ADT 2000 Annual Report Download

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21
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72,700
91368160
42
3
,
016
,
9
TYCO INTERNATIONAL LTD. ANNUAL REPORT 2000
28,931,933
factors
growth
485,
5
111,646,00
0
128,713
6

Table of contents

  • Page 1
    3,016,9 28,931,933 growth factors TYCO I N TERN ATI ON AL LTD. AN N U AL REPORT 2 0 0 0 111,646,000 42 128,713 72,700 6 485,5 218

  • Page 2
    ...variety of industrial, municipal and commercial markets. Tyco holds leadership positions in each of its five core business segments: Electronics, Telecommunications, Healthcare and Specialty Products, Fire and Security Services, and Flow Control. The Company operates in more than 1 0 0 countries and...

  • Page 3
    Tyco has demonstrated the ability to grow each of its businesses organically, as well as by the acquisition of complementary businesses or product lines. This " growth-on-growth" strategy has yielded exceptional financial results for several years, and puts us in a position to achieve excellent ...

  • Page 4
    ... leadership positions in many of the world's best growth industries. Thus, we have the ability to increase sales each year through a combination of geographic expansion, the introduction of innovative new products and market share gains fueled by our status as the low-cost producer in most of our...

  • Page 5
    Exploding technology Tyco is a technology leader with cutting-edge R&D in each of our core business segments. We are known as innovators in many of today's most exciting technologies (cellular telephones, fiber optic components, smart automotive systems, and undersea fiber optic telecommunications ...

  • Page 6
    3 Free cash F OU R

  • Page 7
    ... flow. Cash generation is crucial because it is the very best indicator of how a company is really performing and it provides the resources for us to continue to grow our businesses by acquisition or other types of investment, such as through Tyco Ventures, our new venture capital arm. flow F I VE

  • Page 8
    ... Tyco has outstanding men and women at every level of the organization. We keep employees motivated by encouraging an entrepreneurial culture that values initiative, that provides challenging work and commensurate economic benefits and that demands excellence. Our compensation plans and programs...

  • Page 9
    ... and businesses can now customize and order security systems online at our ADT website - which receives 1 0 0 ,0 0 0 visits monthly- while at AMP's website customers can order 1 1 0 ,0 0 0 different electronic products. The Internet is also reducing our purchasing costs and helping us better serve...

  • Page 10
    Strate E I GH T 6

  • Page 11
    ... in our existing product lines. All acquisitions must immediately add to earnings, but they must also make strategic sense by helping us become a stronger competitor in one of our existing business segments. Buying at a good price is important; finding a company whose people and products fit well in...

  • Page 12
    ...have purchased the system. 2. The 1 0 ,6 0 0 mile C2 C AsiaPac undersea fiber optic telecommunications cable network, which TyCom Ltd. is building for a variety of Asian carriers and investors, including Singapore Telecommunications and KDD, will connect Hong Kong, Japan, China, Taiwan, South Korea...

  • Page 13
    E L E VE N

  • Page 14
    .../Alarm Control Cableâ„¢ made by AFC Cable Systems helps ensure the safety of the 5 0 0 students who attend historic Fairhaven High School in Fairhaven, MA. The cable serves pull stations, smoke detectors and the school's central fire alarm. AFC also makes timesaving flexible conduit, data com cables...

  • Page 15
    ... equipment provides the reliability needed to stay on the job. Tyco is the world's largest manufacturer of industrial valves and controls, creating products that drive the world's oil exploration, power, petrochemical, water and wastewater industries, among others. A growing portion of the unit...

  • Page 16
    ... plastic film used for covering greenhouses. Tyco Plastics makes products such as Ruffies® brand trash bags, Film-Gard® brand plastic sheeting and garment hangers. Tyco Plastics' A&E Products is the world's leading producer of plastic garment hangers, making 4 .7 billion of them last year. F OU...

  • Page 17
    ... and the increasing electronic content within automobiles. Today, it is hard to find a car anywhere that does not contain a growing list of AMP and M/A-COM products, such as GPS (Global Positioning System) antennas, relays, switches, brake and light sensors, connectors for engine controls and radar...

  • Page 18
    S I XT E E N

  • Page 19
    ...® cardiothoracic drainage units and suction catheters- to help their patients and, frequently, save their lives. Tyco Healthcare's international operations, which now account for almost 3 5 percent of its total sales, are growing rapidly around the world, with particularly strong increases in the...

  • Page 20
    ...electrical power and telecom components; electronic, electrical, wireless and electro-optic connector devices; multi-layer printed circuit boards; backplane assemblies; private communication systems; GPS antennas; smart radar sensors; and heat shrink products. Products / Services Designs, engineers...

