<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q/A
(Amendment No. 1)
( X ) QUARTERLY REPORT ( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly
Period Ended September 30, 1995 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 73,331,769 shares of Common Stock (par value
$.01 per share) as of November 7, 1995.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
FORM 10-Q/A
(Amendment No. 1)
THREE MONTHS ENDED SEPTEMBER 30, 1995
<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. . . . . . . . . . 5-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . 10-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K. . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 15
</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 1995 Annual
Report on Form 10-K and amendment thereof. 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
<PAGE> 4
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value amounts)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
---- ----
<S> <C> <C>
ASSETS
Cash and marketable securities (including
marketable securities of $27 at September 30
and June 30) $ 89 $ 70
Accounts receivable, net 262 222
Deferred and installment receivables, net 59 68
Net investment in sales-type leases 125 111
Inventories, net 241 241
Revenue equipment, net 43 50
Other property, plant and equipment, net 166 151
Deferred income taxes, patents and other
assets, net 189 161
Costs in excess of net assets acquired, net 501 497
------ ------
$1,675 $1,571
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 68 $ 63
Accrued liabilities 201 209
Accrued and deferred income taxes payable 20 19
Debt 423 327
Stockholders' equity:
Preferred stock, $.01 par value
Common stock, $.01 par value, 73 shares
outstanding at September 30 and June 30 718 714
Retained earnings 309 296
Treasury stock at cost and other (14) (13)
Currency translation adjustments (50) (44)
------ ------
Total stockholders' equity 963 953
------ ------
$1,675 $1,571
====== ======
</TABLE>
The notes to consolidated condensed financial statements on pages 5-9 are an
integral part of these statements.
2
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(In millions, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Revenues:
Sales $ 236 $ 164
Rentals 12 12
Other 19 15
------- -------
Total revenues 267 191
Operating costs and expenses:
Costs of sales 112 75
Depreciation on revenue equipment 4 4
Selling, customer service and administrative 111 76
Research, development and engineering 7 5
Amortization of intangible assets 4 3
------- -------
Total operating costs
and expenses 238 163
------- -------
Operating income 29 28
Other expenses, net (5) (1)
------- -------
Income before income taxes 24 27
Provision for income taxes 7 7
------- -------
Net income $ 17 $ 20
======= =======
Earnings per common share $ .23 $ .29
======= =======
Cash dividends per common
share $ .055 $ .055
======= =======
Common shares used in computation of
earnings per common share 74 70
======= =======
</TABLE>
The notes to consolidated condensed financial statements on pages 5-9 are an
integral part of these statements.
3
<PAGE> 6
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(In millions)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17 $ 20
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 11 9
Other non-cash charges to operations 6 3
Net changes in operating assets and
liabilities, net of effect of
acquisitions (86) (60)
------ ------
Net cash used in operating
activities (52) (28)
------ ------
Cash flows from investing activities:
Capital expenditures (24) (13)
Acquisitions and other investments (7) (2)
Decrease (increase) in revenue equipment
and inventory available for lease 2 (3)
------ ------
Net cash used in investing activities (29) (18)
------ ------
Cash flows from financing activities:
Bank borrowings 99 47
Proceeds from issuances of common stock
under employee benefit plans, net 4 4
Cash dividends (4) (4)
Other, net - 1
------ ------
Net cash provided by financing activities 99 48
------ ------
Net increase in cash 18 2
------ ------
Cash at beginning of period 44 21
------ ------
Cash at end of period 62 23
Marketable securities at end of period 27 33
------ ------
Cash and marketable securities at end of
period $ 89 $ 56
====== ======
</TABLE>
The notes to consolidated condensed financial statements on pages 5-9 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
Amounts due to the Company in the form of accounts receivable (which are
due within 90 days), deferred receivables (which are generally due within
one year), installment receivables (which generally have periodic payments
over a term of five years) and net investment in sales-type leases
(sales-type leases) (which have periodic payments over lease terms from
five to six years) at September 30 and June 30, 1995 are summarized as
follows (in millions):
<TABLE>
<CAPTION>
September 30 June 30
------------ -------
<S> <C> <C>
Accounts receivable $ 275 $ 236
Deferred and installment receivables 87 98
Sales-type leases 188 169
----- -----
Gross receivables and sales-type leases 550 503
Less allowance for doubtful accounts (24) (27)
Unearned interest and maintenance (80) (75)
----- -----
Net receivables and sales-type leases $ 446 $ 401
===== =====
</TABLE>
The Company received net proceeds of $112 million and $84 million from the
sale or assignment of certain of its receivables and sales-type leases in
the three months ended September 30, 1995 and 1994, respectively. The
uncollected principal balance of receivables and sales-type leases sold
which is subject to varying amounts of recourse totaled $327 million and
$333 million at September 30 and June 30, 1995, respectively. Adequate
reserves have been provided for receivables and leases sold and are
included in accrued liabilities.
