SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
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)
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)
<TABLE>
<S> <C>
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X . No .
The number of shares of common stock outstanding as of January 26, 1995 was 75,175,434.
</TABLE>
<PAGE>
<TABLE> <CAPTION>
TYCO INTERNATIONAL LTD.
INDEX TO FORM 10-Q
<S> <C>
Page
-----
Part I - Financial Information:
Item 1 - Financial Statements -
Consolidated Balance Sheet - December 31, 1994 and
June 30, 1994 1-2
Consolidated Statement of Income for the Second Quarters
and Six Months ended December 31, 1994 and 1993 3
Consolidated Statement of Changes in Shareholders'
Equity for the Six Months ended December 31,
1994 and 1993 4
Consolidated Statement of Cash Flows for the Six
Months ended December 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Operating Results 10-12
Part II - Other Information:
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE> <CAPTION>
CONSOLIDATED BALANCE SHEET
ASSETS
- ----------------------------------------------------------------------------------
(unaudited)
(in thousands) December 31, 1994 June 30, 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 56,781 $ 75,843
Receivables, less allowance for doubtful
accounts of $31,209 in fiscal 1995 and
$29,311 in fiscal 1994 511,224 515,160
Contracts in process 90,839 79,475
Inventories 544,254 517,068
Deferred income taxes 115,266 101,837
Prepaid expenses and other 53,442 54,904
----------- ---------
1,371,806 1,344,287
----------- ---------
Property and Equipment:
Land 33,203 33,235
Buildings 267,794 257,485
Machinery and equipment 699,681 647,058
Leasehold improvements 16,374 15,166
Construction in progress 73,019 42,648
Accumulated depreciation (456,987) (385,719)
-------- --------
633,084 609,873
-------- --------
Goodwill and Other Intangible Assets 932,638 918,791
Reorganization Value in Excess of
Identifiable Assets 112,271 115,201
Deferred Income Taxes 95,151 112,691
Other Assets 41,519 39,978
---------- ----------
$3,186,469 $3,140,821
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(unaudited)
(in thousands except share data) December 31, 1994 June 30, 1994
- --------------------------------------------------------------------------------
Current Liabilities:
Loans payable and current maturities of
long-term debt $ 104,655 $ 163,164
Accounts payable 324,258 332,004
Accrued expenses 390,537 382,576
Contracts in process - billings
in excess of costs 76,977 63,324
Income taxes 78,505 73,301
---------- ----------
974,932 1,014,369
---------- ----------
Deferred Income Taxes 7,986 13,698
Long-term Debt 563,467 588,491
Other Liabilities 153,251 157,237
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 73,901,064
shares in fiscal 1995 and 71,084,293
shares in fiscal 1994, net of reacquired
shares of 7,594,427 in fiscal 1995
and 7,600,747 in fiscal 1994 36,951 35,542
Capital in excess of par value, net of
deferred compensation of $25,367 in
fiscal 1995 and $9,318 in fiscal 1994 603,378 567,476
Currency translation adjustment (23,819) (40,874)
Retained earnings 870,323 804,882
---------- ----------
1,486,833 1,367,026
---------- ----------
$3,186,469 $3,140,821
---------- ----------
---------- ----------
See notes to consolidated financial statements.
