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 March 31, 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)
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2297459
(State of Incorporation) (IRS Employer
Identification Number)
One Tyco Park, Exeter, New Hampshire 03833
(Address of registrant's principal executive office)
603-778-9700
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
The number of shares of common stock outstanding as of May 2, 1995 was
76,338,652.
<PAGE>
TYCO INTERNATIONAL LTD.
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements -
Consolidated Balance Sheet - March 31, 1995 and
June 30, 1994 1-2
Consolidated Statement of Income for the Third Quarters
and Nine Months ended March 31, 1995 and 1994 3
Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months ended March 31,
1995 and 1994 4
Consolidated Statement of Cash Flows for the Nine
Months ended March 31, 1995 and 1994 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 6 - Exhibits and Reports on Form 8-K 13
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEET
ASSETS
- -------------------------------------------------------------------------------
(unaudited)
(in thousands) March 31, 1995 June 30, 1994
- -------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 45,403 $ 75,843
Receivables, less allowance for doubtful
accounts of $31,307 in fiscal 1995 and
$29,311 in fiscal 1994 551,135 515,160
Contracts in process 110,059 79,475
Inventories 582,767 517,068
Deferred income taxes 111,145 101,837
Prepaid expenses and other 48,410 54,904
---------- ----------
1,448,919 1,344,287
---------- ----------
Property and Equipment:
Land 33,611 33,235
Buildings 278,447 257,485
Machinery and equipment 737,040 647,058
Leasehold improvements 17,220 15,166
Construction in progress 57,591 42,648
Accumulated depreciation (479,154) (385,719)
---------- ----------
644,755 609,873
---------- ----------
Goodwill and Other Intangible Assets 971,854 918,791
Reorganization Value in Excess of
Identifiable Assets 110,401 115,201
Deferred Income Taxes 80,878 112,691
Other Assets 46,790 39,978
---------- ----------
$3,303,597 $3,140,821
========== ==========
See notes to consolidated financial statements.
1
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(unaudited)
(in thousands except share data) March 31, 1995 June 30, 1994
- --------------------------------------------------------------------------------
Current Liabilities:
Loans payable and current maturities of
long-term debt $ 103,716 $ 163,164
Accounts payable 357,715 332,004
Accrued expenses 409,777 382,576
Contracts in process - billings
in excess of costs 68,022 63,324
Income taxes 73,148 73,301
---------- ----------
1,012,378 1,014,369
---------- ----------
Deferred Income Taxes 8,298 13,698
Long-term Debt 567,249 588,491
Other Liabilities 131,573 157,237
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 75,310,621
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 37,655 35,542
Capital in excess of par value, net of
deferred compensation of $21,542 in
fiscal 1995 and $9,318 in fiscal 1994 619,219 567,476
Currency translation adjustment (196) (40,874)
Retained earnings 927,421 804,882
---------- ----------
1,584,099 1,367,026
---------- ----------
$3,303,597 $3,140,821
========== ==========
See notes to consolidated financial statements.
