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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
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)
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MASSACHUSETTS 04-2297459
(State of Incorporation) (IRS Employer Identification Number)
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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:
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Name of each exchange
Title of each class on which registered
COMMON STOCK, PAR VALUE $.50 NEW YORK STOCK EXCHANGE
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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 .
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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 .
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The aggregate market value of voting common stock held by nonaffiliates of
registrant was $6,368,004,186 as of September 10, 1996.
The number of shares of common stock outstanding as of September 10, 1996
was 153,454,010.
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 17 and 18 for the exhibit index.
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PART I
ITEM 1. BUSINESS
Tyco International Ltd. (the "Company" or "Tyco"), through its divisions and
operating subsidiaries, engages in the manufacture and distribution of
disposable medical supplies and other specialty products, the design,
manufacture, installation and service of fire detection and suppression systems,
and the manufacture and distribution of flow control products and electrical and
electronic components. The Company maintains a strong leadership position in
each of its segments of these markets. See Notes 12 and 13 to the Consolidated
Financial Statements for certain consolidated segment and geographic financial
data relating to the Company's businesses.
I. DISPOSABLE AND SPECIALTY PRODUCTS
Tyco's Disposable and Specialty Products Group consists of Kendall
International Inc., Ludlow Laminating and Coating, Armin Plastics, Twitchell,
and Accurate Forming. Kendall manufactures and distributes medical supplies,
disposable medical products and adhesive products and tapes. Ludlow Laminating
and Coating manufactures laminated and coated products. Armin manufactures
polyethylene film and packaging products. Twitchell manufactures extrusion
coated polyester yarns and woven fabrics and Accurate manufactures deep-drawn
metal parts. In the first quarter of fiscal 1997, the Company acquired Carlisle
Plastics, Inc. ("Carlisle"), a manufacturer of specialty packaging materials and
garment hangers.
Kendall
Kendall conducts its operations through four business units: Kendall
Healthcare, Kendall International, Kendall-Polyken and Ludlow Technical
Products. In each of its business units, Kendall competes with numerous
companies, including a number of larger, well-established companies. Kendall
relies on its reputation for 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 is the industry leader 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. 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 acquired Professional Medical Products, Inc. ("ProMed") in February
1996. ProMed is a leading provider of incontinent care products, marketing
primarily to nursing homes and other institutional providers of long term care.
ProMed also offers a range of other patient care products, including urological,
wound care, surgical care and respiratory care products.
Kendall's Superior Healthcare Group, Inc., acquired in April 1994,
manufactures a broad line of disposable medical supplies including respiratory,
urology and nursing care products. In October 1994, Kendall acquired Sheridan
Catheter Corporation, a manufacturer of airway management, temperature
monitoring and specialty products serving patients in anesthesia, critical care
and emergency medicine.
Kendall Healthcare distributes its products both directly through its sales
force and through a network of over 250 independent distributors. Kendall
Healthcare's sales force is divided into three groups: one promoting its
vascular therapy products, one promoting its wound care and other health care
products and one selling all of its products into the alternate site markets.
Most of the U.S. distributors also sell similar products made by Kendall's
competitors, a practice common in the industry.
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Kendall International. Kendall International is responsible for the
manufacturing, marketing, distribution and export of Kendall products in
numerous countries worldwide. Kendall International's operations are organized
primarily into three geographic regions--Europe, Latin America and the Far East.
Kendall International generally markets a range of products similar to those of
Kendall Healthcare, although the mix of product lines varies from country to
country. Kendall International markets directly to hospital and medical
professionals and through independent distributors.
Kendall-Polyken. The Kendall-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. Kendall-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.
The Company acquired Nashua Corporation's tape business and Betham
Corporation in May 1996. The tape operation manufactures duct, foil and
strapping tapes and spray adhesives for industrial and consumer markets
worldwide. Betham develops specialty pressure sensitive adhesives and coatings,
principally for the automotive, medical and specialty markets. Both are being
integrated with Polyken's existing operations.
Polyken generally markets its pipeline products directly, working with local
manufacturers' representatives, international engineering and construction
companies, and the owners and operators of pipeline transportation facilities.
Polyken sells its other industrial products either directly to major end users
or through diverse distribution channels, depending on the industry being
served.
Technical Products. The Technical Products division manufactures and sells a
variety of disposable medical products, specialized paper and film products.
These products include disposable electrodes for medical devices, hydrogels,
adhesive tapes, pressure sensitive coated papers and films used for business
forms and in printing applications, high quality facsimile paper and recording
chart papers for medical and industrial instrumentation.
The Technical Products division was originally a division of Ludlow.
Subsequent to the acquisition of Kendall, the Company reorganized to align
Technical Products with Kendall. Over the last three years, Technical Products
has made a series of acquisitions to expand its product line and presence in the
disposable medical products field. Uni-Patch, acquired in December 1993, is a
manufacturer and distributor of transcutaneous electrical nerve simulation
("TENS") electrodes and related products which are used primarily in physical
therapy and other forms of rehabilitation medicine. Classic Medical Products,
acquired in December 1993, is a manufacturer of medical electrodes for EKGs and
similar diagnostic tests. Promeon, acquired in January 1994, is a leading
manufacturer of gels which are used with medical electrodes for testing and
other monitoring purposes. LMI, acquired in November 1994, is a manufacturer of
medical electrodes. Cambrex, acquired in December 1994, is a producer of
hydrogel wound care products. Sentry Medical, acquired in May 1996, manufactures
neonatal electrodes, diagnostic and monitoring electrodes, electrotherapy
electrodes and cable and lead wires.
These products are marketed primarily by the division's internal sales
force. Competitors vary from small regional firms to larger firms that compete
with Technical Products on a national basis. Competition is on the basis of
price and quality.
Ludlow Laminating and Coating
Ludlow Laminating and Coating 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
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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.
Ludlow markets its laminated and coated products through its internal sales
force and through 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.
There are numerous specialized competitors which tend to differ from market to
market.
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, using such additives as coloring, slip
and anti-block chemicals. Armin's products 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
sales are generated through Armin's internal sales force. Armin serves over
6,000 customers in the United States.
Armin competes with a wide range of manufacturers, including some vertically
integrated companies and companies that manufacture polyethylene resins for
their own use. Armin competes in many market segments by emphasizing product
innovation, specialization and customer service.
Twitchell
Twitchell manufactures extrusion coated polyester yarns and woven PVC-coated
yarn fabrics and woven and knit paper fabrics. These fabrics are sold by
Twitchell's internal sales force and through distributors to manufacturers for
use principally in outdoor furniture, wall coverings, window screening, awnings,
housewares and other specialty products. Non-woven fabric is coated and sold for
use as disposable medical clothing. 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 woven fabrics and coated products.
Accurate Forming
Accurate Forming 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.
Carlisle
Carlisle was acquired in September 1996 and is a leading producer of
industrial and consumer plastic products. Carlisle's products include trash
bags, flexible packaging, sheeting and garment hangers. Carlisle's trash bag
products include institutional lines, as well as Carlisle's own national
consumer brands. Sales are primarily in North America.
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Carlisle supplies plastic trash bags to mass merchants, grocery chains, and
institutional customers. Carlisle manufactures Ruffies(R), a national brand
consumer trash bag, for mass merchants and other retail stores. Carlisle also
provides heavy duty trash can liners for institutional customers, such as food
service distributors, janitorial supply houses, restaurants, hotels and
hospitals.
In the consumer trash bag market, Carlisle competes primarily with two
nationally advertised brands. Carlisle has historically concentrated on mass
merchants as the primary market for its branded Ruffies trash bags, while the
other major national brands are marketed primarily through food retailers.
Film-Gard(R), Carlisle's leading plastic sheeting product, is sold to
consumers and professional contractors through do-it-yourself outlets, home
improvement centers and hardware stores. A wide range of Film-Gard products are
sold for various uses, including painting, renovation, construction, landscaping
and agriculture. Carlisle's industrial packaging film is sold through
distributors and manufacturers for use as shrink wrap and for other packaging
requirements.
Carlisle sells molded plastic garment hangers to garment manufacturers,
national retailers, regional or local retailers, and mass merchants. Garment
manufacturers place their clothes on Carlisle's hangers before shipping to
retail outlets. Carlisle creates, manufactures and sells customized hanger
designs to national retailers. Regional or local retailers buy standard Carlisle
hanger lines for retail clothing displays. Carlisle also supplies mass merchants
with consumer plastic hangers for sale to the general public. Carlisle operates
in a competitive marketplace where success is dependent upon price, service and
quality.
II. FIRE AND SAFETY SERVICES
The Company is the largest contractor in the world for the design and
installation of fire detection, suppression and sprinkler systems, and for the
servicing for such systems. The Company is also a leading manufacturer and
distributor of fire detection and suppression products.
The Company's Grinnell subsidiary ("Grinnell"), which was founded in 1850,
is the largest installer, manufacturer and supplier of automatic fire sprinkler
and fire alarm 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 the Asia-Pacific region. Grinnell and Wormald, in
combination, is the largest fire protection company in the world, forming a
network of over 300 offices on five continents. The acquisition of Thorn
Security Group ("Thorn") in July 1996 expands the Company's worldwide position
in the fire detection and security systems market.
Contracting and Service
The Company designs, fabricates, installs and services automatic fire
sprinkler systems, fire alarm and detection systems, special hazard suppression
systems and security systems in buildings and other installations. Grinnell's
fire protection contracting and service 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
and service through a network of offices in the United Kingdom, Continental
Europe, Saudi Arabia, United Arab Emirates, Australia, New Zealand, Southeast
Asia and South America.
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
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existing buildings represented approximately 65% of Grinnell's North American
contracting sales in fiscal 1996. Revenue from the servicing, maintenance,
repair and inspection of fire protection, detection and suppression systems
installed by the Company and other contractors has increased in recent years.
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.
In Australia, New Zealand and Asia, the Company, through its O'Donnell
Griffin division, 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 for different types of
construction, including applications for railroad and bridge construction.
Substantially all of the mechanical components (and, in North America, most
of the pipe) used in the fire protection systems installed by the Company are
manufactured by the Company. 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 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. The Company also installs alarms, detection and activation
devices and centralized monitors. With the acquisition of Thorn, the Company is
now a major manufacturer of alarms, detection and activation devices and central
monitoring stations.
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 ("UA"). In April 1994, following lengthy negotiations, Grinnell's
contracts with a number of locals of the UA were not renewed. Employees in those
locations, representing 64% of those employees represented by the UA 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
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Company manufactures fire extinguishers, fire hose and related equipment. With
the recent addition of Thorn, the Company now manufactures a complete line of
alarm and detection equipment that is installed by the Company's units. Thorn's
products are also sold to other alarm and detection installers.
The Company's Ansul subsidiary manufactures and sells various lines of dry
chemical, liquid and gaseous portable fire extinguishers and related agents for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry, confined industrial spaces and commercial spaces housing delicate and
electronic equipment. Ansul 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.
Environmental Services
In January 1996, the Company acquired The Earth Technology Corporation
("Earth Tech"), a provider of a broad range of environmental, consulting and
engineering services throughout the United States. The principal services of
Earth Tech consist of full-spectrum environmental and hazardous waste management
services, infrastructure design and construction services, facilities
engineering and construction management services for institutional, civic,
commercial and industrial clients, and contract operations and management
services for water, waste water and remediation treatment facilities for
municipal and industrial clients.
Services are provided through a network of 40 offices located throughout
North America. Earth Tech competes with a number of national, regional and local
companies on the basis of price and breadth and quality of services.
III. 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. The Company's Flow Control
Group includes Grinnell, Allied Tube & Conduit, Mueller Co. and a number of
specialized manufacturers of valves, fittings and couplings.
Manufacturing
The Company manufactures and distributes a wide range of flow control
products, including pipe and pipe fittings, tubing, 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.
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 markets. Allied also manufactures
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.
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Over the past 5 years, the Company has expanded its worldwide manufacturing
and distribution presence through a series of acquisitions and internal growth.
In North America, Grinnell manufactures forged steel fittings and valves. In
Switzerland, Neotecha, acquired in April 1992, manufactures Teflon lined
specialty valves for use in highly corrosive environments. In the United
Kingdom, Charles Winn (Valves) Ltd. and Hindle Cockburns, acquired in April
1993, manufacture specialty high performance butterfly valves and ball valves
that are used principally in the oil and gas, chemical and processing
industries. In Spain, Belgicast, acquired in July 1995, manufactures valves used
for waterworks and other industrial applications. In Malaysia the Company
manufactures couplings, fittings, steel tubing and metal framing products.
In September 1996, the Company acquired Henry Pratt Co., James Jones Company
and Edward Barber & Co. from Watts Industries, Inc. The three operations,
located in the United States and the United Kingdom, are engaged in the
manufacture and sale of valves, hydrants and fittings used primarily in water
utility, wastewater treatment and power generation markets.
Distribution
The Company operates through a 45 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. The Company plans to open two additional RDC's, in Pennsylvania and
Texas, in fiscal 1997. Each RDC stocks over 8,500 products. The Company's
Worldwide Flow Control operations also stock and sell products through various
distribution centers in Europe, Australia, New Zealand, the Middle East and
Asia. In Europe, the Company distributes fire protection products, industrial
valves and products for mechanical markets 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 and original equipment
manufacturers. 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. 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, power
and beverage processing industries. Products manufactured by the Company
accounted for approximately 81% of its North American distribution sales and for
approximately 65% of its European distribution sales in fiscal 1996.
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, service and quality. Grinnell competes for the sale
of gray iron pipe fittings, malleable and ductile iron fittings and other flow
control products and fire protection sprinklers and devices principally with
other domestic producers, as well as with foreign manufacturers of fittings.
Grinnell uses an internal sales force for the sale of certain other iron
castings sold direct to original equipment manufacturers 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
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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. Certain of its gas
distribution products are also sold through the Grinnell distribution network.
The Company competes for the sale of these products on the basis of product
quality, service, price, 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.
IV. ELECTRICAL AND ELECTRONIC COMPONENTS
The Company's Electrical and Electronic Components group consists of Simplex
Technologies, Inc. ("Simplex"), Allied's Electrical Conduit division and the
Company's Printed Circuit Group. Simplex manufacturers underwater communications
cable and cable assemblies. Allied manufactures and distributes electrical
conduit and related components used in commercial electrical installations. The
Printed Circuit Group manufactures printed circuit boards and assembles
backplanes for the electronics industry.
Simplex
Simplex is the largest U.S. manufacturer of undersea fiber optic
telecommunications cable. Simplex also manufacturers cable and cable assemblies
for the U.S. Navy, underwater electric power cable and optical ground wire for
use by power authorities and utilities, and electro-mechanical cable for unique
field applications. Simplex's principal customer is AT&T-SSI, which accounted
for approximately 78% of its revenues in fiscal 1996.
