ADT 2000 Annual Report Download - page 33

THIRTY ONE
million. The increase in deferred income taxes is attributable
primarily to current utilization of deductions on restructuring, other
non-recurring charges and purchase accounting spending, other
timing differences between book and tax recognition of income and
expense, utilization of net operating loss and credit carryforwards,
and the tax benefits of stock option exercises.
The net change in working capital, net of the effects of acqui-
sitions and divestitures, was an increase of $91.7 million. The com-
ponents of this change are set forth in detail in the Consolidated
Statement of Cash Flows. The increase in working capital accounts
is attributable to the higher level of business activity in Fiscal 2000
as reflected in the increased sales over the prior year. We focus on
maximizing the cash flow from our operating businesses and
attempt to keep the working capital employed in the businesses to
the minimum level required for efficient operations.
In addition, we used $1,885.1 million to purchase our own
common shares. In November 1999, we announced the authoriza-
tion by our Board of Directors to reacquire up to 20 million Tyco com-
mon shares in the open market, which was completed during the
quarter ended March 31, 2000. In January 2000, the Board of Direc-
tors authorized the expenditure of up to an additional $2,000.0 mil-
lion to reacquire our shares, of which we have spent nearly $1,100.0
million through September 30, 2000. In addition, we repurchase
our own shares from time to time in the open market to satisfy cer-
tain stock-based compensation arrangements, such as the exercise
of stock options.
We received proceeds of $2,130.7 million from the issuance of
common shares by a subsidiary in the TyCom IPO and $355.3 mil-
lion from the exercise of common share options.
The source of the cash used for acquisitions was primarily an
increase in total debt and cash flows from operations. Goodwill and
other intangible assets were $16,332.6 million at September 30,
2000, compared to $12,158.9 million at September 30, 1999.
At September 30, 2000, our total debt was $10,999.0 million,
as compared to $10,122.2 million at September 30, 1999. This
increase resulted principally from borrowings under our commercial
paper program and net proceeds of approximately $565.9 million
from the issuance of Euro denominated private placement notes in
April 2000. For a full discussion of debt activity, see Note 4 to the
Consolidated Financial Statements.
Shareholders’ equity was $17,033.2 million, or $10.11 per share,
at September 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 $4,519.9 million, an unre-
alized gain on available for sale securities of $1,075.7 million and
the issuance of a total of approximately 15.6 million common shares
valued at approximately $671.4 million for the acquisitions of GSI
and AFC Cable in November 1999. Total debt as a percent of total
capitalization (total debt and shareholders’ equity) was 39% at
September 30, 2000 and 45% at September 30, 1999. Net debt
(total debt less cash and cash equivalents) as a percent of total
capitalization was 35% at September 30, 2000 and 37% at
September 30, 1999.
On October 4, 2000, we entered into an agreement to acquire
InnerDyne, Inc. (“InnerDyne”), a manufacturer and distributor of
patented radial dilating access devices used in minimally invasive
medical surgical procedures. The purchase price is approximately
$180 million payable in Tyco common shares. InnerDyne will be
integrated within Tyco’s Healthcare business. We intend to account
for the acquisition as a purchase.
On October 6, 2000, we sold our ADT Automotive business to
Manheim Auctions, Inc., a wholly-owned subsidiary of Cox Enter-
prises, Inc., for approximately $1 billion in cash. The sale is
expected to generate a one-time pre-tax gain to Tyco in excess of
$300 million in the first quarter of Fiscal 2001.
On October 17, 2000, we acquired Mallinckrodt Inc.
(“Mallinckrodt”), a global healthcare company with products used
primarily for respiratory care, diagnostic imaging and pain relief. We
issued approximately 64.8 million common shares, valued at
approximately $3.2 billion, and assumed approximately $1.0 billion
in debt. Mallinckrodt is being integrated within Tyco’s Healthcare
business. We are accounting for the acquisition as a purchase.
On November 13, 2000, we agreed to acquire the Lucent Power
Systems (“LPS”) business unit of Lucent Technologies, Inc. for $2.5
billion in cash. LPS provides a full line of energy solutions and power
products for telecommunications service providers and for the com-
puter industry and will be integrated within the Electronics seg-
ment. LPS products include AC/DC 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 aggregate net proceeds of approximately
$3,374,000,000. Each $1,000 principal amount at maturity security
was issued at 74.165% of principal amount at maturity, accretes at
a rate of 1.5% per annum and is convertible into 10.3014 Tyco com-
mon shares if certain conditions are met. We may be required to
repurchase the securities at the accreted value at the option of the
holders on November 17, 2001, 2003, 2005, 2007 or 2014. The pro-
ceeds of this offering will be used to finance the LPS acquisition and
to repay commercial paper.
On December 4, 2000, we agreed to acquire Simplex Time
Recorder Co. (“Simplex”) for approximately $1.15 billion in cash.
Simplex manufactures fire and security products and communica-
tions systems including control panels, detection devices and
system software. Simplex also installs, monitors and services fire
alarms, security systems and access control systems and will be
integrated within the Fire and Security Services segment. The
acquisition is subject to customary regulatory approvals.
We believe that our cash flow from operations, together with our
existing credit facilities and other credit arrangements, is adequate
to fund our operations.
BACKLOG
At September 30, 2000, we had a backlog of unfilled orders of
approximately $8,214.8 million, compared to a backlog of approxi-
mately $7,581.1 million as of September 30, 1999. We expect that
approximately 86% of our backlog at September 30, 2000 will be
filled during the year ending September 30, 2001. Backlog by indus-
try segment is as follows:
SEPTEMBER 3 0 ,
(I N MILLI ONS) 2 0 0 0 1 9 9 9
Telecommunications $ 2 ,9 4 1 .7 $3,535.4
Electronics 2 ,3 3 5 .7 1,439.1
Flow Control Products and Services 1 ,7 1 1 .4 1,516.5
Fire and Security Services 1 ,1 3 4 .9 986.6
Healthcare and Specialty Products 9 1 .1 103.5
$ 8 ,2 1 4 .8 $7,581.1