<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
( X ) QUARTERLY REPORT ( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly
Period Ended December 31, 1994 Commission File No. 1-10739
-------------------- ---------
SENSORMATIC ELECTRONICS CORPORATION
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 34-1024665
- ---------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
500 N.W. 12th Avenue, Deerfield Beach, Florida 33442-1795
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 420-2000
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Same
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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
------- -------
The Registrant had outstanding 72,204,177 shares of Common Stock (par value
$.01 per share) as of February 6, 1995.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
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FORM 10-Q
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . 1
Consolidated Condensed Balance Sheets . . . . . . 2
Consolidated Condensed Statements of
Income . . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of
Cash Flows. . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed
Financial Statements. . . . . . . . . . . . 5-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 9-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The financial information included herein is unaudited. Certain
information and footnote disclosures normally included in the
financial statements have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission,
although the Company believes that the disclosures made are adequate
to make the information presented not misleading. These financial
statements should be read in conjunction with the financial
statements and related notes contained in the Company's 1994 Annual
Report on Form 10-K. Other than as indicated herein, there have been
no significant changes from the financial data published in said
report. In the opinion of Management, such unaudited information
reflects all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the unaudited
information shown.
Results for the interim period presented herein are not necessarily
indicative of results expected for the full year.
1
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SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except par value amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
---------- --------
<S> <C> <C>
ASSETS
Cash and marketable securities (including
marketable securities of $31,745 and $33,618
at December 31 and June 30, respectively) $ 76,084 $ 54,542
Accounts receivable, net 174,474 127,571
Receivables under deferred terms
and installment contract obligations, net 82,813 71,321
Net investment in sales-type leases 130,342 109,607
Inventories, net 209,303 163,906
Revenue equipment, net 55,227 58,326
Other property, plant and equipment, net 128,843 107,152
Deferred charges, patents and other assets, net 164,511 120,061
Costs in excess of net assets acquired, net 453,256 343,017
------------ -----------
$ 1,474,853 $ 1,155,503
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 41,215 $ 40,884
Accrued liabilities 168,560 143,067
Accrued and deferred income taxes payable 38,801 24,687
Debt 315,634 219,173
Stockholders' equity:
Preferred stock, $.01 par value
Common stock, $.01 par value, 72,137 and
67,612 shares outstanding at December
31 and June 30, respectively 689,216 546,577
Retained earnings 275,379 237,553
Treasury stock, at cost (6,730) (7,274)
Currency translation adjustments (44,541) (45,603)
Notes receivable from stock sales (2,681) (3,561)
------------ -----------
Total stockholders' equity 910,643 727,692
------------ -----------
$ 1,474,853 $ 1,155,503
============ ===========
</TABLE>
The notes to consolidated condensed financial statements on pages 5-8 are an
integral part of these statements.
2
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months ended Six Months ended
December 31, December 31,
-------------------- ----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales $190,495 $136,052 $354,393 $258,639
Rentals 11,155 11,715 23,050 22,564
Other 16,177 12,102 31,266 21,950
-------- ------- -------- --------
Total revenues 217,827 159,869 408,709 303,153
Operating costs and expenses:
Costs of sales 86,382 61,273 161,752 116,608
Depreciation on revenue
equipment 3,222 4,361 6,903 8,032
Selling, customer service and
administrative 84,741 59,194 160,118 114,301
Research, development and
engineering 5,238 3,997 10,268 8,482
Amortization of intangible
assets 3,075 2,516 6,095 4,932
-------- -------- -------- --------
Total operating costs
and expenses 182,658 131,341 345,136 252,355
-------- -------- -------- --------
Operating income 35,169 28,528 63,573 50,798
Other expenses, net (1,479) (3,406) (3,092) (5,870)
-------- -------- -------- --------
Income before income taxes 33,690 25,122 60,481 44,928
Provision for income taxes 8,400 6,300 15,100 11,300
-------- -------- -------- --------
Net income $ 25,290 $ 18,822 $ 45,381 $ 33,628
======== ======== ======== ========
Primary earnings per
common share $ .36 $ .31 $ .65 $ .55
======== ======== ======== ========
Fully diluted earnings
per common share $ .36 $ .29 $ .65 $ .53
======== ======== ======== ========
Cash dividends per common
share $ .055 $ .05 $ .11 $ .10
======== ======== ======== ========
Common shares used in
computation of:
Primary earnings per
common share 70,410 61,070 70,139 60,671
======== ======== ======== ========
Fully diluted earnings per
common share 70,598 68,665 70,312 68,333
======== ======== ======== ========
</TABLE>
The notes to consolidated condensed financial statements on pages 5-8 are an
integral part of these statements.