Under a multi-year engineering development program, Simplex and AT&T Labs,
Inc. have developed a proprietary encapsulation process for AT&T-SSI supplied
optic fibers used in underwater telecommunications cables. Simplex manufactures
the cable and performs system assembly and has proprietary rights to the
encapsulation process. Over the past ten years, Simplex has manufactured more
than 110,000 kilometers of undersea optical cable deployed by AT&T and others.
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, headquartered in France
and KDD, located in Japan. Alcatel 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.
Allied Electrical Conduit
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. The conduit also serves as an electrical ground
that 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 as well as
metal framing and other products.
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
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domestic manufacturers. Competition in the electrical conduit industry is
primarily based upon price, quality, delivery and breadth of product line.
Printed Circuit Group
Tyco's Printed Circuit Group of companies is one of the largest independent
manufacturers of complex 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 68 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 37%
of the Group's sales in fiscal 1996.
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 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.
SALES AND BACKLOG
At June 30, 1996, the Company had a backlog of unfilled orders of
approximately $1.15 billion, compared to a backlog of approximately $1.05
billion as of June 30, 1995. The Company expects that approximately 87% of its
backlog at June 30, 1996 will be filled during the year ending June 30, 1997.
Backlog by industry segment is as follows (in millions of dollars):
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
Disposable and Specialty Products............. $ 59.5 $ 56.5
Fire and Safety Services...................... 724.2 557.6
Flow Control Products......................... 97.2 82.5
Electrical and Electronic Components.......... 267.5 351.7
------------- -------------
$ 1,148.4 $ 1,048.3
------------- -------------
------------- -------------
The increase in backlog in the Fire and Safety Services segment is primarily
due to increased orders in the Asia-Pacific region as well as from the inclusion
of Earth Tech's funded backlog. Within the Electrical Components segment,
increases at the Printed Circuit Group and Allied's Electrical
9
<PAGE>
Conduit operations were offset by a decrease at Simplex. 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.
Sales to agencies of the United States government or for governmental use
have been significant for Earth Tech, but are not significant for the Company as
a whole.
PROPERTIES
The Company's operations are conducted in facilities throughout the world
aggregating some 25 million square feet of floor space, of which approximately
15 million square feet is owned and approximately 10 million square feet is
leased. These facilities house manufacturing and warehousing operations as well
as sales, engineering and administrative offices.
The Company's Disposable and Specialty Products group has manufacturing
facilities at 43 locations in North America, the United Kingdom, Germany,
Mexico, China, Thailand and Malaysia. 4.9 million square feet is owned and 2.0
million square feet is leased.
Within Fire and Safety Services, the fire protection contracting and service
business operates through a network of 315 offices located in North America,
South America, the United Kingdom, Ireland, France, Spain, Belgium, the
Netherlands, Germany, Italy, Austria, Hungary, Switzerland, Denmark, Norway,
Sweden, United Arab Emirates, Saudi Arabia, Australia, New Zealand, Hong Kong,
Singapore, Taiwan, Malaysia, Thailand, Vietnam and Indonesia. Manufacturing of
fire protection components occurs in 24 locations in North America, the United
Kingdom, Germany, Australia, New Zealand and Malaysia. The environmental
services business operates through a network of 40 offices throughout North
America. The Company owns 2.6 million square feet and leases 5.2 million
square feet.
Flow Control products are manufactured at 27 locations in North America, the
United Kingdom, Germany, Switzerland, Spain and Malaysia. The Company
distributes products in North America through a 45 branch distribution network
and 3 regional distribution centers. The Company also stocks and sells products
through warehouse and distribution centers in the Netherlands, the United
Kingdom, Germany, France, Australia, New Zealand and Singapore. The Company owns
6.2 million square feet and leases 3.2 million square feet.
Electrical and Electronic Components has 7 manufacturing locations all
located in the United States. The Company owns 1.3 million square feet and
leases 0.1 million square feet.
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.
RESEARCH AND DEVELOPMENT
The amounts expended for company sponsored research and development were
$32.9 million, $32.0 million and $31.7 million during fiscal 1996, 1995 and
1994, respectively. Customer funded research and development expenditures were
$0.6 million, $1.4 million and $0.5 million in fiscal 1996, 1995 and 1994,
respectively.
Approximately 340 full-time scientists, engineers and other technical
personnel are engaged in product research and development activities.
Research activity in fire and safety services and flow control products is
related to improvements in hydraulic design which controls the motion of fluids
resulting in new sprinkler devices and flow control
10
<PAGE>
products. Activity at Simplex involves the continuing design and development of
the processes for the next generation of underwater fiber optic cable with AT&T
Labs, Inc. Research and development activity at the specialty packaging
companies 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 and of plastic resin 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, pulp, cotton and latex. A
portion of Fire and Safety Services' 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.
PATENTS AND TRADEMARKS
The Company owns a number of patents (principally relating to healthcare and
specialty products, fire protection devices, flow control products, pipe and
tubing manufacture, and cable manufacture) and trademarks, and is a licensee
under a number of patents. 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. Kendall sells certain products
under tradenames owned by its suppliers and packages certain products under
customer trademarks and labels.
EMPLOYEES
The Company employed approximately 40,000 persons at June 30, 1996, of whom
approximately 40% were employed outside of North America. The Company has
collective bargaining agreements with labor unions covering approximately 5,800
employees at certain of its domestic operations and 4,000 employees in its
European and Asia-Pacific businesses. While the Company believes that its
relations with the labor unions and with its employees are generally
satisfactory, a number of local unions affiliated with the United Association of
Plumbers and Pipefitters, 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 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.
11
<PAGE>
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, some of which are voluntary
and some 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 an aggregate amount in
the range of $11.0 million to $41.7 million. At June 30, 1996 the Company has
concluded that the most probable amount which will be incurred within this range
is $19.6 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
liability for cleanup costs among a number of parties, including the Company,
and such liability could be joint and several, management believes it is
probable that other responsible parties will fully pay the cost allocated 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 $19.6 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 discussions under Item 1--Environmental Matters, and Footnote 7
to the Consolidated Financial Statements--Income Taxes.
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 49, 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; associated with the Company
since 1975.
Jerry R. Boggess, age 52, Vice President since February 1996, President of
Grinnell Fire Protection since August 1993, Executive Vice President of Grinnell
from 1989 to 1993; associated with the Company since 1968.
12
<PAGE>
David P. Brownell, age 52, Senior 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; associated with
the Company since 1984.
Neil R. Garvey, age 41, Vice President since February 1996, President of
Simplex Technologies since July 1995, Vice President of Marketing of Simplex
from 1989 to 1995; associated with the Company since 1979.
John J. Guarnieri, age 46, Vice President-Corporate Controller since May
1993, Corporate Controller of Tyco from 1991 to 1993, Corporate Controller of
Grinnell Corporation from 1988 to 1991; associated with the Company since 1982.
J. Brad McGee, age 37, Vice President since February 1996, Vice President of
Tyco Specialty Products since July 1995, Director of Financial Planning and
Development of Tyco from 1993 to 1995; associated with the Company since 1991.
Robert P. Mead, age 45, 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; associated with the Company since 1973.
Richard J. Meelia, age 47, Vice President since February 1996, President of
The Kendall Company since July 1995, Group President of Kendall Healthcare from
January 1991 to July 1995; prior to 1991 Mr. Meelia was President of
Infusaid/Pfizer Hospital Product Group, a manufacturer and marketer of
implantable drug delivery products.
Barbara S. Miller, age 47, Vice President since February 1996, Treasurer
since May 1993; associated with the Company since 1989.
Mark H. Swartz, age 36, Vice President-Chief Financial Officer since
February 1995, Director of Mergers and Acquisitions from 1993 to 1995;
associated with the Company since 1991.
13
<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 10, 1996 was 7,700.
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: (The prices
and dividends below have been restated to reflect a two-for-one stock split
effected in the form of a stock dividend which was distributed on November 14,
1995.)
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995
------------------------------ -------------------------------
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................................. $31.6250 $26.6875 $ .05 $24.1875 $21.2500 $ .05
Second................................ 35.6250 29.5000 .05 25.0625 21.8125 .05
Third................................. 39.2500 32.3750 .05 26.8125 23.2500 .05
Fourth................................ 41.3750 35.1250 .05 29.1250 25.5000 .05
--- ---
$ .20 $ .20
--- ---
--- ---
</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, 1996. This
selected financial information should be read in conjunction with the Company's
consolidated financial statements and related notes.
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED JUNE 30,
--------------------------------------------------------------
1996 1995(3) 1994 1993(4)(5) 1992(2)(6)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Income
Data:
Sales.............................. $5,089,828 $4,534,651 $4,076,383 $3,919,357 $3,066,485
Income before extraordinary item
and cumulative effect of
accounting changes............... $ 310,147 $ 216,593 $ 189,191 $ 94,458 $ 95,266
Net income......................... $ 310,147 $ 213,993 $ 189,191 $ 20,602 $ 95,266
Income Per Share:(1)
Before extraordinary item and
cumulative effect of accounting
changes.......................... $ 2.03 $ 1.43 $ 1.28 $ .65 $ 1.03
Extraordinary item................. $ -- $ (.02) $ -- $ (.02) $ --
Cumulative effect of accounting
changes........................... $ -- $ -- $ -- $ (.49) $ --
Net Income......................... $ 2.03 $ 1.42 $ 1.28 $ .14 $ 1.03
Cash Dividends Per Common Share(1)... $ .20 $ .20 $ .20 $ .19 $ .18
Consolidated Balance Sheet Data:
Working capital.................... $ 403,714 $ 367,186 $ 329,918 $ 341,154 $ 274,278
Total assets....................... $3,953,936 $3,381,461 $3,144,598 $3,164,966 $2,451,537
Long-term debt..................... $ 511,622 $ 506,417 $ 588,491 $ 812,585 $ 534,951
Shareholders' equity............... $1,938,439 $1,634,681 $1,367,026 $1,138,786 $1,040,551
</TABLE>
(Footnotes on following page)
14
<PAGE>
(Footnotes for preceding page)
- ------------
(1) Income and cash dividends per share amounts for all periods presented have
been restated to give effect to a two-for-one stock split effected in the
form of a stock dividend which was distributed on November 14, 1995.
(2) 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 date on which Kendall undertook a financial restructuring. The
selected financial data at and for the year ended June 30, 1992 reflect only
the results of operations and financial position of Tyco.
(3) Fiscal 1995 results include a charge of $31.2 million after-tax for fees and
expenses related to the merger and integration of Tyco and Kendall, 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 4 to the
Consolidated Financial Statements).
(4) 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 its
restructuring and, accordingly, there is no cumulative effect reflected in
the Consolidated Financial Statements.
(5) Fiscal 1993 results include 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.
(6) Fiscal 1992 results include 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.
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 45 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:
Report of Independent Accountants
Consolidated Balance Sheets--June 30, 1996 and 1995
Consolidated Statements of Income for each of the three years in the
period ended June 30, 1996
Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended June 30, 1996
Consolidated Statements of Cash Flows for each of the three years in the
period ended June 30, 1996
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Report of Independent Accountants on Financial Statement Schedule
15
<PAGE>
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.
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.
16
<PAGE>
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) Articles of Amendment (Incorporated by reference to Form 8-K
filed November 12, 1993.)
iii) Bylaws. (Filed herewith.)
(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.)
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.)
1978 Restricted Stock Ownership Plan for Key Employees. (Incorporated by
reference to Shareholders' Proxy Statement for Annual Meeting of Shareholders on
November 21, 1978.)
1981 Key Employee Loan Program. (Incorporated by reference to Form 10-K for
the year ended May 31, 1982.)
1983 Key Employee Loan Program. (Incorporated by reference to Form 10-K for
the year ended May 31, 1983.)
1983 Restricted Stock Ownership Plan for Key Employees. (Incorporated by
reference to Shareholders' Proxy Statement for Annual Meeting of Shareholders on
October 18, 1983.)
Credit Agreement dated July 22, 1993. (Incorporated by reference to Form
10-K for the year ended June 30, 1993.)
1983 Key Employee Loan Program, as amended December 9, 1993 (Incorporated by
reference to Form 10-K for the year ended June 30, 1994.)
17
<PAGE>
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).
1994 Restricted Stock Ownership Plan for Key Employees. (Incorporated by
reference to Shareholders' Proxy Statement for Annual Meeting of Shareholders on
October 19, 1994.)
Tyco International Ltd. Supplemental Executive Retirement Plan (Incorporated
by reference to Form 10-K for the year ended June 30, 1995).
(11) Earnings Per Share Computation. (Filed herewith.)
(12) Ratio of Earnings to Fixed Charges. (Filed herewith.)
(21) Subsidiaries of the registrant. (Filed herewith.)
(23) Consent of Coopers & Lybrand L.L.P. (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 1996.
18
<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, 1996
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, 1996
...................................
