<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended:
MARCH 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-9463
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2626358
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1220 Champion Circle, Suite 100,
Carrollton, Texas 75006
(Address of principal executive offices) (Zip Code)
(972) 280-9675
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 1997: 14,083,656 shares of $.01 par value
common stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1997
INDEX
Part I: Financial Information Page No.
--------------------- --------
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II: Other Information 11
Signatures 12
2
<PAGE> 3
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 47,168,476 71,810,707
Trade Accounts Receivable, less allowance for doubtful accounts 27,788,516 23,800,284
Notes Receivable 1,162,401 1,109,534
Inventories, net 35,035,228 29,698,137
Advances for Inventory Purchases 4,549,695 4,921,481
Prepaid Expenses and Other Current Assets 4,345,773 3,156,489
Deferred Income Taxes 1,283,788 1,283,788
-------------- -----------
Total Current Assets 121,333,877 135,780,420
-------------- -----------
Property, Plant and Equipment, at cost 9,013,290 7,718,605
Less accumulated depreciation and amortization (3,000,119) (2,606,498)
-------------- -----------
6,013,171 5,112,107
-------------- -----------
Goodwill, net of accumulated amortization 53,075,805 28,027,964
Other Assets 3,319,192 3,657,624
-------------- -----------
Total Assets $ 183,742,045 172,578,115
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 14,832,176 11,228,246
Current Portion of Long-Term Debt 5,960 0
Notes Payable 814,350 0
Accrued Expenses 3,244,282 2,835,733
Foreign, Federal and State Income Taxes Payable 1,056,115 720,304
Other Current Liabilities 2,415,611 1,832,723
-------------- -----------
Total Current Liabilities 22,368,494 16,617,006
-------------- -----------
Long Term Debt 0 0
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $5 par value, issuable in series; 2,000,000 shares
authorized; Series A, 12% cumulative convertible, 195,351 shares
authorized, issued and outstanding 976,755 976,755
Common Stock, $.0l par value; 20,000,000 shares authorized;
14,083,656 and 13,863,101 shares issued and outstanding at
March 31, 1997 and December 31, 1996, respectively 140,836 138,631
Additional Paid-in Capital 144,629,239 140,917,563
Common stock to be issued 2,800,000 2,800,000
Foreign Currency Translation (341,567) (35,000)
Less: Treasury Stock, at cost, 35,000 shares (246,068) (246,068)
Retained Earnings 13,414,356 11,409,228
-------------- -----------
Total Stockholders' Equity 161,373,551 155,961,109
-------------- -----------
Total Liabilities and Stockholders' Equity $ 183,742,045 172,578,115
============== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE> 4
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31,1997 MARCH 31,1996
------------- -------------
<S> <C> <C>
Net sales $ 40,572,193 29,674,027
Cost of sales 27,511,144 21,244,887
------------ ------------
Gross profit 13,061,049 8,429,140
Other operating costs:
Marketing and sales 6,181,774 4,171,735
General and administrative 3,617,699 1,678,564
Goodwill amortization 372,953 32,009
------------ ------------
10,172,426 5,882,308
------------ ------------
Operating profits 2,888,623 2,546,832
Other (expense) income:
Interest (expense) income 783,096 (565,026)
Costs of terminated merger (697,055) 0
Other, net 187,246 (25,144)
------------ ------------
273,287 (590,170)
------------ ------------
Income before income taxes 3,161,910 1,956,662
Income taxes (1,127,477) (686,618)
------------ ------------
NET INCOME 2,034,433 1,270,044
Dividend requirements on
preferred stock (29,302) (29,302)
------------ ------------
Net income allocable to
common stockholders $ 2,005,131 1,240,742
============ ============
Income per share:
Primary $ .14 $ .16
============ ============
Assuming Full Dilution $ .14 $ .16
============ ============
Number of common shares used in computations:
Primary 14,555,054 7,635,659
============ ============
Assuming Full Dilution 14,962,035 8,138,387
============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE> 5
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31,1997 MARCH 31,1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,034,433 1,270,044
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 756,890 264,167
Provision for losses on accounts receivable 166,204 86,334
Provision for inventory obsolescene 48,950 163,263
Changes in operating assets and liabilities:
Accounts and notes receivable 763,466 (1,634,403)
Inventory (3,097,177) (2,063,321)
Advances for inventory purchases 371,786 (1,121,650)
Prepaid expenses and other current assets (1,055,354) (272,778)
Noncurrent notes and other assets 338,432 283,351
Accounts and notes payable 2,372,774 2,061,997
Accrued and other current liabilities (1,222,953) (521,843)
------------ ----------
Net cash provided by (used in) operating activities 1,477,451 (1,484,839)