  • Page 21
    ...; valve maintenance services; steel pipe, tubular and metal framing products; cable trays; fire sprinkler devices and other fire protection products; engineering consulting; environmental consulting/remediation; total water management services. 22% 21% 14% Sales: $ 6 ,4 6 7 .9 in millions Sales...

  • Page 22
    .... At Tyco, we are vigilant about making sure that does not happen. Our continuous improvement culture keeps costs low and focuses on innovation and speed to market. We introduce great new products. Complacency kills. We spent over $500 million on R&D last year so we could remain on top. In 2000, we...

  • Page 23
    ...stop shopping. The Internet Finally, the Internet is an excellent everyday cost-cutting tool, which fits extremely well in the Tyco culture, where a focus on efficiency is a way of life. Tyco Ventures During fiscal 2 0 0 0 , we started Tyco Ventures, our new venture capital unit, to access new and...

  • Page 24
    ...for quality are helping it win large contracts with national purchasing groups, while the bundling of products has recently been very effective at integrated networks (groups of independent hospitals that have banded together for bulk purchasing). The alternate site market (nursing homes, outpatient...

  • Page 25
    ... extremely strong demand from both Asia and Latin America for new security systems. Worldwide, we continue to see good growth in our CCTV (closed circuit television) and access control businesses. ADT is creating new markets with some leading-edge new product introductions. Its QControl airport...

  • Page 26
    ...Security Services Fire and Security Services Fire and Security Services Flow Control Products Flow Control Products North America & the Caribbean Bahamas Barbados Bermuda Canada Dominican Republic Haiti Jamaica Mexico Puerto Rico Trinidad/Tobago United States U.S. Virgin Islands Europe, Africa...

  • Page 27
    ... reï¬,ects the grouping of Tyco's businesses into five business segments consisting of Electronics, Telecommunications, Healthcare and Specialty Products, Fire and Security Services, and Flow Control Products and Services. In Fiscal 1999, we consummated two mergers that were accounted for under the...

  • Page 28
    ... products and services include: • designing, engineering and manufacturing of electronic connector systems, fiber optic components, wireless devices, heat shrink products, power components, wire and cable, relays, sensors, touch screens, identification and labeling products, switches and battery...

  • Page 29
    ...Graphic Controls Corporation. Excluding the impact of these acquisitions, the sales increase for Fiscal 1999 over Fiscal 1998 was 5.1%. The 10.2% increase in operating income, before certain credits (charges), in Fiscal 2000 over Fiscal 1999 was due to increased sales volume at Tyco Healthcare, Tyco...

  • Page 30
    ... 2000 over Fiscal 1999 reï¬,ects increased service volume in security operations in the United States and fire protection businesses in North America and Asia. The increase in operating margins, before certain credits, was due to increased sales volume in both security services and fire protection...

  • Page 31
    ... of changes in foreign exchange rates during Fiscal 2000, Fiscal 1999 and Fiscal 1998 was not material to our sales and operating income. C O R P O R AT E E X P E N S E S The effective income tax rate, excluding the impact of merger, restructuring and other non-recurring credits (charges), charges...

  • Page 32
    ...In Fiscal 2000, we established merger, restructuring and other non-recurring reserves of $325.2 million, of which $7 .3 million is included in cost of sales, primarily related to a reserve for certain claims relating to a merged company in the Healthcare business, the restructuring activities in AMP...

  • Page 33
    ...and DC/DC switching power supplies, batteries, power supplies and back-up power systems. The acquisition is subject to customary regulatory approvals. On November 17 , 2000, we completed a private placement offering of $4,657 ,500,000 principal at maturity of zero-coupon debt securities due 2020 for...

  • Page 34
    ...Earth Tech, related to new contract bookings and water and waste water facility contracts, and an increase in demand for its valves and control products. Within the Fire and Security Services segment, backlog increased principally due to long-term service contracts in the Australian fire protection...

  • Page 35
    ... options. For long-term investments, the table presents cash ï¬,ows 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, 2000, and the associated fair value interest rate discount...

  • Page 36
    ...73.3 41.7 27.5 99.0 10.6 2,100.0 0.7 0.7 10.6 0.4 0.0 0.1 Year 2 0 0 0 Compliance Tyco's Year 2000 compliance programs and systems modifications were completed on time, and the conversion process was successful. Our business has not been adversely affected due to the failure of key third...

  • Page 37
    ..., any statement contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission, or in Tyco's communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls...

  • Page 38
    ... include a charge of $361.0 million for the write-off of purchased in-process research and development related to the acquisition of the submarine systems business of AT&T Corp. (6) Prior to their respective mergers, ADT, Keystone, USSC and AMP had December 31 fiscal year ends and Former Tyco had...

  • Page 39
    ...: Loans payable and current maturities of long-term debt Accounts payable Accrued expenses and other current liabilities 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...

