximum employer matching
contributions permitted by the Limitations.
(b) With respect to each Participant who is a Kendall employee,
effective as of July 1, 1995, the Company shall credit to such Participant's
Account an amount equal to the maximum employer matching contributions which
would have been credited to the account of the Participant under the Kendall
Plan for the period July 1, 1995 through December 31, 1995 pursuant to the plan
formula contained therein (but without regard to the plan provision precluding
certain employees from receiving the supplemental match) and utilizing the
definition of "Compensation" used in the Kendall Plan and disregarding the
Limitations, regardless of the Participant's actual level of participation in
the Kendall Plan, less the sum of the maximum employer matching contributions
permitted by the Limitations for the same period and the amount credited to the
---
Participant's cash balance account in The Kendall Company and Subsidiaries
Pension Plan for the period January 1, 1995 through June 30, 1995. Such credit
shall be made as of the last day of each Quarter beginning July 1, 1995 and
October 1, 1995.
(c) With respect to each Participant who is a Kendall employee and
who is precluded by the terms of the Kendall Plan from receiving a supplemental
employer matching contribution, the Company shall credit to such Participant's
Account an amount equal to the maximum supplemental employer matching
contributions (i.e., the additional employer matching contributions for
participants with ten or more Years of Service) which would have been credited
5
<PAGE>
to the account of such Participant under the Kendall Plan for the period July 1,
1995 through December 31, 1995 but for such preclusion. Such credit shall be
made as of the last day of each Quarter beginning July 1, 1995 and October 1,
1995.
(d) Notwithstanding the foregoing, the Company reserves the right to
adjust the credits to any Participant's Account if the Participant's
Compensation for the Plan Year is less than the limit imposed by Section
401(a)(17) of the Code.
4. Crediting Earnings and Losses.
-----------------------------
(a) Except as otherwise provided in Section 7(c) with respect to
installment payments, as of the last day of each Quarter and as of any other
date designated by the Committee for the revaluation and adjustment of Accounts,
each Participant's Account shall be adjusted to reflect an amount of earnings or
losses to be credited on the amount previously credited to such Account. The
Committee shall, from time to time and in its sole discretion select one or more
investment vehicles to be used as the measuring standards for crediting earnings
or losses standing to the credit of each Participant. The earnings or losses to
be credited to each Participant's Account for any period shall be equivalent to
the amount of earnings or losses which would have been credited to the Account
if such Account had actually been invested in such vehicle during such period.
(b) Notwithstanding the foregoing, the Committee may change the
method of crediting earnings or losses to Accounts under the Plan, by written
notice to each Participant, which notice shall specify the new method for
crediting earnings or losses to be used and the effective date of such change.
6
<PAGE>
5. Vesting
-------
(a) A Participant shall become fully vested in the full value of the
amount credited to his or her Account upon attainment of age 55, death,
Disability, or completion of at least five Years of Service.
(b) A Participant whose employment with the Company or any Affiliated
Entity terminates prior to attainment of age 55 (for any reason other than death
or Disability) with fewer than five Years of Service will forfeit all amounts in
his or her Account upon his or her termination of employment.
6. Timing of Distribution
----------------------
Upon initial enrollment in the Plan, a Participant shall irrevocably elect
on a form prescribed by the Company to commence distribution of his or her
vested Account balance either (a) upon his or her Retirement or other
termination of employment, or (b) in any calendar year that is at least five
years from initial participation in the Plan as may be selected by the
Participant, but not later than the year in which the Participant attains age 70
(the "Distribution Year"). If no election is made, the distribution will
commence upon the Participant's termination of employment.
7. Method of Distribution
----------------------
(a) Upon initial enrollment in the Plan, a Participant shall
irrevocably elect on a form prescribed by the Company to receive his or her
vested Account balance pursuant to one of the following payment options:
7
<PAGE>
(i) A single lump sum to be paid within 60 days following the
quarter in which the Participant Retires or otherwise
terminates his or her employment with the Company or an
Affiliated Entity or within the first 60 days of the
Distribution Year.
