<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
001-13836
(COMMISSION FILE NUMBER)
------------------------
TYCO INTERNATIONAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
BERMUDA NOT APPLICABLE
(JURISDICTION OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
THE ZURICH CENTRE, SECOND FLOOR, 90 PITTS BAY ROAD, PEMBROKE, HM 08, BERMUDA
(Address of registrant's principal executive office)
441-292-8674*
(REGISTRANT'S TELEPHONE NUMBER)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The number of common shares outstanding as of August 3, 2000 was
1,684,952,744.
------------------------
* The executive offices of the Registrant's principal United States
subsidiaries are located at One Tyco Park, Exeter, New Hampshire 03833. The
telephone number there is (603) 778-9700.
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<PAGE>
TYCO INTERNATIONAL LTD.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PART I--FINANCIAL INFORMATION:
Item 1--Financial Statements
Consolidated Balance Sheets as of June 30, 2000
(unaudited) and September 30, 1999...................... 1
Consolidated Statements of Operations for the Quarters and
Nine Months ended June 30, 2000 and 1999 (unaudited).... 2
Consolidated Statements of Cash Flows for the Nine Months
ended June 30, 2000 and 1999 (unaudited)................ 3
Notes to Consolidated Financial Statements (unaudited).... 4
Item 2--Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 14
Item 3--Quantitative and Qualitative Disclosures About
Market Risk............................................... 27
PART II--OTHER INFORMATION:
Item 1--Legal Proceedings................................... 28
Item 4--Submission of Matters to a Vote of Security
Holders................................................... 30
Item 6--Exhibits and Reports on Form 8-K.................... 31
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
----------- -------------
(UNAUDITED) (RESTATED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,180.3 $ 1,762.0
Receivables, less allowance for doubtful accounts of
$413.3 at June 30, 2000 and $329.8 at September 30,
1999.................................................... 5,273.8 4,582.3
Contracts in process...................................... 294.4 536.6
Inventories............................................... 3,667.6 2,849.1
Deferred income taxes..................................... 470.9 694.3
Prepaid expenses and other current assets................. 963.1 721.2
--------- ---------
11,850.1 11,145.5
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 529.4 386.8
Buildings................................................. 2,386.8 2,414.0
Subscriber systems........................................ 3,047.7 2,703.3
Machinery and equipment................................... 7,257.0 7,005.3
Leasehold improvements.................................... 282.6 224.4
Construction in progress.................................. 643.5 573.0
Accumulated depreciation.................................. (6,084.6) (5,984.4)
--------- ---------
8,062.4 7,322.4
--------- ---------
GOODWILL AND OTHER INTANGIBLE ASSETS, NET................... 15,346.5 12,158.9
LONG-TERM INVESTMENTS....................................... 1,273.5 269.7
DEFERRED INCOME TAXES....................................... 563.2 668.8
OTHER ASSETS................................................ 787.2 779.0
--------- ---------
TOTAL ASSETS.............................................. $37,882.9 $32,344.3
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt.... $ 2,181.6 $ 1,012.8
Accounts payable.......................................... 2,709.5 2,530.8
Accrued expenses and other current liabilities............ 3,299.2 3,545.7
Contracts in process--billings in excess of costs......... 720.2 977.9
Deferred revenue.......................................... 281.9 258.8
Income taxes.............................................. 925.8 798.0
Deferred income taxes..................................... 2.2 1.0
--------- ---------
10,120.4 9,125.0
--------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES..................... 10,403.2 9,109.4
OTHER LONG-TERM LIABILITIES................................. 1,264.1 1,236.4
DEFERRED INCOME TAXES....................................... 713.5 504.2
SHAREHOLDERS' EQUITY:
Preference shares, $1 par value, 125,000,000 authorized,
none issued............................................... -- --
Common shares, $0.20 par value, 2,500,000,000 shares
authorized; 1,687,309,234 shares outstanding at June 30,
2000 and 1,690,175,338 shares outstanding at September 30,
1999, net of 32,532,338 and 11,432,678 shares owned by
subsidiaries at June 30, 2000 and September 30, 1999,
respectively.............................................. 337.5 338.0
Capital in excess:
Share premium............................................. 5,023.3 4,881.5
Contributed surplus, net of deferred compensation of $73.0
at June 30, 2000 and $30.7 at September 30, 1999........ 3,312.7 3,607.6
Accumulated earnings........................................ 6,538.5 3,992.3
Accumulated other comprehensive income (loss)............... 169.7 (450.1)
--------- ---------
15,381.7 12,369.3
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $37,882.9 $32,344.3
========= =========
</TABLE>
See notes to consolidated financial statements (unaudited).
1
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE QUARTERS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- ----------------------
2000 1999 2000 1999
-------- ---------- --------- ----------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
NET SALES........................................... $7,417.8 $5,819.8 $21,126.5 $16,272.0
Cost of sales....................................... 4,549.8 3,783.3 13,197.0 10,589.6
Selling, general and administrative expenses........ 1,349.5 1,034.7 3,857.2 3,240.6
Merger, restructuring and other non-recurring
(credits) charges, net............................ (6.9) 299.9 (82.3) 926.3
Charges for the impairment of long-lived assets..... -- 194.8 99.0 507.5
-------- -------- --------- ---------
OPERATING INCOME.................................... 1,525.4 507.1 4,055.6 1,008.0
Interest expense, net............................... (195.7) (107.9) (566.7) (346.5)
-------- -------- --------- ---------
Income before income taxes and extraordinary
items............................................. 1,329.7 399.2 3,488.9 661.5
Income taxes........................................ (332.4) (187.0) (878.9) (374.6)
-------- -------- --------- ---------
Income before extraordinary items................... 997.3 212.2 2,610.0 286.9
Extraordinary items, net of taxes................... -- (0.5) (0.2) (45.4)
-------- -------- --------- ---------
NET INCOME.......................................... $ 997.3 $ 211.7 $ 2,609.8 $ 241.5
======== ======== ========= =========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary items................. $ 0.59 $ 0.13 $ 1.55 $ 0.18
Extraordinary items, net of taxes................. -- -- -- (0.03)
Net income........................................ 0.59 0.13 1.55 0.15
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary items................. $ 0.58 $ 0.13 $ 1.52 $ 0.17
Extraordinary items, net of taxes................. -- -- -- (0.03)
Net income........................................ 0.58 0.13 1.52 0.15
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
Basic............................................. 1,687.1 1,640.1 1,689.1 1,631.0
Diluted........................................... 1,712.5 1,673.8 1,713.4 1,665.7
</TABLE>
See notes to consolidated financial statements (unaudited).
2
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
----------------------
2000 1999
--------- ----------
(RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,609.8 $ 241.5
Adjustments to reconcile net income to net cash provided by
operating activities:
Merger, restructuring and other non-recurring (credits)
charges, net............................................ (85.4) 383.8
Charges for the impairment of long-lived assets........... 99.0 507.5
Depreciation.............................................. 859.5 736.4
Goodwill and other intangible amortization................ 396.9 222.8
Deferred income taxes..................................... 466.0 (182.4)
Other non-cash items...................................... 9.9 26.6
Changes in assets and liabilities, net of the effects of
acquisitions:
Accounts receivable and contracts in process............ (552.9) 131.6
Proceeds from sale of accounts receivable............... 100.0 37.0
Inventories............................................. (598.0) (137.5)
Prepaid expenses and other current assets............... 36.2 (148.9)
Accounts payable, accrued expenses and other current
liabilities........................................... (299.8) (6.1)
Income taxes............................................ 52.5 318.4
Deferred revenue........................................ 24.9 (29.1)
Other................................................... 84.9 (43.4)
--------- ---------
Net cash provided by operating activities............. 3,203.5 2,058.2
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................... (1,273.8) (1,089.5)
Purchase of leased property................................. -- (234.0)
Acquisition of businesses, net of cash acquired............. (3,398.8) (2,671.8)
(Increase) decrease in investments.......................... (229.4) 9.0
Other....................................................... (56.5) (46.3)
--------- ---------
Net cash used in investing activities................. (4,958.5) (4,032.6)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on long-term debt and lines of credit.............. 2,281.5 1,659.0
Net proceeds from issuance of public debt................... -- 1,173.7
Cash paid for tender offer.................................. -- (417.9)
Proceeds from exercise of options........................... 144.4 508.2
Dividends paid.............................................. (64.5) (167.1)
Purchase of treasury shares................................. (1,188.1) (222.1)
Other....................................................... -- (7.1)
--------- ---------
Net cash provided by financing activities............. 1,173.3 2,526.7
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (581.7) 552.3
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,762.0 1,072.9
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 1,180.3 $ 1,625.2
========= =========
</TABLE>
See notes to consolidated financial statements (unaudited).
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements presented herein include the
consolidated accounts of Tyco International Ltd. (the "Company" or "Tyco"), a
company incorporated in Bermuda, and its subsidiaries. The financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles in the United States. These statements should be
read in conjunction with the Company's Amendment No. 3 on Form 10-K/A for the
fiscal year ended September 30, 1999.
The consolidated financial statements have not been examined by independent
accountants in accordance with generally accepted auditing standards, but in the
opinion of management, such financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to summarize fairly
the Company's financial position and results of operations. Certain prior period
amounts have been reclassified to conform with the current period presentation.
All references in this Form 10-Q to "$" are to U.S. dollars.
2. ACQUISITIONS AND DIVESTITURES
During the first nine months of fiscal 2000, the Company purchased
businesses in each of its four business segments for an aggregate cost of
$3,883.8 million, consisting of $2,997.7 million in cash, net of cash acquired,
the issuance of approximately 15.6 million common shares valued at
$671.4 million and the assumption of $214.7 million in debt. In addition,
$401.1 million of cash was paid during the nine months for purchase accounting
liabilities related to current and prior years' acquisitions. The cash portions
of the acquisition costs were funded utilizing cash on hand and borrowings under
the Company's commercial paper program. Each acquisition was accounted for as a
purchase, and the results of operations of the acquired companies have been
included in the consolidated results of the Company from their respective
acquisition dates.
In connection with the fiscal 2000 acquisitions, the Company recorded
purchase accounting liabilities of $318.4 million for transaction costs and the
costs of integrating the acquired companies within the various Tyco business
segments. Details regarding these purchase accounting liabilities are set forth
below.
At the time each purchase acquisition is made, the Company records each
asset acquired and each liability assumed at its estimated fair value, which
amount is subject to future adjustment when an appraisal or other further
information is obtained. The excess of (a) the total consideration paid for the
acquired company over (b) the fair value of assets acquired less liabilities
assumed and purchase accounting liabilities recorded is recognized as goodwill.
As a result of acquisitions completed in fiscal 2000, and adjustments to the
fair values of assets and liabilities and purchase accounting liabilities
recorded for acquisitions completed prior to fiscal 2000, approximately
$3,894.1 million in goodwill and other intangibles was recorded by the Company.