  • Page 40
    ... Cost of sales Selling, general and administrative expenses Merger, restructuring and other non-recurring charges Charge for the impairment of long-lived assets O P E R AT I N G I N C O M E Interest income Interest expense Gain on issuance of common shares by subsidiary Income before income taxes...

  • Page 41
    ... loss on marketable securities Minimum pension liability adjustment Total comprehensive income Sale of common shares Exchange of Liquid Yield Option Notes Dividends Restricted stock grants, net of surrenders Warrants and options exercised Purchase of treasury shares Equity-related compensation...

  • Page 42
    ... cost amortization Interest on ITS vendor note Deferred income taxes Provisions for losses on accounts receivable and inventory Other non-cash items Changes in assets and liabilities, net of the effects of acquisitions and divestitures: Receivables Proceeds from accounts receivable sale Contracts...

  • Page 43
    ... products and services include: • designing, engineering and manufacturing of electronic connector systems, fiber optic components, wireless devices, heat shrink products, power components, wire and cable, relays, sensors, touch screens, identification and labeling products, switches and battery...

  • Page 44
    ...are completed. Contract sales for the installation of fire protection systems, underwater cable systems and other construction related projects are recorded on the percentage-of-completion method. Profits recognized on contracts in process are based upon estimated contract revenue and related cost...

  • Page 45
    ... loss contingencies, net realizable value of inventories, estimated contract revenues and related costs, environmental liabilities, income taxes and tax valuation reserves, and the determination of discount and other rate assumptions for pension and post-retirement employee benefit expenses. Actual...

  • Page 46
    ...recurring charges of $164.4 million primarily related to AMP's profit improvement plan and $92.5 million principally related to costs incurred by USSC to exit certain businesses. (3) As a result of the combination of Tyco and AMP, an income tax adjustment was recorded to conform tax accounting. In...

  • Page 47
    ... direct costs, including pension and other employee related costs and other costs. These purchase accounting liabilities relate primarily to the acquisitions of GSI, AFC Cable, Siemens EC, Praegitzer, Critchley and the Electronics OEM Business of Thomas & Betts. In connection with the Fiscal 2000...

  • Page 48
    ... 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. During Fiscal 1999, the Company spent a total of $4,901.2 million in cash related to the acquisition of businesses...

  • Page 49
    ... 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. In February 2000, TIG...

  • Page 50
    ... form of common shares of the Company. Beginning July 2002, the LYONs are redeemable for cash at any time at the option of ADT Operations, Inc., in whole or in part, at redemption prices equal to the issue price plus accrued original issue discount to the date of redemption. The LYONs are guaranteed...

  • Page 51
    ...fair values were estimated, based on market rates or quotes from brokers, which represented the amounts that the Company would receive or pay if the instruments were terminated at the balance sheet dates. These fair values indicated that the termination of forward foreign currency exchange contracts...

  • Page 52
    ..., of the fair market value of restricted shares at the time of vesting over their fair market value at the time of the grants and from the payment of dividends on unvested shares, are credited to contributed surplus. EMPLOYEE STOCK PURCHASE PLAN Substantially all full-time employees of the Company...

  • Page 53
    ... 30, 2000, there were approximately 37 .0 million shares available for future grant under the Incentive Plan. During 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...

  • Page 54
    ...value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted-average assumptions were used for Fiscal 2000: TYCO TYCOM Expected stock price volatility Risk free interest rate Expected annual dividend yield per share Expected life...

  • Page 55
    ... ï¬,ows is less than book value. Fair values are based on quoted market prices and assumptions concerning the amount and timing of estimated future cash ï¬,ows and assumed discount rates, reï¬,ecting varying degrees of perceived risk. 2000 CHARGES improvement plan and the combination of facilities...

  • Page 56
    ... and Security Services Telecommunications Corporate $ (9 0 .9 ) (1) (1 0 .9 ) (2) (1 1 .2 ) 1 3 .1 2 7 6 .2 $ 1 7 6 .3 $ 643.3 (3) 419.1 (27.2) - - $164.4 92.5 - - - $256.9 $1,035.2 (1) Includes $0.9 million charge related to the write-down of inventory, which is included in cost of sales, and...

  • Page 57
    ...EM PLOYEES in 1999 CHARGES AND CREDITS related to the Healthcare and Specialty Products segment for Fiscal 2000 revision in estimates related to Fiscal 1999 charges. The Fire and Security Services segment recorded restructuring and other non-recurring credits of $11.2 million related to revision in...

  • Page 58
    ... costs of $25.4 million relating to the consolidation of certain product lines and other non-recurring charges related to the AMP merger. SEVERAN CE N U M BER OF ( $ I N M I LLI ON S) EM PLOYEES As part of the integration of AMP's electronics business and AMP's profit improvement plan, the Company...

