ADT 1999 Annual Report Download - page 20

To Our Shareholders
Fiscal 1999 was an excellent year for
Tyco International. We exceeded our corporate
goals and continued to build on our recurring
revenue base and forge strong partnerships with
our customers. We also acquired many fine
companies that will provide an immediate boost to
our already strong profit and cash flow and become
an additional source of sustainable growth well into
the future.
For the sixth consecutive year, we
increased revenues and earnings substantially.
Revenues rose 18 percent to $22.5 billion and earn-
ings grew $1.15 billion to $2.56 billion, an 82 per-
cent increase over the prior year.
Fiscal 2000, which began for Tyco on
October 1, 1999, is off to a good start. We expect
sales to exceed $26 billion and free cash flow—an
important measure of our underlying business per-
formance—to nearly double, from $1.7 billion to
over $3.0 billion. This free cash flow figure is after
the reinvestment of $1.6 billion in capital expendi-
tures to strengthen our position in each of our four
business areas.
Today, Tyco is healthier than ever. We are a
leader in businesses accounting for 90 percent of
our revenues. These are great businesses, whose
strong secular growth benefits from powerful global
trends. The extraordinary worldwide buildout of the
Internet creates demand for our fiber optic cable
solutions and maintenance expertise. The
increased use of electronics in all types of industri-
al and consumer products, particularly in telecom-
munications, spurs sales of our sophisticated elec-
tronics products. Demographics and long-term con-
tracts are fueling the growth of our health care busi-
ness. New infrastructure projects around the world,
often in emerging economies, drive sales of our
industrial valves and pipes.
Global growth of the middle class stimulates new
installations of our home security systems.
We aim for sustained earnings growth in
excess of 20 percent, powered by increased
revenues and margin expansion. We achieve
this by: the elimination of
overhead and burdensome
bureaucracy; economies of
scale; a relentless focus
on costs, productivity
improvements and quality;
and an increase in growth
in the higher-margin ser-
vice 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-quality provider of solutions. In virtually all of
our markets, we are already the low-cost producer,
or soon will be. Manufacturing excellence is a cor-
nerstone of our growth strategy. As the low-cost
producer, we can continue to expand our position in
the marketplace.
I don’t want to make this seem easier than it
is; it is far from easy. Attempting to increase mar-
gins, for instance, is a constant effort.
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L. Dennis Kozlowski,
Chairman of the Board and
Chief Executive Officer