2
<PAGE>
<TABLE> <CAPTION>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- -------------------------------------------------------------------------------------------------
For the Periods ended December 31,
1994 and 1993 (in thousands Fiscal Second Quarter Fiscal Six Months
except per share data) 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,097,703 $998,073 $2,151,895 $1,997,671
---------- --------- ---------- ----------
Costs and Expenses:
Cost of sales 804,989 738,386 1,572,626 1,478,851
Selling, general and administrative 177,939 167,728 354,111 336,163
Merger and transaction related costs 37,170 - 37,170 -
Interest 15,020 15,606 31,703 33,320
--------- -------- --------- ---------
1,035,118 921,720 1,995,610 1,848,334
--------- -------- --------- ---------
Income before income taxes and
extraordinary item 62,585 76,353 156,285 149,337
Income taxes (35,961) (32,951) (76,276) (63,867)
--------- -------- --------- ----------
Net income before extraordinary item 26,624 43,402 80,009 85,470
Extraordinary item, net of tax benefit (2,600) - (2,600) -
--------- -------- ---------- ----------
Net Income $ 24,024 $ 43,402 $ 77,409 $ 85,470
---------- --------- ------------ ------------
---------- --------- ------------ ------------
Net Income Per Share:
Before extraordinary item $.35 $.59 $1.07 $1.16
Extraordinary Item (.03) - (.03) -
----- ----- ------ -------
Net income $ .32 $ .59 $1.04 $ 1.16
----- ------ ------ ------
----- ------ ------ ------
Cash dividends per common share $ .10 $ .10 $ .20 .20
----- ------ ------- ------
----- ------ ------- ------
Common equivalent shares 75,185 73,690 74,732 73,624
------ ------ ------- -------
------ ------ ------- -------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
For the Six Months ended December 31, 1994 and 1993
<TABLE> <CAPTION>
- -------------------------------------------------------------------------------------------
Capital in Currency
Common Stock Excess of Translation Retained
(in thousands) $.50 Par Value Par Value Adjustment Earnings
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1993 $35,462 $558,481 $ (89,386) $634,229
Net income 85,470
Dividends (9,269)
Management equity compensation 809
Restricted stock grants,
cancellations, tax
benefits and other 16 1,294
Warrants, options exercised 319
Currency translation adjustment (2,939)
Amortization of deferred
compensation 1,810
-------- -------- -------- --------
Balance at December 31, 1993 $35,478 $562,713 $(92,325) $710,430
-------- -------- -------- --------
-------- -------- -------- --------
Balance at June 30, 1994 $35,542 $567,476 $(40,874) $804,882
Net income 77,409
Dividends (11,968)
Management equity compensation 404
Restricted stock grants,
cancellations, tax
benefits and other 174 255
Warrants, options exercised 1,235 33,392
Currency translation adjustment 17,055
Amortization of deferred compensation 1,851
-------- -------- -------- --------
Balance at December 31, 1994 $36,951 $603,378 $(23,819) $870,323
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------
For the Six Months ended December 31,
(in thousands) 1994 1993
- -------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income $ 77,409 $ 85,470
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item 2,600 -
Depreciation 43,721 40,900
Amortization of intangibles 20,498 21,903
Provision for management equity plans - 7,195
Deferred income taxes (1,426) 22,390
Provision for losses on accounts receivable
and inventory writedowns 6,845 7,328
Changes in assets and liabilities net of
effects from acquisitions and divestitures:
Decrease in accounts receivable and
contracts in process 15,280 182,950
Increase in inventory (23,966) (15,575)
Decrease in accounts payable and
accrued expenses (25,203) (46,663)
Increase in income taxes payable 6,492 323
Other 5,753 3,024
--------- ---------
Net cash provided by operating activities 128,003 309,245
--------- ---------
Cash Flows From Investing Activities:
Capital expenditures (64,292) (41,754)
Purchase of businesses, net of cash acquired (23,601) (15,015)
--------- ---------
Net cash used in investing activities (87,893) (56,769)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from long term debt 144,889 -
Payments on long-term debt and lines of credit (229,430) (251,092)
Dividends paid (9,258) (9,262)
Exercise of stock options and warrants 34,627 319
Other - (344)
--------- ----------
Net cash used in financing activities (59,172) (260,379)
--------- ----------
Decrease in cash and cash equivalents (19,062) (7,903)
Cash and cash equivalents at beginning of year 75,843 50,041
--------- ---------
Cash and cash equivalents at end of period $ 56,781 $ 42,138
--------- ----------
--------- ----------
Supplementary cash flow disclosure:
Interest paid $ 33,636 $ 36,058
--------- ---------
--------- ---------
Income taxes paid $ 56,234 $ 35,603
--------- ---------
--------- ---------
See notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. On October 19, 1994, a wholly-owned subsidiary of Tyco merged with
Kendall International, Inc. ("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 the 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. 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 and integration
costs.