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>
19
<PAGE>
{THIS PAGE INTENTIONALLY LEFT BLANK}
20
<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, 1996 and 1995 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 1996. 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 audits provide 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. as of June 30, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended June 30, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 25, 1996
21
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT JUNE 30
------------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 69,404 $ 66,021
Receivables, less allowance for doubtful accounts of $36,672 in
1996 and $29,554 in 1995......................................... 688,741 527,946
Contracts in process............................................... 130,473 104,526
Inventories........................................................ 608,526 592,158
Deferred income taxes.............................................. 126,282 108,118
Prepaid expenses................................................... 72,098 53,132
---------- ----------
1,695,524 1,451,901
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET................................. 725,742 658,471
GOODWILL AND OTHER INTANGIBLE ASSETS............................... 1,232,617 1,004,463
REORGANIZATION VALUE IN EXCESS OF IDENTIFIABLE ASSETS.............. 102,591 108,801
DEFERRED INCOME TAXES.............................................. 69,823 101,678
OTHER ASSETS....................................................... 127,639 56,147
---------- ----------
TOTAL ASSETS..................................................... $3,953,936 $3,381,461
========== ==========
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt............. $ 127,822 $ 84,387
Accounts payable................................................... 470,819 417,395
Accrued expenses................................................... 506,270 423,387
Contracts in process--billings in excess of costs.................. 89,640 75,546
Income taxes....................................................... 84,196 72,370
Deferred income taxes.............................................. 13,063 11,630
---------- ----------
1,291,810 1,084,715
---------- ----------
LONG-TERM DEBT..................................................... 511,622 506,417
OTHER LIABILITIES.................................................. 192,839 146,049
DEFERRED INCOME TAXES.............................................. 19,226 9,599
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 2,000,000 shares authorized; none
outstanding....................................................... -- --
Common stock, $.50 par value, 180,000,000 shares authorized;
152,977,282 shares outstanding in 1996 and 152,730,002 shares
outstanding in 1995, net of reacquired shares of 16,024,221 in
1996 and 15,921,480 in 1995 (at cost)............................ 76,488 76,366
Capital in excess of par value, net of deferred compensation of
$11,500 in 1996 and $21,636 in 1995.............................. 627,985 582,450
Currency translation adjustment.................................. (34,571) (9,451)
Retained earnings.................................................. 1,268,537 985,316
---------- ----------
1,938,439 1,634,681
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................... $3,953,936 $3,381,461
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
SALES.................................................. $5,089,828 $4,534,651 $4,076,383
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales.......................................... 3,692,885 3,313,301 3,003,194
Selling, general and administrative.................... 814,179 735,917 682,568
Merger and transaction related costs................... -- 37,170 --
Interest............................................... 58,867 63,385 62,431
---------- ---------- ----------
4,565,931 4,149,773 3,748,193
---------- ---------- ----------
Income before income taxes and extraordinary item...... 523,897 384,878 328,190
Income taxes........................................... 213,750 168,285 138,999
---------- ---------- ----------
Income before extraordinary item....................... 310,147 216,593 189,191
Extraordinary item, net of taxes....................... -- (2,600) --
---------- ---------- ----------
NET INCOME............................................. $ 310,147 $ 213,993 $ 189,191
---------- ---------- ----------
---------- ---------- ----------
INCOME PER SHARE:
Income before extraordinary item....................... $ 2.03 $ 1.43 $ 1.28
Extraordinary item, net of taxes $ -- $ (.02) $ --
Net income............................................. $ 2.03 $ 1.42 $ 1.28
Common equivalent shares............................... 152,862 151,018 147,540
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED JUNE 30, 1996
------------------------------------------------------
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, 1993........................ $70,924 $ 523,019 $ (89,386) $ 634,229
Net income.................................... 189,191
Dividends..................................... (18,538)
Management equity compensation................ 1,273
Restricted stock grants, cancellations, tax
benefits and other........................... 30 2,394
Warrants and options exercised................ 130 2,150
Purchase of warrant........................... (600)
Currency translation adjustment............... 48,512
Amortization of deferred compensation......... 3,698
----------- ---------- ----------- ----------
Balance at June 30, 1994........................ 71,084 531,934 (40,874) 804,882
Net income.................................... 213,993
Dividends..................................... (27,462)
Restricted stock grants, cancellations, tax
benefits and other........................... 1,688 15,922
Warrants and options exercised................ 3,950 45,297
Purchase of treasury stock.................... (356) (18,961)
Currency translation adjustment............... 31,423
Minimum pension liability adjustment.......... (6,097)
Amortization of deferred compensation......... 8,258
----------- ---------- ----------- ----------
Balance at June 30, 1995........................ 76,366 582,450 (9,451) 985,316
Net income.................................... 310,147
Dividends..................................... (30,551)
Restricted stock grants, cancellations, tax
benefits and other.............................. 6 24,321
Warrants and options exercised................ 24 513
Purchase of treasury stock.................... (101) (6,769)
Currency translation adjustment............... (25,120)
Minimum pension liability adjustment.......... 3,625
Amortization of deferred compensation......... 13,332
Issuance of stock for acquisition............. 193 14,138
----------- ---------- ----------- ----------
Balance at June 30, 1996........................ $76,488 $ 627,985 $ (34,571) $1,268,537
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $310,147 $213,993 $189,191
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary item........................................ -- 2,600 --
Depreciation.............................................. 94,430 88,106 83,027
Amortization of intangibles and deferred compensation..... 53,452 45,056 48,178
Deferred income taxes..................................... 58,487 21,019 31,459
Provisions for losses on accounts receivable and inventory
writedowns............................................... 31,314 14,819 14,823
Changes in assets and liabilities net of effects from
acquisitions and divestitures:
Increase in accounts receivable......................... (83,625) (47,181) (41,153)
Decrease from accounts receivable sale.................. -- 75,000 150,000
(Increase) decrease in contracts in process............. (24,534) (9,368) 12,471
Increase in inventory................................... (20,764) (51,396) (11,766)
(Decrease) increase in accounts payable and accrued
expenses.............................................. (26,556) 36,987 (26,189)
Increase (decrease) in income taxes payable............. 14,215 (43) 15,389
Other, net.............................................. (13,209) 7,029 26,998
-------- -------- --------
Net cash provided by operating activities................. 393,357 396,621 492,428
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................ (123,227) (119,048) (89,802)
Purchases of businesses, net of cash acquired............... (301,410) (130,256) (72,640)
Net proceeds from sales of acquired assets.................. 49,768 -- 18,054
-------- -------- --------
Net cash used in investing activities..................... (374,869) (249,304) (144,388)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt................................ -- 144,889 104,628
Payments on long-term debt.................................. (55,716) (181,219) (106,871)
Borrowings (payments) on lines of credit.................... 77,425 (126,404) (302,821)
Purchase of treasury stock and warrant...................... (6,870) (19,317) (600)
Dividends paid.............................................. (30,481) (24,335) (18,510)
Financial restructuring and financing fees paid............. -- -- (344)
Issuance of stock and warrants.............................. 537 49,247 2,280
-------- -------- --------
Net cash used in financing activities..................... (15,105) (157,139) (322,238)
-------- -------- --------
Net change in cash and cash equivalents..................... 3,383 (9,822) 25,802
Cash and cash equivalents at beginning of year.............. 66,021 75,843 50,041
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 69,404 $ 66,021 $ 75,843
-------- -------- --------
-------- -------- --------
SUPPLEMENTARY CASH FLOW DISCLOSURE:
Interest paid............................................... $ 61,161 $ 64,638 $ 69,053
-------- -------- --------
-------- -------- --------
Income taxes paid (net of refunds).......................... $ 99,874 $ 97,025 $ 73,751
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
25
<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"). The merger was accounted for under the pooling of interests method
of accounting and these consolidated financial statements reflect the combined
financial position, operating results and cash flows of Tyco and Kendall as if
they had been combined for all periods presented.
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.
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 billed under retainage provisions for
fire protection contracts. Retention balances of $29.2 million at June 30, 1996
which become due upon contract completion and acceptance are expected to be
substantially collected during fiscal 1997.
Property, Plant and Equipment--Property, plant and equipment are principally
recorded at cost. 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 periods up to 40 years. Accumulated amortization
amounted to $169.1 million at June 30, 1996 and $138.4 million at June 30,
1995. 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, 1996 and 1995, no impairment of goodwill 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, 1996 and 1995, accumulated amortization amounted to $20.4
million and $17.2 million, respectively.
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, effective June 30, 1992.
Based on the allocation of reorganization value in conformity with procedures
specified by Statement of Position 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 $29.6 million and $23.4
million at June 30, 1996 and 1995, respectively.
Research and Development--Research and development expenditures are expensed
when incurred.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 liabilities 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, and cross-
currency swaps in its management of interest costs and foreign currency
exposures.
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 is recognized over the life of the agreement as an
adjustment to interest expense.
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. 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.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported periods. Significant estimates in these financial statements
include allowances for doubtful accounts receivable, net realizable value of
inventories, estimated contract revenues and related costs, environmental
liabilities and tax valuation reserves. Actual results could differ from those
estimates.
Income Per Share--Net income per share is calculated on the basis of the
weighted average number of shares outstanding plus common equivalent shares to
reflect stock options and warrants using the treasury stock method.
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
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. THE MERGER--(CONTINUED)
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) in fiscal 1995. 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 AND DIVESTITURES
During fiscal 1996, the Company acquired eight fire and safety services
companies, five disposable and specialty products companies and four flow
control products companies for an aggregate of $301.4 million in cash and
386,000 shares of the Company's common stock. The cash acquisitions were made
utilizing cash on hand as well as borrowings under the Company's uncommitted
lines of credit. Each of the acquisitions was accounted for as a purchase and
the results of operations of the acquired companies were included in the
consolidated results of Tyco from their respective acquisition dates. As a
result of the acquisitions, approximately $255 million in goodwill was recorded
by the Company, which reflects the adjustments necessary to allocate the
individual purchase prices to the fair value of assets acquired, liabilities
assumed and additional purchase liabilities recorded. Additional purchase
liabilities recorded included approximately $19 million for severance and
related costs and $6 million for costs associated with the shut down and
consolidation of certain acquired facilities. At June 30, 1996 liabilities for
approximately $13 million in severance costs and $5 million for facility related
costs remained on the balance sheet. The Company expects to complete its
termination of employees and consolidation of facilities in fiscal 1997.
The following unaudited pro forma data summarize the results of operations
for the periods indicated as if these acquisitions had been completed on July 1,
1994, the beginning of the 1995 fiscal year. The pro forma data give effect to
actual operating results prior to the acquisitions and adjustments to interest
expense, goodwill amortization and income taxes. These pro forma amounts do not
purport to be indicative of the results that would have actually been obtained
if the acquisitions had occurred on July 1, 1994 or that may be obtained in the
future. The pro forma data do not give effect to acquisitions completed
subsequent to June 30, 1996. See Note 17 to the Consolidated Financial
Statements.
YEAR ENDED JUNE 30
------------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Sales............................................. $5,300,694 $5,040,410
---------- ----------
Income before extraordinary item.................. $ 301,053 $ 210,541
---------- ----------
Net income........................................ $ 301,053 $ 207,941
---------- ----------
Income per share before extraordinary item........ $ 1.97 $ 1.39
---------- ----------
Net income per share.............................. $ 1.97 $ 1.37
---------- ----------
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS AND DIVESTITURES--(CONTINUED)
On December 29, 1995, the Company sold certain assets, including trademarks
and patents, of the Curad(R) and Futuro(R) consumer healthcare products business
owned by its Kendall subsidiary. Under the agreements, Kendall will continue to
manufacture certain Curad(R) and Futuro(R) products for the buyer under
long-term supply agreements. The Company received net cash proceeds of $49.8
million on the sale of the brand names and certain domestic assets. The Company
will continue to receive other payments, including payments under royalty and
non-compete agreements, through fiscal 2001. The Company has also granted to the
buyer options to acquire certain additional trademarks, patents and other
international assets. The gain on the sale was not material to the Company's
results of operations.
During fiscal 1995, the Company acquired five flow control products
companies, three disposable and specialty products companies and two European
fire and safety services companies for an aggregate of $130.3 million in cash.
During fiscal 1994, the Company acquired five disposable and specialty products
companies, two flow control products companies and one fire and safety services
company for an aggregate of $72.6 million in cash and a note payable of $3.6
million. The acquisitions were accounted for as purchases, and the results of
operations of the acquired companies were included in the consolidated results
of Tyco from their respective acquisition dates. The effect of these
transactions on the Company's financial position and results of operations in
the year of acquisition was not significant. 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.
4. INDEBTEDNESS
Long-term debt is as follows:
<TABLE>
<CAPTION>
AT JUNE 30
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Credit agreement....................................................... $ -- $ --
Uncommitted lines of credit............................................ 91,000 --
8.9% insurance company note............................................ -- 55,000
8.125% public notes due 1999........................................... 144,924 144,901
6.375% public notes due 2004........................................... 104,386 104,301
9.5% public debentures due 2022........................................ 199,592 199,575
8.0% public debentures due 2023........................................ 49,960 49,959
Other.................................................................. 49,582 37,068
-------- --------
Total debt............................................................. 639,444 590,804
Less current portion................................................... 127,822 84,387
-------- --------
Long-term debt......................................................... $511,622 $506,417
-------- --------
-------- --------
</TABLE>
The Company has a credit agreement that 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
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INDEBTEDNESS--(CONTINUED)
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.
In June 1996, the Company repaid the 8.9% insurance company note, utilizing
borrowings under its uncommitted lines of credit.
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 due in January 1995.
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.
At June 30, 1996, the Company had interest rate swap agreements with a
number of financial institutions having a total notional amount of $150 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 6.64%
and will make payments based on six month LIBOR, which, at June 30, 1996, was
5.79%. These agreements expire in the amounts of $100 million in April 1997 and
$50 million in March 1998. The impact of the Company's interest rate swap
activities on its weighted average borrowing rate was a decrease of 0.1%, an
increase of 0.1% and a decrease of 1.1% for fiscal 1996, 1995 and 1994,
respectively. The impact on reported interest was a reduction of $0.5 million,
an increase of $1.0 million and a reduction of $7.0 million for fiscal 1996,
1995 and 1994, respectively.
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: $127.8 million in fiscal 1997, $4.8 million in fiscal
1998, $1.2 million in fiscal 1999, $145.8 million in fiscal 2000 and $.7 million
in fiscal 2001.
5. 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. 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 $150 million of accounts receivable at the
program's inception in fiscal 1994. In June 1995, the Company increased the
maximum permitted under the agreement to $225 million from $150 million, and
correspondingly sold an additional $75 million. At June 30, 1996 the $225
million available under the program was fully utilized. 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 in fiscal 1995 and 1994 and a reduction of receivables in the Company's
consolidated balance sheet in fiscal 1995. The proceeds of sale are less than
the face amount of accounts receivable sold by an amount that approximates the
purchaser's financing cost of issuing its own commercial paper backed by these
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SALE OF ACCOUNTS RECEIVABLE--(CONTINUED)
accounts receivable. The discount from the face amount was $12.6 million, $8.2
million and $4.1 million during the years ended June 30, 1996, 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.
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash in banks,
temporary investments, accounts receivable and debt. The Company also has
currency options (notional amount of $38.5 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, 1996 the fair value of interest rate
swaps was a $0.6 million asset, and the fair value of long-term debt was
approximately $533.8 million (book value of $511.6 million), based on current
interest rates. The fair value of financial instruments included 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.
7. INCOME TAXES
Provisions for income taxes and the differences between the provisions at
the United States federal statutory rate and the amounts provided are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at statutory rate................................. $183,364 $134,707 $114,866
State income taxes.......................................... 20,584 15,972 11,511
Non-deductible merger and transaction related costs......... -- 7,009 --
Depreciation and amortization under purchase accounting..... 12,635 11,430 10,787
Foreign earnings taxed at different rates................... 4,723 6,873 6,723
Effect of rate changes...................................... -- (3,900) (3,649)
Research and development and foreign
sales corporation benefits................................ (5,150) (4,200) (2,710)
Other....................................................... (2,406) 394 1,471
-------- -------- --------
Provision for income taxes.................................. 213,750 168,285 138,999
Deferred provision.......................................... (52,199) (28,409) (21,113)
-------- -------- --------
Current provision........................................... $161,551 $139,876 $117,886
-------- -------- --------
-------- -------- --------
</TABLE>
In the normal course, the Company's United States federal income tax returns
are examined by the Internal Revenue Service ("IRS") and, in connection with
such examinations, significant assessments
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES--(CONTINUED)
could arise. During fiscal 1995, the IRS examined the Company's 1991 and 1992
income tax returns. In connection with such examination, one item is currently
under review by the IRS National Office, which could result in a significant
assessment of additional taxes. 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 1996, 1995 and 1994 included $29.3 million, $21.7
million and $23.9 million, respectively, for foreign income taxes. The foreign
component of income before income taxes was $55.1 million, $38.7 million and
$35.7 million, for fiscal 1996, 1995 and 1994, 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.
