ADT 2001 Annual Report Download - page 26

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The accompanying Consolidated Financial Statements include
the consolidated accounts of Tyco International Ltd. (“Tyco”)
and its subsidiaries (Tyco and all its subsidiaries, hereinafter
“we” or the “Company”). On June 1, 2001, a subsidiary of the
Company acquired The CIT Group, Inc. (“CIT”), an independent
commercial finance company, now Tyco Capital Corporation.
The discussion and financial data presented herein are fur-
nished separately for each of the following:
• Tyco Industrial
— This represents Tyco and all its subsidiaries
other than Tyco Capital, and includes the results of operations
of Tyco Capital from June 2, 2001 on the equity method of
accounting.
• Tyco Capital — This represents Tyco Capital Corporation and all
its subsidiaries and reflects their results of operations from
June 2, 2001. In addition, Tyco Capital includes certain inter-
national subsidiaries that were sold by Tyco Capital Corpora-
tion to a non-U.S. subsidiary of Tyco on September 30, 2001.
• Consolidated — This represents Tyco Industrial and Tyco
Capital on a consolidated basis.
RESULTS OF OPERATIONS
TYCO INDUSTRIAL
OVERVIEW
Information for all periods presented below reflects the group-
ing of Tyco Industrial’s businesses into four segments, consist-
ing of Electronics, Fire and Security Services, Healthcare and
Specialty Products, and Telecommunications. While our
Telecommunications business currently operates as part of our
Electronics segment, it is broken out separately in the segment
discussion below.
During Fiscal 2001, a change was made in the Company’s
internal management reporting structure such that the opera-
tions of the former Flow Control Products and Services segment
are now reported in part within the Fire and Security Services
and in part within the Electronics segments. The Company has
conformed its segment reporting accordingly and has reclassi-
fied comparative prior period information to reflect this change.
In Fiscal 1999, we consummated two mergers that were
accounted for under the pooling of interests method of account-
ing: the merger with United States Surgical Corporation (“U.S.
Surgical”) and the merger with AMP Incorporated (“AMP”). As
required by generally accepted accounting principles in the
United States (“GAAP”), we restated our financial statements as
if U.S. Surgical and AMP had always been a part of Tyco.
Tyco Industrial segment revenues increased 17.6% during
Fiscal 2001 to $34,036.6 million compared to $28,931.9 million
in Fiscal 2000. Fiscal 2001 revenues reflect a decrease of
$241.1 million resulting from the adoption of Staff Accounting
Bulletin No. 101 (“SAB 101”). Tyco Industrial segment revenues
increased 28.6% during Fiscal 2000 to $28,931.9 million from
$22,496.5 million in Fiscal 1999.
Income before extraordinary items and cumulative effect of
accounting changes was $4,671.1 million in Fiscal 2001 as com-
pared to $4,520.1 million in Fiscal 2000 and $1,067.7 million in
Fiscal 1999. Income before extraordinary items and cumulative
effect of accounting changes for Fiscal 2001 included a net
charge of $382.2 million ($366.8 million after-tax) consisting of
the following: (i) restructuring and other non-recurring charges
and impairment charges totaling $705.4 million related primar-
ily to the closure of facilities within the Electronics and Fire and
Security Services segments; (ii) $184.3 million write-off of pur-
chased in-process research and development related to the
acquisition of Mallinckrodt Inc. (“Mallinckrodt”); (iii) a non-
recurring credit of $166.8 million related to the settlement of lit-
igation; (iv) a net gain on sale of businesses and investments of
$276.6 million principally related to the sale of ADT Automotive,
partially offset by the permanent impairment of an equity
investment; and (v) a $64.1 million net gain on the sale of com-
mon shares of a subsidiary. Income before extraordinary items
and cumulative effect of accounting changes for Fiscal 2001 also
reflects a $111.2 million decrease resulting from the Fiscal 2001
impact of the adoption of SAB 101. Income before extraordinary
items for Fiscal 2000 included a net credit of $1,484.7 million
($793.7 million after-tax) consisting of the following: (i) a gain
of $1,760.0 million on the sale by a subsidiary of its common
shares in connection with TyCom’s initial public offering;
(ii) restructuring, non-recurring and impairment charges of
$424.2 million primarily for non-recurring claims related to a
merged company and the exiting of U.S. Surgical’s interven-
tional cardiology business; and (iii) a credit of $148.9 million
representing a revision of estimates of merger, restructuring and
other non-recurring accruals. Income before extraordinary
items for Fiscal 1999 included a net charge of $1,542.7 million
($1,304.8 million after-tax) related primarily to the mergers
with U.S. Surgical and AMP and costs associated with AMP’s
profit improvement plan.