<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, 1996
Commission file number 0-16979
- - -------------------------------------------------------------------------------
ADT LIMITED
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C> <C>
BERMUDA Cedar House Not Applicable
(Jurisdiction of Incorporation or 41 Cedar Avenue (I.R.S. Employer Identification
Organization) Hamilton HM12, Bermuda No.)
(Address of Principal Executive
Offices)(*) Not Applicable
(Zip Code)
Registrant's telephone number, including area code 809-295-2244(*) (*)See page i
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
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 [ ]
At May 6, 1996, the number of shares outstanding of the registrant's common
shares par value $0.10 per share was 133,256,649 shares. A subsidiary of ADT
Limited owns 3,182,787 common shares which are included in the number
outstanding.
<PAGE> 2
ADT LIMITED
INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 . . . . . . . . . . 1
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1996 AND
DECEMBER 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . 14
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
The consolidated financial statements were approved by the Board of Directors
on May 6, 1996.
REGISTERED AND PRINCIPAL EXECUTIVE OFFICES
The registered and principal executive offices of ADT Limited are located at
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda. The executive offices of
the subsidiary which supervises the Company's North American activities are
located in the United States at One Boca Place, 2255 Glades Road, Suite 421A,
Boca Raton, Florida 33431. The telephone number there is 407-997-8406.
i
<PAGE> 3
ADT LIMITED
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<S> <C> <C>
Three months ended March 31 1996 1995
$m $m
NET SALES 354.3 373.3
Cost of sales (184.4) (200.3)
Selling, general and administrative expenses (112.6) (111.9)
Charge for the impairment of long-lived assets (410.1) -
Goodwill amortization (4.2) (6.6)
----------- ----------
OPERATING (LOSS) INCOME (357.0) 54.5
Interest income 6.4 3.7
Interest expense (19.7) (22.9)
Other expenses less income (0.5) 1.1
----------- ----------
(LOSS) INCOME BEFORE INCOME TAXES (370.8) 36.4
Income taxes (8.3) (9.3)
----------- ----------
NET (LOSS) INCOME (379.1) 27.1
=========== ==========
PRIMARY (LOSS) EARNINGS PER COMMON SHARE $ (2.94) $ 0.21
=========== ==========
</TABLE>
See notes to consolidated financial statements
1
<PAGE> 4
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited Audited
March 31 December 31
1996 1995
$m $m
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 322.1 341.8
Accounts receivable - net 219.5 169.9
Inventories 29.3 31.0
Prepaid expenses and other current assets 27.5 22.7
----------- -----------
Total current assets 598.4 565.4
Property, plant and equipment - net 1,247.6 1,223.5
Goodwill - net 424.1 823.0
Long-term investment 75.5 -
Investment in and loans to associate - 88.8
Other long-term assets 68.1 74.3
----------- -----------
TOTAL ASSETS 2,413.7 2,775.0
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt 47.0 38.8
Accounts payable 134.0 92.0
Other current liabilities 167.9 189.1
----------- -----------
Total current liabilities 348.9 319.9
Long-term debt 919.6 927.8
Deferred revenue 110.4 94.9
Deferred income taxes 121.2 116.7
Other long-term liabilities 116.4 126.3
Minority interests - 15.6
----------- -----------
Total liabilities 1,616.5 1,601.2
----------- -----------
Convertible redeemable preference shares 4.9 4.9
Shareholders' equity:
Common shares 13.2 13.2
Additional paid-in capital
Share premium 729.5 724.9
Contributed surplus 1,436.6 1,436.6
Treasury shares (79.7) (79.7)
Accumulated deficit (1,301.2) (922.0)
Cumulative currency translation adjustments (6.1) (4.1)
----------- -----------
Total shareholders' equity 792.3 1,168.9
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,413.7 2,775.0
=========== ===========
</TABLE>
See notes to consolidated financial statements
2
<PAGE> 5
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31 1996 1995
$m $m
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income (379.1) 27.1
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Charge for the impairment of long-lived assets 410.1 -
Depreciation 40.0 36.8
Goodwill amortization 4.2 6.6
Interest on ITS Vendor Note (2.1) -
Liquid Yield Option Notes discount amortization 5.0 -
Refinancing costs amortization 0.8 1.4
Deferred income taxes 5.8 6.7
Gain arising from the ownership of investments (1.2) -
Loss (gain) on currency transactions 1.7 (0.7)
Other (0.4) (0.8)
Changes in assets and liabilities (29.8) (3.0)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 55.0 74.1
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment - net (66.7) (56.7)
Acquisition of businesses (20.6) (5.3)
Disposal of investment in and loans to associate 15.4 -
Other (2.4) 8.1
----------- -----------
NET CASH UTILIZED BY INVESTING ACTIVITIES (74.3) (53.9)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net receipts (repayments) of short-term debt 8.9 (1.2)
Repayments of long-term debt (15.0) -
Purchase of senior subordinated notes - (7.5)
Proceeds from issue of common shares 4.6 1.9
Other 1.7 1.4
----------- -----------
NET CASH PROVIDED (UTILIZED) BY FINANCING ACTIVITIES 0.2 (5.4)
----------- -----------
EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS (0.6) 0.7
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (19.7) 15.5
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 341.8 215.7
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 322.1 231.2
=========== ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 6
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(i) BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
incorporate the financial statements of ADT Limited, a company incorporated in
Bermuda, and its subsidiaries (the "Company") and have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X
and in accordance with generally accepted accounting principles in the United
States. Accordingly, these unaudited interim consolidated financial statements
do not include all of the disclosures required by generally accepted accounting
principles for annual consolidated financial statements. In the opinion of
management, all adjustments considered necessary for fair presentation have
been included; all such adjustments are of a normal, recurring nature, except
as discussed in note (iii) where, effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 121, and except for the
acquisition of Alert Centre, Inc. ("Alert") as discussed in note (ix). The
preparation of consolidated financial statements in accordance with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Certain figures at December 31, 1995 and for the three months ended
March 31, 1995 have been reclassified to conform to the 1996 presentation. In
particular, corporate expenses have been reclassified from other expenses less
income to a separate component of operating income. This reclassification has
had no net effect on the reported earnings for income before income taxes and
net income. Results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results that may be expected for the full
year ending December 31, 1996. For further information, see the Company's
consolidated financial statements, including the accounting policies and notes
thereto, included in the Annual Report on Form 10-K for the year ended December
31, 1995. ADT Limited is a holding company with no independent business
operations or assets other than its investment in its subsidiaries,
intercompany balances and holdings of cash and cash equivalents. ADT Limited's
businesses are conducted through its subsidiaries.
