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Tyco International Reports Fourth Quarter Earnings From Continuing Operations Before Special Items of $0.61 Per Share and GAAP Earnings of $0.44 Per Share

Tuesday, November 10, 2009 General News J E 4
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SCHAFFHAUSEN, Switzerland, Nov. 10

($ millions, except per-share amounts)

Tyco International Ltd. (NYSE: TYC) today reported $0.44 in diluted earnings per share (EPS) from continuing operations for the fiscal fourth quarter of 2009 and diluted EPS from continuing operations before special items of $0.61 per share. Revenue in the quarter of $4.4 billion declined 16% versus the prior year with an organic revenue decline of 12%. Cash from operating activities was $985 million in the quarter. The company had free cash flow of $614 million, which included cash payments of $84 million for restructuring and legacy legal matters.

For the full year, revenue of $17.2 billion declined 15%. Organic revenue declined 8%, with half of the decline coming from the Electrical and Metal Products business. Cash from operating activities was $2.43 billion. Free cash flow of $1.22 billion included cash payments of $261 million for restructuring and legacy legal matters.

"Our operating results for the fourth quarter reflect good progress in reducing our overall cost structure while we continue to invest in the future growth of our businesses," said Ed Breen, Tyco Chairman and Chief Executive Officer. "We generated strong cash flow in the quarter, effectively managed our working capital and we finished the year in strong financial condition."

Organic revenue, free cash flow, operating income before special items, operating margin before special items and income and diluted EPS from continuing operations before special items are non-GAAP financial measures and are described below. For a reconciliation of these non-GAAP measures, see the attached tables. Additional schedules as well as Fourth Quarter Review slides can be found at www.tyco.com on the Investor Relations portion of Tyco's website. Certain tables in this press release contain the symbol "-", where the percent change is not meaningful.

SEGMENT RESULTS

The financial results presented in the tables below are in accordance with GAAP unless otherwise indicated. Beginning in the first quarter of fiscal 2009, certain businesses within the ADT Worldwide and Fire Protection Services segments were realigned resulting in changes to historical segment performance. The revenue and operating income results shown below have been adjusted to reflect these changes. All dollar amounts are pre-tax and stated in millions. All comparisons are to the fiscal fourth quarter or full year of 2008 unless otherwise indicated.

ADT Worldwide

Revenue of $1.8 billion declined 9% in the quarter with an organic revenue decline of 5% and a 4% decline due to changes in foreign currency. ADT's recurring revenue grew 4% organically on a global basis. Systems installation and service revenue declined 14% organically, mostly due to weakness in North America and Europe, as a result of continuing lower sales to commercial customers, including the retailer end market.

Operating income was $226 million in the quarter and the operating margin was 12.6%. Special items of $31 million resulted primarily from restructuring activities. Operating income before special items of $257 million increased $6 million despite a $7 million negative impact from foreign currency. The operating margin before special items improved 160 basis points to 14.3%, as cost-containment initiatives, restructuring activities and growth in ADT's higher-margin recurring revenue business more than offset volume declines.

Full year revenue of $7.0 billion decreased 9% with an organic revenue decline of 4%. Operating income was $233 million and included $722 million of special items. Operating income before special items of $955 million decreased $45 million driven by a negative foreign currency impact of $56 million. The operating margin before special items improved 70 basis points to 13.6%.

Flow Control

Revenue of $1.0 billion declined 15% in the quarter with an organic revenue decline of 10%. Organic revenue declined 7% in the Valves business, 17% in Water and 12% in Thermal Controls. Backlog of $1.7 billion increased 4% on a quarter sequential basis (a 1% decline excluding the impact of foreign currency).

Operating income was $126 million in the quarter and the operating margin was 12.5%. Special items of $15 million resulted from restructuring activities. The operating income before special items of $141 million included a $9 million negative foreign currency impact. The operating margin before special items improved 40 basis points to 14.0% as cost-containment actions and restructuring activities more than offset the impact of volume declines.

Full year revenue of $3.85 billion decreased 13% primarily due to changes in foreign currency with an organic revenue decline of 3%. Operating income was $518 million and the operating margin was 13.5%. Operating income before special items of $552 decreased $80 million driven primarily by a $76 million negative foreign currency impact. The operating margin before special items remained flat with 2008 at 14.3%.

