<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A-2
( 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
------------------- ---------
SENSORMATIC ELECTRONICS CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 34-1024665
- ------------------------------------------------ --------------------------------------
<S> <C>
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
951 Yamato Road, Boca Raton, Florida 33431-0700
----------------------------------------------- ----------
(Addres of principal exectuive 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 74,357,077 shares of Common Stock (par value
$.01 per share) as of May 1, 1998.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
FORM 10-Q/A-2
NINE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <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......................................................................... 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................................... 23
Signatures .......................................................................................... 24
</TABLE>
<PAGE> 3
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value amounts)
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
1998 1997
------------ --------------
(Restated - See Note 2)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16.3 $ 21.7
Customer receivables 325.5 303.6
Inventories, net 229.4 199.6
Current portion of deferred income taxes 47.5 42.9
Other current assets 66.7 54.4
------------ --------------
Total current assets 685.4 622.2
Customer receivables - noncurrent 142.2 138.5
Revenue equipment, net 67.9 66.8
Property, plant and equipment, net 135.0 145.5
Costs in excess of net assets acquired, net 469.8 482.7
Deferred income taxes 145.0 102.5
Patents and other assets, net 118.1 88.4
------------ --------------
Total assets $1,763.4 $ 1,646.6
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 100.5 $ 21.8
Accounts payable and accrued liabilities 124.0 126.1
Other current liabilities and deferred income taxes 245.2 184.5
------------ --------------
Total current liabilities 469.7 332.4
Long-term debt 511.4 501.5
Other noncurrent liabilities and deferred income taxes 55.6 39.8
------------ --------------
Total liabilities 1,036.7 873.7
Stockholders' equity:
Preferred stock, $.01 par value, 10.0 shares authorized, none issued -- --
Common stock, $.01 par value, 125.0 shares authorized, 74.4 and 74.3
shares outstanding at March 31, 1998 and June 30, 1997, respectively 731.6 730.5
Retained earnings 100.4 143.7
Treasury stock at cost and other, 1.7 shares at March 31, 1998
and June 30, 1997 (12.5) (14.0)
Currency translation adjustments (92.8) (87.3)
------------ --------------
Total stockholders' equity 726.7 772.9
------------ --------------
Total liabilities and stockholders' equity $1,763.4 $ 1,646.6
============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Unaudited
--------------------------------------------------------------------
Three Months Nine Months
Ended March 31, Ended March 31,
---------------------------------- --------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
(Restated - See Note 2) (Restated - See Note 2)
<S> <C> <C> <C> <C>
Revenues:
Sales $ 199.2 $ 205.8 $ 610.1 $ 623.0
Rentals 11.4 15.0 36.6 42.1
Installation, maintenance and other 26.4 29.3 79.4 87.6
------------- ------------- ------------- -------------
Total revenues 237.0 250.1 726.1 752.7
------------- ------------- ------------- -------------
Cost of Sales:
Costs of sales 127.0 126.6 384.2 388.8
Depreciation on revenue equipment 4.3 5.2 14.1 15.5
------------- ------------- ------------- -------------
Total cost of sales 131.3 131.8 398.3 404.3
------------- ------------- ------------- -------------
Gross margin 105.7 118.3 327.8 348.4
Operating expenses:
Selling, general and administrative 67.6 85.2 237.2 256.1
Provision for doubtful accounts 5.2 6.8 15.4 17.0
Restructuring charges 4.7 -- 21.9 --
Research, development and engineering 6.5 6.0 20.0 17.5
Amortization of intangible assets 5.4 5.3 16.0 14.6
------------- ------------- ------------- -------------
Total operating costs and expenses 89.4 103.3 310.5 305.2
------------- ------------- ------------- -------------
Operating income 16.3 15.0 17.3 43.2
------------- ------------- ------------- -------------
Other (expenses) income:
Interest income 3.6 4.1 10.6 12.7
Interest expense (12.7) (12.1) (38.3) (35.7)
Litigation recoveries (settlement), net 7.3 -- (45.7) --
Other, net (1.8) 1.1 (4.9) (0.7)
------------- ------------- ------------- -------------
Total other (expenses) income (3.6) (6.9) (78.3) (23.7)
------------- ------------- ------------- -------------
Income (Loss) before income taxes 12.7 8.1 (61.0) 19.5
Provision (Benefit) for income taxes 2.6 2.3 (17.9) 5.5
------------- ------------- ------------- -------------
Net income (loss) $ 10.1 $ 5.8 $ (43.1) $ 14.0
============= ============= ============= =============
Basic and Diluted earnings (loss)
per common share $ 0.14 $ 0.08 $ (0.58) $ 0.19
============= ============= ============= =============
Cash dividends per common share $ -- $ 0.055 $ -- $ 0.165
============= ============= ============= =============
Number of shares used in computation
of Basic earnings (loss) per share 74.2 74.0 74.2 73.9
============= ============= ============= =============
Number of shares used in computation
of Diluted earnings (loss) per share 74.8 74.2 -- 74.1
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
(Unaudited)
Nine Months
Ended March 31,
-------------------------------
1998 1997
------------ ------------
(Restated - See Note 2)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(43.1) $14.0
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 49.2 49.3
Restructuring charges, net 12.8 (6.2)
Litigation settlement charges and (recoveries/payouts), net 35.7 --
Net changes in operating assets and liabilities,
net of effects of acquisitions:
(Increase)/decrease in receivables and sales-type leases (27.1) 2.2
Increase in inventory (36.1) (40.4)
Increase in current and deferred income taxes relating to
restructuring, special and litigation settlement charges (20.0) --
Other operating assets and liabilities, net (25.7) (24.1)
---------- ----------
Net cash used in operating activities (54.3) (5.2)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21.9) (31.7)
Net proceeds from sale of business 8.2 --
Increase in revenue equipment, net (17.5) (23.9)
Cash paid for acquisitions, net of cash acquired -- (14.8)
Additional investment in acquisitions (15.2) (13.1)
Other, net 4.6 0.7
---------- ----------
Net cash used in investing activities (41.8) (82.8)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings and other debt net of repayments 89.3 44.6
Proceeds from issuance of common stock under employee
benefit plans -- 4.5
Dividends paid -- (12.5)
Other, net 1.4 (1.7)
---------- ----------
Net cash provided by financing activities 90.7 34.9
---------- ----------
Net decrease in cash (5.4) (53.1)
Cash and cash equivalents at beginning of the year 21.7 113.7
---------- ----------
Cash and cash equivalents at end of the period $16.3 $ 60.6
========== ==========
</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)
1) 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 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, 1998 are not necessarily indicative of the results
that may be expected for the year ending June 30, 1998. 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, 1997.
