<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1 ON FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 DATE
OF REPORT (DATE OF EARLIEST EVENT REPORTED)
FEBRUARY 27, 1998
0-16979
(Commission File Number)
--------------------
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
BERMUDA NOT APPLICABLE
(Jurisdiction of Incorporation) (IRS Employer
Identification Number)
THE GIBBONS BUILDING, 10 QUEEN STREET, SUITE 301 HAMILTON HM11,
BERMUDA (Address of registrant's principal executive office)
441-292-8674
(Registrant's telephone number)
----------------
*The executive offices of the Registrant's principal United States subsidiary,
Tyco International (US) Inc., are located at One Tyco Park, Exeter, New
Hampshire 03833. The telephone number there is (603) 778-9700.
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 27, 1998, a subsidiary of Tyco International Ltd. (the
"Company" or "Tyco") consummated the purchase of the Sherwood-Davis & Geck
division ("Sherwood") of American Home Products Corporation for cash of $1.77
billion. Sherwood is a manufacturer of medical and surgical devices, such as
catheters, needles and syringes, sutures, thermometers and other specialized
disposable medical products with annual revenues of approximately $1.0 billion.
The products are distributed around the world with approximately 50 percent of
the sales coming from outside the United States. Sherwood will be integrated
with The Kendall Company within Tyco's Disposable and Specialty Products group.
The Company intends to account for this acquisition as a purchase.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
Attached hereto.
<PAGE> 3
THE SHERWOOD-DAVIS & GECK GROUP
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sherwood Medical Company:
We have audited the accompanying combined balance sheet of The Sherwood-Davis &
Geck Group, as defined (see Note 1), as of December 31, 1997 and the related
combined statements of income and changes in parent company's investment and
advances, and cash flows for the year then ended. These financial statements are
the responsibility of The Sherwood-Davis & Geck Group's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of The Sherwood-Davis &
Geck Group, as defined (see Note 1), as of December 31, 1997, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 11, 1998
F-1
<PAGE> 5
THE SHERWOOD-DAVIS & GECK GROUP
(AS DEFINED, NOTE 1)
COMBINED BALANCE SHEET AS OF DECEMBER 31, 1997
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $36,896
Accounts receivable, net of allowance for doubtful
accounts and cash discounts of $9,272 212,122
Inventories, net 259,694
Other current assets 15,744
----------
Total current assets 524,456
INVESTMENTS 12,145
PROPERTY, PLANT AND EQUIPMENT, net 286,347
GOODWILL AND OTHER INTANGIBLE ASSETS, net 335,868
OTHER ASSETS 9,646
----------
$1,168,462
==========
LIABILITIES AND PARENT COMPANY'S INVESTMENT AND ADVANCES
CURRENT LIABILITIES:
Notes payable $4,930
Accounts payable 40,611
Accrued expenses 118,294
Accrued income taxes 7,051
----------
Total current liabilities 170,886
----------
OTHER NONCURRENT LIABILITIES 6,699
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 22,863
PARENT COMPANY'S INVESTMENT AND ADVANCES 968,014
----------
Total liabilities and parent company's investment and advances $1,168,462
==========
The accompanying notes to the combined financial statements
are an integral part of this balance sheet.
</TABLE>
F-2
<PAGE> 6
THE SHERWOOD-DAVIS & GECK GROUP
(AS DEFINED, NOTE 1)
COMBINED STATEMENT OF INCOME AND CHANGES
IN PARENT COMPANY'S INVESTMENT AND ADVANCES
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<S> <C>
NET SALES $979,162
COST OF GOODS SOLD 522,850
--------
Gross profit 456,312
--------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 298,285
RESEARCH AND DEVELOPMENT EXPENSES 27,683
AMORTIZATION OF GOODWILL 9,168
--------
Operating income 121,176
OTHER INCOME:
Interest income, net 3,020
Other expense, net (326)
--------
Income before provision for income taxes 123,870
PROVISION FOR INCOME TAXES 42,837
--------
Net income 81,033
PARENT COMPANY'S INVESTMENT AND ADVANCES, beginning of year 931,629
ADVANCES, WITHDRAWALS AND DIVIDENDS, net 44,648
--------
PARENT COMPANY'S INVESTMENT AND ADVANCES, end of year $968,014
========
The accompanying notes to the combined financial statements
are an integral part of this statement.