4
<PAGE> 7
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(ii) BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Three months ended March 31 1996 1995
$m $m
<S> <C> <C>
NET SALES
Electronic security services 279.7 261.0
Vehicle auction services 74.6 112.3
----------- -----------
354.3 373.3
=========== ===========
OPERATING (LOSS) INCOME
Electronic security services (351.1) 37.7
Vehicle auction services (2.2) 22.7
Corporate (3.7) (5.9)
----------- -----------
(357.0) 54.5
=========== ===========
</TABLE>
Net sales and operating (loss) income of the electronic security services and
vehicle auction services divisions are discussed in Item 2.
(iii) CHARGE FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1996, the Company was required to adopt Statement of
Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS 121 prescribes a methodology for assessing and measuring an impairment
loss that is significantly different from previous guidelines and procedures.
SFAS 121 requires the recoverability of the carrying value of long-lived
assets, primarily property, plant and equipment, and related goodwill, to be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Under SFAS 121 it
is necessary to evaluate for and calculate an impairment loss at the lowest
level of asset grouping for which there are identifiable cash flows. Under
SFAS 121, if an asset being tested for recoverability was acquired in a
business combination accounted for using the purchase method, the goodwill that
arose in the transaction is included in the impairment evaluation of that
asset.
SFAS 121 requires that an impairment loss is recognized when the carrying
amount of an asset exceeds the sum of the estimated undiscounted future cash
flows of the asset. Under SFAS 121 an impairment loss is calculated as the
difference between the carrying amount of the asset, including the related
goodwill, and its fair value. The carrying amount of the related goodwill is
eliminated before making any reduction in the carrying amount of any other
impaired long-lived asset.
5
<PAGE> 8
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(iii) CHARGE FOR THE IMPAIRMENT OF LONG-LIVED ASSETS (continued)
Prior to the adoption of SFAS 121, the Company's policy was to evaluate for
impairment of long-lived assets, including goodwill, on a global basis for each
business segment. Management has determined that within the electronic
security services division the lowest level of asset grouping referred to above
can be determined on a country by country basis and further split principally
in terms of commercial and residential sectors. The assets principally
comprise subscriber systems installed at customers' premises, which are
included in property plant and equipment, and the related goodwill. Within the
vehicle auction services division the lowest level of asset grouping can be
determined principally on an individual auction center basis, and the assets
principally comprise land and real estate, which are included in property plant
and equipment, and the related goodwill. In adopting SFAS 121 management has
estimated the fair values referred to above by using an analysis of estimated
discounted future cash flows as the best available estimate of fair value. The
basis of the calculation was the Company's business strategy, plans and
financial projections, and an appropriate discount factor based on the
Company's estimated cost of capital.
As a result of the adoption of SFAS 121, in particular the change in
methodology requiring the Company to evaluate assets at the lowest level of
asset grouping, rather than on a global basis, in the first quarter of 1996 the
Company recorded a non-cash charge for the impairment of long-lived assets of
$410.1 million, as a separate line item in the consolidated statement of
income, with no consequential tax effect.
The $410.1 million impairment charge comprised $395.4 million relating to
goodwill in the electronic security services division, $13.0 million relating
to goodwill in the vehicle auction services division, and $1.7 million relating
to other long-lived assets in the electronic security services division, which
facilitated the write-down of the long-lived assets to their estimated fair
values.
The $395.4 million impairment charge in the electronic security services
division related to an impairment in the carrying value of subscriber systems
principally in the commercial sector, including related goodwill which
principally arose on the acquisition of ADT Security Systems in 1987. In the
United States, where the adoption of SFAS 121 coincided with a reorganization
of the business, the impairment charge amounted to $302.4 million. The
Re-Engineering Project, which was commenced in 1995, is continuing in the
United States. In the context of the Re-Engineering Project and changes in the
electronic security services business environment, the electronic security
services operations have been reorganized along separate commercial and
residential business lines, rather than on a geographic basis, with effect from
the second quarter of 1996. In Canada, where the business performance has
continued to be disappointing, the impairment charge amounted to $56.0 million.
In Europe, the impairment charge amounted to $37.0 million, principally due to
the business performance of certain countries not meeting previous
expectations.
The $13.0 million impairment charge in the vehicle auction services division
related to an impairment in the carrying value of property and related
improvements, including related goodwill which principally arose on the
acquisition of ADT Automotive in 1987.
(iv) INTEREST INCOME AND INTEREST EXPENSE
Interest income and interest expense are discussed in Item 2.
6
<PAGE> 9
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(v) OTHER EXPENSES LESS INCOME
Other expenses less income for the three months ended March 31, 1996 comprised
non-recurring net gains arising from the ownership of investments of $1.2
million (note (viii)), losses on currency transactions of $1.7 million (1995 -
$0.7 million gain), and in respect of 1995 other net gains of $0.4 million.
(vi) PRIMARY (LOSS) EARNINGS PER COMMON SHARE
The calculation of primary (loss) earnings per common share was based on the
weighted average of 128,805,641 (1995 - 129,756,727) common shares in issue
during the period, which in 1996 did not allow for full conversion rights
attaching to the allotment of common shares under executive share option
schemes, which are considered common stock equivalents, because their effect
was anti-dilutive as a consequence of the net loss for the period. Common
stock equivalents included in the weighted average number of common shares in
issue during the three months ended March 31, 1995 was 1,870,531. Primary
(loss) earnings per common share was based on adjusted net loss of $379.2
million (1995 - $27.0 million income).
(vii) INVENTORIES
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
$m $m
<S> <C> <C>
Raw materials and consumables 9.1 8.8
Work in process 10.9 12.5
Finished goods 9.3 9.7
----------- -----------
29.3 31.0
=========== ===========
</TABLE>
(viii) INVESTMENT IN AND LOANS TO ASSOCIATE
In February 1996, the Company disposed of its entire interest in Shareholder
Loan Notes with an issue price of $13.9 million and valued by the Company at
$13.3 million and 33.1 per cent of the ordinary share capital of ITS valued by
the Company at $0.9 million, for an aggregate cash consideration of $15.4
million. The net gain arising on the transaction amounted to $1.2 million
which was included in other expenses less income (note (v)).