------------ ----------
Cash flows from investing activities:
Purchases of property and equipment (768,426) (160,597)
Acquisitions, net of cash acquired (25,359,160) 0
------------ ----------
Net cash used in investing activities (26,127,586) (160,597)
------------ ----------
Cash flows from financing activities:
Net borrowings on notes payable 0 1,790,254
Issuance of common stock, net of issuance costs 37,206 0
Purchase of treasury stock 0 (246,067)
Payment of preferred stock dividends (29,302) (29,302)
------------ ----------
Net cash provided by financing activities 7,904 1,514,885
------------ ----------
Net increase (decrease) in cash and cash equivalents (24,642,231) (130,551)
------------ ----------
Cash and cash equivalents at beginning of the period 71,810,707 1,306,482
------------ ----------
Cash and cash equivalents at end of the period $ 47,168,476 1,175,931
============ ==========
Supplemental schedule of noncash investing and financing:
Acquisition of businesses
Assets acquired $ 37,054,407 0
Liabilities assumed (4,295,100) 0
Common stock issued (3,676,672) 0
------------ ----------
29,082,635 0
Less: cash acquired 3,723,475 0
------------ ----------
$ 25,359,160 0
============ ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
<PAGE> 6
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited interim consolidated financial statements include
the accounts of Ultrak, Inc. and its subsidiaries ("Ultrak" or "the
Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
The interim financial statements are prepared on an unaudited basis and do
not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. All
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods have been
made and are of a recurring nature unless otherwise disclosed herein. The
results of operations for such interim periods are not necessarily
indicative of results of operations for a full year. For further
information, refer to the consolidated financial statements and notes to the
consolidated financial statements for the year ended December 31, 1996
included in the Ultrak Annual Report on Form 10-K.
2. Business Acquisitions:
Monitor Dynamics, Inc.
On February 10, 1997, the Company acquired all of the outstanding shares of
capital stock of Monitor Dynamics, Inc.,("MDI"), a California corporation,
for $25 million in cash plus additional cash consideration based on the
amount by which total shareholders' equity of MDI at March 31, 1997, which
is estimated to be approximately $7.5 million, exceeds $6.0 million. MDI
designs, manufactures, markets and sells high-end security and access
control systems under the SAFEnet brandname. MDI's systems are used in very
high-end government, defense, industrial, financial and commercial
applications throughout the US and Europe.
The transaction has been accounted for as a purchase, and the operations of
MDI have been included in the Company's statement of income since the date
of acquisition. Goodwill is being amortized over 30 years using the
straight-line method.
Remaining Interest in MAXPRO Systems Pty, Ltd.
Effective February 17, 1997, the Company acquired the remaining 25% of the
outstanding capital stock of MAXPRO Systems Pty, Ltd. ("MAXPRO") for 175,000
shares of unregistered Ultrak common stock valued at $2.995 million. The
initial 75% interest of MAXPRO was acquired in July 1996.
The acquisition has been accounted for as a purchase and goodwill is being
amortized over approximately 24.4 years using the straight-line method.
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
Intervision Express Ltd.
On February 24, 1997, the Company acquired all of the outstanding share
capital of Intervision Express, Ltd. ("Intervision"), a United Kingdom
limited liability company, for one million British pounds, one half of which
is in promissory notes (valued at approximately $814,000 US dollars) and the
remaining one half of which was paid in 38,822 shares of unregistered Ultrak
common stock (valued at approximately $719,000 US dollars). The total
consideration is approximately $1.533 million US dollars. Intervision
distributes closed circuit television ("CCTV") products, primarily in the
UK, manufactured by Ultrak, Dedicated Micros, Toa, Hitachi, Mitsubishi and
others.
The transaction has been accounted for as a purchase and the operations of
Intervision have been included in the Company's statement of income since
the date of acquisition. Goodwill is being amortized over 25 years using the
straight-line method.
Videosys Group
On April 9,1997, the Company completed the acquisition of all of the
outstanding capital stock of Casarotto Security, SpA, an Italian
corporation, and Videosys Limited, a United Kingdom limited liability
company (collectively, the "Videosys Group") for total consideration of
$9.55 million consisting of $5.55 million in cash and $4.0 million
(comprised of 160,000 shares) in unregistered Ultrak common stock. The
Videosys Group designs, imports, and distributes CCTV and related security
products primarily in Italy, under the Videosys brandname.
