<PAGE> 1
UNITED STATES
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 March 31, 1997 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 Number)
incorporation or organization)
951 Yamato Road, Boca Raton, Florida 33431-0700
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 989-7000
- --------------------------------------------------------------------------------
(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 74,204,458 shares of Common Stock (par value $.01
per share) as of April 30, 1997.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
-----
FORM 10-Q
NINE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets .................... 2
Consolidated Condensed Statements of
Operations ............................................. 3
Consolidated Condensed Statements of
Cash Flows ............................................. 4
Notes to Consolidated Condensed
Financial Statements ................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................ 18
Item 6. Exhibits and Reports on Form 8-K ......................... 19
Signatures .............................................................. 20
</TABLE>
<PAGE> 3
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value amounts)
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and marketable securities (including marketable securities
of $2.6 at March 31, 1997 and $3.2 at June 30, 1996) $ 63.2 $ 116.9
Accounts receivable, net 256.3 244.0
Current portion of deferred and installment receivables, net 15.5 22.9
Current portion of net investment in sales-type leases 39.9 29.0
Inventories, net 200.0 157.8
Current portion of deferred income taxes 14.2 29.3
Other current assets 59.4 33.9
---------- ----------
Total current assets 648.5 633.8
Deferred and installment receivables, net 5.6 41.3
Net investment in sales-type leases 117.6 111.3
Revenue equipment, net 71.0 56.9
Property, plant and equipment, net 151.0 147.8
Costs in excess of net assets acquired, net 484.1 487.5
Deferred income taxes 112.9 96.9
Patents and other assets, net 82.2 54.8
---------- ----------
Total assets $ 1,672.9 $ 1,630.3
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 55.2 $ 24.8
Accounts payable 57.0 59.9
Other current liabilities and deferred income taxes 198.7 174.5
---------- ----------
Total current liabilities 310.9 259.2
Long-term debt 504.4 491.7
Other noncurrent liabilities and deferred income taxes 39.8 47.7
---------- ---------
Total liabilities 855.1 798.6
Stockholders' equity:
Preferred stock, $.01 par value, 10.0 shares authorized -- --
Common stock, $.01 par value, 74.3 and 73.9 shares outstanding
at March 31, 1997 and June 30, 1996, respectively 731.0 723.8
Retained earnings 183.3 181.8
Treasury stock at cost and other (15.4) (13.4)
Currency translation adjustments (81.1) (60.5)
---------- ----------
Total stockholders' equity 817.8 831.7
---------- ----------
Total liabilities and stockholders' equity $ 1,672.9 $ 1,630.3
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
----------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales $ 205.8 $ 192.4 $ 623.0 $ 630.4
Rentals 15.0 12.7 42.1 38.3
Installation, maintenance and other 29.3 20.2 87.6 68.4
---------- ---------- ---------- ----------
Total revenues 250.1 225.3 752.7 737.1
---------- ---------- ---------- ----------
Operating costs and expenses:
Costs of sales 126.6 134.3 388.8 414.5
Depreciation on revenue equipment 5.2 4.6 15.5 15.7
Selling, general and administrative 92.0 105.6 273.1 331.5
Restructuring charges -- 42.5 -- 85.3
Research, development and engineering 6.0 7.0 17.5 20.9
Amortization of intangible assets 5.3 4.4 14.6 12.4
---------- ---------- ---------- ----------
Total operating costs and expenses 235.1 298.4 709.5 880.3
---------- ---------- ---------- ----------
Operating income/(loss) 15.0 (73.1) 43.2 (143.2)
---------- ---------- ---------- ----------
Other (expenses)/income:
Interest income 4.1 3.1 12.7 10.9
Interest expense (12.1) (8.7) (35.7) (25.9)
Other, net 1.1 (0.5) (0.7) (2.7)
---------- ---------- ---------- ----------
Total other (expenses)/income (6.9) (6.1) (23.7) (17.7)
Income/(loss) before income taxes 8.1 (79.2) 19.5 (160.9)
Provision/(benefit) for income taxes 2.3 (29.2) 5.5 (62.7)
---------- ---------- ---------- ----------
Net income/(loss) $ 5.8 $ (50.0) $ 14.0 $ (98.2)
========== ========== ========== ==========
Primary earnings/(losses) per common share $ 0.08 $ (0.68) $ 0.19 $ (1.33)
========== ========== ========== ==========
Cash dividends per common share $ 0.055 $ 0.055 $ 0.165 $ 0.165
========== ========== ========== ==========
Common shares used in computation or
primary earnings/(losses) per common share 74.4 73.8 74.2 73.5
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ 14.0 $ (98.1)
Adjustments to reconcile net income/(loss) to net cash
used in operating activities:
Depreciation and amortization 49.3 36.4
Restructuring charges, net -- 77.7
Other non-cash charges to operations, net 23.2 125.2
Net changes in operating assets and liabilities,
net of effects of acquisitions:
Increase in receivables and sales-type leases (14.8) (98.6)
Decrease in current and deferred income taxes
relating to the restructuring and special charges -- (86.5)
Increase in inventories (46.6) (6.0)
Net increase in other operating assets and liabilities (43.4) (17.6)
-------- --------
Net cash used in operating activities (18.3) (67.5)
-------- --------
Cash flows from investing activities:
Capital expenditures (31.7) (40.5)
Increase in revenue equipment, net of deletions (23.9) (37.0)
Business acquisition, net of cash acquired (14.8) (7.0)
Maturities of marketable securities 0.7 13.4
Other, net -- (3.4)
-------- --------
Net cash used in investing activities (69.7) (74.5)
-------- --------
Cash flows from financing activities:
Issuance of Senior Notes, net -- 229.0
Bank borrowings/(repayments) and other debt 44.6 (28.5)
Issuance of common stock under employee benefit plans 4.5 8.5
Dividends paid (12.5) (12.1)
Other, net (1.7) (0.2)
-------- --------
Net cash provided by financing activities 34.9 196.7
-------- --------
Net (decrease)/ increase in cash (53.1) 54.7
Cash at beginning of the year 113.7 43.6
-------- --------
Cash at end of the period 60.6 98.3
Marketable securities at end of the period 2.6 17.0
-------- --------
Cash and marketable securities at end of the period $ 63.2 $ 115.3
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
SENSORMATIC ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in Millions)
a) BASIS OF PRESENTATION
The consolidated condensed financial statements include the accounts of
Sensormatic Electronics Corporation and all of its subsidiaries (the
"Company"). The accompanying unaudited condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine month period ended
March 31, 1997 are not necessarily indicative of the results that may
be expected for the year ending June 30, 1997. For further information,
refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1996.