(ii) Annual equal installments over a period not to exceed 15
years, beginning no later than 60 days of the calendar year
next following the year in which the Participant Retires or
otherwise terminates his or her employment with the Company
or an Affiliated Entity or March 1 of the Distribution Year.
If no election is made, the distribution will be made in a lump sum
pursuant to (i) above.
(b) All amounts credited to each Participant's Account which become
payable hereunder shall be paid by the Company or an Affiliated Entity in cash.
Each such Account shall be charged with the amount distributed with respect
thereto as of the date of payment.
(c) In the event a benefit is paid in installments, installment
payment amounts shall be determined in the following manner:
(i) The interest rate to be used to calculate installment
payment amounts shall be a fixed interest rate that is
determined by averaging the rates of earnings or losses for
the five Plan Years preceding the initial year of
distribution. If a Participant has participated in the Plan
for fewer than five Plan Years, this average shall be
determined by averaging the rates of earnings or losses for
8
<PAGE>
the Plan Years during which he or she participated in the
Plan.
(ii) Based on the interest rate determined in (i) above, the
Participant's Account balance shall be amortized in equal
annual installment payments over the term of the specified
installment period.
8. Payments Upon Death.
-------------------
(a) In the event of a Participant's death prior to his or her
termination of employment with the Company or an Affiliated Entity, the full
value of the amount credited to the Participant's Account shall be paid to the
Participant's Beneficiary in a single lump sum as soon as practicable after such
Participant's death.
(b) In the event of a Participant's death after his or her
termination of employment but before full distribution of the amounts to be paid
to him or her pursuant to Section 7 has been completed, the value of the amounts
payable under Section 7 shall be paid to the Participant's Beneficiary in a
single lump sum as soon as is practicable after such Participant's death.
(c) Each Participant may designate, from time to time, a Beneficiary
or Beneficiaries (who may be named contingently or successively) to whom any
amounts which remain credited to the Participant's Account at the time of his or
her death shall be paid. Each such designation shall revoke all prior
designations by the same Participant, except to the extent otherwise
specifically noted, shall be in a form prescribed by the Company and shall be
effective only when filed by the Participant in writing with, and acknowledged
by, the Company during his or her lifetime.
9
<PAGE>
9. No Funding Required.
-------------------
(a) Nothing in this Plan will be construed to create a trust or to
obligate the Company or any other person to segregate a fund, purchase an
insurance contract, or in any other way to fund currently the future payment of
any benefits hereunder, nor will anything herein be construed to give any
Participant or any other person rights to any specific assets of the Company or
of any other person. Except as described in (b) below, any benefits which
become payable hereunder shall be paid from the general assets of the Company.
(b) The Company in its sole discretion may establish a grantor or
other trust of which the Company is treated as the owner under the Code, to
provide for the payment of benefits hereunder, subject to the claims of the
Company's general creditors in the event of insolvency, and subject to such
other terms and conditions as the Company may deem necessary or advisable to
ensure (i) that benefits are not includible, by reason of the establishment or
funding of such trust, in the income of trust beneficiaries prior to actual
distribution and (ii) that the existence of such trust does not cause the Plan
or any other arrangement to be considered funded for purposes of Title I of
ERISA.
10. Plan Administration and Interpretation. The Company shall have
--------------------------------------
complete control over the administration of the Plan and complete control and
authority to determine, in its sole discretion, the rights and benefits and all
claims, demands and actions arising out of the provisions of the Plan of any
Participant, Beneficiary, or other person having or claiming to have any
interest under the Plan and the Company's determinations shall be conclusive and
binding on all such parties. The Company shall be deemed to be the Plan
Administrator with the responsibility for complying with any reporting and
10
<PAGE>
disclosure requirements of ERISA. The rights of the Company hereunder shall be
exercised by the Committee. To the extent that the Committee is unable or
unwilling to exercise any right hereunder or make any determination hereunder,
however, the Board of Directors shall exercise such right or make such
determination.
