Tyco International, Inc.
Filed 12/21/00
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
001-13836
(COMMISSION FILE NUMBER)
TYCO INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
BERMUDA NOT APPLICABLE
(Jurisdiction of Incorporation) (IRS Employer Identification No.)
THE ZURICH CENTRE, SECOND FLOOR, 90 PITTS BAY ROAD, PEMBROKE, HM 08, BERMUDA
(Address of registrant's principal executive office)
441-292-8674*
(Registrant's telephone number)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON SHARES, PAR VALUE $0.20 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. /X/.
The aggregate market value of voting common shares held by nonaffiliates of
registrant was $98,909,627,685 as of December 6, 2000.
The number of common shares outstanding as of December 6, 2000 was
1,748,649,762.
DOCUMENTS INCORPORATED BY REFERENCE
See pages 22 to 24 for the exhibit index.
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* The executive offices of Registrant's principal United States subsidiaries
are located at One Tyco Park, Exeter, New Hampshire 03833. The telephone
number there is (603) 778-9700.
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Tyco International Inc. (TYC) NYSE
Indexed 10-K for the fiscal year ended September 30, 2000
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PART I
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PART II
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PART III
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PART IV
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Tyco International Ltd. ("We" or "Tyco") is a diversified manufacturing and
service company that, through its subsidiaries:
- designs, manufactures and distributes electrical and electronic components
and multi-layer printed circuit boards;
- designs, engineers, manufactures, installs, operates and maintains
undersea cable communications systems;
- designs, manufactures and distributes disposable medical supplies and
other specialty products;
- designs, manufactures, installs and services fire detection and
suppression systems and installs, monitors and maintains electronic
security systems; and
- designs, manufactures and distributes flow control products and provides
environmental consulting services.
See Notes 19 and 20 to the Consolidated Financial Statements for certain
segment and geographic financial data relating to our business.
Tyco's strategy is to be the low-cost, high quality producer and provider in
each of our markets. We promote our leadership position by investing in existing
businesses, developing new markets and acquiring complementary businesses and
products. Combining the strengths of our existing operations and our business
acquisitions, we seek to enhance shareholder value through increased earnings
per share and strong cash flows.
I. ELECTRONICS
Tyco is the world's leading supplier of passive electronic components. Our
products and services include:
- designing engineering and manufacturing of electronic connector systems,
fiber optic components, wireless devices, heat shrink products, power
components, wire and cable, relays, sensors, touch screens, identification
and labeling products, switches and battery assemblies; and
- designing and manufacturing of multi-layer printed circuit boards,
backplane assemblies, electronic modules and similar components.
Tyco Electronics has combined the historical leadership of AMP Incorporated
("AMP") in the interconnect industry with other companies such as Raychem
Corporation ("Raychem"), Siemens Electromechanical Components GmbH & Co. KG
("Siemens EC") and the Electronic OEM Business of Thomas & Betts ("T&B"). Tyco
Electronics designs, manufactures and markets a broad range of electronic,
electrical and electro-optic passive and active devices and an expanding number
of interconnection systems and connector-intensive assemblies, as well as
wireless products including semi-conductors, radar sensors, global positioning
satellite systems, silicon and gallium arsenide semiconductors, broadband Local
Multipoint Distribution Systems ("LMDS") and microwave sub-systems. Tyco
Electronics' products have potential uses wherever an electronic, electrical,
computer or telecommunications system is involved, and are becoming increasingly
critical to the performance of these systems as voice, data and video
communications converge. Tyco Electronics manufactures and sells more than
200,000 parts in over 450 global product lines, including terminals, fiber
optic, printed circuit board and cable connectors and assemblies, cable and
cabling systems, and related application tools and application tooling
equipment.
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Tyco Electronics' customers include original equipment manufacturers
("OEMs") and their subcontractors, utilities, government agencies, distributors,
value-added resellers, and customers who install, maintain and repair equipment.
These customers are found in the automotive, power technology, personal
computer, communications, networking, industrial and consumer industries. Tyco
Electronics serves over 200,000 customers located in over 55 countries, covering
many diverse markets.
Tyco Electronics is a global marketing, sales, engineering and manufacturing
company which produces interconnection systems, passive and active electronic
components, and has a strong local presence in the geographical areas in which
it operates, such as the Americas, the Asia-Pacific region, Europe and the
Middle East.
The markets that Tyco Electronics operates in are highly competitive. Tyco
Electronics faces competition across its product lines from other companies
ranging in size from large, diversified manufacturers to small, highly
specialized manufacturers.
The acquisition of Raychem in the last quarter of fiscal 1999 significantly
expanded our product line and complemented existing products and services.
Raychem develops, manufactures and markets a variety of high-performance
products for electronic OEMs, subcontractors and distributors with
telecommunications, computer, consumer, automotive, energy and industrial
markets. Raychem designs, manufactures and distributes products such as circuit
protection devices, heat-shrinkable tubing and molded parts, wire and cable, and
computer touchscreens. In addition, Raychem designs and manufactures fiber optic
and copper cable accessories, energy cable accessories and heat-tracing products
and provides design, engineering and installation services. Siemens EC, acquired
in November 1999, is the world market leader for the manufacture and sale of
relays and is one of the world's leading providers of electro-mechanical
components to the communications, automotive, consumer and general industry
sectors. The Electronic OEM business of T&B, acquired in July 2000, designs and
manufactures electronic connectors for the telecommunications, computer and
automotive industries. T&B's product categories are comprised of: high-density
material interconnect systems used in thermal management, backplane systems and
laptop computers; PCB mounted electromechanical components, including switches,
sockets and I/O connectors; and a variety of connectors for safety systems, I/O
devices, wire harnesses and power distribution centers used in the automotive
industry. T&B's products also include the most advanced high density/high
frequency related metalized particle interconnect technology. These products are
used in telecom equipment and other components such as high density chip carrier
sockets and other high frequency related systems.
In November 2000, we agreed to acquire the Lucent Power Systems ("LPS")
business unit of Lucent Technologies, Inc. LPS provides a full line of energy
solutions and power products for telecommunications service providers and for
the computer industry. LPS products include AC/DC and DC/DC switching power
supplies, batteries, power supplies and back-up power systems.
Also included in Tyco Electronics is Tyco Printed Circuit Group ("TPCG"),
one of the largest independent manufacturers of complex multi-layer printed
circuit boards and backplane assemblies in the United States. TPCG manufactures
multi-layer boards, including highly sophisticated, precision tooled, custom
laminated boards with layer counts up to 68. TPCG also produces sophisticated
flexible-rigid circuit boards for use in commercial, aerospace and military
applications. TPCG's backplane facilities produce soldered, press-fit and
surface mount backplane assemblies. In addition, these facilities provide
turnkey manufacturing services including full "box build" products. Printed
circuit boards and backplane products are manufactured on a job order basis to
the customers' design specifications. The majority of sales are derived from
high-density multi-layer boards.
TPCG markets its products primarily through a direct sales force and, to a
lesser extent, through a network of independent manufacturers' representatives.
Customers are OEMs and contract manufacturers in the communications, computer,
aircraft, military and other industrial and consumer electronics industries. We
compete with several other large independent and captive companies that
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manufacture printed circuit board products primarily in the United States.
Competition is on the basis of quality, reliability, price and timeliness of
delivery.
II. TELECOMMUNICATIONS
Tyco's 86% owned subsidiary, TyCom Ltd. ("TyCom"), is a leading independent
provider of transoceanic fiber optic networks and services. TyCom's products and
services include:
- design, engineering, manufacture and installation of undersea cable
communications systems;
- service and maintenance of major undersea cable networks; and
- design, manufacture and installation of a global undersea fiber optic
network, known as the TyCom Global Network-TM- ("TGN"). TyCom plans to
operate, maintain and sell bandwidth capacity on the TGN.
TyCom, a Bermuda Company, was incorporated on March 8, 2000 as a
wholly-owned subsidiary of Tyco to serve as the holding company for its undersea
fiber optic cable communications business. TyCom is the world's only
fully-integrated source for the design, engineering, manufacturing, installation
and servicing of undersea cable communications systems. TyCom designs and builds
both repeatered and non-repeatered fiber optic cable systems. Repeaters are
specialized undersea equipment designed to house and protect optical amplifiers
that amplify voice, video and data signals as they travel across fiber optic
cable. Used typically in systems spanning between 300 and 12,000 kilometers,
repeaters provide the ability to amplify optical signals without first
converting these signals to their electrical equivalents. Non-repeatered
systems, which allow for even greater circuit capacity and reduced transmission
costs, support short haul systems of several hundred kilometers. TyCom has
designed, manufactured and installed over 300,000 kilometers of undersea optical
cable. TyCom Integrated Cable Systems, Inc. is the primary supplier of cable and
cable assemblies to TyCom. It also manufactures underwater electrical power
cables and electro-mechanical cables for unique field operations. Temasa,
acquired during the prior fiscal year, provides a portion of the cable
installation and maintenance operations of TyCom, and is based in Spain.
TyCom is designing, building and installing its own global undersea fiber
optic network, known as the TyCom Global Network ("TGN") and plans to operate,
maintain and sell bandwidth capacity on the TGN. In July 2000, TyCom sold
approximately 14 percent of its common shares in an initial public offering. Net
proceeds from the offfering were approximately $2.1 billion, which will be used
primarily toward the deployment of the TGN. TyCom's principal operating
subsidiaries include TyCom (US) Inc. (formerly Tyco Submarine Systems Ltd.),
TyCom Integrated Cable Systems Inc. (formerly Simplex Technologies) and
Telecomunicaciones Marinas, S.A. ("Temasa").
TyCom Laboratories, the research and development group of TyCom, includes a
world class research and development facility populated by acclaimed engineers
and state of the art equipment to facilitate forward looking design work. TyCom
Laboratories' intellectual property portfolio includes many key enabling
technologies involving terminal transmission and power equipment, optical signal
amplifiers, cable and fiber, network management systems and software,
installation and repair technologies and network integration. TyCom operates one
of the world's largest fleet of ships deployed worldwide to design, maintain,
install and service undersea fiber optic transmission systems. TyCom also uses a
variety of other undersea tools, including robotic vehicles for undersea cable
burial and retrieval operations.
TyCom's sales and marketing personnel consist of professionals with
extensive telecommunication, technical or service backgrounds, and are located
in offices in Bermuda, France, Singapore, the United Kingdom and the United
States.