In fiscal 1996, the Company changed its presentation from an
unclassified to a classified balance sheet. The Company believes this
change provides a better presentation of the Company's financial
position and conforms with industry practice.
b) RESTRUCTURING AND SPECIAL CHARGES
During the second quarter of fiscal 1996, the Company initiated an
extensive and systematic review of its global operations, cost
structure and balance sheet aimed at reducing its operating expenses,
manufacturing costs and increasing efficiencies. As a result, the
Company recorded restructuring and special charges totaling $186.0
pretax in the second and third quarter of fiscal 1996 primarily for
product rationalization and related equipment impairment charges,
facility closures and severance costs, and increases in the valuation
allowances for doubtful accounts receivable and inventories. The total
restructuring and special charges recorded in the second and third
quarter of fiscal 1996 were $85.3 and $100.7 pretax, respectively. The
special charges are reflected in the accompanying Statement of
Operations as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, 1996 March 31, 1996
--------------------------------------------------------------------------------
<S> <C> <C>
Cost of Sales $ 14.0 $ 29.1
Depreciation on Revenue Equipment 1.0 2.6
Selling, general and administrative 16.6 68.5
Research, development and engineering -- 0.5
--------------------------------------------------------------------------------
Total $ 31.6 $ 100.7
--------------------------------------------------------------------------------
</TABLE>
Approximately $33.3 of the restructuring costs recorded in fiscal 1996
which totaled $85.3 will result in cash outlays, of which $17.6 was
paid as of March 31, 1997. During the nine months of fiscal 1997, the
restructuring reserve was reduced by approximately $16.8 as a result of
cash and non-cash charges. The following table sets forth the details
and the cumulative activity of the restructuring charges as of March
31, 1997:
5
<PAGE> 7
<TABLE>
<CAPTION>
Non-cash Reserve
Fiscal 1996 Cash (Reductions)/ Balance at
Provision Reductions Adjustments March 31, 1997
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other $ 45.3 $ -- $ (42.7) $ 2.6
Closure of facilities and related costs 23.5 (2.1) (4.3) 17.1
Employee termination and related costs 16.5 (15.5) (0.1) 0.9
--------------------------------------------------------------------------------------------------------
Total $ 85.3 $ (17.6) $ (47.1) $ 20.6
--------------------------------------------------------------------------------------------------------
</TABLE>
The restructuring plan is expected to be substantially completed prior
to the end of calendar year 1997 and the Company believes the
provisions recorded are adequate to cover the costs associated with
this plan.
c) 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 (which principally have periodic payments over lease
terms of five to six years) at March 31, 1997 and June 30, 1996 are
summarized as follows :
<TABLE>
<CAPTION>
March 31 June 30
-------- -------
<S> <C> <C>
Accounts receivable $ 287.2 $ 276.1
Allowance for doubtful accounts (30.9) (32.1)
-------- --------
Total accounts receivable, net $ 256.3 $ 244.0
======== ========
Deferred receivables $ 4.7 $ 11.3
Installment receivables 46.9 90.6
Allowance for doubtful accounts (11.5) (13.4)
Unearned interest and maintenance (19.0) (24.3)
-------- --------
Total deferred and installment receivables, net 21.1 64.2
-------- --------
Less: Amounts due in 1 year, net (15.5) (22.9)
-------- --------
Total noncurrent deferred and
installment receivables, net $ 5.6 $ 41.3
======== ========
Sales-type leases-minimum lease payments receivable $ 207.5 $ 206.0
Allowance for uncollectible minimum lease payments (15.2) (17.3)
Unearned interest and maintenance (34.8) (48.4)
-------- --------
Total sales-type leases, net 157.5 140.3
-------- --------
Less: Amounts due in 1 year, net (39.9) (29.0)
-------- --------
Total noncurrent sales-type leases, net $ 117.6 $ 111.3
======== ========
</TABLE>
The Company received net proceeds of $311.0 and $287.0 from the sale or
assignment of certain of its receivables and sales-type leases in the
nine months ended March 31, 1997 and 1996, respectively. The
uncollected principal balance of receivables and sales-type leases sold
which was subject to
6
<PAGE> 8
varying amounts of recourse totaled $219.1 and $294.1 at March 31, 1997
and 1996, respectively. Adequate reserves have been provided for
receivables and leases sold and are included in accrued liabilities.