2) RESTATEMENT OF FINANCIAL STATEMENTS
In May 1997, the Company agreed in principle with Pinkertons Inc.
("Pinkertons") to the principal terms of the sale of the Company's
U.S. commercial/industrial direct sales and service business subject
to completion of due diligence and definitive agreements.
During the fourth quarter of fiscal 1997, the Company recognized a
$12.0 restructuring liability for estimated losses due to the
Company's plan to sell this business. In August 1997, the Company
discontinued negotiations with Pinkertons due to the companies'
inability to reach mutually acceptable terms.
In September 1997, the Company sold its U.S. commercial/industrial
direct sales and service business to Securities Technology Group
("STG"). Unlike the Pinkertons transaction, as one of the terms of the
sale, the Company is required to reimburse STG for costs to complete
certain jobs in process if those costs exceed defined amounts. The
Company originally retained the $12.0 restructuring liability as an
estimate of losses under its new agreement with STG which the Company
viewed as addressing the same underlying business and risk profile as
in the Pinkertons agreement in principle.
In connection with a review of its financial statements incorporated by
reference in the Company's pending registration statement registering
the Company's 6 1/2% Convertible Preferred Stock and related Depository
Shares, the Company has determined that all of the requirements to
recognize the indicated loss under Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies", were not met as a
result of the new agreement with STG. Accordingly, the $12.0 liability
for estimated losses due to the Company's plan to sell this business
which was originally recorded during the fourth quarter of fiscal 1997
was reversed in the first quarter of fiscal 1998. The Company's
consolidated financial statements for the quarter ended September 30,
1997 have been restated to include the effects of reversing this
liability. During the third quarter of fiscal 1998, the Company
recognized a $4.7 restructuring liability for probable losses resulting
from the Company's sale of this business to STG. The effects of these
adjustments on the Company's previously reported consolidated financial
statements for the nine months ended March 31, 1998 are as follows:
5
<PAGE> 7
Consolidated Condensed Statements of Operations:
Nine Months Ended
March 31, 1998
--------------------------
As Reported As Restated
----------- -----------
Restructuring Charges $ 29.2 $ 21.9
Operating income $ 10.0 $ 17.3
Loss from continuing operations $(47.5) $(43.1)
Net loss $(47.5) $(43.1)
Basic and diluted loss per share $ (.64) $ (.58)
Consolidated Condensed Balance Sheets:
March 31, 1998
--------------------------
As Reported As Restated
----------- -----------
Total assets $1,763.3 $1,763.4
Total current liabilities $ 474.0 $ 469.7
Total shareholders' equity $ 722.3 $ 726.7
3) RESTRUCTURING
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. During the fourth quarter of fiscal
1997, the Company announced additional restructuring activities
principally pertaining to workforce reductions in the Company's
European operations and the divestiture of non-core businesses. The
restructuring charges recorded in the fourth quarter of fiscal 1997 and
the first and third quarters of fiscal 1998, net of the reversal of
$12.0 million described in Note 2, totaled $48.7 million with an
after-tax impact of $32.3 million. Included in the total of $48.7
million were inventory write-downs related to restructuring activities
of $4.2 million which were recorded in "cost of sales".