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As a supplier of undersea fiber optic cable systems, TyCom competes on a
worldwide basis primarily against two other providers: Alcatel-Alsthom and KDD
Submarine Cable Systems Inc. ("KDD"). Other smaller players compete on a more
limited basis, either as subcontractors to other providers or as suppliers of
regional or non-repeatered systems. Alcatel, like TyCom, is vertically
integrated and produces its own cable, whereas KDD utilizes a Japanese cable
manufacturer. Participants in this market compete on the basis of, among other
things, price, technology, time-to-market, the provision of financing and
regional and long-term relationships. In the future, we will be offering less of
our cable system design, manufacturing and installation capacity to our
customers, and our existing competitors and potential new cable system suppliers
will play a more significant role in the undersea cable system market.
As a provider of undersea cable maintenance, TyCom competes primarily with
Global Marine Systems Ltd., a subsidiary of Global Crossing Ltd. as well as
Alcatel and KDD.
There are a number of companies that are pursuing the deployment of global
fiber optic networks, including Global Crossing, FLAG Telecom, Teleglobe,
360networks and 1Cybernetworks. There are other companies that are or will be
selling bandwidth capacity on various shorter distance undersea cable networks.
As TyCom deploys the TGN, it will face competition in the sale of bandwidth
capacity from existing and planned fiber optic cable networks, as well as
satellite providers and, on certain routes, terrestrial networks. In addition,
the first phase of the TGN will compete with certain of TyCom's customers,
including Global Crossing, 360networks, and various participants in cable system
consortia. The planned expansion of the TGN beyond the first phase will likely
also result in competition with these customers as well as some of TyCom's other
customers. Bandwidth customers, such as large telecommunications service
providers, often have ownership interest in networks that may cause them to
favor purchasing capacity on their own networks rather than on the TGN.
III. HEALTHCARE AND SPECIALTY PRODUCTS
Tyco has a strong leadership position in the medical products and plastics
industries. Our products include:
- a wide variety of disposable medical products, including wound care
products, syringes and needles, sutures and surgical staplers,
incontinence products, electrosurgical instruments and laparoscopic
instruments;
- flexible plastic packaging, plastic bags and sheeting, coated and
laminated packaging materials, tapes and adhesives, and plastic garment
hangers; and
- ADT Automotive's auto redistribution services (which was sold on
October 6, 2000).
The principal divisions in the Healthcare and Specialty Products segment are
Tyco Healthcare Group, Tyco Plastics and Adhesives and ADT Automotive.
TYCO HEALTHCARE GROUP
The Tyco Healthcare Group consists of four primary business units including
Kendall Healthcare, Tyco Healthcare International, U.S. Surgical Corporation and
ValleyLab.
Kendall Healthcare, which is comprised of Kendall, Sherwood-Davis & Geck,
Kendall-LTP, Graphic Controls and Confab, manufactures and markets worldwide a
broad range of needles, syringes, electrodes and wound care, specialized paper
and film, vascular therapy, urological care, incontinence care and other nursing
care products to hospitals and to alternate site healthcare customers. Its
Confab unit sells store brand baby diapers and incontinence and feminine hygiene
products through retail outlets in the United States and Canada.
Kendall Healthcare distributes its products in the United States through its
own sales force and through a network of more than 250 independent distributors.
The sales force is divided into five
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groups: vascular therapy products, medical and surgical products, alternate site
markets, Kendall-LTP and Confab.
Tyco Healthcare's competitors include Johnson & Johnson, Becton Dickinson,
Bard and Smith and Nephew, among others.
Kendall Healthcare, which operates throughout the United States, is the
industry leader in gauze products with its Kerlix-Registered Trademark- and
Curity-Registered Trademark- brand dressings. Kendall Healthcare's other core
product category consists of its vascular therapy products, principally
anti-embolism stockings, marketed under the T.E.D.-Registered Trademark- brand
name, sequential pneumatic compression devices sold under the
SCD-Registered Trademark- brand name and a venous plexus foot pump. Kendall
Healthcare pioneered the pneumatic compression form of treatment and continues
to be the leading participant in the pneumatic compression and elastic stocking
segments of the vascular therapy market.
Kendall Healthcare is also an industry leader in the adult incontinence
market serving the acute care, long-term care and retail markets. It offers a
complete line of disposable adult briefs, underpads, baby diapers and other
related products.
Kendall-LTP, which includes Graphic Controls, manufactures and sells a
variety of disposable medical products, specialized paper and film products.
These include medical electrodes and gels for monitoring and diagnostic tests
and hydrogel wound care products, which are used primarily in critical care,
physical therapy and rehabilitative departments in hospitals. Graphic Controls
also sells operating room kits, sharps containers and other operating room
related products.
Tyco Healthcare International is responsible for the manufacturing,
marketing, distribution and export of the Tyco Healthcare Group products outside
of the United States. Tyco Healthcare International markets directly to
hospitals and medical professionals, as well as through independent
distributors. With a presence in more than 75 countries, its operations are
organized primarily into three geographic regions, Europe, Latin America and the
Asia-Pacific region, although the mix of product lines offered varies from
country to country.
U.S. Surgical, a leader in innovative wound closure products and
laparoscopic instrumentation, develops, manufactures and markets its products to
hospitals throughout the world. Its products include surgical staplers, sutures,
disposable laparoscopic instrumentation, in addition to numerous other products
used in surgical and medical specialties including spine surgery, cardiovascular
surgery, cancer biopsies and orthopedic surgery.
ValleyLab is a leading manufacturer and marketer of electrosurgical and
ultrasonic surgical products used in open and minimally invasive surgical
procedures. Additional product lines relate to radio frequency energy and vessel
sealing technology.
In October 2000, we acquired Mallinckrodt Inc. ("Mallinckrodt"), a global
company whose products are used primarily for respiratory care, diagnostic
imaging and pain relief. Mallinckrodt is the leader in the global respiratory
care markets, alternate care markets, diagnostic imaging, and bulk
pharmaceuticals. Mallinckrodt's products are sold to hospitals and alternate
care sites, clinical laboratories, pharmaceutical manufacturers and other
customers on a worldwide basis.
TYCO PLASTICS AND ADHESIVES
Tyco Plastics & Adhesives consists of Tyco Plastics, A&E Products, Tyco
Adhesives and Ludlow Coated Products.
TYCO PLASTICS
Tyco Plastics manufactures polyethylene based films, packaging products,
bags and sheeting in a wide range of size, gauge, strength, stretch capacity,
clarity and color. Tyco Plastics extrudes low density, high density and linear
low density resin purchased in pellet form, incorporating such additives
5
as color, slip and anti-block. Manufacturing facilities are located in all
regions of the US to insure proper customer service and competitive
transportation costs.
Tyco Plastics Products include: Ruffies-Registered Trademark-, a national
brand consumer trash bag sold to mass merchants, grocery chains and other retail
outlets and Film-Gard-Registered Trademark-, a leading plastic sheeting product
sold to consumers and professional contractors through do-it-yourself outlets,
home improvement centers and hardware stores. A wide range of Film-Gard products
are sold for various uses, including painting, renovation, construction,
landscaping and agriculture.
Tyco Plastics sells it product directly to the retailer for resale, to
distributors for resale or directly to end-users. Tyco Plastics competes with
other nationally recognized brands and also many smaller regional producers on
the basis of price, delivery, breadth of product line and specialized product
capabilities.
LUDLOW COATED PRODUCTS
Ludlow Coated Products produces protective packaging and other materials
made of coated or laminated combinations of paper, polyethylene and foil. Coated
packaging materials provide barriers against grease, oil, light, heat, moisture,
oxygen and other contaminants. The division produces structural coated and
laminated products such as plastic coated kraft, linerboard and bleached boards
for rigid urethane insulation panels, automotive components and wallboard
panels. Other product applications include packaging for photographic film,
frozen foods, health care products, electrical and metallic components,
agricultural chemicals, cement and specialty resins. Ludlow is also the dominant
supplier of thin wall insulative sheathing and a major producer and supplier of
breathable housewrap for the building industry.
Ludlow markets its laminated and coated products through its own sales force
and through independent manufacturers' representatives. Ludlow competes with
many large manufacturers of laminated and coated products on the basis of price,
service, marketing coverage and custom application engineering. It has various
specialized competitors in different markets.
TYCO ADHESIVES
The Tyco Adhesives division manufactures and markets specialty adhesive
products and tapes for industrial applications, including external corrosion
protection products for oil, gas and water pipelines. Other industrial
applications include tapes and adhesive films and laminations used in the
automotive industry for wire harness wraps, sealing and other purposes, in the
aerospace industry, in the heating, ventilation and air conditioning (HVAC)
industry and in the medical industry. Tyco Adhesives also produces duct, foil,
strapping, packaging and electrical tapes and spray adhesives for industrial and
consumer markets worldwide and manufacturers cloth and medical tapes for Tyco
Healthcare and others. Tyco Adhesives' Betham division develops and markets
custom pressure sensitive adhesives and coatings, principally for the
automotive, medical and specialty markets.
Tyco Adhesives generally markets its corrosion protection products directly
to its customer base, working with international engineering and construction
companies and the owners and operators of pipeline transportation facilities.
Tyco Adhesives sells its other industrial products either directly to major end
users or through diverse distribution channels, depending upon the industry
being supplied. Products are sold under the Polyken-Registered Trademark-,
Nashua Tape-Registered Trademark-, Raychem-Registered Trademark-,
Betham-Registered Trademark- and National-TM- brand names.
A&E PRODUCTS
A&E Products Group L.P. manufactures and sells garment hangers throughout
the world and associated apparel products and packing materials to garment
manufacturers and merchants in the Americas. The majority of A&E Products'
clientele are garment manufacturers, national, regional and local retailers, as
well as merchants.
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Garment manufacturers place their apparel on A&E hangers before shipping to
retail outlets. Retailers purchase customized hanger designs created and
manufactured for them exclusively by A&E Products as well as a standard line of
hangers to save time and money. A&E Products also produces a line of plastic
hangers available for sale to the private customer.
In addition to the manufacturing and selling of new hangers, A&E Products
also operates hanger-recycling facilities in the United States and Europe. Used
hangers are bought from various retailers; they are then sorted, processed and
repackaged for sale back to the general marketplace.
ADT AUTOMOTIVE
In October 2000, we sold our ADT Automotive business, which performed auto
redistribution services.
IV. FIRE AND SECURITY SERVICES
Tyco is the world's leading provider of fire protection and electronic
security services. Our products and services include:
- designing, installing and servicing of a broad line of fire detection,
prevention and suppression systems;
- providing electronic security installation and monitoring services; and
- manufacturing and servicing of fire extinguishers and related products.
