Aug. 7 (Bloomberg) -- Tyco International Ltd., the conglomerate built by now-jailed former Chief Executive Officer L. Dennis Kozlowski, posted a third-quarter loss of $3.55 billion on costs to settle a shareholder lawsuit and split into three parts.

The net loss of $7.18 a share compared with net income of $868 million, or $1.68, a year earlier, the Bermuda-based company said today in a statement. Sales rose 7.8 percent to $5.09 billion, led by the valve unit, which serves the energy industry.

Tyco spun off health-care company Covidien Ltd. and electrical components-maker Tyco Electronics Ltd. on June 29. Chief Executive Ed Breen stayed on to run units including security and fire, which posted profit declines on restructuring costs. In the period, Tyco paid $2.88 billion to settle a shareholder lawsuit. For this quarter, the company forecast an operating profit margin before items of as much as 9.5 percent.

``Fourth-quarter guidance was light on the operating margin side,'' wrote Nicole Parent, an analyst at Credit Suisse in New York. Three of the company's six segments missed her operating profit forecasts, Parent, who rates the company ``neutral,'' said in her note.

Shares of Tyco, with operating headquarters in West Windsor, New Jersey, have declined 10 percent since the split. They fell 56 cents, or 1.2 percent, to $47.44 at 4:02 p.m. in New York Stock Exchange composite trading.

Analyst Estimates

Excluding costs for the legal settlement and breakup expenses of $343 million, Tyco said profit was 55 cents a share in the quarter ended June 29. That beat the average of 11 analyst estimates compiled by Bloomberg of adjusted profit of 48 cents. Goodwill impairment expenses were $46 million and restructuring spending was $37 million, Tyco said.

The company forecast fourth-quarter revenue growth of 6 percent to 7 percent. Tyco didn't provide a per-share earnings forecast. Costs for restructuring efforts, which are focused on the security and fire operations in Europe, may reach as much as $400 million, Breen reiterated on a call with analysts and investors.

Tyco will review its use of free cash flow and its dividend policy for 2008, company executives said on the call. Tyco may seek ways to ``return excess free cash flow to shareholders,'' invest in new products and may make ``bolt-on'' acquisitions, Breen said on the call.

`Excess Cash'

``We're not going to sit on any excess cash,'' he said.

Breen affirmed in June plans to divest the infrastructure- services division, with 2006 sales of $1.3 billion. Tyco will report the unit as a discontinued operation in the fourth quarter, the statement said. An announcement on the disposal should be made in the next six to 12 months, said Christopher Coughlin, the chief financial officer, on the call.

Tyco, which should have a tax rate of 30 percent to 32 percent in its fourth quarter, may have a lower rate of 27 percent for the year and a 25 percent rate in 2008, Coughlin said.

Breen and his board moved in January 2006 to split up Tyco. Kozlowski is now serving time in New York State prison for stealing from the company.

Stockholders received shares Covidien and Tyco Electronics in a tax-free spinoff.

The smaller Tyco is now divided into ADT security, fire protection, flow control, safety products and electrical and metal-product units.

ADT Revenue Rises

At ADT, revenue rose 6 percent to $1.09 billion. Profit declined 15 percent to $205 million because of restructuring costs and goodwill impairment. Excluding those items, profit rose 8 percent on lower attrition rates, or rates at which subscribers to security systems disconnect their service.

Tyco began recording the life of ADT contracts in North America as 15 years on its books to better reflect the lower attrition rates, Coughlin said on the call. Previously, contracts were booked as generating revenue for 10 to 14 years, he said. The change was ``reviewed in great detail by the auditing firm.''

In the fourth quarter, disconnect rates were 12 percent, down from about 16 percent in 2004, he said.

Profit at the fire division declined 7 percent to $57 million even as revenue rose 7 percent to $882 million, on costs to restructure European operations. Excluding that expense, profit gained 13 percent, Tyco said, led by sales in North America, Asia and Australia.

Flow Control

At the flow-control division, maker of valves, pipes and fittings, revenue grew 22 percent to $982 million with a profit rise of 43 percent to $124 million.

Safety products, which makes items including breathing equipment for firefighters, reported a 5 percent increase in sales to $452 million. Operating profit was $73 million compared with a $20 million loss a year earlier.

Electrical and metal products, maker of steel tubing and flexible conduit for commercial construction, posted a 44 percent drop in profit to $47 million, mostly because of higher copper costs. Revenue declined 1 percent to $519 million.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net

Last Updated: August 7, 2007 16:27 EDT