ADT 1999 Annual Report Download

Download and view the complete annual report

Please find the complete 1999 ADT annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 72

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

Tyco International Ltd. 1999 Annual Report
The Zurich Centre
2nd Floor
90 Pitts Bay Road
Pembroke HM08
Bermuda
http://www.tyco.com
Tyco International Ltd. 1999 Annual Report

Table of contents

  • Page 1
    Ty co Int nn aa t ilo L nt ad l . L1 td 19 Aa nln R ua Rre Ty c o In ter ae tr io 9. 99 A9n9n u e lp o tp o r t http://www.tyco.com The Zurich Centre 90 Pitts Bay Road 2nd Floor Pembroke HM08 Bermuda

  • Page 2
    Ty c o I n t e r n a t i o n a l L t d . 19 99 Annual Report Get to know

  • Page 3
    ...'s largest supplier of electronic and electrical connectors WE ARE THE WORLD'S LARGEST INSTALLER AND SERVICER OF FIRE AND SECURITY SYSTEMS we are the world's largest producer...0 0 0 EMPLOYEES IN OVER 80 COUNTRIES AROUND THE we are a global leader in disposable health care we achieved sales of over ...

  • Page 4
    ... of high-performance electrical components, created the nucleus for the formation of Tyco Electronics Corporation, the world's largest supplier of passive electronic components. The diverse capabilities of AMP and Raychem, combined with the soaring growth of our telecommunications business, means...

  • Page 5

  • Page 6
    ..., New Jersey, Tyco engineers concentrate on increasing the parameters of transoceanic systems that will be implemented in future years. Tyco's commitment to advanced research is unique in the undersea fiber optic telecommunications cable business. a $900 million world leader in automotive and...

  • Page 7
    ...the world, nearly every automobile contains AMP products. AMP connectors are crucial to the world's most sophisticated automotive systems, such as autonomous, laser-guided cruise control, computerized navigation systems and electronically controlled seats. undersea fiber optic company in the world.

  • Page 8
    ... U N D - C A R E D R E SSINGS AND we are now able to offer a much broader product line to BANDAGES group purchasing organizations and integrated health SYRINGES AND NEEDLES I NCO N T I N E N C E P R ODUCT S care networks, key health care customers where our E LE C T R O S U R G I C A L INST RUM ENT...

  • Page 9
    Tyco is one of the world's largest global health care product providers, with leadership positions in wound-care dressings and bandages, minimally-invasive surgical instruments, electrosurgical instrumentation, syringes, catheters, sutures, incontinence products and sales have risen tenfold to $1.4...

  • Page 10

  • Page 11
    ...during on-ground aircraft paint and maintenance operations. geographical scope and effectiveness. We are taking advantage of substantial growth outside the United States, and international sales now account for more than 35 percent of our total health care business. Our position in the fast-growing...

  • Page 12
    ... to expand our business in Asia and Latin America. ADT won important new commercial accounts, significantly increasing its security business at major banks and adding contracts to provide electronic security at six of the busiest airports in the United States: O'Hare (Chicago), Dulles and Reagan...

  • Page 13
    ... largest electronic security company. Industry innovator ADT offers motion detectors, child alert systems (parents can be notified when a child arrives home safely), and monitoring systems for heating, ventilation and air-conditioning equipment. ADT never sleeps-so you can, soundly and safely. ADT...

  • Page 14
    ... Summer Olympics-Tyco was selected to supply a $26million multi-service package of fire protection and suppression systems, fire doors and extinguishers, as well as heating, ventilation and geographic expansion, and increased the significance of our maintenance and inspection revenue, as planned...

  • Page 15
    for a Kimberly-Clark plant in Mexico; we provided the fire protection system for the Inchon Airport in South Korea; we completely upgraded fire protection at the General Motors Global Headquarters in Detroit; we installed a new fire detection and sprinkler system for Heineken's 20building brewery in...

  • Page 16
    ... parts of the world. Tyco Flow Control also acquired Central Sprinkler Company, a major manufacturer of fire sprinkler products throughout the world. Recurring revenues rose sharply, as we signed new contracts to inspect and recondition valves for some of our largest industrial customers. Our fast...

  • Page 17
    ... Gardner, Massachusetts, Tyco's Earth Tech division designed and built-and currently operates - a municipal wastewater treatment plant and is now constructing a new water treatment facility for the town. Earth Tech employees routinely test wastewater to be certain the treatment process is effective...

  • Page 18
    ... a water treatment plant, eventually increasing its processing capacity from 300 to 4,000 liters per second. As we expanded our businesses, we also exited some, divesting Mueller Company, which manufactures fire hydrants, municipal water valves and gas products. We also sold Grinnell Supply Sales...