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 are as follows:
AT JUNE 30
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
Deferred tax assets:
Accrued liabilities and reserves.................... $123,077 $111,014
Accrued post-retirement benefit obligation.......... 31,890 34,276
Tax loss carryforwards.............................. 164,229 180,115
Other............................................... 4,237 747
-------- --------
323,433 326,152
-------- --------
Deferred tax liabilities:
Property, plant and equipment....................... (77,096) (69,114)
Contracts........................................... (6,861) (10,557)
Accrued liabilities and reserves.................... (17,398) (3,450)
Other............................................... (11,133) (10,506)
-------- --------
(112,488) (93,627)
-------- --------
Net deferred income tax asset before
valuation allowance................................. 210,945 232,525
Valuation allowance................................... (47,129) (43,958)
-------- --------
Net deferred income tax asset......................... $163,816 $188,567
-------- --------
-------- --------
As of June 30, 1996 the Company had approximately $185.3 million of net
operating loss carryforwards in certain foreign jurisdictions. Of these, $164.5
million have no expiration, and the remaining $20.8 million will expire in the
years 1997 to 2003. Domestic operating loss carryforwards at June 30, 1996 were
approximately $159.7 million and will expire in the years 2004 to 2008. A
valuation allowance has been provided for operating loss carryforwards that are
not expected to be utilized.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. KEY EMPLOYEE LOAN PROGRAM
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, 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 $12.3 million and $8.4 million at June 30, 1996 and 1995,
respectively.
9. CAPITAL STOCK
During the second quarter of fiscal 1996, the Board of Directors declared a
two-for-one stock split effected in the form of a 100% stock dividend on the
Company's common stock. Per share amounts and share data have been retroactively
adjusted to reflect the stock split.
In July 1994, the Company's Board of Directors authorized the repurchase of
up to 5.8 million of its common shares.
In January 1996 the Company repurchased 201,000 shares for $6.9 million. In
April and May 1995 the Company repurchased 435,070 and 297,556 shares
respectively, of its common stock from the President of Kendall at $26.47 and
$26.22 per share, respectively, the shares 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. The total cost of reacquired shares at June 30, 1996 and 1995 was
$92.9 million and $89.3 million, respectively.
In June 1994, the Company repurchased for $0.6 million a warrant which
entitled the holder, Tyco Investments (Australia) Limited, formerly Wormald
International Limited, to purchase ten million Tyco shares at a price of $35 per
share.
The Company's 1978 Restricted Stock Ownership Plan (the "1978 Plan")
provided for the award of 4,800,000 shares of common stock to key employees
through November 30, 1988. Under the 1978 Plan, 4,776,800 shares were granted,
net of surrenders. The 1983 Restricted Stock Ownership Plan (the "1983 Plan")
provided for the award of 6,800,000 shares of common stock to key employees
through October 18, 1993. Under the 1983 Plan, 5,797,516 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, 1996, there were 2,164,248
shares available, of which 778,814 shares had been granted. Common shares are
awarded subject to certain restrictions with vesting varying over periods of up
to ten years.
For grants that 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 grants and from the payment of dividends on
unvested shares are credited to capital in excess of par value.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. CAPITAL STOCK--(CONTINUED)
In connection with its Restructuring, effective June 30, 1992, Kendall
issued to holders of its equity securities, in exchange for such securities,
warrants to purchase common stock at per share exercise prices of $7.73 (the "A
Warrants") and $10.31 (the "B Warrants" and together with the A Warrants, the
"Warrants"). As a result of the merger with Kendall, these Warrants became
exercisable for Tyco common stock at per share prices of $5.97 and $7.96,
respectively. The Warrants expire on July 7, 1999. During fiscal 1996, 14,047 A
Warrants and 13,312 B Warrants were exercised. During fiscal 1995, 2,599,228 A
Warrants and 2,719,434 B Warrants were exercised. At June 30, 1996, 143,779 A
Warrants and 95,896 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 Tyco common stock. Transactions under these plans during fiscal
1996, 1995 and 1994 were as follows (after giving retroactive effect to the
conversion of Kendall shares to Tyco shares at the Tyco/Kendall merger exchange
ratio):
OPTION PRICE
SHARES PER SHARE
---------- -------------
Outstanding June 30, 1993....................... 2,673,866 $3.980- 9.945
Granted......................................... 659,078 9.315-19.595
Exercised....................................... (157,972) 3.980
Cancelled....................................... (62,152) 3.980
---------- -------------
Outstanding June 30, 1994....................... 3,112,820 3.980-19.595
Exercised....................................... (2,963,912) 3.980-19.595
Cancelled....................................... (119,644) 9.315-17.185
---------- -------------
Outstanding June 30, 1995....................... 29,264 9.315
Exercised....................................... (2,590) 9.315
---------- -------------
Outstanding June 30, 1996....................... 26,674 $ 9.315
---------- -------------
---------- -------------
Exercisable June 30, 1996....................... 26,674 $ 9.315
---------- -------------
---------- -------------
Kendall had a restricted stock grant agreement that provided for the
issuance of up to 2,000,000 shares of its common stock to its President. As a
result of the Merger, up to 2,589,700 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 732,626
of such shares. Compensation expense of $0.6 million and $1.3 million was
recorded for the grant during fiscal 1995 and 1994, respectively.
During fiscal 1995 Tyco 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 8,000,000 shares of common stock
for issuance under the plan. During fiscal 1996, options for 420,294 shares were
granted at prices ranging from $30.1875 to $40.375 per share. Options for
266,250 shares at $26.6875 to $33.125 per share were cancelled. During fiscal
1995, options for 3,034,500 shares were granted at a price of $26.6875 per
share. Grants are for periods generally not in excess of ten years. Options for
3,188,544 shares were outstanding at June 30, 1996 of
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. CAPITAL STOCK--(CONTINUED)
which 566,650 shares had vested; however, none were exercisable. At June 30,
1996 there were 4,811,456 shares available for future grant.
Tyco paid cash dividends of $0.20 per share in fiscal 1996, 1995 and 1994.
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." The standard defines a fair value based method of accounting for
employee stock options. The compensation expense arising from this method can be
reflected in the financial statements or, alternatively, the pro forma net
income and income per share effect of the fair value based accounting can be
disclosed in the footnotes to the financial statements. The Company will adopt
SFAS 123 in fiscal 1997 and expects to adopt the footnote disclosure
alternative.
10. COMMITMENTS AND CONTINGENCIES
The Company occupies certain facilities under leases that expire at various
dates through the year 2021. Rental expense under these leases and leases for
equipment was $85.7 million, $71.3 million and $60.4 million for fiscal 1996,
1995 and 1994, respectively. At June 30, 1996 the minimum lease payment
obligations under noncancellable leases were as follows: $65.5 million in fiscal
1997, $49.6 million in fiscal 1998, $39.5 million in fiscal 1999, $24.9 million
in fiscal 2000, $18.5 million in fiscal 2001 and an aggregate of $86.0 million
in fiscal years 2002 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 at a number of sites. 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 an aggregate amount in the range of $11.0 million to
$41.7 million. At June 30, 1996, the Company has concluded that the most
probable amount that will be incurred within this range is $19.6 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 liability for cleanup
costs among a number of parties, including the Company, and such liability could
be joint and several, management believes it is probable that other responsible
parties will fully pay the cost allocated 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 $19.6
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.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. 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 includes
the following components:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................... $11,245 $12,708 $12,523
Interest cost.................................................. 29,339 28,675 26,747
Actual return on assets........................................ (42,709) (40,349) (7,717)
Net amortization and deferral.................................. 10,255 11,486 (19,454)
------- ------- -------
Net periodic pension cost...................................... $ 8,130 $12,520 $12,099
------- ------- -------
------- ------- -------
</TABLE>
Accrued (prepaid) pension cost at June 30, 1996 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................................................ $ 281,448 $93,267 $374,715
Non-vested............................................ 10,112 8,682 18,794
------------- ------------- --------
Total............................................. 291,560 101,949 393,509
Effect of future salary increases....................... 4,243 3,770 8,013
------------- ------------- --------
Projected benefit obligations........................... 295,803 105,719 401,522
Plan assets at fair value............................... 331,782 53,185 384,967
------------- ------------- --------
Plan assets (in excess of) less than projected benefit
obligations........................................... (35,979) 52,534 16,555
Unrecognized transition asset (liability)............... 9 (856) (847)
Unrecognized prior service cost......................... (1,876) (6,931) (8,807)
Additional minimum liability............................ -- 9,439 9,439
Unrecognized net (loss) gain............................ (16,309) 499 (15,810)
------------- ------------- --------
Accrued (prepaid) pension cost.......................... $ (54,155) $54,685 $ 530
------------- ------------- --------
------------- ------------- --------
</TABLE>
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. 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>
Pursuant to the provisions of SFAS 87, "Employers' Accounting for Pensions,"
the Company recorded, in other liabilities, an additional minimum pension
liability adjustment of $9.4 million and $17.3 million as of June 30, 1996 and
1995, respectively, 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 recorded, net of the related deferred tax
benefit, as a reduction of shareholders' equity in the amount of $2.5 million
and $6.1 million at June 30, 1996 and 1995, respectively.
In fiscal 1996, 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, 57% relate to domestic plans and 43% 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 8.0% and 7.8%, respectively, at June 30, 1996 and 1995. The
average rate of increase in future compensation levels was 5.1% at June 30, 1996
and 1995. The weighted average long-term rate of return on assets was 10.0% and
10.2%, respectively, at June 30, 1996 and 1995. 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 $23.0 million, $18.0 million and $15.6 million for fiscal
1996, 1995 and 1994, 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
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. RETIREMENT PLANS--(CONTINUED)
SERP was $1.7 million and $0.4 million in fiscal 1996 and 1995, respectively.
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 $2.0 million, $2.5 million and $6.7 million for fiscal 1996, 1995 and
1994, respectively.
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.
Net periodic post-retirement benefit cost reflects the following components:
YEAR ENDED JUNE 30
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
Service cost................................... $ 359 $ 361 $ 372
Interest cost.................................. 4,358 4,739 5,822
Net amortization and deferral.................. (2,844) (2,857) (1,275)
------- ------- -------
Net periodic post-retirement benefit cost...... $ 1,873 $ 2,243 $ 4,919
------- ------- -------
------- ------- -------
The components of the accrued post- retirement benefit obligation, all of
which are unfunded, are as follows:
AT JUNE 30
------------------
1996 1995
------- -------
(IN THOUSANDS)
Accumulated post-retirement benefit obligation:
Retirees.............................................. $39,578 $44,829
Fully eligible active plan participants............... 11,134 9,469
Other active plan participants........................ 7,706 6,618
------- -------
58,418 60,916
Unrecognized prior service benefit...................... 17,377 23,887
Unrecognized net gain................................... 13,622 14,627
------- -------
Accrued post-retirement benefit cost.................... $89,417 $99,430
------- -------
------- -------
For measurement purposes, in fiscal 1996 a 9.7% 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 5.5% by the year 2008 and remain 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 one percentage point would increase the
accumulated post-retirement benefit obligation as of June 30, 1996 by $3.6
million and the aggregate of the service and interest cost component of net
periodic post-retirement benefit cost for the year then ended by $0.3 million.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 8.25%, 7.5% and 8.3% at June 30, 1996,
1995 and 1994, 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.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. CONSOLIDATED SEGMENT DATA
Selected information by industry segment is presented below.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED JUNE 30
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Disposable and Specialty Products................. $1,459,398 $1,386,781 $1,199,163
Fire and Safety Services.......................... 1,990,865 1,703,412 1,525,906
Flow Control Products............................. 1,158,944 1,014,357 914,430
Electrical and Electronic Components.............. 480,621 430,101 436,884
---------- ---------- ----------
$5,089,828 $4,534,651 $4,076,383
---------- ---------- ----------
---------- ---------- ----------
Income Before Income Taxes and Extraordinary Item:
Disposable and Specialty Products................. $ 291,744 $ 261,154 $ 191,669
Fire and Safety Services.......................... 128,136 86,512 70,171
Flow Control Products............................. 114,145 90,368 74,125
Electrical and Electronic Components.............. 88,525 76,397 72,510
---------- ---------- ----------
Income from operations............................ 622,550 514,431 408,475
Interest expense.................................. (58,867) (63,385) (62,431)
Corporate and other expenses...................... (39,786) (66,168)(1) (17,854)
---------- ---------- ----------
$ 523,897 $ 384,878 $ 328,190
---------- ---------- ----------
---------- ---------- ----------
Total Assets:
Disposable and Specialty Products................. $1,086,133 $ 843,557 $ 886,759
Fire and Safety Services.......................... 1,474,476 1,256,526 1,138,905
Flow Control Products............................. 1,045,124 1,030,364 861,362
Electrical and Electronic Components.............. 232,406 165,615 178,336
Corporate assets.................................. 115,797 85,399 79,236
---------- ---------- ----------
$3,953,936 $3,381,461 $3,144,598
---------- ---------- ----------
---------- ---------- ----------
Depreciation and Amortization:
Disposable and Specialty Products................. $ 42,511 $ 39,877 $ 40,618
Fire and Safety Services.......................... 34,056 31,795 29,513
Flow Control Products............................. 46,194 41,866 39,409
Electrical and Electronic Components.............. 10,985 10,997 11,313
Corporate......................................... 14,136 8,627 4,027
---------- ---------- ----------
$ 147,882 $ 133,162 $ 124,880
---------- ---------- ----------
---------- ---------- ----------
Capital Expenditures:
Disposable and Specialty Products................. $ 41,125 $ 46,402 $ 26,341
Fire and Safety Services.......................... 29,098 24,429 17,445
Flow Control Products............................. 39,328 36,618 33,941
Electrical and Electronic Components.............. 12,469 10,941 11,728
Corporate......................................... 1,207 658 347
---------- ---------- ----------
$ 123,227 $ 119,048 $ 89,802
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------
(1) 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.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. CONSOLIDATED GEOGRAPHIC DATA
Selected information by geographic area is presented below.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED JUNE 30
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales:
Americas............................................. $3,664,645 $3,284,982 $3,011,678
Europe............................................... 831,813 756,988 705,240
Asia-Pacific......................................... 593,370 492,681 359,465
---------- ---------- ----------
$5,089,828 $4,534,651 $4,076,383
---------- ---------- ----------
---------- ---------- ----------
Income From Operations:
Americas............................................. $ 554,170 $ 468,466 $ 362,764
Europe............................................... 42,980 28,564 34,519
Asia-Pacific......................................... 25,400 17,401 11,192
---------- ---------- ----------
$ 622,550 $ 514,431 $ 408,475
---------- ---------- ----------
---------- ---------- ----------
Total Assets:
Americas............................................. $2,728,772 $2,172,851 $2,106,729
Europe............................................... 775,745 802,231 687,947
Asia-Pacific......................................... 333,622 320,980 270,686
Corporate assets..................................... 115,797 85,399 79,236
---------- ---------- ----------
$3,953,936 $3,381,461 $3,144,598
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
14. SUPPLEMENTARY BALANCE SHEET INFORMATION
AT JUNE 30
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
Inventories:
Purchased materials and manufactured parts.......... $162,600 $161,243
Work in process..................................... 108,733 98,193
Finished goods...................................... 337,193 332,722
-------- --------
$608,526 $592,158
-------- --------
-------- --------
Property, Plant and Equipment:
Land................................................ $ 37,560 $ 33,842
Buildings........................................... 320,034 286,839
Machinery and equipment............................. 934,918 784,737
Leasehold improvements.............................. 22,658 17,881
Construction in progress............................ 52,289 46,178
Accumulated depreciation............................ (641,717) (511,006)
-------- --------
$725,742 $658,471
-------- --------
-------- --------
Accrued Payroll and Payroll Related Costs............. $ 74,686 $ 65,749
-------- --------
-------- --------
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs........................................ $83,409 $76,796 $71,498
------- ------- -------
------- ------- -------
Research and development....................................... $33,480 $33,375 $32,170
------- ------- -------
------- ------- -------
</TABLE>
16. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
----------------------------------------------------
1ST 2ND 3RD 4TH
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales...................................... $1,216,202 $1,243,885 $1,257,619 $1,372,122
Gross profit............................... $ 320,274 $ 334,167 $ 347,541 $ 394,961
Net income................................. $ 65,664 $ 70,771 $ 79,474 $ 94,238
Net income per share....................... $ .43 $ .46 $ .52 $ .62
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
----------------------------------------------------
1ST 2ND(2) 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....................................... $ .36 $ .17 $ .43 $ .47
Net income per share....................... $ .36 $ .16 $ .43 $ .47
</TABLE>
- ------------
(1) Income per share has been restated for all periods presented to give effect
to a two-for-one stock split. See Note 9 to the Consolidated Financial
Statements.