Effective January 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", for
the various transfers of receivables that occurred subsequent to
January 1, 1997. The transfer of receivables under certain of the
Company's existing agreements continue to qualify for off-balance sheet
treatment under the provisions of SFAS No. 125, principally the
non-recourse portion of the U.S. factoring agreements. The transfer of
receivables during the third quarter of fiscal 1997 under other
existing receivable financing agreements was not material and was
accounted for as financing transactions. Accordingly, the impact of
adoption on net income in the 1997 third quarter was immaterial.
In March 1997, the Company entered into a five-year 100 million pound
sterling (approximately $160.0) uncommitted Asset Backed Commercial
Paper Conduit Program (the "Program") with an affiliate of the Union
Bank of Switzerland ("UBS"). The Program allows for the sale, and the
related off-balance sheet treatment under the provisions of SFAS No.
125, of accounts receivable from eligible equipment lease contracts
originating in the United Kingdom and Scotland on a nonrecourse basis
to Mont Blanc Receivables Financing Limited ("MBRF"), an entity
sponsored by UBS. Under the Program, the Company will receive cash from
MBRF equal to 85.0% of the accounts receivable sold and will retain a
15.0% interest in the receivables sold in the form of a subordinated
loan receivable due from MBRF. Repayment of the subordinated loan by
MBRF and collection of other credit enhancement provisions on a
priority basis, as per the terms of the Program, are subject to
collection of the accounts receivable sold. Additionally, certain of
the cash proceeds received are restricted in use and available to UBS
in the event that the Company fails to perform its equipment
maintenance and repair obligations. Under the terms of this Program,
the Company has agreed to service the financial assets.
In March 1997, the Company sold approximately $64.0 of the accounts
receivable from eligible equipment lease contracts to MBRF for cash
proceeds of $54.4 and issued a subordinated loan to MBRF for the
remaining amount of $9.6. In accordance with SFAS No. 125, the Company
has recorded all assets obtained and liabilities incurred related to
this transaction at fair market value.
In July 1996, the Company entered into a $75.0 receivable purchase
agreement facility with a group of financial institutions. This
committed facility allows the Company to sell certain of its U.S.
receivables on a limited recourse basis. The U.S. receivables sold
under this agreement principally include deferred and installment
receivables. The Company is currently negotiating the terms of a new
U.S. facility which will meet the requirements of SFAS No. 125 and
allow the continued recognition of transfers of U.S. receivables as
sales. Accordingly, the Company did not transfer any receivables under
this existing facility during the third quarter of fiscal 1997.
7
<PAGE> 9
d) INVENTORY
Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
-------------- -------------
<S> <C> <C>
Finished goods $ 156.5 $ 134.8
Parts 52.6 42.4
Work-in-process 24.0 18.6
-------- --------
233.1 195.8
Less allowance for inventory losses (33.1) (38.0)
-------- --------
Total inventories, net $ 200.0 $ 157.8
======== ========
</TABLE>
e) DEBT
In December 1996, the Company entered into a $250.0 revolving credit
agreement with a group of banks led by two major U.S. financial
institutions. The facility has a three-year term and a maturity date of
December 10, 1999.
f) FINANCIAL INSTRUMENTS
INTEREST RATE AGREEMENTS
The Company enters into interest rate agreements with financial
institution counterparties principally to manage interest rate exposure
associated with its sale of U.S. receivables and debt. See Note 13 of
Notes to Consolidated Financial Statements in the Company's 1996 Annual
Report on Form 10-K for additional discussion.
At March 31, 1997, the Company was a party to the following interest
rate agreements:
(1) 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>
$6.0 May 1999 7.75% 1 Month LIBOR
5.0 September 1999 5.84% 1 Month LIBOR
5.5 May 2000 6.16% 1 Month LIBOR
2.4 April 2000 6.58% 1 Month LIBOR
1.6 April 1999 4.60% 1 Month LIBOR
1.5 August 1998 4.80% 1 Month LIBOR
1.2 May 1998 4.94% 1 Month LIBOR
0.7 March 1999 4.65% 1 Month LIBOR
---------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average interest rates paid and received under all such
floating to fixed swap agreements at March 31, 1997 were 6.25% and
5.17%, respectively.
(2) INTEREST RATE CAP AGREEMENT
In fiscal 1995, the Company entered into an interest rate cap agreement
expiring in September 1999, with a notional amount at March 31, 1997 of
$2.5. Under the agreement the Company will be paid an amount equal to
the excess, if any, of the 1 month LIBOR over 7.0% multiplied by the
notional amount. At March 31, 1997 there was no such excess.
8
<PAGE> 10
FOREIGN CURRENCY CONTRACTS
The Company conducts business in a wide variety of currencies and
consequently enters into foreign exchange forward and option contracts
to manage exposure to fluctuations in foreign currency exchange rates.
These contracts generally involve the exchange of one currency for
another at a future date and are used to hedge substantially all of the
Company's anticipatory intercompany commitments.
