Tyco International Ltd. (
Q1 2012 Earnings Call
January 31, 2012 8:30 am ET
Ed Breen – Chairman, Chief Executive Officer
Frank Sklarsky – Chief Financial Officer
Patrick Decker – President, Flow Control
Antonella Franzen – Vice President, Investor Relations
Jeff Sprague – Vertical Research
Steve Tusa – JP Morgan
Scott Davis – Barclays Capital
John Inch – Bank of America
Deane Dray – Citi Investment Research
Nigel Coe – Morgan Stanley
Steven Winoker – Sanford Bernstein
Previous Statements by TYC
» TYCO's CEO Discusses F4Q11 and Year End 2011 - Earnings Call Transcript
» Tyco International's CEO Discusses Plan to Separate into Three Independent, Publicly Traded Companies - Conference Call Transcript
» TYCO International's CEO Discusses F3Q 2011 Results - Earnings Call Transcript
» Tyco International CEO Discusses Q1 2011 Results - Earnings Call Transcript
Welcome to the Tyco First Quarter Earnings conference call. All participants have been placed on listen-only mode until the question and answer session. At that time, please press star, one on your touchtone phone. Today’s conference is being recorded. If you have any objections, please disconnect at this time.
I will now turn the call over to Antonella Franzen, Vice President of Investor Relations. You may begin.
Good morning and thank you for joining our conference call to discuss Tyco’s first quarter results for fiscal year 2012 and the press release issued earlier this morning. With me today are Tyco’s Chairman and Chief Executive Officer, Ed Breen; Tyco’s Chief Financial Officer, Frank Sklarsky; and Tyco’s Flow Control President and future CEO of the standalone flow control company, Patrick Decker. As we continue to move closer to the separation, we look forward to having each of our new CEOs join us on upcoming calls.
I would like to remind you that during the course of today’s call, we will be providing certain forward-looking information. We ask that you look at today’s press release and read through the forward-looking cautionary informational statements that we’ve included there. In addition, we will use certain non-GAAP measures in our discussions and we ask that you read through the sections of our press release that address the use of these items.
The press release issued this morning and all related tables, as well as the conference call slides, can be found on the Investor Relations portion of our website at tyco.com. Please also note that we will be filing our quarterly SEC Form 10-Q later today.
Certain items to be discussed during today’s call, including those related to the Company’s proposed separation, will be addressed in a proxy statement to be filed with the Securities and Exchange Commission. Before making any voting decisions, investors are urged to read the proxy statement regarding the proposed separation and any other relevant documents carefully in their entirety as they become available because they will contain important information about the proposed separation. Three copies of the proxy statement, when available, and other documents filed with the SEC by Tyco can be obtained through the SEC’s website as well as through Tyco’s website.
In discussing our segment operations, when we refer to changes in average revenue per user, backlog and order activity, these figures exclude the impact of foreign currency. Additionally, references to operating margins during the call exclude special items and these metrics are non-GAAP measures. Again, these non-GAAP measures are reconciled in the schedules attached to our press release.
Additionally, I would like to call you attention to the realignment of our business segments. Beginning with the second fiscal quarter of 2012, we are managing the businesses and will publicly report our results in a manner consistent with our post-separation segment structure. This will consist of three business segments, including ADT North America Residential and Small Business, Commercial Fire and Security, and Flow Control. We will continue to report corporate as a segment in its historical format in Tyco’s consolidated results.
The results presented in our press release today are based on Tyco’s historical presentation. Our comments on today’s call will address both the historical presentation as well as future expectations on a realigned basis. In an effort to provide some comparable information, concurrent with the filing of our press release earlier this morning, we have also filed in 8-K which recasts the quarters of fiscal 2011 and the first quarter of fiscal 2012 in the new segment format.
Now let me quickly recap this quarter’s results. Revenue in the quarter was 4.2 billion and was consistent with our previous guidance. This represents a 4% increase year-over-year, excluding the contribution from the electrical and metal products business in the prior year quarter. Organic revenue grew 4% in the quarter. Foreign currency negatively impacted revenue by less than 1%. Earnings per share from continuing operations attributable to Tyco common shareholders was $0.71 and included charges of $0.13 related to special items. Earnings per share from continuing operations before special items was $0.84 compared to our previous guidance of about $0.77, led by strong operating results across all businesses.
Now let me turn the call over to Ed for some opening comments.
Thanks, Antonella, and good morning everyone. We are off to a solid start to 2012, highlighted by strong operating margin performance. Growth in our large and stable base of recurring and service revenue, which represented 45% of our revenue in the quarter, coupled with good operating leverage in our manufacturing businesses, helped drive the operating performance this quarter. Additionally, we continued to benefit from our restructuring and cost containment initiatives, which also contributed to the 100 basis point improvement in operating margin year-over-year.
We exited the quarter feeling encouraged by both our performance and our order activity. It’s important to keep in mind that our North America residential business, which represents about 20% of total revenue, has continued to achieve quarterly organic revenue growth over the past several years, including the period throughout the economic downturn. From an orders perspective, order growth relates to the remaining 80% of our portfolio, which has continued to see positive momentum.
To quickly recap our recent order activity, year-over-year orders improved 5% in the first quarter of fiscal 2011, followed by 7% growth in each of the second, third and fourth quarters; and in the first quarter of fiscal 2012 that we just exited, orders grew 8% year-over-year. Additionally, we saw a nice increase in backlog in both our fire and flow control businesses during the first quarter.