</TABLE>
F-3
<PAGE> 7
THE SHERWOOD-DAVIS & GECK GROUP
(AS DEFINED, NOTE 1)
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF U. S. DOLLARS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income $ 81,033
Adjustments to reconcile net income to net cash provided from
operating activities-
Income allocated to minority interest 4,376
Depreciation and amortization 65,807
Changes in assets and liabilities-
Accounts receivable (5,925)
Inventories (24,479)
Other current assets (3,531)
Other assets 1,500
Notes payable 746
Accounts payable 7,439
Accrued expenses 35,578
Accrued income taxes 1,427
Other noncurrent liabilities (50,194)
Other changes in minority interest, net 1,792
--------
Net cash provided from operating activities 115,569
--------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (70,272)
Changes in investments, net (1,910)
Acquisition of intangibles, net (17,952)
--------
Net cash used in investing activities (90,134)
FINANCING ACTIVITIES -- Change in parent company's investment
and advances, net (27,998)
EFFECT OF EXCHANGE RATES ON CASH BALANCES (1,166)
--------
Decrease in cash (3,729)
CASH, beginning of year 40,625
--------
CASH, end of year $ 36,896
========
The accompanying notes to the combined financial statements
are an integral part of this statement.
</TABLE>
F-4
<PAGE> 8
THE SHERWOOD-DAVIS & GECK GROUP
(AS DEFINED, NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
(1) DESCRIPTION OF BUSINESS:
The combined balance sheet and statement of income reflects substantially
all of the assets, liabilities and operations of Sherwood Medical Company
(doing business as Sherwood-Davis & Geck) and, to the extent primarily
related to the business conducted by the Sherwood Medical Company,
affiliated entities (collectively, The Sherwood-Davis & Geck Group).
The Sherwood-Davis & Geck Group develops, manufactures, and markets a wide
array of medical and surgical device products including catheters, needles,
syringes, thermometry and other specialized products.
On December 20, 1997 American Home Products Corporation (AHPC or Parent)
and its wholly-owned subsidiaries, American Cyanamid Company (ACC) and AHPC
Subsidiary Holding Corporation entered into an agreement with Tyco
International (US) Inc. (Tyco) for the sale of The Sherwood-Davis & Geck
Group.
Basis of Presentation of the
Combined Statements
----------------------------
All significant intercompany accounts and transactions have been eliminated
in preparing the combined statements.
Summary of Significant Accounting Policies-
-------------------------------------------
Allowance for Doubtful Accounts and Cash Discounts-
---------------------------------------------------
The following summarizes the allowance for doubtful accounts and cash
discounts and the related activity-
<TABLE>
<CAPTION>
Write-offs and
Beginning Charged to Reductions, Net Ending
Description Balance Expense of Recoveries Balance
----------- --------- ---------- ------------------ -------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
and cash discounts-
December 31, 1997 $8,970 $625 ($323) $9,272
</TABLE>
F-5
<PAGE> 9
Inventories-
------------
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market.
The components of inventory at December 31, 1997 are as follows-
Raw materials and work-in-process $114,776
Finished goods 144,918
--------
$259,694
========
Investments-
------------
Investments primarily consist of three 50% joint ventures with B. Braun
Melsurgen AG and B. Braun Medical S.A. The joint ventures are accounted
for using the equity method of accounting.
The equity in earnings of the joint ventures for the year ended
December 31, 1997 was $2,856 and is included in other income.
Property, Plant and Equipment-
------------------------------
Property, plant and equipment is stated at cost. Normal maintenance and
repairs are charged to expense as incurred. Additions and improvements
either to provide necessary capacity, improve the efficiency of production,
or to modernize facilities are capitalized. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the various classes
of assets (which range from 2 to 40 years).
Property, plant and equipment consists of-
Land and land improvements $ 13,963
Building and building improvements 171,983
Machinery and equipment 429,576
Furniture and fixtures 51,304
---------
666,826
Less- Accumulated depreciation (380,479)
---------
$ 286,347
=========
F-6
<PAGE> 10
Goodwill and Other Intangible Assets-
-------------------------------------
During 1994, AHPC acquired substantially all of the outstanding shares of
ACC which included the Davis & Geck Business, now part of The
Sherwood-Davis & Geck Group. Goodwill represents the excess of cost over
the fair value of net assets acquired that relates to the Davis & Geck
Business. Goodwill is being amortized using the straight-line method over a
40 year period. Other intangible assets consist primarily of costs
associated with patents, trademarks, sales rights and noncompete
agreements. Other intangible assets are being amortized over periods of one
to 17 years. At December 31, 1997, goodwill and other intangible assets
consists of the following-
Goodwill $339,069
Other intangible assets 52,445
--------
391,514
Accumulated amortization (55,646)
--------
$335,868
========
Impairment of Long-Lived Assets-
--------------------------------
The Sherwood-Davis & Geck Group is required, among other things, to review
its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of such
assets may not be fully recoverable. The Sherwood-Davis & Geck Group does
not believe that any such change has occurred.