2. The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and note disclosures required
by generally accepted accounting principles. These statements
should be read in conjunction with the financial statements and
notes thereto for the year ended June 30, 1994 included in the
Company's Current Report on Form 8-K dated January 10, 1995. The
accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management such
financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to summarize fairly the
Company's financial position and results of operations.
3. Long-term debt is as follows:
<TABLE> <CAPTION>
- -------------------------------------------------------------------------------------------
December 31, June 30,
(in thousands) 1994 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Credit agreement $ - $ 94,447
Uncommitted lines of credit - 22,000
Insurance company notes 135,000 135,000
8.25% subordinated notes due 2003 - 100,000
8.125% public notes due 1999 144,889 -
6.375% public debentures due 2004 104,262 104,644
9.5% public debentures due 2022 199,568 199,559
8.0% public debentures due 2023 49,958 49,957
Other, including industrial revenue bonds 34,445 46,048
----------- ----------
668,122 751,655
Less current portion and loans payable 104,655 163,164
----------- ----------
$563,467 $588,491
----------- ----------
----------- ----------
</TABLE>
6
<PAGE>
Under Tyco's 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
arrangements which allow the Company to borrow from
commercial banks on an "as offered" basis. The
borrowings and repayments occur daily and contain
no specific terms other than due dates and interest
rates. The due dates generally range from
overnight to 90 days and interest rates approximate
those available under the credit agreement.
In November 1994, the Company issued $145 million
principal amount of 8.125% notes due 1999. The net
proceeds from the sale of 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, the $80 million of
insurance company notes that were due on January
30, 1995. In the interim, the proceeds were used
to repay outstanding borrowings under various
uncommitted lines of credit.
In connection with the refinancing of Kendall's
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 for the Company's quarter
ended December 31, 1994.
Under its various loan agreements, the Company is
required to meet certain covenants, none of which
is considered restrictive to the operations of the
Company.
4. The Company has an agreement under which it sells
participating interests in a defined pool of trade
accounts receivable. Proceeds of $150 million from
the 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
$1.8 million and $1.3 million during the second
quarter of fiscal 1995 and 1994, respectively, and
$3.6 million and $1.3 million for the first six
months of fiscal 1995 and 1994, respectively, and
has been included in selling, general and
administrative expense in the Company's
Consolidated Statement of Income.
7
<PAGE>
5. Selected information for the Company's four industry segments
follows (in thousands):
<TABLE> <CAPTION>
Second Quarter Ended Six Months Ended
December 31, December 31,
--------------------- -------------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales:
Fire Protection $ 422,395 $ 393,243 $ 801,944 $ 763,999
Flow Control Products 237,906 211,003 480,974 431,789
Electrical and Electronic
Components 103,646 104,838 205,638 214,578
Disposable and Specialty
Products 333,756 288,989 663,339 587,305
----------- --------- ---------- ---------
$1,097,703 $ 998,073 $2,151,895 $1,997,671
----------- --------- ---------- ---------
----------- --------- ---------- ---------
Income Before Income Taxes
amd Extraordinary Item:
Fire Protection $ 21,014 $ 18,270 $ 39,198 $ 34,269
Flow Control Products 18,349 16,104 39,511 33,936
Electrical and Electronic
Components 18,494 19,131 36,595 36,094
Disposable and Specialty
Products 63,072 43,408 121,400 86,287
-------- -------- -------- ---------
Total operations 120,929 96,913 236,704 190,586
Interest expense (15,020) (15,606) (31,703) (33,320)
Corporate and other
amounts (1) (43,324) (4,954) (48,716) (7,929)
-------- -------- --------- ----------
$ 62,585 $ 76,353 $ 156,285 $ 149,337
-------- -------- --------- ----------
-------- -------- --------- ----------
</TABLE>
(1) The second quarter and six months ended December 31, 1994 include
charges of $37.2 million for merger and transaction related costs.
See Note 1 to these consolidated financial statements.