(2) Includes after-tax merger and transaction related costs of $31.2 million
($.21 per share) and an extraordinary item resulting from the early
extinquishment of certain Kendall debt of $2.6 million ($.02 per share). See
Notes 2 and 4 to the Consolidated Financial Statements.
17. SUBSEQUENT EVENTS
The Company has entered into an agreement to acquire Carlisle Plastics, Inc.
("Carlisle"), in exchange for approximately 3.1 million shares of Tyco common
stock. The Company intends to account for the acquisition as a purchase and, in
connection with the acquisition, the Company will assume approximately $180
million in long-term debt of Carlisle. Carlisle, which has annual revenues of
approximately $400 million, is a manufacturer of plastic sheeting, garment
hangers and other specialty packaging products. The acquisition is subject to
approval by the shareholders of Carlisle and certain other conditions. The
transaction, which has been approved by Carlisle's Board of Directors, is
expected to close in September 1996.
Subsequent to June 30, 1996 the Company acquired Thorn Security Group
Limited ("Thorn") for approximately $214 million. The acquisition was financed
utilizing borrowings of $100 million under the Company's credit agreement with
the balance through uncommitted lines of credit and will be accounted for as a
purchase. Thorn, which has annual revenues of approximately $300 million,
designs, manufactures, installs and services a broad range of systems used in
fire alarm and detection and building security applications. Thorn's principal
operations are in the United Kingdom, Continental Europe, Asia and the United
States.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
RESULTS OF OPERATIONS
Information for all periods presented below reflects the grouping of the
Company's businesses into four business segments consisting of Disposable and
Specialty Products, Fire and Safety Services (formerly Fire Protection), Flow
Control Products, and Electrical and Electronic Components.
OVERVIEW
Income before extraordinary item was $310.1 million, or $2.03 per share, for
fiscal 1996 compared with $216.6 million, or $1.43 per share, for fiscal 1995.
Income before extraordinary item rose 25% excluding the $31.2 million ($0.21 per
share) after-tax charge for merger and transaction related costs from the
Kendall merger in fiscal 1995 (see Note 2 to the Consolidated Financial
Statements). The increase was attributable to strong earnings improvements in
each of the Company's business segments.
SALES
Sales increased 12% during fiscal 1996 to $5.09 billion from $4.53 billion
in fiscal 1995. Sales of the Disposable and Specialty Products group increased
$72.6 million to $1.46 billion, or 5%. Increased sales at Kendall and, to a
lesser extent, at Ludlow were partially offset by decreased sales at Armin, due
to reduced raw material pricing, and by Kendall's sale of Futuro in the second
quarter of fiscal 1996. Kendall's sales include the sales of Professional
Medical Products, Inc. which was acquired during the third quarter of fiscal
1996. Sales of the Fire and Safety Services group increased $287.5 million to
$1.99 billion, or 17%, due to increased sales in the North American, European
and Asia-Pacific regions contracting businesses, as well as sales resulting from
the acquisition of The Earth Technology Corporation ("Earth Tech") in the third
quarter of fiscal 1996. Sales of the Flow Control group increased $144.6
million, or 14%, to $1.16 billion, reflecting higher volume at Allied, including
businesses acquired by Allied in the second half of fiscal 1995 as well as from
Grinnell's distribution operations, Mueller and European Flow Control. Sales of
the Electrical and Electronic Components group increased $50.5 million to $480.6
million, or 12%, resulting principally from higher sales of underwater
communications cable systems at Simplex as well as at the printed circuit
businesses and at Allied's electrical conduit operations.
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 and Safety Services 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 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.
42
<PAGE>
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
Pre-tax income before extraordinary item was $523.9 million in fiscal 1996
and $384.9 million in fiscal 1995. Pre-tax income increased 24% excluding the
$37.2 million charge for merger and transaction related costs in fiscal 1995.
Operating profits of the Disposable and Specialty Products group increased
$30.5 million to $291.7 million, or 12%, reflecting higher earnings at Kendall
and Ludlow partially offset by decreased earnings at Armin, where profits were
adversely affected by changes in raw material costs. Operating profits of the
Fire and Safety Services group rose $41.6 million to $128.1 million, or 48%, due
to higher margins at fire protection operations in each geographic region, as
well as the inclusion of earnings from Earth Tech, which was acquired during the
third quarter of fiscal 1996. Operating profits of the Flow Control group
increased $23.7 million to $114.1 million, or 26%, resulting from increased
earnings principally at Allied and Mueller and, to a lesser extent, at the
group's other operating units. Operating profits of the Electrical and
Electronic Components group increased $12.1 million to $88.5 million, or 16%,
due to increased earnings at Simplex, the printed circuit businesses and at
Allied's electrical conduit operations.
The impact on the consolidated sales and results of operations from changes
in foreign exchange rates relative to the U.S. dollar for fiscal 1996 as
compared to fiscal 1995 was not material.
Corporate and other expenses rose to $39.8 million from $29.0 million in
fiscal 1995 (excluding merger and transaction related costs) due principally to
an increase in expense associated with the Company's accounts receivable
financing program. Under the program, the discount on accounts receivable is
included in selling, general and administrative expense and is excluded from
interest expense. See Note 5 to the Consolidated Financial Statements.
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
Kendall 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 and Safety Services 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. 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.
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 expenses 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 accounts receivable financing program. See Note 5 to the
Consolidated Financial Statements.
INTEREST EXPENSE
Interest expense decreased $4.5 million to $58.9 million during fiscal 1996
due to lower average interest rates partially offset by higher average debt
levels. Interest expense increased $1.0 million to
43
<PAGE>
$63.4 million during fiscal 1995 due to higher average interest rates partially
offset by 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.
INCOME TAX EXPENSE
Income tax expense before extraordinary item was $213.8 million in fiscal
1996 and $168.3 million in fiscal 1995. An analysis of income taxes and the
effective income tax rate is presented in Note 7 to the Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
As presented in the Consolidated Statement of Cash Flows, net cash provided
by operating activities was $393.4 million in fiscal 1996. The significant
changes in working capital were an $83.6 million increase in accounts
receivable, a $24.5 million increase in contracts in process, a $26.6 million
decrease in accounts payable and accrued expenses and a $20.8 million increase
in inventory. The impact during fiscal 1996 of a strengthened dollar on foreign
currency denominated net working capital was not material. Working capital
requirements are not anticipated to increase substantially in fiscal 1997.
During fiscal 1996, the Company used cash of $301.4 million to acquire
companies in the disposable and specialty products, fire and safety services and
flow control products businesses, $123.2 million to purchase property, plant and
equipment, $30.5 million to pay dividends to shareholders and $6.9 million to
reacquire shares. The Company received net cash of $49.8 million from the sale
of certain brand names and domestic assets of the Curad and Futuro consumer
healthcare products business.
The level of capital expenditures is expected to increase moderately in
fiscal 1997, 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 1997. See Note 10 to the Consolidated Financial
Statements.
At June 30, 1996 the Company's total debt was $639.4 million as compared to
$590.8 million at June 30, 1995. The Company utilized borrowings under its
uncommitted lines of credit to partially finance its acquisitions in fiscal
1996, as well as to repay an insurance company note due in June 1996.
The Company believes that its funding sources are adequate for its
anticipated requirements, including the July 1996 acquisition of Thorn and the
proposed acquisition of Carlisle, through expected cash flow from operations and
established financing arrangements.
Shareholders' equity was $1,938.4 million, or $12.67 per share, at June 30,
1996 compared to $1,634.7 million, or $10.70 per share, at June 30, 1995. The
increase is due principally to fiscal 1996 net income, partially offset by a
decrease of $25.1 million resulting from translation of assets, principally
goodwill, and liabilities of foreign operations into U.S. dollars. Because the
dollar was stronger against foreign currencies at June 30, 1996 than at June 30,
1995, the net assets recorded in local currencies translated into a lesser
amount of U.S. dollars, resulting in a decrease in the various asset and
liability accounts as well as shareholders' equity.
44
<PAGE>
Total debt as a percent of total capitalization (total debt and
shareholders' equity) was 25% at June 30, 1996 and 27% at June 30, 1995.
BACKLOG
Backlog at June 30, 1996 amounted to $1.15 billion, compared to $1.05
billion at June 30, 1995. The increased backlog at June 30, 1996 is due to an
increase in the Company's Disposable and Specialty Products, Fire and Safety
Services, and Flow Control Products business segments, partially offset by a
decrease in the Company's Electrical and Electronic Components segment. Within
the Electrical and Electronic Components segment, increases at the Printed
Circuit Group and Allied's electrical conduit operations were offset by a
decrease at Simplex, where backlog is affected by the timing of delivery under
contracts for underwater cable communications systems.
ACCOUNTING PRONOUNCEMENT
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." The standard defines a fair value based method of accounting for
employee stock options. The compensation expense arising from this method can be
reflected in the financial statements or, alternatively, the pro forma net
income and income per share effect of the fair value based accounting can be
disclosed in the footnotes to the financial statements. The Company will adopt
SFAS 123 in fiscal 1997 and expects to adopt the footnote disclosure
alternative.
45
<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 three years ended June 30, 1996 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 three years ended
June 30, 1996.
In our opinion, the financial statement schedule for the three years ended
June 30, 1996 referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston Massachusetts
July 25, 1996
S-1
<PAGE>
TYCO INTERNATIONAL LTD.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<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>
(IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994:
Allowances for doubtful
accounts(1)......................... 28,981 7,884 (1,163) 6,391(2) 29,311
Product warranty..................... 10,468 1,725 (671) 1,810 9,712
Year Ended June 30, 1995:
Allowances for doubtful
accounts(1)......................... 29,311 7,407 (785) 6,379(2) 29,554
Product warranty..................... 9,712 1,695 2,115 1,694 11,828
Year Ended June 30, 1996:
Allowances for doubtful
accounts(1)......................... 29,554 10,498 3,080 6,460(2) 36,672
Product warranty..................... 11,828 2,743 (502) 5,111 8,958
</TABLE>
- ------------
(1) Deducted from assets.
(2) Write-off of accounts receivable considered uncollectible.
S-2
<PAGE>
<TABLE><CAPTION>
INDEX TO EXHIBITS
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
(3) Bylaws.
(11) Earnings Per Share Computation.
(12) Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the registrant.
(23) Consent of Coopers & Lybrand L.L.P.
(27) Financial Data Schedule.
</TABLE>
EXHIBIT 3
BY-LAWS
OF
TYCO INTERNATIONAL LTD.
Amended as of July 31, 1996
<PAGE>
BY-LAWS
OF
TYCO INTERNATIONAL LTD.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of stockholders shall be
--------- --------------
held on such date and at such time as shall be designated by the Board of
Directors. The purposes for which the annual meeting are to be held, in
addition to those prescribed by law, by the Articles of Organization, or by
these by-laws, may be specified by the Board of Directors or by the President.
Section 2. Special Meetings. Special meetings of stockholders may be
--------- ----------------
called by the chief executive officer or by the Board of Directors or as
otherwise authorized by law. The call for the meeting may be oral or written
and shall state the place, date, hour, and purposes of the meeting.
Section 3. Notice of Meetings; Stockholder Nominations and Proposals.
--------- ---------------------------------------------------------
(a) A written notice of the place, date, and hour of all meetings of
stockholders stating the purposes of the meeting shall be given by the Clerk or
an Assistant Clerk (or other person authorized by these by-laws or by law) at
least ten days before the meeting to each stockholder entitled to vote thereat
and to each stockholder who, by law, by the Articles of Organization, or by
these by-laws is entitled to such notice, by leaving such notice with him or at
his residence or usual place of business or by mailing it postage prepaid and
addressed to such stockholder at his address as it appears upon the records of
the corporation. Notice need not be given to a stockholder if a written waiver
of notice, executed before or after the meeting by such stockholder or his
attorney thereunto authorized, is filed with the records of the meeting.
(b) Any stockholder desiring to make a nomination for the election of
directors or a proposal to be submitted to a vote at a meeting of stockholders
must timely submit written notice, consisting of such nomination or proposal and
the other information required by this section, to the Secretary of the
corporation. To be timely, a stockholder's notice must be received at the
corporation's principal office not later than the close of business on the
sixtieth day prior to the scheduled date of the meeting in question. If a
stockholder's notice pertains to the nomination of directors, it shall set forth
as to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required in solicitations of proxies for the election of directors or as may be
otherwise required pursuant to Section 14 (including the rules and regulations
promulgated thereunder) and Schedule 14A (or in each case any successors thereto
or similar provisions) under the Securities Act of 1934, as amended, and a
representation that such person has consented to being named in a proxy
statement as a nominee and to serving as a director if elected. If a
stockholder's notice pertains to a proposal to be submitted to a vote, it shall
set forth the exact language of such proposal as it is proposed to be presented
to the meeting of stockholders. Any stockholder's notice submitted
1
<PAGE>
pursuant to this section also shall specify the meeting of stockholders as to
which it is submitted and shall set forth as to the stockholder giving the
notice (i) the name and address, as they appear on the corporation's books, of
such stockholder and (ii) the class and number of shares of the capital stock of
the corporation which are beneficially owned by such stockholder as of the date
of the notice. The person presiding at the meeting may in his or her discretion
determine and declare to the meeting that a nomination or proposal was not made
in accordance with the foregoing procedures and, in the event of such
determination, shall so declare to the meeting, and the defective nomination or
proposal shall be disregarded.