Fiscal 2000 purchase acquisitions include, among others, the acquisitions of
General Surgical Innovations, Inc. ("GSI"), AFC Cable Systems, Inc. ("AFC
Cable") and Siemens Electromechanical Components GmbH & Co. KG ("Siemens EC") in
November 1999, Praegitzer Industries, Inc. ("Praegitzer") in December 1999 and
Critchley Group PLC ("Critchley") in March 2000. GSI, a manufacturer and
distributor of balloon dissectors and related devices for minimally invasive
surgery, was purchased through the issuance of approximately 2.8 million Tyco
common shares valued at $108.6 million and has been integrated within the
Healthcare and Specialty Products segment. AFC Cable, a manufacturer of prewired
armor cable, was purchased through the issuance of approximately 12.8 million
Tyco common shares valued at $562.8 million and has been integrated within the
Flow Control Products and Services segment. Siemens EC, a world market leader
for relays and one of the world's leading providers of components to
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. ACQUISITIONS AND DIVESTITURES (CONTINUED)
the communications, automotive, consumer and general industry sectors, was
purchased for $1,165.8 million in cash and has been integrated within the
Telecommunications and Electronics segment. Praegitzer, a provider of printed
circuit board and interconnect solutions to OEMs and contract manufacturers in
the communications, computer, industrial and consumer electronics industries,
was purchased for $72.2 million in cash and has been integrated within the
Telecommunications and Electronics segment. Critchley, a world leader in cable
identification products, was purchased for $185.0 million in cash and has been
integrated within the Telecommunications and Electronics segment.
The following table summarizes activity with respect to purchase accounting
liabilities in fiscal 2000 ($ in millions):
<TABLE>
<CAPTION>
SEVERANCE FACILITIES OTHER
-------------------- --------------------- --------
NUMBER OF NUMBER OF
EMPLOYEES RESERVE FACILITIES RESERVE RESERVE TOTAL
--------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total reserve balance at September 30, 1999....... 3,390 $217.3 101 $282.7 $ 70.3 $ 570.3
Fiscal 2000 acquisition reserves.................. 4,215 186.1 63 58.9 73.4 318.4
Changes in estimates.............................. 601 24.1 58 43.3 44.6 112.0
Reversal to goodwill.............................. -- (13.8) -- (63.1) (1.1) (78.0)
Fiscal 2000 utilization........................... (4,443) (224.9) (112) (97.0) (91.9) (413.8)
------ ------ ---- ------ ------ -------
Ending balance at June 30, 2000................... 3,763 $188.8 110 $224.8 $ 95.3 $ 508.9
====== ====== ==== ====== ====== =======
</TABLE>
In connection with the fiscal 2000 acquisitions, the Company formulated
certain plans at the date of each acquisition for workforce reductions and the
closure and consolidation of an aggregate of 63 facilities. The Company has
communicated with the employees of the acquired companies to announce the
terminations and benefit arrangements, even though all individuals have not been
specifically told of their terminations. The costs of employee termination
benefits relate to the elimination of 1,939 positions in Europe, 1,670 positions
in the United States, 596 positions in the Asia-Pacific region and 10 positions
in South America, consisting primarily of manufacturing and distribution,
administrative, sales and marketing, and technical personnel. Facilities
designated for closure include 25 facilities in Europe, 21 facilities in the
United States and 17 facilities in the Asia-Pacific region, consisting primarily
of manufacturing plants, sales offices and administrative buildings. At
June 30, 2000, 2,527 employees had been terminated and 31 facilities had been
closed or consolidated related to fiscal 2000 acquisitions.
Changes in estimates recorded during the nine months ended June 30, 2000
relate primarily to revisions associated with finalizing the exit plans for
Raychem Corporation, which was acquired in August 1999, and other fiscal 1999
acquisitions. These changes in estimates resulted in additional purchase
accounting liabilities of $112.0 million and a corresponding increase in
goodwill and deferred tax assets. These revisions include the elimination of an
additional 601 employees, related primarily to manufacturing plants and
administrative offices in the United States and Europe. Additional facilities
designated for closure include 24 facilities in Europe, 19 facilities in the
Asia-Pacific region, 11 facilities in the United States and 4 facilities in
South America, consisting primarily of sales and administrative offices and
manufacturing plants.
In addition, during fiscal 2000 the Company reduced its estimate of purchase
accounting liabilities by $78.0 million, primarily because costs of facility
shutdowns for acquisitions consummated prior to fiscal 2000 were less than
anticipated. Goodwill and related deferred tax assets were reduced by an
equivalent amount.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. ACQUISITIONS AND DIVESTITURES (CONTINUED)
The Company has not yet finalized its business integration plans for recent
acquisitions and accordingly, purchase accounting liabilities are subject to
revision in future quarters. In addition, the Company is still in the process of
obtaining information to finalize estimates for the fair values of assets
acquired and liabilities assumed.
At June 30, 2000, a total of $508.9 million purchase accounting reserves
remained on the Consolidated Balance Sheet, of which $394.8 million are included
in accrued expenses and other current liabilities and $114.1 million are
included in other long-term liabilities. The Company expects that the
termination of employees and consolidation of facilities related to all such
acquisitions will be substantially complete within two years of the related
dates of acquisition, except for certain long-term contractual obligations.
The following unaudited pro forma data summarize the results of operations
for the periods indicated as if the fiscal 2000 acquisitions had been completed
as of the beginning of the periods presented. The pro forma data give effect to
actual operating results prior to the acquisitions and adjustments to interest
expense, goodwill amortization and income taxes. No effect has been given to
cost reductions or operating synergies in this presentation. These pro forma
amounts do not purport to be indicative of the results that would have actually
been obtained if the acquisitions had occurred as of the beginning of the
periods presented or that may be obtained in the future.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
-----------------------
2000 1999
---------- ----------
(IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales................................................... $21,805.5 $18,009.9
Income before extraordinary items........................... 2,607.5 232.9
Net income.................................................. 2,607.3 187.5
Net income per common share:
Basic..................................................... 1.54 0.11
Diluted................................................... 1.52 0.11
</TABLE>
In January 2000, the Company announced that it had entered into an agreement
to sell its ADT Automotive business to Manheim Auctions, Inc., a wholly-owned
subsidiary of Cox Enterprises, Inc., for approximately $1 billion in cash. The
sale is subject to customary regulatory review and, when complete, is expected
to generate a one-time pre-tax gain to the Company of approximately
$300 million. This transaction is expected to close prior to September 30, 2000.
On June 28, 2000, Tyco announced that one of its subsidiaries had entered
into a definitive agreement to acquire Mallinckrodt Inc., a global healthcare
company. Mallinckrodt shareholders are expected to receive Tyco shares valued at
approximately $47.50 for each share of Mallinckrodt. The transaction is valued
at approximately $4.2 billion and is contingent upon customary regulatory review
and approval by Mallinckrodt shareholders. Mallinckrodt will be integrated
within Tyco's Healthcare group. Tyco intends to account for the acquisition as a
purchase.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
--------- -------------
(IN MILLIONS)
<S> <C> <C>
Commercial paper program(i)................................. $ 3,564.3 $ 1,392.0
International overdrafts and demand loans................... 107.9 184.9
Floating rate private placement notes due 2000.............. 499.9 499.4
0.57% Yen denominated private placement notes due 2000...... 89.7 89.7
8.25% senior notes due 2000................................. 9.5 9.5
Floating rate private placement notes due 2001.............. 499.6 499.1
6.5% public notes due 2001.................................. 299.6 299.3
6.125% public notes due 2001................................ 749.0 748.1
6.875% private placement notes due 2002 (ii)................ 994.2 992.2
5.875% public notes due 2004................................ 398.1 397.7
6.375% public notes due 2004................................ 104.7 104.6
6.375% public notes due 2005................................ 744.5 743.7
6.125% Euro denominated private placement notes due
2007(iii)................................................. 560.4 --
6.125% public notes due 2008................................ 395.3 394.9
7.2% notes due 2008......................................... 398.9 398.8
7.25% senior notes due 2008................................. -- 8.2
6.125% public notes due 2009................................ 394.6 394.1
Zero coupon Liquid Yield Option Notes ("LYONs") due 2010.... 34.8 49.1
International bank loans, repayable through 2013............ 225.2 208.2
6.25% public Dealer Remarketable Securities due 2013........ 758.0 760.1
9.5% public debentures due 2022............................. 49.0 49.0
8.0% public debentures due 2023............................. 50.0 50.0
7.0% public notes due 2028.................................. 492.6 492.4
6.875% public notes due 2029................................ 781.0 780.5
Financing lease obligation.................................. 59.9 69.5
Other....................................................... 324.1 507.2
--------- ---------
Total debt.................................................. 12,584.8 10,122.2
Less current portion........................................ 2,181.6 1,012.8
--------- ---------
Long-term debt.............................................. $10,403.2 $ 9,109.4
========= =========
</TABLE>
------------------------
(i) In February 2000, Tyco International Group S.A. ("TIG") increased its
commercial paper program from $3.9 billion to $4.5 billion.
(ii) In June 2000, TIG offered to exchange all of its $1.0 billion 6.875%
private placement notes due 2002 for public notes. The form and terms of the
public notes are identical in all material respects to the form and terms of
the outstanding private placement notes of the corresponding series, except
that the public notes are not subject to restrictions on transfer under
United States securities laws.
(iii) In April 2000, TIG issued [EURO]600 million ($565.7 million) 6.125% notes
due 2007 in a private placement offering. The notes are fully and
unconditionally guaranteed by Tyco. The net proceeds were used to repay
borrowings under TIG's commercial paper program.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. LONG-TERM DEBT (CONTINUED)
In February 2000, TIG renewed and increased the $3.4 billion portion of its
credit facility with a group of commercial banks, giving it the right to borrow
up to $4.5 billion until February 9, 2001, with the option to extend the
facility for one additional year and to increase the $4.5 billion up to
$5.0 billion. The additional $0.5 billion portion of TIG's credit facility
continues to be available until February 12, 2003. TIG plans to principally use
the $4.5 billion portion of the credit facility to fully support borrowings
under its commercial paper program.
TIG's credit facility is guaranteed by the Company. Under the terms of the
credit facility, the Company is required to meet certain covenants. None of
these covenants is considered restrictive to the operations of the Company.
The Company recorded extraordinary items of $0.5 million in the quarter
ended June 30, 1999 and $0.2 million and $45.4 million in the nine months ended
June 30, 2000 and 1999, respectively, which were related to the write-off of net
unamortized deferred financing costs related to the early extinguishment of
debt.
4. EARNINGS PER COMMON SHARE
The reconciliations between basic and diluted earnings per common share are
as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------- -------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------- --------- -------- -------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BASIC INCOME PER COMMON SHARE:
Income before extraordinary items......... $ 997.3 1,687.1 $0.59 $212.2 1,640.1 $0.13
Stock options............................. -- 21.8 -- 24.4
Exchange of LYONs debt.................... 0.4 3.6 1.0 9.3
-------- ------- ------ -------
DILUTED INCOME PER COMMON SHARE:
Income before extraordinary items plus
assumed conversions..................... $ 997.7 1,712.5 $0.58 $213.2 1,673.8 $0.13
======== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------- -------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------- --------- -------- -------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BASIC INCOME PER COMMON SHARE:
Income before extraordinary items......... $2,610.0 1,689.1 $1.55 $286.9 1,631.0 $0.18
Stock options............................. -- 20.2 -- 22.9
Exchange of LYONs debt.................... 1.2 4.1 3.4 11.8
-------- ------- ------ -------
DILUTED INCOME PER COMMON SHARE:
Income before extraordinary items plus
assumed conversions..................... $2,611.2 1,713.4 $1.52 $290.3 1,665.7 $0.17
======== ======= ====== =======
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. EARNINGS PER COMMON SHARE (CONTINUED)
The computation of diluted income per common share in the quarters ended
June 30, 2000 and 1999 and the nine months ended June 30, 2000 and 1999 excludes
the effect of the assumed exercise of approximately 18.2 million, 1.2 million,
16.8 million and 8.0 million stock options, respectively, because the effect
would be anti-dilutive.