FIRE PROTECTION CONTRACTING AND SERVICES
Operating under several trade names including Grinnell, Wormald, Mather &
Platt, Total Walther, O'Donnell Griffin, Dong Bang, Ansul and Tyco, we design,
fabricate, install and service automatic fire sprinkler systems, fire alarm and
detection systems, and special hazard suppression systems in buildings and other
installations. Tyco's fire protection contracting and service business utilizes
a worldwide network of sales offices.
We install fire protection systems in both new and existing structures.
Typically, the contracting businesses bid on contracts for fire protection
installation which are let by owners, architects, construction engineers and
mechanical or general contractors. In recent years, the business of retrofitting
existing buildings has grown as a result of legislation mandating the
installation of fire protection systems and also as a result of lower insurance
premiums available to structures with automatic sprinkler systems. We continue
to focus on system maintenance and inspection, which has become a more
significant part of the business.
The majority of the fire suppression systems installed by Tyco are
water-based. However, we are also the world's leading provider of custom
designed hazard fire protection systems which incorporate various specialized
non-water agents such as foams, dry chemicals and gases. Systems using agents
other than water are especially suited to fire protection in certain
manufacturing, power generation, petrochemical, offshore oil exploration,
transportation, telecommunications, mining and marine applications. We hold
exclusive manufacturing and distribution rights in several regions of the world
for INERGEN-Registered Trademark- fire suppression products. INERGEN is an
alternative to the ozone depleting agent known as halon and consists of a
mixture of three inert gases designed to effectively extinguish fires without
polluting the environment, damaging costly equipment or harming people.
In Australia, New Zealand and Asia, Tyco also engages in the installation of
electrical wire and related electrical equipment in new and existing structures
and provides specialized electrical contracting services, including applications
for railroad and bridge construction, primarily through its O'Donnell Griffin
division.
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Substantially all of the mechanical components (and, in North America, a
high proportion of the pipe) used in the fire protection systems installed by us
are manufactured by us. We also have fabrication plants worldwide that cut,
thread and weld pipe, which is then shipped with other prefabricated components
to job sites for installation. We have developed our own computer-aided-design
technology that reduces the time required to design systems for specific
applications and coordinates the fabrication and delivery of system components.
Generally, competition in the fire protection business varies by geographic
location. In North America, Tyco competes with hundreds of smaller contractors
on a regional or local basis for the installation of fire suppression and fire
alarm and detection systems. Many of the regional and local competitors employ
non-union labor. In Europe, Tyco competes with many regional or local
contractors on a country by country basis. In Australia, New Zealand and Asia,
we compete with a few large fire protection contractors as well as with many
smaller regional or local companies. Tyco competes for fire protection contracts
primarily on the basis of price, service and quality.
ELECTRONIC SECURITY SERVICES
We provide electronic security services principally under the ADT trade name
and also under other trade names including Alarmguard, Thorn Security, Total
Walther, Holmes Protection, CIPE, CAPS, Zettler, Sonitrol, TEPG and Armourguard.
We provide electronic security services primarily in North America, Europe, the
Middle East, the Asia-Pacific region and Latin America.
Electronically monitored security systems involve the installation and use
on a customer's premises of devices designed to detect or react to various
occurrences or conditions, such as intrusion, movement, fire, smoke, flooding,
environmental conditions (including temperature or humidity variations),
industrial operations (such as water, gas or steam pressure and process flow
controls) or other hazards. These detection devices are connected to a
microprocessor-based control panel which communicates through telephone lines to
a monitoring center, often located at remote distances from the customer's
premises, where alarm and supervisory signals are received and recorded. In most
systems, control panels can identify the nature of the alarm and the areas
within a building where the sensor was activated. Depending upon the type of
service for which the subscriber has contracted, monitoring center personnel
respond to alarms by relaying appropriate information to the local fire or
police departments, notifying the customer or taking other appropriate action,
such as dispatching employees to the customer's premises. In some instances, the
customer may monitor the system at its own premises or the system may be
connected to local fire or police departments.
We provide electronic security services to both commercial and residential
customers. Our commercial customers include financial institutions, industrial
and commercial businesses, facilities of federal, state and local government
departments, defense installations, and health care and educational facilities.
We provide residential electronic security services primarily in North America
and Europe, with a growing presence in the Asia-Pacific region. Our customers
are often prompted to purchase security systems by their insurance carriers,
which may offer lower insurance premium rates if a security system is installed
or require that a system be installed as a condition to coverage.
We also offer event monitoring and inspection services. We are the global
leader for the supply of event monitoring in the security industry. In addition
to the traditional monitoring of a burglar alarm system, Tyco monitors fire
alarms, heating services, medical alert systems, and activity where around the
clock monitoring and response is required. We also offer regular inspection and
maintenance services so that systems will function appropriately and are
upgraded as technology or risk profiles change.
Our electronic security systems and products are tailored to our customers'
specific needs and include electronic monitoring services that provide intrusion
and fire detection, as well as card or keypad activated access control systems
and closed circuit television ("CCTV") systems. Systems may be monitored by the
customer at its premises or connected to one of our monitoring centers. In
either case, we usually provide support and maintenance through service
contracts. It has been our experience
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that commercial and residential contracts are generally renewed after their
initial terms. Contract discontinuances occur principally as a result of
customer relocation or closure. Systems installed at commercial customers'
premises may be owned by us or by our customer. We usually retain ownership of
standard residential systems, but more sophisticated residential systems are
usually purchased by our customers.
We market our electronic security services to commercial and residential
customers through a direct sales force and an authorized dealer network.
Commercial customers are serviced by a separate national accounts sales force.
We also utilize advertising, telemarketing and direct mail to market our
services.
The electronic security services business in North America is highly
competitive, with a number of major firms and approximately 12,000 smaller
regional and local companies. Tyco also competes with several national companies
and several thousand regional and local companies in Europe, the Middle East,
the Asia-Pacific region and Latin America. Competition is based primarily on
price in relation to quality of service. We believe that the quality of our
electronic security services is higher than that of many of our competitors and,
therefore, our prices may be higher than those charged by our competitors.
In December 2000, we agreed to acquire Simplex Time Recorder Co.
("Simplex"). Simplex manufactures fire and security products and communications
systems including control panels, detection devices and system software. Simplex
also installs, monitors and services fire alarms, security systems and access
control systems.
MANUFACTURING
Our Ansul subsidiary manufactures and sells various lines of dry chemical,
liquid and gaseous portable fire extinguishers and related agents for
industrial, government, commercial and consumer applications. Ansul also
manufactures and sells special hazard fire suppression systems designed for use
in restaurants, marine applications, mining applications, the petrochemical
industry, confined industrial spaces and commercial spaces housing electronic
and other delicate equipment. Ansul also manufactures spill control products
designed to absorb, neutralize and solidify spills of various hazardous
materials.
Our Fire and Security Services segment manufactures certain alarm, detection
and activation devices and central monitoring station equipment which is both
installed by our own units and sold to other installers of alarm and detection
devices. Otherwise, we do not manufacture the electronic security system
components which we install, although we do provide our own specifications to
manufacturers for certain security system components and undertake some final
assembly work in respect of more sophisticated systems. These products are
manufactured primarily outside of the United States.
V. FLOW CONTROL PRODUCTS AND SERVICES
Tyco is the world's leading manufacturer of industrial valves and controls.
Our products and services include:
- a full line of valves and related products for industrial and process
control including butterfly, gate, globe, check, ball, plug, safety
relief, knife-gate, instrumentation, sampling, and other valves as well as
actuators, positioners, couplings and related products, which are used to
transport, control and sample liquids, gases, powders and other
substances;
- pipe and tubular products, made primarily from steel, ductile iron and
plastic and utilized in the mechanical tubing, construction, automotive,
water distribution, fencing products and other markets;
9
- electrical raceway products, including steel conduit, pre-wired armored
cable, flexible conduit, steel support systems and fasteners, cable tray
and cable ladder;
- a broad range of consulting, engineering, construction management and
operating services for the water, wastewater, environmental,
transportation and infrastructure markets; and
- fire sprinkler devices, specialty valves, steel pipe, plastic pipe and
fittings and pipe couplings used in commercial, residential and industrial
fire protection systems.
MANUFACTURING AND SERVICES
VALVES AND CONTROLS
Tyco Flow Control manufactures a wide variety of standard and highly
specialized valves and related products on a worldwide basis in a variety of
configurations, body types, materials, pressure ratings and sizes. The group
also manufactures related equipment and products such as valve actuators,
gauges, positioners, valve control systems, vapor control products, heat tracing
and leak detection systems and other related products. These products are
manufactured in Tyco's facilities located throughout North America, Europe,
South America and the Asia-Pacific region. The group's valves and related
products are used in power generation, chemical, petrochemical, oil and gas,
water distribution, wastewater, pulp and paper, commercial irrigation, mining,
industrial process, food and beverage, plumbing, HVAC and other applications.
Tyco Flow Control also provides engineering, design, inspection, repair and
commissioning services.
Tyco's valves and related products are sold under several trade names,
including Keystone, Grinnell, Hindle, KTM, Flow Control Technologies, Gachot,
Richards, Sapag, Winn, Vanessa, Raimondi, Fasani, Sempell, Descote, Klein,
Biffi, Morin Actuators, Westlock Controls, Crosby, Anderson Greenwood, Yarway,
Valvtron, Neotecha, Belucci, Intecva, Bayard, Belgicast, Whessoe Varec and many
others. Tyco Flow Control sells heat tracing products and services under the
Raychem HTS, Tracer Industries, Accutron and Isopad names.
PIPE AND TUBULAR PRODUCTS
Tyco Flow Control manufactures steel pipe and tubular products at a number
of locations in North America, the United Kingdom, Brazil and Australia.
Allied Tube & Conduit ("Allied") is the leading North American manufacturer
of steel tubular products including (i) mechanical tubing in a wide assortment
of shapes and sizes for a variety of industrial and commercial applications,
(ii) tubing products for the residential, industrial and commercial fence
market, and (iii) light wall steel trusses and studs for the residential and
commercial construction industry. Other specialty products include steel
signposts, welded steel fittings, welded and roll formed carbon steel tubing and
shapes, and stainless steel razor tape.
Tyco Flow Control manufactures and distributes welded and drawn steel tube
products in the United Kindgom under the trade names of Newman Monmore, Newman
Phoenix, Tyco Tube Components and HUB LeBas. We manufacture specialty steel
strip products under the JB&S Lees, Firth Cleveland Steel Strip and Ductile
Stourbridge trade names and also in Brazil under the trade name of Frefer. In
Australia, Tyco Flow Control manufactures ductile and steel pipe, steel
fittings, valves and related products primarily for the water industry at
several locations under the trade name Tyco Water. We also manufacture a line of
plastic pipe and fittings in Australia and Malaysia.