3
<PAGE> 6
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(In thousands)
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $45,381 $33,628
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 17,513 17,545
Other non-cash charges to operations 6,685 5,772
Net changes in operating assets and
liabilities, net of effect of
acquisitions (97,289) (41,239)
-------- --------
Net cash provided by (used in) operating
activities (27,710) 15,706
-------- --------
Cash flows from investing activities:
Capital expenditures (22,879) (26,954)
Cash acquired from (paid for) acquisitions
and other investments 5,761 (5,957)
Maturities of marketable securities 2,162 10,560
Increase in revenue equipment
and inventory available for lease (1,834) (14,654)
Purchases of marketable securities (300) (16,769)
Other, net 1,363 1,507
-------- --------
Net cash used in investing activities (15,727) (52,267)
-------- --------
Cash flows from financing activities:
Bank borrowings (net of effect of
acquisitions) 67,629 15,454
Cash dividends (7,555) (5,851)
Proceeds from issuances of common stock
under employee benefit plans, net 5,898 5,390
Other, net 880 (459)
-------- --------
Net cash provided by financing activities 66,852 14,534
-------- --------
Net increase (decrease) in cash 23,415 (22,027)
Cash at beginning of period 20,924 89,101
-------- --------
Cash at end of period 44,339 67,074
Marketable securities at end of period 31,745 34,882
-------- --------
Cash and marketable securities at end of
period $ 76,084 $ 101,956
======== ==========
</TABLE>
The notes to consolidated condensed financial statements on pages 5-8 are an
integral part of these statements.
4
<PAGE> 7
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
a) Receivables and net investment in sales-type leases
Accounts receivable are stated net of an allowance for doubtful
accounts of $10.4 million at December 31 and June 30, 1994.
Receivables under deferred terms, substantially all of which mature
within one year, and installment contract obligations are stated net of
the following at December 31 and June 30, 1994 (in millions):
<TABLE>
<CAPTION>
December 31 June 30
----------- --------
<S> <C> <C>
Allowance for doubtful accounts $ 6.7 $ 6.4
Unearned interest and maintenance $ 18.6 $ 19.5
</TABLE>
Net investment in sales-type leases (leases) is stated net of the following
at December 31 and June 30, 1994 (in millions):
<TABLE>
<CAPTION>
December 31 June 30
----------- ---------
<S> <C> <C>
Allowance for uncollectible minimum
lease payments $ 2.6 $ 3.4
Unearned interest and maintenance $ 43.4 $ 38.6
</TABLE>
The Company accrued loss contingencies at December 31 and June 30, 1994 of
$1.8 million and $1.3 million, respectively, related to $273.5 million and
$199.9 million, respectively, of receivables and leases sold to and
outstanding with third party financing institutions which are subject to
full or partial repurchase. At December 31 and June 30, 1994, accounts
receivable assigned to and outstanding with a third party financing
institution (substantially all of which are not subject to recourse) were
$55.3 million and $57.9 million, respectively, of which the financing
institution had advanced $50 million to the Company (bearing interest at
fluctuating rates). The Company received net proceeds of $200.5 million
and $134.4 million upon the sale or assignment of receivables and leases in
the six months ended December 31, 1994 and 1993, respectively. At December
31 and June 30, 1994 balances due from financing institutions related to
these transactions aggregated $24.2 million and $29.1 million,
respectively, and are due within one year (classified as other assets).
b) Inventories
At December 31 and June 30, 1994, inventories are comprised of parts
inventory of $32.8 million and $34.1 million, work-in-process of $23.2
million and $20.0 million and inventory available for sale or lease of
$153.3 million and $109.8 million, respectively; and are net of allowance
for inventory losses of $10.0 million and $10.6 million, respectively.