At March 31, 1997, the Company owned forward contracts and options
which allow it to sell currencies for the indicated U.S. dollar
amounts, in fiscal year 1998 and 1997, as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------------------------------
<S> <C> <C>
French Francs $ 54.4 $ 28.0
British Pounds 19.6 --
German Marks 59.1 9.5
Other 39.7 6.1
---------------------------------------------------------------------------------
Total $ 172.8 $ 43.6
---------------------------------------------------------------------------------
</TABLE>
g) PROSPECTIVE ACCOUNTING CHANGES
In February 1997, the FASB issued SFAS No. 128 " Earnings per Share"
and SFAS No. 129 "Disclosure of Information about Capital Structure".
SFAS No. 128 simplifies the current required calculation of earnings
per share ("EPS") under APB No. 15, "Earnings per Share", by replacing
the existing calculation of primary EPS with a basic EPS calculation.
It requires a dual presentation, for complex capital structures, of
basic and diluted EPS on the face of the income statement and requires
a reconciliation of basic EPS factors to diluted EPS factors. SFAS No.
129 requires disclosing information about an entity's capital
structure. The Company plans to adopt SFAS 128 and SFAS 129, which are
effective for periods after December 15, 1997, with no material impact
to the Company's EPS calculation or disclosure information.
h) RECLASSIFICATIONS
Certain amounts in the prior year's consolidated condensed financial
statements have been reclassified to conform to the current year's
condensed presentation.
i) LITIGATION AND OTHER MATTERS
During the first six months of fiscal 1996, a number of class actions
were filed in federal court by alleged shareholders of the Company
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 and, in the later actions or complaint
amendments, that the scope of the Company's year-end audit for the
fiscal year ended 1995 had been expanded and that results for the third
quarter of fiscal 1995 were being restated. These actions have been
consolidated. The consolidated complaint alleges, among other things,
that the Company and certain of its current and former directors,
officers and employees, as well as the Company's auditors, violated
certain Federal securities laws.
One of the claims against the Company's auditors, asserted under state
law, originally included in the consolidated complaint, has been
dismissed by the Court. That claim alleged that the Company's auditors
negligently misrepresented certain information regarding the Company
and failed to exercise
9
<PAGE> 11
reasonable care. The claims recited in the consolidated complaint
relate to the same events and occurrences as those alleged in the
various actions referred to above, updated to incorporate more recent
events and occurrences and to reflect certain information furnished to
plaintiffs during pre-trial discovery. The consolidated complaint
requested certification of the action as a class action on behalf of
all purchasers of the common stock of the Company and certain stock
option traders from August 10, 1994 through October 2, 1995, including
those shareholders who received common stock of the Company in
connection with the Company's merger with Knogo. The consolidated
complaint also seeks rescissory and/or compensatory damages,
pre-judgment and post-judgment interest, costs, attorneys' fees, and
other relief, and further provides that the shareholders of the Company
who received common stock of the Company in connection with the merger
with Knogo are tendering back to the Company such shares of common
stock.
The consolidated complaint supersedes all prior complaints in the
consolidated actions. By stipulation, dated September 12, 1996, the
parties to the consolidated class actions agreed to limit the proposed
class to all persons who purchased, or received through the exercise of
options, shares of common stock of the Company during the period from
August 10, 1994 through and including August 31, 1995, provided that
shares purchased on August 31, 1995 were purchased at a price of $25.25
per share or higher. The stipulated class excludes persons who acquired
common stock pursuant to the Company's merger with Knogo approved by
its shareholders in December 1994. The stipulation was approved by the
court in an order entered on September 30, 1996.
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. These actions have been
consolidated.
Further, in May 1997, a declaratory judgment action was filed in
federal court against the Company and certain of its current and former
officers and certain of its directors by one of the Company's three
directors and officers liability insurance carriers during the period
December 15, 1994 to December 15, 1995. The insurance contract at
issue in the suit provides $10.0 in coverage and is excess to $10.0 in
primary directors and officers liability insurance for the period. The
complaint seeks, among other things, (i) rescission of the
above-referenced insurance contract; (ii) reformation of the insurance
contract to exclude the hazards raised by the pending securities class
actions and derivative actions referred to above, the GILFORD action
and the SEC proceeding, all of which are described in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996; and
(iii) a declaratory judgment that the above-referenced insurance
contract does not afford coverage for defendants for any loss arising
out of such actions and proceeding. The complaint alleges, among other
things, that the Company's applications for that insurance contract and
attachments thereto contained material misrepresentations, omissions,
concealment of facts and incorrect statements relating principally to
the Company's revenue recognition practices which are also a subject of
the actions and proceeding referred to above.
The Company intends to vigorously defend against the foregoing 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 financial statements.
10
<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 1996 Annual Report on Form 10-K) and is intended to
assist the reader in understanding the financial results and condition
of the Company.
RESULTS OF OPERATIONS - THREE MONTHS AND NINE MONTHS ENDED MARCH 31,
1997 COMPARED TO THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1996
The following discussion of operating results excludes the effects of
restructuring and special charges recorded in fiscal 1996, which are
discussed in the section "Restructuring and Special Charges" below.