  • Page 19
    ... construction and were too cyclical for today's Tyco, while Grinnell Supply Sales primarily sold commodity products in an increasingly competitive marketplace. The proceeds from these divestitures have been redeployed into other areas of Tyco to generate greater returns for our shareholders. 17

  • Page 20
    ... an increase in growth in the higher-margin service components of our business. Where growth, margin improvement and cost reduction are concerned, Tyco has no finish line. This model has produced consistently strong results for well over a decade. It is extremely important to be the low-cost, high...

  • Page 21
    ...two highly-ranked companies in the industry. *We expanded our e-commerce operations. Tyco Healthcare now does much of its purchasing online and our ADT LION Web site offers interactive, electronic automobile auctions. In October, ADT Security launched an e-commerce site allowing customers to design...

  • Page 22
    ... their business than we do at the corporate level. Our role is to encourage them to buy new equipment and develop new systems to improve productivity, and then evaluate performance based on strict return-on-investment hurdles. Cutting costs is not the same as cutting corners. When ADT Security makes...

  • Page 23
    ... added three cable ships to our fleet, which will help meet increasing maintenance demand. We recently introduced a unique, new undersea cable maintenance program, guaranteeing a fast response if a network is ever disabled. We have already signed two contracts worth $225 million over five years...

  • Page 24
    ... last year. Sales for the year grew by 20 percent to $3.5 billion from $2.9 billion in 1998. Tyco Flow Control Products had a strong year, led by international expansion and increasing service revenue. We saw growing demand for valve reconditioning in the United Kingdom, the Asia/Pacific region...

  • Page 25
    ... by expanding product offerings in existing geographies and entering new markets in Australia, New Zealand, South Africa and Sweden. We are now much bigger and considerably more diversified geographically than we were just a year ago. Globally, the water and wastewater treatment and environmental...

  • Page 26
    ... Specialty Products Healthcare and Specialty Products Fire and Security Services Fire and Security Services Fire and Security Services Flow Control Products Flow Control Products North America & the Caribbean Bahamas Barbados Canada Dominican Republic Haiti Jamaica Mexico Puerto Rico Trinidad...

  • Page 27
    ... 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. In September 1997, the Company changed its fiscal year end from December...

  • Page 28
    ... sales increased an estimated 1.9%. The Telecommunications and Electronics segment also experienced organic growth in sales in Fiscal 1999 and Fiscal 1998 at TSSL and the Tyco Printed Circuit Group. This growth was offset in part by decreased sales at AMP. Prior to the Company's merger with AMP, AMP...

  • Page 29
    ... • designs, installs and services a broad line of fire detection, prevention and suppression systems worldwide; • provides electronic security installation and monitoring services; and • manufactures and services fire extinguishers and related products. The following table sets forth sales and...

  • Page 30
    ... compensation expense under the Company's equity-based, incentive compensation plans due in part to an increase in the market value of the Company's stock price in Fiscal 1999, and an increase in corporate staffing to support and monitor the Company's expanding businesses and operations. ($ in...

  • Page 31
    ... to the Company's tender offers for debt and the write-off of net unamortized deferred financing costs related to the LYONs. Further details are provided in Notes 4 and 13 to the Consolidated Financial Statements. set forth above, less certain corporate expenses, and is before merger, restructuring...

  • Page 32
    ....0 million related to the purchase of leased property in connection with the merger with USSC. The Company continues to fund capital expenditures to improve the cost structure of its businesses, to invest in new processes and technology, and to maintain high quality production standards. The level...

  • Page 33
    ... Services segment, backlog increased principally due to an increase in backlog at the Company's worldwide security and European fire protection businesses. Within the Healthcare and Specialty Products segment, the increase resulted principally from an increase in demand for the products sold by Tyco...

  • Page 34
    ... interest rates, including long-term investments, debt obligations, interest rate swaps and currency swaps. For long-term investments, the table presents cash flows of principal payments (in millions) related to a subordinated, non-collateralized zero coupon loan note, based on the amortized cost of...

  • Page 35
    ... options. For long-term investments, the table presents cash flows of principal payments (in millions) related to a subordinated, non-collateralized zero coupon loan note, based on the amortized cost of the investment as of September 30, 1999, and the associated fair value interest rate discount...

  • Page 36
    ... resources or by installing new systems, and by monitoring supplier, customer and other third-party readiness. Review of the systems affecting the Company is progressing and the Company is continuing its implementation strategy. The costs of the Company's Year 2000 program to date have not been...

  • Page 37
    ... 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...

  • Page 38
    ... in-process research and development related to the acquisition of the submarine systems business of AT&T Corp. (5) Prior to their respective mergers, ADT, Keystone, USSC and AMP had December 31 fiscal year ends and Former Tyco had a June 30 fiscal year end. The selected consolidated financial data...