Research and Development-
-------------------------
Research and development costs are charged to expense as incurred.
Concentration of Risk-
----------------------
Financial instruments subject to credit risk are primarily trade accounts
receivable. Due to the large number and diversity of The Sherwood-Davis &
Geck Group's customer base, concentration of credit risk with respect to
trade receivables is limited.
For the year ended December 31, 1997, The Sherwood-Davis & Geck Group had
one customer that accounted for approximately 10% of net sales.
Use of Estimates-
-----------------
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the combined financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could
differ from those estimates.
F-7
<PAGE> 11
Accounts Payable and Accrued Expenses-
--------------------------------------
Accounts payable and certain accrued expenses payable to affiliates of The
Sherwood-Davis & Geck Group have been included as part of the Parent
company's investment and advances. Accounts payable consists of trade
payables. Accrued expenses consist of the following-
Payroll and related expenses $ 26,191
Rebates 22,508
Plant closure expenses 32,296
Other 37,299
--------
$118,294
========
Parent Company's Investment and Advances-
-----------------------------------------
Parent company's investment and advances includes the stockholder's equity
of The Sherwood-Davis & Geck Group described above. The equity of the
individual subsidiaries represents the original investment by AHPC, plus
accumulated net income and net advances, withdrawals and dividends. Cash
receipts are transferred to AHPC by daily cash sweeps and AHPC makes funds
available for operating expenses in the United States.
(2) COMMITMENTS AND CONTINGENCIES:
The Sherwood-Davis & Geck Group leases certain warehouse space, machinery,
office equipment and automobiles under operating leases. Rental expense for
the year ended December 31, 1997 of $10,079 is included in cost of goods
sold and selling, general and administrative expenses. The future minimum
lease payments are as follows-
1998 $ 9,417
1999 6,335
2000 5,647
2001 4,991
2002 3,070
Thereafter 3,895
-------
$33,355
=======
The Sherwood-Davis & Geck Group is involved in various legal matters
including product liability and intellectual property proceedings which are
considered normal to its business. In the opinion of management, although
the outcome of any legal proceeding cannot be predicted with certainty, the
ultimate liability in connection with its legal proceedings will not have a
material adverse effect on the combined financial position but could be
material to the combined results of operations of The Sherwood-Davis & Geck
Group in any one accounting period.
(3) TRANSLATION OF CURRENCIES:
International assets and liabilities are translated into United States
dollars at period end exchange rates and international profit and loss
account items are translated into United States dollars at monthly average
exchange rates.
F-8
<PAGE> 12
(4) INCOME TAXES:
The domestic operations of The Sherwood-Davis & Geck Group are included in
the consolidated tax returns of AHPC and its subsidiaries. The
Sherwood-Davis & Geck Group has reflected taxes in the accompanying
statement of income at the statutory tax rates without regard for temporary
differences. Accordingly, The Sherwood-Davis & Geck Group has no deferred
tax assets or liabilities since those amounts are being paid or received by
AHPC. Deferred tax assets and liabilities would reflect temporary
differences between assets and liabilities for financial reporting purposes
and income tax purposes. Such temporary differences are primarily
attributable to depreciation, allowances for doubtful accounts, trade
promotion accruals and other accruals and have not been significant.
The provision for income taxes consists of-
Domestic $16,211
Foreign 26,626
-------
$42,837
=======
A reconciliation between The Sherwood-Davis & Geck Group's effective tax
rate and U. S. statutory rate is as follows-
U. S. statutory rate 35.0%
Puerto Rico and certain foreign operations, taxed at lower rates (7.9)
Amortization of goodwill 7.5
----
Effective tax rate 34.6%
====
(5) RELATED PARTY TRANSACTIONS:
The combined statement of income includes the costs of certain
administrative and other services provided by AHPC and allocated to The
Sherwood-Davis & Geck Group. These services include treasury, tax, legal,
environmental, safety, public relations, audit and executive management
advisory functions. The charge to The Sherwood-Davis & Geck Group for
corporate administration was $5,702 in 1997.