The transaction will be accounted for as a purchase and the operations of
the Videosys Group will be included in the Company's statement of income
beginning April 1, 1997. Goodwill will be amortized over 30 years using the
straight-line method.
3. New Accounting Pronouncement - Earnings per Share
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The
new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed.
Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted average common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities and other contracts to
issue common stock were
7
<PAGE> 8
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
exercised and converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.
The adoption of this new standard is not expected to have a material impact
on the disclosure of earnings per share in the financial statements. The
effect of adopting this new standard has not been determined.
8
<PAGE> 9
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three Months ended March 31, 1997 compared to the
Three Months ended March 31, 1996
Results of Operations
For the three months ended March 31, 1997, net sales were $40,572,193, an
increase of $10,898,166 (37%) over the same period in 1996. This increase for
the three months ended March 31, 1997 was due to the effect of the acquisitions
entered into during 1996 and 1997, sales of new products introduced during late
1996 and 1997 and increased volume of sales of existing CCTV products to most
of the markets served by the Company.
Cost of sales was $27,511,144, an increase of $6,266,257 (30%) over the same
period in 1996. Gross profit margins on net sales increased to 32.2% for the
three months ended March 31, 1997 from 28.4% for the same period in 1996. This
increase in cost of sales was due to increased sales levels of Ultrak-branded
products, cost reductions realized on certain Ultrak-branded products, the
effect of the acquisitions entered into during 1996 and 1997 and higher margins
earned on new products introduced during 1996 and 1997.
Marketing and sales expenses were $6,181,774, an increase of $2,010,039 (48%)
over the same period in 1996. Marketing and sales expenses for the three months
ended March 31, 1997 were 15.2% of net sales, up from 14.1% for the same period
in 1996. This increase was due to the effect of acquisitions during 1996 and
1997 and the effect of hiring additional sales, sales support and marketing
personnel in anticipation of new product introductions and resulting sales
activities, as well as the increased travel, printing, product literature,
advertising and promotion costs associated with the introduction of new
products.
General and administrative expenses were $3,617,699, an increase of $1,939,135
(116%) over the same period in 1996. General and administrative expenses for
the three months ended March 31, 1997 were 8.9% of net sales, up from 5.7% of
net sales for the same period in 1996. This increase was a result of (i) the
acquisitions during 1996 and 1997, all of which maintain certain separate
administrative functions and have greater research and development costs, as a
percentage of net sales, than Ultrak's other operations, and (ii) the hiring of
additional research and development and administrative staff to support the
anticipated growth in sales.
Other income was $273,287, a increase of $863,457 (146%) from the same period
in 1996. This increase was due primarily to no interest expense in 1997
resulting from the repayment of bank and other lender borrowings from proceeds
of the June 1996 stock offering and interest income on cash and cash
equivalents resulting from the proceeds of the November 1996 stock offering.
9
<PAGE> 10
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Liquidity and Capital Resources
The Company had a net decrease in cash and cash equivalents for the three
months ended March 31, 1997 of approximately $24,642,000. Net cash provided by
operating activities for the period was approximately $1.5 million, primarily
consisting of decreases in accounts and notes receivable and advances for
inventory and increases in trade accounts and notes payable offset partially by
increases in inventory and prepaid expenses and other current assets as
required by the increased sales. Net cash used in investing activities was
approximately $26.1 million consisting of purchases of property and equipment
and cash payments for acquisitions. Net cash provided by financing activities
was approximately $7,900 consisting of net proceeds from issuance of common
stock pursuant to exercises of stock options, offset by the payment of
dividends on the Series A Preferred Stock.
As of March 31, 1997, the Company had unused available revolving lines of
credit under its bank facility totaling $20.0 million. The Company was in
compliance with all of its covenants with its lender as of April 28, 1997.
The Company believes that internally generated funds, available borrowings
under the credit facilities, current amounts of cash and the remaining net
proceeds from the sale of the November 1996 stock offering will be sufficient
to meet its presently anticipated needs for working capital, capital
expenditures and acquisitions, if any, for at least the next 12 months.
10
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1997
Part II: Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Exhibit 10.1: Ultrak, Inc. Incentive Stock Option Plan
Exhibit 11.1: Computation of Per Share Income for the three
months ended March 31, 1997.
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K.
A Form 8-K was filed on February 19, 1997 under Item 2:
Acquisition of Assets relative to the Company's acquisition
of Monitor Dynamics, Inc., a California corporation, and
under Item 5: Other Events relative to the acquisition of
Intervision Express Ltd, a United Kingdom limited liability
company, and the acquisition of Veravison, Inc., a California
corporation.
