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ADT LIMITED REPORTS INCOME FROM CORE BUSINESSES UP 22 PERCENT IN THIRD QUARTER; FINANCIAL RESTRUCTURING - MANAGEMENT PRIORITY

    NEW YORK, Nov. 23 ~PRNewswire~ -- ADT Limited (NYSE: ADT), the world leader in electronic security services and vehicle auctions, announced in its third quarter results today that income before income taxes for the third quarter of 1992 amounted to $41.9 million, compared with $23 million for the third quarter of 1991 and primary earnings per common share amounted to $0.33 (1991:  $0.15).
    Income from operations was $53.3 million compared with $44.9 million for the third quarter of 1991.  For the nine months to Sept. 30, 1992, income before income taxes and primary earnings per common share amounted to $111.6 million and $0.85 respectively, compared with $103.1 million and $0.73, respectively.
    Commenting on the company's results, Mr. Michael A. Ashcroft, chairman and chief executive officer said:
    "ADT's Security Services and Vehicle Auction businesses performed well against dull economic backgrounds in both North America and Europe. The third quarter results are in line with expectations and, in the absence of unforeseen circumstances, combined operating income from our two core businesses for 1992 should exceed that for 1991.
    "Throughout 1992 ADT's objectives have continued to be to concentrate resources on its Security Services and Vehicle Auction businesses and to take all practical steps to strengthen the company's balance sheet as a prelude to the refinancing of the company which is expected to be in place during 1993."
    Review of Operations:
    Security Services
    Income before income taxes from the Security Services division amounted to $37.2 million in the third quarter of 1992, compared with $27.9 million in the third quarter of 1991.
    These results reflect the continuing high volume residential sales program in North America together with a reduction in overheads due to the continuing central station consolidation program.  ADT's high volume residential sales program for 1992 will exceed 100,000 new system sales.
    Although there has been no significant upturn in the commercial security marketplace, ADT has experienced some early signs of improvement in this sector in the Midwest, Southeast and West regions of the United States.  Commercial sector sales successes included a security services contract with Dillard, a major department store, to provide security monitoring services at 285 store locations.
    The consolidation of central stations into approximately 30 regional customer service centers throughout North America and Europe continued with the closure of 18 central stations through the third quarter with a further four planned for closure by the year end which will substantially complete the program.
    In the United Kingdom, the security services business is achieving improved performance as a direct result of efficiency and operational improvements implemented by the new management team.  During the third quarter ADT installed advanced high technology fire detection systems at new Toys R Us locations in the U.K. and ADT is currently in the process of enhancing its services to high security customers including banks and other large organizations such as British Rail.
    Auctions
    The Auctions division continued to be competitive in difficult trading conditions both in the United States and the U.K.  Income before income taxes amounted to $15.5 million in the third quarter of 1992 compared with $15.3 million in the third quarter of 1991.
    In the United States, the overall number of vehicles sold was lower due to the expected decrease in sales of manufacturers' vehicles because of rental companies retaining vehicles longer to service additional business generated by lower airfares.  Inventory levels of manufacturers' vehicles are now increasing and it is expected that a proportion of the recent volume decrease will be recovered in the fourth quarter.  Consignment business sales increased in the third quarter by 14 percent over the comparable period for 1991 and fleet~lease sales were static.
    The increase in new car sales in the U.K. at the start of the new vehicle registration year in August did not materialize to the extent anticipated by manufacturers and volume levels were similar to those achieved in 1991.  Retail demand for used cars remained weak but ADT Auctions experienced improvements in fleet and daily rental volumes. The year on year 12 percent reduction in vehicles sold reported at the end of the second quarter had reduced to 9 percent by the end of the third quarter.  The indications are however that the downturn in the U.K. vehicle market has now leveled out.
    The planned auction site development is on target with the Baltimore expansion completed.  The openings of San Diego and Bridgwater, in the U.K., are on schedule for January 1993.  In continental Europe ADT Auctions acquired Denmark's largest vehicle auction company, Auto Auktion-Vejle, for $8.8 million.