REVENUES
Revenues of $250.1 for the third quarter of fiscal 1997 reflect an
increase of 11.0% over revenues of $225.3 for the same period in fiscal
1996. The increase in the fiscal 1997 third quarter revenues was due to
an increase in Worldwide Retail business revenues of 17.0% over the
same period in fiscal 1996, partially offset by a 2.0% decrease in
revenues of the Worldwide Commercial/Industrial business unit. Third
quarter revenues for fiscal 1997 were negatively impacted by the
strengthening of the U.S. dollar and the impact of foreign currency
translation, resulting in a reduction of revenues of approximately $6.0
as compared to the year ago quarter. Revenues of $752.7 for the nine
months ended March 31, 1997 increased 2.0%, as compared to revenues of
$737.1 for the nine months ended March 31, 1996. Revenues for the nine
months ended March 31, 1997 increased only slightly from the comparable
period of the prior year which includes a major customer roll-out order
of $28.1 during the first quarter of fiscal 1996. The current period
was also adversely impacted by product availability issues, principally
within the CCTV product line.
Consolidated EAS system revenues increased 12.3% to $128.0 in the third
quarter of fiscal 1997 and were essentially flat at $393.6 for the nine
months of fiscal 1997 as compared to the comparable periods of fiscal
1996. The increase in the third quarter EAS revenues over the
comparable period in the prior year resulted principally from increased
revenues from the Ultra-Max product line, which is used primarily by
retail customer. Year-to-date Ultra-Max revenues increased
significantly, even after giving effect to the major customer roll-out
in the first quarter of fiscal 1996 for $28.1; however, these increases
were offset by decreases in revenues from the Company's AisleKeeper
technology.
CCTV system revenues remained relatively constant with the third
quarter of 1996 with $77.6 for the third quarter of 1997, and increased
3.2% to $227.9 for the first nine months of fiscal 1997 from the
comparable period of fiscal 1996. Worldwide Access Control system
revenues decreased 3.4% to $15.2 and 6.1% to $43.7 for the third
quarter and first nine months of fiscal 1997, respectively, from the
comparable periods of fiscal 1996.
11
<PAGE> 13
Revenues generated by the Commercial/Industrial Worldwide Operations
("C/I Worldwide") decreased 2.0% and remained constant in the third
quarter and first nine months of fiscal 1997, respectively, as compared
to fiscal 1996. The decrease in revenues for the third quarter and the
flat revenues for fiscal 1997 are principally due to the focus on
channel harmonization between direct and dealer sales. Additionally,
product availability problems in the CCTV product line, product
competition and integration and rationalization activities in the U.S.
and Europe also contributed to this outcome. The Company is currently
consolidating its C/I Worldwide business in Europe to reduce costs and
strategically position the C/I Worldwide business within this region
for future growth and improved customer support. C/I Worldwide expects
modest growth or flat revenues for the remainder of fiscal 1997 as
compared to fiscal 1996 as a result of the above mentioned factors.
In connection with C/I Worldwide's focus on its channel harmonization
program, in May 1997, the Company agreed with Pinkerton's Inc. to the
principal terms for the divestiture of its U.S. Commercial/Industrial
systems integration business unit, subject to completion of due
diligence and definitive agreements. This business unit has annual
sales of approximately $80.0.
For the third quarter and the first nine months of fiscal 1997, North
America Retail revenues increased 33.3% and 6.0%, respectively, as
compared to the same periods for fiscal 1996. For the third quarter of
fiscal 1997, Ultra-Max revenues increased approximately 51.1% over
the year ago quarter reflecting increased sales and numerous system
upgrades by retailers. As previously indicated, the increase in
revenues for the first nine months of fiscal 1997, as compared to the
same period in the prior year, was negatively impacted by a major
customer roll-out order of $28.1 recorded in the first quarter of
fiscal 1996.
Europe Retail revenues decreased 3.5% and 5.7% for the third quarter
and the first nine months of fiscal 1997, respectively, as compared to
the same periods for fiscal 1996. The decrease in Europe retail
revenues is primarily attributable to operations in the U.K. which have
been negatively affected by the repositioning of its market focus and
management changes. Third quarter Europe Retail revenues were
also negatively affected by approximately $6.0 for foreign currency
translation and the strengthening U.S. dollar.
International Retail revenues, which includes the Latin America and
Asia/Pacific regions, increased 46.9% and 25.9%, respectively, for the
third quarter and the first nine months of fiscal 1997 as compared to
the comparable periods of fiscal 1996. The increase in International
Retail was largely due to the revenues earned in Latin America, which
increased 71.4% and 39.4%, respectively, for the third quarter and the
first nine months of fiscal 1997 as compared to the same periods of
fiscal 1996. The increase is partially due to the acquisition in
October 1996 of the Company's distributor in Argentina in a stock
purchase transaction for cash of $14.8 and future contingent payments
up to approximately $5.0. Excluding the effects of this acquisition,
the 1997 third quarter International Retail revenue increased 21.3%
due to increased business activity.
GROSS MARGINS
Effective fiscal 1997, the Company has classified certain customer and
engineering expenses, previously classified in selling, customer
service and administrative expenses (renamed as "selling, general and
administrative"), as a component of costs of sales. Accordingly, prior
year amounts have been reclassified to conform to the current period
presentation.
12
<PAGE> 14
Gross margins on revenues were 47.3% and 46.3% for the three and nine
month periods ended March 31, 1997, respectively, compared with 45.0%
and 45.9% for the comparable periods of the prior year. The three
months' increase in the gross margin is largely due to lower costs of
manufacturing as a result of increased production volume efficiencies,
as well as cost reduction efforts. The trend in quarterly gross margins
over the preceding three quarters reflects consistent improvement,
principally due to cost reduction programs, notwithstanding that
certain segments of the Company's markets are experiencing dynamic
pricing competition.
