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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A-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 MARCH 31, 1998 Commission File No. 1-10739
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SENSORMATIC ELECTRONICS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 34-1024665
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
951 Yamato Road, Boca Raton, Florida 33431-0700
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(Address of principal executive offices) (Zip Code)
(561) 989-7000
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(Registrant's telephone number, including area code)
Same
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(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
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The Registrant had outstanding 74,367,523 shares of Common Stock (par value $.01
per share) as of July 31, 1998.
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SENSORMATIC ELECTRONICS CORPORATION
INDEX
FORM 10-Q/A-1
NINE MONTHS ENDED MARCH 31, 1998
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................... 1
Signatures......................................................................... 3
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company entered into an agreement to settle the consolidated
shareholder class actions filed during calendar 1995 and pending
against the Company and certain of its current and former officers and
directors in the United States District Court for the Southern District
of Florida. These actions, which challenged the Company's prior revenue
recognition and other accounting practices in fiscal year 1995 and
earlier, are described in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 ("Form 10-K"). The settlement,
which has been fully performed by the Company, provides, among other
things, for the payment by the Company of $53.5 million. The settlement
agreement was approved by the Court on February 27, 1998. The deadline
for filing claims with the claims administrator was March 26, 1998.
The Company has recovered a portion of the settlement amount and
related expenses from its primary directors and officers liability
insurance policy, which has a policy limit of $10.0 million, and from
one of its two excess insurance carriers, Reliance Insurance Company
("Reliance"), under a policy with a limit of $10.0 million. Pursuant to
the Company's agreement with certain of its current and former
directors and officers, certain of such insurance proceeds will be held
in escrow for the benefit of such directors and officers to satisfy
certain additional claims they may have under the policies, with any
balance in such escrow account thereafter being paid over to the
Company. The Company has reached an agreement in principle to settle
its litigation with the other such excess insurance carrier, Federal
Insurance Company ("Federal"), with respect to a policy with a limit of
$ 10.0 million, as further described below.
In the GILFORD action described in the Form 10-K and referred to in the
Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, previous settlement negotiations failed to resolve the matter
and the plaintiff moved for leave to amend the complaint again to add
allegations relating to plaintiffs transactions in options on the
Company's securities. The court has denied that motion as moot, and has
dismissed the action pursuant to defendants' previously-filed motion to
dismiss in light of the injunction against such litigation entered by
the United States District Court for the Southern District of Florida
in connection with the class action settlement described above.
In the three derivative actions in the Delaware Court of Chancery
described in the Form 10-K, the Company has reached an agreement in
principle to settle the matter. The settlement provides for payment of
legal fees by the Company in an amount that would not be material. The
agreement in principle is subject to final documentation and Court
approval.
The Company, certain former Company officers and Ronald G. Assaf, the
Company's non-executive Chairman of the Board and former Chief
Executive Officer, entered into agreements, without admitting or
denying any wrongdoing, with the Securities and Exchange Commission
(the "SEC") to resolve the investigation described in the Form 10-K.
Pursuant to the agreements, the SEC instituted and simultaneously
settled several enforcement actions. Generally, the SEC alleged in an
administrative proceeding that the Company violated the antifraud,
reporting, internal controls and books and records provisions of the
federal securities laws from at
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least July 1, 1993 through July 10, 1995. Specifically, the SEC
alleged, among other things, that during that period the Company
improperly recognized and recorded revenue in one quarter from product
shipped to customers in the next quarter and misstated its quarterly
earnings in certain financial statements contained in periodic reports
and registration statements. As part of its settlement, the Company
agreed to an Order of the SEC that it will not in the future violate
certain periodic reporting, books and records, internal controls and
antifraud provisions of the Federal securities laws. There were no
penalties imposed upon the Company.
In its related civil injunctive complaint, the SEC alleged, among other
things, that, during the relevant period, certain former officers of
the Company, other than Mr. Assaf (see below), knew of certain improper
revenue recognition practices and condoned or directed those practices,
and knew that certain Company periodic reports filed with the SEC were
false and misleading. Those officers agreed, without admitting or
denying any wrongdoing, to, among other things, final judgments or
orders prohibiting them from violating certain antifraud provisions and
certain record keeping and periodic reporting provisions of the Federal
securities laws and ordering certain of them to pay civil penalties.
Further, the SEC alleged, among other things, in the civil complaint
that, during the relevant period, Mr. Assaf knew of certain improper
recognition practices and knew or was generally aware that certain
Company periodic reports filed with the SEC were false and misleading.
Mr. Assaf agreed, without admitting or denying any wrongdoing, to a
civil final judgment enjoining him from future violations of certain
record keeping and periodic reporting provisions of the Federal
securities laws and ordering him to pay a civil penalty of $50,000.
The complaint in the WOLF action described in the Form 10-K was
dismissed by the Delaware Court of Chancery in June 1998.
The action brought by Reliance, described in the Form 10-K, has been
settled, with Reliance having paid, pursuant to that settlement, $10.0
million as described above in connection with the settlement of the
shareholder class action.
The Company has reached an agreement in principle to settle its
litigation with Federal described in the Form 10-K. The agreement in
principle, which is subject to final documentation, provides for the
payment by Federal of $6.25 million in settlement of its insurance
obligations in connection with, among other things, the settlements of
the shareholder class action and derivative actions referred to above.
In addition, reference is made to Item 3 of Part I of the Form 10-K and
to Item 1 of Part II of each of the Company's Quarterly Reports on Form
10-Q for the fiscal quarters ended September 30 and December 31, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to the report to be
signed on its behalf by the undersigned hereunto duly authorized.
SENSORMATIC ELECTRONICS CORPORATION
By /s/ Garrett E. Pierce
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Garrett E. Pierce
Senior Vice President, Chief
Administrative Officer and
Chief Financial Officer
(Principal Financial Officer)
Date: November 17, 1998
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