ELECTRICAL PRODUCTS
Tyco Flow Control manufactures electrical raceway and related products in
North America, Europe and the Asia-Pacific region. Our products include steel
electrical conduit, pre-wired armored cable, flexible electrical conduit, metal
framing systems, cable tray and cable ladder and related products
10
utilized in the construction, industrial and original equipment markets. In
North America, Allied is the leading manufacturer of steel electrical conduit
and AFC Cable Systems is the leading manufacturer of steel and aluminum
pre-wired armored cable. Georgia Pipe manufactures plastic conduit. Allied
manufactures metal framing and support systems and electrical cable tray and
cable ladders in North America and sells them under the Powerstrut, Unistrut and
T.J. Cope trade names. We also manufacture metal framing and support products in
Europe, which we sell under the Unistrut trade name. In Australia and Asia, we
manufacture and sell these products under the Unistrut, A.C.S. and other trade
names. We manufacture specialty fastening products in the United Kingdom under
the Lindapter trade name.
ENGINEERING SERVICES
Through its Earth Tech subsidiary, the Flow Control group provides a broad
range of environmental, consulting and engineering services. Earth Tech's
principal services consist of full-spectrum water, wastewater, environmental and
hazardous waste management services. These services include infrastructure
design and construction services for institutional, civic, commercial and
industrial clients; design, construction management, project financing and
facility operating services for water and wastewater treatment facilities for
municipal and industrial clients; and transportation engineering and consulting.
Earth Tech operates through a network of offices in the United States,
Canada, the United Kingdom and Brazil.
FIRE PROTECTION PRODUCTS
The Flow Control group manufactures, sells and distributes a wide variety of
products utilized by fire protection contractors and fabricators of fire
protection systems. These products include a complete line of fire sprinkler
devices, valves, plastic pipe and pipe fittings and ductile iron pipe couplings.
We sell these products to third parties as well as to our fire protection
contracting businesses on an arms-length basis. We manufacture our products in
the United States, the United Kingdom, Germany, China and Malaysia and sell them
under the Central Sprinkler, GEM Sprinkler, Star Sprinkler and Spraysafe trade
names. In North America, Allied also manufactures and sells a complete line of
steel pipe for use in fire protection systems.
SALES AND DISTRIBUTION
We sell valves and related products in some locations directly by an
internal sales force and in other geographical areas by a network of independent
distributors and manufacturer's representatives. The valve industry is highly
fragmented and we compete against a number of international, national and local
manufacturers as well as against specialized manufacturers on the basis of
price, delivery, breadth of product line and specialized product capability.
Allied competes for the sale of steel pipe and tube with other United States
and non-United States producers. The group's pipe and tubular products
manufactured in the United Kingdom, Australia and Brazil compete primarily with
other local and national producers in those countries. Competition is based on
price, service and breadth of product line. Competition for fence products is
principally from national and regional United States producers and to a lesser
extent from non-United States companies on the basis of price, service and
distribution. Allied competes with many small regional manufacturers for the
sale of specialized industrial tubing on the basis of price and breadth of
product line. The group's electrical raceway and related products are sold
through independent distributors and agents. Competition for electrical products
is from local and national companies in each country on the basis of price,
delivery and service. Earth Tech competes with a number of international,
national, regional and local companies on the basis of price and the breadth and
quality of their services.
11
For fire protection products in the United States, Central Sprinkler
maintains a network of distribution facilities which stock and sell a full line
of fire protection products directly to contractors and installers. GEM
Sprinkler and Star Sprinkler sell fire protection products through a network of
independent distributors. In Canada, Central America, South America and the
Asia-Pacific region, we sell fire protection products through independent
distribution and in some cases directly to fire protection contractors. In
Europe and the Middle East, we operate a number of company owned distribution
facilities which stock and sell a full line of fire protection, mechanical and
other flow control products. Competition for the sale of fire products is based
on price, delivery, breadth of product line and specialized product capability.
The principal competitors are specialty products manufacturing companies based
in the United States, with other smaller competitors in Europe and Asia.
BACKLOG
At September 30, 2000, we had a backlog of unfilled orders of approximately
$8,214.8 million, compared to a backlog of approximately $7,581.1 million as of
September 30, 1999. We expect that approximately 86% of our backlog at
September 30, 2000 will be filled during the year ending September 30, 2001.
Backlog by industry segment is as follows ($ in millions):
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
Telecommunications.......................................... $2,941.7 $3,535.4
Electronics................................................. 2,335.7 1,439.1
Flow Control Products and Services.......................... 1,711.4 1,516.5
Fire and Security Services.................................. 1,134.9 986.6
Healthcare and Specialty Products........................... 91.1 103.5
-------- --------
$8,214.8 $7,581.1
======== ========
The decrease in backlog within the Telecommunications segment is due to
TyCom devoting a substantial portion of its resources to designing and
manufacturing the TGN and therefore taking on less work as a supplier of
undersea fiber optic cable systems for others. Within the Electronics segment,
backlog increased principally due to an increase in demand for the products
manufactured by AMP and Raychem, and to a lesser extent, the effect of
acquisitions. Within the Flow Control Products and Services segment, the
increase was principally due to increased backlog at Earth Tech, related to new
contract bookings and water and waste water facility contracts, and an increase
in demand for its valves and control products. Within the Fire and Security
Services segment, backlog increased principally due to long-term service
contracts in the Australian fire protection business and, to a lesser extent,
the effect of acquisitions. Backlog in the Healthcare and Specialty Products
segment is not indicative of the level of sales activity. Backlog in this
segment generally represents unfilled orders which are shipped shortly after
puchase orders are received.
PROPERTIES
Our operations are conducted in facilities throughout the world aggregating
some 74.8 million square feet of floor space, of which approximately
39.9 million square feet are owned and approximately 34.9 million square feet
are leased. These facilities house manufacturing, distribution and warehousing
operations as well as sales and marketing, engineering and administrative
offices.
The Electronics segment has manufacturing facilities in North America,
Central and South America, Europe and Asia. The group occupies some
31.6 million square feet, of which 18.9 million square feet are owned and
12.7 million square feet are leased.
12
The Healthcare and Specialty Products segment has manufacturing facilities
in North America, Europe and Asia. The group occupies some 20.5 million square
feet, of which 11.9 million square feet are owned and 8.6 million square feet
are leased.
The Flow Control Products and Services segment has manufacturing facilities,
warehouses and distribution centers throughout North America, Europe, Australia,
Asia and Central and South America. The group occupies some 7.8 million square
feet, of which 5.8 million square feet are owned and 2.0 million square feet are
leased.
Within the Fire and Security Services segment, the fire protection
contracting and service business operates through a network of offices located
in North America, Central America, South America, Europe, the Middle East and
Asia-Pacific regions. Fire protection components are manufactured at locations
in North America, the United Kingdom, Germany, Australia, New Zealand and South
Korea. The electronic security services business operates through a network of
monitoring centers and sales and service offices and other properties in North
America, Europe, the Asia-Pacific region and Latin America. The environmental
services business operates through a network of offices throughout North
America. The group occupies some 13.4 million square feet, of which 2.5 million
square feet are owned and 10.9 million square feet are leased.
The Telecommunications segment has manufacturing and storage facilities in
North America, Hawaii, St. Croix, Guam and Spain, and sales and administrative
offices in Bermuda, North America, Singapore, Spain and France. The group
occupies some 1.5 million square feet, of which 0.8 million square feet are
owned and 0.7 million are leased.
In the opinion of management, Tyco's properties and equipment generally are
in good operating condition and are adequate for our present needs. We do not
anticipate difficulty in renewing existing leases as they expire or in finding
alternative facilities. See Note 17 to Consolidated Financial Statements for a
description of our rental obligations.
RESEARCH AND DEVELOPMENT
The amounts expended for Tyco-sponsored research and development during
Fiscal 2000, Fiscal 1999, and Fiscal 1998 were $527.5 million, $450.5 million
and $511.4 million, respectively. Customer-funded research and development
expenditures were $18.6 million, $4.6 million and $6.8 million, respectively.
Approximately 7,900 full-time scientists, engineers and other technical
personnel are engaged in our product research and development activities.
Research activity at TyCom involves the continuing design and development of
processes for the next generation of undersea fiber optic cable. Activity at
Tyco Electronics focuses on new product development and a continual expansion of
technical capabilities. Tyco Healthcare focuses on acquiring rights to new
products and technologies to complement existing product lines and applying
expertise to refine and successfully commercialize such products and
technologies. Research activity in the Fire and Security Services and Flow
Control Products and Services segments is related to improvements in hydraulic
design which controls the motion of fluids, resulting in new sprinkler devices
and flow control products. Research and development activity at the specialty
packaging companies involves new product applications.
RAW MATERIALS
We are one of the largest buyers of steel and plastic resin in the United
States. Other principal materials include copper, brass, plastic, gold,
polyethylene resin and film, polypropylene, electronic components, chemicals and
additives, thin and flexible copper clad materials, paper, ink, foil, adhesives,
cloth, wax, pulp and cotton. Certain of the materials used in the Fire and
Security Services segment and the Flow Control Products and Services segment,
principally certain valves and fittings and security
13
systems, are purchased for installation in fire protection systems or for
distribution. Materials are purchased both inside and outside of the United
States from a large number of independent sources. There have been no shortages
in materials which have had a material adverse effect on our businesses.
PATENTS AND TRADEMARKS
We own a number of patents which principally relate to electrical and
electronic products, healthcare and specialty products, fire protection devices,
electronic security systems, flow control products, pipe and tubing manufacture,
and cable manufacture. We also own a number of trademarks and are a licensee
under a number of patents. Although these have been of value and are expected to
continue to be of value in the future, in the opinion of management, the loss of
any single patent or group of patents would not materially affect the conduct of
the business in any of our segments. The patents and licenses have remaining
lives of from one to twenty years. Kendall, part of Tyco Healthcare, sells
certain products under trade names owned by its suppliers and packages certain
products under customer trademarks and labels.