The following table sets forth the details and the activity of the
Company's restructuring charge reserves as of March 31, 1998:
6
<PAGE> 8
1996 Reserve
<TABLE>
<CAPTION>
Accrual Accrual
Utilization Balance at Utilization Balance at
1996 ----------------- June 30, ----------------- Reserve June 30,
Provision Cash Non-Cash 1996 Cash Non-Cash Reallocations 1997
--------- ---- -------- ---------- ----- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other...... $ 45.3 $ -- $(34.2) $11.1 $ -- $(12.4) $ 2.8 $ 1.5
Closure of facilities and
related costs.................... 23.5 (1.0) (1.6) 20.9 (1.4) (6.5) (7.3) 5.7
Employee termination and related
costs............................ 16.5 (10.4) (0.7) 5.4 (6.6) -- 4.5 3.3
------ ------ ------ ----- ------ ------ ----- -----
Total.......................... $ 85.3 $(11.4) $(36.5) $37.4 $ (8.0) $(18.9) $ -- $10.5
====== ====== ====== ===== ====== ====== ===== =====
Inventory write downs
recorded as a component of
cost of sales(2)................. (19.6) 10.6 (9.0) 9.0 --
------ ------ ------ ----- ----- ------ ----- -----
$ 65.7 $(11.4) $(25.9) $28.4 $(8.0) $ (9.9) $ -- $10.5
====== ====== ====== ===== ===== ====== ===== =====
</TABLE>
1996 Reserve (continued)
<TABLE>
<CAPTION>
Accrual Accrual
Balance at Utilizaton Balance at
June 30, ------------------- March 31,
1997 Cash Non-Cash 1998
--------- ---- -------- ----------
<S> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other................ $ 1.5 $ -- $ -- $1.5
Closure of facilities and related costs...... 5.7 1.1 (2.0) 4.8
Employee termination and related costs...... 3.3 (3.3) -- --
----- ----- ----- ----
Total.................................... $10.5 $(2.2) $(2.0) $6.3
===== ===== ===== ====
</TABLE>
7
<PAGE> 9
1997/1998 Reserve(1)
<TABLE>
<CAPTION>
Accrual Accrual
Balance at 1998 Utilization Balance at
1997 June 30, Additions ----------------- March 31,
Provision 1997 (Reversals) Cash Non-Cash 1998
--------- --------- ----------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other...... $ 2.9 $ 2.9 $ -- $ -- $(1.4) $ 1.5
Closure of facilities and
related costs.................... 6.5 6.5 8.8 0.4 (3.4) 12.3
Closure of facilities(2)........... -- (2.9) (2.9)
Employee termination and related
costs............................ 0.5 0.5 20.4 (6.5) -- 14.4
Non-core business divestitures..... 16.9 16.9 (7.3) -- -- 9.6
----- ----- ----- ----- ----- -----
Total.......................... $26.8 $23.9 $21.9 $(6.1) $(4.8) $34.9
===== ===== ===== ===== ===== =====
Inventory write downs
recorded as a component of
cost of sales(2)................. -- (4.2) 2.7 (1.5)
----- ----- ----- ----- ----- -----
Total.......................... $26.8 $19.7 $21.9 $(6.1) $(2.1) $33.4
===== ===== ===== ===== ===== =====
</TABLE>
- ---------------------------------
(1) Certain amounts related to non-core business divestitures have been
restated. See Note 2.
(2) Amounts classified directly to the impaired assets.
8
<PAGE> 10
4) CUSTOMER RECEIVABLES
Amounts due to the Company in the form of accounts receivable (which
are generally 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, 1998 and
June 30, 1997 are summarized as follows :
<TABLE>
<CAPTION>
March 31 June 30
--------- --------
<S> <C> <C>
Accounts receivable $ 308.3 $ 291.2
Allowance for doubtful accounts (37.3) (39.6)
--------- --------
Total accounts receivable, net $ 271.0 $ 251.6
Less: Amounts due in 1 year, net (271.0) (251.6)
--------- --------
Total noncurrent accounts receivable , net $ -- $ --
========= ========
Deferred receivables $ 4.7 $ 7.3
Installment receivables 42.5 46.0
Allowance for doubtful accounts (7.3) (7.8)
Unearned interest and maintenance (16.4) (18.0)
--------- --------
Total deferred and installment receivables, net 23.5 27.5
Less: Amounts due in 1 year, net (18.4) (17.6)
--------- --------
Total noncurrent deferred and
installment receivables, net $ 5.1 $ 9.9
========= ========
Sales-type leases-minimum lease payments receivable $ 227.6 $ 215.5
Allowance for uncollectible minimum lease payments (18.6) (16.4)
Unearned interest and maintenance (35.8) (36.1)
--------- --------
Total sales-type leases, net 173.2 163.0
Less: Amounts due in 1 year, net (36.1) (34.4)
--------- --------
Total noncurrent sales-type leases, net $ 137.1 $ 128.6
========= ========
Total customer receivables $ 467.7 $ 442.1
Less: Amounts due in 1 year, net 325.5 303.6
--------- --------
Total noncurrent customer receivables $ 142.2 $ 138.5
========= ========
</TABLE>
5) ACCOUNTS RECEIVABLE FINANCING
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", and
accordingly, subsequent to the adoption of SFAS No. 125, only
receivables sold or transferred under financing agreements which meet
the criteria for off-balance sheet treatment as defined by SFAS No.
125 are recognized as sales. All other transfers of receivables are
treated as financing transactions. See Note 4 of Notes to Consolidated
Financial Statements in the Company's 1997 Annual Report on Form 10-K
for additional discussion on the Company's various receivable
financing programs.
9
<PAGE> 11
The uncollected principal balance of receivables and sales-type leases
sold prior to January 1, 1997, under then existing agreements, which
are subject to varying amounts of recourse totaled $143.9 at March 31,
1998. Loss reserves have been provided for receivables and sales-type
lease receivables sold, as deemed necessary, and are included in
accrued liabilities.
6) EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share". SFAS No. 128 supersedes Accounting
Principles Board Opinion ("APB") No. 15, "Earnings Per Share" and
various other authoritative pronouncements regarding earnings per
share ("EPS"). SFAS No. 128 became effective for periods ending after
December 15, 1997. Accordingly, the Company adopted SFAS No. 128
effective December 31, 1997.
Under SFAS No. 128, primary earnings per share in accordance with APB
No. 15 is replaced with a simpler calculation called "basic earnings
per share", which excludes the dilutive effect of options, warrants
and convertible securities. Diluted earnings per share under SFAS No.
128 has not changed significantly as compared to fully diluted
earnings per share under APB No. 15, but has been renamed "diluted
earnings per share".
All earnings per share amounts for all periods have been presented in
accordance with the requirements of SFAS No. 128. There was no
material change to the Company's previously reported calculation of
primary and fully diluted earnings per share under APB No. 15 as a
result of the adoption of SFAS No. 128. The following table sets forth
the computation of basic and diluted earnings per share under SFAS No.
128:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NUMERATOR:
Net income (loss) (a) $10.1 $ 5.8 $(43.1) $14.0
===== ===== ====== =====
DENOMINATOR:
Basic EPS - weighted average shares 74.2 74.0 74.2 73.9
Dilutive effect: Stock options 0.6 0.2 0.3 0.2
----- ----- ------ -----
Diluted EPS - weighted average shares 74.8 74.2 74.5 74.1
===== ===== ====== =====
Basic earnings (loss) per share $0.14 $0.08 $(0.58) $ .19
===== ===== ====== =====
Diluted earnings per share $0.14 $0.08 $ -- (b) $ .19
===== ===== ====== =====
</TABLE>
- ----------------------------
(a) The net income (loss) for the three and nine months ended March
31, 1998 has been restated. See Note 2.
(b) Excluded as result is anti-dilutive.
10
<PAGE> 12
7) INVENTORY
Inventories are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998 JUNE 30, 1997
-------------- -------------
<S> <C> <C>
Finished goods $ 185.6 $ 145.0
Raw materials and parts 54.8 58.8
Work-in-process 19.2 24.9
-------- --------
259.6 228.7
Less allowance for excess and obsolete inventory (30.2) (29.1)
-------- --------
Total inventories, net $ 229.4 $ 199.6
======== ========
</TABLE>
8) DIVESTITURES
In September 1997, the Company sold its U.S commercial/industrial
direct sales and service business to Securities Technology Group
("STG") for total proceeds of $10.5. The Company also agreed in such
transaction to sell its monitoring business, which was consummated in
October 1997. The Company retained ownership of all of the accounts
receivable related to these operations totaling approximately $30.7.
As one of the terms of the sale, the Company is required to reimburse
STG for costs to complete certain jobs in process if those costs
exceed defined amounts. While there is no stated "cap" or limit on the
amount the Company is obligated to pay the buyer under this provision,
the range of the probable loss that may be incurred by the Company
under this provision is estimated to be between $4.7 and $8.0. No gain
on the sale has been recognized pending the outcome of this
uncertainty.
During the third quarter of fiscal 1998, the Company recognized a $4.7
restructuring liability for probable losses resulting from the
Company's sale of this business to STG. See Note 2.
The U.S. commercial/industrial direct sales and service business had
annual sales of approximately $80.0. The revenues of these operations
prior to the divestiture date and included in the Company's
Consolidated Condensed Statement of Operations for the nine months
ended March 31, 1998 and 1997 were $11.4 and $60.9, respectively.
11
<PAGE> 13
9) FINANCIAL INSTRUMENTS
INTEREST RATE AGREEMENTS
The Company enters into interest rate agreements, principally to
manage interest rate exposure associated with its sale of certain U.S.
receivables. See Note 14 of Notes to Consolidated Financial Statements
in the Company's 1997 Annual Report on Form 10-K for additional
discussion.
At March 31, 1998, the Company was a party to the following
significant 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>
$4.0 May 1999 7.75% 1 Month LIBOR
3.0 September 1999 5.84% 1 Month LIBOR
4.5 May 2000 6.16% 1 Month LIBOR
1.3 April 2000 6.58% 1 Month LIBOR
0.6 April 1999 4.60% 1 Month LIBOR
0.3 August 1998 4.80% 1 Month LIBOR
0.2 May 1998 4.94% 1 Month LIBOR
0.2 March 1999 4.65% 1 Month LIBOR
30.0 March 2001 5.70% 1 Month LIBOR
30.0 March 2000 5.92% 1 Month LIBOR
30.0 March 2003 6.05% 1 Month LIBOR
30.0 March 2002 6.00% 1 Month LIBOR
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average interest rates paid and received under all such
Floating to Fixed Swap Agreements at March 31, 1998 were 5.7% and
6.0%, respectively.
In fiscal 1997, the Company entered into an interest rate swap
agreement with a party to its U.K. receivable financing program. The
effect of the interest rate swap agreement is to revert from the
financing party to the Company the differential between the fixed rate
imputed on the receivables sold under this program and the floating
rate to be paid to the investors in the receivables. As of March 31,
1998, the notional amount of this interest rate swap agreement was
Pounds 60.3 million. The interest rate agreement will expire when the
underlying receivables are paid down. At March 31, 1998, the floating
rate to be paid by the Company is the one month Fed AA CP Composite
rate and the fixed rate to be received is approximately 10.0%.
(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, 1998 of $2.0. 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, 1998 there was no such
excess.