5
<PAGE> 8
c) Debt
Debt at December 31 and June 30, 1994 is summarized as follows
(in millions):
<TABLE>
<CAPTION>
December 31 June 30
----------- --------
<S> <C> <C>
Senior Notes $ 135.0 $ 135.0
Unsecured revolving credit notes
payable 170.8 64.0
Capital lease obligations and other,
net 9.8 20.2
------- -------
$ 315.6 $ 219.2
======= =======
</TABLE>
At December 31, 1994, the Company had approximately $63.2 million
of unused credit under all of its line of credit arrangements.
In January 1993, the Company issued $135 million aggregate principal amount
of 8.21% Senior Notes due January 2003 (the Senior Notes). Subsequently,
the Company entered into fixed to floating interest rate swap agreements in
order to reduce the Company's interest expense by taking advantage of lower
short-term interest rates prevailing through the end of fiscal 1994 and
match the maturities of its invested cash and marketable securities (see
Note f)(ii). The effective interest rate on the Senior Notes for the six
months ended December 31, 1994 and 1993 was 9.5% and 6.2%, respectively.
This increase in the effective interest rate on the Senior Notes during the
first six months of fiscal 1995 was offset in part by higher effective
interest rates earned on invested cash and marketable securities.
Interest expense for the six months ended December 31, 1994 and 1993 was
$12.7 million and $11.6 million, respectively. The Company made interest
payments of $11.8 million and $10.8 million for the six months ended
December 31, 1994 and 1993, respectively.
d) Income taxes
For the six months ended December 31, 1994 and 1993, the provision for
income taxes was computed using an estimated annual effective tax rate
based on a United States statutory rate of 35% adjusted principally for
anticipated United States/Puerto Rico "Section 936" tax benefits,
amortization of costs in excess of net assets acquired and international
tax rate differentials.
The Company made income tax payments of $2.6 million and $6.0 million for
the six months ended December 31, 1994 and 1993, respectively.
6
<PAGE> 9
e) Acquisitions
On December 29, 1994, the Company acquired through a merger the operations
of Knogo Corporation ("Knogo") outside of the United States, Puerto Rico
and Canada for approximately 3.1 million shares of the Company's Common
Stock (with a value of approximately $101 million). Knogo's international
operations constituted one of the leading loss prevention businesses in
Europe and Asia.
The acquisition was accounted for under the purchase method and resulted in
cost in excess of net assets acquired of approximately $88 million (based
on a preliminary allocation of the purchase price) which is being amortized
over 40 years.
Knogo post-acquisition operations (two-day period ended December 31, 1994)
are included in the Company's fiscal 1995 financial statements. The
significant assets acquired and liabilities assumed and/or incurred in
connection with the Knogo acquisition were included in the Company's
December 31, 1994 balance sheet as follows:
<TABLE>
<S> <C>
Cash and marketable securities $ 5.8
Accounts receivable, net 15.0
Net investment in sales-type leases 23.6
Inventories, net 11.9
Deferred charges, patents and other assets, net 9.7
Accrued liabilities 28.4
Debt 23.0
</TABLE>
The Company's unaudited pro forma consolidated condensed statements of
income for the six months ended December 31, 1994 and 1993, assuming the
acquisition of Knogo was effected at the beginning of each such period, are
summarized as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Total revenues $441,175 $339,180
Net income $ 45,753 $ 38,322
Primary earnings per share $ .62 $ .60
Fully diluted earnings per share $ .62 $ .57
</TABLE>
This pro forma information does not purport to be indicative of the results
which may have been obtained had the acquisition been consummated at the
dates assumed and is not necessarily indicative of results expected for the
full year (see the financial statements and other information contained in
the Company's Current Report on Form 8-K/A filed January 27, 1995).
