Tyco to Incur Approximately $280 Million Charge in Q4; Confirms 2005 and 2006 Guidance
September 12 2005 - 5:16PM
PR Newswire (US)
PEMBROKE, Bermuda, Sept. 12 /PRNewswire-FirstCall/ -- Tyco
International Ltd. (NYSE:TYC)(BSX:TYC) today announced that the
company will incur a pre- tax charge of approximately $280 million
in the fourth quarter of 2005 as a result of the United States
Court of Appeals for the Federal Circuit's affirmation of a lower
court decision that certain pulse oximetry monitoring devices sold
by Tyco's Nellcor unit infringe three patents. Oximetry sensors,
rather than monitoring devices, represent the bulk of Nellcor's
oximetry sales. Relevant sales of Nellcor's pulse oximetry
monitoring devices -- products that use pulse oximetry sensors to
determine the oxygen level in patients' blood -- totaled
approximately $41 million in 2004. As a result of the court's
ruling, Nellcor expects to discontinue its sale of certain pulse
oximetry devices in the near term. Use of monitors previously
provided to customers will not be impacted. This decision in no way
affects Nellcor's ability to provide a full range of pulse oximetry
sensors to the marketplace -- or its ability to support customers.
Nellcor will launch a new line of pulse oximetry monitors and
oximetry circuit boards shortly. These products will be sold as
part of Nellcor's OxiMax pulse oximetry system and will utilize a
unique signal processing engine. The charge for this special item
is expected to cover damages of $165 million awarded in an August
2004 court decision for product sales between July 2001 and May
2004, as well as additional interest and estimated damages for
product sales through the end of the current fiscal year. The
company continues to expect earnings per share (EPS) from
continuing operations excluding special items of $0.45 to $0.47 for
the fourth quarter of 2005 and $1.85 to $1.87 for the full year.
The company continues to expect full-year cash from operating
activities of $6.0 to $6.4 billion and free cash flow of $4.2 to
$4.6 billion. With respect to fiscal year 2006, the company expects
EPS before special items to increase by approximately 10 percent
over full-year 2005 results. The company further expects that 2006
free cash flow will exceed net income excluding special items. EPS
from continuing operations excluding special items and Free Cash
Flow are non-GAAP financial measures and are described below. A
part of Tyco Healthcare's Mallinckrodt business, Nellcor is the
world's foremost supplier of pulse oximetry and airway management
products. Tyco International Ltd. is a global, diversified company
that provides vital products and services to customers in five
business segments: Fire & Security, Electronics, Healthcare,
Engineered Products & Services, and Plastics & Adhesives.
With 2004 revenue of $40 billion, Tyco employs approximately
250,000 people worldwide. More information on Tyco can be found at
http://www.tyco.com/. FORWARD-LOOKING STATEMENTS This release may
contain certain "forward-looking statements" within the meaning of
the United States Private Securities Litigation Reform Act of 1995.
These statements are based on management's current expectations and
are subject to risks, uncertainty and changes in circumstances,
which may cause actual results, performance or achievements to
differ materially from anticipated results, performance or
achievements. All statements contained herein that are not clearly
historical in nature are forward-looking and the words
"anticipate," "believe," "expect," "estimate," "plan," and similar
expressions are generally intended to identify forward-looking
statements. The forward-looking statements in this release include
statements addressing the following subjects: future financial
condition and operating results. Economic, business, competitive
and/or regulatory factors affecting Tyco's businesses are examples
of factors, among others, that could cause actual results to differ
materially from those described in the forward-looking statements.
Tyco is under no obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements
whether as a result of new information, future events or otherwise.
More detailed information about these and other factors is set
forth in Tyco's Annual Report on Form 10-K for the fiscal year
ended Sept. 30, 2004, and Quarterly Report on Form 10-Q for the
quarterly period ended July 1, 2005 NON-GAAP MEASURES "EPS from
continuing operations excluding special items," "free cash flow"
(FCF), are non-GAAP measures and should not be considered
replacements for GAAP results. The company has forecast its EPS
from continuing operations results excluding special items related
to divestitures, early retirement of debt, and other income or
charges that may mask the underlying results and trends and make it
difficult to give investors additional perspective on underlying
business results. Because the company cannot predict the amount and
timing of such items and the associated charges or gains that will
be taken, it is difficult to include the impact of those items in
the forecast. The company has forecast its cash flow results
excluding any voluntary pension contributions because it has not
yet made a determination about the amount and timing of any future
such contributions. The difference between cash flows from
operating activities (the most comparable GAAP measure) and FCF
(the non-GAAP measure) consists mainly of significant cash outflows
that the company believes are useful to identify. FCF permits
management and investors to gain insight into the number that
management employs to measure cash that is free from any
significant existing obligation. It is also a significant component
in the company's incentive compensation plans. The difference
reflects the impact from: * the sale of accounts receivable
programs, * net capital expenditures, * acquisition of customer
accounts (ADT dealer program), * cash paid for purchase accounting
and holdback/earn-out liabilities and, * voluntary pension
contributions. See the accompanying tables to this press release
for a cash flow statement presented in accordance with GAAP and a
reconciliation presenting the components of FCF. The impact from
the sale of accounts receivable programs and voluntary pension
contributions is added or subtracted from the GAAP measure because
this activity is driven by economic financing decisions rather than
operating activity. Capital expenditures and the ADT dealer program
are subtracted because they represent long-term commitments. Cash
paid for purchase accounting and holdback/earn-out liabilities is
subtracted from Cash Flow from Operating Activities because these
cash outflows are not available for general corporate uses. The
limitation associated with using FCF is that it subtracts cash
items that are ultimately within management's and the Board of
Directors' discretion to direct and that therefore may imply that
there is less or more cash that is available for the company's
programs than the most comparable GAAP measure. This limitation is
best addressed by using FCF in combination with the GAAP cash flow
numbers. FCF as presented herein may not be comparable to similarly
titled measures reported by other companies. The measure should be
used in conjunction with other GAAP financial measures. Investors
are urged to read the company's financial statements as filed with
the Securities and Exchange Commission, as well as the accompanying
tables to this press release that shows all the elements of the
GAAP measures of Cash Flows from Operating Activities, Cash Flows
from Investing Activities, Cash Flows from Financing Activities and
a reconciliation of the company's total cash and cash equivalents
for the period. DATASOURCE: Tyco International Ltd. CONTACT: Marty
Dauer, Media Relations, +1-609-720-4385, or Ed Arditte, Investor
Relations, +1-609-720-4621, or John Roselli, Investor Relations,
+1-609-720-4624, all of Tyco International Ltd. Web site:
http://www.tyco.com/ Company News On-Call:
http://www.prnewswire.com/comp/897850.html
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