  • Page 39
    ... Contracts in process - billings in excess of costs Deferred revenue Income taxes Deferred income taxes Total current liabilities Long-Term Debt Other Long-Term Liabilities Deferred Income Taxes Total Liabilities Commitments and Contingencies (Note 17) Shareholders' Equity: Preference shares...

  • Page 40
    ... 30, 1997 Year Ended September 30, (in millions, except per share data) 1999 1998 Net Sales Cost of sales Selling, general and administrative expenses Merger, restructuring and other non-recurring charges Charge for the impairment of long-lived assets Write-off of purchased in-process research and...

  • Page 41
    ...marketable securities Minimum pension liability adjustment Total comprehensive loss Effect of ASH's excluded activity Liquidation of ASH's ESOP Sale of common shares Exchange of Liquid Yield Option Notes Dividends Restricted stock grants, cancellations and tax benefits Warrants and options exercised...

  • Page 42
    ... issuance of public debt Repayment of long-term debt, including debt tenders Proceeds from long-term debt Proceeds from sale of common shares Proceeds from exercise of options and warrants Dividends paid Purchase of treasury shares Other Net cash provided by financing activities Net increase in cash...

  • Page 43
    ... Services segment: • designs, installs and services a broad line of fire detection, prevention and suppression systems worldwide; • provides electronic security installation and monitoring services; and • manufactures and services fire extinguishers and related products. Change in Year...

  • Page 44
    ... of the related assets as follows: Buildings and related improvements Leasehold improvements Subscriber systems Other plant, machinery, equipment and furniture and fixtures 5 to 50 years Remaining term of the lease 10 to 14 years 2 to 25 years Long-Lived Assets The Company periodically evaluates...

  • Page 45
    ... with current year presentation. Stock Splits Per share amounts and share data have been retroactively restated to give effect to the reverse stock split effected in connection with the merger of ADT and Former Tyco referred to in Note 2, and the two-forone stock splits distributed on October...

  • Page 46
    ...four shares after giving effect to the subsequent stock splits) of the Company's common stock for each share of the Former Tyco common stock outstanding. On a post-split basis, a total of approximately 673.6 million Tyco common shares were issued to the shareholders of Former Tyco in the merger. (in...

  • Page 47
    ...cash was paid during the year for purchase accounting liabilities related to current and prior years' acquisitions. The cash portions of the acquisition costs were funded utilizing cash on hand, the issuance of long-term debt and borrowings under the Company's commercial paper program. Each of these...

  • Page 48
    ... future royalties equal to a percentage of net sales of the businesses sold. The Company also granted an option to the buyer to purchase certain intellectual property in the future at the then fair market value. The following unaudited pro forma data summarize the results of operations for the...

  • Page 49
    ... 31, 2008 at a price per share of $100,000, plus unpaid dividends, adjusted for certain increases in the value of Tyco's stock, as defined. Fiscal 1997 In addition to the mergers discussed in Note 2, in Fiscal 1997 the Company acquired companies in each of its business segments for an aggregate of...

  • Page 50
    ... guaranteed by the Company. Proceeds from the sale of the notes are used for working capital and other corporate purposes. TIG is required to maintain an available unused balance under its bank credit agreement sufficient to support amounts outstanding under the commercial paper program...

  • Page 51
    ... financing lease obligation relates to USSC's European headquarters office building and distribution center complex in Elancourt, France. The French franc denominated financing lease requires principal amortization in varying amounts over the eleven year term of the lease with a balloon payment of...

  • Page 52
    ..., customers and geographic areas. None of the Company's financial instruments with off-balance sheet risk would result in a significant loss to the Company if a counterparty failed to perform according to the terms of its agreement. The Company does not require collateral or other security to...

  • Page 53
    ... merger per share exchange ratios of 0.48726, 0.43, 0.7606 and 0.7507, respectively (1.94904, 1.72, 1.5212 and 1.5014, respectively, after giving effect to the subsequent stock splits). 8. Key Employee Loan Program Loans are made to employees of the Company under the Former Tyco 1983 Key Employee...

  • Page 54
    ... October 1998, a broad-based option plan for non-officer employees, the Tyco Long-Term Incentive Plan II ("LTIP II"), was approved by the Board of Directors. The Company has reserved 50.0 million common shares for issuance under the LTIP II. The terms and conditions of this plan are similar to the...

  • Page 55
    ...-Scholes option-pricing model. The following weighted average assumptions were used for Fiscal 1999: Tyco AMP Stock-Based Compensation SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") allows companies to measure compensation cost in connection with executive share option plans...