11. Claims Procedure.
----------------
(a) Any Participant or Beneficiary of a deceased Participant (such
Participant or Beneficiary being referred to below as a "Claimant") may deliver
to the Committee a written claim for a determination with respect to the amounts
distributable to such Claimant from the Plan. If such a claim relates to the
contents of a notice received by the Claimant, the claim must be made within 60
days after such notice was received by the Claimant. All other claims must be
made within 180 days of the date on which the event that caused the claim to
arise occurred. The claim must state with particularity the determination
desired by the Claimant.
(b) The Committee shall consider a Claimant's claim within 90 days,
and shall notify the Claimant in writing:
(i) that the Claimant's requested determination has been made,
and that the claim has been allowed in full; or
(ii) that the Committee has reached a conclusion contrary, in
whole or in part, to the Claimant's requested determination, and such notice
must set forth in a manner calculated to be understood by the Claimant:
(A) the specific reason(s) for the denial of the claim, or
any part of it;
11
<PAGE>
(B) specific reference(s) to pertinent provisions of the
Plan upon which such denial was based;
(C) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an explanation of why such
material or information is necessary; and
(D) an explanation of the claim review procedure set forth
in this Section 11.
(c) Within 60 days after receiving a notice from the Committee that a
claim has been denied, in whole or in part, a Claimant (or the Claimant's duly
authorized representative) may file with the Committee a written request for a
review of the denial of the claim. Thereafter, but not later than 30 days after
the review procedure began, the Claimant (or the Claimant's duly authorized
representative):
(i) may review pertinent documents;
(ii) may submit written comments or other documents; and/or
(iii) may request a hearing, which the Committee, in its sole
discretion, may grant.
(d) The Committee shall render its decision on review promptly, and
not later than 60 days after the filing of a written request for review of the
denial, unless a hearing is held or other special circumstances require
additional time, in which case the Committee's decision must be rendered within
120 days after such date. Such decision must be written in a manner calculated
to be understood by the Claimant, and it must contain:
(i) specific reasons for the decision;
12
<PAGE>
(ii) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(iii) such other matters as the Committee deems relevant.
(e) A Claimant's compliance with the foregoing provisions of this
Section 11 is a mandatory prerequisite to a Claimant's right to commence any
legal action with respect to any claim for benefits under this Plan.
12. Non-Assignable. Amounts payable under this Plan shall not be subject
--------------
to alienation, assignment, garnishment, execution or levy of any kind, and any
attempt to cause any such amount to be so subjected shall be null, void and of
no effect and shall not be recognized by the Company.
13. Termination and Modification. The Company may, by action of the
----------------------------
Committee, terminate or amend this Plan by written notice to each Participant
participating therein. A termination of the Plan shall have no effect other
than to eliminate the right of each Participant to have additional amounts
credited to his or her Account pursuant to Section 3. Except for such
"prospective" termination, the Plan may not be amended, modified, waived,
discharged or terminated, except by mutual consent of the Company and the
Participant or Participants affected thereby, which consent shall be evidenced
by an instrument in writing, signed by the party against which enforcement of
such amendment, modification, waiver, discharge or termination is sought.
14. Parties. The terms of this Plan shall be binding upon the Company,
-------
its successors or assigns and each Participant participating herein and his or
her spouse, Beneficiaries, heirs, executors and administrators.
13
<PAGE>
15. Liability of Company. Subject to its obligation to pay the amount
--------------------
credited to the Participant's Account at the time distribution is called for by
this Plan, neither the Company nor any person acting in behalf of the Company
shall be liable to any Participant or any other person for any act performed or
the failure to perform any act with respect to the Plan.
16. Notices. Notices, elections or designations by a Participant to the
-------
Company hereunder shall be addressed to the Company to the attention of the
Treasurer of the Company. Notices by the Company to a Participant shall be
addressed to the Participant at his or her most recent home address as reflected
in the records of the Company.