  • Page 59
    ... recorded restructuring charges of $12.0 million related to employee severance costs, facility disposals and asset write-downs as part of USSC's cost cutting program. USSC substantially completed its 1998 restructuring activities during Fiscal 1999. [1 8 ] Retirement Plans DEFINED BENEFIT PENSION...

  • Page 60
    ...net pension cost recognized at September 30, 2000 and 1999 for all U.S. and non-U.S. defined benefit plans is as follows: U . S. PLAN S ( $ I N M I LLI ON S) 2000 1999 N ON - U . S. PLAN S 2000 1999 C H A N G E I N B E N E F I T O B L I G AT I O N Benefit obligation at beginning of year Service...

  • Page 61
    ... Company generally does not provide postretirement benefits other than pensions for its employees. Certain of Former Tyco's acquired operations provide these benefits to employees who were eligible at the date of acquisition. In addition, ADT's electronic security services operation in the United...

  • Page 62
    ..., based generally on net sales and other factors. For additional information, including a description of the products and services included in each segment, see Note 1. Electronics Telecommunications Healthcare and Specialty Products Fire and Security Services Flow Control Products and Services...

  • Page 63
    ... and wireless communications business and a credit of $107 .8 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...

  • Page 64
    ...$28.3 million is included in cost of sales, and charges for the impairment of long-lived assets of $65.6 million related to AMP's profit improvement plan. Also includes a credit of $3.0 million representing a revision of estimates related to Tyco's 1997 merger, restructuring and other non-recurring...

  • Page 65
    [2 4 ] Tyco International Group S.A. During Fiscal 2000 and Fiscal 1999, Tyco International Group S.A. ("TIG"), a wholly-owned subsidiary of the Company, issued public debt securities (See Note 4) which are fully and unconditionally guaranteed by Tyco. In accordance with SEC rules promulgated in ...

  • Page 66
    ...TYCO TYCO ( I N M I LLI ON S) I N TERN ATI ON AL LTD. I N TERN ATI ON AL GROU P, S. A. OTH ER SU BSI DI ARI ES CON SOLI DATI N G ADJU STM EN TS TOTAL CURRENT ASSETS: Cash and cash equivalents Accounts... - 1,740.6 Common shares Capital in excess: Share premium Contributed surplus Accumulated ...

  • Page 67
    ...in cost of sales, primarily for non-recurring claims related to a merged company in the Healthcare business, the restructuring activities in AMP's Brazilian operations and wireless communications business, a non-recurring charge incurred in connection with TyCom's initial public offering and credits...

  • Page 68
    ... items, net of taxes(2) NET INCOME $1,502.0 $695.8 $(1,959.7) (1) Operating income includes restructuring and other non-recurring charges recorded by AMP of $185.8 million related to its profit improvement plan and a credit of $21.4 million to restructuring charges representing a revision of...

  • Page 69
    ... Proceeds from long-term debt Proceeds from exercise of options and warrants Dividends (paid) Intercompany dividends received (paid) Purchase of treasury shares Financing from parent Capital contributions Other Net cash provided by financing activities Net increase in cash and cash equivalents...

  • Page 70
    ... STM EN TS TOTAL C A S H F L O W S F R O M O P E R AT I N G A C T I V I T I E S : Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES: $ 177.8 $ (5.8) $ 2,109.8 $ - $ 2,281.8 Purchase of property, plant and equipment, net Acquisition of businesses, net...

  • Page 71
    ...DC/DC switching power supplies, batteries, power supplies and back-up power systems. The acquisition is subject to customary regulatory approvals. On November 17 , 2000, the Company completed a private placement offering of $4,657 ,500,000 principal at maturity of zerocoupon debt securities due 2020...

  • Page 72
    ... ended September 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We...

  • Page 73
    ...The number of registered holders of Tyco's common shares at November 13, 2000 was 34,675. Tyco common shares are listed and traded 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 Tyco...

  • Page 74
    ... Directors Corporate Officers Key Operating Management L. Dennis Kozlowski L. Dennis Kozlowski Jerry R. Boggess Chairman of the Board Lord Ashcroft KCMG President Chief Executive Officer Mark A. Belnick President-Tyco Fire and Security Services Diane Creel Chairman Carlisle Holdings...

  • Page 75
    ... (shares held in your own name) with questions regarding your account such as change of address, lost certificates or dividend checks should contact our transfer agent at: www.tyco.com or use our corporate news and information service to obtain a delayed stock quote, listen to press releases and...

  • Page 76
    87,384,008 25801150 1,684,511,070 TH E ZU RI CH CEN TRE 2 N D FL OOR 9 0 PI TTS B AY ROAD PEM B ROK E H M 0 8 B ERM U DA WWW. TYCO. COM 01001 571,32 35 902,124,106 363 4 22,887,466