Section 4. Quorum. At any meeting of stockholders the holders of
--------- ------
outstanding shares of stock of the corporation entitled to cast a majority of
the votes entitled to be cast by the holders of all classes of capital stock of
the corporation entitled to vote generally in elections of directors, considered
for this purpose as one class, present in person or represented by proxy, shall
constitute a quorum, but the holders of a lesser number of shares of stock of
the corporation may adjourn any meeting from time to time and such meeting may
be held as adjourned without further notice. When a quorum is present, the
holders of shares of stock of the corporation entitled to cast a majority of the
votes entitled to be cast by the holders of all classes of the corporation's
capital stock which are present at such meeting, either in person or represented
by proxy, except where a larger vote is required by law, by the Articles of
Organization, or by these by-laws, shall decide any matter brought before the
meeting.
Section 5. Voting and Proxies. At any meeting of stockholders, each
--------- ------------------
stockholder shall have one vote for each share of stock entitled to vote held by
him of record according to the books of the corporation and a proportionate vote
for a fractional share, unless otherwise provided by law or by the Articles of
Organization. Stockholders entitled to vote may vote either in person or by
written proxy as permitted by law. Proxies shall be filed with the Clerk of the
meeting, or of any adjournment(s) thereof, before being voted. Proxies shall
entitle the persons named therein to vote at any adjournment(s) of such meeting
but, except as otherwise permitted by law, shall not be valid after the
adjourned meeting. Proxies need not be sealed or attested. A proxy with
respect to stock held in the name of two or more persons shall be valid if
executed by one of them, unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a stockholder shall
be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. All proxies and ballots shall
be received and tabulated by inspectors of election, who shall be independent of
the corporation and its directors and officers. All proxies, ballots and vote
tabulations that identify the vote of a particular stockholder shall be kept
confidential, except to the extent necessary to meet the requirements of
applicable law and except that information as to which stockholders have or have
not voted and periodic status reports on the aggregate vote may be made
available to the corporation if the corporation so requests.
Section 6. Certain Business Combinations. The stockholder vote
--------- -----------------------------
required to approve Business Combinations shall be as set forth in this
2
<PAGE>
Section 6 (all capitalized terms being used in this Section 6 as defined in this
Section 6):
1. Higher Vote for Business Combinations. Except as otherwise expressly
-------------------------------------
provided in Subsection 3 of this Section 6, in addition to any affirmative vote
required by law, the Articles of Organization, or these by-laws (and
notwithstanding the fact that no vote may be required, or that a lower
proportion may be specified, by law or in any agreement between the Corporation
and any national securities exchange or other person, or otherwise), approval of
the following types of transactions, or any agreement, contract, or other
arrangement providing for entry into such a transaction, shall require the
affirmative vote of the holders of not less than 80 percent of the outstanding
shares of Voting Stock, voting together as a single class:
A. any merger or consolidation of the Corporation or a Subsidiary
with or into a Related Person or any other corporation that is, or after
such merger or consolidation would be, an Affiliate or Associate of a
Related Person;
B. any sale, lease, exchange, transfer, or other disposition
(including, without limitation, the creation of a mortgage or any other
security interest) to a Related Person or to an Affiliate or Associate of a
Related Person, in one transaction or a series of transactions, of any
Substantial Part of the assets of the Corporation (including, without
limitation, any voting securities of a Subsidiary) or of a Subsidiary;
C. any sale, lease, exchange, transfer, or other disposition to the
Corporation or a Subsidiary, in one transaction or a series of
transactions, of the assets of a Related Person, or an Affiliate or
Associate of a Related Person, in an amount that would immediately prior to
such transaction constitute a Substantial Part of the assets of the
Corporation;
D. any issuance or sale by the Corporation or any Subsidiary of any
securities of the Corporation or a Subsidiary to a Related Person or an
Affiliate or Associate of a Related Person, other than pursuant to an
employee plan approved by a majority of the Continuing Directors and by the
stockholders of the Corporation;
E. any acquisition by the Corporation or a Subsidiary of any
securities of a Related Person or of an Affiliate or Associate of a Related
Person;
F. any adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of a Related Person
or any Affiliate or Associate of a Related Person;
G. any reclassification of securities (including any reverse stock
split), recapitalization of the Corporation, or any other transaction
(whether or not with or otherwise involving a Related Person) that has the
effect, directly or indirectly, of increasing the proportion of the
outstanding shares of any class of equity security of
3
<PAGE>
the Corporation or any Subsidiary directly or indirectly owned by any
Related Person or any Affiliate or Associate of any Related Person; and
H. any transaction (including, a merger or consolidation of the
Corporation with or into a Subsidiary) occurring at a time when a Related
Person exists, as a result of which the provisions of this Section 6 or
substantially equivalent provisions would thereafter cease to be in effect.
2. Definition of "Business Combination". As used in this Section 6, the
------------------------------------
term "Business Combination" means any transaction or transactions, or agreement
providing for a transaction or transactions, referred to in Subsection 1 of this
Section 6.
3. When Higher Vote is Not Required. The provisions of Subsection 1 of
this Section 6 shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote as is
required by law and any other provision of these by-laws or the Articles of
Organization, if all the conditions specified in any one of the following
paragraphs A, B, or C are met:
A. Approval in Advance by the Board of Directors. Not less than a
---------------------------------------------
majority of the Continuing Directors then holding office, in advance of
either the acquisition of outstanding shares of Voting Stock or the issue
or sale by the Corporation of shares of Voting Stock that caused the
Related Person to become a Related Person (an Initial Acquisition),
expressly approved such Initial Acquisition and determined, on such terms
and conditions, if any, as they deemed appropriate at the time, that the 80
percent voting requirement of Subsection 1 of this Section 6 would not be
applicable to Business Combinations with such Related Person.
B. Approval by Continuing Directors. A majority of the Continuing
--------------------------------
Directors approve the Business Combination when it is proposed.
C. Price and Procedure Requirements. All the following conditions
--------------------------------
are met:
(i) The Business Combination is a merger or consolidation, and
the aggregate value of the cash and/or Fair Market Value of the
property, securities, or other consideration to be received per share
in the Business Combination by each holder of Common Stock is not less
than the higher of (a) the highest per share price (with appropriate
adjustments for recapitalizations and stock splits, stock dividends,
and like distributions, with such distributions valued as of their
distribution dates) paid by the Related Person (regardless of the form
of such payment) in acquiring any of its holdings of Common Stock on
any date (the "Reference Date") within the three-year period preceding
the first public announcement of the earlier of the consummation and
the proposal of the Business Combination (the "Announcement Date"),
adjusted for inflation (but not deflation) as reflected in the
consumer price index published by the United States Department of
4
<PAGE>
Labor (or other then appropriate governmental body) between the
Reference Date and the Announcement Date, and (b) the highest Closing
Price per share of Common Stock during the period of one year
preceding (and including) the Announcement Date.
(ii) The Business Combination is a merger or consolidation, and
the aggregate value of the cash and/or Fair Market Value of the
property, securities or other consideration to be received per share
in the Business Combination by each holder of shares of any class of
outstanding Voting Stock (other than Common Stock) is not less than
the highest of (a) the highest per share price (with appropriate
adjustments for recapitalizations and stock splits, stock dividends,
and like distributions, with such distributions valued as of their
distribution dates) paid by the Related Person (regardless of the form
of such payment) in acquiring any of its holdings of such class of
Voting Stock on a Reference Date within the three-year period
preceding the Announcement Date, adjusted for inflation (but not
deflation) as reflected in the consumer price index published by the
United States Department of Labor (or other then appropriate
governmental body) between the Reference Date and the Announcement
Date, (b) the highest Closing Price per share of such class of Voting
Stock during the period of one year preceding (and including) the
Announcement Date, and (c) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Corporation.
(iii) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock)
shall be in cash or, if the application of subpart (a) of either parts
(i) or (ii) of this paragraph C produces the higher or highest value,
as applicable, in the same form as the Related Person previously paid
for shares of such class of Voting Stock. For the purposes of parts
(i) and (ii), the phrase "other consideration to be received"
includes, without limitation, Voting Stock retained by its existing
stockholders in the event of a Business Combination in which the
Corporation is the surviving corporation. If the Related Person paid
for shares of any class of Voting Stock with varying forms of
consideration, the form of consideration for such class of Voting
Stock shall be either cash or the same form used to acquire the
largest number of shares of such class of Voting Stock previously
acquired by such Related Person. As used in this part (iii), the
phrase "the same form" includes the requirement, with respect to any
security (as that term is defined in the Securities Act of 1933, as
amended, or any succeeding statute), that the security have, in the
good faith judgment of a majority of the Continuing Directors, the
same (or higher) level of soundness, liquidity, and general
attractiveness as an investment on the Announcement Date as it had at
the Reference Date.
(iv) After the Related Person became a Related Person and
prior to the consummation of such Business Combination: (a) except
5
<PAGE>
as approved by a majority of the Continuing Directors, there shall
have been no (1) failure to declare and pay at the regular date
therefor any full dividends (whether or not cumulative) on the
outstanding Preferred Stock or (2) reduction in the annual rate or
frequency of dividends paid on the Common Stock (except as necessary
to reflect any subdivision of, or dividends paid in, the Common
Stock), and (b) there shall have been such increase in the annual rate
of dividends on the Common Stock as may be necessary to reflect any
reclassification of securities (including any reverse stock split),
recapitalization, reorganization, or any similar transaction that had
the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate was approved
by a majority of the Continuing Directors.
(v) After the Related Person became a Related Person, such
Related Person shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges, or other financial assistance or any
tax credits or other tax advantages provided by the Corporation or a
Subsidiary, unless the transaction (or agreement providing for the
transaction) in which such benefit was received was approved by a
majority of the Continuing Directors at the time.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Exchange Act and the rules and regulations thereunder shall have been
mailed to stockholders of the Corporation at least forty-five days
prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant
to such Act).
4. Certain Definitions. For purposes of this Section 6:
-------------------
A. A "Person" means any natural person, firm, partnership, corporation,
government or political subdivision, agency, or instrumentality of a government,
or other entity.
B. "Related Person" means any Person that together with its Affiliates
and Associates owns in the aggregate five percent (5%) or more of the
outstanding shares of the Voting Stock, and any Affiliate or Associate of any
such Person, provided that "Related Person" shall not include the Corporation or
any Subsidiary.
C. "Substantial Part" means assets having an aggregate value in excess of
ten percent (10%) of the total consolidated assets of the Corporation and its
Subsidiaries as of the end of the Corporation's most recent fiscal quarter prior
to the time the determination is made.
D. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and, unless the provisions thereof as in effect on a specific date are referred
to, any successor statute.
6
<PAGE>
E. A Person shall be deemed to "own" any Voting Stock:
(i) of which such Person or any of its Affiliates or Associates would
be the beneficial owners as such term is defined in Rule 13d-3 promulgated
by the Securities and Exchange Commission (the "Commission") under the
Exchange Act as in effect on December 1, 1984; or
(ii) of which such Person or any of its Affiliates or Associates would
be the beneficial owner, as such term is defined in the rules promulgated
by the Commission under Section 16 of the Exchange Act, as in effect on
December 1, 1984; or
(iii) that such Person or any of its Affiliates or Associates has the
right to acquire (whether such right is exercisable immediately, only after
the passage of time, or upon the occurrence of a specified event or
condition), directly or indirectly pursuant to any agreement, arrangement,
or understanding (regardless of whether it is in writing), or upon the
exercise of conversion rights, exchange rights, warrants, or options, or
otherwise; or
(iv) that are owned by any other person with which such Person or any
of its Affiliates or Associates has any agreement, arrangement, or
understanding (regardless of whether it is in writing) for the purpose of
acquiring, holding, voting, or disposing of any shares of Voting Stock.
F. "Continuing Directors" means any director who is not an Affiliate or
Associate of any Related Person involved in the proposed Business Combination
and (a) who was a member of the Board of Directors of the Corporation on
December 1, 1984, (b) was a member of the Board of Directors of the Corporation
immediately prior to the time that any Related Person became a Related Person
(or, if the transaction involves more than one Related Person, immediately prior
to the time the first of such Persons to become a Related Person became a
Related Person), or (c) was elected or proposed for election for his or her
initial term of office by a majority of the Continuing Directors.
G. "Affiliate" or "Associate" have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated by the Commission under the Exchange Act,
as such Rule was in effect on December 1, 1984.
H. "Voting Stock" means all outstanding shares of capital stock of the
Corporation entitled to vote in the election of directors other than shares only
entitled to vote in the election of directors upon the occurrence of a specified
event or condition, and each reference to a proportion of shares of Voting Stock
shall refer to such proportion of the votes as may be entitled to be cast by the
holders of such shares.
I. "Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Corporation; provided,
however, that, for purposes of the definition of Related Person set forth in
paragraph B of this Subsection 4, the term
7
<PAGE>
"Subsidiary" means only a corporation of which the voting of a majority of each
class of equity securities is controlled, directly or indirectly, by the
Corporation.
J. "Closing Price" means the closing price of a share of stock on the
Composite Tape of the New York Stock Exchange Listed Stocks, or, if such stock
is not quoted on the Composite Tape of the New York Stock Exchange or is not
listed on such Exchange, on the principal United States securities exchange
registered under the Exchange Act on which such stock is listed, or, if such
stock is not listed on any such exchange, the closing bid quotation with respect
to a share of such stock on the National Association of Securities Dealers, Inc.
Automated Quotations System or any other electronic quotation system then in
use, or, if no such quotations are available, the fair market value of a share
of such stock as determined in good faith by a majority of the Continuing
Directors.
K. "Fair Market Value" as of any date means (i) in the case of stock, the
arithmetic mean of the Closing Prices for such stock during the thirty-day
period immediately preceding such date, and (ii) in the case of property other
than cash or stock, the fair market value of such property on such date as
determined in good faith by a majority of the Continuing Directors.
L. "Corporation" means Tyco International Ltd.
M. "Common Stock" means any class of common stock of the Corporation.
N. "Preferred Stock" means any class of preferred stock of the
Corporation.
5. Powers of Continuing Directors. Unless a different proportion is
------------------------------
specified in a particular provision of this Section 6, a majority of the
Continuing Directors of the Corporation shall have the power and duty to
determine, on the basis of information known to them after reasonable inquiry,
all facts necessary to determine compliance with this Section 6, including,
without limitation, (A) whether a Person is a Related Person, (B) the number of
shares of Voting Stock owned by any Person, (C) whether a Person is an Affiliate
or Associate of another, (D) whether the requirements of paragraph C of
Subsection 3 have been met with respect to any Business Combination, (E) whether
the assets that are the subject of any Business Combination have an aggregate
Fair Market Value in excess of the amount set forth in paragraphs B and C of
Subsection 1 of this Section 6, and (F) any other facts that a majority of the
Continuing Directors determine to be relevant; and the good faith determination
of a majority of the Continuing Directors on such matters shall be conclusive
and binding for all the purposes of this Section 6.