As a result of the above transaction, the Company now holds a 10.0 per cent
interest in the ordinary share capital of ITS, valued by the Company at a
nominal amount, together with the Vendor Note, which at March 31, 1996 is
disclosed as a long-term investment amounting to $75.5 million.
7
<PAGE> 10
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(ix) MINORITY INTERESTS
In February 1996, following approval by Alert's shareholders, Alert was merged
into the Company and, as a result, those shares then held by the minority
shareholders and not owned by the Company were converted into the right to
receive in cash the price paid per share by the Company in the initial tender
offer. Accordingly, the minority interest outstanding at December 31, 1995 has
been eliminated.
(x) COMMON SHARES
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
<S> <C> <C>
Number of common shares of $0.10 each:
Authorized 220,000,000 220,000,000
Issued and outstanding 132,303,404 131,850,465
</TABLE>
8
<PAGE> 11
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(xi) ADT OPERATIONS, INC.
ADT Operations, Inc., a company incorporated in the State of Delaware, United
States, is an indirect wholly owned subsidiary of ADT Limited. ADT Operations,
Inc. is a holding company that, through its subsidiaries, conducts the
Company's electronic security services and vehicle auction services businesses
in the United States. ADT Operations, Inc. has no independent business
operations or assets other than its investment in its subsidiaries,
intercompany balances and holdings of cash and cash equivalents.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended March 31 1996 1995
$m $m
<S> <C> <C>
NET SALES 295.4 266.3
Cost of sales (146.2) (132.3)
Selling, general and administrative expenses (96.3) (84.6)
Charge for the impairment of long-lived assets (316.4) -
Goodwill amortization (2.8) (4.5)
----------- -----------
OPERATING (LOSS) INCOME (266.3) 44.9
Interest income - non-affiliates 0.6 0.5
Interest expense - affiliates (7.5) (5.3)
Interest expense - non-affiliates (18.9) (20.0)
Gain on disposal of assets to affiliates 26.8 -
Other expenses less income (1.1) (1.0)
----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (266.4) 19.1
Income taxes (6.6) (7.2)
----------- -----------
NET (LOSS) INCOME (273.0) 11.9
=========== ===========
</TABLE>
9
<PAGE> 12
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(xi) ADT OPERATIONS, INC. (continued)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited Audited
March 31 December 31
1996 1995
$m $m
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 115.4 54.0
Accounts receivable - net - affiliates 28.6 28.9
Accounts receivable - net - non-affiliates 176.3 132.8
Inventories 18.1 17.2
Prepaid expenses and other current assets 8.5 6.9
----------- -----------
Total current assets 346.9 239.8
Property, plant and equipment - net 1,074.3 1,049.1
Goodwill - net 345.3 698.4
Other long-term assets 28.6 28.9
----------- -----------
TOTAL ASSETS 1,795.1 2,016.2
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt - non-affiliates 44.8 36.3
Accounts payable - affiliates 15.5 9.6
Accounts payable - non-affiliates 119.4 75.2
Other current liabilities - non-affiliates 115.6 127.5
----------- -----------
Total current liabilities 295.3 248.6
Long-term debt - affiliates 156.2 130.2
Long-term debt - non-affiliates 885.4 895.4
Deferred revenue 71.8 67.3
Deferred income taxes 98.6 92.9
Other long-term liabilities - affiliates 126.7 129.8
Other long-term liabilities - non-affiliates 94.0 96.3
Minority interests - 15.6
----------- -----------
Total liabilities 1,728.0 1,676.1
----------- -----------
Shareholders' equity:
Common shares - -
Contributed surplus 858.5 858.5
Accumulated deficit (791.4) (518.4)
----------- -----------
Total shareholders' equity 67.1 340.1
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,795.1 2,016.2
=========== ===========
</TABLE>
10
<PAGE> 13
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(xi) ADT OPERATIONS, INC. (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31 1996 1995
$m $m
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income (273.0) 11.9
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Charge for the impairment of long-lived assets 316.4 -
Depreciation 33.4 28.5
Goodwill amortization 2.8 4.5
Liquid Yield Option Notes discount amortization 5.0 -
Refinancing costs amortization 0.8 1.4
Deferred income taxes 5.7 6.4
Gain on disposal of assets to affiliates (26.8) -
Other (0.3) (0.1)
Changes in assets and liabilities (12.4) (6.9)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 51.6 45.7
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment - net (59.4) (48.9)
Acquisition of businesses from non-affiliates (20.6) (0.8)
Disposal of assets to affiliates 73.5 -
Other (3.6) (0.1)
----------- -----------
NET CASH UTILIZED BY INVESTING ACTIVITIES (10.1) (49.8)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net receipts of short-term debt - non-affiliates 8.9 -
Proceeds from long-term debt - affiliates 26.0 -
Repayments of long-term debt - non-affiliates (15.0) -
Other - (2.2)
----------- -----------
NET CASH PROVIDED (UTILIZED) BY FINANCING ACTIVITIES 19.9 (2.2)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 61.4 (6.3)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 54.0 78.3
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 115.4 72.0
=========== ===========
</TABLE>
11
<PAGE> 14
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(xi) ADT OPERATIONS, INC. (continued)
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
Three months ended March 31 1996 1995
$m $m
<S> <C> <C>
NET SALES
Electronic security services 220.8 196.7
Vehicle auction services 74.6 69.6
----------- -----------
295.4 266.3
=========== ===========
OPERATING (LOSS) INCOME
Electronic security services (264.0) 34.4
Vehicle auction services (2.2) 10.9
Corporate (0.1) (0.4)
----------- -----------
(266.3) 44.9
=========== ===========
March 31 December 31
1996 1995
$m $m
INVENTORIES
Raw materials and consumables 6.7 6.5
Work in process 7.5 7.4
Finished goods 3.9 3.3
----------- -----------
18.1 17.2
=========== ===========
</TABLE>
LONG-TERM DEBT - NON-AFFILIATES
Under the terms of the indenture governing ADT Operations, Inc. senior
subordinated notes a payment blockage prevents ADT Operations, Inc. and its
guarantor subsidiaries and ADT Limited from making any payment of principal,
interest or premium on the senior subordinated notes and from purchasing,
redeeming or otherwise acquiring any senior subordinated notes during the
continuance of any payment blockage period. No payment blockage is currently
in effect.