EMPLOYEES
Tyco employed approximately 202,000 persons at September 30, 2000, of which
approximately 90,000 are employed in the United States and 112,000 outside the
United States. These amounts exclude approximately 13,000 persons who work for
Mallinckrodt Inc., which we acquired in October 2000. We have collective
bargaining agreements with labor unions covering approximately 36,000 employees
at certain of our North American, European and Asia-Pacific businesses. We
believe that our relations with the labor unions and with our employees are
generally satisfactory. In April 1994, following lengthy negotiations, contracts
between our Grinnell Corporation ("Grinnell") subsidiary and a number of local
unions affiliated with the United Association of Plumbers and Pipefitters were
not renewed. Employees in those locations, representing 64 percent of Grinnell
Fire Protection's North American union employees at the time of their strike in
1994, continue to be on strike. Grinnell has continued to operate with former
union members who have crossed over and with replacement workers. The labor
action is still pending. The action has not had, and is not expected to have,
any material adverse effect on our business or results of operations.
ENVIRONMENTAL MATTERS
We make a substantial effort to operate our facilities in compliance with
laws relating to the protection of the environment. Compliance has not had and
is not expected to have a material adverse effect upon our capital expenditures,
earnings or competitive position.
We believe that, consistent with applicable laws and regulations, we
exercise due care and take appropriate precautions in the management of wastes.
We have received notification from the United States Environmental Protection
Agency, and from certain state environmental agencies, that conditions at a
number of sites where we and others disposed of hazardous wastes require cleanup
and other possible remedial action.
We also have a number of projects underway at several of our manufacturing
facilities in order to comply with environmental laws. In addition, we remain
responsible for certain environmental issues at manufacturing locations sold by
us. These projects relate to a variety of activities, including solvent and
metal contamination clean up and oil spill equipment upgrades and replacement.
These projects, some of which are voluntary and some of which are required under
applicable law, involve both remediation expenses and capital improvements.
The ultimate cost of site cleanup is difficult to predict given the
uncertainties regarding the extent of the required cleanup, the interpretation
of applicable laws and regulations and alternative cleanup methods. Based upon
our experience with the foregoing environmental matters, we have concluded that
there is at least a reasonable possibility that remedial costs will be incurred
with respect to these issues
14
in an aggregate amount in the range of $32.9 million to $95.2 million. As of
September 30, 2000, we had concluded that the most probable amount which would
be incurred within this range was $68.3 million, $35.4 million of such amount is
included in accrued expenses and other current liabilities and $32.9 million is
included in other long-term liabilities in the Consolidated Balance Sheet. Based
upon information available to us, at those sites where there has been an
allocation of the liability for cleanup costs among a number of parties,
including Tyco, and such liability could be joint and several, management
believes it is probable that other responsible parties will fully pay the cost
allocated to them, except with respect to one site for which we have assumed
that one of the identified responsible parties will be unable to pay the cost
apportioned to it and that such party's cost will be reapportioned among the
remaining responsible parties. In view of our financial position and reserves
for environmental matters of $68.3 million, we have concluded that our payment
of such estimated amounts will not have a material adverse effect on our
consolidated financial position, results of operations or liquidity.
ITEM 2. PROPERTIES
See Item 1. "Business--Properties" for information relating to the Company's
owned and leased properties.
ITEM 3. LEGAL PROCEEDINGS
SECURITIES LITIGATION
Beginning on December 9, 1999, Tyco and two Tyco executive officers were
named as defendants in thirty-eight substantially identical class action
lawsuits that were filed in various federal courts seeking damages on account of
alleged violations of the securities laws in connection with Tyco's financial
disclosures concerning certain mergers and acquisitions and Tyco's accounting
therefor. All of the cases have been consolidated for pretrial purposes before
the United States District Court for the District of New Hampshire.
The Court has selected lead plaintiffs. A Second Amended Class Action
Complaint and Jury Trial Demand was filed on November 2, 2000, purporting to
name two additional Tyco officers and a Tyco Director as defendants. In the
Second Amended Complaint, plaintiffs seek certification of a class of persons
who purchased or acquired Tyco securities during the period from October 1,
1998, through December 8, 1999, as well as certification of certain subclasses.
The plaintiffs seek money damages and/ or rescission. The Court has set a
schedule for briefing a motion to dismiss this action.
TYCO SUBMARINE SYSTEMS LTD./GLOBAL CROSSING LITIGATION
TyCom (US) Inc. (formerly known as Tyco Submarine Systems Ltd.), a
subsidiary of Tyco, is named as the defendant in an action brought in the United
States District Court for the Southern District of New York on May 22, 2000 by
Global Crossing Ltd. and its subsidiary South American Crossing (Subsea) Ltd.
The complaint alleges that, in connection with the development of a South
American subsea cable system to be owned by South American Crossing
(Subsea) Ltd., TyCom (US) Inc. misappropriated trade secrets, committed fraud,
breached several alleged agreements, and defamed South American Crossing
(Subsea) Ltd. Plaintiffs seek damages, including punitive damages, in excess of
$1 billion, attorneys' fees and costs, and declarative and injunctive relief.
TyCom (US) Inc. has answered the complaint, denying its material allegations
and raising various defenses to plaintiffs' claims. Additionally, TyCom
(US) Inc. has asserted counterclaims that South American Crossing
(Subsea) Ltd., at the instance of Global Crossing Ltd., breached the parties'
construction contract. TyCom (US) Inc. seeks damages of not less than
$150 million and attorneys' fees and costs, as well as declarative relief.
Plaintiffs have replied to the counterclaims and denied the material allegations
therein.
15
The Court has set February 28, 2001, as the date for completion of all party
and third-party fact discovery.
TYCO SUBMARINE SYSTEMS LTD./GLOBAL CROSSING ARBITRATION
TyCom (US) Inc. (formerly known as Tyco Submarine Systems Ltd.), a
subsidiary of Tyco, is named as the defendant in an arbitration proceeding that
was commenced on May 22, 2000 by Atlantic Crossing Ltd., GT Landing Corp., GT
U.K. Ltd., Global Telesystems GmbH, and GT Netherlands BV (all subsidiaries of
Global Crossing Ltd.) under the international rules of the American Arbitration
Association. In the notice of arbitration, claimants assert that TyCom
(US) Inc. breached an alleged duty of loyalty and three agreements between the
parties relating to the Atlantic Crossing-1 subsea cable system. Claimants seek
unspecified monetary damages and declarative and injunctive relief. The parties
have since agreed to terminate one of the agreements at issue (the operations,
administration and maintenance agreement) in exchange for mutual releases,
payments to TyCom (US) Inc. of approximately $19 million, and a dismissal from
the arbitration of claims arising out of that agreement.
TyCom (US) Inc. has responded to claimants' notice of arbitration, denying
the claims therein and asserting counterclaims for claimants' breaches of the
parties' agreements by refusing to pay certain costs, expenses, and commissions
due and owing to TyCom (US) Inc. TyCom (US) Inc. seeks the denial of all relief
sought by claimants, full disclosure and an accounting of certain contracts,
damages of more than $188 million, and an award of interest and other costs. On
July 24, 2000, claimants replied to TyCom (US) Inc.'s statement of defenses and
counterclaims, denying the material allegations therein.
A panel of three arbitrators has been appointed. Hearings in the arbitration
are scheduled to commence on December 18, 2000. Pursuant to the parties'
commission sharing agreement, the parties have, at the arbitrators' direction,
agreed on an independent auditor who is examining the amount of sales
commissions owing to TyCom (US) Inc. under the parties' agreements.
TYCO SUBMARINE SYSTEMS LTD./IDT
On January 31, 2000, IDT Europe B.V.B.A. filed a complaint in the United
States District Court for the District of New Jersey asserting claims against
TyCom (US) Inc. (formerly known as Tyco Submarine Systems Ltd.) and Tyco Group
S.a.r.l., a Luxembourg subsidiary of Tyco International Ltd. The claims arose
out of negotiations conducted by Tyco Group S.a.r.l. with IDT Europe B.V.B.A., a
Belgian corporation, concerning the possible formation of a joint venture for
the development of an undersea fiber optic telecommunications system to be
supplied by TyCom (US) Inc., which the complaint alleged was to be substantially
similar to the proposed TyCom Global Network. The plaintiff, IDT Europe
B.V.B.A., alleged that Tyco Group S.a.r.l. breached a Memorandum of
Understanding dated November 9, 1999 (which expired in December 1999), and
alleged implied covenants of good faith and fair dealing and made various other
claims. The plaintiff sought, among other relief such as attorneys' fees and
costs, specific performance of Tyco Group S.a.r.l.'s alleged obligation to
negotiate and execute such agreements, as well as compensatory and punitive
damages. With respect to TyCom (US) Inc., the plaintiff alleged breach of an
agreement by which the plaintiff reserved manufacturing capacity for the cable
system and authorized the undertaking of certain long-lead time activities.
Plaintiff also alleged that TyCom (US) Inc. failed to negotiate in good faith a
system supply agreement for the cable system. The plaintiff sought, among other
relief such as attorneys' fees and costs, compensatory damages of $1 billion,
punitive damages of $3 billion and injunctive relief precluding TyCom (US) Inc.
from undertaking any business activity contrary to the terms of the Instruction
to Proceed. On June 5, 2000, the court granted Tyco Group S.a.r.l. and TyCom
(US) Inc.'s motion to dismiss.
On March 24, 2000, Tyco Group S.a.r.l., TyCom (US) Inc., Tyco International
Ltd., Tyco International (US) Inc., and TyCom Ltd. filed a complaint in the
Supreme Court of the State of New York, County of New York, asserting claims
against IDT Europe B.V.B.A. and IDT Corporation
16
(collectively "IDT"). The complaint alleged that IDT filed a baseless lawsuit in
federal court in New Jersey, improperly disclosed confidential information to
the press and otherwise engaged in a pattern of conduct with the purpose and
effect of obstructing efforts to build the TyCom Global Network and to finance
it principally through the initial public offering of TyCom shares. The
complaint demanded compensatory damages of at least $1 billion, punitive damages
and declaratory and injunctive relief. On June 19, 2000, the court denied IDT
Corporation's motion to dismiss and referred IDT Europe B.V.B.A.'s motion to
dismiss to a referee to hear and report with recommendations.
On June 13, 2000, IDT Europe B.V.B.A. filed a complaint in the Superior
Court of New Jersey, Law Division, Morris County, against Tyco Group (S.a.r.l.),
TyCom (US) Inc., Tyco International Ltd., and Tyco International (US) Inc. The
complaint made factual allegations similar to those previously asserted in the
federal complaint in the United States District Court for the District of New
Jersey, along with additional allegations regarding, among other things, a
purported agreement between TyCom (US) Inc. and Global Crossing. The complaint
asserted claims, similar to those previously asserted in the complaint in
federal court. The plaintiff sought, among other relief such as attorneys' fees
and costs, specific performance, compensatory damages of $1 billion, punitive
damages of $3 billion and injunctive relief. On August 18, 2000, the Court
granted the defendants' motion to dismiss without prejudice, and on the
condition that defendants may not defend any subsequent action by plaintiff upon
the grounds of statute of limitations.