Various insurance coverages are provided to The Sherwood-Davis & Geck Group
through AHPC consolidated programs. Medical, dental, auto, property,
product liability and other insurance charges incurred by AHPC are
allocated to The Sherwood-Davis & Geck Group based on AHPC's overall cost.
The charge for these coverages of $23,145 in 1997 has been included in the
combined statement of income.
These costs have been allocated on a basis which management believes is
reasonable.
(6) INCENTIVE PLANS:
AHPC has a Management Incentive Plan that provides for cash and deferred
contingent common stock awards to key employees and a stock option program.
F-9
<PAGE> 13
No awards were made to The Sherwood-Davis & Geck Group personnel under the
AHPC Management Incentive Plan for 1997. During 1996 and 1997 certain
employees of The Sherwood-Davis & Geck Group were granted stock options
under the AHPC stock option plans. These options have a ten year term and
generally vest one year from date of grant.
Transactions involving the plans are summarized as follows-
Weighted
Average Exercise
1997 Price
------ ----------------
Options shares-
Outstanding January 1 2,782 $35.77
Granted ($70.59 - $72.44) 806 72.39
Canceled ($23.61 - $72.44) (51) 64.07
Exercised ($21.64 - $53.06) (717) 34.13
----- ------
Outstanding December 31 ($23.61 - $72.44) 2,820 $46.15
===== ======
Exercisable December 31 2,048 $36.26
===== ======
Effective January 1, 1996, AHPC adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted by the statement,
AHPC has elected to continue to account for stock-based compensation using
the intrinsic value method under Accounting Principles Board Opinion No.
25. Accordingly, no compensation expense has been recognized for stock
options. If compensation expense for The Sherwood-Davis & Geck Group's
stock options issued in 1996 and 1997 had been determined based on the fair
value method of accounting, as defined in SFAS No. 123, The Sherwood-Davis
& Geck Group's net income would have been reduced to the pro forma amount
indicated below-
Net income-
As reported $81,033
Pro forma 76,666
The fair value of issued stock options is estimated on the date of grant
using the Black-Scholes option-pricing model incorporating the following
assumptions for options granted in 1997 and 1996: expected volatility (the
amount by which the stock price is expected to fluctuate) of 18.3% and
15.0%; expected dividend yield of 3.7% and 4.3%; risk-free interest rate of
6.5% and 6.4%; and expected life of four years. The weighted average fair
value of options granted during 1997 and 1996 was $11.78 and $6.83,
respectively.
(7) EMPLOYEE BENEFIT PLANS:
The Sherwood-Davis & Geck Group sponsors several retirement plans for
certain employees. Other employees are included in AHPC's sponsored benefit
plans. These benefit costs are allocated to The Sherwood-Davis & Geck Group
based on eligible employees participating in the plans. The combined
statement of income includes charges of $14,733 relating to these benefits.
F-10
<PAGE> 14
The actuarial present value of the Sherwood Medical Pension Plan for Hourly
Wage Employees (Monoject Division) as of December 31, 1997 was as follows-
Benefit obligation-
Vested $27,704
Nonvested 2,343
-------
Accumulated benefit obligation 30,047
Effect on benefits from projected compensation increases 2,127
-------
Projected benefit obligation 32,174
Plan assets at fair value 29,111
-------
Projected benefit obligation in excess of plan assets 3,063
Unrecognized net loss (3,969)
Unrecognized net transition obligation 402
Unrecognized prior service cost (97)
-------
Net prepaid pension cost ($601)
=======
Assumptions used in developing the projected benefit obligation as of
December 31, 1997 are as follows-
Discount rate 7.25%
Rate of increase in compensation 4.00%
Rate of return on plan assets 9.50%
(8) COMPANY DATA BY GEOGRAPHIC SEGMENT:
Net sales to customers for the year ended December 31, 1997-
United States, Canada and Latin America $ 576,952
Europe and Africa 274,074
Asia and Australia 128,136
----------
Combined total $ 979,162
==========
Income before taxes for the year ended December 31, 1997-
United States, Canada and Latin America $ 62,972
Europe and Africa 33,466
Asia and Australia 27,432
----------
Combined total $ 123,870
==========
Total assets at December 31, 1997-
United States, Canada and Latin America $ 624,259
Europe and Africa 407,006
Asia and Australia 137,197
----------
Combined total $1,168,462
==========
F-11
<PAGE> 15
(9) IMPACT OF RECENT ACCOUNTING STANDARDS:
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued to
establish standards for reporting and displaying comprehensive income and
its components in a full set of general-purpose financial statements. This
statement requires disclosure of the components of comprehensive income
including, among other things, foreign currency translation adjustments,
minimum pension liability items and unrealized gains and losses on certain
investments in debt and equity securities. The statement is effective for
fiscal years beginning after December 15, 1997.
