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Tyco International (TYC)
Q1 2013 Earnings Call
January 29, 2013 9:00 am ET
George R. Oliver - Chief Executive Officer and Director
Arun Nayar - Chief Financial Officer and Executive Vice President
Ajay Kejriwal - FBR Capital Markets & Co., Research Division
Jeffrey T. Sprague - Vertical Research Partners, LLC
Scott R. Davis - Barclays Capital, Research Division
Nigel Coe - Morgan Stanley, Research Division
Julian Mitchell - Crédit Suisse AG, Research Division
Charles Stephen Tusa - JP Morgan Chase & Co, Research Division
Gautam Khanna - Cowen and Company, LLC, Research Division
Previous Statements by TYC
» Tyco International Management Discusses Q4 2012 Results - Earnings Call Transcript
» Tyco International Management Discusses Q3 2012 Results - Earnings Call Transcript
» Tyco's CEO Discusses F2Q11 Results - Earnings Call Transcript
Good morning, and thank you for joining our conference call to discuss Tyco's first quarter results for fiscal year 2013 and the press release issued earlier this morning. With me today are Tyco's Chief Executive Officer, George Oliver; and Chief Financial Officer, Arun Nayar.
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 including normalized earnings per share 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 conference call slides, which contain summary financial information, can be found on the Investor Relations portion of our website, at tyco.com.
Please also note that we will be filing our first quarter SEC Form 10-Q later today. In discussing our segment operations, when we refer to changes in backlog and order activity, these figures exclude the impact of foreign currency. Additionally, references to operating margins during the call exclude special items, making them non-GAAP metrics. These non-GAAP metrics are reconciled in the schedules attached to our press release.
Now, let me quickly recap this quarter's earnings. Earnings per share from continuing operations attributable to Tyco common shareholders was $0.34 and included charges of $0.06 related to special items. These charges related primarily to separations and restructuring activities.
Earnings per share from continuing operations before special items was $0.40 compared to the prior year quarter of $0.26. As we mentioned on last earnings call, EPS this fiscal year is not comparable to the prior year, as the prior year's results include corporate and interest expense associated with supporting the ADT and Flow Control businesses.
Additionally, our 2013 results are being impacted by the synergies associated with the separation of the Commercial Security operations in North America from ADT. Normalizing last year's results for these items, the comparable prior year earnings per share before special items would have been $0.36.
Now, let me turn the call over to George.
George R. Oliver
Thanks, Antonella. Good morning, everyone. We were off to a great start as the new Tyco. During our first quarter, we made a lot of progress in bringing the teams together as an integrated Fire and Security company and executing on our growth strategy. We also continued to strengthen our competitive capabilities across our businesses. Both organically and through acquisitions, we have started to see the increased benefits from our productivity initiatives.
Overall, our first quarter results reflect a year-over-year increase of 11% in earnings per share before special items on a normalized basis, a solid beginning to fiscal 2013.
In line with our growth strategy, our Installation and Services segment benefited from increased service revenue across most geographic regions, and our product businesses continue to reap the benefits of our focused R&D spend to drive new product introductions.
Additionally, we've strengthened our service platform and augmented key vertical markets with recent acquisitions and accelerated our growth rate in high-growth markets.
Before I turn to our business results for the quarter, let me quickly touch on each of these items. First, service revenue, including recurring revenue, represented nearly 45% of total revenue in the quarter.
Given the integration of our Fire and Security businesses, we are uniquely positioned to bring differentiated solutions to our combined customer base. We expect this will allow us to accelerate the rate of service revenue growth to 5% over the next few years.
Second, we continued to fund engineering and product development with double-digit increases year-over-year. It is these types of investments which drive new or enhanced product introductions. For example, this quarter in Fire protection products, we introduced a new liquid vehicle system under our ANSUL brand, which is a new liquid agent system technology for mobile equipment, particularly suited for the mining verticals. It is a holistic approach to fire suppression, with early fire detection and fast actuation to control and suppress flames in seconds. This new technology positions us well for future growth in the mobile equipment market.
In Security Products, we developed the fastest IP camera on the market, with improvements in the speed, the camera can pan, tilt and zoom. This significantly boosts the capabilities we provide for our customers, where precision and detail can make all the difference.
On a separate front, we are also upgrading our existing residential panels and keypads, integrating the Visonic PowerG wireless technology obtained from our recent Visonic acquisition.