6. Amendment, Repeal, etc. Notwithstanding any other provision of these
----------------------
by-laws (and notwithstanding the fact that a lesser proportion may be specified
by law, these by-laws, or the Articles of Organization of the Corporation), the
affirmative vote of the holders of not less than 80 percent (80%) of the Voting
Stock, voting together as a single class, shall be required to amend or repeal,
or adopt any provisions inconsistent with, this
8
<PAGE>
Section 6 of these by-laws, whether such amendment, repeal, or adoption of
inconsistent provision is proposed to be made in these by-laws or in the
Articles of Organization, provided that this Subsection 6 shall not be
applicable to any such amendment if such amendment is approved by a majority of
the Continuing Directors, and any such approved amendment shall require only the
affirmative vote of the stockholders required by law or other applicable
provisions of these by-laws or the Articles of Organization.
ARTICLE II
Directors
---------
Section 1. Powers. The business of the corporation shall be managed by a
--------- ------
Board of Directors, who may exercise all the powers of the corporation except as
otherwise provided by law, by the Articles of Organization, or by these by-laws.
In the event of a vacancy in the Board of Directors, the remaining directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.
Section 2. Election and Qualification. A Board of Directors of such
--------- --------------------------
number, not less than three, shall be elected by the stockholders at the annual
meeting. A director need not be a stockholder.
Section 3. Vacancies. Any vacancy in the Board of Directors, however
--------- ---------
occurring, including a vacancy resulting from the enlargement of the Board of
Directors, shall be filled by the remaining directors.
Section 4. Enlargement of the Board. The number of members of the Board
--------- ------------------------
of Directors may be increased by the stockholders at any meeting or by the Board
of Directors by vote of a majority of the directors then in office.
Section 5. Tenure. Except as otherwise provided by law, by the Articles
--------- ------
of Organization, or by these by-laws, directors shall hold office until the next
annual meeting of stockholders and until their successors are chosen and
qualified. Any director may resign by delivering his written resignation to the
corporation at its principal office or to the President, Clerk, or Secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 6. Removal. A director may be removed from office (a) with or
--------- -------
without cause by vote of the holders of a majority of the shares of stock
entitled to vote in the election of directors, or (b) for cause by vote of a
majority of the directors then in office. A director may be removed for cause
only after reasonable notice and opportunity to be heard before the body
proposing to remove him.
Section 7. Meetings. Regular meetings of the Board of Directors may be
--------- --------
held without notice at such time, date and place as the Board of Directors may
from time to time determine. A regular meeting of the Board of Directors may be
held without notice at the same place as the annual meeting of stockholders, or
the special meeting held in lieu thereof, following such meeting of
stockholders.
9
<PAGE>
Special meetings of the Board of Directors may be called, either orally or
in writing, by the Chairman of the Board of Directors, the President, or two or
more directors, designating the time, date and place thereof.
Section 8. Notice of Meetings. Notice of the time, date and place of all
--------- ------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary, or, if there be no Secretary, by the Clerk or Assistant Clerk,
or, in the case of the death, absence, incapacity, or refusal of such persons,
by the officer or one of the directors calling the meeting. Notice shall be
given to each director either personally or by telephone or by telegram sent to
his business or home address at least twenty-four hours in advance of the
meeting or by written notice mailed to his business or home address at least
forty-eight hours in advance of the meeting. Notice need not be given to any
director if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting or to any director who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him. A notice or waiver of notice of a meeting of the Board of
Directors need not specify the purposes of the meeting.
Section 9. Quorum. At any meeting of the Board of Directors a majority of
--------- ------
the directors then in office shall constitute a quorum. Less than a quorum may
adjourn any meeting from time to time, and the meeting may be held as adjourned
without further notice.
Section 10. Action of the Board of Directors. At any meeting of the
---------- --------------------------------
Board of Directors at which a quorum is present a majority of those present may
take any action on behalf of the Board of Directors except to the extent that a
larger number is required by law, by the Articles of Organization, or by these
by-laws. Any action by the Board of Directors may be taken without a meeting if
all the directors consent to the action in writing and the written consents are
filed with the records of the meetings of the Board of Directors. Such consent
shall be treated as a vote of the Board of Directors for all purposes.
Section 11. Executive Committee. The Board of Directors may, by vote of a
---------- -------------------
majority of its entire number, elect from its own number an Executive Committee
of three or more members to which committee may be delegated the management on
behalf of the Board of Directors of the current and ordinary business of the
corporation and such other duties and functions as the Board of Directors may by
vote prescribe except those which by law, by the Articles of Organization, or by
these by-laws may not be delegated. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, but a lesser number may
adjourn any meeting from time to time and the meeting may be held as adjourned
without further notice. The Executive Committee may make rules not inconsistent
herewith for the holding and conduct of its meetings. A record of the meetings
of the Executive Committee shall be kept as provided for meetings of the Board
of Directors.
The Executive Committee shall report its action to the Board of Directors.
The Board of Directors shall have power to rescind any action of the Executive
Committee, but no such rescission shall have retroactive effect.
10
<PAGE>
Section 12. Committee of Independent Directors. The independent directors
---------- ----------------------------------
(as hereinafter defined) shall constitute a Committee of Independent Directors,
which shall independently evaluate management proposals to the Board of
Directors and generate independent proposals for consideration by the Board of
Directors. The Committee of Independent Directors shall have the authority to
employ, and terminate the employment of, staff members, who will work for and
report to the Committee and not to the officers of the Corporation. For this
purpose an "independent director" shall mean a director who has not been
employed by the corporation or an affiliate of the corporation in an executive
capacity within the past five years; was not, and is not, a member of a
corporation or firm that is one of the corporation's paid advisers or
consultants; is not employed by a significant customer, supplier or provider of
professional services to the corporation; has no personal services contract with
the corporation; is not employed by a foundation or university that receive
significant grants or endowments from the corporation; is not a relative of any
member of the management of the corporation; is not a shareholder who has signed
a shareholder agreement legally obligating him to vote with management; and is
not a director of a company of which the corporation's Chairman or chief
executive officer is also a member of the board of directors.
Section 13. Other Committees. The Board of Directors may, from time to
---------- ----------------
time, appoint one or more committees comprised of directors and officers of the
corporation for such purposes and having such powers, responsibilities, and
functions as are conferred by the vote or resolution appointing such committee
and as are permitted by law.
ARTICLE III
Officers
--------
Section 1. Enumeration. The officers of the corporation shall consist
--------- -----------
of a President, a Treasurer, and a Clerk, and such other officers, including a
Chairman of the Board, one or more Vice Presidents, Assistant Treasurers,
Assistant Clerks, and a Secretary and Assistant Secretaries, as the Board of
Directors may determine.
Section 2. Election. The President, the Treasurer, and the Clerk shall
--------- --------
be elected annually by the Board of Directors at their first meeting following
the annual meeting of stockholders. Other officers may be chosen by the Board
of Directors at such meeting or at any other meeting.
Section 3. Qualification. An officer need not be a stockholder or
--------- -------------
director. Any two or more offices may be held by the same person, provided that
the President and the Clerk shall not be the same person. The Clerk shall be a
resident of Massachusetts unless the corporation has a resident agent appointed
for the purpose of service of process. Any officer may be required by the Board
of Directors to give bond for the faithful performance of his duties in such
amount and with such sureties as the Board of Directors may determine.
Section 4. Tenure. Except as otherwise provided by law, by the Articles
--------- ------
of Organization, or by these by-laws, the President, the Treasurer,
11
<PAGE>
and the Clerk shall hold office until the next annual meeting of stockholders
and until their respective successors are chosen and qualified, and all other
officers shall hold office until the next annual meeting of stockholders and
until their successors are chosen and qualified or for such shorter term as the
Board of Directors may fix at the time such officers are chosen. Any officer
may resign by delivering his written resignation to the corporation at its
principal office or to the President, the Clerk, or the Secretary, and such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 5. Removal. The Board of Directors may remove any officer with or
--------- -------
without cause by a vote of a majority of the entire number of directors then in
office; provided that an officer may be removed for cause only after reasonable
notice and opportunity to be heard by the Board of Directors.
Section 6. Vacancies. Any vacancy in any office may be filled for the
--------- ---------
unexpired portion of the term by the Board of Directors.
Section 7. Chairman of the Board of Directors. The Board of Directors
--------- ----------------------------------
may elect from its number a Chairman of the Board and may provide that he shall
be the chief executive officer of the corporation. The Chairman of the Board
shall preside, when present, at all meetings of the stockholders and of the
Board of Directors unless he shall decline to do so.
Section 8. President and Vice Presidents. Unless the Board of Directors
--------- -----------------------------
shall otherwise provide, the President shall be the chief executive officer of
the corporation and shall preside at all meetings of the stockholders and of the
Board of Directors in the absence of the Chairman of the Board or if the
Chairman of the Board shall decline to preside. The President shall, subject to
the direction of the Board of Directors, have general supervision and control of
the business of the corporation.
Any Vice President shall have such powers and shall perform such duties as
the Board of Directors may from time to time designate.
Section 9. Treasurer and Treasurers. Unless the Board of Directors shall
--------- ------------------------
otherwise provide, the Treasurer shall, subject to the direction of the Board of
Directors, have general charge of the financial affairs of the corporation. He
shall have power to endorse for deposit or collection all instruments for the
payment of money to the corporation and to accept drafts on its behalf. He
shall cause to be kept accurate books of account of the affairs of the
corporation. He shall have custody of all funds, securities, and valuable
documents of the corporation except as the Board of Directors may otherwise
provide.
Any Assistant Treasurer shall have such powers as the Board of Directors
may from time to time designate.
Section 10. Clerk. The Clerk shall keep a record of the meetings of
---------- -----
stockholders. In case a Secretary or Assistant Secretary is not elected or is
absent, the Clerk or an Assistant Clerk shall keep a record of the meetings of
the Board of Directors. In the absence of the Clerk from any meeting of
stockholders, an Assistant Clerk, if one be elected, otherwise a Temporary
12
<PAGE>
Clerk designated by the person presiding at the meeting, shall perform the
duties of the Clerk.
Section 11. Secretary. The Secretary, if one be elected, shall keep a
---------- ---------
record of the meetings of the Board of Directors. In the absence of the
Secretary, all Assistant Secretaries, the Clerk, and all Assistant Clerks, a
Temporary Secretary shall be designated by the person presiding at such meeting
to perform the duties of the Secretary.
Any Assistant Secretary shall have such powers as the Board of Directors
may from time to time designate.
Section 12. Other Powers and Duties. Each officer shall, subject to
---------- -----------------------
these by-laws, have in addition to the duties and powers specifically set forth
in these by-laws, such duties and powers as are customarily incident to his
office and such duties and powers as the Board of Directors may from time to
time designate. The exercise of any power which by law, by the Articles of
Organization, or by these by-laws, or under any vote; of the stockholders or the
Board of Directors, may be exercised by an officer of the corporation only in
the event of the absence of another officer or any other contingency shall bind
the corporation in favor of anyone relying thereon in good faith, whether or not
such absence or contingency existed.
ARTICLE IV
Capital Stock
-------------
Section 1. Certificates of Stock. Each stockholder shall be entitled to a
--------- ---------------------
certificate of the capital stock of the corporation in such form as shall, in
conformity to law, be prescribed from time to time by the Board of Directors.
Such certificate shall be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer. Such signatures may be facsimile if the
certificate is signed by a Transfer Agent or by a Registrar other than a
director, officer, or employee of the corporation. In case any officer who has
signed or whose facsimile signature has been placed on any such certificate
shall have ceased to be such officer before such certificate is issued, such
certificate may be issued by the corporation with the same effect as if he were
such officer at the time of its issue. Every certificate for shares of stock
which is subject to any restriction on transfer and every certificate issued
when the corporation is authorized to issue more than one class or series of
stock shall contain such legend with respect thereto as is required by law.
Section 2. Transfers. Subject to the restrictions, if any, noted on the
--------- ---------
stock certificates, shares of stock may be transferred on the books of the
corporation by the surrender to the corporation or its Transfer Agent of the
certificate therefor properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with transfer stamps (if necessary)
affixed, and with such proof of the authenticity of signature as the corporation
or its Transfer Agent may reasonably require.
Section 3. Record Holder. Except as may be otherwise required by law, by
--------- -------------
the Articles of Organization, or by these by-laws, the corporation shall be
13
<PAGE>
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect thereto, regardless of any transfer, pledge, or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these by-laws. It
shall be the duty of each stockholder to notify the corporation of his post
office address.
Section 4. Record Dates. The Board of Directors may in advance fix a date
--------- ------------
not more than sixty days preceding the date of any meeting of stockholders, or
the date for the payment of any dividend or the making of any distribution to
stockholders, or the last day on which the consent or dissent of stockholders
may be effectively expressed for any purpose, as the record date for determining
the stockholders having the right to notice of and to vote at such meeting, and
any adjournment thereof, or the right to receive such dividend or distribution,
or the right to give such consent or dissent. In such case only stockholders of
record on such record date shall have such right notwithstanding any transfer of
stock on the books of the corporation after the record date. Without fixing
such record date the Board of Directors may for any such purposes close the
transfer books for all or any part of such period.
Section 5. Replacement of Certificates. In case of the alleged loss,
--------- ---------------------------
destruction, or mutilation of a certificate of stock, a duplicate certificate
may be issued in place thereof upon such terms as the Board of Directors may
prescribe.
Section 6. Issue of Stock. Except as otherwise voted by the stockholders,
the whole or any part of any unissued balance of the authorized capital stock of
the corporation may be issued pursuant to vote of the Board of Directors to such
persons, for such consideration, whether cash, property, good will, services, or
expenses, or as a stock dividend, and on such terms as the Board of Directors
may determine from time to time without first offering the same for subscription
to stockholders of the corporation.
ARTICLE V
Miscellaneous Provisions
------------------------
Section 1. Fiscal Year. Except as from time to time otherwise determined
--------- -----------
by the Board of Directors, the fiscal year of the corporation shall be the
twelve months ending June 30.
Section 2. Seal. The Board of Directors shall have the power to adopt and
--------- ----
alter the seal of the corporation.
Section 3. Execution of Instruments. All deeds, leases, transfers,
--------- ------------------------
contracts, bonds, notes and other obligations authorized to be executed by an
officer of the corporation on its behalf shall be signed by the President or the
Treasurer, except as the Board of Directors may generally or in particular cases
otherwise determine.
14
<PAGE>
Section 4. Voting of Securities. Except as the Board of Directors may
--------- --------------------
otherwise designate, the President or Treasurer may waive notice of and act on
behalf of the corporation or appoint any person or persons to act as proxy or
attorney in fact for the corporation (with or without discretionary power and/or
power of substitution) at any meeting of stockholders of any other corporation
or organization, any of the securities of which may be held by the corporation.
