- BOSTON (Reuters) - Tyco International
Ltd. TYC.N on Tuesday posted a $2.32 billion quarterly loss, mostly due
to the recent sale of CIT Group Inc. CIT.N , but also because of the telecom
bust and lower margins in its plastics, electronics and security businesses.
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- The sharp drop in cash flow came as the conglomerate
works to reduce debt and restore investor confidence after the abrupt resignation
of its longtime chairman.
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- "Pricing trends seemed to be down in nearly every
business," said Nicholas Heymann, a Prudential Securities analyst
who has a "hold" rating on Tyco shares. "The trend in the
erosion of cash flow is not slowing but accelerating."
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- Tyco shares, which fell about 6 percent Tuesday afternoon,
have been hammered by an about-face on corporate strategy, questions about
its accounting, and the departure of Chairman L. Dennis Kozlowski just
before he was indicted last month on charges he evaded $1 million in taxes.
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- Interim Chief Executive John Fort said Tyco would not
certify its past results until after an internal investigation into its
finances is completed next month. Because it is based in Bermuda, the company
is not subject to a new requirement that executives certify their results
by Aug. 14.
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- "We may miss (the deadline) because of the investigation.
We want to be sure we got everything out there before we attest to it,"
Fort said.
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- Tyco's quarterly cash flow tumbled to $657 million, far
below the company's original estimate of $900 million to $1.1 billion,
largely from stricter payment terms as suppliers fear a cash crunch.
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- Mark Swartz, Tyco's chief financial officer, said on
a conference call that a hoped-for easing of payment terms after the sale
of CIT had failed to materialize and was now not expected this year.
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- As a result, Swartz cut Tyco's cash flow estimate for
the fiscal year ending Sept. 30 and gave a more conservative forecast for
2003. CIT fetched a little less than half of the $9.5 billion Tyco paid
for the company last year.
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- Tyco finished the quarter with $2.8 billion in cash on
hand and total debt of $26 billion. Tyco faces a $1.5 billion debt gap
at the end of 2003, but said non-core asset sales and bank refinancings
can close it.
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- Tyco reported a net loss of $1.16 a share for the fiscal
third quarter, which ended June 30, including a $2.23 billion charge on
the CIT sale earlier this month. That compared with year-earlier net income
of $1.17 billion, or 65 cents a share.
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- Excluding charges and special items, Tyco said it earned
45 cents a share, compared with 73 cents a year earlier, in line with analysts'
expectations.
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- Electronics revenue tumbled about 23 percent while profit
margins for the segment fell sharply to 12.8 percent from 24.9 percent
a year earlier.
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- Tyco's telecom business, which consists of a costly undersea
fiber-optic cable network, saw its revenue fall 77 percent, and operating
losses are expected to continue there, Tyco said.
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- Tyco said profit margins at its healthcare and specialty
business dropped to 20.8 percent from 23.9 percent, as its Paragon Trade
Brands, one of the world's largest makers of generic diapers, drove revenue
increases.
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- Profit margins at Paragon, acquired by Tyco in January,
are lower than the segment average, Tyco said.
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- Tyco's plastics business also saw margins decline because
of volume shortfalls and pricing issues, Tyco said.
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- Tyco's revenue from continuing operations rose to $9.12
billion from $8.68 billion.
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- Tyco's ongoing operations, which includes diaper, ADT
burglar alarms, and electronics, recorded net charges of nearly $1 billion
before taxes. Tyco took a goodwill writeoff of $513 million before taxes
on impaired telecommunications and engineered products and services assets.
Tyco also took charges at its ADT security and health care businesses.
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- Tyco said it expected to earn 45 cents to 47 cents a
share in the fiscal fourth quarter, before special items. Analysts were
looking for Tyco to earn 42 cents to 50 cents a share, with a mean estimate
of 46 cents, according to First Call.
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- "When you look at the underlying core trends, they
had a very solid quarter," said Harriet Baldwin, an analyst at Deutsche
Bank who rates Tyco's stock a "strong buy."
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- Tyco shares are off 80 percent this year, underperforming
the 29 percent decline on the S&P 500 index .SPX . Tyco's stock was
down 71 cents, or 6.1 percent, to $11.13, on Tuesday afternoon on the New
York Stock Exchange.
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