17. Withholding. All payments under this Plan shall be net of tax
-----------
withholding required by applicable Federal and state laws.
18. Unsecured General Creditors. No Participant or his or her legal
---------------------------
representative or any Beneficiary designated by him or her shall have any right,
other than the right of an unsecured general creditor, against the Company in
respect of the Account of such Participant established hereunder.
19. Effective Date. This Plan shall be effective as of January 1, 1995,
--------------
and shall continue in existence thereafter until terminated pursuant to Section
13. Notwithstanding the foregoing, this Plan shall be effective as of July 1,
1995 with respect to the Kendall employees.
20. Governing Law. This Plan shall be construed and enforced in
-------------
accordance with, and governed by, the laws of the State of New Hampshire.
14
<PAGE>
IN WITNESS WHEREOF, this Plan has been duly signed for and on behalf of the
Company by its duly authorized officer on the 25TH day of July, 1995.
TYCO INTERNATIONAL LTD.
By: THE RETIREMENT COMMITTEE
--------------------------
15
EXHIBIT 12
TYCO INTERNATIONAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Earnings:
Income before income taxes, extraordinary item and
cumulative effect of accounting changes................... $384,878 $328,190 $179,295
-------- -------- --------
Fixed charges:
Interest expense(1)....................................... 63,385 62,431 85,785
Rentals(2)................................................ 23,767 19,932 21,021
-------- -------- --------
87,152 82,363 106,806
-------- -------- --------
Earnings before income taxes and fixed charges.............. $472,030 $410,553 $286,101
-------- -------- --------
-------- -------- --------
Ratio of earnings to fixed charges.......................... 5.42 4.98 2.68
-------- -------- --------
-------- -------- --------
</TABLE>
------------
(1) Interest expense consists of interest on indebtedness and amortization of
debt expense.
(2) One-third of net rental expense is deemed representative of the interest
factor.
EXHIBIT 21
TYCO INTERNATIONAL LTD.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY PLACE OF INCORPORATION
--------------------------------------------------------------------- -----------------------
<S> <C>
AUSTRALIA
A.C.N. 000 233 536 PTY LIMITED)...................................... Australia
A.C.N. 007 664253 PTY LIMITED (1).................................... Australia
FIRE CONTROL PTY LIMITED............................................. Australia
FIREFAIR PTY LIMITED................................................. Australia
FIRE GUARD A.F.S. PTY LTD............................................ Australia
FIRMAGROUP OPERATIONS HOLDINGS PTY LTD............................... Australia
G.F.P.S. PTY LIMITED (3)............................................. Australia
GRINNELL ASIA PACIFIC PTY LIMITED (4)................................ Australia
GRINNELL BUILDING PRODUCTS PTY LTD (2)............................... Australia
ISIS INTERIORS PTY LIMITED........................................... Australia
KENDALL AUSTRALASIA PTY LIMITED...................................... Australia
MATHER & PLATT PROPRIETARY LIMITED................................... Australia
M.B. JOHN LIMITED.................................................... Australia
NEWMAC BUILDING PRODUCTS PTY LIMITED................................. Australia
SILAN PTY LIMITED.................................................... Australia
SUPER NOMINEES PTY LIMITED (NSW)..................................... Australia
TESP PTY LIMITED..................................................... Australia
T.I.S.P. PTY LIMITED................................................. Australia
TYCO GRINNELL ASIA PACIFIC PTY LIMITED............................... Australia
TYCO INTERNATIONAL PTY LIMITED....................................... Australia
VIKING FIRE SYSTEMS PTY LIMITED (5).................................. Australia
WORMALD AUSTRALIA PTY LIMITED (6).................................... Australia
</TABLE>
------------
(1) Also doing business under the following name: Firegard (Australia) Company
(2) Also doing business under the following names: Cecon Fire Doors (NSW only),
Fire Systems Engineering
(3) Also doing business under the following name: Guardian Fire Protection Co.