Section 5. Corporate records. The original or attest copies of the
--------- -----------------
Articles of Organization, by-laws, and records of all meetings of the
incorporators and stockholders and the stock and transfer records, which shall
contain the names of all stockholders and the record address and the amount of
stock held by each, shall be kept in Massachusetts at the principal office of
the corporation, or at an office of its transfer agent, Clerk, or resident
agent, and shall be open at all reasonable times to the inspection of any
stockholder for any proper purpose, but not to secure a list of stockholders for
the purpose of selling said list or copies thereof or of using the same for a
purpose other than in the interest of the applicant, as a stockholder, relative
to the affairs of the corporation.
Section 6. Evidence of Authority. A certificate by the Clerk, a Temporary
--------- ---------------------
Clerk, the Secretary, or any Assistant Secretary as to any action taken by the
stockholders, directors, or any officer or representative of the corporation
shall, as to all persons who rely thereon in good faith, be conclusive evidence
of such action.
Section 7. Ratification. Any action taken on behalf of the corporation by
--------- ------------
the directors or any officer or representative of the corporation which requires
authorization by the stockholders or the directors of the corporation shall be
deemed to have been authorized if subsequently ratified by the stockholders or
by the directors, as the case may be, at a meeting held in accordance with these
by-laws.
Section 8. Articles of Organization. All references in these bylaws to
--------- ------------------------
the Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation as amended and in effect from time to time.
ARTICLE VI
Amendments
----------
These by-laws may be amended or repealed by vote of the stockholders at any
annual or special meeting or by the Board of Directors at any regular or special
meeting, provided that:
(a) The Board of Directors may not amend or repeal any provision of these
by-laws which by law, by the Articles of Organization, or by these by-laws
requires action by the stockholders;
(b) Not later than the time of giving notice of the meeting of
stockholders next following the amendment or repeal by the Board of
Directors of any of these by-laws, notice thereof stating the
15
<PAGE>
substance of such change shall be given to all stockholders entitled to
vote on the amendment of these by-laws; and
(c) Any amendment or repeal of these by-laws by the Board of Directors and
any by-law adopted by the Board of Directors may be amended or repealed by
the stockholders.
16
EXHIBIT 11
TYCO INTERNATIONAL LTD.
EARNINGS PER SHARE COMPUTATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
CALCULATION OF EARNINGS PER SHARE:
PRIMARY:
Weighted average common shares outstanding during the period 152,714 147,889 141,984
Dilutive effect of the restricted stock plan, stock options
and warrants using the treasury stock method.............. 148 3,129 5,556
-------- -------- --------
Total common equivalent shares........................ 152,862 151,018 147,540
-------- -------- --------
-------- -------- --------
Income before extraordinary item............................ $310,147 $216,593 $189,191
Extraordinary item.......................................... -- (2,600) --
-------- -------- --------
Net income.................................................. $310,147 $213,993 $189,191
Earnings per share:
Before extraordinary item................................... $ 2.03 $ 1.43 $ 1.28
Extraordinary item.......................................... -- (.02) --
-------- -------- --------
Net income per share........................................ $ 2.03 $ 1.42 $ 1.28
-------- -------- --------
-------- -------- --------
FULLY DILUTED:(1)
Weighted average common shares outstanding during the period 152,714 147,889 141,984
Dilutive effect of the restricted stock plan, stock options
and warrants using the treasury stock method.............. 236 3,201 5,628
-------- -------- --------
Total common equivalent shares........................ 152,950 151,090 147,612
-------- -------- --------
-------- -------- --------
Income before extraordinary item............................ $310,147 $216,593 $189,191
Extraordinary item.......................................... -- (2,600) --
-------- -------- --------
Net income.................................................. $310,147 $213,993 $189,191
-------- -------- --------
-------- -------- --------
Earnings per share:
Before extraordinary item................................... $ 2.03 $ 1.43 $ 1.28
Extraordinary item.......................................... -- (.02) --
-------- -------- --------
Net income per share........................................ $ 2.03 $ 1.42 $ 1.28
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by Footnote 2 to Paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
EXHIBIT 12
TYCO INTERNATIONAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Earnings:
Income before income taxes and extraordinary item......... $523,897 $384,878 $328,190
-------- -------- --------
Fixed charges:
Interest expense(1)....................................... 58,867 63,385 62,431
Rentals(2)................................................ 28,529 23,767 19,932
-------- -------- --------
87,396 87,152 82,363
-------- -------- --------
Earnings before income taxes and fixed charges.............. $611,293 $472,030 $410,553
-------- -------- --------
-------- -------- --------
Ratio of earnings to fixed charges.......................... 6.99 5.42 4.98
-------- -------- --------
-------- -------- --------
</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>
PLACE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------- --------------------
<S> <C>
ARGENTINA
GRINNELL SISTEMAS DE PROTECCION CONTRA INCENDIO S.A.DE C.V............. Argentina
AUSTRALIA
A.C.N. 000 233 536 PTY LIMITED) (1).................................... Australia
A.C.N. 007 664253 PTY LIMITED (2)...................................... 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
GAAM FIRE ENGINEERING PTY LIMITED...................................... Australia
GRINNELL ASIA PACIFIC PTY LIMITED (4).................................. Australia
GRINNELL BUILDING PRODUCTS PTY LTD (5)................................. 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 AUSTRALIA PTY LIMITED (6)......................................... Australia
TYCO GRINNELL ASIA PACIFIC PTY LIMITED................................. Australia
TYCO INTERNATIONAL PTY LIMITED......................................... Australia
VIKING FIRE SYSTEMS PTY LIMITED (7).................................... Australia
VOTRAINT NO. 822 PTY. LIMITED.......................................... Australia
</TABLE>
- ------------
(1) Also doing business as GAAM Fire & Rescue.
(2) Also doing business under the following name: Firegard (Australia) Company
(3) Also doing business under the following name: Guardian Fire Protection Co.
(4) Also doing business under the following names: Fire Guard A.F.S., 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 names: Cecon Fire Doors (NSW only),
Fire Systems Engineering
(6) Also doing business under the following names: ACT Plumbing & Maintenance,
Advanced Systems Engineering, Building Asset Maintenance, E.P.S. Electrical
& Plumbing Services, Fire Control Services, FHD Airconditioning, Goldfields
Fire Services, Masterbilt Industries, Olsen Engineering Company, Quintrix
Communications, Safeguard Fire Systems, Simplex Fire Protection Company,
Tyco Fire Monitoring, Viking Fire Sprinklers, Williams Extinguisher Service,
Wormald Advanced Systems Engineering, Wormald Building Products, Wormald
Control Systems, Wormald Electronics, Wormald Fire & Safety, Wormald Fire
Engineering, Wormald Technology
(7) Also doing business under the following name: Viking Fire Sprinklers (SA and
NT only)
<PAGE>
<TABLE>
<CAPTION>
PLACE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------- --------------------
<S> <C>
AUSTRIA
WORMALD WALTHER FEUERSCHUTZ GES. M.B.H................................. Austria
BELGIUM
WORMALD S.A............................................................ Belgium
BERMUDA
KRAL STEEL, LTD........................................................ Bermuda
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 OF 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>
CHILE
UNISTRUT CHILE LTD..................................................... Chile
CHINA
KENDALL-YANTAI MEDICAL PRODUCTS COMPANY, LTD........................... China
OYT-GRINNELL FIRE DOOR MANUFACTURING COMPANY LIMITED................... China
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
CDK HOLDING DEUTSCHLAND GMBH........................................... Germany
GH MONTAGE GMBH........................................................ Germany
GRINNELL HOFFMANN SPRINKLER GMBH....................................... Germany
GRINNELL SALES & DISTRIBUTION (DEUTSCHLAND) HOLDING GMBH............... Germany
HELMUT GEISSLER GLASINSTRUMENTE GMBH................................... Germany
KENDALL MEDIZINISCHE ERZEUGNISSSE GMBH................................. Germany
NEOTECHA GMBH.......................................................... Germany
OTTO FANKHANEL & SOHN GMBH............................................. Germany
RATHGEBER BIOFORM GMBH................................................. Germany
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------- --------------------
<S> <C>
TOTAL WALTHER FEUERSCHUTZ GMBH (KOLN).................................. Germany
TOTAL WALTHER FEUERSCHUTZ LOSCHMITTEL GMBH............................. Germany
TYCO HOLDING GMBH...................................................... Germany
WORMALD DEUTSCHLAND GMBH............................................... Germany
GUATEMALA
GRINNELL SISTEMAS DE PROTECCION CONTRA INCENDIO, S.A................... Guatemala
HONG KONG
KENDALL (ASIA) MEDICAL PRODUCTS LIMITED................................ Hong Kong
O'DONNELL GRIFFIN (HONG KONG) LTD...................................... Hong Kong
WORMALD ENGINEERING SERVICES LTD....................................... Hong Kong
CROWN NATION INTERNATIONAL LIMITED (50%)............................... Hong Kong
PIONEER FAITH INTERNATIONAL LIMITED (50%).............................. Hong Kong
HUNGARY
WORMALD WALTHER HUNGARY................................................ Hungary
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
GRINNELL SUPPLY SALES (MALAYSIA) SDN BHD............................... 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
CIMA DE ACUNA 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
PRODUCTOS DE ATENCION DE SALLID DE MEXICO, S.A. DE C.V................. Mexico
NETHERLANDS
ANSUL B.V.............................................................. Netherlands
GRINNELL SALES AND DISTRIBUTION B.V.................................... Netherlands
TOTAL WALTHER B.V...................................................... Netherlands
TYCO LABS HOLLAND I B.V................................................ Netherlands
TYCO WATERWORKS B.V.................................................... Netherlands
WALTHER BRANDBEVEILIGING B.V........................................... Netherlands
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PLACE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------- --------------------
<S> <C>
WORMALD B.V............................................................ Netherlands
NEW ZEALAND
ASSOCIATED FIRE ALARMS LTD. (39%)...................................... New Zealand
BENEFIS SYSTEMS LIMITED................................................ New Zealand
FABRICATION & PUMP SERVICES LIMITED.................................... New Zealand
FIRE PROTECTION INSPECTION SERVICES LTD. (19%)......................... New Zealand
GRINNELL SUPPLY SALES LIMITED.......................................... New Zealand
METROPOL FIRE NEW ZEALAND LIMITED...................................... New Zealand
O'DONNELL GRIFFIN LIMITED.............................................. New Zealand
TYCO INTERNATIONAL NZ LIMITED.......................................... 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
NORWAY
WORMALD SIGNALCO A/S................................................... Norway
PANAMA
ANSUL INTERNATIONAL CORP, S.A.......................................... Panama
KENDALL S.A. (PANAMA).................................................. Panama
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
BELGICAST INTERNATIONAL, S.L........................................... Spain
REVAME, S.L............................................................ Spain
TOTAL WALTHER S.A...................................................... Spain
WORMALD MATHER + PLATT ESPANA S.A. (1)................................. 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PLACE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------- --------------------
<S> <C>
FIRE DEFENDER (UK) LTD................................................. United Kingdom
GRINNELL (UK), LTD. (1)................................................ United Kingdom
GRINNELL MANUFACTURING (U.K.) LIMITED (2).............................. United Kingdom
GRINNELL SALES & DISTRIBUTION (UK) LTD................................. United Kingdom
HINDLE COCKBURNS LIMITED............................................... United Kingdom
LASTONET PRODUCTS LIMITED.............................................. United Kingdom
LEPRODUX 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
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: Grinnell Firekil, GEM
Consultants
(2) Also doing business under the following names: The Ansul Fabrication, Debro
Engineering & Presswork
(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 HOLDING CORPORATION............................................. Pennsylvania,U.S.
ALLIED TUBE & CONDUIT CORPORATION...................................... Delaware,U.S.
ALTERNATIVE WAYS, INC.................................................. New Jersey,U.S.
ANSUL, INCORPORATED (1)................................................ Delaware,U.S.
ATCOR, INC............................................................. Delaware,U.S.
DEUTSCHLAND HOLDINGS, INC.............................................. Delaware,U.S.
EARTH TECH, INC........................................................ California,U.S.
GRINNELL CORPORATION (2)............................................... Delaware,U.S.
J.B. SMITH MFG. CO..................................................... Oklahoma,U.S.
KENDALL INTERNATIONAL, INC............................................. Delaware,U.S.
LUDLOW CORPORATION (3)................................................. 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 EARTH TECHNOLOGY CORPORATION (USA)................................. Delaware,U.S.
THE KENDALL COMPANY.................................................... Delaware,U.S.
TWITCHELL CORPORATION.................................................. Alabama,U.S.
TYCO INTERNATIONAL ASIA, INC........................................... Delaware,U.S.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PLACE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------- --------------------
<S> <C>
UNISTRUT CORPORATION................................................... Delaware,U.S.
UNISTRUT INTERNATIONAL CORP............................................ Delaware,U.S.
UNITED STATES CONSTRUCTION CO.......................................... Delaware,U.S.
WATER HOLDINGS CORP.................................................... Delaware,U.S.
WHITE MOUNTAIN INSURANCE COMPANY....................................... Vermont,U.S.
WORMALD AMERICAS, INC.................................................. Delaware,U.S.
</TABLE>
- ------------
(1) Also doing business under the following name: Ansul Fire Protection.
(2) 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.
(3) Also doing business under the following names: Accurate Forming, Classic
Medical Products, Ludlow Laminating and Coating, Ludlow Technical Products,
Twitchell, Uni-Patch.
<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
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, 33-57885, 33-64867, 33-64869, 33-64953 and
333-02251) of Tyco International Ltd. of our reports dated July 25, 1996 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, 1996 and 1995
which reports are included in this Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 20, 1996
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
TYCO INTERNATIONAL LTD.
FINANCIAL DATA SCHEDULE
(IN THOUSANDS EXCEPT PER SHARE DATA)
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> $ 69,404
<SECURITIES> 0
<RECEIVABLES> 712,658
<ALLOWANCES> 36,672
<INVENTORY> 608,526
<CURRENT-ASSETS> 1,695,524
<PP&E> 1,367,459
<DEPRECIATION> (641,717)
<TOTAL-ASSETS> 3,953,936
<CURRENT-LIABILITIES> 1,291,810
<BONDS> 511,622
0
0
<COMMON> 76,488
<OTHER-SE> 1,861,951
<TOTAL-LIABILITY-AND-EQUITY> 3,953,936
<SALES> 5,089,828
<TOTAL-REVENUES> 5,089,828
<CGS> 3,692,885
<TOTAL-COSTS> 3,692,885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,498
<INTEREST-EXPENSE> 58,867
<INCOME-PRETAX> 523,897
<INCOME-TAX> 213,750
<INCOME-CONTINUING> 310,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 310,147
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 2.03
</TABLE>