At March 31, 1996, ADT Operations, Inc. had $330.9 million of Senior
Indebtedness comprised of $80.9 million of Senior Indebtedness related to
letters of credit issued under the terms of the revolving bank credit agreement
and $250.0 million of Senior Indebtedness related to the Senior Notes, (in each
case as defined in the Senior Subordinated Note Indenture).
At March 31, 1996, ADT Limited had no Guarantor Senior Indebtedness (as defined
in the Senior Note Indenture, but excluding Indebtedness in respect of
guarantees issued by ADT Limited of debt of ADT
12
<PAGE> 15
ADT LIMITED
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
(xi) ADT OPERATIONS, INC. (continued)
Operations, Inc. or its subsidiaries). At March 31, 1996, the subsidiary
guarantors had $51.2 million of Guarantor Senior Indebtedness (as defined in
the Senior Note Indenture), in each case ranking pari passu in right of payment
with the Senior Note Guarantees.
All of the subsidiary guarantors under the senior notes and the revolving bank
credit agreement are direct or indirect, wholly owned subsidiaries of ADT
Operations, Inc. Separate financial statements and other disclosures for the
subsidiary guarantors are not included herein because the subsidiary guarantors
have guaranteed the senior notes on a joint and several basis, the aggregate
assets, liabilities, earnings and equity of the subsidiary guarantors are
substantially equivalent to the assets, liabilities, earnings and equity of ADT
Operations, Inc. on a consolidated basis and such separate financial statements
and other disclosures are not considered material to investors.
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
<S> <C> <C>
COMMON SHARES
Number of common shares of $0.10 each:
Authorized 10,000 10,000
Issued and outstanding 1,820 1,820
</TABLE>
13
<PAGE> 16
ADT LIMITED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion of results of operations addresses net sales,
operating income and certain other line items in the consolidated financial
statements. The discussion is based on the segmental information set out
below.
NET SALES
<TABLE>
<CAPTION>
Three months ended March 31 1996 1995
$m $m
<S> <C> <C>
Electronic security services 279.7 261.0
Vehicle auction services 74.6 112.3
----------- -----------
Net sales 354.3 373.3
=========== ===========
OPERATING (LOSS) INCOME AND (LOSS) INCOME BEFORE INCOME TAXES
Three months ended March 31 1996 1995
$m $m
Electronic security services (351.1) 37.7
Vehicle auction services (2.2) 22.7
Corporate expenses (3.7) (5.9)
----------- -----------
Operating (loss) income (357.0) 54.5
----------- -----------
Interest income 6.4 3.7
Interest expense (19.7) (22.9)
Other expenses less income (0.5) 1.1
----------- -----------
(Loss) income before income taxes (370.8) 36.4
=========== ===========
Charge for the impairment of long-lived assets 410.1 -
Depreciation 40.0 36.8
Goodwill amortization 4.2 6.6
Capital expenditures 67.8 59.1
</TABLE>
The charge for the impairment of long-lived assets and other expenses less
income are discussed in Item 1.
14
<PAGE> 17
ADT LIMITED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
ELECTRONIC SECURITY SERVICES - RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31 1996 1996 1995 1995
$m % $m %
<S> <C> <C> <C> <C>
Net sales
North America 241.6 86 211.6 81
Europe(*) 38.1 14 49.4 19
--------- --------- --------- ---------
279.7 100 261.0 100
========= ========= ========= =========
Operating income
North America 45.1 91 39.3 93
Europe(*) 4.3 9 3.1 7
--------- --------- --------- ---------
Operating income before the charge
for the impairment of long-lived
assets and goodwill amortization 49.4 100 42.4 100
========= =========
Charge for the impairment of long-lived assets (397.1) -
Goodwill amortization (3.4) (4.7)
--------- ---------
Operating (loss) income (351.1) 37.7
========= =========
Depreciation 37.0 32.2
Capital expenditures 63.9 55.3
</TABLE>
(*) The Company's European electronic article surveillance operation was
disposed of in November 1995.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Net sales of the division, which represented approximately 79 per cent of the
Company's consolidated net sales for the quarter, increased 7.2 per cent in
1996 to $279.7 million from $261.0 million in the first quarter of 1995. This
sales increase was attributable to an increase of $30.0 million in the sales of
the North American operations offset by a $11.3 million decline in the sales of
the European operations, which was principally due to the exclusion of sales of
the European electronic article surveillance operation which was sold in
November 1995. In North America the increase in sales was due to the first
time inclusion of the sales of Alert which was acquired in December 1995, as
well as increased recurring monitoring and maintenance revenues arising from a
larger base of residential security systems. Approximately 60,000 new
residential security systems were installed in the first quarter of 1996
compared with approximately 56,000 systems in the first quarter of 1995.
However, due to price competition in the market place, installation revenues
showed a modest decline in the first quarter of 1996 compared with 1995. The
commercial business in the United States experienced modest growth in new
system sales and installation revenues, and growth in recurring revenues
continues to be affected by these market conditions.
15
<PAGE> 18
ADT LIMITED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Operating results of the division declined from $37.7 million income in the
first quarter of 1995 to $351.1 million loss in 1996, due to a charge for the
impairment of long-lived assets of $397.1 million.
Operating income of the division before the charge for the impairment of
long-lived assets and goodwill amortization increased 16.5 per cent in 1996 to
$49.4 million from $42.4 million in the first quarter of 1995. Operating
income before the charge for the impairment of long-lived assets and goodwill
amortization as a percentage of net sales ("Operating margin") increased to
17.7 per cent in 1996 from 16.2 per cent in the first quarter of 1995. The
increase in operating income before the charge for the impairment of long-lived
assets and amortization and the increase in Operating margin reflected the
first time inclusion of Alert, the exclusion of the European electronic article
surveillance operation and the continuing success of the residential security
system sales program, which has achieved further advances in recurring revenues
in the first quarter of 1996. However this improvement has been offset by
continued price competition which has caused the contribution from installation
revenue and outright sales to remain flat.