(4) Also doing business under the following names: Grinnell ACT, Grinnell
Controlled Atmospheres, Grinnell Flow Control, Grinnell Supply Sales,
Jefferson Electrical Services, O'Donnell Griffin, Planned Communications
Australia, WF Energy Controls
(5) Also doing business under the following name: Viking Fire Sprinklers (SA and
NT only)
(6) Also doing business under the following names: Advanced Systems Engineering,
E.P.S. Electrical & Plumbing Services, Fire Control Services, Olsen
Engineering Company, Quintrix Communications, Wormald Advanced Systems
Engineering, Wormald Building Products, Wormald Fire Engineering, Wormald
Fire Systems, Wormald Manufacturing & Distribution, Wormald Security
(Tasmania only), Wormald Technology.
<TABLE>
<S> <C>
AUSTRIA
WORMALD WALTHER FEUERSCHUTZ GES. M.B.H............................... Austria
BELGIUM
WORMALD S.A.......................................................... Belgium
BERMUDA
KRAL STEEL LIMITED................................................... Bermuda
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARY PLACE OF INCORPORATION
--------------------------------------------------------------------- -----------------------
<S> <C>
BORNEO
WORMALD BORNEO SDN. BHD.............................................. Borneo
CANADA
495649 ONTARIO LIMITED............................................... Canada
KENDALL CANADA, INC.................................................. Canada
LUDLOW CANADA, INC................................................... Canada
TYCO INTERNATIONAL OF CANADA LTD. (1)................................ Canada
UNISTRUT CANADA LIMITED.............................................. Canada
</TABLE>
------------
(1) Also doing business under the following names: Canvil, Mueller Canada,
Grinnell Fire Protection, Grinnell Supply Sales, Wormald Canada, Scotia
Sprinklers, Wormald Fire Systems
<TABLE>
<S> <C>
CHINA
KENDALL-YANTAI MEDICAL PRODUCTS COMPANY, LTD......................... China
OYT-GRINNELL FIRE DOOR MANUFACTURING COMPANY LIMITED................. China
CHILE
UNISTRUT CHILE LTD................................................... Chile
CYPRUS
GREENE INSURANCE LIMITED............................................. Cyprus
DENMARK
WORMALD INTERNATIONAL (SCANDINAVIA) A/S.............................. Denmark
FRANCE
ACHEROISE DES PARTICIPATIONS......................................... France
ANSUL S.A............................................................ France
BON & NAGA S.A....................................................... France
GRINNELL DISTRIBUTION FRANCE SARL.................................... France
KENDALL S.A.......................................................... France
MATHER & PLATT WORMALD S.A........................................... France
OMNIUM DE PREVENTION ET DE PROTECTION INCENDIE S.A................... France
SOCIETE EUROPEENE DE PROTECTION CONTROL L'INCENDIE, S.A.............. France
TYCO EUROPE SA....................................................... France
GERMANY
BIOFORM GMBH......................................................... Germany
CDK HOLDING DEUTSCHLAND GMBH......................................... Germany
GRINNELL HOFFMANN SPRINKLER GMBH..................................... Germany
HELMUT GEISSLER GLASINSTRUMENTE GMBH................................. Germany
IRS INDUSTRIE RATIONALISIERUNGS SYSTEME.............................. Germany
KENDALL MEDIZINISCHE ERZEUGNISSSE GMBH............................... Germany
OTTO FANKHANEL & SOHN GMBH........................................... Germany
TOTAL WALTHER FEUERSCHUTZ GMB........................................ Germany
TOTAL WALTHER FEUERSCHUTZ LOSCHMITTEL GMBH........................... Germany
TYCO HOLDING GMBH.................................................... Germany
WORMALD DEUTSCHLAND GMBH............................................. Germany
HONG KONG
KENDALL (ASIA) MEDICAL PRODUCTS LIMITED.............................. Hong Kong
O'DONNELL GRIFFIN (HONG KONG) LTD.................................... Hong Kong
WORMALD ENGINEERING SERVICES LTD..................................... Hong Kong