A Form 8-K was filed on April 9, 1997 under Item 5: Other
Events relative to the Company's acquisition of Casarotto
Security, SpA, a Italian corporation, and Videosys Limited, a
United Kingdom limited liability company.
11
<PAGE> 12
ULTRAK, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ULTRAK, INC.
(Registrant)
Date: May 2, 1997 By: /s/ Tim D. Torno
--------------------------
Tim D. Torno
Principal Financial and
Accounting Officer
12
<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Ultrak, Inc. Incentive Stock Option Plan
11.1 Computation of Per Share Income
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
ULTRAK, INC.
INCENTIVE STOCK OPTION PLAN
On January 29, 1997, the Board adopted the following Incentive Stock
Option Plan:
1. PURPOSE. The purpose of the Plan is to provide key
employees and non-employee directors with a proprietary interest in the
Company through the granting of Incentive Options and Nonqualified
Options which will
(a) increase the interest of the key employees and non-
employee directors in the Company's welfare;
(b) furnish an incentive to the key employees and non-
employee directors to continue their services for
the Company; and
(c) provide a means through which the Company may
attract able persons to enter its employ or serve
on the Board.
2. ADMINISTRATION. The Plan shall be administered by the
Committee.
3. PARTICIPANTS. Each Year the Committee shall determine the
particular key employees of the Company and its Subsidiaries and non-
employee directors of the Company to whom options, if any, are to be
granted for that Year, and who will, upon such grant, become
participants in the Plan. For purposes of the Plan, "key employees"
means all executive officers and such other management employees as
determined by the Committee each Year. An otherwise eligible employee
or director must be employed by the Company or a Subsidiary or serving
on the Board by January 1 of a Year to be eligible to be granted an
option for that Year. An Incentive Option may not be granted to a
director who is not an employee of the Company or one of its
Subsidiaries.
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be
granted to an employee who owns more than 10% of the voting power of all
classes of
<PAGE> 2
stock of the Company or its Parent or Subsidiaries. This limitation
will not apply if the option price is at least 110% of the fair market
value of the stock at the time the Incentive Option is granted and the
Incentive Option is not exercisable more than five years from the date
it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant
options under the Plan for more than 400,000 shares of Common Stock of
the Company, but this number may be adjusted to reflect, if deemed
appropriate by the Committee, any stock dividend, stock split, share
combination, recapitalization, or the like, of or by the Company.
Shares to be optioned and sold may be made available from either
authorized but unissued Common Stock or Common Stock held by the Company
in its treasury. Shares that by reason of the expiration of an option
or otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value
(determined at the time of grant) of the shares of Common Stock which
any employee is first eligible to purchase in any Year by exercise of
Incentive Options granted under the Plan and all incentive stock option
plans of the Company or its Parent or Subsidiaries shall not exceed
$100,000. For this purpose, the fair market value (determined at the
respective date of grant of each option) of the stock purchasable by
exercise of an Incentive Option (or an installment thereof) shall be
counted against the $100,000 annual limitation for an employee only for
the Year such stock is first purchasable under the terms of the option.
The total number of shares of Common Stock subject to options granted
for any Year, if any, including to any individual participant, shall not
exceed one
-2-
<PAGE> 3
percent of the aggregate number of shares of Common Stock outstanding as
of the Date of Grant of options for such Year.
7. DETERMINATION OF GRANTS AND ALLOTMENT OF SHARES. Each key
employee and non-employee director of the Company determined by the
Committee to be eligible pursuant to Section 3 for a Year shall be
granted an option, effective as of the Date of Grant for that Year, to
purchase a number of shares of Common Stock to be determined pursuant to
this Section 7 based on or more of Economic Value Added (EVA)
considerations, Market Value Added (MVA) considerations and budget
achievement considerations as described herein.