OPERATING EXPENSES AND OPERATING INCOME
Selling, general and administrative expenses, as a percentage of total
revenues, was 36.8% and 36.3% for the third quarter and the first nine
months of fiscal 1997, respectively, as compared to 39.5% and 35.7% for
the comparable periods in fiscal 1996. The decrease in expenses as a
percent of revenues for the third quarter reflects the results of cost
reduction efforts. In addition, the third quarter of fiscal 1997
includes higher than normal levels of operating expenses in Europe,
particularly in the U.K. The increase in expenses for the nine months
ended March 31, 1997 over the comparable period of the prior year is
due to the Company's sponsorship of the 1996 summer Olympics and
incremental investments in the Company's infrastructure aimed at
improving systems and processes. The Company completed its Olympic
sponsorship activities and related expense exposure in the first
quarter of fiscal 1997.
Research, development and engineering expenses decreased to 2.4% and
2.3% of revenue in the three and nine months ended March 31, 1997 as
compared to 3.1% and 2.8% for the same periods in fiscal 1996,
respectively. Research, development and engineering spending has
decreased as a percentage of revenues as compared to the prior year,
due to revenue increases and the Company's increased focus on certain
key product development initiatives.
Operating income for the three and nine months ended March 31, 1997
increased to $15.0, or 6.0% of revenues, and to $43.2, or 5.7% of
revenues, respectively, versus $1.0, or 0.4% of revenues, and $42.8, or
5.8% of revenues, respectively, for the comparable periods of fiscal
1996. Due to the strengthening of the U.S. dollar and the impact of
foreign currency translation, operating income for the three months
ended March 31, 1997 was reduced by approximately $2.0 as compared to
the comparable period in fiscal 1996.
INTEREST EXPENSE AND OTHER INCOME AND TAXES
Net interest expense of $8.0 and $23.0 for the third quarter and first
nine months of fiscal 1997, respectively, reflected an increase of $2.4
and $7.9 over the comparable periods of fiscal 1996. This increase is
primarily due to increased debt levels outstanding during the period as
well as an increase in the Company's weighted average interest rate on
its borrowings which reflects the Company's decision to substitute
short-term variable rate for long-term fixed rate borrowings. In the
third and fourth quarter of fiscal 1996, the Company issued $350.0 of
Senior Notes, the proceeds of which were used to repay short-term U.S.
and European bank borrowings and for general corporate purposes.
Other, net for the third quarter of fiscal 1997 includes gains of
approximately $2.4 as a result of the cancellation of certain foreign
currency contracts. The Company canceled certain forward contracts
which allowed it to sell British Pounds for fixed U.S. dollar amounts
as a result of the recapitalization of its U.K. affiliate.
13
<PAGE> 15
The provision for income taxes for the first nine months of fiscal 1997
is based on an estimated effective annual consolidated tax rate of
29.0% compared to an estimated effective annual consolidated tax
benefit of 39.0% utilized for the first nine months of fiscal 1996. The
tax benefit for the prior year related primarily to the restructuring
and special charges recorded during the second and third quarter of
fiscal 1996. In August 1996, Congress repealed the favorable tax status
in Puerto Rico which will be phased out over a ten year period for
years beginning after December 31, 1995. The Company does not
anticipate any significant adverse effects as a result of the new law
through fiscal year 2002; for the years thereafter, the Company is
evaluating the impact which is linked to the Company's further growth
and investment in its Puerto Rico manufacturing facility.
The Company reported net income of $5.8, or $0.08 per share, and $14.0,
or $0.19 per share, for the third quarter and first nine months of
fiscal 1997, respectively, as compared to a loss of $50.0, or $0.68 per
share, and a loss of $98.2, or $1.33 per share (including restructuring
and special charges), respectively, for the same periods of fiscal
1996, as a result of the factors discussed above. Excluding the
restructuring and special charges, the Company reported a net loss of
$1.3, or $0.02 per share, and income of $20.0, or $0.27 per share, for
the third quarter and first nine months of fiscal 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Overall, for the first nine months of fiscal 1997, cash and marketable
securities decreased $53.0, primarily due to increases in inventories,
third-party receivables from financing institutions for accounts
receivable sold, capital expenditures, investments in revenue equipment
and acquisitions, offset by cash from operations of $86.5 and an
increase in short-term bank borrowings and other debt.
More specifically, for the nine month period ended March 31, 1997, cash
flow used in operating activities was $18.3 compared with cash used in
operations for the nine month period ended March 31, 1996 of $67.5. The
use of cash in the nine month period ended March 31, 1997 was primarily
a result of increases in inventories and third party receivables from
financing institutions. The receivables from financing institutions are
included as a component of "other current and noncurrent assets".
The increase in inventories results from delayed new product
introductions, lower third quarter revenues than forecasted and the
adjustment of safety stocks for key products in order to reduce lead
time on sales and improve customer service. The Company continues to
place substantial focus on inventory management through improved
forecasting, its sales pipeline management program and production
planning.