    Other Expenses Less Income
    Other expenses less income for the third quarter of 1992 contributed $0.6 million compared with a net expense of $6.8 million in the second quarter of 1992.  This improvement was principally due to the generation of $5.7 million of operating income by the company's highly seasonal non-core activities, which are expected to produce a small operating loss in the fourth quarter.
    Interest Expense
    During the third quarter the company continued to benefit from low U.S. dollar interest rates.  The company has recently purchased interest rate hedges in respect of $300 million of its floating rate debt in order to limit the exposure to future interest rate increases.  The hedges will operate between March 31, 1993, and Jan. 2, 1996, and the company is reviewing the desirability of purchasing additional hedging instruments.
    Balance Sheet
    During the last 12 months the company has realized approximately $200 million from the disposition of investments and other non-core assets.  Approximately $82 million of bank debt has been repaid and approximately $38 million has been applied in the purchase of existing preference shares into treasury thereby eliminating approximately $50 million of convertible preference share liability.  Some cash has been retained and resources have also been channeled into the company's core businesses, primarily for the expansion of the residential security program and auction site investment.  This capital expenditure is discretionary and has been made to secure opportunities which may not be available to the company in the future.  Management also considers that these expenditures will increase the long-term enterprise values of the core businesses and therefore be beneficial to the company in its refinancing.
    The majority of the company's syndicated bank debt falls due in 1994 and the company's outstanding convertible redeemable preference shares are also likely to be presented for redemption by the holders during that year.  Strengthening the balance sheet continues to be a management priority.  Management has therefore been working with financial advisors to formulate the appropriate refinancing strategy as well as to identify the optimum timing for implementation.  This process is now well advanced.  One of the alternatives actively under consideration would involve the issue of sufficient long-term equity linked securities to enable the company to meet its financial obligations with respect to its 6 percent convertible redeemable preference shares and to form the basis for renegotiating bank debt.  Management and the company's advisors continue to work on finalizing these plans.  It is currently expected that the implementation of the refinancing will take place after the results for the year to Dec. 31, 1992, are released.
                            ADT LIMITED
                  Consolidated Statements of Income
                          ($m; unaudited)
     Three months ended Sept. 30                    1992      1991
    Net sales                                     $336.0    $294.0
    Income from operating divisions                 52.7      43.2
    Other expenses less income                       0.6       1.7
    Income from operations                          53.3      44.9
    Associates                                        --      (5.2)
    Interest expense and other investment income   (11.2)    (14.9)
    Dividends and premium on exchangeable shares    (0.2)     (1.8)
    Income before income taxes                      41.9      23.0
    Income taxes                                    (1.8)     (2.4)
    Income before extraordinary items               40.1      20.6
    Extraordinary items                             (3.2)     (3.4)
    Income before dividends                         36.9      17.2
    Dividends on preference shares                  (5.1)     (5.3)
    Net income                                      31.8      11.9
    Primary earnings per common share              $0.33     $0.15
                          Segmental Information
                            ($m; unaudited)
     Three months ended Sept. 30                    1992      1991
     Net sales
    Security services                             $225.3    $213.8
    Auctions                                        80.2      78.9
    Other activities                                30.5       1.3
    Total                                          336.0     294.0
     Income from operations
    Security services                               37.2      27.9
    Auctions                                        15.5      15.3
    Other expenses less income                       0.6       1.7
    Total                                           53.3      44.9
                    Consolidated Statements of Income
                           ($m; unaudited)
     Nine months ended Sept. 30                     1992      1991
    Net sales                                   $1,013.3    $907.5
    Income from operating divisions                156.4     149.7
    Other expenses less income                     (15.6)     (2.3)
    Income from operations                         140.8     147.4
    Associates                                       2.8       6.9
    Interest expense and other investment income   (34.8)    (44.4)
    Dividends and premium on exchangeable shares     2.8      (6.8)
    Income before income taxes                     111.6     103.1
    Income taxes                                    (6.7)     (9.6)
    Income before minority interests and