During the quarter ended September 30, 1995, the average age of
accounts receivables increased for certain business units. The Company
intends to intensify internal collection efforts and, where appropriate, to
out-source certain collection efforts, in order to improve the aging
profile of its receivables. In addition, due to customer bankruptcies, the
Company's estimated realization of certain receivable balances,
particularly those related to customers involved in reorganization
proceedings, will be reexamined. Such reexamination could result in an
adjustment to the allowance for doubtful accounts.
b) Inventories
Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
September 30 June 30
------------ -------
<S> <C> <C>
Available for sale or lease $ 187 $ 183
Parts 45 45
Work-in-process 21 23
----- -----
253 251
Less allowance for inventory losses (12) (10)
----- -----
$ 241 $ 241
===== =====
</TABLE>
c) Deferred income taxes, patents and other assets
At September 30 and June 30, 1995, deferred income taxes, patents and other
assets are comprised of the following (in millions):
<TABLE>
<CAPTION>
September 30 June 30
------------ -------
<S> <C> <C>
Deferred income taxes $ 56 $ 53
Patents and other intangibles 39 36
Prepaid expenses and deposits 32 24
Receivables from financing institutions
(due within one year) 21 8
Deferred charges 14 17
Other 27 23
----- -----
$ 189 $ 161
===== =====
</TABLE>
5
<PAGE> 8
d) Debt
Debt at September 30 and June 30, 1995 is summarized as follows (in
millions):
<TABLE>
<CAPTION>
September 30 June 30
------------ -------
<S> <C> <C>
Senior Notes $ 135 $ 135
Unsecured revolving credit notes
payable 279 182
Capital lease obligations and other,
net 9 10
----- -----
$ 423 $ 327
===== =====
</TABLE>
Interest expense for the three months ended September 30, 1995 and 1994 was
$9 million and $5 million, respectively. The Company made interest
payments of $11 million and $8 million for the three months ended September
30, 1995 and 1994, respectively.
e) Income taxes
For the three months ended September 30, 1995 and 1994, 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.
f) Acquisitions
On December 29, 1994, the Company acquired the operations outside of the
United States, Puerto Rico and Canada of Knogo Corporation ("Knogo") for
approximately 3.1 million shares of the Company's Common Stock.
The Company's unaudited pro forma consolidated condensed statement of
income for the three months ended September 30, 1994, assuming the
acquisition of Knogo was effected at the beginning of such period, is
summarized as follows (in millions, except per share amounts):
<TABLE>
<S> <C>
Total revenues $ 206
Net income $ 20
Earnings per share $ .27
</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
date assumed.
In connection with acquisitions, the market value of the assets acquired
for the three months ended September 30, 1995 and 1994 was as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Cash paid (net of cash acquired) $ 7 $ -
Liabilities assumed and/or incurred - 8
Common stock issued - 32
---- ----
Market value of assets acquired $ 7 $ 40
==== ====
</TABLE>
6
<PAGE> 9
g) Financial Instruments
(i) Currency hedging instruments
The Company has a policy of purchasing forward exchange contracts and
options designated to hedge certain intercompany transactions and
identifiable anticipatory intercompany commitments which are denominated in
foreign currencies. At September 30, 1995, the Company owned forward
exchange contracts which allowed it to sell currencies for the indicated
U.S. dollar amounts with respect to fiscal 1996 and 1997 intercompany
transactions and commitments, as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Currencies
French Francs $ 38 $ 38
Deutschemarks 25 21
British Pounds 21 12
Other 14 18
---- ----
$ 98 $ 89
==== ====
</TABLE>
In July 1995 the Emerging Issues Task Force (EITF) reached a consensus
which narrows the scope of intercompany foreign currency commitments which
are eligible to be hedged for financial reporting purposes. This applies
to transactions arising after July 21, 1995. Adoption of this consensus
did not have a material effect on the Company's results of operations or
financial condition during the first quarter of fiscal 1996 and is not
expected to have a material effect in future periods.
