Tyco International Limited (TYC) Message Board

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Non-Tech : Tyco International Limited (TYC)

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To: Sidney Street who wrote (3670)	8/22/2004 7:38:30 PM
From: rich evans	of 3770

Here are some other observations on Tyco's excellent Q3 results: Tyco income statement shows 55.6 mill in restructure costs. Tyco says mostly offset by savings. But netting the costs against savings not best picture. The costs are one time charges while the savings are on going. This can be distinguished from a restructure credit from past accuals overestimated. So add 55 mill to proforma earnings or about another 2cents a share for a proforma income of 47 cents/share. TGN losses can be determined by the corporate charges of 87 mill. Corporate expenses usually run 60 mill. So TGN and other charges included in corporate had 27 mill in losses thereabouts. This again can be added to proforma earnings as TGN being sold next quarter and is really a discountinued operation. So thats another 1 cent a share so proforma earnings now 48cents/share. Tyco shows 46 mill in deferred tax on cashflow. Will never have to pay these. So actual tax accrual more like 312 mill divided by 1284 pretax earnings gives tax rate of 24%. Add another 2 cents a share to proforma earnings or 50cents a share. Inventory/bad debt charges reduced from 100 mill to 76 mill. Still above normal. Breen says will improve especially in Fire/Security. More normal ongoing charge more like 50 mill. So add another 26 mill to proforma earnings or 1 cent/share. Earnings now 51cents. Cash flow helped a lot by release of restricted cash and restricted investments to cash account. Also nonrestricted short term investments released to cash account. Page 20 of last 10Q shows tyco had 662mill of restricted cash and investments. Tyco balance sheet not like other companies grouping cash,restricted cash and short term investments in the cash column. Tyco puts a lot of it in Other Assets. Confusing. Tyco still has several million of cash equivalents in the Other Asset column which they can use as cash. Tyco operating margin this quarter was 14.6. How reach this? Last quarter was 12.5. Add in last quarter restructure/divesture charges, impairment charges, and inventory/bad debt reduction from 100mill to 76mill and you get the 14.6 margin-Simple. The operating margin of 14.6 this quarter can be raised proforma to over 15.2% if you take out the restructure charges and tgn losses.Income statement shows gross margins of 36.4%. SGA is 21.2%. This leaves 15.2% as operating margin even including TGN losses. Next quarter Q4 is usually seasonally flat with Q3 or little above. Tyco should beat guidance given of 41-43cents and cashflow based on the above factors and observatons. Margins will continue to go up and cover the reduction in expected results in engineering when margin goes down from 13% to 11% because of high steel price( 40 mill hit per cc). Tyco is a definite hold near term and next year. I would guess 44 cents AFTER RESTRUCTURE fir Q4. Only negative is terror risk. But I suggest we live our lives like the Israelis and not let the terrorists get to us. Rich

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