5. SHAREHOLDERS' EQUITY
Tyco paid a quarterly cash dividend of $0.0125 per common share in each of
the first three quarters of fiscal 2000 and fiscal 1999. Prior to its merger
with Tyco on April 1, 1999, AMP paid a dividend of $0.27 per share in each of
the first two quarters of fiscal 1999.
In November 1999, the Board of Directors authorized the Company to reacquire
up to 20 million of its common shares in the open market, which was completed
during the quarter ended March 31, 2000. In January 2000, the Board of Directors
authorized the Company to reacquire up to an additional $2.0 billion of its
common shares in the open market, of which the Company has in excess of
$1.6 billion remaining as of June 30, 2000.
6. MERGER, RESTRUCTURING AND OTHER NON-RECURRING CHARGES (CREDITS)
The following table summarizes activity with respect to merger,
restructuring and other non-recurring charges (credits) in fiscal 2000 ($ in
millions):
<TABLE>
<CAPTION>
SEVERANCE FACILITIES OTHER
-------------------- --------------------- --------
NUMBER OF NUMBER OF
EMPLOYEES RESERVE FACILITIES RESERVE RESERVE TOTAL
--------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total reserve balance at September 30,
1999...................................... 7,914 $100.4 67 $117.7 $181.2 $ 399.3
Fiscal 2000 restructuring charges........... 926 4.9 3 4.8 26.2 35.9
Revisions in estimates...................... (3,044) (44.4) (12) (15.4) (57.4) (117.2)
Fiscal 2000 utilization..................... (1,770) (23.5) (31) (70.0) (73.4) (166.9)
------ ------ --- ------ ------ -------
Ending balance at June 30, 2000............. 4,026 $ 37.4 27 $ 37.1 $ 76.6 $ 151.1
====== ====== === ====== ====== =======
</TABLE>
During the nine months ended June 30, 2000, the Company recorded a net
merger, restructuring and other non-recurring credit of $81.3 million. The net
credit of $81.3 million is comprised of a credit of $117.2 million representing
a revision of estimates for accrued merger, restructuring and other
non-recurring charges recorded in prior periods, offset by restructuring and
other non-recurring charges of $35.9 million. The $117.2 million credit is
comprised of revisions of $80.3 million related primarily to the merger with AMP
Incorporated ("AMP") and costs associated with AMP's profit improvement plan, of
which $6.3 million is included in cost of sales; $21.4 million related to the
Company's 1997 restructuring plans; and $15.5 million related primarily to the
merger with United States Surgical Corporation ("USSC"). The changes in
estimates of the restructuring plan at AMP were attributable primarily to
increased demand for certain of AMP's products which was not anticipated at the
time of the merger and to recent acquisitions such as Siemens EC. Therefore, the
Company has determined not to close several facilities and not to terminate
approximately 3,000 employees, whose costs were provided for in previous AMP
restructuring plans. In addition, certain restructuring activities at AMP were
completed for amounts lower than originally anticipated. The changes in
estimates of the Company's 1997 restructuring plans and the USSC restructuring
plans were due primarily to the completion of activities for amounts lower than
originally recorded. The charges of $35.9 million consist of $16.9 million
related to the restructuring activities in AMP's Brazilian operations and
wireless communications business, of which $0.9 million is
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. MERGER, RESTRUCTURING AND OTHER NON-RECURRING CHARGES (CREDITS) (CONTINUED)
included in cost of sales; $11.1 million related to USSC's suture business; and
$7.9 million related to the Company's exiting the USSC interventional cardiology
business, of which $6.4 million is included in cost of sales.
During the nine months ended June 30, 1999, the Company recorded net merger,
restructuring and other non-recurring charges of $1,032.7 million, of which
$106.4 million is included in cost of sales. The $1,032.7 million net charge
consists of charges of $693.3 million related to the merger with AMP and AMP's
profit improvement plan and charges of $417.4 million primarily related to the
merger with USSC, offset by a credit of $50.0 million related to a litigation
settlement with AlliedSignal Inc. and a credit of $28.0 million representing a
revision of estimates related to the Company's 1997 merger, restructuring and
other non-recurring accruals.
At June 30, 2000, a total of $151.1 million merger, restructuring and other
non-recurring reserves remained on the Consolidated Balance Sheet, of which
$117.6 million are included in accrued expenses and other current liabilities
and $33.5 million are included in other long-term liabilities. The Company
currently anticipates that the restructuring activities to which all of the
above charges relate will be substantially completed by the end of calendar
2000, except for certain long-term contractual obligations.
7. CHARGES FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
During the nine months ended June 30, 2000, the Healthcare and Specialty
Products segment recorded charges of $99.0 million primarily related to an
impairment in goodwill and other intangible assets associated with the Company
exiting the interventional cardiology business of USSC.
During the nine months ended June 30, 1999, the Telecommunications and
Electronics segment recorded charges of $431.5 million related to the write-down
of goodwill and property, plant and equipment, primarily manufacturing and
administrative facilities, associated with the merger with AMP and AMP's profit
improvement plan. Additionally, the Healthcare and Specialty Products segment
recorded charges of $76.0 million primarily related to the write-down of
property, plant and equipment, principally administrative facilities, associated
with the consolidation of facilities in USSC's operations in the United States
and Europe as a result of its merger with the Company.
8. COMPREHENSIVE INCOME (LOSS)
Total comprehensive income (loss) and its components are as follows:
<TABLE>
<CAPTION>
FOR THE QUARTERS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net income.............................................. $ 997.3 $ 211.7 $2,609.8 $ 241.5
Unrealized gain (loss) on securities, net of taxes.... 819.7 0.8 830.1 (0.3)
Minimum pension liability, net of taxes............... -- -- -- (12.8)
Foreign currency translation adjustment, net of
taxes............................................... (58.6) (116.5) (210.3) (284.5)
-------- ------- -------- -------
Total comprehensive income (loss)....................... $1,758.4 $ 96.0 $3,229.6 $ (56.1)
======== ======= ======== =======
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. CONSOLIDATED SEGMENT DATA
Selected information for the Company's four industry segments is as follows:
<TABLE>
<CAPTION>
FOR THE QUARTERS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------- -------------------------
2000 1999 2000 1999
---------- -------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
NET SALES:
Telecommunications and Electronics....... $ 3,245.6 $1,959.0 $ 9,011.9 $ 5,488.5
Healthcare and Specialty Products........ 1,645.8 1,449.0 4,794.1 4,186.9
Fire and Security Services............... 1,517.9 1,435.6 4,434.5 4,001.6
Flow Control Products and Services....... 1,008.5 976.2 2,886.0 2,595.0
---------- -------- --------- ---------
$ 7,417.8 $5,819.8 $21,126.5 $16,272.0
========== ======== ========= =========
OPERATING INCOME:
Telecommunications and Electronics....... $ 821.5 (1) $ (206.0)(3) $ 2,138.9 (6) $ (416.4)(9)
Healthcare and Specialty Products........ 381.5 (2) 376.8 (4) 1,031.4 (7) 525.3 (10)
Fire and Security Services............... 255.6 244.8 (5) 733.0 (8) 677.0 (11)
Flow Control Products and Services....... 196.7 167.7 546.5 429.7
---------- -------- --------- ---------
1,655.3 583.3 4,449.8 1,215.6
Less: Corporate expenses................... (50.6) (27.0) (144.8) (65.3)
Goodwill amortization expense.......... (79.3) (49.2) (249.4) (142.3)
---------- -------- --------- ---------
$ 1,525.4 $ 507.1 $ 4,055.6 $ 1,008.0
========== ======== ========= =========
</TABLE>
------------------------
(1) Includes a merger, restructuring and other non-recurring credit of
$9.8 million representing a revision of estimates of merger, restructuring
and other non-recurring accruals related to the merger with AMP and AMP's
profit improvement plan.
(2) Includes restructuring and other non-recurring charges of $2.9 million
related to USSC's suture business.
(3) Includes merger, restructuring and other non-recurring charges of
$418.0 million, of which $51.2 million is included in cost of sales, and
charges for the impairment of long-lived assets of $194.8 million related to
the merger with AMP and AMP's profit improvement plan. Also includes a
credit of $50.0 million related to a litigation settlement with
AlliedSignal Inc.
(4) Includes restructuring and other non-recurring credit of $3.5 million
representing a revision in estimates related to the Company's 1997
restructuring and other non-recurring accruals, offset by restructuring and
other non-recurring charges of $2.8 million related to USSC's suture
business.
(5) Includes a credit of $16.2 million representing a revision of estimates
related to the Company's 1997 restructuring and other non-recurring
accruals.
(6) Includes a restructuring charge of $16.9 million, of which $0.9 million is
included in cost of sales, related to AMP's Brazilian operations and
wireless communications business and a credit of $80.3 million, of which
$6.3 million is included in cost of sales, primarily representing a revision
of estimates of merger, restructuring and other non-recurring accruals
related to the merger with AMP and AMP's profit improvement plan.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. CONSOLIDATED SEGMENT DATA (CONTINUED)
(7) Includes restructuring and other non-recurring charges of $7.9 million, of
which $6.4 million is included in cost of sales, and charges for the
impairment of long-lived assets of $99.0 million related to exiting USSC's
interventional cardiology business. Includes restructuring and other
non-recurring charges of $11.1 million related to USSC's suture business.
Also includes a credit of $25.7 million representing a revision in estimates
of merger, restructuring and other non-recurring accruals, consisting of
$15.5 million related primarily to the merger with USSC and $10.2 million
related to the Company's 1997 restructuring accruals.
(8) Includes a merger, restructuring and other non-recurring credit of
$11.2 million representing a revision in estimates related to the Company's
1997 restructuring accruals.
(9) Includes restructuring and other non-recurring charges of $693.3 million, of
which $106.4 million is included in cost of sales, and charges for the
impairment of long-lived assets of $431.5 million related to the merger with
AMP and AMP's profit improvement plan. Also includes a credit of
$50.0 million related to a litigation settlement with AlliedSignal Inc.
(10) Includes merger, restructuring and other non-recurring charges of
$417.4 million and charges for the impairment of long-lived assets of
$76.0 million, primarily related to the merger with USSC. Also includes a
credit of $4.7 million representing a revision in estimates related to the
Company's 1997 restructuring and other non-recurring accruals.
(11) Includes a credit of $23.3 million representing a revision of estimates
related to the Company's 1997 restructuring and other non-recurring
accruals.
10. INVENTORIES
Inventories are classified as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
-------- -------------
(IN MILLIONS)
<S> <C> <C>
Purchased materials and manufactured parts............ $1,054.5 $ 719.1
Work in process....................................... 958.7 774.2
Finished goods........................................ 1,654.4 1,355.8
-------- --------
$3,667.6 $2,849.1
======== ========
</TABLE>
11. TYCO INTERNATIONAL GROUP S.A.
TIG indirectly owns a substantial portion of the operating subsidiaries of
Tyco. During fiscal 1999, TIG issued public debt securities, which are fully and
unconditionally guaranteed by Tyco. The Company has not included separate
financial statements and footnotes for TIG because of the full and unconditional
guarantee by Tyco and the Company's belief that such information is not material
to holders of the debt
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. TYCO INTERNATIONAL GROUP S.A. (CONTINUED)
securities. The following presents consolidated summary financial information
for TIG and its subsidiaries, as if TIG and its current organizational structure
were in place for all periods presented.