In connection with acquisitions, for the six months ended December 31, 1994
and 1993 the market value of the assets acquired was as follows (in
millions):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Cash paid (acquired), net $ (5.8) $ 4.6
Liabilities assumed and/or incurred 65.8 2.2
Common stock issued 137.3 14.9
------ ------
Market value of assets acquired $197.3 $ 21.7
====== ======
</TABLE>
7
<PAGE> 10
f) Financial Instruments
(i) Currency hedging instruments
The Company has a policy of purchasing forward exchange contracts and
options (forward contracts and options) designated to hedge certain
intercompany transactions and identifiable anticipatory intercompany
commitments which are denominated in foreign currencies. At December 31,
1994, the Company owned forward contracts and options which allowed it to
sell currencies for the indicated U.S. dollar amounts with respect to
fiscal 1995 and 1996 intercompany transactions and commitments, as follows
(in millions):
<TABLE>
<CAPTION>
1996 1995
---- ----
Currencies Options Forwards Options Forwards
---------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
French Francs $ - $ 39.2 $ 1.8 $ 22.9
Deutschemarks - 29.3 1.8 14.7
British Pounds - 25.1 - 17.1
Other - 12.6 - 16.6
---- ------ ----- ------
$ - $106.2 $ 3.6 $ 71.3
==== ====== ===== ======
</TABLE>
(ii) Interest rate swap agreements
The Company has entered into interest swap agreements with financial
institution counterparties in order to manage its exposure to interest rate
fluctuations associated with certain transactions and debt. (See notes 2.,
6. and 12. of Notes to Consolidated Financial Statements in the Company's
1994 Annual Report on Form 10-K for additional discussion). At December
31, 1994, the Company was a party to the following swap agreements (in
millions):
FIXED TO FLOATING SWAP AGREEMENTS
<TABLE>
<CAPTION>
Notional Expiration Floating Rate Fixed Rate
Amount Date to be Paid to be Received
---------- ------------ --------------- ----------------
<S> <C> <C> <C>
$50.0 February 1996 6 Month LIBOR 5.45%
50.0 February 1996 6 Month LIBOR 5.40%
35.0 June 1996 6 Month LIBOR 5.01%
</TABLE>
The weighted average interest rate paid and received under all such Fixed
to Floating Swap Agreements at December 31, 1994 was 7.0% and 5.3%,
respectively (see Note c).
FLOATING TO FIXED SWAP AGREEMENTS
<TABLE>
<CAPTION>
Notional Expiration Fixed Rate Floating Rate
Amount Date to be Paid to be Received
---------- ------------ ------------ ----------------
<S> <C> <C> <C>
$15.5 May 1999 7.75% 1 Month LIBOR
6.0 April 2000 6.58% 1 Month LIBOR
5.6 April 1999 4.60% 1 Month LIBOR
5.0 August 1998 4.80% 1 Month LIBOR
3.6 May 1998 4.94% 1 Month LIBOR
2.3 March 1999 4.65% 1 Month LIBOR
</TABLE>
The weighted average interest rate paid and received under all such
Floating to Fixed Swap Agreements at December 31, 1994 was 6.3% and 6.0%,
respectively.
g) Reclassifications
Certain amounts in the prior period's consolidated condensed financial
statements have been reclassified to conform to the current period's
condensed presentation.
8
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company's consolidated condensed financial statements present a
consolidation of its worldwide operations. On December 29, 1994, the Company
acquired through a merger the operations of Knogo Corporation ("Knogo") outside
of the United States, Puerto Rico and Canada and, accordingly, Knogo
post-acquisition operations (two-day period ended December 31, 1994) are
included in the fiscal 1995 financial statements. (See Note e of Notes to
Consolidated Condensed Financial Statements). This discussion supplements the
detailed information presented in the Consolidated Condensed Financial
Statements and Notes thereto (which should be read in conjunction with the
financial statements and related notes contained in the Company's 1994 Annual
Report on Form 10-K) and is intended to assist the reader in understanding the
financial results and condition of the Company.
Financial Condition
The Company's overall financial condition remained strong as reflected
in the Consolidated Condensed Balance Sheet at December 31, 1994 compared to
June 30, 1994. Cash and marketable securities increased $22 million primarily
due to net short-term borrowings ($68 million, excluding $23 million of debt
assumed from the Knogo acquisition); offset in part by: (a) net cash used in
operations ($28 million) due primarily to increases in receivables, net
investment in sales-type leases (Leases) and inventories, and a decrease in
accrued liabilities, and (b) net capital expenditures ($23 million). Total
stockholders' equity at December 31 increased $183 million over the June 30
balance to $911 million while debt increased by $96 million to $316 million,
resulting in a debt-to-total capitalization ratio of .26 to 1 at December 31,
1994, compared to .23 to 1 at June 30, 1994.