Fire Protection Services

Revenue of $904 million declined 11% in the quarter with an organic revenue decline of 7%. Service revenue declined 5% organically and installation revenue declined 8% driven by continued softness in the North American and EMEA regions. Backlog of $1.2 billion decreased 5% on a quarter sequential basis (a 7% decline excluding the impact of foreign currency).

Operating income was $65 million in the quarter and the operating margin was 7.2%. Special items of $31 million resulted from restructuring activities. Operating income before special items was $96 million and the operating margin before special items improved 60 basis points to 10.6% as cost-containment actions more than offset the decline in revenue.

Full year revenue of $3.4 billion decreased 11% primarily due to changes in foreign currency with an organic revenue decline of 3%. Operating income was $68 million and included $225 million of special items. Operating income before special items of $293 million decreased $66 million primarily due to lower volume and a $12 million negative foreign currency impact.

Electrical and Metal Products

Revenue of $326 million declined 45% in the quarter with an organic revenue decline of 41%. The decline was primarily due to lower selling prices for both steel and copper products.

Operating income was $12 million in the quarter and included $9 million of special items for restructuring activities. Operating income before special items of $21 million decreased $98 million, primarily due to lower spreads for both steel and copper products. The operating margin before special items was 6.4%.

Full year revenue of $1.4 billion decreased 39% with an organic revenue decline of 35%. Electrical and Metal Products incurred an operating loss of $940 million which included special items of $957 million. Operating income excluding special items was $17 million.

Safety Products

Revenue of $382 million declined 25% in the quarter. Organic revenue declined 22% due to lower volume across the Fire Suppression, Electronic Security and Life Safety businesses resulting from weaker demand in end markets.

Operating income was $46 million in the quarter and the operating margin was 12.0%. Special items of $14 million resulted from restructuring activities. Operating income before special items was $60 million and the operating margin before special items decreased 3.8 percentage points to 15.7% as cost-containment actions and restructuring activities were more than offset by significant volume declines.

Full year revenue of $1.6 billion decreased 20% with an organic revenue decline of 14%. Safety Products incurred an operating loss of $789 million, which included $1.0 billion of special items. Operating income before special items of $229 million includes a $19 million negative foreign currency impact.

OTHER ITEMS

ABOUT TYCO INTERNATIONAL

Tyco International Ltd. (NYSE: TYC) is a diversified, global company that provides vital products and services to customers around the world. Tyco is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products. Tyco had 2009 revenue of more than $17 billion and has more than 100,000 employees worldwide. More information on Tyco can be found at www.tyco.com.

CONFERENCE CALL AND WEBCAST

Management will discuss the company's fourth quarter results and outlook for fiscal 2010 during a conference call and webcast today beginning at 8:30 a.m. EST. Today's conference call for investors can be accessed in the following ways:

NON-GAAP MEASURES

"Organic revenue," "free cash flow (outflow)" (FCF), "income from continuing operations before special items", "earnings per share (EPS) from continuing operations before special items", "operating income before special items" and "operating margin before special items" are non-GAAP measures and should not be considered replacements for GAAP results.

Organic revenue is a useful measure used by the company to measure the underlying results and trends in the business. The difference between reported net revenue (the most comparable GAAP measure) and organic revenue (the non-GAAP measure) consists of the impact from foreign currency, acquisitions and divestitures, and other changes that do not reflect the underlying results and trends (for example, revenue reclassifications and changes to the fiscal year). Organic revenue is a useful measure of the company's performance because it excludes items that: i) are not completely under management's control, such as the impact of foreign currency exchange; or ii) do not reflect the underlying results of the company's existing businesses, such as acquisitions and divestitures. It may be used as a component of the company's compensation programs. The limitation of this measure is that it excludes items that have an impact on the company's revenue. This limitation is best addressed by using organic revenue in combination with the GAAP numbers. See the accompanying tables to this press release for the reconciliation presenting the components of organic revenue.

FCF is a useful measure of the company's cash which is free from any significant existing obligation. The difference between Cash Flows from Operating Activities (the most comparable GAAP measure) and FCF (the non-GAAP measure) consists mainly of significant cash outflows that the company believes are useful to identify. FCF permits management and investors to gain insight into the number that management employs to measure cash that is free from any significant existing obligation. It, or a measure that is based on it, may be used as a component in the company's incentive compensation plans. The difference reflects the impact from:

Capital expenditures and the ADT dealer program are subtracted because they represent long-term commitments. Cash paid for purchase accounting and holdback liabilities is subtracted because these cash outflows are not available for general corporate uses. Voluntary pension contributions and the impact from the sale of accounts receivable programs are added or subtracted because this activity is driven by economic financing decisions rather than operating activity.

