TYC: Tyco Reports Third Quarter Earnings From Continuing Operations of $0.43 Per Share

Tyco International Ltd. (NYSE: TYC; BSX: TYC) today reported diluted GAAP earnings per share (EPS) from continuing operations of $0.43 for the third fiscal quarter of 2006. This included $0.03 per share for estimated costs to complete a pre-existing product replacement program in the company's Engineered Products & Services segment, as well as $0.03 per share for costs related to the planned separation of Tyco into three publicly traded companies. Results also include a $0.01 per share charge related to the expensing of stock options, which is not reflected in the prior period. This compares to GAAP EPS from continuing operations of $0.51 in the third fiscal quarter of 2005.

Revenue in the quarter totaled $10.5 billion, with organic revenue growth of 5 percent. The company generated cash flow from operating activities of $1.5 billion and free cash flow of $1.1 billion in the quarter, which included $71 million in cash payments for the previously disclosed Securities and Exchange Commission (SEC) settlement and separation activities.

Tyco Chairman and Chief Executive Officer Ed Breen said, "This was another quarter of sequential progress for Tyco, with continued revenue growth, improved operating performance and solid cash flow. We are also making good progress with our separation activities and remain on track to complete the transactions by the end of the first calendar quarter of 2007."

During the third quarter, Tyco used $1.1 billion in cash to buy back 41 million shares. In addition, Tyco spent $134 million to repurchase 5 million shares in early July. Since the start of the fiscal year, Tyco has repurchased 76 million shares, representing 3.5 percent of diluted shares outstanding.

As announced earlier this morning, Tyco has entered into a definitive agreement to divest its Tyco Printed Circuit Group (TPCG) business for $226 million. Beginning with this quarter, the TPCG business has been classified as a discontinued operation. As a result, TPCG's financial performance is not reflected in Tyco's revenue and income from continuing operations. TPCG, which is currently part of the company's Electronics segment, had revenue of $103 million in the third quarter.

In July, Tyco announced that its Healthcare segment had entered into a definitive agreement to acquire Confluent Surgical, Inc. -- a developer and supplier of polymer-based technology used in sprayable surgical sealants and anti-adhesion products -- for $245 million. In addition, the company yesterday announced its intent to acquire a 37.25 percent share of Airox S.A. -- a European company in the home respiratory ventilation systems business -- for approximately $40 million. The initial share purchase will be followed by a mandatory tender offer for the remaining Airox shares. The Confluent and Airox acquisitions are part of Tyco Healthcare's strategy to expand its product portfolio by purchasing complementary technologies that can be efficiently integrated into the segment's core business.

In the third quarter, the company recorded a pre-tax charge of $100 million related to a pre-existing voluntary replacement program in its Engineered Products & Services segment. The program was originally launched in 2001 by Central Sprinkler -- a division of Tyco Engineered Products & Services -- to replace certain fire sprinkler heads manufactured from the mid-1970s to 2001. When the program was first launched, Tyco established a reserve of $370 million to reflect anticipated costs related to the program. The current charge reflects the company's updated estimate of the additional costs necessary to bring the program to completion.

At the beginning of the fiscal year, Tyco adopted Statement of Financial Accounting Standards (SFAS) No. 123R, which requires the expensing of stock options; prior year results were not restated. Organic revenue growth, free cash flow, EPS from continuing operations excluding special items, income from continuing operations excluding special items, and operating income excluding stock option expense are non-GAAP financial measures and are described below. For a reconciliation of these non-GAAP measures, see the attached tables. To further assist in understanding the special items included in Tyco's GAAP results for fiscal year 2006, the company has provided a summary schedule attached to this document. A set of detailed schedules can be found at http://www.tyco.com on the Investor Relations portion of Tyco's website.


OUTLOOK

For the fourth quarter of 2006, the company expects to achieve EPS from continuing operations, excluding special items, of $0.47 to $0.49 per share. For the full year, this would result in EPS from continuing operations, excluding special items, of $1.80 to $1.82 per share.

The company continues to expect that 2006 free cash flow, excluding the cash impact of previously disclosed legal items and separation costs, will exceed income from continuing operations excluding special items.