On October 10, 2000, Tyco Group (S.a.r.l.), TyCom (US) Inc., Tyco
International Ltd., Tyco International (US) Inc., and TyCom Ltd. entered into a
Settlement Agreement with IDT Europe B.V.B.A. and IDT Corporation which
encompasses all actual and potential claims asserted in the actions before the
United States District Court for the District of New Jersey, the Supreme Court
of the State of New York, County of New York, and the Supreme Court of New
Jersey, Law Division, Morris County. Under the terms of the Settlement
Agreement, TyCom Ltd. granted IDT Europe B.V.B.A. rights to use a certain
limited amount of capacity on the transatlantic and transpacific segments of the
first phase of the TGN free of charge.
Tyco has agreed to indemnify TyCom (US) Inc. for certain losses and expenses
with respect to the claims brought in these federal litigation and arbitration
proceedings, excluding losses and expenses arising out of any award of
injunctive relief.
See also the discussions under Item 1. "Business--Environmental Matters".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Tyco's executive officers and executive officers of certain subsidiaries are
as follows (1):
L. Dennis Kozlowski, age 54, Chairman of the Board, President and Chief
Executive Officer since July 1997. Chairman of the Board of Former Tyco from
January 1993 to July 1997; Chief Executive Officer of Former Tyco since
July 1992, President of Former Tyco since 1989; associated with Former Tyco
since 1975.
Mark A. Belnick, age 54, Executive Vice President and Chief Corporate
Counsel since September 1998. Prior to joining Tyco, Mr. Belnick was a Senior
Partner at the international law firm of Paul, Weiss, Rifkind, Wharton &
Garrison since 1987.
Jerry R. Boggess, age 56, President of Tyco Fire and Security Services since
August 1993. Vice President of Former Tyco since February 1996; associated with
Former Tyco since 1968.
Neil R. Garvey, age 45, President and Chief Executive Officer of TyCom Ltd.
since July 2000. President and Chief Executive Officer of Tyco Submarine
Systems Ltd. from July 1997 to July 2000;
17
President of Simplex Technologies from July 1995 to June 1997; associated with
Former Tyco since 1979.
Juergen W. Gromer, age 55, President of Tyco Electronics since April 1999.
Senior Vice President, Worldwide Sales and Service of AMP from 1998 to
April 1999; President, Global Automotive Division, and Corporate Vice President
of AMP from 1997 to 1998; Vice President and General Manager of various
divisions of AMP from 1990 to 1997.
Stephen B. McDonough, age 47, President of Tyco Flow Control Products since
November 2000. President of Tyco Plastics and Adhesives since May 1997;
President of A&E Molded Products from January 1997 to May 1997; Vice President
and General Manager of Ludlow Laminating and Coating from July 1991 to
January 1997; associated with Former Tyco since 1979.
Richard J. Meelia, age 51, President of Tyco Healthcare Group since 1995.
Group President of Kendall Healthcare Products Company from January 1991 to
1995.
Mark H. Swartz, age 40, Executive Vice President and Chief Financial Officer
since July 1997. Vice President and Chief Financial Officer of Former Tyco since
February 1995; associated with Former Tyco since 1991.
------------------------
(1) In July 1997, a wholly-owned subsidiary of what was formerly called ADT
Limited ("ADT") merged with Tyco International Ltd., a Massachusetts
Corporation ("Former Tyco"). Upon consummation of the merger, ADT (the
continuing public company) changed its name to Tyco International Ltd.
Former Tyco became a wholly-owned subsidiary of the Company and changed its
name to Tyco International (US) Inc. ("Tyco US").
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SECURITY HOLDER
MATTERS
The number of registered holders of Tyco's common shares at November 13,
2000 was 34,675.
Tyco common shares are listed and traded on the New York Stock Exchange
("NYSE"), the London Stock Exchange and the Bermuda Stock Exchange. The
following table sets forth the high and low sales prices per Tyco common share
as reported by the NYSE and the dividends paid on Tyco common shares, for the
quarterly periods presented below. The price and dividends for Tyco common
shares have been restated to reflect a two-for-one stock split distributed on
October 21, 1999, which was effected in the form of a stock dividend.
FISCAL 2000 FISCAL 1999
---------------------------------- ----------------------------------
MARKET PRICE RANGE MARKET PRICE RANGE
------------------- DIVIDEND PER ------------------- DIVIDEND PER
QUARTER HIGH LOW COMMON SHARE HIGH LOW COMMON SHARE
------- -------- -------- ------------ -------- -------- ------------
First..................... $53.8750 $23.0625 $0.0125 $39.5938 $20.1563 $0.0125
Second.................... 53.2500 32.0000 0.0125 39.9688 33.7500 0.0125
Third..................... 51.3750 41.0000 0.0125 47.4063 35.1875 0.0125
Fourth.................... 59.1875 45.5625 0.0125 52.9375 47.1250 0.0125
------- -------
$ 0.05 $ 0.05
======= =======
18
PART II
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of Tyco as at and for the fiscal years ended September 30, 2000, 1999 and 1998,
the nine-month fiscal period ended September 30, 1997 and the year ended
December 31, 1996. This selected financial information should be read in
conjunction with Tyco's Consolidated Financial Statements and related notes. The
selected financial data reflect the combined results of operations and financial
position of Tyco, Former Tyco, Keystone, Inbrand (from January 1, 1997), USSC
and AMP restated for all periods presented pursuant to the pooling of interests
method of accounting. The selected financial data prior to January 1, 1997 do
not reflect the results of operations and financial position of Inbrand, which
was acquired in 1997 and accounted for under the pooling of interests method of
accounting, due to immateriality. See Notes 1 and 2 to the Consolidated
Financial Statements.
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED
--------------------------------- SEPTEMBER 30, DECEMBER 31,
2000(1) 1999(2) 1998(3) 1997(4)(5) 1996(6)(7)
(IN MILLIONS, EXCEPT PER SHARE DATA) --------- --------- --------- ------------- ------------
Consolidated Statements of Operations
Data:
Net sales............................... $28,931.9 $22,496.5 $19,061.7 $12,742.5 $14,671.0
Operating income........................ 5,474.4 2,190.8 1,948.1 125.8 587.4
Income (loss) from continuing
operations............................ 4,520.1 1,067.7 1,168.6 (348.5) 49.4
Income (loss) from continuing operations
per common share:
Basic................................. 2.68 0.65 0.74 (0.24) 0.02
Diluted............................... 2.64 0.64 0.72 (0.24) 0.02
Cash dividends per common share(8)........ See (9) below.
Consolidated Balance Sheet Data (End of
Period):
Total assets............................ $40,404.3 $32,344.3 $23,440.7 $16,960.8 $14,686.2
Long-term debt.......................... 9,461.8 9,109.4 5,424.7 2,785.9 2,202.4
Shareholders' equity.................... 17,033.2 12,369.3 9,901.8 7,478.7 7,022.6
------------------------
(1) Operating income in the fiscal year ended September 30, 2000 includes a net
charge of $176.3 million, of which $1.0 million is included in cost of
sales, for restructuring and other non-recurring charges, and charges of
$99.0 million for the impairment of long-lived assets. See Notes 12 and 16
to the Consolidated Financial Statements. Income from continuing operations
for the fiscal year ended September 30, 2000 includes a one-time pre-tax
gain of $1,760.0 million related to the issuance of common shares by a
subsidiary. See Note 15 to the Consolidated Financial Statements.
(2) Operating income in the fiscal year ended September 30, 1999 is net of
charges of $1,035.2 million for merger, restructuring and other
non-recurring charges, of which $106.4 million is included in cost of sales,
and charges of $507.5 million for the impairment of long-lived assets
related to the mergers with USSC and AMP and AMP's profit improvement plan.
See Notes 12 and 16 to the Consolidated Financial Statements.
(3) Operating income in the fiscal year ended September 30, 1998 is net of
charges of $80.5 million primarily related to costs to exit certain
businesses in USSC's operations and restructuring charges of $12.0 million
related to the continuing operations of USSC. In addition, AMP recorded
restructuring charges of $185.8 million in connection with its profit
improvement plan and a credit of $21.4 million to restructuring charges
representing a revision of estimates related to its 1996 restructuring
activities. See Note 16 to the Consolidated Financial Statements.
(4) In September 1997, Tyco changed its fiscal year end from December 31 to
September 30. Accordingly, the nine-month transition period ended
September 30, 1997 is presented.
19
(5) Operating income in the nine months ended September 30, 1997 is net of
charges related to merger, restructuring and other non-recurring costs of
$917.8 million and impairment of long-lived assets of $148.4 million
primarily related to the mergers and integration of ADT, Former Tyco,
Keystone, and Inbrand, and charges of $24.3 million for litigation and other
related costs and $5.8 million for restructuring charges in USSC's
operations. The results for the nine months ended September 30, 1997 also
include a charge of $361.0 million for the write-off of purchased in-process
research and development related to the acquisition of the submarine systems
business of AT&T Corp.
(6) Prior to their respective mergers, ADT, Keystone, USSC and AMP had
December 31 fiscal year ends and Former Tyco had a June 30 fiscal year end.
The selected consolidated financial data have been combined using a
December 31 fiscal year end for ADT, Keystone, Former Tyco, USSC and AMP for
the year ended December 31, 1996.
(7) Operating income in 1996 includes non-recurring charges of $744.7 million
related to the adoption of Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets to Be Disposed
Of," $237.3 million related principally to the restructuring of ADT's
electronic security services business in the United States and United
Kingdom, $98.0 million to exit various product lines and manufacturing
operations associated with AMP's operations and $8.8 million of fees and
expenses related to ADT's acquisition of Automated Security (Holdings) plc,
a United Kingdom company.
(8) Per share amounts have been retroactively restated to give effect to the
mergers with Former Tyco, Keystone, Inbrand, USSC and AMP; a 0.48133 reverse
stock split (1.92532 after giving effect to the subsequent stock splits)
effected on July 2, 1997; and two-for-one stock splits distributed on
October 22, 1997 and October 21, 1999, both of which were effected in the
form of a stock dividend.