VEHICLE AUCTION SERVICES - RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31 1996 1996 1995 1995
$m % $m %
<S> <C> <C> <C> <C>
Net sales
United States 74.6 100 69.6 62
Europe(*) - - 42.7 38
--------- --------- --------- ---------
74.6 100 112.3 100
========= ========= ========= =========
Operating income
United States 11.6 100 11.7 48
Europe(*) - - 12.9 52
--------- --------- --------- ---------
Operating income before the charge
for the impairment of long-lived
assets and goodwill amortization 11.6 100 24.6 100
========= =========
Charge for the impairment of long-lived assets (13.0) -
Goodwill amortization (0.8) (1.9)
--------- ---------
Operating (loss) income (2.2) 22.7
========= =========
Depreciation 2.9 4.4
Capital expenditures 3.5 3.7
</TABLE>
(*)In December 1995 the Company disposed of an interest in its United Kingdom
and Continental European vehicle auction services businesses ("European
Auctions").
16
<PAGE> 19
ADT LIMITED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Net sales of the United States vehicle auction services business, which
represented approximately 21 per cent of the Company's consolidated net sales
for the quarter, increased 7.2 per cent in 1996 to $74.6 million from $69.6
million in the first quarter of 1995. The volume of vehicles sold increased by
approximately 5 per cent which was principally due to an increase in the volume
of vehicles sold for fleet lease customers of approximately 39 per cent, while
the volume of vehicles sold for vehicle manufacturers and new and used vehicle
dealers declined by approximately 9 per cent and approximately 1 per cent,
respectively.
Operating results of the division declined from $22.7 million income in the
first quarter of 1995 to $2.2 million loss in 1996 due to a charge for the
impairment of long-lived assets of $13.0 million and the exclusion of the
operating income of European Auctions.
Operating income before the charge for the impairment of long-lived assets and
goodwill amortization of the United States vehicle auction services business
declined from $11.7 million in the first quarter of 1995 to $11.6 million in
1996. Operating margin declined from 16.8 per cent in 1995 to 15.5 per cent in
1996. The declines in operating income and Operating margin were due
principally to severe weather conditions prevailing in the first quarter,
particularly on the East coast. Snow removal costs and cancelled auctions
caused adverse operating income movements in excess of $1.0 million. This
adverse movement was offset by an increase in the ratio of vehicles sold to
vehicles entered for sale to 60.1 per cent in 1996 from 57.4 per cent in 1995
which was due to a higher proportion of vehicles entered for sale by fleet
lease customers.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased by $2.7 million in the first quarter of 1996 to $6.4
million from $3.7 million in the first quarter of 1995, partly due to the
increase in the level of cash deposits held by the Company in 1996, following
the disposal of European Auctions and the European electronic article
surveillance business in the fourth quarter of 1995. During the first
quarter of 1996 interest income included $2.1 million relating to the ITS
Vendor Note.
Interest expense declined by $3.2 million from $22.9 million in the first
quarter of 1995 to $19.7 million in the first quarter of 1996, principally due
to the effects of the refinancing which took place in the third quarter of
1995. During the first quarter of 1996 interest expense included $5.0 million
relating to Liquid Yield Option Notes discount amortization and $0.8 million
(1995 - $1.4 million) relating to refinancing costs amortization.
LIQUIDITY AND CAPITAL RESOURCES
The net decrease in cash and cash equivalents amounted to $19.7 million, after
the negative effect of currency translation on cash and cash equivalents of
$0.6 million. Net cash of $55.0 million provided by operating activities and
$0.2 million provided by financing activities was offset by net cash utilized
by investing activities of $74.3 million.
Net cash provided by operating activities of $55.0 million principally included
cash provided by the Company's electronic security services and vehicle auction
services divisions less other expenses and
17
<PAGE> 20
ADT LIMITED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
adjusted for the net increase in working capital. Within the net increase of
$29.8 million in working capital, increases in accounts receivable of $49.6
million and other assets of $1.4 million were offset by a net increase in
liabilities of $21.2 million, principally relating to increases in accounts
payable and deferred revenue and a decrease in other liabilities. The
movements in accounts receivable and accounts payable were principally due to
the timing of cash receipts and payments in the vehicle auction business in
respect of vehicle sales which took place in the latter part of March 1996,
together with an increase in accounts receivable in the electronic security
services division. The movement in deferred revenue was principally due to the
timing of billings within the electronic security services division.
Net cash utilized by investing activities of $74.3 million was principally due
to capital expenditures of $63.9 million and $3.5 million in the electronic
security services and vehicle auction services divisions, respectively, and
$20.6 million relating to the acquisition of the minority interest in Alert,
which was offset by $15.4 million received on the disposal of certain
investments in and loans to associate.
Net cash provided by financing activities of $0.2 million was principally due
to net receipts of $8.9 million from short-term debt and $4.6 million of
proceeds from the issue of common shares, which was offset by repayments of
$15.0 million of long-term debt.
A market purchase program in respect of up to 5 million common shares was
approved by the board of directors on May 6, 1996, to be carried out at
prevailing market prices from time to time, depending on market conditions and
other considerations.
The Company believes that the working capital at March 31, 1996, its available
credit facilities and the current cash flows from operations are adequate for
the Company's normal growth and operating needs, the funding of its capital
expenditures budget, the funding of the purchase program referred to above, and
the current servicing of its debt requirements.
18
<PAGE> 21
ADT LIMITED
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Waiver and Consent No. 1 dated February 16, 1996 to the Credit
Agreement dated as of August 23, 1995.
11.1 Statement regarding the computation of earnings per common share.
27 Financial Data Schedule (for SEC use only).
(b) Current Reports on Form 8-K and Form 8-K/A were filed by ADT
Limited on January 16, 1996 and March 12, 1996, respectively,
comprising certain details of the disposal by the Company on
December 29, 1995 of an interest in its United Kingdom and
Continental European vehicle auction services businesses.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S> <C>
ADT LIMITED
/s/ Stephen J. Ruzika
May 7, 1996 ---------------------------------------------------------------
Stephen J. Ruzika
Chief Financial Officer, Executive Vice President and Director
(Principal Financial Officer and Principal Accounting Officer)
</TABLE>
19
<PAGE> 22
INDEX TO EXHIBITS TO QUARTERLY REPORT
ON FORM 10-Q
FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
10.1 Waiver and Consent No. 1 dated February 16, 1996 to the
Credit Agreement dated as of August 23, 1995.