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
--------- -------------
(IN MILLIONS)
<S> <C> <C>
Total current assets................................. $ 7,837.8 $ 7,610.2
Total non-current assets............................. 29,316.7 24,008.4
Total current liabilities............................ 7,905.0 6,817.1
Total non-current liabilities........................ 13,236.8 10,553.9
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTERS FOR THE NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- ---------------------
2000 1999 2000 1999
-------- -------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales........................................... $4,985.1 $4,359.2 $14,315.2 $12,135.2
Gross profit........................................ 1,890.9 1,642.1 5,321.7 4,677.1
Income before extraordinary items(1)................ 429.3 186.7 1,315.2 176.1
Net income (2)...................................... 429.3 186.2 1,315.0 130.7
</TABLE>
------------------------
(1) Income before extraordinary items in the nine months ended June 30, 2000
includes restructuring and other non-recurring charges of $11.1 million
related to USSC's suture business and includes restructuring and other
non-recurring charges of $7.9 million, of which $6.4 million is included in
cost of sales, and charges for the impairment of long-lived assets of
$99.0 million related to exiting USSC's interventional cardiology business.
Also included are credits of $15.5 million representing a revision of
estimates of merger, restructuring and other non-recurring accruals related
primarily to the merger with USSC and $21.4 million related to the Company's
1997 restructuring plans. Income before extraordinary items in the nine
months ended June 30, 1999 includes merger, restructuring and other
non-recurring charges of $417.4 million and charges for the impairment of
long-lived assets of $76.0 million, primarily related to the merger with
USSC. Also included is a credit of $28.0 million representing a revision of
estimates related to the Company's 1997 merger, restructuring and other
non-recurring accruals.
(2) Extraordinary items were primarily comprised of losses on the write-off of
net unamortized deferred financing costs relating to the early
extinguishment of debt.
12. SUBSEQUENT EVENTS
On January 17, 2000, Tyco announced that TyCom Ltd. ("TyCom"), its undersea
fiber optics business, will design, build, install, operate and maintain its own
global undersea fiber optic communications network, to be known as the TyCom
Global Network-TM-. In August 2000, TyCom sold approximately 14 percent of its
common shares in an initial public offering. Net proceeds to TyCom from the
offering were approximately $2.1 billion, which will be used primarily toward
the deployment of the TyCom Global Network.
On July 3, 2000, the Company consummated its acquisition of the Electronic
OEM Business of Thomas & Betts for $750 million in cash. The Electronic OEM
Business of Thomas & Betts manufactures electronic connectors for the
telecommunications, computer and automotive industries and will be integrated
within the Tyco Electronics group. The Company is accounting for the acquisition
as a purchase.
13
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Information for all periods presented below reflects the grouping of the
Company's businesses into four business segments consisting of
Telecommunications and Electronics, Healthcare and Specialty Products, Fire and
Security Services, and Flow Control Products and Services.
OVERVIEW
Sales increased 27.5% during the quarter ended June 30, 2000 to
$7,417.8 million from $5,819.8 million in the quarter ended June 30, 1999.
Income before extraordinary items was $997.3 million in the quarter ended
June 30, 2000, as compared to $212.2 million in the quarter ended June 30, 1999.
Income before extraordinary items for the quarter ended June 30, 2000 included
an after-tax net credit of $5.2 million ($6.9 million pre-tax) consisting of a
credit of $7.3 million ($9.8 million pre-tax) representing a revision of
estimates of merger, restructuring and other non-recurring accruals, offset by
restructuring charges of $2.1 million ($2.9 million pre-tax) related to USSC's
suture business. Income before extraordinary items for the quarter ended
June 30, 1999 included an after-tax net charge of $487.2 million
($545.9 million pre-tax) consisting of merger, restructuring and non-recurring,
and impairment charges of $532.5 million ($615.6 million pre-tax) primarily
related to the merger with AMP and AMP's profit improvement plan, offset by a
credit of $45.3 million ($69.7 million pre-tax). The pre-tax credit consists of
$50.0 million relating to a litigation settlement with AlliedSignal Inc. and
$19.7 million representing a revision of estimates related to the Company's 1997
restructuring and other non-recurring accruals.
Sales increased 29.8% during the nine months ended June 30, 2000 to
$21,126.5 million from $16,272.0 million in the nine months ended June 30, 1999.
Income before extraordinary items was $2,610.0 million in the nine months ended
June 30, 2000, as compared to $286.9 million in the nine months ended June 30,
1999. Income before extraordinary items for the nine months ended June 30, 2000
included an after-tax net charge of $20.0 million ($17.7 million pre-tax)
consisting of restructuring and impairment charges of $107.2 million
($134.9 million pre-tax) primarily related to the exiting of USSC's
interventional cardiology business, offset by a credit of $87.2 million
($117.2 million pre-tax) representing a revision of estimates of merger,
restructuring and other non-recurring accruals. Income before extraordinary
items for the nine months ended June 30, 1999 included an after-tax net charge
of $1,302.9 million ($1,540.2 million pre-tax) consisting of merger,
restructuring and impairment charges of $1,354.0 million ($1,618.2 million
pre-tax) related to the merger with AMP, AMP's profit improvement plan and the
merger with USSC, offset by a credit of $51.1 million ($78.0 million pre-tax)
representing a revision of estimates of merger, restructuring and other
non-recurring accruals.
14
<PAGE>
The following table details the Company's sales and earnings in the quarters
and nine months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
FOR THE QUARTERS FOR THE NINE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
2000 1999 2000 1999
-------- -------- --------- ---------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales........................................... $7,417.8 $5,819.8 $21,126.5 $16,272.0
======== ======== ========= =========
Operating income, before certain credits
(charges)(i)(ii).................................. $1,597.8 $1,102.2 $ 4,322.7 $ 2,690.5
Merger, restructuring and other non-recurring
credits (charges), net............................ 6.9 (351.1) 81.3 (1,032.7)
Impairment of long-lived assets..................... -- (194.8) (99.0) (507.5)
Amortization of goodwill............................ (79.3) (49.2) (249.4) (142.3)
-------- -------- --------- ---------
Operating income.................................... 1,525.4 507.1 4,055.6 1,008.0
Interest expense, net............................... (195.7) (107.9) (566.7) (346.5)
-------- -------- --------- ---------
Pre-tax income before extraordinary items........... 1,329.7 399.2 3,488.9 661.5
Income taxes........................................ (332.4) (187.0) (878.9) (374.6)
-------- -------- --------- ---------
Income before extraordinary items................... 997.3 212.2 2,610.0 286.9
Extraordinary items, net of taxes................... -- (0.5) (0.2) (45.4)
-------- -------- --------- ---------
Net income.......................................... $ 997.3 $ 211.7 $ 2,609.8 $ 241.5
======== ======== ========= =========
</TABLE>
------------------------
(i) This amount is the sum of the operating income of the Company's four
business segments set forth in the segment discussion below, less certain
corporate expenses, and is before merger, restructuring and other
non-recurring credits (charges), charges for the impairment of long-lived
assets, and amortization of goodwill.
(ii) Net merger, restructuring and other non-recurring charges in the amount of
$51.2 million, $1.0 million and $106.4 million related to the write-down of
inventory have been included as part of cost of sales in the Consolidated
Statements of Operations for the quarter ended June 30, 1999 and the nine
months ended June 30, 2000 and 1999, respectively. However, they have not
been included as part of cost of sales for the purpose of calculating
operating income before certain credits (charges) in this table. These
charges are instead included in the total merger, restructuring and other
non-recurring credits (charges).
In fiscal years 1999 and 2000, the Company recorded merger, restructuring
and other non-recurring charges (credits) and charges for the impairment of
long-lived assets with respect to AMP and USSC. Under the Company's
restructuring and integration programs, the Company terminates employees and
closes facilities deemed to be redundant. The reduction in manpower and
facilities comes from the manufacturing, distribution and administrative
functions. In addition, the Company discontinues or disposes of product lines
which do not fit the long-term strategy of the respective businesses. The
Company does not separately track the impact on financial results of the
restructuring and integration programs. However, the Company estimates that its
overall cost structure will be reduced by approximately $1 billion on an
annualized basis due to the impact associated with these charges. As of
June 30, 2000, the Company believes that approximately $925 million of benefits
on an annualized basis have been realized. The significant decreases have been
to selling, general and administrative expenses and to cost of sales. The
restructuring plans are expected to improve the cost structure over the
remainder of fiscal 2000. The effect on the ongoing operations of restructuring
and other non-recurring charges and charges for the impairment of long-lived
assets taken in fiscal 2000 will not be material.
15
<PAGE>
Operating income, before certain credits (charges), improved in all segments
in the quarter and nine months ended June 30, 2000 as compared to the quarter
and nine months ended June 30, 1999. The operating improvements are the result
of increased revenues and enhanced margins in certain segments. Increased
revenues resulted from organic growth and from acquisitions. The Company
enhances its margins through improved productivity and cost reductions in the
ordinary course of business, unrelated to acquisition or divestiture activities.
The Company regards charges that it incurs in the ordinary course of business to
reduce costs as recurring charges, which are reflected in cost of sales and in
selling, general and administrative expenses in the Consolidated Statements of
Operations.
When the Company makes acquisitions that are accounted for using the
purchase method, the sales and operating results of the acquired companies are
included in the financial results of Tyco from the dates of their acquisition.
The acquired companies are immediately integrated within the Company's existing
operations. Consequently, the Company does not separately track the operating
results of acquired companies. The discussion following the tables below
includes an estimated sales comparison that excludes the effects of indicated
acquisitions.
QUARTER ENDED JUNE 30, 2000 COMPARED TO QUARTER ENDED JUNE 30, 1999
SALES AND OPERATING INCOME
TELECOMMUNICATIONS AND ELECTRONICS
The following table sets forth sales and operating income (loss) and margins
for the Telecommunications and Electronics segment:
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
JUNE 30,
-----------------------
2000 1999
--------- ---------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales.................................................. $3,245.6 $1,959.0
Operating income, before certain credits (charges)..... $ 811.7 $ 356.8
Operating margins, before certain credits (charges).... 25.0% 18.2 %
Operating income (loss), after certain credits
(charges)............................................ $ 821.5 $ (206.0)
Operating margins, after certain credits (charges)..... 25.3% (10.5)%
</TABLE>
The 65.7% increase in sales in the quarter ended June 30, 2000 over the
quarter ended June 30, 1999 for the Telecommunications and Electronics segment
resulted from acquisitions, as well as organic growth. These included: the
acquisition in May 1999 of Telecomunicaciones Marinas, S.A. ("Temasa"), included
in TyCom Ltd. ("TyCom"); the acquisition in August 1999 of Raychem Corporation
("Raychem"), included in Tyco Electronics; the acquisition in November 1999 of
Siemens Electromechanical Components GmbH & Co. KG ("Siemens EC"), included in
Tyco Electronics; the acquisition in December 1999 of Praegitzer
Industries, Inc. ("Praegitzer"), included in Tyco Electronics; and the
acquisition in March 2000 of Critchley Group PLC ("Critchley"), included in Tyco
Electronics. Excluding the impact of these acquisitions, sales increased an
estimated 20.8%, reflecting strong organic growth in sales in the quarter ended
June 30, 2000 at each of TyCom and Tyco Electronics.