(ii) Interest rate instruments
The Company has entered into interest rate instruments 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
1995 Annual Report on Form 10-K/A for additional discussion). At September
30, 1995, the Company was a party to the following 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 February 1996 6 Month LIBOR 5.45%
50 February 1996 6 Month LIBOR 5.40%
35 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 September 30, 1995 was 6.0% and 5.3%,
respectively.
7
<PAGE> 10
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>
$ 12 May 1999 7.75% 1 Month LIBOR
11 May 2000 5.84% 1 Month LIBOR
9 May 2000 6.16% 1 Month LIBOR
5 April 2000 6.58% 1 Month LIBOR
4 April 1999 4.60% 1 Month LIBOR
4 August 1998 4.80% 1 Month LIBOR
3 May 1998 4.94% 1 Month LIBOR
2 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 September 30, 1995 was 6.2% and 5.9%,
respectively.
h) Reclassifications
Certain amounts in the prior period's consolidated condensed financial
statements have been reclassified to conform to the current period's
condensed presentation.
i) Litigation
In July, August and September 1995, thirteen actions were filed by alleged
shareholders of the Company following announcements by the Company that its
earnings for the quarter and year ended June 30, 1995, would be
substantially below expectations and, in the more recent actions and a
complaint amendment, that the scope of the Company's year-end audit had
been expanded. The various complaints allege, among other things, that the
Company and certain of its directors and officers who were named as
defendants issued false and misleading statements about the Company's
business prospects, failed to follow appropriate accounting practices, and
failed to disclose adverse information. One of the complaints also
alleges, among other things, that the Company failed to disclose hazards
affecting individuals wearing pacemakers allegedly caused by certain of its
products.
The claimants are seeking class certification, rescissory damages and/or
unspecified compensatory damages, as well as interest, costs and various
fees and expenses, on behalf of themselves and other putative class members
who purchased the Company's common stock or related securities during the
respective class periods alleged by their complaints. In one of the
actions, allegedly brought on behalf of Company shareholders who obtained
their shares in the Company's merger with Knogo Corporation, the relief
sought also includes rescission of the vote on that merger.
Also in September 1995, three derivative actions were filed against the
Company and its directors for breach of fiduciary duties, mismanagement and
waste of corporate assets. Those claimants are seeking, among other
relief, restitution and/or damages in favor of the Company and imposition
of a constructive trust.
An additional, similar action was filed on or about October 31, 1995.
The Company intends to vigorously defend against the actions. The ultimate
outcome of these actions cannot presently be determined. Accordingly, no
provision for any liability that may result has been made in the
consolidated condensed financial statements.
8
<PAGE> 11
j) Subsequent event
The Securities and Exchange Commission (the "SEC") has entered a formal
order of private investigation In the Matter of Sensormatic Electronics
Corporation (the "Order"). The Order authorizes the SEC to investigate,
among other things, trading in the Company's securities and certain
disclosure, accounting and financial reporting issues. Documents sought by
the SEC in a subpoena to the Company, issued pursuant to the Order, include
documents relating to the Company's revenue recognition policies and
procedures, which were the subject of an expanded audit by Ernst & Young
LLP, the Company's independent auditors (see note 9d. of Notes to
Consolidated Financial Statements in the Company's 1995 Annual Report on
Form 10-K and amendment thereof for additional discussion). The Company
had previously been cooperating with an informal inquiry by the SEC into
these issues and intends to continue to cooperate with the SEC in its
formal investigation.
9
<PAGE> 12
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. 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 1995 Annual
Report on Form 10-K and amendment thereto) and is intended to assist the reader
in understanding the financial results and condition of the Company.
Financial Condition
Cash and marketable securities increased $19 million primarily due to
net short-term borrowings ($99 million); offset in part by: (a) net cash used
in operations ($52 million) due primarily to increases in receivables and net
investment in sales-type leases and deferred income taxes, patents and other
assets, and a decrease in accrued liabilities, and (b) net capital expenditures
($24 million); including approximately $21 million related to the acquisitions
of a corporate and a business unit headquarters. Total stockholders' equity
at September 30 increased $10 million to $963 million. The debt-to-total
capitalization ratio was .31 to 1 at September 30, 1995, compared to .26 to 1
at June 30, 1995.
Total receivables and net investment in sales-type leases increased to $446
million at September 30, 1995 from $401 million at June 30, 1995. The increase
primarily resulted from lower than anticipated sales of receivables and leases
to financing institutions during the quarter ended September 30, 1995. Certain
financial institutions in Europe delayed purchasing additional receivables or
leases until after the completion of the fiscal 1995 audit and filing of the
Form 10-K. In addition, anticipated sales of recievables in the U.S. were not
completed by the end of the quarter. The Company expects to resume selling
these receivables and leases in future quarters.