      extraordinary items                          104.9      93.5
    Minority interests                                --      (0.4)
    Extraordinary items                             (3.2)    (40.2)
    Income before dividends                        101.7      52.9
    Dividends on preference shares                 (15.5)    (15.9)
    Dividends on common shares                        --     (32.5)
    Net income                                      86.2       4.5
    Primary earnings per common share              $0.85     $0.73
                         Segmental Information
                            ($m; unaudited)
     Nine months ended Sept. 30                     1992      1991
     Net sales
    Security services                             $669.2    $651.7
    Auctions                                       258.2     251.4
    Other activities                                85.9       4.4
    Total                                        1,013.3     907.5
     Income from operations
    Security services                              101.4      89.6
    Auctions                                        55.0      60.1
    Other expenses less income                     (15.6)     (2.3)
    Total                                          140.8     147.4
                       Consolidated Balance Sheets
                                                Unaudited   Audited
                                                 9~30~92   12~31~91
                                                    $m        $m
     Assets
    Current assets:
    Cash                                          $228.4    $162.3
    Secured loan notes                                --     107.8
    Short-term investments                           3.9       4.1
    Accounts receivable                            177.3     148.9
    Inventories                                     43.7      48.1
    Other current assets                            83.6      67.1
    Total current assets                           536.9     538.3
    Property, plant and equipment                1,284.9   1,253.1
    Long-term investments                           93.7     131.2
    Other long-term assets                         130.1     138.6
    Total assets                                 2,045.6   2,061.2
     Liabilities and shareholders' equity
    Current liabilities:
    Short-term debt                                 53.8     158.8
    Accounts payable                               153.8      84.5
    Other current liabilities                      233.2     215.6
    Total current liabilities                      440.8     458.9
    Long-term debt                                 865.1     881.3
    Other long-term liabilities                    214.5     219.8
    Total liabilities                            1,520.4   1,560.0
    Shareholders' equity:(A)
    Common shares                                   11.0      11.0
    Share premium                                  558.0     558.0
    Distributable reserves                         953.4     872.7
    Convertible preference shares(B)               596.2     596.2
    Total                                        2,118.6   2,037.9
    Goodwill written off                        (1,434.7) (1,434.7)
    Shareholders' equity                           683.9     603.2
    Non-voting exchangeable shares                  14.2      14.6
    Treasury shares
      Common shares                                (97.8)    (98.4)
      Convertible preference shares**              (96.4)    (79.1)
    Exchangeable redeemable preference shares       21.3      60.9
    Total liabilities and shareholders' equity   2,045.6   2,061.2
    (A) -- Restated as a result of the application of the new U.K. Generally Accepted Accounting Principle relating to the accounting for goodwill on the disposal of businesses.
    (B) -- As at Nov. 23, 1992, 29,738 5-3~4 percent convertible redeemable preference shares and 290,400 6 percent convertible redeemable preference shares are in issue to third parties.
                 Consolidated Statement of Cash Flows
                           ($m; unaudited)
     Nine months ended Sept. 30                              1992
     Cash flows from operating activities
    Operating profit                                       $140.8
    Adjustments to reconcile operating profit
     to net cash provided by operating activities:
     Depreciation                                            82.7
     Other items                                             (5.9)
    Changes in assets and liabilities                        40.6
    Net cash provided by operating activities               258.2
    Discontinued operations costs                            (3.6)
    Returns on Investments and Servicing of Finance
     Interest received                                       11.4
     Interest paid                                          (42.0)
     Dividends received                                       2.8
     Dividends paid                                         (15.0)
    Net cash outflow from returns on investments
     and servicing of finance                               (42.8)
    Income taxes                                             (4.8)
    Investing activities
      Purchase of property, plant and equipment(net)       (128.0)
      Disposal of investments                                 6.7
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Publication:PR Newswire
Date:Nov 23, 1992
Words:2003
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