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Non-Tech : Tyco International Limited (TYC)
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To: rich evans who wrote (3672)10/15/2004 3:41:25 PM
From: rich evans   of 3770
 
Tyco Q4 not going to be exciting.

Tyco stock price lanquishes in the 30-31 range probably for a good reason. Tyco's Q4 results will probably be same as Q3. Reasons are:

Steel and oil price increases will hurt margins in Engineering and Plastics. For examle in Q3, tyco did 13% OM in Engineering but expects to do only 11% in Q4 as steel prices on LIFO inventory accounting will now hurt margins. That should decrease profits by 25 mill or so.

Tyco restructering expenses in Q4 should also be higher as in Q4 they are expected to finish with this and will be accruing whatever necessary. Net charges after savings could be 85-115 mill.

Tyco also paying offf 350 mill in AR financing in Q4 which runs thru operating cash flow and will reduce it. Last quarter this was 461 mill and made up by contributions from restricted cash which not as available this quarter .No sale yet of TGN means Tyco not get those proceeds either as planned.

All in all, I see a reduction in operating margin from Q3s 14.6% because of these above items. Revs should be the same. Interest a bit lower. So Tyco will probably do a penny less or so from Q3s 43cents a share after restucturing.

But in FY 2005 tyco should shine with all this behind if the economy can be decent.
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