The Company has historically had a high level of receivables and sales-type
leases outstanding, measured as a percentage of revenues. A key element of
the Company's marketing strategy has been, to increase market penetration by
providing customers alternative financing options. This strategy has been
successful. It has also helped the Company increase customer loyalty and
commitment
10
<PAGE> 13
The Company believes its total allowance for doubtful accounts for
receivables and sales-type leases, and its related reserve for receivables and
sales-type leases sold to financing institutions which are subject to full or
partial recourse, are adequate. The decrease in the total allowance for
doubtful accounts from $27 million at June 30 to $24 million at September 30,
1995 is primarily attributable to write-offs of receivables. These receivables
were substantially provided for in the June 30, 1995 allowance for doubtful
accounts.
During the quarter ended September 30, 1995, the average age of
accounts receivables increased for certain business units. The Company intends
to intensify internal collection efforts and, where appropriate, to out-source
certain collection efforts, in order to improve the aging profile of its
receivables. In addition, due to customer bankruptcies, the Company's estimated
realization of certain receivable balances, particularly those related to
customers involved in reorganization proceedings, will be reexamined. Such
reexamination could result in an adjustment to the allowance for doubtful
accounts.
Inventories at September 30, 1995 remained consistent with the June 30, 1995
levels. Deferred income taxes, patents and other assets increased $28 million
primarily as a result of increases in prepaid expenses and receivables due
within one year from financing institutions.
Total debt increased $96 million over the June 30, 1995 balance, to $423
million, primarily as a result of additional borrowings under short-term credit
lines.
The Company believes it is positioned to meet anticipated future cash
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 ($89 million
at September 30, 1995), and funds available from existing worldwide credit
lines ($42 million unused at September 30, 1995).
The Company maintains a shelf registration statement filed with the Securities
and Exchange Commission under which the Company is able to issue up to 4.5
million shares of its Common Stock (approximately 2.5 million shares remain
available). These securities are intended to be used in connection with
acquisitions of other businesses or assets.
11
<PAGE> 14
Results of Operations
Three Months Ended September 30, 1995 Compared to Three Months Ended September
30, 1994
Revenues for the three months ended September 30, 1995 increased 40% over the
three months ended September 30, 1994. The revenue growth resulted principally
from increased EAS revenues, particularly from: increased revenues from the
Ultra-Max(R) product line, which is primarily for hard goods retail customers
and is used in the Company's Universal Product Protection (UPPsm) program for
source tagging; increased revenues from the Aislekeeper(R) product line;
increased sales of CCTV products used by retailers; and increased revenues from
the U.S.-based Commercial/Industrial Group.
Revenues from retail customers for EAS product lines increased 44% to $160
million in the first quarter of fiscal 1996 from the comparable period of
fiscal 1995. This increase resulted principally from growth of 68% in revenues
from the Ultra-Max product line, and the inclusion of approximately $13 million
of revenues from the Knogo product line.
Revenues from the CCTV product lines for retailers increased 30% to $35 million
for the first quarter of fiscal 1996 from the comparable period of fiscal 1995.
Revenues from the U.S.-based Commercial/Industrial Group increased 52% to $46
million (including installation revenues) in the first quarter of fiscal 1996
compared to fiscal 1995 due primarily to increased sales of CCTV and access
control products to non-retail customers, and revenue from recent acquisitions.
Operating income for the three months ended September 30, 1995 increased
approximately 1% over last year's comparable period primarily due to the higher
level of business; offset in part by reduced gross margins and an increase in
selling, customer service and research, development and engineering expenses.
The gross margin for the first quarter of fiscal 1996 was 52%, lower than the
54% gross margin for last year's comparable period. The reduction in the total
gross margin resulted primarily from lower gross margins realized on the sale
of CCTV products in the U.S. due to a high volume of trade-ins and lower margin
sales to major customers and lower margin sales of Ultra-Max products to major
customers in the U.S.