11.1 Statement regarding the computation of earnings per common
share.
27 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 10.1
[CONFORMED COPY]
CREDIT AGREEMENT WAIVER AND CONSENT NO. 1
THIS CREDIT AGREEMENT WAIVER AND CONSENT NO. 1 (this "Waiver and
Consent"), dated as of February 16, 1996, among ADT OPERATIONS, INC., a company
organized under the laws of Delaware (the "Borrower"), the Agents (as defined
below) and the Required Lenders (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of August 23,
1995 (the "Credit Agreement"), among the Borrower, the financial institutions
as are or may become parties thereto (collectively, the "Lenders"), The Bank of
Nova Scotia ("Scotiabank"), individually and as documentation agent (the
"Documentation Agent") for the Lenders, and Chemical Bank ("Chemical"),
individually and as administrative agent (the "Administrative Agent", and,
together with the Documentation Agent, the "Agents") for the Lenders, the
Lenders extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, on December 6, 1995 (the "Judgment Date"), ADT Limited
obtained a judgment in the High Court of Justice in the Queen's Bench Division
(Mr. Justice May presiding) (the "U.K. Court") against BDO Binder Hamlyn (the
"Defendant") in an aggregate amount approximately equal to British Pound
Sterling 105,000,000 (the "Judgment");
WHEREAS, certain insurance carriers (collectively, the "Insurance
Carriers") are obligated to pay, in the aggregate, approximately British Pound
Sterling 55,000,000 in respect of such judgment in five installments over the
course of one year;
WHEREAS, three such installments shall be payable in United States
Dollars in the following amounts: $33,563,134; $44,188,111 and $8,947,566 (each
such amount, a "Dollar Insurance Payment Amount");
WHEREAS, in accordance with the terms of the written judgment of
the U.K. Court (the "U.K. Court Order"), as a condition to making each such
payment, the Insurance Carriers must receive a letter of credit or letters of
credit to their benefit in an aggregate face amount equal to the Dollar
Insurance Payment Amount applicable to such payment plus interest at a rate
(the "Judgment Interest Rate") to be agreed between ADT Limited and the
Defendant (or its agents), which letter of credit or
<PAGE> 2
letters of credit would be capable of being drawn upon to the extent
(a) (i) the Judgment is reversed in whole or in part
pursuant to a subsequent judgment, (ii) the Insurance Carriers are
entitled to repayment of all or any portion of any Dollar Insurance
Payment Amount and (iii) ADT Limited and its Subsidiaries do not
make such repayment; or
(b) as of a date which is not more than five Business
Days' prior to the expiry date of any such letter of credit, the
Judgment continues to be subject to appeal and the beneficiary
thereof has not received either (i) an extension and/or amendment
thereto extending such expiry date and increasing the face amount
thereof to take into account interest at the Judgment Interest Rate
which would accrue through such extended expiry date or (ii) a
substitute letter of credit substantially in the form of such
letter of credit with the extension and/or amendment described in
the preceding clause (i) (or such other substitute security for
repayment which is reasonably satisfactory to such beneficiary or
to a court of competent jurisdiction),
(each such letter of credit, an "Initial Judgment Letter of Credit", and,
collectively, the "Initial Judgment Letters of Credit");
WHEREAS, the Borrower desires that each Initial Judgment Letter of
Credit may, subject to the terms and conditions of the Credit Agreement then in
effect, (a) have its expiry date extended for successive periods not exceeding
one year each and (b) at the time of each such extension have the face amount
thereof amended to take into account additional interest at the Judgment
Interest Rate which would accrue for such additional period (each Initial
Judgment Letter of Credit, together with each such Initial Judgment Letter of
Credit as so extended and amended, collectively, the "Judgment Letters of
Credit", and, individually, a "Judgment Letter of Credit");
WHEREAS, each Dollar Insurance Payment Amount shall be received by
ADT Limited and used by it and its Subsidiaries in conducting the Core
Business;
WHEREAS, the Borrower desires to have each Initial Judgment Letter
of Credit issued as a Letter of Credit under the Credit Agreement and to have
each Judgment Letter of Credit remain a Letter of Credit under the Credit
Agreement upon any extension or amendment described above of such Judgment
Letter of Credit;
WHEREAS, Letter of Credit Availability as of the date hereof equals
$18,996,450;
-2-
<PAGE> 3
WHEREAS, the Credit Agreement as currently in effect does not
permit the Initial Judgment Letters of Credit to be issued thereunder since the
issuance thereof would result in Letter of Credit Outstandings exceeding
$100,000,000;
WHEREAS, the Borrower desires that the Required Lenders consent to,
among other things, the exclusion of the Judgment Letters of Credit from the
determination of Letter of Credit Outstandings under clause (a) of the
definition of "Letter of Credit Availability" so as to permit issuance of the
Judgment Letters of Credit under the Credit Agreement; and
WHEREAS, the Required Lenders are willing to consent to such
exclusion and the issuance of such Judgment Letters of Credit, on the terms and
subject to the conditions of this Waiver and Consent;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined or the context otherwise requires, terms
for which meanings are provided in the Credit Agreement shall have such
meanings when used in this Waiver and Consent.