2
<PAGE>
<TABLE><CAPTION>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
For the Periods ended March 31,
1995 and 1994 (in thousands Fiscal Third Quarter Fiscal Nine Months
except per share data) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,135,100 $1,003,730 $3,286,995 $3,001,401
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of sales 830,840 743,403 2,403,466 2,222,254
Selling, general and administrative 177,566 162,402 531,677 498,565
Merger and transaction related costs - - 37,170 -
Interest 15,583 13,949 47,286 47,269
---------- ---------- ---------- ----------
1,023,989 919,754 3,019,599 2,768,088
---------- ---------- ---------- ----------
Income before income taxes and
extraordinary item 111,111 83,976 267,396 233,313
Income taxes (46,156) (34,460) (122,432) (98,327)
---------- ---------- ---------- ----------
Income before extraordinary item 64,955 49,516 144,964 134,986
Extraordinary item, net of tax benefit - - (2,600) -
---------- ---------- ---------- ----------
Net Income $ 64,955 $ 49,516 $ 142,364 $ 134,986
========== ========== ========== ==========
Income Per Share:
Before extraordinary item $ .85 $.67 $ 1.93 $ 1.83
Extraordinary item - - (.03) -
Net income $ .85 $ .67 $ 1.89 $ 1.83
Cash dividends per common share $ .10 $ .10 $ .30 $ .30
Common equivalent shares 76,125 73,889 75,198 73,711
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE><CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
For the Nine Months ended March 31, 1995 and 1994
- ------------------------------------------------------------------------------------------------------------------------------
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 134,986
Dividends (13,903)
Management equity compensation 1,041
Restricted stock grants,
cancellations, tax
benefits and other 16 2,153
Warrants, options exercised 65 1,812
Currency translation adjustment 6,552
Amortization of deferred
compensation 2,764
-------- -------- -------- --------
Balance at March 31, 1994 $35,543 $566,251 $(82,834) $755,312
-------- -------- -------- --------
Balance at June 30, 1994 $35,542 $567,476 $(40,874) $804,882
Net income 142,364
Dividends (19,825)
Management equity compensation
Restricted stock grants,
cancellations, net tax
benefits and other 151 945
Warrants, options exercised 1,962 47,320
Currency translation adjustment 40,678
Amortization of deferred
compensation 3,478
-------- -------- -------- --------
Balance at March 31, 1995 $37,655 $619,219 $ (196) $927,421
-------- -------- -------- --------
See notes to consolidated financial statements.
4
<PAGE>
</TABLE>
<TABLE><CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------------------------
For the Nine Months ended March 31,
(in thousands) 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $142,364 $134,986
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item 2,600 -
Depreciation 66,447 65,748
Amortization of intangibles 31,058 31,556
Provision for management equity plans - 8,524
Deferred income taxes 17,708 41,722
Provision for losses on accounts receivable
and inventory writedowns 12,147 7,805
Changes in assets and liabilities net of
effects from acquisitions and divestitures:
(Increase) decrease in accounts receivable and
contracts in process (38,147) 156,332
Increase in inventory (54,322) (27,832)
Decrease in accounts payable and
accrued expenses (16,028) (62,180)
Increase (decrease) in income taxes payable 994 (2,202)
Other 942 461
-------- --------
Net cash provided by operating activities 165,763 354,920
-------- --------
Cash Flows From Investing Activities:
Capital expenditures (88,196) (63,088)
Purchase of businesses, net of cash acquired (58,031) (23,824)
-------- --------
Net cash used in investing activities (146,227) (86,912)
-------- --------
Cash Flows From Financing Activities:
Proceeds from long term debt 144,889 -
Payments on long-term debt and lines of credit (227,483) (266,667)
Dividends paid (16,664) (13,881)
Exercise of stock options and warrants 49,282 1,878
Other - (344)
-------- --------
Net cash used in financing activities (49,976) (279,014)
-------- --------
Decrease in cash and cash equivalents (30,440) (11,006)
Cash and cash equivalents at beginning of year 75,843 50,041
-------- --------
Cash and cash equivalents at end of period $ 45,403 $ 39,035
======== ========
Supplementary cash flow disclosure:
Interest paid $ 46,992 $ 49,272
======== ========
Income taxes paid $ 74,158 $ 52,949
======== ========
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:
--------------------------------------------------------------------
March 31, June 30,
(in thousands) 1995 1994
--------------------------------------------------------------------
Credit agreement $ - $ 94,447
Uncommitted lines of credit 74,300 22,000
Insurance company note due 1996 55,000 135,000
8.25% subordinated notes due 2003 - 100,000