(9) Tyco has paid a quarterly cash dividend of $0.0125 per common share since
July 2, 1997, the date of the Former Tyco/ADT merger. Prior to the merger
with ADT, Former Tyco had paid a quarterly cash dividend of $0.0125 per
share of common stock since January 1992. ADT had not paid any dividends on
its common shares since 1992. USSC paid quarterly dividends of $0.04 per
share in the year ended September 30, 1998 and the nine months ended
September 30, 1997 and aggregate dividends of $0.08 per share in 1996. AMP
paid dividends of $0.27 per share in the first two quarters of the year
ended September 30, 1999, $0.26 per share in the first quarter and $0.27 per
share in the last three quarters of the year ended September 30, 1998, $0.26
per share in each of the three quarters of the nine months ended
September 30, 1997 and aggregate dividends of $1.00 per share in 1996. The
payment of dividends by Tyco in the future will depend on business
conditions, Tyco's financial condition and earnings and other factors.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears on pages 81 to 98 of this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears on pages 81 to 98 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and schedule are filed as
part of this Annual Report:
Financial Statements:
Reports of Independent Accountants
20
Consolidated Balance Sheets--September 30, 2000 and September 30, 1999
Consolidated Statements of Operations for the fiscal years ended
September 30, 2000, 1999 and 1998.
Consolidated Statements of Shareholders' Equity for the fiscal years
ended September 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the fiscal years ended
September 30, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts
All other financial statements and schedules have been omitted since the
information required to be submitted has been included in the consolidated
financial statements and related notes or because they are either not applicable
or not required under the rules of Regulation S-X.
See Notes to Consolidated Financial Statements for Summarized Quarterly
Financial Data (unaudited).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Directors of the Registrant is hereby
incorporated by reference to the Registrant's definitive proxy statement which
will be filed with the Commission within 120 days after the close of the fiscal
year.
ITEM 11. MANAGEMENT REMUNERATION
Information concerning management remuneration is hereby incorporated by
reference to the Registrant's definitive proxy statement which will be filed
with the Commission within 120 days after the close of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is hereby incorporated by reference to the Registrant's definitive
proxy statement which will be filed with the Commission within 120 days after
the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
hereby incorporated by reference to the Registrant's definitive proxy statement
which will be filed with the Commission within 120 days after the close of the
fiscal year.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules--see Item 8.
(b) Exhibits
2.1 Agreement and Plan of Merger, dated as of November 22, 1998,
by and among Tyco International (PA) Inc., AMP Merger Corp.
and AMP Incorporated, including guarantee of Tyco
International Ltd. (Incorporated by reference to the
Registrant's Form S-4 filed December 11, 1998.)
2.2 Agreement and Plan of Merger, dated as of May 25, 1998, by
and among Tyco International Ltd., T11 Acquisition Corp. and
United States Surgical Corporation. (5)
2.3 Agreement and Plan of Merger, dated as of May 19, 1999, by
and among Tyco International Ltd., Tyco International (PA)
Inc. and Raychem Corporation (Incorporated by reference to
the Registrant's Form S-4 filed June 11, 1999).
2.4 Agreement and Plan of Merger, dated June 28, 2000, by and
among Tyco Acquisition Corp. VI (NV), EVM Merger Corp. and
Mallinckrodt Inc. (Incorporated by reference to the
Registrant's Form S-4 filed July 12, 2000)
2.5 Agreement for the Purchase and Sale of Assets, dated
November 13, 2000, by and between Lucent Technologies and
Tyco Group S.a.r.L. (Filed herewith)
2.6 Stock Purchase Agreement, dated January 13, 2000, by and
between Manheim Auctions, Inc. and ADT General Holdings,
Inc. (Filed herewith).
3.1 Memorandum of Association (as altered) (Incorporating all
amendments to May 26, 1992). (1)
3.2 Certificate of Incorporation on change of name dated July 2,
1997. (3)
3.3 Bye-Laws (Incorporating all amendments to April 1, 1999).
(6)
4.1 Indenture dated as of July 1, 1995 among ADT Operations,
Inc., ADT Limited and Bank of Montreal Trust Company, as
trustee and the form of note included therein. (2)
4.2 Indenture dated April 30, 1992 between Former Tyco and
Security Pacific National Trust Company (New York)
(Incorporated by reference to Former Tyco's Form 10-Q for
the period ended March 31, 1992).
4.3 First Supplemental Indenture dated April 30, 1992 between
Former Tyco and Security Pacific National Trust Company (New
York) (Incorporated by reference to Former Tyco's Form 10-Q
for the period ended March 31, 1992).
4.4 Second Supplemental Indenture, dated as of March 8, 1993,
between Former Tyco and BankAmerica National Trust Company,
as Trustee (Incorporated by reference to Tyco International
Ltd.'s Form 8-K filed on March 8, 1993).
4.5 Form of Indenture, dated as of June 9, 1998, among Tyco
International Group S.A. (TIG), Tyco and The Bank of New
York, as trustee. (7)
4.6 Form of Supplemental Indenture No.1, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as trustee
relating to the 6 1/8% Notes due 2001 of the Company
(including the form of Notes). (7)
4.7 Form of Supplemental Indenture No.2, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as trustee
relating to the 6 3/8% Notes due 2005 of the Company
(including the form of Notes). (7)
4.8 Form of Supplemental Indenture No.3, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as trustee
relating to the 7% Notes due 2028 of the Company (including
the form of Notes). (7)
4.9 Form of Supplemental Indenture No.4, dated as of June 9,
1998, among TIG, Tyco and The Bank of New York, as trustee
relating to the 6 1/4% Dealer remarketable
securities(SM)(Drs.(SM)) due 2013 of the Company (including
the form of Drs). (7)
22
4.10 Form of Supplemental Indenture No.5, dated as of November 2,
1998, among TIG, Tyco and The Bank of New York, as trustee
relating to the 5.875% Notes due 2004 of TIG. (8)
4.11 Form of Supplemental Indenture No.6, dated as of November 2,
1998, among TIG, Tyco and The Bank of New York, as trustee
relating to the 6.125% Notes due 2008 of TIG. (8)
4.12 Form of Supplemental Indenture No. 7, dated as of
January 12, 1999, among TIG, Tyco and The Bank of New York,
as trustee relating to the 6.125% due 2009 of TIG. (7)
4.13 Form of Supplemental Indenture No. 8, dated as of
January 12, 1999, among TIG, Tyco and The Bank of New York,
as trustee relating to the 6.875% due 2029 of TIG. (7)
4.14 Form of Supplemental Indenture No. 10, dated as of August
31, 1999, among TIG, Tyco and The Bank of New York, as
trustee relating to the Floating Rate Notes due 2001 of TIG.
(9)
4.15 Form of Supplemental Indenture No. 11, dated as of August
31, 1999, among TIG, Tyco and The Bank of New York, as
trustee relating to the 6.875% Notes due 2002. (9)
4.16 Form of Supplemental Indenture No. 13, dated as of April 4,
2000, among TIG, TIL and The Bank of New York, as trustee
relating to the Euro 6 1/8% Notes due 2007. (9)
4.17 Form of Indenture among United States Surgical Corporation
("USSC") and The Bank of New York, as trustee relating to
the 7.25% Senior Debt Securities due 2008 of USSC
(incorporated by reference to Exhibit 4(a) to USSC's Form
S-3 (File No. 333-46239) filed March 6, 1998).
4.18 Officer's Certificate, dated March 17, 1998, defining the
terms of the debenture among USSC and The Bank of New York,
as Trustee relating to the 7.25% Senior Debt Securities due
2008 of USSC. (8)
4.19 364-Day Credit Agreement dated as of February 11, 2000 among
TIG, the Banks named therein and Morgan Guaranty Trust
Company of New York, as Agent (Filed herewith).
4.20 $500 million Extendible Credit Agreement, as amended, dated
February 13, 1998 held by TIG. (4)
4.21 Parent Guarantee Agreement, as amended, dated as of February
13, 1998. (4)
4.22 Indenture dated November 17, 2000 between Tyco International
Ltd. and State Street Bank and Trust Company, as Trustee
(Incorporated by reference to the Registrant's Form S-3
filed December 8, 2000).
10.1 The Tyco International Ltd. Long Term Incentive Plan
(formerly known as the ADT 1993 Long-Term Incentive Plan)
(as amended May 12, 1999) (Incorporated by reference to the
Registrant's Form S-8 filed on June 10, 1999).*
10.2 1981 Key Employee Loan Program (Incorporated by reference to
Former Tyco's Form 10-K for the year ended May 31, 1982).*
10.3 1983 Restricted Stock Ownership Plan for Key Employees
(Incorporated by reference to Former Tyco Shareholders'
Proxy Statement for Annual Meeting of Shareholders on
October 18, 1983).*
10.4 1983 Key Employee Loan Program, as amended December 9, 1993
(Incorporated by reference to Former Tyco's Form 10-K for
the year ended June 30, 1994).*
10.5 1994 Restricted Stock Ownership Plan for Key Employees
(Incorporated by reference to the Registrant's Form S-8
filed on December 21, 1999).
10.6 Tyco International Ltd. Supplemental Executive Retirement
Plan (Incorporated by reference to Former Tyco's Form 10-K
for the year ended June 30, 1995).*
10.7 The Tyco International Ltd. Long Term Incentive Plan II
(Incorporated by reference to the Registrant's Form S-8
filed March 25, 1999).*
21.1 Subsidiaries of the registrant (Filed herewith).
23.1 Consent of PricewaterhouseCoopers (Filed herewith).
23.2 Consent of Arthur Andersen LLP (Filed herewith).
27 Financial Data Schedule (Filed herewith).
------------------------
* Management contract or compensatory plan.
23
(1) Incorporated by reference to an Exhibit to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1992.
(2) Incorporated by reference to an Exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.
(3) Incorporated by reference to an Exhibit to the Registrant's
Current Report dated July 2, 1997 on Form 8-K filed
July 10, 1997.
(4) Incorporated by reference to an Exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997.
(5) Incorporated by reference to an Exhibit to the Registrant's
Current Report dated May 25, 1998 on Form 8-K filed
June 24, 1998.
(6) Incorporated by reference to an Exhibit to the Registrant's
Registration Statement on Form S-3 filed April 23, 1998 and
Current Report dated September 10, 1999 on Form 8-K filed
September 14, 1999.
(7) Incorporated by reference to an Exhibit to the Registrant's
and TIG's Co-Registration Statement on Form S-3 (File Nos.
333-50855 and 333-50855-01) filed June 9, 1998.
(8) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1998.
(9) Incorporated by reference to an Exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1999 filed December 13, 1999.
(c) Reports on Form 8-K.