ARTICLE II
LIMITED WAIVER AND CONSENT
SECTION 2.1. Limited Waiver and Consent. On the terms and subject
to the conditions set forth herein and in reliance on the representations and
warranties herein contained, the Required Lenders consent to:
(a) the exclusion of the Judgment Letters of Credit from
the determination of Letter of Credit Outstandings under clause (a)
of the definition of "Letter of Credit Availability" for the sole
purpose of permitting the issuance of the Judgment Letters of
Credit as Letters of Credit under the Credit Agreement (provided
that no portion of the Stated Amount of any Judgment Letter of
Credit shall be included in the determination of Letter of Credit
Outstandings under clause (a) of the definition of "Letter of
Credit Availability" when determining such Letter of Credit
Availability at the time of any proposed issuance
-3-
<PAGE> 4
(subsequent to the issuance of the Judgment Letters of Credit) of
any other Letter of Credit); provided, however, that:
(i) the Judgment Interest Rate used to calculate the
interest component of the Stated Amount of any Judgment
Letter of Credit may not exceed 10%, and
(ii) no more than two Judgment Letters of Credit may be
outstanding at any time in respect of any single Dollar
Insurance Payment Amount; and
(b) each Initial Judgment Letter of Credit having a
Stated Expiry Date which is up to two years from its date of
issuance (provided that each such Initial Judgment Letter of Credit
may be extended for successive periods not exceeding one year
each); provided, however, that in no event shall such Stated Expiry
Date (inclusive of all extensions) be later than June 29, 2000.
The foregoing consent shall be limited precisely as written and in no event
shall be deemed to constitute a consent to the modification of the term "Letter
of Credit Outstandings" when used in any other provision of the Credit
Agreement or for any other purpose or a consent to the modification of any
other term, provision or condition of the Credit Agreement or any other Loan
Document or prejudice any right or remedy that any Agent or any Lender may now
have or may have in the future under or in connection with the Credit
Agreement, any other Loan Document or any other instrument or agreement
referred to therein. Without limiting the generality of the foregoing
sentence, the Stated Amount of each Judgment Letter of Credit shall at all
times be included in any determination of Revolving Loan Commitment
Availability.
SECTION 2.2. Acknowledgement and Agreement of Borrower. (a) The
Borrower agrees that, in the case of each draw under a Judgment Letter of
Credit (each such draw, a "Draw Event"), it will provide to the Agents a
certificate executed by its chief financial Authorized Officer (each such
certificate, a "Draw Certificate") pursuant to which it will show in reasonable
detail:
(i) to the extent it shall have received such information
from the Issuer, the amount of such draw (such amount, the "Current
Draw Amount"),
(ii) to the extent it shall have previously received such
information from the Issuer, the aggregate amount of all previous
draws under all Judgment Letters of Credit (such aggregate amount,
the "Prior Draw Amount"),
-4-
<PAGE> 5
(iii) the aggregate amount (without duplication) of all
cash contributions made to the capital of the Borrower by the
Borrower's parent and of all cash proceeds of Subordinated
Intercompany Debt provided by ADT Limited or Wholly Owned
Subsidiaries of ADT Limited (other than Subsidiaries of the
Borrower) and permitted pursuant to clause (m) of Section 8.2.2 of
the Credit Agreement, in each case since the Judgment Date (such
aggregate amount, the "Investment Amount"), and
(iv) the aggregate amount (without duplication) counted
(A) as an Investment under clause (c) of Section 4.2.5 of the ADT
Limited Guaranty (by virtue of clause (k) of Section 4.2.2 of the
ADT Limited Guaranty) (the maximum amount permitted under such
clause (c) by virtue of such clause (k) at any time, the "Borrower
Intercompany Debt Basket"), (B) as an Investment under clause (o)
of Section 4.2.5 of the ADT Limited Guaranty (the maximum amount
permitted under such clause (o) at any time, the "General Debt
Basket") or (C) as a Restricted Borrower Distribution under clause
(b)(ii) of Section 4.2.6 of the ADT Limited Guaranty (the maximum
amount permitted under such clause (b)(ii) at any time, the
"Restricted Borrower Distribution Basket"), in each case prior to
such Draw Event as a result of the immediately succeeding sentence
(such aggregate amount, the "Basket Usage Amount").
The failure of the Borrower to deliver to the Agents a Draw Certificate within
ten Business Days after notice of a Draw Event shall have been given to the
Borrower shall constitute an Event of Default.
(b) The Borrower acknowledges that, upon each Draw Event, the
excess, if any, of (i) the sum of the Current Draw Amount with respect to such
Draw Event plus the Prior Draw Amount with respect to such Draw Event over (ii)
the sum of the Investment Amount with respect to such Draw Event plus the
Basket Usage Amount with respect to such Draw Event shall, to the extent
available and as specified in the applicable Draw Certificate (or, in the
absence of such Draw Certificate, as specified by the Administrative Agent),
count against the Borrower Intercompany Debt Basket, the General Debt Basket
and/or the Restricted Borrower Distribution Basket. In the event the aggregate
amount then available under the Borrower Intercompany Debt Basket, the General
Debt Basket and the Restricted Borrower Distribution Basket is less than the
excess referred to in the immediately preceding sentence, the Borrower agrees
that it will use its best efforts to obtain, within ten Business Days after
notice of the applicable Draw Event shall have been given to it, a cash capital
contribution from its parent and/or cash proceeds of Subordinated Intercompany
Debt provided by ADT Limited or Wholly Owned
-5-
<PAGE> 6
Subsidiaries of ADT Limited (other than Subsidiaries of the Borrower) to the
extent permitted by clause (m) of Section 8.2.2 of the Credit Agreement in an
aggregate amount equal to or greater than such excess. The failure of the
Borrower to obtain such amount and provide to the Agents a certificate executed
by its chief financial Authorized Officer certifying as to its receipt of such
amount within such ten day period shall constitute an Event of Default
(regardless of whether the Borrower has used its best efforts).
(c) Notwithstanding any provision to the contrary in Section 4.2
of the Credit Agreement, in the event the Borrower desires to extend the Stated
Expiry Date initially provided for in a Judgment Letter of Credit (or any
subsequent date to which such Judgment Letter of Credit has been extended), the
Borrower shall deliver to the applicable Issuer and the Administrative Agent an
Issuance Request at least fifteen but not more than sixty Business Days prior
to such Stated Expiry Date (or subsequent expiry date) requesting any such
extension.
ARTICLE III
CONDITIONS PRECEDENT
This Waiver and Consent shall become effective upon the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
Article III (the first date as of which each such condition has been satisfied
being herein called the "Effective Date").
SECTION 3.1. Documents Relating to the U.K. Court Order. The
Agents shall have received true, correct and complete copies, satisfactory in
form to the Agents, of the U.K. Court Order.
SECTION 3.2. Counterparts. The Documentation Agent shall have
received counterparts hereof executed on behalf of the Borrower and the
Required Lenders.