Total receivables and Leases increased to $388 million at September 30, 1994
from $309 million at June 30, 1994 resulting principally from the acquisition
of Knogo (approximately $15 million of accounts receivable and $24 million of
Leases) and from a higher level of business in the first half of fiscal 1995;
offset in part by net sales and assignments of receivables and Leases to third
party financing institutions in the first half of fiscal 1995.
9
<PAGE> 12
The Company has historically had a high level of receivables outstanding
measured as a percentage of revenues. This results in part from the strategy
of using its financial strength as a marketing tool in obtaining new business.
For example, the Company offers flexible, deferred payment arrangements
(substantially all of which mature within one year), or longer term
installment sales financing or leasing arrangements (subject to stated or
imputed interest) to facilitate purchases. Additionally, the Company has
experienced an historical pattern of delayed payments by certain of its major
retail customers which has extended its receivables aging profile.
The Company continues to manage its receivables by, among other things, using
third party servicing agents to enhance the efficiency of its billing and
collection practices and expanding the number and use of third party financing
institutions to sell or assign receivables and Leases. The results have been
to reduce the average time required to collect receivables and to provide the
Company with the flexibility to convert its longer term receivables and Leases
into cash as needed. The Company received proceeds of $201 million and $134
million from the sale and assignment of receivables and Leases during the first
half of fiscal 1995 and 1994, respectively (net of repurchases).
The Company believes its allowance for doubtful accounts related to receivables
and Leases, and its reserve related to receivables and Leases sold to financing
institutions which are subject to full or partial repurchase, are adequate
after taking into account, among other things: (a) the aging of its receivables
and Leases (including those repurchased or subject to repurchase from financing
institutions) ; (b) the payment history of its customers; (c) the Company's
security interest position in equipment financed under deferred terms and
installment sales contracts and the Company's retention of title in equipment
under Leases; (d) its ability to re-market such equipment if needed; (e) the
prospects of its collection efforts; and (f) its relationship with major retail
customers. Additionally, with the rapid broadening of the Company's customer
base both geographically and to include hard goods retailers, commercial and
industrial customers, and manufacturers and vendors providing retailers with
source labeled merchandise under the Company's Universal Product Protection
(UPP(SM)) program, the Company's historical concentration in soft goods
retailers, where the more
10
<PAGE> 13
significant aging of receivables was experienced, is being reduced.
Inventories at December 31, 1994 increased $45 million over June 30, 1994 due
principally to the acquisition of Knogo ($12 million) and to meet forecasted
production and sales levels. Deferred charges and other assets increased $44
million primarily as a result of deferred taxes and other assets related to
companies acquired in the first half of fiscal 1995.
In addition, as a result of the acquisition of Knogo, the Company acquired
approximately $4 million of revenue equipment, $5 million of other property,
plant and equipment and assumed or incurred approximately $54 million of
accounts payable, accrued liabilities, income taxes payable and debt; which
generated approximately $88 million of cost in excess of net assets acquired
(based on a preliminary allocation of the purchase price).
The Company believes it is well positioned to meet anticipated future capital
requirements through the use of funds to be generated by future operating
activities (including the sale and assignment of receivables and Leases to
financing institutions), existing cash and marketable securities ($76 million
at December 31, 1994), and funds available from existing worldwide credit lines
($63 million unused at December 31, 1994).
In February 1994, the Company filed a shelf registration statement with the
Securities and Exchange Commission (SEC) under which the Company is able to
issue up to 4.5 million shares of its Common Stock. These securities are
intended to be used in connection with acquisitions of other businesses or
assets (approximately 2.5 million shares remain available).
Results of Operations
Three Months and Six Months Ended December 31, 1994 Compared to
Three Months and Six Months Ended December 31, 1993
Revenues for the three months and six months ended December 31, 1994 increased
36% and 35%, respectively, over the three months and six months ended December
31, 1993. The revenue growth resulted principally from increased revenues from
the Ultra-Max(R) product line primarily for hard goods retail customers and used
in the Company's UPP program for source labeling; increased
11
<PAGE> 14
revenues from the sale of CCTV products used by retailers; increased
revenues from the U.S.-based Commercial/Industrial Group which markets
electronic asset protection (EAP), CCTV and access control systems to
non-retail customers.