(a) Annual Number of Shares to be Granted Based on EVA
Considerations. Options in the amounts determined
hereunder shall be granted pursuant to this subsection (a)
to the eligible key employees and non-employee directors
for a Year if the EVA threshold is met that Year. The EVA
threshold for a Year shall be met if the net income after
taxes of the Company for that Year exceeds the EVA hurdle
amount established for that Year and such excess amount
shall be referred to as "EVA." The EVA hurdle amount for
a Year shall be equal to the average stockholder equity of
the Company for the Year multiplied by the EVA hurdle rate
for that Year. The average stockholder equity of the
Company for a Year shall be determined by adding the
stockholder equity of the Company as of the first day of
the Year to the stockholder equity of the Company as of
the last day of the Year, determined by excluding the
proceeds of any stock offering and the effects of any
acquisitions, if any, during that Year, and dividing that
sum by two. If the EVA threshold is met for a Year, the
number of shares of Common Stock to be granted pursuant to
this subsection (a) for that Year shall be determined by
multiplying the EVA for that Year by the EVA factor
established for that Year and then dividing that product
by the adjusted market value of the Common Stock and then
multiplying that quotient by the EVA percentage
established for that Year. The adjusted market value of
the Common Stock for a Year shall be equal to the closing
price per share of the Common Stock on the Date of Grant
for such Year multiplied by the Black-Scholes discount
factor established for that Year.
-3-
<PAGE> 4
(b) Establishing EVA Considerations for a Year. Except
for the 1996 Year of the Plan, the Committee shall
determine the EVA hurdle rate, the EVA factor, the EVA
percentage, and the Black-Scholes discount factor for a
Year prior to March 31 of the Year and shall set forth all
such determinations in its minutes. For the 1996 Year,
the EVA hurdle rate shall be 15%, the EVA factor shall be
25%, the EVA percentage shall be 25% and the Black-Scholes
discount factor shall be 50%.
(c) Allocation of Shares Granted Under Subsection (a).
The number of shares granted under subsection (a) for a
Year shall be allocated among the eligible key employees
and non-employee directors for that Year based on the
percentage established for each such participant by the
Committee for that Year. Except for the 1996 Year of the
Plan, the Committee shall establish the respective
percentage for each such participant prior to March 31 of
the Year and the aggregate of all such percentages shall
equal 100%.
(d) Annual Number of Shares to be Granted Based on MVA
Considerations. Options in the amounts determined
hereunder shall be granted pursuant to this subsection (d)
to the eligible key employees and non-employee directors
for a Year if the MVA threshold is met for that Year. The
MVA threshold for a Year shall be met if the excess of the
average closing price of the Common Stock of the Company
for the month of December of that Year over the average
closing price of the Common Stock of the Company for the
month of December of the preceding Year exceeds the MVA
hurdle amount established for that Year and such excess
amount shall be referred to as "per share MVA." The MVA
hurdle amount for a Year shall be equal to the average
closing price of the Common Stock of the Company for the
month of December of the preceding Year multiplied by the
MVA hurdle rate for that Year. If the MVA threshold is
met for a Year, the number of shares of Common Stock to be
granted pursuant to this subsection (d) for that Year
shall be determined by multiplying the per share MVA for
that Year by the number of shares of Common Stock of the
Company outstanding as of the Date of Grant (excluding any
shares of Common Stock issued since the prior Date of
Grant pursuant to any stock offering or acquisition by the
Company) and multiplying that product by the MVA factor
established for that Year and then dividing that product
by the adjusted market value of the Common Stock and then
multiplying that quotient by the MVA percentage for that
Year. The adjusted market value of the Common Stock for a
Year shall be equal to the closing price per share of the
Common Stock on the Date of Grant for such Year multiplied
by the Black-Scholes discount factor established for that
Year.
-4-
<PAGE> 5
(e) Establishing MVA Considerations for a Year. Except
for the 1996 Year of the Plan, the Committee shall
determine the MVA hurdle rate, the MVA factor, the MVA
percentage, and the Black-Scholes discount factor for a
Year prior to March 31 of the Year and shall set forth all
such determinations in its minutes. For the 1996 Year,
the MVA hurdle rate shall be 15%, the MVA factor shall be
5%, the MVA percentage shall be 75%, and the Black-Scholes
discount factor shall be 50%.
(f) Allocation of Shares Granted Under Subsection (d).
The number of shares granted under subsection (d) for a
Year shall be allocated among the eligible key employees
and non-employee directors for that Year based on the
percentage established for each such participant by the
Committee for that Year. Except for the 1996 Year of the
Plan, the Committee shall establish the respective
percentage for each such participant prior to March 31 of
the Year and the aggregate of all such percentages shall
equal 100%.
(g) Annual Number of Shares to be Granted Based on
Budget Achievement Considerations. Commencing with the
1997 Year of the Plan, options in the amounts determined
hereunder shall be granted pursuant to this subsection (g)
to the eligible key employees and non-employer directors
for a Year if the budget threshold is met for that Year.