The substantial increase in operating income and margins, before certain
credits (charges), in the quarter ended June 30, 2000 compared with the quarter
ended June 30, 1999 was due to the acquisition of Raychem, higher sales volume
at TyCom and improved margins at Tyco Electronics. The improved operating
margins at Tyco Electronics in the quarter ended June 30, 2000 resulted from
increased volume, improved pricing and continuing cost reduction programs
following the AMP merger.
In addition to the items discussed above, the substantial increase in
operating income and margins, after certain credits (charges), was due to a
restructuring credit of $9.8 million in the quarter ended
16
<PAGE>
June 30, 2000 compared with a net merger, restructuring and impairment of
long-lived assets charge of $562.8 million in the quarter ended June 30, 1999.
On January 17, 2000, Tyco announced that TyCom Ltd. ("TyCom"), its undersea
fiber optics business, will design, build, install, operate and maintain its own
global undersea fiber optic communications network, to be known as the TyCom
Global Network ("TGN"). In August 2000, TyCom sold approximately 14 percent of
its common shares in an initial public offering. Net proceeds to TyCom from the
offering were approximately $2.1 billion, which will be used primarily toward
the deployment of the TGN. During the construction of the TGN, TyCom's future
revenues and operating income may decrease from current levels until the second
half of fiscal 2001.
On July 3, 2000, the Company consummated its acquisition of the Electronic
OEM Business of Thomas & Betts for $750 million in cash. The Electronic OEM
Business of Thomas & Betts manufactures electronic connectors for the
telecommunications, computer and automotive industries and will be integrated
within the Tyco Electronics group. The Company is accounting for the acquisition
as a purchase.
HEALTHCARE AND SPECIALTY PRODUCTS
The following table sets forth sales and operating income and margins for
the Healthcare and Specialty Products segment:
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
JUNE 30,
-----------------------
2000 1999
--------- ---------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales.................................................. $1,645.8 $1,449.0
Operating income, before certain credits (charges)..... $ 384.4 $ 376.1
Operating margins, before certain credits (charges).... 23.4% 26.0%
Operating income, after certain credits (charges)...... $ 381.5 $ 376.8
Operating margins, after certain credits (charges)..... 23.2% 26.0%
</TABLE>
The 13.6% increase in sales in the quarter ended June 30, 2000 over the
quarter ended June 30, 1999 was primarily the result of organic growth in both
Tyco Plastics and Adhesives and Tyco Healthcare.
In addition, sales increased in the quarter ended June 30, 2000 due to the
effects of acquisitions, which included: Batts Inc., acquired in April 1999;
General Surgical Innovations, Inc. ("GSI"), acquired in November 1999;
Radionics, acquired in January 2000; and Fiber-Lam, acquired in March 2000.
Excluding the impact of these acquisitions, sales increased an estimated 10.4%.
The 2.2% increase in operating income, before certain credits (charges), in
the quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 was
principally due to increased sales volume at Tyco Plastics and ADT Automotive.
The decrease in operating margins, before certain credits (charges), in the
quarter ended June 30, 2000 compared to the quarter ended June 30, 1999 was due
to lower margins at Tyco Healthcare principally as a result of higher raw
material costs, partially offset by improved margins at Tyco Plastics and
Adhesives and ADT Automotive.
In addition, the decrease in operating margins, after certain credits
(charges), was due to a restructuring and other non-recurring charge of
$2.9 million in the quarter ended June 30, 2000 compared with a net
restructuring and other non-recurring credit of $0.7 million in the quarter
ended June 30, 1999.
On January 14, 2000, the Company announced that it had entered into an
agreement to sell its ADT Automotive business to Manheim Auctions, Inc., a
wholly-owned subsidiary of Cox Enterprises, Inc., for approximately $1 billion
in cash. The sale is subject to customary regulatory review and, when complete,
is
17
<PAGE>
expected to generate a one-time pre-tax gain to the Company of approximately
$300 million. This transaction is expected to close prior to September 30, 2000.
On June 28, 2000, Tyco announced that one of its subsidiaries had entered
into a definitive agreement to acquire Mallinckrodt Inc., a global healthcare
company. Mallinckrodt shareholders are expected to receive Tyco shares valued at
approximately $47.50 for each share of Mallinckrodt. The transaction is valued
at approximately $4.2 billion and is contingent upon customary regulatory review
and approval by Mallinckrodt shareholders. Mallinckrodt will be integrated
within Tyco's Healthcare group. Tyco intends to account for the acquisition as a
purchase.
FIRE AND SECURITY SERVICES
The following table sets forth sales and operating income and margins for
the Fire and Security Services segment:
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
JUNE 30,
-----------------------
2000 1999
--------- ---------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales....................................................... $1,517.9 $1,435.6
Operating income, before certain credits.................... $ 255.6 $ 228.6
Operating margins, before certain credits................... 16.8% 15.9%
Operating income, after certain credits..................... $ 255.6 $ 244.8
Operating margins, after certain credits.................... 16.8% 17.1%
</TABLE>
The 5.7% increase in sales in the quarter ended June 30, 2000 over the
quarter ended June 30, 1999 resulted primarily from increased sales in security
operations in the United States and higher sales volume in fire protection
operations in North America. The increases were due primarily to a higher volume
of recurring service revenues.
The increase in operating income and margins, before certain credits, in the
quarter ended June 30, 2000 over the quarter ended June 30, 1999 was primarily
due to increased service volume and higher margins in the worldwide security
operations and international fire protection businesses. Increased operating
margins, before certain credits, in the quarter ended June 30, 2000 reflect
higher margins in the worldwide security business as a result of the
reorganization of its dealer program and internal sales force during the first
two quarters of fiscal 2000.
The decrease in operating margins, after certain credits, was due to a
restructuring and other non-recurring credit of $16.2 million in the quarter
ended June 30, 1999.
FLOW CONTROL PRODUCTS AND SERVICES
The following table sets forth sales and operating income and margins for
the Flow Control Products and Services segment:
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
JUNE 30,
------------------------
2000 1999
-------- --------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales....................................................... $1,008.5 $976.2
Operating income............................................ $ 196.7 $167.7
Operating margins........................................... 19.5% 17.2%
</TABLE>
18
<PAGE>
The 3.3% sales increase in the quarter ended June 30, 2000 over the quarter
ended June 30, 1999 reflects increased demand for valve products in the
Asia-Pacific region, increased sales at Allied Tube and Conduit and Earth Tech
and the impact of acquisitions. These acquisitions included: Central Sprinkler
Corporation ("Central Sprinkler"), acquired in August 1999; AFC Cable
Systems, Inc. ("AFC Cable"), acquired in November 1999; and Flow Control
Technologies ("FCT"), acquired in February 2000. During August 1999, the Company
completed the sale of certain businesses within this segment, including The
Mueller Company and portions of Grinnell Supply Sales and Manufacturing.
Excluding the impact of these acquisitions and divestitures, sales increased an
estimated 5.5%.
The 17.3% increase in operating income in the quarter ended June 30, 2000
over the quarter ended June 30, 1999 was primarily due to increased volume in
worldwide valve operations, Allied Tube and Conduit and Earth Tech. Also,
royalty and licensing fee income from certain intellectual property associated
with the divested businesses offset a portion of the operating income lost from
the divestitures. Increased operating margins in the quarter ended June 30, 2000
resulted primarily from royalty and licensing fee income and margin improvements
in the North American and European valve operations and Earth Tech.
FOREIGN CURRENCY
Changes in foreign exchange rates during the quarter ended June 30, 2000 as
compared to the quarter ended June 30, 1999 had a negative impact which was not
material to the Company's overall sales and operating income.
CORPORATE EXPENSES
Corporate expenses were $50.6 million in the quarter ended June 30, 2000
compared to $27.0 million in the quarter ended June 30, 1999. This increase was
due principally to an increase in corporate staffing and related costs to
support and monitor the Company's expanding businesses and operations and higher
compensation expense under the Company's equity-based incentive compensation
plans.
AMORTIZATION OF GOODWILL
Amortization of goodwill, a non-cash charge, increased to $79.3 million in
the quarter ended June 30, 2000 from $49.2 million in the quarter ended
June 30, 1999, due to an increase in goodwill resulting from acquisitions.
INTEREST EXPENSE, NET
Interest expense, net, increased to $195.7 million in the quarter ended
June 30, 2000, compared to $107.9 million in the quarter ended June 30, 1999.
The increase was due to higher average interest rates and higher average debt
balances resulting from borrowings to finance acquisitions and the Company's
stock repurchase program. The increase in borrowings was mitigated in part by
the use of free cash flow to pay for certain acquisitions.
EXTRAORDINARY ITEMS
Extraordinary items in the quarter ended June 30, 1999 included after-tax
losses amounting to $0.5 million related to the write-off of net unamortized
deferred financing costs in connection with the early extinguishment of debt.
There were no extraordinary items in the quarter ended June 30, 2000.
INCOME TAX EXPENSE
The effective income tax rate, excluding the impact of merger, restructuring
and other non-recurring credits (charges) and charges for the impairment of
long-lived assets, was 25.0% during the quarter ended
19
<PAGE>
June 30, 2000, as compared to 26.0% in the quarter ended June 30, 1999. The
decrease in the effective income tax rate was primarily due to higher earnings
in tax jurisdictions with lower income tax rates.
NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO NINE MONTHS ENDED JUNE 30, 1999
SALES AND OPERATING INCOME
TELECOMMUNICATIONS AND ELECTRONICS
The following table sets forth sales and operating income (loss) and margins
for the Telecommunications and Electronics segment:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
---------------------
2000 1999
-------- --------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales....................................................... $9,011.9 $5,488.5
Operating income, before certain credits (charges).......... $2,075.5 $ 658.4
Operating margins, before certain credits (charges)......... 23.0% 12.0 %
Operating income (loss), after certain credits (charges).... $2,138.9 $ (416.4)
Operating margins, after certain credits (charges).......... 23.7% (7.6)%
</TABLE>
The 64.2% increase in sales in the nine months ended June 30, 2000 over the
nine months ended June 30, 1999 for the Telecommunications and Electronics
segment resulted in part from acquisitions. These acquisitions included: the
acquisition in May 1999 of Temasa, included in TyCom; the acquisition in
August 1999 of Raychem, included in Tyco Electronics; the acquisition in
November 1999 of Siemens EC, included in Tyco Electronics; the acquisition in
December 1999 of Praegitzer, included in Tyco Electronics; and the acquisition
in March 2000 of Critchley, included in Tyco Electronics. Excluding the impact
of these acquisitions, sales increased an estimated 21.2%, reflecting strong
organic growth in sales in the nine months ended June 30, 2000 at each of TyCom
and Tyco Electronics.