8.125% public notes due 1999 144,895 -
6.375% public debentures due 2004 104,282 104,236
9.5% public debentures due 2022 199,571 199,559
8.0% public debentures due 2023 49,958 49,957
Other, including industrial revenue bonds 42,959 46,456
-------- --------
670,965 751,655
Less current portion and loans payable 103,716 163,164
-------- --------
$567,249 $588,491
======== ========
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 $2.2 million and $1.3 million during the third quarter
of fiscal 1995 and 1994, respectively, and $5.8 million and
$2.6 million for the first nine 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>
</TABLE>
<TABLE><CAPTION>
5. Selected information for the Company's four industry segments follows (in thousands):
Third Quarter Ended Nine Months Ended
March 31, March 31,
----------------------- ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Fire Protection $ 419,389 $ 386,147 $1,221,333 $1,150,146
Flow Control Products 250,132 220,385 731,106 652,174
Electrical and Electronic
Components 107,313 106,612 312,951 321,190
Disposable and Specialty
Products 358,266 290,586 1,021,605 877,891
---------- ---------- ---------- ----------
$1,135,100 $1,003,730 $3,286,995 $3,001,401
========== ========== ========== ==========
Income Before Income Taxes
amd Extraordinary Item:
Fire Protection $ 21,774 $ 18,621 $ 59,572 $ 52,890
Flow Control Products 22,588 18,477 62,799 52,413
Electrical and Electronic
Components 19,246 17,767 55,841 53,861
Disposable and Specialty
Products 69,402 47,969 189,802 134,256
---------- ---------- ---------- ----------
Total operations 133,010 102,834 368,014 293,420
Interest expense (15,583) (13,949) (47,286) (47,269)
Corporate and other
amounts (6,316) (4,909) (53,332) (1) (12,838)
---------- ---------- ---------- ----------
$ 111,111 $ 83,976 $ 267,396 $ 233,313
========== ========== ========== ==========
(1) The nine months ended March 31, 1995 include charges of $37.2 million for
merger and transaction related costs. See Note 1 to these consolidated
financial statements.
</TABLE>
8
<PAGE>
6. Differences between the provision for federal income taxes at the
statutory rate and the amounts provided are as follows
(in thousands):
<TABLE><CAPTION>
Third Quarter Ended Nine Months Ended
March 31, March 31,
------------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Provision at statutory
rate $38,889 $29,392 $ 93,589 $81,660
State income taxes 4,647 2,548 12,093 7,972
Non-deductible merger
and transaction related
costs - - 7,009 -
Depreciation and amorti-
zation under purchase
accounting 2,794 2,616 8,499 8,222
Foreign earnings taxed
at different rates 2,513 2,024 4,455 4,711
Effect of rate changes (2,400) - (2,400) (3,224)
Other (287) (2,120) (813) (1,014)
------- ------- -------- -------
Provision for income
taxes $46,156 $34,460 $122,432 $98,327
======= ======= ======== =======
</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, is not expected
to have a material adverse effect on the Company's financial
position or results of operations.
7. Inventories are classified as follows (in thousands):
March 31, 1995 June 30, 1994
-------------- -------------
Purchased materials and
manufactured parts $ 173,078 $145,965
Work in process 96,201 92,786
Finished goods 313,488 278,317
-------- --------
$ 582,767 $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 nine months of fiscal 1995, income before extraordinary item
was $145.0 million, or $1.93 per share, compared with $135.0 million, or $1.83
per share, for the first nine months of fiscal 1994. Excluding the $31.2
million, or $0.41 per share, after tax charge for merger and transaction related
costs related to the Kendall transaction in fiscal 1995 (see Note 1 to the
consolidated financial statements), income before extraordinary item rose 30% to
$176.1 million, or $2.34 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.
Results of Operations
Third Quarter of Fiscal 1995 Compared to Third Quarter of Fiscal 1994:
Sales increased 13% during the third quarter of fiscal 1995 to $1.1 billion from
$1.0 billion in the third quarter of fiscal 1994. Sales of the Fire Protection
group increased $33.2 million to $419.4 million, or 9%, 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
denominated sales. Sales of the Flow Control group increased $29.7 million to
$250.1 million, or 13%, reflecting increased volume 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
increased slightly to $107.3 million, or 1%, resulting principally from higher
sales at Allied's electrical operations offset by lower sales of underwater
communications cable systems at Simplex and lower sales at the printed circuit
businesses. Sales of the Disposable and Specialty Products group increased $67.7
million to $358.3 million, or 23 %, due principally to increased sales at
Kendall, Armin and, to a lesser extent, Ludlow.