The budget threshold for a Year shall be met if the
Company budget approved for that Year by the board of
directors is met or exceeded. If the budget threshold is
met for a Year, the number of shares of Common Stock to be
granted pursuant to this subsection (g) for that Year
shall be equal to 50% of the allocable pool for that Year
(the "allocable pool percentage"). The allocable pool for
a Year shall be equal to one percent of the aggregate
number of shares of Common Stock outstanding as of the
Date of Grant of options for such Year multiplied by the
budget percentage for that Year. If the budget threshold
for year is exceeded, the allocable pool percentage for
that Year shall be increased by 5% for each percentage
point (rounded to the nearest whole percentage) that the
actual performance of the Company for the Year exceeds the
budget for the Year (up to a maximum of 100% if the budget
is exceeded by 10%).
(h) Establishing Budget Considerations for a Year.
Except for the 1997 Year of the Plan, the Committee shall
determine the budget percentage for a Year prior to March
31 of the Year and shall set forth such determination in
its minutes. For the 1997 Year, the budget percentage
shall be 75%.
(i) Allocations of Shares Granted Under Subsection (g).
The number of shares granted under subsection (g) for a
Year shall be allocated among
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<PAGE> 6
the eligible key employees and non-employee directors for
that Year based on the percentage established for each
such participant by the Committee for that Year. Except
for the 1997 Year of the Plan, the Committee shall
establish the respective percentage for each participant
prior to March 31 of the Year and the aggregate of all
such percentages shall equal 100%.
The grant of an option to a key employee or non-employee director shall
not be deemed either to entitle the key employee or director to, or to
disqualify the key employee or director from, participation in any other
grant of options under the Plan.
8. GRANT OF OPTIONS. The Committee is authorized to grant
Incentive Options and Nonqualified Options under the Plan. All options
under the Plan shall be automatically granted as provided in Section 7.
The grant of options shall be evidenced by stock option agreements
containing such terms and provisions as are approved by the Committee,
but not inconsistent with the Plan, including provisions that may be
necessary to assure that any option that is intended to be an Incentive
Option will comply with Section 422 of the Internal Revenue Code of
1986, as amended. The Company shall execute stock option agreements
upon instructions from the Committee. The Plan shall be submitted to
the Company's stockholders for approval. The Committee may grant
options under the Plan prior to the time of stockholder approval, which
options will be effective when granted, but if for any reason the
stockholders of the Company do not approve the Plan prior to one year
from the date of adoption of the Plan by the Board, all options granted
under the Plan will be terminated and of no effect, and no option may be
exercised in whole or in part prior to such stockholder approval.
A stock option agreement may provide that the participant may
request approval from the Committee to exercise an option or a portion
thereof by tendering shares of
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<PAGE> 7
Common Stock at the fair market value per share on the date of exercise
in lieu of cash payment of the exercise price.
9. OPTION PRICE. The option price for all options to be
granted for a Year shall be equal to the average of the high and low
price per share of the Common Stock (or 110% of such amount as required
by Section 4) on the Date of Grant for such Year.
10. OPTION PERIOD. Except as provided in Section 4 hereof,
the Option Period will begin on the Date of Grant of the option and will
terminate on the tenth anniversary of that date.
11. EXERCISE OF OPTION. Options granted under the Plan shall
become exercisable in five cumulative annual installments of 20% of the
total optioned shares beginning on the first anniversary of the Date of
Grant of the option, and succeeding anniversaries thereafter. If an
installment covers a fractional share, such installment will be rounded
off to the next highest share, except the final installment, which will
be for the balance of the total optioned shares. In no event may an
option be exercised or shares be issued pursuant to an option if any
requisite action, approval or consent of any governmental authority of
any kind having jurisdiction over the exercise of options shall not have
been taken or secured.
12. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant
dies or becomes (disabled within the meaning of Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended) prior to expiration of his
right to exercise an option in accordance with the provisions of his
stock option agreement without having totally exercised the option, the
option may be exercised, to the extent of the total remaining
-7-
<PAGE> 8
shares that have not been purchased by exercise by the participant prior
to the date of his death or disability, (i) in the case of death, by the
participant's estate or by the person who acquired the right to exercise
the option by bequest or inheritance or by reason of the death of the
participant, or (ii) in the case of disability, by the participant or
his personal representative; provided, however, in either case that the
option is exercised prior to the date of its expiration or one year from
the date of the participant's death or disability, whichever first
occurs. The date of disability of a participant shall be determined by
the Committee.