The substantial increase in operating income and margins, before certain
credits (charges), in the nine months ended June 30, 2000 compared with the nine
months ended June 30, 1999 was due to the acquisition of Raychem, higher sales
volume at TyCom and improved margins at Tyco Electronics. The improved operating
margins at Tyco Electronics in the nine months ended June 30, 2000 resulted from
increased volume, improved pricing and continuing cost reduction programs
following the AMP merger.
In addition to the items discussed above, the substantial increase in
operating income and margins, after certain credits (charges), was due to a
merger, restructuring and other non-recurring net credit of $63.4 million in the
nine months ended June 30, 2000 compared with a restructuring and other
non-recurring charge of $1,074.8 million in the nine months ended June 30, 1999.
20
<PAGE>
HEALTHCARE AND SPECIALTY PRODUCTS SEGMENT
The following table sets forth sales and operating income and margins for
the Healthcare and Specialty Products segment:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
---------------------
2000 1999
-------- --------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales....................................................... $4,794.1 $4,186.9
Operating income, before certain credits (charges).......... $1,123.7 $1,014.0
Operating margins, before certain credits (charges)......... 23.4% 24.2%
Operating income, after certain credits (charges)........... $1,031.4 $ 525.3
Operating margins, after certain credits (charges).......... 21.5% 12.5%
</TABLE>
The 14.5% increase in sales in the nine months ended June 30, 2000 over the
nine months ended June 30, 1999 was primarily the result of organic growth in
both Tyco Plastics and Adhesives and Tyco Healthcare. In addition, sales
increased in the nine months ended June 30, 2000 due to the effects of
acquisitions, which included: Graphic Controls Corporation and Sunbelt Plastics,
both acquired in November 1998 and included in results for all of the nine
months ended June 30, 2000 but only part of the nine months ended June 30, 1999;
Batts Inc., acquired in April 1999; GSI, acquired in November 1999; Radionics,
acquired in January 2000; and Fiber-Lam, acquired in March 2000. Excluding the
impact of these acquisitions, sales increased an estimated 9.5%.
The 10.8% increase in operating income, before certain credits (charges), in
the nine months ended June 30, 2000 compared to the nine months ended June 30,
1999 was principally due to higher volume at Tyco Plastics and Adhesives and ADT
Automotive, partially offset by lower margins at Tyco Healthcare principally due
to higher raw material costs.
In addition to the items discussed above, the substantial increase in
operating income and margins, after certain credits (charges), was due to net
merger, restructuring and other non-recurring charges of $92.3 million in the
nine months ended June 30, 2000 compared with net merger, restructuring and
other non-recurring charges of $488.7 million in the nine months ended June 30,
1999.
FIRE AND SECURITY SERVICES
The following table sets forth sales and operating income and margins for
the Fire and Security Services segment:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
---------------------
2000 1999
-------- --------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales....................................................... $4,434.5 $4,001.6
Operating income, before certain credits.................... $ 721.8 $ 653.7
Operating margins, before certain credits................... 16.3% 16.3%
Operating income, after certain credits..................... $ 733.0 $ 677.0
Operating margins, after certain credits.................... 16.5% 16.9%
</TABLE>
The 10.8% increase in sales in the nine months ended June 30, 2000 over the
nine months ended June 30, 1999 reflects primarily increased sales in the
worldwide electronic security services business and higher sales volume in fire
protection operations in North America and Australia. The increases were due
primarily to a higher volume of recurring service revenues and, to a lesser
extent, the effects of acquisitions
21
<PAGE>
in the security services business. These acquisitions included: Entergy,
acquired in January 1999, and Alarmguard, acquired in February 1999, both of
which were included in results for all of the nine months ended June 30, 2000
but only part of the nine months ended June 30, 1999. Excluding the impact of
Entergy and Alarmguard, the sales increase for the segment in the nine months
ended June 30, 2000 was an estimated 9.5%.
The 10.4% increase in operating income, before certain credits, in the nine
months ended June 30, 2000 over the nine months ended June 30, 1999 reflects
increased service volume in security operations in the United States and fire
protection businesses in North America and Australia. Operating margins, before
certain credits, were relatively consistent between periods, due to the increase
in operating income from increased sales volume offset by the costs of the
reorganization of its dealer program and internal sales force during the first
two quarters of fiscal 2000.
Operating margins, after certain credits, decreased due to a merger,
restructuring and other non-recurring credit of $11.2 million in the nine months
ended June 30, 2000 as compared to a restructuring and other non-recurring
credit of $23.3 million in the nine months ended June 30, 1999.
FLOW CONTROL PRODUCTS AND SERVICES
The following table sets forth sales and operating income and margins for
the Flow Control Products and Services segment:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
---------------------
2000 1999
-------- --------
(UNAUDITED)
($ IN MILLIONS)
<S> <C> <C>
Sales.................................................. $2,886.0 $2,595.0
Operating income....................................... $ 546.5 $ 429.7
Operating margins...................................... 18.9% 16.6%
</TABLE>
The 11.2% sales increase in the nine months ended June 30, 2000 over the
nine months ended June 30, 1999 reflects increased demand for valve products in
the Asia-Pacific regian and Europe, increased sales at Allied Tube and Conduit
and Earth Tech and the impact of acquisitions and divestitures. These
acquisitions included: Glynwed, acquired in March 1999; Central Sprinkler,
acquired in August 1999; AFC Cable, acquired in November 1999; and FCT, acquired
in February 2000. During August 1999, the Company completed the sale of certain
businesses within this segment, including The Mueller Company and portions of
Grinnell Supply Sales and Manufacturing. Excluding the impact of these
acquisitions and divestitures, sales increased an estimated 12.1%.
The 27.2% increase in operating income in the nine months ended June 30,
2000 over the nine months ended June 30, 1999 was primarily due to increased
volume at Allied Tube and Conduit and volume and improved margins in North
American and European valve operations and Earth Tech. Also, royalty and
licensing fee income from certain intellectual property associated with the
divested businesses offset a portion of the operating income lost from the
divestitures. Increased operating margins in the nine months ended June 30, 2000
resulted primarily from royalty and licensing fee income and margin improvements
in the North American and European valve operations and Earth Tech.
FOREIGN CURRENCY
Changes in foreign exchange rates during the nine months ended June 30, 2000
as compared to the nine months ended June 30, 1999 had a negative impact which
was not material to the Company's overall sales and operating income.
22
<PAGE>
CORPORATE EXPENSES
Corporate expenses were $144.8 million in the nine months ended June 30,
2000 compared to $65.3 million in the nine months ended June 30, 1999. This
increase was due principally to higher compensation expense under the Company's
equity-based incentive compensation plans and an increase in corporate staffing
and related costs to support and monitor the Company's expanding businesses and
operations.
AMORTIZATION OF GOODWILL
Amortization of goodwill, a non-cash charge, increased to $249.4 million in
the nine months ended June 30, 2000 from $142.3 million in the nine months ended
June 30, 1999, due to an increase in goodwill resulting from acquisitions.
INTEREST EXPENSE, NET
Interest expense, net, increased to $566.7 million in the nine months ended
June 30, 2000, compared to $346.5 million in the nine months ended June 30,
1999. The increase was due to higher average interest rates and higher average
debt balances resulting from borrowings to finance acquisitions and the
Company's stock repurchase program. The increase in borrowings was mitigated in
part by the use of free cash flow to pay for certain acquisitions.
EXTRAORDINARY ITEMS
Extraordinary items in the nine months ended June 30, 2000 and 1999 included
after-tax losses amounting to $0.2 million and $45.4 million, respectively,
related to the write-off of net unamortized deferred financing costs in
connection with the early extinguishment of debt.
INCOME TAX EXPENSE
The effective income tax rate, excluding the impact of merger, restructuring
and other non-recurring credits (charges) and charges for the impairment of
long-lived assets, was 25.0% during the nine months ended June 30, 2000, as
compared to 27.8% in the nine months ended June 30, 1999. The decrease in the
effective income tax rate was primarily due to higher earnings in tax
jurisdictions with lower income tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The following table shows the sources of the Company's cash flow from
operating activities and the use of a portion of that cash in the Company's
operations in the nine months ended June 30, 2000.
23
<PAGE>
Management refers to the net amount of cash generated from operating activities
less capital expenditures and dividends as "free cash flow."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30, 2000
-----------------
(UNAUDITED)
(IN MILLIONS)
<S> <C>
Operating income, before certain credits (charges).......... $ 4,322.7 (1)
Depreciation and amortization............................... 1,007.0 (2)
Net increase in deferred income taxes....................... 466.0
Less:
Net increase in working capital........................... (1,120.7)(3)
Interest expense, net..................................... (566.7)
Income tax expense........................................ (878.9)
Restructuring expenditures................................ (116.4)(4)
Other (net)............................................... 90.5
---------
Cash flow from operating activities......................... 3,203.5
Less:
Capital expenditures...................................... (1,273.8)
Dividends paid............................................ (64.5)
---------
Free cash flow.............................................. $ 1,865.2
=========
</TABLE>
------------------------
(1) This amount is the sum of the operating income of the four business segments
as set forth above, less certain corporate expenses, and is before merger,
restructuring and other non-recurring credits (charges), charges for the
impairment of long-lived assets and goodwill amortization.
(2) This amount is the sum of depreciation of tangible property
($859.5 million) and amortization of intangible assets other than goodwill
($147.5 million).
(3) This amount is net of $100.0 million received on the sale of accounts
receivable.
(4) This amount is cash paid out for merger, restructuring and other
non-recurring charges.
In addition, during the nine months ended June 30, 2000, the Company paid
out $401.1 million in cash that was charged against reserves established in
connection with acquisitions accounted for under the purchase accounting method.
This amount is included in "Acquisition of businesses, net of cash acquired" in
the Consolidated Statement of Cash Flows.
In the nine months ended June 30, 2000, the Company established
restructuring and other non-recurring reserves of $35.9 million, of which
$7.3 million is included in cost of sales, primarily related to the
restructuring activities in AMP's Brazilian operations and wireless
communications business, charges associated with USSC's suture business and the
exiting of USSC's interventional cardiology business. At September 30, 1999,
there existed merger, restructuring and other non-recurring reserves of
$399.3 million. During the nine months ended June 30, 2000, the Company paid out
$116.4 million in cash and incurred $50.5 million in non-cash charges that were
charged against these reserves. Also in the nine months ended June 30, 2000, the
Company determined that $117.2 million of merger, restructuring and other
non-recurring reserves established in prior years was not needed and recorded a
credit of $110.9 million to the merger, restructuring and other non-recurring
charges line item and a credit of $6.3 million to the cost of sales line item in
the Consolidated Statement of Operations. The changes in estimates of the
restructuring plan at AMP were attributable primarily to increased demand for
certain of AMP's products which was not anticipated at the time of the merger
and to recent acquisitions such as Siemens EC. Therefore, the Company has
determined not to close several facilities and not to terminate approximately
3,000 employees, the costs of which were provided for in previous AMP
restructuring plans. In addition, certain restructuring activities at AMP were
completed for amounts lower than originally anticipated. The changes in
estimates of the Company's 1997 restructuring plans and the USSC restructuring
plans were
24
<PAGE>
due primarily to the completion of activities for amounts lower than originally
recorded. At June 30, 2000, there remained $151.1 million of merger,
restructuring and other non-recurring reserves on the Company's Consolidated
Balance Sheet, of which $117.6 million is included in accrued expenses and other
current liabilities and $33.5 million is included in other long-term
liabilities.