In the third quarter of fiscal 1998, the Company entered into four
interest rate swap agreements with notional amounts totaling $120.0.
As a result of these recent interest rate swap agreements combined
with existing swap agreements and the terms of various finance
agreements, approximately 70.0% of the Company's interest rate
exposure is fixed and 30.0% is variable.
12
<PAGE> 14
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, 1998, the Company owned forward contracts and options
which allow it to sell or (buy) currencies for the indicated U.S.
dollar amounts, in fiscal year 1998 and 1999, as follows:
1998 1999
- ------------------------------------------------------------------------------
German Marks $ 41.4 $ 66.4
Italian Lire 32.3 24.3
French Francs 14.8 66.7
Swedish Krona 9.1 10.3
British Pounds 8.1 25.9
Spanish Pesetas -- 27.4
Irish Punts (4.4) (9.5)
Other 5.9 (0.7)
- ------------------------------------------------------------------------------
Total $107.2 $210.8
- ------------------------------------------------------------------------------
10) 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
were 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. The consolidated complaint
and other litigation matters, including three derivative actions filed
in September 1995 and actions brought by the Company's two excess
directors and officers liability insurers in May and July 1997, are
discussed more fully in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 and Quarterly Report on Form 10-Q
for the fiscal quarters ended September 30, 1997, December 31, 1997
and March 31, 1998.
The Company has settled the above-referenced class action. The
settlement agreement requiring payment by the Company of approximately
$53.5, was approved by the Court and has been fully performed by the
Company. 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, and has also been
paid an amount equal to the policy limit of $10.0 by one of its two
excess directors and officers liability insurers pursuant to a
settlement of one of the actions referred to in the preceding
paragraph. In addition, the Company is seeking payment from its other
excess insurance carrier having a policy limit of $10.0. As noted
above, the Company is currently in litigation with such excess
carrier. A pretax charge of $53.0, with an after-tax effect of $37.0,
was recorded by the Company for payments made in connection with this
settlement in the first quarter of fiscal 1998. Subsequently, during
the third quarter of fiscal 1998, the Company also recorded a net
estimated insurance recovery of $7.3 ($5.1 after-tax).
13
<PAGE> 15
The Company intends to vigorously defend against the derivative
actions and the remaining insurance carrier action referred to above,
and to vigorously pursue the recovery of insurance proceeds from such
remaining excess directors and officers insurance carrier.
11) CONVERTIBLE PREFERRED STOCK
In April 1998, the Company issued 6,900,000 Depositary Shares for
gross proceeds of $172.5, or $166.6 net of commissions, discounts and
other expenses. Each Depositary Share represents a one-tenth interest
in a share of 61/2% Convertible Preferred Stock with a liquidation
preference of $250.00 per share. Dividends on the preferred stock will
accrue at a rate per annum equal to 61/2% of the liquidation
preference per share of preferred stock and will be payable quarterly
on January 1, April 1, July 1 and October 1 of each year, commencing
July 1, 1998. Dividends will be payable in cash or, at the option of
the Company, in shares of common stock of the Company or a combination
thereof. The Company's ability to pay cash dividends, purchase or
redeem shares or make other payments or distributions is restricted by
various covenants and conditions contained in certain of its financial
agreements, and it is likely that the Company would not be able to pay
cash dividends on the preferred stock until after the preparation of
its audited financial statements for fiscal 1999 at the earliest. The
Depositary Shares will be convertible, subject to prior redemption, at
any time after July 13, 1998, at the option of the holder thereof into
shares of common stock at a conversion price of $19.52 per share,
subject to certain adjustments. The preferred stock is redeemable, at
the option of the Company, in whole or in part, at any time on or
after April 4, 2001, at prices commencing with 103.71% of liquidation
preference, declining to 100% of liquidation preference on April 4,
2005. The preferred stock ranks junior in right of payment to all
indebtedness and other liabilities of the Company.
14
<PAGE> 16
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 1997 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,
1998 COMPARED TO THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1997
The following discussion of operating results excludes the effects of
restructuring charges (and the reversal of certain of such charges),
net litigation charges and net estimated insurance recoveries recorded
in fiscal 1998, which are discussed in the Notes to Consolidated
Condensed Financial Statements included herein.
REVENUES
Revenues of $237.0 for the third quarter of fiscal 1998 decreased
5.2%, as compared to revenues of $250.1 for the same period in fiscal
1997. Revenues of $726.1 for the nine months ended March 31, 1998
decreased 3.5 %, as compared to revenues of $752.7 for the nine months
ended March 31, 1997. Fiscal 1998 results were negatively affected by
the strengthening of the U.S. dollar against currencies in Europe and
Asia and the related impact of foreign currency translation, resulting
in a reduction in revenues of approximately $9.4 for the third quarter
and $32.3 for the first nine months. Fiscal 1998 revenues also reflect
the decline in revenues of certain non-core businesses, principally
the U.S. commercial/industrial direct sales and service business which
was sold in September 1997. Excluding the effects of the strengthening
of the U.S. dollar against currencies in Europe and Asia and the
divestiture of non-core businesses, fiscal 1998 revenues increased
approximately 7.4% for the third quarter and 8.7% for the first nine
months, as compared with the same periods in fiscal 1997.