(10) TRANSITION AGREEMENT:
On December 20, 1997, AHPC and Tyco entered into a transition services
agreement, whereby AHPC will provide for a fee, among other services,
certain back office and support services, services related to international
regulatory affairs, quality assurance and quality control services and
warehouse and distribution services for certain periods not exceeding
18 months.
F-12
<PAGE> 16
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(b) Pro Forma Financial Information.
The following unaudited pro forma combined condensed financial
statements set forth the results of operations for the nine month transition
period ended September 30, 1997 ("Fiscal 1997") and the three months ended
December 31, 1997, as if the acquisition of The Sherwood-Davis & Greck Group
("Sherwood") by Tyco had occurred at the beginning of Fiscal 1997. The financial
position as of December 31, 1997 is presented as if the acquisition had occurred
as of that date. Sherwood has a December 31 financial year, which differs from
Tyco's September 30 fiscal year end. Tyco's most recent Form 10-K presented the
audited financial statements for the nine month transition period ended
September 30, 1997. The pro forma combined condensed statements of operations
for the nine month transition period ended September 30, 1997 and the three
months ended December 31, 1997 include the historical results of operations for
Sherwood for those same corresponding periods of operation.
The acquisition will be accounted for using the purchase method of
accounting. The pro forma results of operations are not necessarily indicative
of the future operations or the actual results that would have occurred had the
acquisition of Sherwood been consummated at the beginning of Fiscal 1997. The
pro forma combined condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in Tyco's
Transition Report on Form 10-K and the financial statements filed under part (a)
of this item.
TYCO INTERNATIONAL LTD.
AND
THE SHERWOOD-DAVIS & GECK GROUP
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- ------------------------
TYCO SHERWOOD ADJUSTMENTS COMBINED
-------- -------- ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET SALES................................................ $7,588.2 $ 730.7 $ -- $8,318.9
Cost of goods sold....................................... 5,102.6 390.9 -- 5,493.5
Selling, general and administrative expenses............. 1,534.9 245.1 (6.6)(a) 1,799.5
26.1(b)
Merger, restructuring and other non-recurring charges.... 917.8 -- -- 917.8
Charge for the impairment of long-lived assets........... 148.4 -- -- 148.4
Write off of purchased in-process research and
development............................................ 361.0 -- -- 361.0
-------- -------- -------- --------
Operating (loss) income.................................. (476.5) 94.7 (19.5) (401.3)
Interest income.......................................... 24.2 2.3 -- 26.5
Interest expense......................................... (137.5) -- (78.7)(c) (216.2)
Other income less expenses............................... -- (1.7) -- (1.7)
-------- -------- -------- --------
(Loss) income before income taxes and extraordinary
items.................................................. (589.8) 95.3 (98.2) (592.7)
Income taxes............................................. (187.0) (33.1) 27.6(d) (192.5)
-------- -------- -------- --------
(Loss) income before extraordinary items................. (776.8) 62.2 (70.6) (785.2)
Extraordinary items, net of taxes........................ (58.3) -- -- (58.3)
-------- -------- -------- --------
NET (LOSS) INCOME........................................ $ (835.1) $ 62.2 $ (70.6) $ (843.5)
======== ======== ======== ========
BASIC EARNINGS PER SHARE:
(Loss) income before extraordinary items................. $ (1.50) $ (1.51)
Extraordinary items, net of taxes........................ (.11) (.11)
-------- --------
Net (Loss) Income........................................ $ (1.61) $ (1.62)
======== ========
DILUTED EARNINGS PER SHARE:
(Loss) income before extraordinary items................. $ (1.50) $ (1.51)
Extraordinary items, net of taxes........................ (.11) (.11)
-------- --------
Net (Loss) Income........................................ $ (1.61) $ (1.62)
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic.................................................... 519.5 519.5
======== ========
Diluted.................................................. 519.5 519.5
======== ========
</TABLE>
<PAGE> 17
TYCO INTERNATIONAL LTD.
