Tyco Posts Profit, Restates Expenses
Tyco International Ltd. said Tuesday that it had a fiscal third-quarter profit of $566.5 million and had to restate $630 million in expenses related to its ADT alarm business.
The net income of 27 cents a share was mostly attributable to cost cuts at its health-care unit, the Bermuda-based conglomerate said. Including results from its former CIT finance unit, Tyco had a net loss a year earlier of $2.63 billion, or $1.32 a share.
Sales rose 3.4% to $9.41 billion only because of currency-related gains, Chief Financial Officer David FitzPatrick said.
Chief Executive Ed Breen, who joined Tyco a year ago, is fixing accounting irregularities left from former CEO L. Dennis Kozlowski, who was accused of theft and fraud. Profit missed analysts’ forecasts as Tyco revamped its ADT unit and resin prices for plastics remained high. Breen said fourth-quarter profit also may be below expectations because of the weak economy.
“Getting to our goal of building a high-performing operating company will take time,” Breen said. “We are managing this business for cash first and we are making good progress.”
Breen said free cash flow in Tyco’s third quarter was $844 million, above some estimates, and he boosted his forecast for the year ending Sept. 30 to $2.2 billion to $2.4 billion, excluding pension contributions.
Tyco’s shares fell 75 cents to $19 on the New York Stock Exchange. They have risen 51% in the last year.
Tyco on Tuesday moved $364.5 million and $265.5 million in pretax expenses from its second quarter to earlier periods and said a Securities and Exchange Commission investigation continues. That and other restatements bring the total this year to $1.1 billion.
Tyco also reclassified pretax charges of $71.5 million for workers compensation and $46.6 million related to life insurance for former executives. Tyco said the restatements address all the “significant issues” of a probe by the SEC’s corporate finance division, which remains open.
Those issues date to Kozlowski, who was ousted as CEO in June 2002 before he was indicted twice -- on charges of evading $1 million in New York sales taxes and in connection with the looting of the firm of $600 million.
The company is reviewing whether it needs to write down any of its remaining $26 billion in goodwill, or intangible assets such as brand names, and will report back by October, when its fiscal fourth-quarter results are released, FitzPatrick said.
Excluding the cost of paying debt and a gain from a tax settlement, Tyco had third-quarter profit of 32 cents a share, 3 cents less than the average analyst estimate, said Thomson First Call.
