PEMBROKE, BERMUDA — Tyco International in November reported a loss of 15 cents per share for its fourth quarter, compared to a loss of 72 cents per share in the fourth quarter of 2002. For the full fiscal year 2003, Tyco reported earnings of 49 cents per diluted share, compared to a loss of $4.62 in fiscal 2002.
Tyco also initiated a divestiture and restructuring program as part of its previously discussed strategy to sharpen the focus on its core businesses. The businesses to be exited, the largest of which had annual sales of less than $400 million, had combined annualized revenues of $2.1 billion in fiscal year 2003, or about 6% of the company’s total revenue base.
The businesses to be exited are in every Tyco business segment except Plastics & Adhesives. Measured on the basis of revenue, more than half the planned divestitures are in the Fire & Security segment. Aside from the company’s undersea fiber optic business, the company is not identifying at this time which businesses will be exited.
Tyco’s restructuring program includes the consolidation of 219 manufacturing, sales, distribution and other facilities. These actions are expected to reduce employment levels by about 7,200 employees.
Of the facilities to be consolidated, 184 are in Fire & Security, 30 are in Plastics & Adhesives, and the remainder are in Engineered Products & Services. The charges associated with the restructuring program, most of which will be expensed in fiscal year 2004, are expected to be $400 million, of which $280 million is cash. Total annualized savings from the restructuring program are estimated at $230 million by 2005.
“Tyco’s core businesses are strong, we continue to make progress in improving our operating efficiency, and I believe the restructuring and divestiture actions will enhance our future performance,” said Chairman and CEO Ed Breen.
Other results for the quarter and full year include revenues of $9.5 billion for the quarter, compared to $9.4 billion for the fourth quarter of last year. For the full year, revenues were $36.8 billion, compared to $35.6 billion for fiscal year 2002. Revenues were down slightly in the fourth quarter and essentially flat in fiscal 2003 compared to fiscal 2002.
Fire & Security reported net revenues for the fourth quarter of more than $2.9 billion, operating profit of more than $133 million at a 4.6% margin.
Revenues increased $30 million, driven by a $132 million increase from foreign currency. Excluding the impact of currency changes, revenue declined modestly, due to continued weakness in the Continental Europe Security business.
Operating profit in the fourth quarter of 2003 includes $101 million in net charges, primarily related to restructuring and impairment of long-lived assets. Operating performance benefited from improvement in Worldwide Security, which was partially offset by weakness in the Fire Protection business.
Breen noted that Tyco strengthened the Fire & Security segment by changing senior management, focusing the security business on higher quality customers and capital returns, initiating the streamlining of the manufacturing organization and improving operating costs across the segment.