Current Report on Form 8-K filed on July 14, 2000 containing the press release
of Tyco dated July 13, 2000 announcing that it had been advised that the
informal inquiry, which was being conducted by the staff of the Division of
Enforcement of the Securities and Exchange Commission since December 1999, had
been terminated.
Current Report on Form 8-K filed on November 1, 2000 containing the press
release of Tyco dated November 1, 2000 announcing the consummation of the
acquisition of Mallinckrodt Inc.
Current Report on Form 8-K filed on November 15, 2000 containing the press
releases of Tyco dated November 13 and 14, 2000 announcing the private offering
of zero-coupon convertible debt securities.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TYCO INTERNATIONAL LTD.
By: /s/ MARK H. SWARTZ
-----------------------------------------
Mark H. Swartz
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: December 21, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
Chairman of the Board, Chief
/s/ L. DENNIS KOZLOWSKI Executive Officer, President
-------------------------------------- and Director (Principal
L. Dennis Kozlowski Executive Officer)
/s/ LORD ASHCROFT KCMG
-------------------------------------- Director
Lord Ashcroft KCMG
/s/ JOSHUA M. BERMAN
-------------------------------------- Director
Joshua M. Berman
/s/ RICHARD S. BODMAN
-------------------------------------- Director December 21, 2000
Richard S. Bodman
/s/ JOHN F. FORT
-------------------------------------- Director
John F. Fort
/s/ STEPHEN W. FOSS
-------------------------------------- Director
Stephen W. Foss
/s/ PHILIP M. HAMPTON
-------------------------------------- Director
Philip M. Hampton
/s/ WENDY E. LANE
-------------------------------------- Director
Wendy E. Lane
/s/ JAMES S. PASMAN, JR.
-------------------------------------- Director
James S. Pasman, Jr.
/s/ W. PETER SLUSSER
-------------------------------------- Director
W. Peter Slusser
/s/ MARK H. SWARTZ Executive Vice President and
-------------------------------------- Chief
Mark H. Swartz Financial Officer
/s/ FRANK E. WALSH, JR.
-------------------------------------- Director
Frank E. Walsh, Jr.
25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Tyco International Ltd.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, shareholders' equity and cash flows present fairly, in all
material respects, the financial position of Tyco International Ltd. and its
subsidiaries at September 30, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States of America. In addition, in our opinion, the accompanying
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the financial
statements of AMP Incorporated, a wholly owned subsidiary, as of September 30,
1998, and for the year ended September 30, 1998, which statements reflect total
assets of 20.1% of the related consolidated total assets as of September 30,
1998, and net sales of 29.0% of the related consolidated total sales for the
year ended September 30, 1998. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for AMP Incorporated, as of and
for the period described above, is based solely on the report of the other
auditors. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS
Hamilton, Bermuda
October 24, 2000, except as to Note 25
which is as of December 4, 2000
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of AMP Incorporated:
We have audited the consolidated balance sheet of AMP Incorporated (a
Pennsylvania corporation) and subsidiaries as of September 30, 1998, the related
consolidated statements of income, shareholders' equity and cash flows for the
year ended September 30, 1998, which are not included herein. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
AMP Incorporated and subsidiaries as of September 30, 1998, and the consolidated
results of their operations and their cash flows for the year ended
September 30, 1998, in conformity with accounting principles generally accepted
in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II, which is not included
herein, is presented for purposes of complying with the Securities and Exchange
Commission rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 12, 1999
(except with respect to the matter disclosed in
Note 18--Merger with Tyco International Ltd.,
as to which the date is April 2, 1999)
27
TYCO INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
SEPTEMBER 30,
---------------------
2000 1999
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents................................... $ 1,264.8 $ 1,762.0
Receivables, less allowance for doubtful accounts of $442.1
in 2000 and $329.8 in 1999................................ 5,630.4 4,582.3
Contracts in process........................................ 357.3 536.6
Inventories................................................. 3,845.1 2,849.1
Deferred income taxes....................................... 683.3 694.3
Prepaid expenses and other current assets................... 1,034.8 721.2
--------- ---------
Total current assets........................................ 12,815.7 11,145.5
CONSTRUCTION IN PROGRESS--TYCOM GLOBAL NETWORK.............. 111.1 --
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 8,218.4 7,322.4
GOODWILL AND OTHER INTANGIBLE ASSETS, NET................... 16,332.6 12,158.9
LONG-TERM INVESTMENTS....................................... 1,653.7 269.7
DEFERRED INCOME TAXES....................................... 532.5 668.8
OTHER ASSETS................................................ 740.3 779.0
--------- ---------
TOTAL ASSETS............................................ $40,404.3 $32,344.3
========= =========
CURRENT LIABILITIES:
Loans payable and current maturities of long-term debt...... $ 1,537.2 $ 1,012.8
Accounts payable............................................ 3,291.9 2,530.8
Accrued expenses and other current liabilities.............. 4,038.2 3,545.7
Contracts in process--billings in excess of costs........... 835.0 977.9
Deferred revenue............................................ 265.7 258.8
Income taxes................................................ 1,650.3 798.0
Deferred income taxes....................................... 60.6 1.0
--------- ---------
Total current liabilities................................... 11,678.9 9,125.0
LONG-TERM DEBT.............................................. 9,461.8 9,109.4
OTHER LONG-TERM LIABILITIES................................. 1,095.3 1,236.4
DEFERRED INCOME TAXES....................................... 791.6 504.2
--------- ---------
TOTAL LIABILITIES....................................... 23,027.6 19,975.0
--------- ---------
COMMITMENTS AND CONTINGENCIES (NOTE 17)
MINORITY INTEREST........................................... 343.5 --
SHAREHOLDERS' EQUITY:
Preference shares, $1 par value, 125,000,000 shares
authorized, none issued................................... -- --
Common shares, $0.20 par value, 2,500,000,000 shares
authorized; 1,684,511,070 shares outstanding in 2000 and
1,690,175,338 shares outstanding in 1999, net of
31,551,310 shares owned by subsidiaries in 2000 and
11,432,678 shares owned by subsidiaries in 1999........... 336.9 338.0
Capital in excess:
Share premium........................................... 5,233.3 4,881.5
Contributed surplus, net of deferred compensation of
$59.4 in 2000 and $30.7 in 1999....................... 2,786.3 3,607.6
Accumulated earnings........................................ 8,427.6 3,992.3
Accumulated other comprehensive income (loss)............... 249.1 (450.1)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.............................. 17,033.2 12,369.3
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $40,404.3 $32,344.3
========= =========
See Notes to Consolidated Financial Statements.
28
TYCO INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30,
---------------------------------
2000 1999 1998
--------- --------- ---------
NET SALES................................................... $28,931.9 $22,496.5 $19,061.7
Cost of sales............................................... 17,931.2 14,433.1 12,694.8
Selling, general and administrative expenses................ 5,252.0 4,436.3 4,161.9
Merger, restructuring and other non-recurring charges....... 175.3 928.8 256.9
Charge for the impairment of long-lived assets.............. 99.0 507.5 --
--------- --------- ---------
OPERATING INCOME............................................ 5,474.4 2,190.8 1,948.1
Interest income............................................. 75.2 61.5 62.6
Interest expense............................................ (844.8) (547.1) (307.9)
Gain on issuance of common shares by subsidiary............. 1,760.0 -- --
--------- --------- ---------
Income before income taxes, minority interest and
extraordinary items....................................... 6,464.8 1,705.2 1,702.8
Income taxes................................................ (1,926.0) (637.5) (534.2)
Minority interest........................................... (18.7) -- --
--------- --------- ---------
Income before extraordinary items........................... 4,520.1 1,067.7 1,168.6
Extraordinary items, net of taxes........................... (0.2) (45.7) (2.4)
--------- --------- ---------
NET INCOME.................................................. $ 4,519.9 $ 1,022.0 $ 1,166.2
========= ========= =========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary items......................... $ 2.68 $ 0.65 $ 0.74
Extraordinary items, net of taxes......................... -- (0.03) --
Net income per common share............................... 2.68 0.62 0.74
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary items......................... $ 2.64 $ 0.64 $ 0.72
Extraordinary items, net of taxes......................... -- (0.03) --
Net income per common share............................... 2.64 0.61 0.72
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic..................................................... 1,688.0 1,641.3 1,583.4
Diluted................................................... 1,713.2 1,674.8 1,624.7
See Notes to Consolidated Financial Statements.
29
TYCO INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN MILLIONS, EXCEPT PER SHARE DATA)
COMMON ACCUMULATED
SHARES CONTRIBUTED OTHER
FOR THE YEARS ENDED $0.20 SHARE SURPLUS-- ACCUMULATED COMPREHENSIVE COMPREHENSIVE
SEPTEMBER 30, 1998, 1999 AND 2000 PAR VALUE PREMIUM COMMON EARNINGS INCOME (LOSS) INCOME
--------------------------------- --------- -------- ----------- ----------- ------------- -------------
BALANCE AT SEPTEMBER 30, 1997.................. $303.7 $2,450.2 $ 2,559.4 $2,302.3 $ (136.9)
Comprehensive income:
Net income................................... 1,166.2 $1,166.2
Currency translation adjustment.............. (36.7) (36.7)
Unrealized loss on marketable securities..... (15.6) (15.6)
Minimum pension liability adjustment......... (14.7) (14.7)
--------
Total comprehensive income................. $1,099.2
========
Sale of common shares.......................... 10.2 1,239.9 (5.1)
Exchange of Liquid Yield Option Notes.......... 3.6 151.7
Dividends...................................... (305.9)
Restricted stock grants, net of surrenders..... .2 .1
Warrants and options exercised................. 8.0 344.9 35.5
Purchase of treasury shares.................... (1.8) (282.1)
Equity-related compensation expense, including
amortization of deferred compensation........ 43.4
Issuance of common shares for acquisition...... .2 19.0
Issuance of common shares for litigation
settlement................................... 7.8
Tax benefit on stock transactions.............. 55.1
Other adjustments.............................. (.8)
------ -------- --------- -------- --------
BALANCE AT SEPTEMBER 30, 1998.................. 324.1 4,035.0 2,584.0 3,162.6 (203.9)
Comprehensive income:
Net income................................... 1,022.0 $1,022.0
Currency translation adjustment.............. (258.3) (258.3)
Unrealized gain on marketable securities..... 12.6 12.6
Minimum pension liability adjustment......... (.5) (.5)
--------
Total comprehensive income................. $ 775.8
========
Exchange of Liquid Yield Option Notes.......... 1.6 70.7
Dividends...................................... (192.3)
Restricted stock grants, n