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARY PLACE OF INCORPORATION
--------------------------------------------------------------------- -----------------------
<S> <C>
INDONESIA
P.T. ODG WORMALD GRIFFIN INDONESIA................................... Indonesia
IRELAND
EXETER INSURANCE COMPANY LIMITED..................................... Ireland
MATHER & PLATT (IRELAND) LTD......................................... Ireland
MATHER & PLATT IRELAND (MANUFACTURING) LTD........................... Ireland
TYCO IRELAND LIMITED................................................. Ireland
ITALY
WORMALD ITALIANA S.P.A............................................... Italy
JAPAN
NIHON KENDALL K.K.................................................... Japan
MALAYSIA
INNODOUBLE (M) SDN BHD............................................... Malaysia
LOVYTEX SDN BHD...................................................... Malaysia
MEDIQUIP SDN BHD..................................................... Malaysia
TYCO FLOW CONTROL (MALAYSIA) SDN BHD................................. Malaysia
TYCO GRINNELL KM SDN BHD............................................. Malaysia
TYCO ENGINEERING & CONSTRUCTION (MALAYSIA) SDN BHD................... Malaysia
MEXICO
ANSUL MEXICO, S.A. DE C.V............................................ Mexico
ESPECIALIDADES MEDICAS KENMEX, S.A................................... Mexico
GRINNELL SISTEMAS DE PROTECCION CONTRA INCENDIO MEXICO S.A. DE C.V... Mexico
KEMEX HOLDING COMPANY, S.A. DE C.V................................... Mexico
KENDALL DE MEXICO S.A. DE C.V........................................ Mexico
NETHERLANDS
ANSUL B.V............................................................ Netherlands
BRAVOS B.V........................................................... Netherlands
GRINNELL SALES AND DISTRIBUTION B.V.................................. Netherlands
TOTAL WALTHER B.V.................................................... Netherlands
TYCO LABS HOLLAND I B.V.............................................. Netherlands
WORMALD B.V.......................................................... Netherlands
NEW ZEALAND
BENEFIS SYSTEMS LIMITED.............................................. New Zealand
FABRICATION & PUMP SERVICES LIMITED.................................. New Zealand
GRINNELL SUPPLY SALES LIMITED........................................ New Zealand
METROPOL FIRE NEW ZEALAND LIMITED.................................... New Zealand
O'DONNELL GRIFFIN LIMITED............................................ New Zealand
TYCO HOLDINGS NEW ZEALAND LTD........................................ New Zealand
WORMALD FIRE SYSTEMS LIMITED......................................... New Zealand
WORMALD HOLDINGS N.Z. LTD............................................ New Zealand
WORMALD NEW ZEALAND LTD.............................................. New Zealand
WORMALD SECURITY LIMITED............................................. New Zealand
WORMALD VIGILANT LIMITED............................................. New Zealand
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARY PLACE OF INCORPORATION
--------------------------------------------------------------------- -----------------------
<S> <C>
NORWAY
WORMALD SIGNALCO A/S................................................. Norway
PORTUGAL
WORMALD SERVICOS DE PROTECCAO CONTRA INCENDIOS, LIMITADA............. Portugal
SINGAPORE
GRINNELL SUPPLY SALES ASIA PTE. LTD.................................. Singapore
TYCO ENGINEERING AND CONSTRUCTION (SEA) PTE LTD...................... Singapore
TYCO LABORATORIES INTERNATIONAL (1993) PTE LTD....................... Singapore
SPAIN
KENDALL ESPANA S.A................................................... Spain
TOTAL WALTHER S.A.................................................... Spain
WORMALD MATHER + PLATT ESPANA S.A. (1)............................... Spain
BELGICAST INTERNATIONAL, S.L......................................... Spain
REVAME, S.L.......................................................... Spain
</TABLE>
------------
(1) Also doing business under the following name: Wormald Espania
<TABLE>
<S> <C>
SWEDEN