The limitation associated with using FCF is that it subtracts cash items that are ultimately within management's and the Board of Directors' discretion to direct and therefore may imply that there is less or more cash that is available for the company's programs than the most comparable GAAP measure. This limitation is best addressed by using FCF in combination with the GAAP cash flow numbers.

FCF as presented herein may not be comparable to similarly titled measures reported by other companies. The measure should be used in conjunction with other GAAP financial measures. Investors are urged to read the company's financial statements as filed with the Securities and Exchange Commission, as well as the accompanying tables to this press release that show all the elements of the GAAP measures of Cash Flows from Operating Activities, Cash Flows from Investing Activities, Cash Flows from Financing Activities and a reconciliation of the company's total cash and cash equivalents for the period. See the accompanying tables to this press release for a cash flow statement presented in accordance with GAAP and a reconciliation presenting the components of FCF.

The company has presented its income and EPS from continuing operations before special items and operating income and margin before special items. Special Items include charges and gains related to divestitures, acquisitions, restructurings, impairments, legacy legal and tax charges and other income or charges that may mask the underlying operating results and/or business trends of the company or business segment, as applicable. The company utilizes income and EPS from continuing operations before special items and operating income and margin before special items to assess overall operating performance and segment level core operating performance, as well as to provide insight to management in evaluating overall and segment operating plan execution and underlying market conditions. They may be used as components in the company's incentive compensation plans. Operating income, operating margin, and income and EPS from continuing operations before special items are useful measures for investors because they permit more meaningful comparisons of the company's underlying operating results and business trends between periods. The difference between income and EPS from continuing operations before special items and income and EPS from continuing operations (the most comparable GAAP measures) consists of the impact of charges and gains related to divestitures, acquisitions, restructurings, impairments, legacy legal and tax charges and other income or charges that may mask the underlying operating results and/or business trends. Operating income and margin before special items do not reflect any additional adjustments that are not reflected in income from continuing operations before special items. The limitation of these measures is that they exclude the impact (which may be material) of items that increase or decrease the company's reported operating income and margin and operating income and EPS from continuing operations. This limitation is best addressed by using the non-GAAP measures in combination with the most comparable GAAP measures in order to better understand the amounts, character and impact of any increase or decrease on reported results. Tyco provides general corporate services to its segments and those costs are reported in the "Corporate and Other" segment. This segment's operating income (loss) is presented as "Corporate Expense."

FORWARD-LOOKING STATEMENTS

This release may contain certain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. All statements contained herein and in accompanying conference calls or webcasts that are not clearly historical in nature are forward-looking and the words "anticipate," "believe," "expect," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. The forward-looking statements in this release and accompanying conference calls generally include, but are not limited to, statements addressing Tyco's future financial condition and operating results, as well as its portfolio refinement activities. Economic, business, competitive and/or regulatory factors affecting Tyco's businesses are examples of factors, among others, that could cause actual results to differ materially from those described in the forward-looking statements. Tyco is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. More detailed information about these and other factors is set forth in Tyco's Annual Report on Form 10-K for the fiscal year ended Sept. 26, 2008 and in the interim reports filed on Form 10-Q for subsequent quarterly periods.



Q4 2009 Q4 2008 % Change FY 2009 FY 2008 % Change ------- ------- -------- ------- ------- -------- Revenue $4,421 $5,284 (16)% $17,237 $20,199 (15)% Income (Loss) from Continuing Operations $207 $264 (22)% ($1,833) $1,095 - Diluted EPS from Continuing Operations $0.44 $0.55 (20)% ($3.87) $2.25 - Special Items ($0.17) ($0.26) ($6.23) ($0.81) Income from Continuing Ops Before Special Items $291 $387 (25)% $1,122 $1,493 (25)% Diluted EPS from Continuing Ops Before Special Items $0.61 $0.81 (25)% $2.36 $3.06 (23)%

SOURCE Tyco International Ltd.
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