Revenues from retail customers for the electronic article surveillance (EAS)
product lines increased 22% to $126 million in the second quarter of fiscal
1995 and 18% to $237 million in the first six months of fiscal 1995 compared to
$103 million and $200 million in the comparable periods of fiscal 1994. These
increases resulted principally from growth in revenues in excess of 50% in the
second quarter and in the first six months of fiscal 1995 (compared to last
year) from the Ultra-Max product line; offset in part by a decline in revenues
in the second quarter and in the first six months in fiscal 1995 (compared to
last year) from soft goods retailers for the traditional microwave product
line.
Revenues from the CCTV product lines for retailers increased to $29 million and
$56 million for the second quarter and the first six months of fiscal 1995,
respectively, compared to $16 million and $29 million in the comparable periods
of fiscal 1994. Revenues from the U.S.-based Commercial/Industrial Group
increased 106% to $35 million and 128% to $66 million (including installation
revenues) in the second quarter and the first six months of fiscal 1995
compared to fiscal 1994, respectively, due primarily to increased sales of CCTV
and access control products to non-retail customers and the inclusion in the
second quarter and the first six months of fiscal 1995 of the revenues of
certain acquisitions made throughout fiscal 1994 and in the first quarter of
fiscal 1995 (aggregating $6 million and $18 million, respectively).
Operating income for the three and six months ended December 31, 1994 increased
23% and 25%, respectively, over last year's comparable period primarily due to
the higher level of business; offset in part by slightly lower gross margins in
the first six months of fiscal 1995 compared to fiscal 1994. Gross margins for
the second quarter and first six months of fiscal 1995 were 55% and 54%,
respectively, compared to 55% for last year's comparable periods.
Total selling, customer service and administrative, and research, development
and engineering expenses, as a percentage of total revenues, increased to 41%
and 42% for the second quarter and the
12
<PAGE> 15
first six months of fiscal 1995, respectively, compared to 40% and 41%
for the comparable periods in fiscal 1994 as a result of relatively higher
selling expenses incurred in selling EAS products in certain Latin America
countries and in selling CCTV and access control products to commercial and
industrial customers worldwide. The aggregate amount of these expenses
increased by 39% in the current year's first six months over last year's
comparable period primarily as a result of the higher level of business in
fiscal 1995.
Total net other non-operating expenses in the second quarter and the first six
months of fiscal 1995 decreased by $2 million and $3 million, respectively,
compared to the comparable periods of fiscal 1994, principally due to a
decrease in interest expense resulting from the conversion of 7% convertible
subordinated debentures in May 1994, and an increase in interest income due
primarily to higher interest rates and an increase in the average amount of
longer term receivables and Leases (which earn interest income) outstanding
throughout the first six months of fiscal 1995 compared to the first six months
of fiscal 1994; partially offset by higher interest rates on higher average
levels of short-term borrowings throughout the first six months of fiscal 1995.
The Company utilizes interest rate swap agreements and currency forward
contracts and options (derivatives) to hedge certain of its currency and
interest rate risks. The Company does not enter into speculative derivative
transactions. The derivative instruments it does purchase are not held as
investments, and it is the Company's intent to hold such instruments for their
respective terms. Therefore, changes in their fair values will have no effect
on the Company's operations, cash flows or financial position (see Notes c and
f of Notes to Consolidated Condensed Financial Statements; additionally see
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Notes 1., 2., 6. and 12. of Notes to Consolidated Financial
Statements in the Company's fiscal 1994 Annual Report on Form 10-K for further
discussion of the Company's currency and interest rate risks and use of
derivatives).
The provision for income taxes for the first six months of fiscal 1995 is based
on an estimated effective annual consolidated tax rate of 25% (the same tax
rate reported on the Company's income for the full 1994 fiscal year). Changes
in U.S. and Puerto Rico tax law and the recent acquisition of Knogo are
expected to exert
13
<PAGE> 16
upward pressure on the Company's effective tax rate. The potential
effect of these items is continually being examined by the Company in order to
develop strategies to minimize this effect.