6. Differences between the provision for federal income taxes at the
statutory rate and the amounts
provided are as follows (in thousands):
<TABLE> <CAPTION>
Second Quarter Ended Six Months Ended
December 31, December 31,
-------------------- ------------------
1994 1993 1994 1993
----- ----- ----- ------
<S> <C> <C> <C> <C>
Provision at statutory
rate $21,905 $26,724 $54,700 $52,268
State income taxes 3,824 2,414 7,446 5,424
Non-deductible merger
and transaction related
costs 7,009 - 7,009 -
Depreciation and amorti-
zation under purchase
accounting 2,975 2,864 5,705 5,606
Foreign earnings taxed
at different rates 863 1,931 1,942 2,687
Effect of rate changes - - - (3,224)
Other (615) (982) (526) 1,106
-------- -------- -------- -------
Provision for income
taxes $35,961 $32,951 $76,276 $63,867
-------- -------- -------- -------
-------- -------- -------- -------
</TABLE>
In the normal course, the Company's federal income tax returns are
examined by the Internal Revenue Service and in connection with
such examinations, significant assessments could arise. Currently,
the Company's fiscal 1991 and 1992 returns are under examination.
Ultimate resolution of such assessments, if any, are not expected
to have a material adverse effect on the Company's financial
position or result of operations.
8
<PAGE>
7. Inventories are classified as follows (in thousands):
December 31, 1994 June 30, 1994
------------------- --------------
Purchased materials and
manufactured parts $160,132 $145,965
Work in process 99,883 92,786
Finished goods 284,239 278,317
--------- ---------
$544,254 $517,068
--------- ---------
8. In November 1992, the Financial Accounting Standards Board (the
"Board") issued Statement of Financial Accounting Standards
("SFAS") No. 112, "Employer's 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. In May 1993, the Board issued SFAS 114, "Accounting
by Creditors for Impairment of a Loan." This new standard must be
adopted no later than fiscal 1996. Adoption of this standard is
not expected to have a material effect on the Company's financial
position or results of operations.
9. In the normal course of business, the Company is liable for
contract completion and product performance. In addition, the
Company is in receipt of notifications from various environmental
agencies that conditions at a number of sites where hazardous
wastes of the Company and other persons were disposed of may
require cleanup and other possible remedial action. In the
opinion of management, these obligations will not materially
affect the Company's financial position or results of operations.
9
<PAGE>
Item 2 - Management's Discussion and Analysis of
Financial Condition and Operating Results
Overview
On October 19, 1994, a wholly-owned subsidiary of Tyco merged with Kendall
International, Inc. ("Kendall"). The transaction was accounted for as a pooling
of interests and the historical results of the companies have been combined for
all periods presented.
For the first six months of fiscal 1995, net income before extraordinary item
was $80.0 million, or $1.07 per share, compared with $85.5 million, or $1.16 per
share, for the first six months of fiscal 1994. Excluding the $31.2 million
after tax charge, or $0.42 per share, for merger and transaction related costs
related to the Kendall transaction in fiscal 1995 (see Note 1 to these
consolidated financial statements), net income before extraordinary item rose
30% to $111.2 million, or $1.49 per share. The increase was attributable to
strong earnings in the Disposable and Specialty Products group as well as
increased income in each of the Company's other business segments.
Results of Operations
Second Quarter of Fiscal 1995 Compared to Second Quarter of Fiscal 1994:
Sales increased 10% during the second quarter of fiscal 1995 to $1.1 billion
from $998.1 million in the second quarter of fiscal 1994. Sales of the Fire
Protection group increased $29.2 million to $422.4 million, or 7%, due primarily
to increased sales in the North American and Asia-Pacific contracting
businesses. Sales were relatively unchanged 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 dominated sales and by increased sales in certain operations. Sales
of the Flow Control group increased $26.9 million to $237.9 million, or 13%,
principally reflecting increased volume at Grinnell's distribution operations
and at Allied's pipe and tube business. Sales of the Electrical and Electronic
Components group decreased $1.2 million to $103.6 million, or 1%, resulting
principally from slightly lower sales of underwater communications cable systems
at Simplex and at the printed circuit businesses partially offset by higher
sales at Allied's electrical operations. Sales of the Disposable and Specialty
Products group increased $44.8 million to $333.8 million, or 16%, due
principally to increased sales at Kendall, and to a lesser extent, at Ludlow and
Armin.