REVENUES BY PRODUCT LINE
Consolidated Electronic Article Surveillance ("EAS") system revenues
remained relatively unchanged from the third quarter and the first
nine months of fiscal 1997. However, Ultra-Max revenues increased
for the first nine months of fiscal 1998 over the comparable period in
the prior year by 23.6%. This increase was partially offset by a
decrease of 16.2%, when compared to the prior year period, in revenues
from the Company's SensorStrip Checkout technology, which is sold
principally in Europe.
Combined CCTV, Access Control and Intelligent Tagging and Tracking
system revenues decreased 5.0% and 7.8% for the third quarter and the
first nine months of fiscal 1998, respectively, as compared with the
same periods of fiscal 1997. These decreases were principally due to a
decline in revenues as a result of divested non-core businesses.
REVENUES BY BUSINESS UNIT
Revenues generated by the Commercial/Industrial Worldwide Operations
("C/I Worldwide") decreased 27.1% and 21.2% in the third quarter and
first nine months of fiscal 1998, respectively, as compared to fiscal
15
<PAGE> 17
1997. The decrease in revenues is principally due to the divestiture
in September 1997 of the U.S. commercial/industrial direct sales and
systems integration business, referred to in the following paragraph.
Excluding the effect on revenues of non-core businesses and foreign
exchange, C/I Worldwide indirect revenues remained relatively flat for
the third quarter of fiscal 1998 and increased 9.0% in the first nine
months of fiscal 1998, as compared with the same periods of fiscal
1997.
In September 1997, the Company sold its U.S. commercial/industrial
systems integration business, which had fiscal year 1997 sales of
approximately $80.0, to Securities Technologies Group, Inc. ("STG").
The Company also agreed in such transaction to sell to STG the
Company's monitoring business, the sale of which was consummated in
October 1997.
For the third quarter and first nine months of fiscal 1998, North
America Retail revenues increased 15.0% and 10.2%, respectively, as
compared to the same periods for fiscal 1997. EAS market penetration
increased in the following market segments: music, discounters, mass
merchants, automotive, office supply, home centers, video and shoes.
Excluding the effect on revenues of non-core businesses, North America
Retail revenues increased 18.7% and 13.4% in the third quarter and
first nine months of fiscal 1998, respectively, as compared with the
same periods from fiscal 1997. In addition, source tagging unit label
volume increased 65% for the first nine months of fiscal 1998 as
compared to the same periods of fiscal 1997.
Europe Retail revenues decreased 10.5% for both the third quarter and
first nine months of fiscal 1998 as compared to the same periods for
fiscal 1997. Excluding the effect of exchange due to foreign currency
translation, Europe Retail revenues for fiscal 1998 remained
relatively flat for the quarter and nine months ending March 31, 1998,
as compared to the same periods for fiscal 1997. The Company expects
Europe Retail revenues to remain flat through fiscal 1999. The Company
believes that Europe Retail's results during fiscal 1998 were
negatively impacted by the restructuring activities announced in
August 1997.
International Retail revenues, which includes Latin America, Asia
Pacific and the Middle East, increased 10.7% and 20.6% for the third
quarter and first nine months of fiscal 1998, respectively, as
compared to the same periods of fiscal 1997. The increase in
International Retail was largely due to Latin America revenues which
increased by 21.8% and 37.0% in the third quarter and first nine
months of fiscal 1998, respectively, as compared to the same periods
of fiscal 1997. Beginning in the second quarter of fiscal 1998, Asia
Pacific revenue growth was negatively impacted by the Asian currency
volatility. The Company expects this trend to continue into fiscal
1999. Excluding the effect of acquisitions and currency effects,
International Retail revenues for the third quarter and first nine
months of fiscal 1998 increased 21.6% and 28.0%, respectively, as
compared to the same periods in fiscal 1997.
GROSS MARGINS, OPERATING EXPENSES AND OPERATING INCOME
Gross margins on revenues were 44.6% and 45.1% for the three and nine
month periods ended March 31, 1998, respectively, compared with 47.3%
and 46.3% for the comparable periods of the prior year. The decrease
in gross margins reflects lower volumes as well as pricing pressures
in the market for retail article protection equipment.
16
<PAGE> 18
Selling, general and administrative expenses, as a percentage of total
revenues, was 28.5% and 32.7% for the third quarter and first nine
months of fiscal 1998, respectively, as compared to 34.1% and 34.0%
for the comparable periods in fiscal 1997. The decrease in expenses as
a percentage of revenues for the third quarter of fiscal 1998 reflects
the benefit from cost reduction efforts implemented as a result of the
restructuring actions previously announced. The remaining decrease in
expenses as a percentage of revenues for the first nine months of
fiscal 1998 reflects the divestiture of the U.S. commercial/industrial
direct sales and service business which typically had a higher
operating expense level in relation to revenues.
Research, development and engineering expenses increased to 2.7% and
2.8% of revenue in the three and nine months ended March 31, 1998,
respectively, as compared to 2.4% and 2.3% for the same periods in
fiscal 1997. Research, development and engineering spending has
increased as a percentage of revenues as compared to the prior year
due to the Company's increased focus on new product development in all
product categories. New product development continues to be a high
priority of the Company, and the Company expects fiscal 1998 spending
levels for research, development and engineering to be approximately
20% higher than fiscal 1997 levels.