For the third quarter of fiscal 1995 as compared to the third quarter of fiscal
1994, operating profits of the Fire Protection group increased $3.2 million to
$21.8 million, or 17%, due principally to higher margins in North American and
Asia-Pacific fire protection contracting partially offset by slightly lower
margins in the European contracting operations. Operating profits of the Flow
Control group increased $4.1 million to $22.6 million, or 22%, due to increased
earnings at Mueller, Allied's pipe and tube business and the European flow
control operations. Operating profits of the Electrical and Electronic
Components group increased $1.5 million to $19.2 million, or 8%, due to higher
earnings at Simplex and Allied's electrical operations. Operating income of the
Disposable and Specialty Products group increased $21.4 million to $69.4
million, or 45%, due primarily to higher operating profits at Kendall, Armin
and, to a lesser extent, Ludlow.
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 third quarter of
fiscal 1995 as compared to the same period of fiscal 1994 was not material.
Interest expense increased $1.6 million to $15.6 million during the third
quarter of fiscal 1995 from the third quarter of fiscal 1994 due principally to
higher average debt levels as well as higher interest rates.
10
<PAGE>
First Nine Months of Fiscal 1995 Compared with First Nine Months of Fiscal 1994:
Sales during the first nine months of fiscal 1995 were $3.3 billion, a 10%
increase over fiscal 1994 sales of $3.0 billion. Sales of the Fire Protection
group increased $71.2 million to $1,221.3 million, or 6%, 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. This decline was partially offset by the
impact of changes in average foreign currency exchange rates on non-U.S. dollar
denominated sales in the first nine months of fiscal 1995 as compared to the
first nine months of fiscal 1994. Had average foreign currency exchange rates
during the first nine months of fiscal 1995 remained constant with the averages
during the first nine months of fiscal 1994, and excluding the effect of the
fire products sale, Fire Protection group sales would have increased
approximately $65.5 million or 6%. Sales of the Flow Control group increased
$78.9 million to $731.1 million, or 12%, reflecting higher volume at Allied,
Mueller and Grinnell's distribution operations. Sales of the Electrical and
Electronic Components group decreased $8.2 million to $313.0 million, or 3%,
resulting principally from lower sales of underwater communications cable
systems at Simplex. Sales of the Disposable and Specialty Products group
increased $143.7 million to $1,021.6 million, or 16%, due to increased sales
principally at Kendall, Armin and, to a lesser extent, Ludlow.
For the first nine months of fiscal 1995 as compared to the first nine months of
fiscal 1994, operating profits of the Fire Protection group rose $6.7 million to
$59.6 million, or 13%, due principally to higher margins at the North American
and Asia-Pacific contracting and manufacturing businesses partially offset by
slightly lower margins at the European contracting businesses. The operating
profits of the Flow Control group increased $10.4 million to $62.8 million, or
20%, resulting principally from increased earnings at Mueller and Grinnell's
North American distribution operations. Operating profits of the Electrical and
Electronic Components group increased $2.0 million to $55.8 million, or 4%, due
to increased earnings at Simplex somewhat offset by decreased margins at
Allied's electrical business. Operating profits of the Disposable and Specialty
Products group increased $55.5 million to $189.8 million, or 41%, reflecting
higher earnings principally at Kendall, Armin and, to a lesser extent, Ludlow.
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 nine
months of fiscal 1995 as compared to the same period of fiscal 1994 was not
material.
Interest expense was $47.3 million for both the first nine months of fiscal 1995
and the first nine months of fiscal 1994. Lower average debt balances were
offset by higher interest rates in fiscal 1995 as compared to fiscal 1994.
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.