Consolidated net income for the second quarter and first six months of fiscal
1995 increased 34% to $25 million and 35% to $45 million, respectively, when
compared to the prior year's comparable periods due primarily to the factors
discussed above.
14
<PAGE> 17
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of stockholders of the Company was held on November 11,
1994. The following business was transacted:
Re-elected as directors of the Company were Jerome M. LeWine and Michael E.
Pardue, Executive Vice President, Chief Operating Officer and Chief Financial
Officer, to serve for three-year terms. The terms of office of the following,
as directors, continued after the meeting: Ronald G. Assaf, Thomas V. Buffett,
James E. Lineberger, Dr. Arthur G. Milnes and John T. Ray, Jr.
The Company's 1995 Stock Incentive Plan was approved with 40,201,558 shares of
the outstanding Common Stock of the Company voting in favor of, and 16,156,732
shares voting against its adoption, with 315,684 shares abstaining.
The Company's Employee Stock Purchase Plan was amended to extend its term to
December 31, 1999 with 55,110,130 shares of the outstanding Common Stock of the
Company voting in favor of, and 1,251,715 shares voting against its adoption,
with 312,129 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11) Computation of Earnings Per Common Share.
27) Financial Data Schedule (for SEC use only).
b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
three-month period ended December 31, 1994.
15
<PAGE> 18
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 hereunto duly authorized.
SENSORMATIC ELECTRONICS CORPORATION
By /S/ Michael E. Pardue
------------------------------
Michael E. Pardue
Executive Vice President,
Chief Operating Officer, Chief
Financial Officer and Director
/S/ Lawrence J. Simmons
------------------------------
Lawrence J. Simmons
Vice President of Finance and
Chief Accounting Officer
Date: February 8, 1995
16
<PAGE> 1
EXHIBIT 11
SENSORMATIC ELECTRONICS CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months ended Six Months ended
December 31, December 31,
-------------------------- ------------------------
1994 1993 1994 1993
------- -------- -------- --------
<S> <C> <C> <C> <C>
Income:
Net income for primary
computation $ 25,290 $ 18,822 $ 45,381 $ 33,628
Add interest expense (net
of tax) on 7% convertible
subordinated debentures - 1,247 - 2,538
-------- -------- -------- -------
Adjusted net income for fully
diluted computation $ 25,290 $ 20,069 $ 45,381 $ 36,166
======== ======== ======== ========
Common shares:
Weighted average shares
outstanding during the period 69,078 58,952 68,799 58,620
Potential dilutive exercise of
stock options and warrants (1) 1,332 2,118 1,340 2,051
-------- -------- -------- --------
Shares included in computation
of primary earnings per share 70,410 61,070 70,139 60,671
Shares issuable on conversion
of 7% convertible subordinated
debentures - 7,283 - 7,283
Maximum dilution of stock
options and warrants (2) 188 312 173 379
-------- -------- -------- --------
Shares included in computation of
fully diluted earnings per
share 70,598 68,665 70,312 68,333
======== ======== ======== ========
</TABLE>
(1) Computed under the treasury stock method based on the average stock price
during the periods.
(2) Computed under the treasury stock method based on stock price at end of
periods if higher than the average price during the periods.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF SENSORMATIC ELECTRONICS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> DEC-31-1994
<CASH> 44,339
<SECURITIES> 31,745
<RECEIVABLES> 407,366
<ALLOWANCES> 19,737
<INVENTORY> 209,303
<CURRENT-ASSETS> 0
<PP&E> 190,123
<DEPRECIATION> 61,280
<TOTAL-ASSETS> 1,474,853
<CURRENT-LIABILITIES> 0
<BONDS> 144,867
<COMMON> 689,216
0
0
<OTHER-SE> 221,427
<TOTAL-LIABILITY-AND-EQUITY> 1,474,853
<SALES> 354,393
<TOTAL-REVENUES> 408,709
<CGS> 161,752
<TOTAL-COSTS> 168,655
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,114
<INTEREST-EXPENSE> 12,653
<INCOME-PRETAX> 60,481
<INCOME-TAX> 15,100
<INCOME-CONTINUING> 45,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,381
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