AND
THE SHERWOOD-DAVIS & GECK GROUP
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (unaudited)
THREE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- ------------------------
TYCO SHERWOOD ADJUSTMENTS COMBINED
-------- -------- ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET SALES................................................ $2,687.5 $ 248.5 $ -- $2,936.0
Cost of goods sold....................................... 1,791.7 132.0 -- 1,923.7
Selling, general and administrative expenses............. 500.9 90.0 (2.5)(a) 597.1
8.7(b)
-------- -------- -------- --------
Operating income (loss).................................. 394.9 26.5 (6.2) 415.2
Interest income.......................................... 6.8 0.7 -- 7.5
Interest expense......................................... (49.8) -- (26.2)(c) (76.0)
Other income less expenses............................... 7.5 1.4 -- 8.9
-------- -------- -------- --------
Income before income taxes and extraordinary items....... 359.4 28.6 (32.4) 355.6
Income taxes............................................. (118.6) (9.8) 9.2(d) (119.2)
-------- -------- -------- --------
Income before extraordinary items........................ 240.8 18.8 (23.2) 236.4
Extraordinary items, net of taxes........................ (0.9) -- -- (0.9)
-------- -------- -------- --------
NET INCOME............................................... $ 239.9 $ 18.8 $ (23.2) $ 235.5
======== ======== ======== ========
BASIC EARNINGS PER SHARE:
Income before extraordinary items........................ $ .44 $ .43
Extraordinary items, net of taxes........................ -- --
-------- --------
Net income............................................... $ .44 $ .43
======== ========
DILUTED EARNINGS PER SHARE:
Income before extraordinary items........................ $ .43 $ .42
Extraordinary items, net of taxes........................ -- --
-------- --------
Net income............................................... $ .43 $ .42
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic.................................................... 545.1 545.1
======== ========
Diluted.................................................. 568.3 568.3
======== ========
</TABLE>
<PAGE> 18
TYCO INTERNATIONAL LTD.
AND
THE SHERWOOD-DAVIS & GECK GROUP
PRO FORMA COMBINED CONDENSED BALANCE SHEET (unaudited)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- -------------------------
TYCO SHERWOOD ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ $ 364.8 $ 36.9 $ (30.4)(e) $ 371.3
Accounts receivable, net................................. 1,983.8 212.1 (23.9)(e) 2,172.0
Inventories.............................................. 1,121.4 259.7 -- 1,381.1
Other current assets..................................... 711.4 15.8 (2.6)(e) 840.1
115.5(f)
--------- -------- -------- ---------
4,181.4 524.5 58.6 4,764.5
Property, plant and equipment............................ 2,927.9 286.3 (45.9)(g) 3,168.3
Goodwill and other intangible assets..................... 2,952.3 335.9 (329.7)(e) 4,350.8
1,392.3(h)
Other assets............................................. 452.4 21.8 -- 474.2
--------- -------- -------- ---------
Total assets............................................. $10,514.0 $1,168.5 $1,075.3 $12,757.8
========= ======== ======== =========
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt... $ 259.0 $ 4.9 $ -- $ 263.9
Accounts payable......................................... 876.2 40.6 (4.0)(e) 912.8
Accrued expenses......................................... 1,691.3 118.3 (6.8)(e) 2,086.9
284.1(i)
Other current liabilities................................ 942.9 7.1 -- 950.0
--------- -------- -------- ---------
3,769.4 170.9 273.3 4,213.6
--------- -------- -------- ---------
Long-term debt........................................... 2,382.2 -- 1,770.0(j) 4,152.2
--------- -------- -------- ---------
Other long-term liabilities 519.6 6.7 -- 526.3
--------- -------- -------- ---------
Minority interest........................................ -- 22.9 -- 22.9
--------- -------- -------- ---------
SHAREHOLDERS' EQUITY:
Common shares............................................ 110.0 -- -- 110.0
Capital in excess:
Share premium.......................................... 2,188.8 -- -- 2,188.8
Contributed surplus.................................... 2,392.5 -- -- 2,392.5
Currency translation adjustment.......................... (211.4) -- -- (211.4)
Accumulated deficit...................................... (637.1) -- -- (637.1)
Parent Company's investment and advances................. -- 968.0 (968.0)(k) --
--------- -------- -------- ---------
3,842.8 968.0 (968.0) 3,842.8
--------- -------- -------- ---------
Total liabilities and shareholders' equity............... $10,514.0 $1,168.5 $1,075.3 $12,757.8
========= ======== ======== =========
</TABLE>
<PAGE> 19
TYCO INTERNATIONAL LTD.