For the second quarter of fiscal 1995 as compared to the second quarter of
fiscal 1994, operating profits of the Fire Protection group increased $2.7
million to $21.0 million, or 15%, due principally to higher margins in North
American fire protection contracting partially offset by slightly lower margins
in the European contracting operations. Operating profits of the Flow Control
group increased $2.2 million to $18.3 million, or 14%, due to increased earnings
at Mueller, at Allied's pipe and tube business and at Grinnell's distribution
operations. Operating profits of the Electrical and Electronic Components group
decreased $0.6 million to $18.5 million, or 3%, due to slightly lower earnings
at Simplex. Operating income of the Disposable and Specialty Products group
increased $19.7 million to $63.1 million, or 45%, due primarily to higher
operating profits at Kendall, and to a lesser extent, at Ludlow and Armin.
The impact on the consolidated results of operations from changes in foreign
exchange rates relative to the value of the U.S. dollar for the second quarter
of fiscal 1995 as compared to the same period of fiscal 1994 was not material.
Interest expense decreased $0.6 million to $15.0 million during the second
quarter of fiscal 1995 from the second quarter of fiscal 1994 due principally to
the sale of $150 million of accounts receivable late in the second quarter of
fiscal 1994 (see Note 4 to these consolidated financial statements) and lower
average debt balances offset partially by higher interest rates.
During the second quarter of 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.
10
<PAGE>
First Six Months of Fiscal 1995 Compared with First Six Months of Fiscal 1994:
Sales during the first six months of fiscal 1995 were $2.15 billion, an 8%
increase over fiscal 1994 sales of $2.0 billion. Sales of the Fire Protection
group increased $37.9 million to $801.9 million, or 5%, due to increased sales
in the North American and Asia-Pacific contracting business partially offset by
slightly lower sales in the European contracting business. The decline in
Europe was principally the result of the sale of certain fire products
businesses in the fourth quarter of fiscal 1994 partially offset by the impact
of changes in average foreign currency exchange rates on non U.S. dollar
denominated sales in the first six months of fiscal 1995 as compared to the
first six months of fiscal 1994. Had average foreign currency exchange rates
during the first six months of fiscal 1995 remained constant with the average
during the first six months of fiscal 1994, sales would have been approximately
$24 million less in fiscal 1995. Sales of the Flow Control group increased
$49.2 million to $481.0 million, or 11%, reflecting higher volume at Allied,
Mueller and Grinnell's distribution operations. Sales of the Electrical and
Electronic Components group decreased $8.9 million to $205.6 million, or 4%,
resulting principally from lower sales of underwater communications cable
systems at Simplex. Sales of the Disposable and Specialty Products group
increased $76.0 million to $663.3 million, or 13%, due to increased sales
principally at Kendall, and to a lesser extent, at Ludlow and Armin.
For the first six months of fiscal 1995 as compared to the first six months of
fiscal 1994, operating profits of the Fire Protection group rose $4.9 million to
$39.2 million, or 14%, due principally to higher margins at the North American
and Asia-Pacific fire protection operations partially offset by slightly lower
margins at the European contracting operations. The operating profits of the
Flow Control group increased $5.6 million to $39.5 million, or 16%, resulting
principally from increased earnings at Mueller and at Grinnell's North American
distribution operations. Operating profits of the Electrical and Electronic
Components group increased $0.5 million to $36.6 million, or 1%, due to
increased earnings at Simplex somewhat offset by decreased margins at Allied's
electrical business. Operating income of the Disposable and Specialty Products
group increased $35.1 million to $121.4 million, or 41%, reflecting higher
earnings principally at Kendall, and to a lesser extent, at Ludlow and Armin.