The Company's investing activities used $69.7 of cash in the first nine
months of fiscal 1997, compared to $74.5 in the first nine months of
fiscal 1996. The investing activity in fiscal 1997 was principally due
to capital expenditures of $31.7, increases in the Company's investment
in revenue equipment of $23.9 and an acquisition of $14.8. The capital
expenditures principally include investments in manufacturing
operations for new production equipment and the addition of
enterprise-wide management information system software to enhance
operational efficiencies and improve customer service. The world-wide
implementation of this system is currently underway and is expected to
be completed during the calendar year 1998. The increases in revenue
equipment are due to the expansion of the Company's operating lease
base. As previously mentioned, the Company acquired its distributor in
Argentina during the second quarter of fiscal 1997 for cash; see above
for further discussion.
14
<PAGE> 16
For the nine month period ended March 31, 1997, financing activities
generated $34.9 of cash as compared to $196.7 in the nine month period
ended March 31, 1996. Cash flows from financing activities were
principally due to additional borrowings of approximately $44.6,
primarily from the Company's unsecured revolving credit facility,
offset, in part, by cash dividends of $12.5 paid on common stock.
The Company's percentage of total debt to total capital was 40.6% at
March 31, 1997 as compared to 38.3% at June 30, 1996.
In December 1996, the Company entered into a new $250.0 multicurrency
revolving credit agreement. The new facility has a three-year term and
a maturity date of December 10, 1999. The new facility replaced the
Company's pre-existing $320.0 line of credit.
Effective in January 1997, the Company adopted the requirements of SFAS
No. 125 for the various transfers of receivables that occurred
subsequent to January 1, 1997. Certain of the Company's existing
agreements continue to qualify for off-balance sheet treatment under
the provisions of SFAS No. 125, principally the non-recourse portion of
the U.S. factoring agreements. The transfer of receivables during the
third quarter of fiscal 1997 under other existing financing agreements
was not material and was accounted for as financing transactions.
Accordingly, the impact of adoption of SFAS No. 125 on net income in
the third quarter of 1997 was immaterial.
The Company is currently negotiating the terms of a new U.S.
receivables purchase agreement facility to meet the requirements under
SFAS No. 125. The U.S. receivables sold under its existing $75.0
receivable purchase agreement facility, which was substantially
utilized at December 31, 1996, principally represent deferred and
installment receivables. The Company did not transfer any receivables
under this existing facility during the third quarter of fiscal 1997.
In March 1997, the Company entered into a five-year 100 million pound
sterling (approximately $160.0) uncommitted Asset Backed Commercial
Paper Conduit Program (the "Program") with an affiliate of the Union
Bank of Switzerland ("UBS"). The Program allows for the sale, and the
related off-balance sheet treatment under the provision of SFAS No.
125, of accounts receivable from eligible equipment lease contracts
originating in the United Kingdom and Scotland on a nonrecourse basis.
In March 1997, the Company sold approximately $64.0 of accounts
receivable from eligible equipment lease contracts under this Program
and received cash proceeds of approximately $54.4 and issued a
subordinated loan to MBRF for the remaining amount of $9.6. See Note c)
in the Notes to Consolidated Condensed Financial Statements for further
discussion.
At March 31, 1997, the Company's primary sources of liquidity consisted
of cash, committed and uncommitted lines of credit totaling
approximately $361.5 (of which approximately $55.2 was utilized) and
receivable financing agreements, all of which are available subject to
compliance with certain covenants. The Company believes that the
liquidity provided by future operations, existing cash and the
financing arrangements described above will be sufficient to meet the
Company's future capital requirements.
The Company uses the U.S. dollar as the reporting currency for
financial statement purposes. The Company conducts business in numerous
countries around the world through its international subsidiaries which
use local currencies to denominate their transactions, and is,
therefore, subject to certain risks associated with fluctuating foreign
currencies. The resulting changes in the statements do not indicate any
underlying changes in the financial position of the international
subsidiaries but
15
<PAGE> 17
merely adjust the carrying value of the net assets of these
subsidiaries at the current U.S. dollar exchange rate. Because of the
long-term nature of the Company's investment in these subsidiaries, the
translation adjustments resulting from these exchange rate fluctuations
are excluded from results of operations and recorded in a separate
component of consolidated stockholders' equity. The $20.6 decrease for
the nine months ended March 31, 1997 resulted primarily from the
translation of the balance sheets denominated in French francs, German
marks and Spanish pesetas, reflecting the strengthening of the U.S.
dollar relative to such currencies at March 31, 1997. The Company
monitors its currency exposures but has decided not to hedge its
translation exposures due to the high economic costs of such a program
and the long-term nature of its investment in its international
subsidiaries.
RESTRUCTURING AND SPECIAL CHARGES
During fiscal 1996, the Company initiated a restructuring plan with the
following objectives: (i) expense reduction and asset control; (ii)
improved processes and systems; and (iii) quality growth. The initial
phase of this plan included an extensive review of the Company's
operations and cost structure. As a result, the Company recorded
restructuring charges of $85.3 in the second and third quarters of
fiscal 1996, primarily for product rationalization and related
equipment impairment charges, facility closures and severance costs.
The Company planned for the reduction of 875 people and the sale,
disposal or termination of lease arrangements of approximately 30
locations, principally in the U.K. and U.S. As of March 31, 1997, the
planned staff reductions are substantially completed and approximately
one-half of the locations have been eliminated and the remaining
locations are in various stages of disposition. During the first nine
months of fiscal 1997, the restructuring reserve was reduced by
approximately $16.8 as a result of cash and non-cash charges.
