ADT 2001 Annual Report Download - page 17

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Fiscal 2001 was a year of outstanding performance for
Tyco International. And, although I have made similar
statements before, the consistency of our ability to deliver
strong results is important, especially in a year marked
by global economic turbulence. Many outstanding com-
panies found it impossible to meet their financial targets
last year; and some couldn’t make any money at all.
Yet in the worst economic environment we have seen in
a decade, Tyco managed to exceed its profit goals. All of
us at Tyco are very proud of that achievement.
How were we able to perform so well? The answers go to
the heart of what makes Tyco tick. And they explain why,
despite the current economic slowdown, we remain opti-
mistic about fiscal 2002.
We grew diluted earnings per share 29 percent in fiscal
2001 in large part because of the strategy we formed
during the 1990–1991 recession to reinvent Tyco as a
company that could thrive in any economy. Since then,
we have built businesses with low cyclicality and the
ability to generate strong recurring revenues.
Today, almost 40 percent of our revenues are recurring in
nature, and over 60 percent are in businesses with little
cyclicality. Our healthcare and security businesses have
achieved solid growth every year regardless of the
prevailing economic conditions, while our fire protection
business has only limited economic sensitivity (less than
10 percent of its revenues come from new construction).
All three of these businesses performed superbly in
fiscal 2001.
A decade ago, we also sought to build on the strengths of
a company that was diversified by industry and geogra-
phy. This diversity helped us withstand the weakness in
certain global markets and disappointing product
demand in our Electronics division.
But the electronics shortfall had less impact than it might
have for another reason: Tyco’s culture. Tyco is decentral-
ized and entrepreneurial, and our employees are strongly
encouraged to find ways to make our products better and
faster—and to save money while doing so. At Tyco, there
is a relentless push throughout the entire organization to
reduce costs—in good times and bad.
Faced with a global technology slowdown, our Electronics
managers moved quickly to reduce costs and rationalize
production processes. They consolidated plants, stream-
lined production processes, moved production to lower
cost areas and lowered cycle times. In addition, they
introduced dozens of new products that helped us gain
market share.
One advantage of our financial strength is that we can
increase research and development spending during
tough times and thereby gain an advantage over com-
petitors who lack the financial wherewithal to follow
suit. We increased the level of spending substantially in
all of our electronics businesses last year, and saw excit-
ing new products emerge from each division.
The upshot: even though our electronics shipments fell
in several categories—most notably telecommunica-
tions—our electronics profits rose 20 percent.
Considering that most of our direct competitors saw
their profits either plunge or vanish, this was a powerful
performance.
Our overall business remained strong despite the attacks
on the United States on September 11. On that terrible
day, in fact, we did all we could to help the rescue
workers and the people of New York City, Washington
D.C. and Pennsylvania. In addition to sending healthcare
products to the scenes, we provided oxygen packs and
thermal imaging devices to firefighters (both made by
Scott Technologies, which we recently acquired), energy
systems to restart downed power lines and components
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