Operating income for the three and nine months ended March 31, 1998
was $21.0, or 8.9% of revenues, and $39.2, or 5.4% of revenues,
respectively, versus $15.0, or 6.0% of revenues and $43.2, or 5.7% of
revenues, respectively, for the comparable period of fiscal 1997.
INTEREST EXPENSE, OTHER INCOME AND TAXES
Net interest and other expenses of $10.9 and $32.6 for the third
quarter and first nine months of fiscal 1998, respectively, reflected
an increase of $4.0 and $8.9, respectively, over the comparable
periods of fiscal 1997. This increase is primarily due to increased
debt levels outstanding during the period.
The benefit for income taxes for the first nine months of fiscal 1998,
including the restructuring and net litigation charge, is based on an
estimated effective annual consolidated tax benefit rate of 31.0%
compared to an estimated effective annual consolidated tax provision
rate of 29.0% utilized for the first nine months of fiscal 1997. The
tax benefit for the current year related primarily to the
restructuring and net litigation charges recorded during fiscal 1998.
The Company reported net income of $8.3, or $0.11 per share, and $4.1,
or $0.06 per share, for the third quarter and first nine months of
fiscal 1998, respectively, as compared to net income of $5.8, or $0.08
per share, and $14.0, or $0.19 per share, respectively, for the same
periods of fiscal 1997, as a result of the factors discussed above.
Including the restructuring, litigation charges and net estimated
insurance recoveries, the Company reported a net loss of $43.1, or
$0.58 per share, for the first nine months of fiscal 1998.
17
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended March 31, 1998, cash flow used in
operating activities was $54.3 compared with cash used in operations
for the nine month period ended March 31, 1997 of $5.2. The use of cash
in the nine month period ended March 31, 1998 was primarily a result of
cash payments related to the Company's restructuring programs and
litigation settlement, along with increases in inventory, customer
receivables and sales-type leases.
The Company's investing activities used $41.8 of cash in the nine
month period ended March 31, 1998, compared to $82.8 of cash used in
the nine month period ended March 31, 1997. The investing activity in
fiscal 1998 was principally due to capital expenditures of $21.9,
increases in the Company's investment in revenue equipment of $17.5
and additional investments in acquisitions of $15.2; offset by the
proceeds received from the sale of the U.S. commercial/industrial
direct sales and service business. The capital expenditures
principally include investments in manufacturing operations for new
production equipment and the addition of an enterprise-wide management
information system software.
For the nine month period ended March 31, 1998, financing activities
generated $90.7 of cash as compared to $34.9 in the nine month period
ended March 31, 1997. Cash flows from financing activities were
principally due to additional borrowings of approximately $89.3,
primarily from the Company's unsecured revolving credit facility. The
Company's percentage of total debt to total capital was 45.7% at March
31, 1998 as compared to 40.4% at June 30, 1997.
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 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 $5.5 increase in
the cumulative translation adjustment for the nine months ended March
31, 1998 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, 1998. 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.
At March 31, 1998, the Company's primary source of liquidity consisted
of cash and a committed line of credit totaling approximately $250.0,
of which approximately $59.0 was utilized, and receivable financing
18
<PAGE> 20
agreements totaling approximately $270.0, of which approximately
$159.7 was utilized. Use of the balances under such facilities is
subject to compliance with certain covenants and, in the case of such
receivable financing agreements, subject to the terms within such
agreements.
In early April 1998, the Company completed the issuance of $172.5 in
liquidation preference of a new series of convertible preferred stock
in a private placement transaction. The net proceeds of $166.6 from
the issuance were applied to the balance outstanding under the
Company's revolving credit line as well as to the remaining payable on
the shareholder litigation settlement. As a result of the proceeds
provided by the above mentioned issuance, the Company's entire $250.0
unsecured revolving credit facility is available as a future source of
funds.
The Company believes that the liquidity provided by future operations,
existing cash and the financing arrangements described above are
sufficient to meet the Company's future capital requirements.
RESTRUCTURING
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 and systematic review of the
Company's operations, cost structure and balance sheet aimed at
reducing its operating expenses and manufacturing costs while
increasing efficiencies. In addition, during fiscal 1997, the Company
announced further restructuring actions which included the divestiture
of non-core operations and additional cost-reduction plans, which
mainly include staff reductions within its European operations. During
the fourth quarter of fiscal 1997, the Company recognized $26.8 of this
charge with plans to record the remaining portion in the first quarter
of fiscal 1998. As a result, the Company recorded $17.2 in
restructuring charges during the first quarter of fiscal 1998, net of
the reversal of $12.0 described in Note 2 to the Consolidated Condensed
Financial Statements. These charges related primarily to product
rationalization and related equipment impairment charges, facility
closures and severance costs. In addition, during the third quarter of
fiscal 1998 the Company recorded additional restructuring charges of
$4.7 related to the Company's sale of its U.S. commercial/industrial
direct sales and service business to STG. The Company may record
additional restructuring charges in future periods related to the
Company's sale of its U.S. commercial/industrial direct sales and
service business to STG as any additional probable amounts become
reasonably estimable.