WORMALD FIRE SYSTEMS AB.............................................. Sweden
SWITZERLAND
NEOTECHA AG.......................................................... Switzerland
TOTAL WALTHER FEUERSCHUTZ AG......................................... Switzerland
TAIWAN
WORMALD ENGINEERING SYSTEMS TAIWAN LTD............................... Taiwan
THAILAND
KENDALL GAMMATRON LIMITED............................................ Thailand
TYCO INTERNATIONAL (THAILAND) LTD.................................... Thailand
UNITED KINGDOM
ATLAS FIRE ENGINEERING LIMITED....................................... United Kingdom
AVALON EMERGENCY SYSTEMS LIMITED..................................... United Kingdom
CDK U.K. LIMITED..................................................... United Kingdom
CHARLES WINN (VALVES) LIMITED........................................ United Kingdom
FIRE DEFENDER (UK) LTD............................................... United Kingdom
GRINNELL (UK), LTD. (2).............................................. United Kingdom
GRINNELL MANUFACTURING (U.K.) LIMITED (1)............................ United Kingdom
GRINNELL SALES & DISTRIBUTION (UK) LTD............................... United Kingdom
HINDLE COCKBURNS LIMITED............................................. United Kingdom
LASTONET PRODUCTS LIMITED............................................ United Kingdom
LITEPEEL LIMITED..................................................... United Kingdom
MATHER & PLATT (EXPORTS) LTD......................................... United Kingdom
MATHER & PLATT FIRE PROTECTION LIMITED............................... United Kingdom
SPENSALL ENGINEERING LIMITED......................................... United Kingdom
TEN ACRE SECURITIES LTD.............................................. United Kingdom
THE KENDALL COMPANY (U.K.) LIMITED................................... United Kingdom
TYCO HOLDINGS (UK) LTD............................................... United Kingdom
TYCO VALVES LIMITED.................................................. United Kingdom
WORMALD ANSUL (UK) LIMITED (3)....................................... United Kingdom
WORMALD ENGINEERING LTD.............................................. United Kingdom
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARY PLACE OF INCORPORATION
--------------------------------------------------------------------- -----------------------
<S> <C>
WORMALD FIRE SYSTEMS LTD............................................. United Kingdom
WORMALD HOLDINGS (UK) LTD............................................ United Kingdom
WORMALD INDUSTRIAL PROPERTY LTD...................................... United Kingdom
</TABLE>
------------
(1) Also doing business under the following names: The Ansul Fabrication, Debro
Engineering & Presswork
(2) Also doing business under the following names: Grinnell Firekil, GEM
Consultants
(3) Also doing business under the following names: Wormald Fire Systems, Wormald
Engineering, Wormald Britannia, Wormald Lintott and Lintott Process Systems
<TABLE>
<S> <C>
UNITED STATES
ALLIED TUBE & CONDUIT CORPORATION.................................... Delaware,U.S.
ANSUL, INCORPORATED (3).............................................. Delaware,U.S.
ATCOR, INC........................................................... Delaware,U.S.
DEUTSCHLAND HOLDINGS, INC............................................ Delaware,U.S.
GRINNELL CORPORATION (1)............................................. Delaware,U.S.
J.B. SMITH MFG. CO................................................... Oklahoma,U.S.
KENDALL INTERNATIONAL, INC........................................... Delaware,U.S.
LUDLOW CORPORATION (2)............................................... Mass, U.S.
LUDLOW JUTE CO. LTD.................................................. Mass, U.S.
MUELLER CO........................................................... Illinois,U.S.
MUELLER CO. FOUNDATION............................................... Illinois,U.S.
MUELLER HOLDINGS CORP................................................ Illinois,U.S.
MUELLER SERVICE CO................................................... Delaware,U.S.