Approximately $33.3 of the restructuring costs will result in cash
outlays, of which $17.6 has been disbursed as of March 31, 1997. The
restructuring plan is expected to be substantially completed prior to
the end of calendar year 1997, and the Company believes the provisions
recorded are adequate to cover the costs associated with this plan.
Additionally, during the second and third quarters of fiscal 1996, the
Company performed an extensive review of its balance sheet, due
primarily to the weakening in the retail industry following a poor
holiday season. As a result of this review, the Company recorded
special charges of $100.7, primarily representing increases in the
valuation allowances for doubtful accounts receivable and inventories.
These special charges were included in the Consolidated Statement of
Operations as follows:
16
<PAGE> 18
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, 1996 March 31, 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost of Sales $ 14.0 $ 29.1
Depreciation on Revenue Equipment 1.0 2.6
Selling, general and administrative 16.6 68.5
Research, development and engineering -- .5
-----------------------------------------------------------------------------------------------------
Total $ 31.6 $100.7
-----------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Except for historical matters, the matters discussed in this Form 10-Q
are forward-looking statements which reflect the Company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and
uncertainties which could cause actual results to differ materially
from historical results or those anticipated. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of their dates. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. The following
factors could cause actual results to differ materially from historical
results or those anticipated: 1) international operation changes 2)
exchange rate risk 3) market conditions for the Company's products 4)
the Company's ability to provide innovative and cost-effective
solutions 5) development risks 6) competition and 7) changes in the
economic climate.
17
<PAGE> 19
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
A complaint in a declaratory judgment action against the Company and
certain of its current and former officers and certain of its directors
has been filed in the United States District Court for the Southern
District of Florida by Reliance National Insurance Company, one of the
Company's three directors and officers liability insurance carriers
during the period December 15, 1994 to December 15, 1995. RELIANCE
NATIONAL INSURANCE COMPANY V. SENSORMATIC ELECTRONICS CORPORATION, ET
AL., Case No. 97-8364. The complaint was filed on May 9, 1997, but has
not yet been served on the Company. In addition to the Company, the
complaint names as defendants Ronald G. Assaf, the Company's Chairman
of the Board of Directors and former Chief Executive Officer and
President; James E. Lineberger, John T. Ray, Jr., and Jerome M. LeWine,
all members of the Company's Board of Directors; Dennis C. Gillette,
the Company's former Vice President of Sales; Lawrence Simmons, the
Company's former Vice President of Finance; and Gerd Witter, the
Company's Senior Vice President of Europe. The insurance contract at
issue in the suit provides $10.0 million in coverage and is excess to
$10.0 million in primary directors and officers liability insurance for
the period.
The complaint seeks, among other things, (i) rescission of the
above-referenced insurance contract pursuant to Sections 627.409(l)(a)
and (l)(b), Florida Statutes; (ii) reformation of the insurance
contract to exclude the hazards raised by the pending securities class
actions, the GILFORD action, the derivative actions and the SEC
proceeding described in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1996; and (iii) a declaratory judgment,
pursuant to 28 U.S.C. Section 2201, that the above-referenced insurance
contract does not afford coverage for defendants for any loss arising
out of such actions and proceeding. The complaint alleges, among other
things, that the Company's applications for that insurance contract and
attachments thereto contained material misrepresentations, omissions,
concealment of facts and incorrect statements relating principally to
the Company's revenue recognition practices which are also a subject
of the actions and proceeding referred to above.
The Company intends to defend this action vigorously and to enforce the
insurance contract at issue.
In addition, reference is made to Item 1 of Part II of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996
and to the Company's current report on Form 8-K filed November 21,
1996.
18
<PAGE> 20
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 March 31, 1997.
19
<PAGE> 21
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/ Garrett E. Pierce
-----------------------------
Garrett E. Pierce
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 1997
20
<PAGE> 1
EXHIBIT 11
SENSORMATIC ELECTRONICS CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
March 31, March 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income/(loss) $ 5.8 $ (50.0) $ 14.0 $ (98.2)
------- ------- ------- -------
Common shares:
Weighted average shares
outstanding during the period 74.2 73.8 74.0 73.5
Potential dilutive exercise
of stock options
and warrants .2 --(1) .2 --(1)
------- ------- ------- -------
Shares included in computation
of earnings/(loss) per share 74.4 73.8 74.2 73.5
======= ======= ======= =======
</TABLE>
(1) Not presented as the effect is anti-dilutive.
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SENSORMATIC ELECTRONICS FOR THE NINE MONTHS ENDED
MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 60
<SECURITIES> 3
<RECEIVABLES> 493
<ALLOWANCES> 58
<INVENTORY> 200
<CURRENT-ASSETS> 648
<PP&E> 251
<DEPRECIATION> 100
<TOTAL-ASSETS> 1,673
<CURRENT-LIABILITIES> 311
<BONDS> 504
0
0
<COMMON> 731
<OTHER-SE> 87
<TOTAL-LIABILITY-AND-EQUITY> 1,673
<SALES> 623
<TOTAL-REVENUES> 753
<CGS> 389
<TOTAL-COSTS> 404
<OTHER-EXPENSES> 24
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 20
<INCOME-TAX> 6
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