The impact on the consolidated results of operations from changes in foreign
exchange rates relative to the value of the U.S. dollar for the first six months
of fiscal 1995 as compared to the same period of fiscal 1994 was not material.
Interest expense decreased $1.6 million to $31.7 million during the first six
months of fiscal 1995 as compared to the first six months of fiscal 1994 due
principally to the sale of $150 million of accounts receivable late in the
second quarter of fiscal 1994 (see Note 4 to these consolidated financial
statements) and lower average debt balances offset partially by higher interest
rates.
Liquidity and Capital Resources
As presented in the Consolidated Statement of Cash Flows, net cash provided by
operating activities was $128.0 million during the first six months of fiscal
1995. The significant changes in working capital accounts were a decrease of
$15.3 million in accounts receivable and contracts in process, an increase of
$24.0 million in inventory and a $25.2 million decrease in accounts payable and
accrued expenses. Net changes in other working capital accounts were not
significant during the period. Working capital requirements for the remainder
of fiscal 1995 are not expected to change significantly.
11
<PAGE>
During the first six months of fiscal 1995, the Company used cash to purchase
$64.3 million of property and equipment, acquire a European fire products
company, a U.S. flow control company and three U.S. disposable health products
companies for an aggregate of $23.6 million, pay dividends of $9.3 million and
reduce total debt by $84.5 million. The Company received $34.6 million of cash
during the first six months of fiscal 1995 from the exercise of stock options
and warrants.
The level of capital expenditures is expected to increase slightly in fiscal
1995 as compared to fiscal 1994 and the source of funds for such expenditures is
expected to be cash from operations. The amount of total dividends paid is
expected to increase during the remainder of fiscal 1995 due to issuance of
shares of common stock in connection with the acquisition with Kendall. The
source of funds for such dividends is expected to be cash from operations.
At December 31, 1994 the Company's total debt was $668.1 million as compared to
$751.7 million at June 30, 1994. 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 due on January 30, 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 3 to these consolidated financial statements). The Company believes
that its funding sources are adequate for its anticipated requirements through
expected cash flows from operations and established financing arrangements.
Shareholders' equity was $1,486.8 million or $20.12 per share at December 31,
1994 compared to $1,367.0 million or $19.23 per share at June 30, 1994. The
increase is due to fiscal 1995 net income and to the exercise of stock options
and warrants. Total debt as a percent of total capitalization (total debt and
shareholders' equity) was 31% at December 31, 1994 and 35% at June 30, 1994.
The change is due principally to the decrease in debt and the increase in
shareholders' equity discussed above.
Backlog
The backlog of unfilled orders was approximately $1,037.5 million at
December 31, 1994 and $763.0 million at June 30, 1994. The increase is
principally attributable to a $185 million increase at Simplex, where backlog
was increased by an order extension on a multi-year contract for the manufacture
of underwater communications cable systems. Backlog also increased in each of
the Company's other business segments, most notably in the European and Asia-
Pacific regions of the Fire Protection segment.
12
<PAGE>
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------
At the Company's Annual Meeting on October 19, 1994,
shareholders voted on the following items:
i) To approve the issuance of Tyco common stock, par
value $0.50 per share, in connection with an Agreement
and Plan of Merger, dated as of July 13, 1994,
among Tyco, T Acquisition Corp., a wholly owned
subsidiary of Tyco, and Kendall International, Inc.:
Voted for 33,320,454
Voted against 965,396
Abstained 333,165
Broker non-votes 289,385
ii) To elect nine directors to hold office until the
1995 Annual Meeting of
Shareholders.:
A total of 37,644,452 shares were voted for, and
481,692 shares were voted against, each of the nine
directors as a group. Votes withheld against
individual directors were as follows: L.