  • Page 56
    ... used for Fiscal 1997: Former Tyco Tyco Inbrand USSC AMP Expected stock price volatility Risk free interest rate Expected annual dividend yield per share Expected life of options 22% 6.07% $0.05 5 years 22% 6.34% $0.05 5 years 55% 6.26% - 6.4 years 34% 6.45% $0.11 3.8 years 25% 6.49% 1.25...

  • Page 57
    ... business with that of Former Tyco. Telecommunications and Electronics Healthcare and Specialty Products Fire and Security Services Flow Control Products $259.0 76.0 - - $335.0 $- - - - $- $ - - 118.8 29.6 $148.4 Effective January 1, 1996, the Company adopted Statement of Financial Accounting...

  • Page 58
    ... Electronics Healthcare and Specialty Products Fire and Security Services Flow Control Products $ 841.8(1) 431.4 (11.5) - $ 1,261.7 $ 164.4 92.5 - - $ 256.9 $ - 161.4 530.3 256.2 $ 947.9 (1) Includes $78.9 million related to the write-down of inventory which is included in cost of sales. 1999...

  • Page 59
    ..., printing, accounting, financial advisory services and other direct expenses related to the AMP merger; $78.9 million related to the write-down of inventory used in AMP's operations which is included in cost of sales; lease termination costs following the ties Number of Employees Other merger of...

  • Page 60
    ... the consolidation of sales and service offices, electronic security system monitoring centers, warehouses and other locations; the costs of disposing of excess equipment and other assets of $133.5 million; and other costs of $220.0 million relating to the consolidation of certain product lines, the...

  • Page 61
    ... of operations or liquidity. Voluntary Early Retirement Programs In the fourth quarter of Fiscal 1998, AMP offered enhanced retirement benefits to targeted groups of employees. The cost of these benefits totaled $138.3 million and was recorded as part of AMP's fourth quarter restructuring charge...

  • Page 62
    ... Special termination benefits Currency translation adjustment Benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Employee contributions Acquisitions Divestitures Plan settlements Benefits...

  • Page 63
    ... number of multi-employer defined benefit plans on behalf of certain employees. Pension expense related to multi-employer plans was $7.5 million, $1.7 million and $1.5 million for Fiscal 1999, Fiscal 1998 and Fiscal 1997, respectively. AMP provides post-retirement health care coverage to qualifying...

  • Page 64
    ... in cost of sales, and charges for the impairment of longlived assets of $259.0 million primarily related to the merger with AMP and AMP's profit improvement plan. Net sales: Telecommunications and Electronics Healthcare and Specialty Products Fire and Security Services Flow Control Products...

  • Page 65
    ... certain research projects of non-core businesses at USSC, as well as the consolidation or closing of selected research and development facilities of AMP and USSC in connection with their integration into the Company during Fiscal 1999. Net sales: Americas (primarily U.S.) Europe Asia-Pacific Total...

  • Page 66
    ... primarily related to business exit costs in USSC's operations and charges of $185.8 million related to AMP's profit improvement plan. (6) Extraordinary items relate principally to the Company's debt tender offers and the write off of net unamortized deferred refinancing costs relating to the early...

  • Page 67
    ... 1999 1998 fees in defending against AlliedSignal's bid, relating primarily to legal, public relations and financial consulting costs. In April 1999, AlliedSignal converted its AMP stock into Tyco common shares and reached a settlement with Tyco and AMP, under which AlliedSignal paid $50 million to...

  • Page 68
    ... flows for the years ended September 30, 1999 and 1998, and the nine months ended September 30, 1997, in conformity with accounting principles generally accepted in the United States. These consolidated financial statements are the responsibility of the Company's management; our responsibility is...

  • Page 69
    ... on the New York Stock Exchange ("NYSE"), the London Stock Exchange and the Bermuda Stock Exchange. The following table sets forth the high and low sales prices per share of Tyco common shares as reported in the NYSE Composite Transaction Tape and the dividends paid on Tyco common shares, for the...

  • Page 70
    directors, of ficers and key management Directors L. Dennis Kozlowski Chairman of the Board Corporate Officers L. Dennis Kozlowski President Chief Executive Officer Key Operating Management Jerry R. Boggess President - Tyco Fire and Security Services Michael A. Ashcroft Chairman Carlisle Holdings...

  • Page 71
    ...-7330 E-mail: [email protected] Corporate News and Information Stay abreast of the latest Company news by visiting our Web site at www.tyco.com or use our corporate news and information service to obtain a delayed stock quote, listen to press releases and the latest earnings and dividend...

  • Page 72
    ...think that Tyco should be a household name - synonymous with quality, leadership and a commitment to build shareholder value. We think Tyco is a company worth knowing. Telecommunications and Electronics Fire and Security Services 12 34 Healthcare and Specialty Products Flow Control Products 00