13. RIGHTS IN EVENT OF TERMINATION OF EMPLOYMENT. If a
participant's employment with the Company and its Subsidiaries or
service as a non-employee director of the Company terminates without
cause (as defined below) prior to expiration of his right to exercise an
option in accordance with the provisions of his stock option agreement
without having totally exercised the option, the option may be
exercised, to the extent of the shares with respect to which the option
could have been exercised by the participant on the date his employment
or service as a director terminates, prior to the date of its expiration
or 30 days from the date his employment or directorship terminates,
whichever first occurs. If a participant's employment with the Company
and its Subsidiaries or service as a non-employee director of the
Company is terminated with cause prior to expiration of his right to
exercise an option in accordance with the provisions of his stock option
agreement without having totally exercised the option, the option shall
terminate as of the effective date his employment or service as a
director is terminated. For purposes of the Plan, a participant's
employment or service as a director
-8-
<PAGE> 9
shall be deemed terminated with cause if the Company terminates his
employment or directorship because of (i) a material breach by the
participant of any of the terms of his employment contract, if any, (ii)
his conviction for fraud or embezzlement, or because he has conducted
himself in any way punishable as a felony, (iii) his engaging in conduct
constituting or exhibiting malfeasance, gross negligence, gross
incompetence or moral turpitude, or (iv) his suffering from drug or
alcohol abuse or addiction that could, in the opinion of the Board,
materially impair his ability to perform his duties or injure the
assets, properties, operations or business reputation of the Company.
14. PAYMENT. Full payment for shares purchased upon
exercising an option shall be made in cash or by check or by tendering
shares of Common Stock at the fair market value per share at the time of
exercise, or on such other terms as are set forth in the applicable
option agreement. No shares may be issued until full payment of the
purchase price therefor has been made, and a participant will have none
of the rights of a stockholder until shares are issued to him. In
addition, the participant shall tender payment of the amount as may be
requested by the Company, if any, for the purpose of satisfying its
liability to withhold federal, state or local income or other taxes
incurred by reason of the exercise of an option.
15. CAPITAL ADJUSTMENTS AND REORGANIZATIONS; ANTIDILUTION.
The number of shares of Common Stock covered by each outstanding option
granted under the Plan and the option price may be adjusted to reflect,
as deemed appropriate by the Committee, any stock dividend, stock split,
share combination, exchange of shares,
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<PAGE> 10
recapitalization, merger, consolidation, separation, reorganization,
liquidation or the like, of or by the Company.
In the event the Company shall be a party to any merger,
consolidation or corporate reorganization, as the result of which the
Company shall be the surviving corporation the rights and duties of the
participants holding options and the Company shall not be affected in
any manner. In the event the Company shall sell all or substantially
all of its assets or shall be a party to any merger, consolidation or
corporate reorganization, as the result of which the Company shall not
be the surviving corporation, or in the event any other person or entity
may make a tender or exchange offer for stock of the Company whereby
such other person or entity would own more than 50% of the outstanding
Common Stock of the Company (the surviving corporation, purchaser, or
tendering corporation being collectively referred to as the "Purchaser,"
and the transaction being collectively referred to as the
"Transaction"), then the Company may, at its election, (a) reach an
agreement with the Purchaser that the Purchaser will assume the
obligations of the Company under each option; (b) reach an agreement
with the Purchaser that the Purchaser will convert each option into an
option of at least equal value as to stock of the Purchaser; or (c) not
later than twenty days prior to the effective date of such Transaction,
notify each participant holding an option that his option is accelerated
and afford to the participant a right for ten days after the date of
such notice to exercise any then unexercised portion of the option
whether or not such option shall then be exercisable according to its
terms. Within such ten-day period, each such participant may exercise
any portion of such option as he may desire and deposit with the Company
the requisite
-10-
<PAGE> 11
cash to purchase in full and not in installments the Common Stock
thereby exercised (or comply with Section 14, if applicable, with
respect to exercising the option by tendering shares of Common Stock in
lieu of each payment for the optioned shares being purchased), in which
case the Company shall, prior to the effective date of the Transaction,
issue all Common Stock thus exercised, which shall be treated as issued
stock for purposes of the Transaction.
16. NON-ASSIGNABILITY. Options may not be transferred other
than by will or by the laws of descent and distribution. During a
participant's lifetime, options granted to a participant may be
exercised only by the participant or by his personal representative as
provided in Section 12.
17. INTERPRETATION. The Committee shall interpret the Plan
and shall prescribe such rules and regulations in connection with the
operation of the Plan as it determines to be advisable for the
administration of the Plan. The Committee may rescind and amend its
rules and regulations.
18. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or
discontinued by the Board without the approval of the stockholders of
the Company, except that any amendment that would (a) materially
increase the number of securities that may be issued under the Plan or
(b) materially modify the requirements of eligibility for participation
in the Plan must be approved by the stockholders of the Company.
-11-
<PAGE> 12
19. EFFECT OF PLAN. Neither the adoption of the Plan nor any
action of the Board or the Committee shall be deemed to give any key
employee or non-employee director any right to be granted an option to
purchase Common Stock of the Company or any other rights except as may
be evidenced by the stock option agreement, or any amendment thereto,
duly authorized by the Committee and executed on behalf of the Company
and then only to the extent and on the terms and conditions expressly
set forth therein. Nothing in this Plan shall be construed as
conferring upon any participant the right to continue as an employee,
officer or director.
20. TERM. Unless sooner terminated by action of the Board,
this Plan will terminate on January 28, 2007. The Committee may not
grant options under the Plan after that date, but options granted before
that date will continue to be effective in accordance with their terms.
21. APPLICABLE LAW. This Plan shall be construed in
accordance with and governed by the laws of the State of Texas.
22. DEFINITIONS. For the purpose of this Plan, unless the
context requires otherwise, the following terms shall have the meanings
indicated:
(a) "Board" means the Board of Directors of the
Company.
(b) "Committee" means the Compensation Committee of the
Board.
(c) "Common Stock" means the Common Stock which the
Company is currently authorized to issue or may in
the future be authorized to issue (as long as the
common stock varies from that currently authorized,
if at all, only in amount of par value).
(d) "Company" means Ultrak, Inc., a Delaware
corporation.
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<PAGE> 13
(e) "Date of Grant" means for any Year the April 1st of
the next Year.
(f) "Incentive Option" means an option granted under
the Plan which meets the requirements of Section
422 of the Internal Revenue Code of 1986, as
amended.
(g) "Nonqualified Option" means an option granted under
the Plan which is not intended to be an Incentive
Option.
(h) "Option Period" means the period during which an
option may be exercised.
(i) "Parent" means any corporation in an unbroken chain
of corporations ending with the Company if, at the
time of granting of the option, each of the
corporations other than the Company owns stock
possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in the chain.
(j) "Plan" means this Incentive Stock Option Plan, as
amended from time to time.
(k) "Subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company
if, at the time of the granting of the option, each
of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all
classes of stock in one of the other corporations
in the chain, and "Subsidiaries" means more than
one of any such corporations.
(l) "Year" means the calendar year.
-13-
<PAGE> 1
EXHIBIT 11.1
ULTRAK, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Computation of Income per Share-Primary:
Net income $ 2,034,433
Less: Dividend requirements on preferred
stock (29,302)
------------
Net income allocable to common stockholders $ 2,005,131
============
Weighted average number of common shares
outstanding during the period 14,022,852
Net effect of dilutive stock options and
warrants based on the treasury method using
average market price 532,202
------------
Shares used for computation 14,555,054
============
Income per share-primary $ .14
============
Computation of Income per Share-Assuming Full Dilution:
Net income $ 2,034,433
Less: Dividend requirements on preferred stock --
------------
Net income allocable to common stockholders $ 2,034,433
============
Weighted average number of common shares
outstanding during the period 14,022,852
Net effect of dilutive stock options and
warrants based on the treasury method using
the greater of average or ending price 532,202
Net effect of preferred stock conversion 406,981
------------
Shares used for computation 14,962,035
============
Income per share-assuming full dilution $ .14
============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 47,168,476
<SECURITIES> 0
<RECEIVABLES> 28,989,462
<ALLOWANCES> 1,200,946
<INVENTORY> 35,035,228
<CURRENT-ASSETS> 121,333,877
<PP&E> 9,013,290
<DEPRECIATION> 3,000,119
<TOTAL-ASSETS> 183,742,045
<CURRENT-LIABILITIES> 22,368,494
<BONDS> 0
0
976,755
<COMMON> 140,836
<OTHER-SE> 160,255,960
<TOTAL-LIABILITY-AND-EQUITY> 161,373,551
<SALES> 40,572,193
<TOTAL-REVENUES> 40,572,193
<CGS> 27,511,144
<TOTAL-COSTS> 27,511,144
<OTHER-EXPENSES> 10,122,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,161,910
<INCOME-TAX> 1,127,477
<INCOME-CONTINUING> 2,034,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,034,433
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