Dennis Kozlowski - 5,266 votes, Joshua M. Berman -
6,289 votes, Richard S. Bodman - 7,861 votes,
Christopher D. Corrigan - 903,460 votes, John
F. Fort - 13,584 votes, Stephen W. Foss -
3,975 votes, Philip M. Hampton - 9,465 votes,
Edward Anthony Parkes - 903,516 votes and
Frank E. Walsh, Jr. - 6,310 votes. There were
no abstentions or broker non-votes.
iii) To approve the proposed Tyco 1994 Restricted Stock
Ownership Plan for Key Employees:
Voted for 30,496,842
Voted against 6,207,039
Abstained 1,100,595
Broker non-votes 289,385
iv) To approve the proposed Tyco Incentive Compensation
Plan:
Voted for 33,176,460
Voted against 2,395,963
Abstained 828,026
Broker non-votes 289,385
13
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Earnings Per Share Computation
27 - Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed by the Company on October 28,
1994 and Form 8-K/As were filed by the Company on
November 1, 1994, November 2, 1994 and November 3,
1994 to put on file certain audited and unaudited
historical financial information of the Company and
Kendall.
14
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TYCO INTERNATIONAL LTD.
/S/ Terry L. Hall
--------------------------
Terry L. Hall
Vice President - Chief Financial Officer
(Principal Accounting and Financial Officer)
Date: January 30, 1995
15
<PAGE>
TYCO INTERNATIONAL LTD.
INDEX TO EXHIBITS
Exhibit No.
11 Earnings Per Share Computation
27 Financial Data Schedule
16
<PAGE>
EXHIBIT 11
<TABLE> <CAPTION>
TYCO INTERNATIONAL LTD.
Earnings Per Share Computation
(In thousands, except per share amounts)
Quarter Ended Six months Ended
December 31, December 31,
------------------- --------------------
1994 1993 1994 1993
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Calculation of earnings per share:
Net Income before extraordinary item $26,624 $43,402 $80,009 $85,470
Extraordinary item (2,600) - (2,600) -
------- ------- -------- --------
Net income $24,024 $43,402 $77,409 $85,470
======= ====== ======= ======
Weighted average common shares issued
and outstanding during the period 73,307 70,969 72,271 70,952
Increase in weighted average common
shares outstanding due to restricted
stock plan, stock options and warrants 1,878 2,721 2,461 2,672
------ ----- ------ -----
Total common equivalent shares 75,185 73,690 74,732 73,624
======= ====== ======= ======
Earnings per share:
Before extraordinary item $0.35 $0.59 $1.07 $1.16
Extraordinary item (0.03) - (0.03) -
-------- ------ ------- -------
Net income $0.32 $0.59 $1.04 $1.16
======= ======= ======= ======
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> QTR-2 6-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-END> DEC-31-1994 DEC-31-1994
<CASH> 56,781 56,781
<SECURITIES> 0 0
<RECEIVABLES> 540,396 540,396
<ALLOWANCES> 31,209 31,209
<INVENTORY> 544,254 544,254
<CURRENT-ASSETS> 1,371,806 1,371,806
<PP&E> 1,090,071 1,090,071
<DEPRECIATION> (456,987) (456,987)
<TOTAL-ASSETS> 3,186,469 3,186,469
<CURRENT-LIABILITIES> 974,932 974,932
<BONDS> 563,467 563,467
<COMMON> 36,951 36,951
0 0
0 0
<OTHER-SE> 1,449,882 1,449,882
<TOTAL-LIABILITY-AND-EQUITY> 3,186,469 3,186,469
<SALES> 1,097,703 2,151,895
<TOTAL-REVENUES> 1,097,703 2,151,895
<CGS> 804,989 1,572,626
<TOTAL-COSTS> 804,989 1,572,626
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,571 3,267
<INTEREST-EXPENSE> 15,020 31,703
<INCOME-PRETAX> 62,585 156,285
<INCOME-TAX> 35,961 76,276
<INCOME-CONTINUING> 26,624 80,009
<DISCONTINUED> 0 0
<EXTRAORDINARY> (2,600) (2,600)
<CHANGES> 0 0
<NET-INCOME> 24,024 77,049
<EPS-PRIMARY> 0.32 1.04
<EPS-DILUTED> 0.32 1.04
</TABLE>