POLYKEN TECHNOLOGIES EUROPE, INC..................................... Delaware,U.S.
SIMPLEX OCEAN SYSTEMS, INC........................................... Delaware,U.S.
SIMPLEX TECHNOLOGIES, INC............................................ Mass, U.S.
STARPLEX COMMUNICATIONS, INC......................................... Delaware,U.S.
THE KENDALL COMPANY.................................................. Delaware,U.S.
TYCO INTERNATIONAL ASIA, INC......................................... Delaware,U.S.
UNISTRUT CORPORATION................................................. Delaware,U.S.
UNISTRUT GEORGIA, INC................................................ Georgia,U.S.
UNISTRUT INTERNATIONAL CORP.......................................... Delaware,U.S.
UNISTRUT SPACE FRAME SYSTEMS, INC.................................... Delaware,U.S.
WATER HOLDINGS CORP.................................................. Delaware,U.S.
WORMALD AMERICAS, INC................................................ Delaware,U.S.
</TABLE>
------------
(1) Also doing business under the following names: Anvil Products, Gem Sprinkler
Company, Grinnell Flow Control, Grinnell Supply Sales Company, Grinnell Fire
Protection Systems Company, Hersey Products.
(2) Also doing business under the following names: Accurate Forming, Classic
Medical Products, Ludlow Laminating and Coating, Ludlow Technical Products,
Twitchell, Uni-Patch.
(3) Also doing business under the following name: Ansul Fire Protection.
<TABLE>
<S> <C>
VENEZUELA
ANSUL DE VENEZUELA C.A............................................... Venezuela
KENDALL DE VENEZUELA C.A............................................. Venezuela
</TABLE>
The above direct and indirect subsidiaries are included in the Consolidated
Financial Statements of Tyco International Ltd., which is incorporated in
Massachusetts, United States.
Tyco International Ltd. also does business under the following names through
its divisions: Armin Plastics, North American Printed Circuits, Tyco Engineered
Systems (TESI) and Tyco Backplanes.
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the incorporation by reference in the Registration Statements
on Forms S-8 (File nos. 2-86758, 2-93570, 33-54127, 33-56075, 33-56077,
33-56081, 33-56083, 33-56079 and 33-57885) of Tyco International Ltd. of our
reports dated August 1, 1995 on our audit of the consolidated financial
statements and financial statement schedule of Tyco International Ltd. as of and
for the years ended June 30, 1995 and 1994 which reports are included in this
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 20, 1995
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (File nos. 2-86758, 2-93570, 33-54127, 33-56075,
33-56077, 33-56081, 33-56083, 33-56079 and 33-57885) of Tyco International Ltd.
(formerly Tyco Laboratories, Inc.) of our reports dated August 3, 1993 appearing
on pages 20 and S-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Boston, Massachusetts
September 20, 1995
<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
YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 66,021
<SECURITIES> 0
<RECEIVABLES> 552,728
<ALLOWANCES> (29,554)
<INVENTORY> 529,158
<CURRENT-ASSETS> 1,451,901
<PP&E> 1,169,477
<DEPRECIATION> (511,006)
<TOTAL-ASSETS> 3,381,461
<CURRENT-LIABILITIES> 1,084,715
<BONDS> 506,417
<COMMON> 38,183
0
0
<OTHER-SE> 1,596,498
<TOTAL-LIABILITY-AND-EQUITY> 3,381,461
<SALES> 4,534,651
<TOTAL-REVENUES> 4,534,651
<CGS> 3,313,301
<TOTAL-COSTS> 3,313,301
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,407
<INTEREST-EXPENSE> 63,385
<INCOME-PRETAX> 384,878
<INCOME-TAX> 168,285
<INCOME-CONTINUING> 216,593
<DISCONTINUED> 0
<EXTRAORDINARY> (2,600)
<CHANGES> 0
<NET-INCOME> 213,993
<EPS-PRIMARY> 2.83
<EPS-DILUTED> 2.83
</TABLE>