AND
THE SHERWOOD-DAVIS & GECK GROUP
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION
The acquisition will be accounted for using the purchase method of
accounting. The allocation of the purchase price is based on an estimate of
the fair market value of the net assets acquired and is subject to
adjustment.
2. PRO FORMA ADJUSTMENTS
The accompanying pro forma adjustments in the Pro Forma Combined Condensed
Statements of Operations and Pro Forma Combined Condensed Balance Sheets
reflect the following items:
(a) Reduction of amortization expense related to intangible assets not
acquired by Tyco.
(b) Increase in selling, general and administrative expenses due to
amortization of the excess of the cost over the net assets acquired
(goodwill) over a period of 40 years.
(c) Increase in interest expense due to borrowing of long-term debt used to
make the cash payment of $1.77 billion to acquire Sherwood, calculated
using Tyco's average borrowing rate.
(d) Income tax benefit associated with the adjustment above (excluding the
amortization of goodwill), calculated at the statutory income tax rate
of 35% applicable in Sherwood's domicile country, the United States.
(e) Reduction for cash, accounts receivable, goodwill and other intangible
assets, accounts payable and accrued expenses not acquired by Tyco.
(f) Increase deferred income taxes to record tax effect of pro forma
adjustments.
(g) Write down of property, plant and equipment related to duplicate
facilities, consolidation of operations and the disposal of excess
equipment.
(h) Excess of the cost over the fair value of the net assets acquired of
Sherwood.
(i) Record accrued expenses related to direct transaction costs and
estimated acquisition liabilities.
(j) Increased borrowings at the time of acquisition used to make the cash
payment to acquire Sherwood.
(k) Eliminate Sherwood's equity accounts.
3. EARNINGS PER SHARE
The effects on diluted earnings per share of convertible securities and
other common stock equivalents are anti-dilutive in the nine months ended
September 30, 1997.
<PAGE> 20
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
Exhibit
Number Title
- ------- -----
2.1 Purchase Agreement dated December 20, 1997 by and among American
Cyanamid Company, American Home Products Corporation, AHP Subsidiary Holding
Corporation and Tyco International (US) Inc.*
2.2 Parent Guarantee of obligations dated December 20, 1997.*
2.3 First Amendment to Purchase Agreement dated February 27, 1998 by and
among American Cyanamid Company, American Home Products Corporation, AHP
Subsidiary Holding Corporation and Tyco International (US) Inc.*
23 Consent of Arthur Andersen LLP
- -------------
* Previous filed.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Tyco International Ltd.
By: /s/ Mark H. Swartz
------------------------------------------------
Mark H. Swartz
Executive Vice President-Chief Financial Officer
Date: May 13, 1998
<PAGE> 22
EXHIBIT INDEX
Exhibit
Number
- ------
2.1 Purchase Agreement dated December 20, 1997 by and among American Cyanamid
Company, American Home Products Corporation, AHP Subsidiary Holding
Corporation and Tyco International (US) Inc.*
2.2 Parent Guarantee of obligations dated December 20, 1997.*
2.3 First Amendment to Purchase Agreement dated February 27, 1998 by and
among American Cyanamid Company, American Home Products Corporation, AHP
Subsidiary Holding Corporation and Tyco International (US) Inc.*
23 Consent of Arthur Andersen LLP
- ---------------
* Previously filed.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Current Report on Form 8-K/A of our report dated May 11, 1998 covering the
combined financial statements of The Sherwood-Davis & Geck Group as of and for
the year ended December 31, 1997, and the incorporation by reference into Tyco
International Ltd.'s previously filed Registration Statements on Form S-3 (File
Nos. 333-21425, 333-33779, 333-43333 and 333-50855) and on Form S-8 (File Nos.
33-38249, 33-26970 and 333-03975).
ARTHUR ANDERSEN LLP
Roseland, New Jersey
May 11, 1998
