ADT 2000 Annual Report Download - page 25

TWENTY THREE
Results are before non-recurring charges and have been restated for mergers
accounted for under the pooling-of-interests accounting method.
ADT, the security monitoring leader in North America, the
U.K., Australia, France, Spain and the Benelux countries, con-
tinued to perform well. ADT is now adding 75,000 new accounts
a month in North America largely because of its new marketing
and dealer programs, which make those new accounts profitable
much more quickly. ADT now recovers the cost of a newly
installed system in less than two years. This contributed to
greater earnings and improved cash flow performance.
Outside the U.S., we are experiencing extremely strong
demand from both Asia and Latin America for new security sys-
tems. 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 monitoring system,
which prevents illegal exits from airport terminals, debuted at
Miami International Airport this year and has already been sold
to 15 other airports. The new SecureVision®product relies on
neural networks to help customers avoid false alarms. These
neural networks — sensory devices combined with complex soft-
ware that allow the system to “ learn” from past inputs— factor
out environmental or operational changes that might otherwise
trigger an alarm.
We continued to add to our global lead in fire protection.
Sales growth was in the U.S., Canada and the Asia/Pacific region
due to increased penetration and expanding markets. Much of
this growth came from higher margin service revenue, driven by
a growing concern with safety in all regions and stricter local fire
codes. Service revenue as a percent of total sales continues to
increase, helping us achieve record margins for the division.
Going into fiscal 2001, prospects are very positive and we have
a record backlog. At this moment, we are actively monitoring
over four million customer sites around the world.
Tyco Flow Control Products
Operating income in Tyco’s Flow Control segment rose to $747
million, a 23 percent increase over the $606 million earned last
year. Sales for the year grew by 12 percent to $3.9 billion, up
from $3.5 billion in 1999.
Particularly strong sales growth was shown by the Keystone
valve business, Allied Conduit and Earth Tech’s total water serv-
ice business. Earth Tech is ideally positioned to capitalize on the
growing concern about the quality of drinking water and the
accelerating privatization of municipal water systems (which
often leads to a facilities upgrade by the private companies that
acquire them). The portion of the global water treatment busi-
ness that is not publicly financed is projected to grow from $20
billion today to $230 billion a decade from now. To be posi-
tioned to take advantage of this global opportunity, Earth Tech is
expanding in key markets such as Asia, Latin America and
Australia.
Tyco’s world-leading industrial valve business remains
strong and, increasingly, the Company is making its valves and
control products more electronically sophisticated.
For example, the recent acquisition of Westlock Control gives
Tyco access to more high-tech products, such as positioners,
indicators and control systems.
In fire protection products, Flow Control is using its new prod-
uct development facilities to help differentiate itself from its com-
petitors. Flow Control recently introduced an expanded range of
new high-rack storage sprinkler systems for warehouse stores, and
Home Depot, Lowe’s and Bed Bath and Beyond have all specified
that their stores will install these new cost-saving products.
Looking Forward
Tyco’s future looks outstanding and I am confident that our
“ growth-on-growth” strategy will continue to deliver enviable
results. We are poised for growth because we have the best brand
names in our industries, names that represent “ reliability” and
“ innovation” to purchasers.
We also have another great but underutilized brand name:
“ Tyco.” In fiscal 2000, we began adding the Tyco name to all our
packaging, and we expect that this will gradually lead to greater
recognition of the Company and to increased sales, especially to
institutions that want to make bundled purchases.
In addition to anticipating double-digit internal growth gains
in fiscal 2001, we expect to seek additional margin improvement
by capitalizing on our operating leverage, productivity enhance-
ments, cost reductions, recurring revenues (which invariably have
high margins) and e-business strategies. All of our businesses
have healthy global acquisition possibilities, and we will contin-
ue to invest our free cash flow to maximize future growth.
Once again, Tyco’s 215,000 employees met the tough
challenges that we set for them and responded with the
determination, ingenuity and resourcefulness that has made us
all proud. We have great people at Tyco, and that is why we feel
so comfortable asking a lot from them. Their dedication to
doing things right—to making our products better and our
manufacturing more efficient—is admirable, and I do not think
you will find it equaled at very many companies. I am proud to
be their colleague. My thanks to one and all.
Thank you again, shareholders, for your support.
L. Dennis Kozlowski
Chairman of the Board and Chief Executive Officer
December 8, 2000