During the nine months ended June 30, 2000, the Company made acquisitions at
an aggregate cost of $3,883.8 million. Of this amount, $2,997.7 million was paid
in cash (net of cash acquired), $671.4 million was paid in the form of Tyco
common shares, and the Company assumed $214.7 million in debt. In connection
with these acquisitions, the Company established purchase accounting reserves of
$318.4 million for transaction and integration costs. In addition, purchase
accounting liabilities of $112.0 million and a corresponding increase to
goodwill and deferred tax assets were recorded during the nine months ended
June 30, 2000 representing changes in estimates related to acquisitions
consummated prior to fiscal 2000, primarily the acquisition of Raychem in
August 1999. At the beginning of fiscal 2000, purchase accounting reserves were
$570.3 million as a result of purchase accounting transactions made in prior
years. During the nine months ended June 30, 2000, the Company paid out
$401.1 million in cash and incurred $12.7 million in non-cash charges against
the reserves established during and prior to this period. Also, in the nine
months ended June 30, 2000, the Company determined that $78.0 million of
purchase accounting reserves related to acquisitions prior to fiscal 2000 were
not needed and reversed that amount against goodwill. At June 30, 2000, there
remained $508.9 million in purchase accounting reserves on the Company's
Consolidated Balance Sheet, of which $394.8 million is included in accrued
expenses and other current liabilities and $114.1 million is included in other
long-term liabilities.
The net change in working capital, net of the effects of acquisitions and
divestitures, was an increase of $1,120.7 million in the nine months ended
June 30, 2000. These changes are set forth in detail in the Consolidated
Statement of Cash Flows. The significant operating changes in working capital
were a $598.0 million increase in inventories, a $552.9 million increase in
accounts receivable and contracts in process and a $299.8 million decrease in
accounts payable, accrued expenses and other current liabilities. The net
increase in working capital accounts is attributable to the higher level of
business activity as reflected in the increased sales over the prior period and
the payment of fiscal 1999 year-end bonuses. Increases in working capital have
occurred to fuel the organic growth of our businesses and to facilitate the
integration of acquired companies. Management focuses on maximizing the cash
flow from its operating businesses and attempts to keep the working capital
employed in the businesses to the minimum level required for efficient
operations.
In addition, during the nine months ended June 30, 2000, the Company
received proceeds of $144.4 million from the exercise of common share options
and used $1,188.1 million of cash to purchase its own common shares. In
November 1999, the Board of Directors authorized the Company to reacquire up to
20 million of its common shares in the open market, which was completed during
the quarter ended March 31, 2000. In January 2000, the Board of Directors
authorized the expenditure of up to an additional $2.0 billion to repurchase
shares of the Company, of which the Company has in excess of $1.6 billion
remaining as of June 30, 2000. The timing and actual amount of the repurchases
will be subject to market conditions and other factors.
The source of the cash used for acquisitions in fiscal 2000 was primarily an
increase in total debt and cash flows from operations. Goodwill and other
intangible assets were $15,346.5 million at June 30, 2000 compared to
$12,158.9 million at September 30, 1999. At June 30, 2000, the Company's total
debt was $12,584.8 million, as compared to $10,122.2 million at September 30,
1999. This increase was attributable principally to borrowings under the
Company's commercial paper program and net proceeds received of approximately
$565.9 million from the issuance of Euro denominated private placement notes in
April 2000. The net proceeds were used to repay borrowings under TIG's
commercial paper program. For further detail on debt activity, see Note 3 to the
Consolidated Financial Statements.
In February 2000, TIG renewed and increased the $3.4 billion portion of its
credit facility with a group of commercial banks, giving it the right to borrow
up to $4.5 billion until February 9, 2001, with the option
25
<PAGE>
to extend the facility for one additional year and to increase the $4.5 billion
up to $5.0 billion. The additional $0.5 billion portion of TIG's credit facility
continues to be available until February 12, 2003. In addition, TIG increased
its commercial paper program from $3.9 billion to $4.5 billion. The Company
plans to use the $4.5 billion portion of the credit facility principally to
fully support borrowings under its commercial paper program.
Shareholders' equity was $15,381.7 million, or $9.12 per share, at June 30,
2000, compared to $12,369.3 million, or $7.32 per share, at September 30, 1999.
The increase in shareholders' equity was due primarily to net income of
$2,609.8 million for the nine months ended June 30, 2000, the issuance of a
total of approximately 15.6 million common shares valued at $671.4 million for
the acquisitions of GSI and AFC Cable in November 1999 and an unrealized gain on
available for sale securities of $830.1 million. This increase was partially
offset by the Company's repurchase of its common shares discussed above. Total
debt as a percent of total capitalization (total debt and shareholders' equity)
was 45% at June 30, 2000 and September 30, 1999. Net debt (total debt less cash
and cash equivalents) as a percent of total capitalization was 41% at June 30,
2000 and 37% at September 30, 1999.
In January 2000, the Company announced that it had entered into an agreement
to sell its ADT Automotive business for cash proceeds of approximately
$1 billion. This transaction is expected to close prior to September 30, 2000.
As previously discussed, on July 3, 2000, the Company consummated its
acquisition of the Electronic OEM Business of Thomas & Betts for $750 million in
cash.
As previously discussed, on June 28, 2000, Tyco announced that one of its
subsidiaries had entered into a definitive agreement to acquire Mallinckrodt
Inc., a global healthcare company. Mallinckrodt shareholders are expected to
receive Tyco shares valued at approximately $47.50 for each share of
Mallinckrodt. The transaction is valued at approximately $4.2 billion and is
contingent upon customary regulatory review and approval by Mallinckrodt
shareholders. Mallinckrodt will be integrated within Tyco's Healthcare group.
Tyco intends to account for the acquisition as a purchase.
As previously discussed, on January 17, 2000, Tyco announced that TyCom
Ltd., its undersea fiber optics business, will design, build, install, operate
and maintain its own global undersea fiber optic communications network, to be
known as the TyCom Global Network. In August 2000, TyCom sold approximately
14 percent of its common shares in an initial public offering. Net proceeds to
TyCom from the offering were approximately $2.1 billion, which will be used
primarily toward the deployment of the TyCom Global Network.
BACKLOG
At June 30, 2000, the Company had a backlog of unfilled orders of
approximately $7,362.8 million, compared to a backlog of approximately
$7,581.1 million at September 30, 1999. Backlog by industry segment is as
follows (unaudited):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
-------- -------------
(IN MILLIONS)
<S> <C> <C>
Telecommunications and Electronics.................... $4,681.0 $4,974.5
Flow Control Products and Services.................... 1,444.9 1,516.5
Fire and Security Services............................ 1,121.8 986.6
Healthcare and Specialty Products..................... 115.1 103.5
-------- --------
$7,362.8 $7,581.1
======== ========
</TABLE>
Within the Telecommunications and Electronics segment, backlog decreased
primarily due to a decline in backlog at TyCom as the business shifts its focus
to the construction of the TyCom Global Network and due to the timing of
contracts. This decrease was offset partially by an increase in backlog at Tyco
Electronics, primarily resulting from the acquisition of Siemens EC. Within the
Flow Control
26
<PAGE>
Products and Services segment, backlog decreased primarily due to a decrease at
Earth Tech resulting from the timing of contracts. Within the Fire and Security
Services segment, backlog increased principally due to an increase in backlog at
the Company's fire protection operations in Australia and New Zealand. Within
the Healthcare and Specialty Products segment, the increase resulted principally
from an increase in demand for the products sold by Tyco Plastics and Adhesives.
ACCOUNTING AND TECHNICAL PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." This bulletin summarizes certain views of the SEC staff on applying
generally accepted accounting principles to revenue recognition in financial
statements. The SEC staff expressed its view that revenue is realized or
realizable and earned when all of the following criteria are met: persuasive
evidence of an arrangement exists; delivery has occurred or services have been
rendered; the seller's price to the buyer is fixed or determinable; and
collectability is reasonably assured. The Company has not yet completed the
analysis to determine the effect that SAB 101 will have on its financial
statements.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues clarifies
the following: the definition of an employee for purposes of applying APB
Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. The Company
does not expect the application of FIN 44 to have a material impact on the
Company's financial position or results of operations.
FORWARD LOOKING INFORMATION
Certain statements in this report are "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. All forward
looking statements involve risks and uncertainties. In particular, any statement
contained herein, in press releases, written statements or other documents filed
with the Securities and Exchange Commission, or in the Company's communications
and discussions with investors and analysts in the normal course of business
through meetings, phone calls and conference calls, regarding the consummation
and benefits of future acquisitions, as well as expectations with respect to
future sales, earnings, cash flows, operating efficiencies, product expansion,
backlog, financings and share repurchases, are subject to known and unknown
risks, uncertainties and contingencies, many of which are beyond the control of
the Company, which may cause actual results, performance or achievements to
differ materially from anticipated results, performances or achievements.
Factors that might affect such forward looking statements include, among other
things, overall economic and business conditions; the demand for the Company's
goods and services; competitive factors in the industries in which the Company
competes; changes in government regulation; changes in tax requirements
(including tax rate changes, new tax laws and revised tax law interpretations);
results of litigation; interest rate fluctuations and other capital market
conditions, including foreign currency rate fluctuations; economic and political
conditions in international markets, including governmental changes and
restrictions on the ability to transfer capital across borders; the timing of
construction and the successful operation of the TyCom Global Network; the
ability to achieve anticipated synergies and other cost savings in connection
with acquisitions; and the timing, impact and other uncertainties of future
acquisitions.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk from changes in interest rates,
foreign currency exchange rates and commodity prices has not changed materially
from its exposure as of the most recent year ended September 30, 1999.
27
<PAGE>
PART II--OTHER INFORMATION
ITEM 1--LEGAL PROCEEDINGS
SEC INQUIRY
As previously reported in a Current Report on Form 8-K filed on July 14,
2000, Tyco announced that it had been advised that the informal inquiry, which
was being conducted by the staff of the Division of Enforcement of the
Securities and Exchange Commission since December 1999, had been terminated.
SECURITIES LITIGATION
As previously reported, lawsuits that have been filed against the Company
and certain directors and officers of the Company with respect to alleged
violations of securities laws ("Securities Litigation") have now been
consolidated in the United States District Court for the District of New
Hampshire, for pretrial proceedings. Applications to serve as lead plaintiff and
for retention of lead counsel are currently pending before the District Court,
and the District Court has set a schedule for serving a further amended
complaint and for briefing a motion to dismiss following selection of a lead
plaintiff and retention of lead counsel.
IDT LITIGATION
As previously reported,on January 31, 2000, a complaint was filed in the
United States District Court for the District of New Jersey asserting claims
against two subsidiaries of the Company arising out of negotiations conducted by
the Company's Luxembourg subsidiary, Tyco Group S.a.r.l. ("Tyco Group"), with a
Belgian corporation, IDT Europe B.V.B.A., concerning the possible formation of a
joint venture for the development of an undersea fiber optic telecommunications
system. The plaintiff alleged that Tyco Group breached a Memorandum of
Understanding dated November 9, 1999, (which expired in December 1999), and
alleged implied covenants of good faith and fair dealing, in various ways,
including by failing to negotiate in good faith to complete and finalize various
agreements relating to the proposed joint venture. The plaintiff also alleged
that Tyco Group tortiously interfered with another agreement (the "Instruction
to Proceed"), and with contractual relations, business relations and fiduciary
duties relating to that agreement, which plaintiff claims it had with Tyco
Submarine Systems, Ltd. ("TSSL"), the other Company subsidiary named in the
complaint. Similar breach of contract and breach of implied covenant of good
faith and fair dealing claims are asserted against TSSL in connection with the
Instruction to Proceed. Plaintiff sought, among other relief, such as attorneys'
fees and costs, specific performance, compensatory damages of $1 billion,
punitive damages of $3 billion and temporary and permanent injunctive relief.