Liquidity and Capital Resources
As presented in the Consolidated Statement of Cash Flows, net cash provided by
operating activities was $165.8 million during the first nine months of fiscal
1995. The significant changes in working capital accounts were an increase of
$38.1 million in accounts receivable and contracts in process, an increase of
$54.3 million in inventory and a $15.2 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 nine months of fiscal 1995, the Company used $88.2 million to
purchase property and equipment; an aggregate of $58.0 million to acquire a
European fire products company, a European flow control company, three U.S. flow
control companies and three U.S. disposable health products companies; $16.7
million to pay dividends and $82.6 million to reduce total debt. The Company
received $49.3 million of cash during the first nine months of fiscal 1995 from
the exercise of stock options and warrants.
The level of capital expenditures is expected to increase in fiscal 1995 as
compared to fiscal 1994 and the source of funds for such expenditures is
expected to be cash from operations.
At March 31, 1995 the Company's total debt was $671.0 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 the 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 $1.6 billion or $21.03 per share at March 31, 1995
compared to $1.4 billion or $19.23 per share at June 30, 1994. The increase is
due to fiscal 1995 net income, to the exercise of stock options and warrants and
to the translation of assets, principally goodwill, and liabilities of foreign
operations into U.S. dollars. Due to a weaker dollar against foreign currencies
at March 31, 1995 as compared to 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 and liability accounts as well as shareholders'
equity. Total debt as a percent of total capitalization (total debt and
shareholders' equity) was 30% at March 31, 1995 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 $1,029.0 million at March 31,
1995 and $763.0 million at June 30, 1994. The increase is principally
attributable to a $151.0 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.
12
<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
None
13
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TYCO INTERNATIONAL LTD.
/s/ Mark H. Swartz
---------------------------------------
Mark H. Swartz
Vice President - Chief Financial Officer
(Principal Accounting and Financial Officer)
Date: May 12, 1995
14
<PAGE>
TYCO INTERNATIONAL LTD.
INDEX TO EXHIBITS
Exhibit No.
-----------
11 Earnings Per Share Computation
27 Financial Data Schedule
EXHIBIT 11
<TABLE><CAPTION>
TYCO INTERNATIONAL LTD.
Earnings Per Share Computation
(In thousands, except per share amounts)
Quarter Ended Nine months Ended
March 31, March 31,
------- ------- ------- -------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Calculation of earnings per share:
Income before extraordinary item $64,955 $49,516 $144,964 $134,986
Extraordinary item - - (2,600) -
------- ------- -------- --------
Net income $64,955 $49,516 $142,364 $134,986
======= ======= ======== ========
Weighted average common shares
outstanding during the period 75,121 71,019 73,221 70,974
Dilutive effect of the restricted stock
plan, stock options and warrants
using the treasury stock method 1,004 2,870 1,977 2,737
------- ------- -------- --------
Total common equivalent shares 76,125 73,889 75,198 73,711
======= ======= ======== ========
Earnings per share:
Before extraordinary item $.85 $.67 $1.93 $1.83
Extraordinary item - - (0.03) -
Net income $.85 $.67 $1.89 $1.83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND INCOME STATEMENTS OF TYCO INTERNATIONAL LTD. AS OF AND
FOR THE QUARTER AND THE NINE MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 45,403
<SECURITIES> 0
<RECEIVABLES> 579,030
<ALLOWANCES> 31,307
<INVENTORY> 582,767
<CURRENT-ASSETS> 1,448,919
<PP&E> 1,123,909
<DEPRECIATION> (479,154)
<TOTAL-ASSETS> 3,303,597
<CURRENT-LIABILITIES> 1,012,378
<BONDS> 567,249
<COMMON> 37,655
0
0
<OTHER-SE> 1,546,444
<TOTAL-LIABILITY-AND-EQUITY> 3,303,597
<SALES> 3,286,995
<TOTAL-REVENUES> 3,286,995
<CGS> 2,403,466
<TOTAL-COSTS> 2,403,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,875
<INTEREST-EXPENSE> 47,286
<INCOME-PRETAX> 267,396
<INCOME-TAX> 122,432
<INCOME-CONTINUING> 144,964
<DISCONTINUED> 0
<EXTRAORDINARY> (2,600)
<CHANGES> 0
<NET-INCOME> 142,364
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
</TABLE>
