Tyco Keeps Forecast, Sees Charge

The company will record a pretax $280 million charge in the fourth quarter.
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Tyco International

(TYC)

affirmed its earnings forecast but said it will record a pretax charge of roughly $280 million in the fourth quarter because of an adverse court decision.

A federal appeals court affirmed a lower court decision that some devices sold by the company's Nellcor unit infringe on three patents.

The products are called pulse oximetry monitoring devices. Oximetry sensors, rather than monitoring devices, represent the bulk of Nellcor's oximetry sales. As a result of the court's ruling, Nellcor expects to stop selling certain pulse oximetry devices in the near term.

Tyco said the charge will cover damages of $165 million awarded in an August 2004 court decision for product sales between July 2001 and May 2004, as well as additional interest and estimated damages for product sales through the end of the current fiscal year.

The Bermuda-based maker of security systems and medical devices continues to expect earnings from continuing operations of 45 cents to 47 cents a share for the fourth quarter and $1.85 to $1.87 for the full year, in line with estimates.

Tyco said full-year cash from operating activities should be $6.0 billion to $6.4 billion, while free cash flow will probably be $4.2 billion to $4.6 billion.

Fiscal 2006 earnings before special items should increase by about 10% from 2005, Tyco said.