Tyco Group and TSSL filed a motion to dismiss the complaint on the ground that
the court lacks subject matter jurisdiction. Plaintiffs opposed that motion. In
an order dated June 5, 2000, the United States District Court for the District
Court of New Jersey granted the motion to dismiss.
On March 24, 2000, Tyco Group, TSSL, Tyco International Ltd., Tyco
International (US) Inc., and TyCom Ltd. filed a complaint in the Supreme Court
of the State of New York, County of New York, asserting claims against IDT
Europe B.V.B.A. and IDT Corporation (collectively, "IDT"). The complaint alleges
that IDT filed a baseless lawsuit in federal court in New Jersey seeking to
enforce non-binding provisions of the Memorandum of Understanding dated
November 9, 1999 and the Instruction to Proceed, improperly disclosed
confidential information to the press, and otherwise engaged in a pattern of
conduct with the purpose and effect of obstructing efforts to build and finance
the TyCom Global Network. The complaint asserts five causes of action, including
breach of contract and tortious interference with both contract and prospective
business relations, and demands compensatory damages of at least $1 billion,
punitive damages, and declaratory and injunctive relief. IDT moved to dismiss
the complaint. Tyco Group and the other plaintiffs opposed that motion. On
June 19, 2000, the court rendered a decision denying IDT
28
<PAGE>
Corporation's motion to dismiss and referring IDT Europe B.V.B.A.'s motion to
dismiss to a referee to hear and report with recommendations.
On June 13, 2000, IDT Europe B.V.B.A. filed a complaint in the Superior
Court of New Jersey, Law Division, Morris County, against Tyco Group, TSSL, Tyco
International Ltd., and Tyco International (US) Inc. The complaint makes factual
allegations similar to those previously asserted in the federal complaint in the
United States District Court for the District of New Jersey, along with
additional allegations regarding, among other things, a purported agreement
between TSSL and Global Crossing. The complaint asserts claims for specific
performance, breach of contract and breach of an implied covenant of good faith
and fair dealing against Tyco Group and TSSL and for breach of fiduciary duty
against Tyco Group. The complaint also asserts claims for tortious interference
with contract, business relations and prospective business relations against
Tyco Group and adds Tyco International Ltd. and Tyco International (US) Inc. as
defendants on these claims. Additionally, the complaint asserts a claim for
fraudulent inducement against Tyco Group and TSSL. The plaintiff seeks, among
other relief such as attorneys' fees and costs, specific performance,
compensatory damages of $1 billion, punitive damages of $3 billion and
injunctive relief. On July 20, 2000, defendants filed a motion to dismiss the
action or, in the alternative, to stay the action on comity grounds pending the
outcome of the action in New York Supreme Court. The Company's subsidiaries
believe that the claims asserted are without merit and intend to defend against
them vigorously.
GLOBAL CROSSING LITIGATION
On May 22, 2000, Global Crossing Ltd. ("GCL") and its subsidiary, South
American Crossing (Subsea) Ltd. ("SACS") filed a complaint against TSSL in the
United States District Court for the Southern District of New York. The
complaint alleges that TSSL misappropriated trade secrets and other confidential
information in connection with plaintiffs' development of a South American
subsea cable system; fraudulently induced SACS to enter into a development and
construction agreement relating to that system; fraudulently concealed
negotiations concerning the development of a competing South American subsea
cable system while simultaneously negotiating with plaintiffs; breached alleged
agreements with GCL by misusing and improperly divulging GCL's confidential
information, by failing to inform GCL of TSSL's alleged opportunities to bid on
or develop competing subsea cable systems and by investing in the Pacific
segment of the TyCom Global Network ("TGN") that will compete with GCL in the
Pacific region; and defamed plaintiff SACS by informing a potential customer
that SACS had defaulted on its contract with TSSL and that plaintiffs' system
would not be completed on schedule. Plaintiffs seek damages, including punitive
damages, in excess of $1 billion, as well as a declaration that SAC's
construction and development agreement with TSSL is void due to TSSL's alleged
fraud and injunctive relief barring TSSL from further claimed misappropriation
of plaintiffs' trade secrets and confidential information.
On June 13, 2000, TSSL answered the complaint, denying its material
allegations and asserting defenses to plaintiffs' claims. Additionally, TSSL
asserted counterclaims that plaintiff SACS, at the instance of GCL, breached the
parties' contract relating to the construction and development of a South
American subsea cable system by refusing to pay amounts due under the contract's
termination for convenience provisions, by refusing to pay amounts due and owing
under the terms of the contract, by wrongfully preventing TSSL from performing
and by breaching its obligations of good faith and fair dealing. TSSL further
asserted that plaintiffs breached the contract by wrongfully disclosing and
misusing confidential information belonging to TSSL. TSSL seeks relief that
includes damages of not less than $150 million and declaratory relief.
On July 5, 2000, plaintiffs answered TSSL's counterclaims. On July 25, 2000
the court set February 28, 2001, as the date for completion of all fact
discovery.
29
<PAGE>
On August 7, 2000, TSSL served a motion for judgment on the pleadings with
respect to plaintiffs' claims for defamation, fraudulent inducement, fraudulent
concealment and breach of the alleged agreements to inform GCL of opportunities
to bid on or develop competing subsea cable systems and to refrain from
investing in the Pacific segment of TGN.
GLOBAL CROSSING ARBITRATION
On May 22, 2000, Atlantic Crossing Ltd., and various foreign subsidiaries of
GCL filed a claim against TSSL under the international rules of the American
Arbitration Association arising from three agreements relating to Atlantic
Crossing-1 ("AC-1"), a subsea transatlantic cable system constructed by TSSL.
Claimants asserted that TSSL breached those agreements by negligently routing
and installing a segment of AC-1, by failing to make necessary repairs, by
presenting improper invoices and demanding payments to which claimants assert
TSSL was not entitled, by promoting competing systems and acting as selling
agent for AC-1 while acting as selling agent for another competing cable system
and by misappropriating AC-1's customer database. Claimants seek unspecified
monetary damages, including the costs necessary to construct a back-up system
for the allegedly defective segment of AC-1. Claimants also seek a declaration
that the agreements are terminated and that various invoices and payments
arising under them are not owed to TSSL, as well as other relief, including the
return of allegedly misappropriated intellectual property.
On June 22, 2000, TSSL responded to claimants' notice of arbitration,
asserting that its invoices were proper, that the claimants are obligated to
make payments to TSSL that they have improperly refused to make, and that TSSL
has not misappropriated any proprietary information from claimants.
Additionally, TSSL asserted counterclaims that claimants breached the parties'
agreements by refusing to pay amounts due and owing under each of the three
contracts and by refusing to pay sales commissions due to TSSL on certain sales
of capacity. In addition to the denial of all relief sought by claimants in
their notice of arbitration, TSSL seeks compensatory damages in excess of $195
million, an accounting of moneys received for commissionable sales of capacity,
and other relief.
On July 24, 2000, claimants responded to TSSL's arbitration counterclaims,
asserting various defenses. Each party has nominated an arbitrator, and on
August 4, 2000, the party-nominated arbitrators agreed on a third arbitrator to
serve as chairman of the arbitral panel.
TSSL management believes that the claims that have been asserted by GCL and
its affiliates in the federal litigation and the arbitration proceedings are
without merit, and it intends to defend against those claims, and to prosecute
its counterclaims with vigor.
Tyco International Ltd. has agreed to indemnify TSSL and TyCom against
certain losses and expenses arising out of the pending litigation and
arbitration proceedings brought against TSSL by GCL and certain of its
affiliates. Pursuant to that agreement, Tyco has the right to control the
litigation and arbitration proceedings. Tyco's indemnification obligations under
that agreement exclude certain losses and expenses arising out of these
litigation and arbitration proceedings, for which TyCom and TSSL will bear the
risks, including losses and expenses arising out of the award of any injunctive
relief.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2000 Annual General Meeting of Shareholders ("the Meeting") of the
Company was held on April 19, 2000. All Company proposals submitted at the
Meeting were passed and all shareholder proposals were not passed, as described
below. The following is a brief description of each matter voted upon at the
Meeting.
COMPANY PROPOSAL 1. To elect the Board of Directors of the Company:
30
<PAGE>
The following is a tabulation of the votes submitted in respect of
Company Proposal 1; proxy votes giving discretion to the chairman of the
Meeting have been included in the "Number of Votes For" column.
<TABLE>
<CAPTION>
NUMBER OF VOTES
NUMBER OF AGAINST OR NUMBER OF
VOTES FOR WITHHELD ABSTENTIONS
------------- --------------- -----------
<S> <C> <C> <C>
L. Dennis Kozlowski.................................. 1,467,121,348 8,297,095 --
Michael A. Ashcroft.................................. 1,467,027,585 8,390,858 --
Joshua M. Berman..................................... 1,467,129,424 8,289,019 --
Richard S. Bodman.................................... 1,467,144,147 8,274,296 --
John F. Fort, III.................................... 1,467,143,835 8,274,608 --
Stephen W. Foss...................................... 1,467,144,262 8,274,181 --
Philip M. Hampton.................................... 1,467,125,829 8,292,614 --
Wendy E. Lane........................................ 1,467,125,492 8,292,951 --
James S. Pasman, Jr.................................. 1,467,139,036 8,279,407 --
W. Peter Slusser..................................... 1,467,106,677 8,311,766 --
Frank E. Walsh, Jr................................... 1,467,142,880 8,275,563 --
</TABLE>
COMPANY PROPOSAL 2. To re-appoint PricewaterhouseCoopers as the independent
auditors and to authorize the Board of Directors to fix the auditors'
remuneration:
A total of 1,468,208,856 shares were voted for and 3,109,730 shares were
voted against the re-appointment and authorization. There were 4,099,857
abstentions.
SHAREHOLDER PROPOSAL 1. To consider a shareholder proposal concerning
Polyvinyl chloride (PVC) plastic use in the manufacture of medical supplies:
A total of 38,376,219 shares were voted for and 1,159,176,538 shares
were voted against the shareholder proposal. There were 44,456,715
abstentions and 233,408,971 broker non-votes.
SHAREHOLDER PROPOSAL 2. To consider a shareholder proposal concerning
Polyvinyl chloride (PVC) plastic use in the manufacture of medical supplies:
A total of 37,498,108 shares were voted for and 1,159,251,608 shares
were voted against the shareholder proposal. There were 45,259,756
abstentions and 233,408,971 broker non-votes.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
none
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<S> <C>
TYCO INTERNATIONAL LTD.
/S/ MARK H. SWARTZ
------------------------------------------------
Mark H. Swartz
Executive Vice President and Chief Financial
Officer
(Principal Accounting and Financial Officer)
</TABLE>
Date: August 14, 2000
32