19
<PAGE> 21
YEAR 2000 ISSUE
Year 2000
Many computer applications, processor chips embedded in many products
and computers and operating systems that are not Year 2000 compliant
are unable to distinguish between the calendar year 1900 and the
calendar year 2000. The Year 2000 Issue creates potential risks for the
Company, including potential problems in the Company's products as well
as in the Information Technology ("IT") and non-IT systems that the
Company uses in its business operations. The Company may also be
exposed to risks from third parties with whom the Company interacts who
fail to adequately address their Year 2000 Issues. The Company has
recognized the need to ensure that its business operations will not be
adversely affected by the upcoming calendar year 2000 and is cognizant
of the time sensitive nature of the Year 2000 problem. In 1996, the
Company began a project to implement a global enterprise resource
planning system. The Company has completed this implementation at all
manufacturing locations and many of the sales and service subsidiaries
around the world. The Company's key non-compliant IT systems remaining
are in the United Kingdom and implementation is scheduled for September
6, 1999.
The Company's State of Readiness
The Company centralized its focus on addressing the Year 2000 Issue by
establishing a Year 2000 Program Management Office in order to
implement a consistent approach to minimizing Year 2000 risks across
the Company worldwide. The Company also assigned Project Teams in each
Business Unit. The Program Management Office and the Project Teams are
assisted by specialists and consultants. The Company's key dates
relative to its program focusing on IT and non-IT systems that the
Company uses in its business operations are as follows:
Inventory and assessment completed August 31, 1999
All Critical components in testing September 30, 1999
Critical components Year 2000 compliant November 30, 1999
20
<PAGE> 22
The Company has substantially completed testing of its manufactured
products. To aid in communication with the Company's customers and
suppliers, the Company has developed an Internet Web site that
identifies the current Year 2000 status for each of the Company's
products.
A survey of the Company's suppliers and service providers has begun to
insure they are working on this effort and will remain viable
suppliers through and after January 1, 2000. The process of evaluating
the Year 2000 status of the Company's principal suppliers and service
providers will be on-going through the remainder of the calendar year.
The Costs to Address the Company's Year 2000 Issues
The cost of implementing the enterprise resource planning system is
estimated at $40.0 million. In addition to the enterprise resource
planning system, the Company currently estimates approximately $1.0
million for the cost associated with the Company's Year 2000 project.
Remediation efforts are not currently expected to be significant;
however, this cannot be assured until after the inventory and
assessment is completed. Should significant remediation efforts be
required, the project cost would exceed $1.0 million.
The Risks of the Company's Year 2000 Issues
The Company presently believes that the Year 2000 issue will not cause
material operational problems for the Company. However, if the Company
is not successful in identifying all material Year 2000 problems, or
its assessment and remediation of identified Year 2000 problems is not
completed in a timely manner, there may be an interruption in, or
failure of, certain normal business activities or operations. This
risk includes unforeseen delays in the implementation of the Company's
enterprise resource planning system. Such interruptions, failures or
delays in implementing the enterprise resource planning system could
have a material adverse impact on the Company's consolidated results
of operations and financial condition, or on its relationships with
customers, suppliers or others.
The Company's Contingency Plans
The Company expects to have developed by September 30, 1999, or shortly
thereafter, a comprehensive contingency plan to address situations that
may result if the Company or any of the third parties upon which the
Company is dependent is unable to achieve Year 2000 readiness. The
Company's Year 2000 compliance program is ongoing and its ultimate
scope, as well as the consideration of contingency plans, will continue
to be evaluated as new information becomes available.
21
<PAGE> 23
Year 2000 Forward-Looking Statements
The foregoing Year 2000 discussion contains "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements, including without limitation,
anticipated costs and the dates by which the Company expects to
complete certain actions, are based on management's best current
estimates, which were derived utilizing numerous assumptions about
future events, including the continued availability of certain
resources, representations received from third parties and other
factors. However, there can be no guarantee that these estimates will
be achieved, and actual results could differ materially from those
anticipated. Specific factors that might cause such material
differences include, but are not limited to, the ability to identify
and remediate all relevant IT and non-IT systems, results of Year 2000
testing, adequate resolution of Year 2000 Issues by businesses and
other third parties who are service providers, suppliers or customers
of the Company, unanticipated system costs, the adequacy of and
ability to develop and implement contingency plans and similar
uncertainties. The "forward-looking statements" made in the foregoing
Year 2000 discussion speak only as of the date on which such
statements are made, and the Company undertakes no obligation to
update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events.
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) changes in international
operations 2) exchange rate risks 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.
22
<PAGE> 24
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Note: Unless otherwise indicated below, the following Exhibits
were filed with the original Report and are not being
re-filed with this Amendment.
4) Certificate of Designations of Voting Power,
Designation Preferences and Relative, Participating,
Optional and Other Special Rights and
Qualifications, Limitations and Restrictions of
61/2% Convertible Preferred Stock of the Company,
filed with the Secretary of State of the State of
Delaware on April 9, 1998.
10) Second Amendment dated as of February 20, 1998 to
the Amended and Restated Multicurrency Revolving
Credit Agreement, dated as of March 18, 1997,
between the Company and BankBoston, N.A. and other
lending institutions.
27) Financial Data Schedule (for SEC use only) (Amended
schedule is filed herewith).
b) Reports on Form 8-K:
There was a report on Form 8-K filed during the
three - month period ended March 31, 1998. The
report was filed on April 2, 1998, and related to
the Company's plan to offer depositary shares and
related preferred stock.
23
<PAGE> 25
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, Chief
Administrative Officer and
Chief Financial Officer
(Principal Financial Officer)
Date: August 17, 1999
24
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