updated 5/4/2006 1:51:22 PM ET 2006-05-04T17:51:22

Tyco International Ltd. on Thursday reported second-quarter earnings shot up fivefold from year-ago results that included a hefty charge. The manufacturing conglomerate also lowered its full-year forecast.

The company, best known for its home alarm system ADT Security Services, said quarterly profit totaled $1.02 billion, or 49 cents per share, up from $192 million, or 10 cents per share, a year earlier. Revenue totaled $10.21 billion, up slightly from $9.99 billion a year ago.

Earnings from continuing operations totaled 52 cents per share, compared with 19 cents per share a year ago.

Excluding special items that boosted earnings by 7 cents per share, Tyco’s latest results matched the average forecast of 42 cents per share made by 15 analysts surveyed by Thomson Financial.

The latest results include 2 cents per share in costs for expensing employee stock options, which regulators did not require until last quarter. The costs were factored into the consensus analyst forecast.

For the third quarter, Tyco Chief Executive Ed Breen said in a conference call with analysts that he expects earnings from continuing operations of 46 cents to 48 cents per share, excluding special items.

The company also lowered its full-year expectations from continuing operations, excluding special items, to a range of $1.80 to $1.85 per share. In February it announced a full-year forecast of $1.85 to $1.92 per share.

Analysts expect earnings per share of 50 cents for the quarter and $1.83 for the year.

Breen said the cautious outlook was driven by the increase in the past quarter for the price of copper. Tyco buys more than 50 million pounds of copper each quarter for its electronic products.

“It was almost staggering,” Breen said. “And gold is up another 20-some percent. We’ve got a $120 million headwind from metals we can’t totally offset in the second half of the year. We’ve already taken all the other cost actions we can take.”

Brian Langenberg, an analyst with Foresight Research, called the results disappointing but not surprising.

“When you’re lowering guidance, and the rest of the galaxy is holding or raising guidance, that’s just not good,” he said.

The results in Tyco’s health-care business, which makes medical devices, were particularly poor, with operating income down 15 percent from last year to $589 million. Tyco is coping with voluntary product recalls announced last quarter.

“Health care was poor, and they very clearly told us that the margins structurally in that business are lower than what they used to be,” Langenberg said. “That’s a long term negative. That’s not a one-quarter thing.”

Breen said that during the second quarter and through April 11, Tyco used $1 billion in cash to buy back 36.6 million shares. The board of directors has approved a new $2 billion share repurchase program.

The company reduced its debt by $2.5 billion during the quarter, reaching its $10 billion debt target, he added.

Based in Bermuda but with operating headquarters in West Windsor, N.J., Tyco is readying for a split by early 2007 into three separate operations: fire and security, electronics and health care.

The company also has had to absorb legal costs and a $50 million civil penalty related to illegal accounting practices by former CEO L. Dennis Kozlowski and former Chief Financial Officer Mark H. Swartz, who were convicted last year and imprisoned for looting hundreds of millions of dollars from the company. Both men are appealing their convictions.

On Wednesday, auction house Sotheby’s sold for a combined $7.9 million two paintings — a Monet and a Renoir — that once hung in a Manhattan apartment Kozlowski used. The money is to be put in escrow while lawyers sort out whether Tyco or Kozlowski was the owner.

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