SECTION 3.3. Guarantor Acknowledgement. The Documentation Agent
shall have received an acknowledgement from each Guarantor as to the execution
and delivery of this Waiver and Consent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Required Lenders and the Agents to enter
into this Waiver and Consent, the Borrower hereby reaffirms, as of the date
hereof and as of the Effective Date,
-6-
<PAGE> 7
the representations and warranties contained in Article VII of the Credit
Agreement and additionally represents and warrants unto each Lender and each
Agent that, as of the Effective Date, no Default shall have occurred and be
continuing.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Waiver and Consent is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof, including, without
limitation, Article XI thereof.
SECTION 5.2. Headings. The various headings of this Waiver and
Consent are inserted for convenience only and shall not affect the meaning or
interpretation of this Waiver and Consent or any provisions hereof.
SECTION 5.3. Execution in Counterparts. This Waiver and Consent
may be executed by the parties hereto in several counterparts, each of which
shall be deemed to be an original and all of which shall constitute together
but one and the same agreement.
SECTION 5.4. Governing Law. THIS WAIVER AND CONSENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Consent to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
ADT OPERATIONS, INC.
By /s/ Jan S. Beck
--------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Documentation Agent, as Letter
of Credit Issuer and as a Lender
By /s/ Frank F. Sandler
--------------------------------
Title: Relationship Manager
CHEMICAL BANK, as Administrative
Agent and as a Lender
By /s/ Scott S. Ward
--------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By /s/ Robert A. Kilgannon
--------------------------------
Title: Senior Vice President
BANK OF MONTREAL
By /s/ W. T. Calder
--------------------------------
Title: Director
CIBC INC.
By /s/ Roger Colden
----------------------------------
Title: Director
-8-
<PAGE> 9
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By /s/ Robert Ivosevich
--------------------------------
Title: Authorized Signature
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Robert Ivosevich
--------------------------------
Title: Senior Vice President
CREDIT SUISSE
By /s/ Jan Kopol
--------------------------------
Title: Member of Senior Management
By /s/ Kristinn R. Kristinsson
--------------------------------
Title: Associate
MIDLAND BANK PLC, NEW YORK BRANCH
By /s/ Jonathan E. Morris
--------------------------------
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
By /s/ Teiji Teramoto
--------------------------------
Title: Vice President & Manager
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Patricia Loret de Mola
--------------------------------
Title: Senior Vice President
-9-
<PAGE> 10
NATIONSBANK, N.A. (SOUTH)
By /s/ Julie Anne Autrey
--------------------------------
Title: Senior Vice President
FIRST AMERICAN NATIONAL BANK
By /s/ Jane Weaver
--------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF FLORIDA
By /s/ Mary A. Morgan
--------------------------------
Title: Vice President and
Portfolio Manager
MELLON BANK N.A.
By /s/ Clifford A. Mull
--------------------------------
Title: Assistant Vice President
NBD BANK
By /s/ Peter F. Ward
--------------------------------
Title: Vice President
UNITED STATES NATIONAL BANK OF OREGON
By /s/ Stephen Mitchell
--------------------------------
Title: Vice President
-10-
<PAGE> 11
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK AND CAYMAN ISLANDS
BRANCHES
By /s/ Alan S. Bookspan
-------------------------------
Title: Vice President
By /s/ Cordula Kraska-Hornemann
-------------------------------
Title: Vice President
BANK OF HAWAII
By /s/ Joseph T. Donalson
--------------------------------
Title: Vice President
-11-
<PAGE> 1
ADT LIMITED
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. 11.1
Computation of (Loss) Earnings per Common Share
Three months ended March 31 1996 1995
$m $m
Net (loss) income (379.1) 27.1
Dividends on convertible redeemable preference shares (0.1) (0.1)
----------- -----------
Adjusted net (loss) income available to common shareholders -
primary and fully diluted earnings per common share (379.2) 27.0
=========== ===========
Three months ended March 31 1996 1995
Number Number
Weighted average number of common shares in issue 128,805,641 127,886,196
Weighted average number of common stock
equivalents in issue resulting from:
- Executive share option schemes - 1,867,622
- Non-voting exchangeable shares - 2,909
----------- -----------
Weighted average number of common shares in issue as used
in the computation of primary (loss) earnings per common share 128,805,641 129,756,727
Executive share option schemes - 1,160,653
----------- -----------
Weighted average number of common shares in issue as used
in the computation of fully diluted earnings per common share - 130,917,380
=========== ===========
Three months ended March 31 1996 1995
$ $
Primary (loss) earnings per common share (2.94) 0.21
=========== ===========
Fully diluted earnings per common share - 0.21
=========== ===========
</TABLE>
Notes
(i) A certain number of common stock equivalents resulting from
executive share option schemes are anti-dilutive in the calculation
of primary and fully diluted (loss) earnings per common share in
1996 and 1995.
(ii) The effect on fully diluted earnings per common share resulting
from the assumed exchange of Liquid Yield Option Notes, which were
issued in July 1995, is anti-dilutive in 1996. The effect on fully
diluted earnings per common share resulting from the assumed
conversion of convertible redeemable preference shares is
anti-dilutive in 1996 and 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 322,100
<SECURITIES> 0
<RECEIVABLES> 219,500
<ALLOWANCES> 0
<INVENTORY> 29,300
<CURRENT-ASSETS> 598,400
<PP&E> 1,247,600
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,413,700
<CURRENT-LIABILITIES> 348,900
<BONDS> 919,600
4,900
0
<COMMON> 13,200
<OTHER-SE> 779,100
<TOTAL-LIABILITY-AND-EQUITY> 792,300
<SALES> 0
<TOTAL-REVENUES> 354,300
<CGS> 0
<TOTAL-COSTS> 184,400
<OTHER-EXPENSES> 414,300 <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,700
<INCOME-PRETAX> (370,800)
<INCOME-TAX> 8,300
<INCOME-CONTINUING> (379,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (379,100)
<EPS-PRIMARY> (2.94)
<EPS-DILUTED> (2.94)
<FN>
<F1>Represents a charge of $410,100 for the impairment of long-lived-assets as
a result of the adoption of SFAS 121 and $4,200 of goodwill amortization.
</FN>
</TABLE>