Total selling, customer service and administrative, and research, development
and engineering expenses, as a percentage of total revenues, were 44% and 42%
for the first quarter of fiscal 1996 and 1995, respectively. The increase as a
percentage of revenues is primarily attributable to increased selling, customer
service and administrative expenses in Europe and to additional audit and legal
fees incurred as a result of the expansion of the Company's fiscal 1995 year-
end audit (approximately $2 million) which are included in administrative
expense. The aggregate amount of these
12
<PAGE> 15
expenses increased by 48% in the current year's first quarter over last year's
comparable period primarily as a result of the higher level of business in
fiscal 1996.
Costs at every level in the Company have and continue to be reexamined.
Management's stated goal is to reduce annual operating expenses by 10%, while
continuing to make required investments in the infrastructure to support
profitable growth. Certain cost reductions may require eliminating redundant
functions. These actions may result in severance and related costs which will
be recorded in the period these decisions are made and communicated.
Total net other non-operating expenses in the first quarter of fiscal 1996
increased approximately $4 million compared to the comparable period of fiscal
1995, principally due to an increase in interest expense resulting from the
higher level of short-term borrowings outstanding during the first quarter of
fiscal 1996.
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 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 1995 Annual Report on Form 10-K and amendment thereof for
further discussion of the Company's currency and interest rate risks and use of
derivatives).
In July 1995 the Emerging Issues Task Force (EITF) reached a consensus which
narrows the scope of intercompany foreign currency commitments which are
eligible to be hedged for financial reporting purposes. This applies to
transactions arising after July 21, 1995. Adoption of this consensus did not
have a material effect on the Company's operations or financial condition
during the first quarter of fiscal 1996 and is not expected to have a material
effect in future periods.
The provision for income taxes for the first quarter of fiscal 1996 is based on
an estimated effective annual consolidated tax rate of 28% compared to an
estimated effective annual tax rate of 25% utilized for the first quarter of
fiscal 1995. The increase in the rate resulted primarily from the following:
an increase in the relative proportion of the Company's profits earned from
international subsidiaries, which are subject to statutory tax rates generally
higher than those in the U.S.; increases in U.S. earnings not qualifying for
U.S./Puerto Rico "Section 936" tax benefits; and increases in amortization of
costs in excess of net assets acquired.
Consolidated net income for the first quarter of fiscal 1996 decreased $3
million when compared to the prior year's comparable period due primarily to
the factors discussed above.
13
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A shareholder action was filed by Steven M. Fradin (Fradin) on
or about October 31, 1995 against the Company in the United
States District Court for the Southern District of New York. The
complaint is similar to a number of complaints filed in July,
August and September 1995, following announcements by the Company
that, among other things, its earnings for the quarter and year
ended June 30, 1995 would be substantially below expectations.
The Fradin plaintiff, who claims to have purchased 200 shares of
the Company's common stock during the period December 30, 1994
through July 6, 1995, alleges, on behalf of himself and a
putative class of purchasers of the Company's shares during such
period, that commencing on December 30, 1994, the Company and
certain other named defendants issued false and misleading
statements about the Company's business prospects and failed to
disclose allegedly adverse information, including information
relating to the Company's merger with Knogo Corporation
consummated December 30, 1994, all of which allegedly inflated
the price of the Company's stock artificially in violation of
federal securities law. The complaint also alleges a common law
claim for negligent misrepresentation. In addition to the
Company, also named as defendants were: Ronald G. Assaf, Chairman
of the Board, President and Chief Executive Officer; Gerd Witter,
President of Sensormatic Europe; Lawrence J. Simmons, formerly
Vice President of Finance and Chief Accounting Officer; Michael
E. Pardue, formerly Executive Vice President, Chief Operating
Officer and Chief Financial Officer and a director; and John T.
Ray, Jr. and Arthur G. Milnes, directors. As in the
previously-filed actions referred to above, the Fradin plaintiff
seeks class certification, unspecified compensatory damages,
interest, attorneys', accountants' and experts' fees and other
relief.
The Company intends to vigorously defend against this suit.
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:
On July 20, 1995, the Company filed a Current Report on
Form 8-K, as amended August 15, 1995, with respect to
certain actions filed against the Company and certain of
its directors and officers (see note i of Notes to
Consolidated Condensed Financial Statements).
On November 2, 1995, the Company filed a Current Report
on Form 8-K with respect to a formal order of private
investigation entered by the Securities and Exchange
Commission In the Matter of Sensormatic Electronics
Corporation (see note j of Notes to Consolidated
Condensed Financial Statements).
14
<PAGE> 17
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/ RAYMOND MONTELEONE
---------------------------------
Raymond Monteleone
Vice President of Corporate
Development and Acting Chief
Financial Officer
Date: November 15, 1995
15
