<PAGE> 1
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 DECEMBER 31, 1997 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
--------------------------------------- ----------
(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 74,363,735 shares of Common Stock (par value
$.01 per share) as of January 31, 1998.
<PAGE> 2
SENSORMATIC ELECTRONICS CORPORATION
INDEX
FORM 10-Q/A-1
SIX MONTHS ENDED DECEMBER 31, 1997
<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......................................................................... 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................................... 22
Signatures ...................................................................................... 23
</TABLE>
<PAGE> 3
SENSORMATIC ELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions, except par value amounts)
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
1997 1997
-------------- --------------
(Restated - See Note 2)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15.8 $ 21.7
Customer receivables 336.6 303.6
Inventories, net 206.3 199.6
Current portion of deferred income taxes 44.6 42.9
Other current assets 61.8 54.4
-------------- --------------
TOTAL CURRENT ASSETS 665.1 622.2
Customer receivables - noncurrent 141.0 138.5
Revenue equipment, net 71.5 66.8
Property, plant and equipment, net 138.5 145.5
Costs in excess of net assets acquired, net 471.4 482.7
Deferred income taxes 136.7 102.5
Patents and other assets, net 103.9 88.4
-------------- --------------
TOTAL ASSETS $ 1,728.1 $1,646.6
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 89.5 $ 21.8
Accounts payable and accrued liabilities 109.5 126.1
Other current liabilities and deferred income taxes 260.1 184.5
-------------- --------------
TOTAL CURRENT LIABILITIES 459.1 332.4
Long-term debt 510.5 501.5
Other noncurrent liabilities and deferred income taxes 48.6 39.8
-------------- --------------
TOTAL LIABILITIES 1,018.2 873.7
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10.0 shares authorized, none issued -- --
Common stock, $.01 par value, 125.0 shares authorized, 74.3 shares
outstanding at December 31, 1997 and June 30, 1997 731.2 730.5
Retained earnings 90.4 143.7
Treasury stock at cost and other, 1.7 shares at December 31, 1997
and June 30, 1997 (13.3) (14.0)
Currency translation adjustments (98.4) (87.3)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 709.9 772.9
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,728.1 $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>
Three Months Six Months
Ended December 31, Ended December 31,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ------------ ------------ -----------
(Restated - See Note 2)
<S> <C> <C> <C> <C>
Revenues:
Sales $ 206.4 $ 212.2 $ 410.9 $ 417.2
Rentals 12.7 14.6 25.2 27.1
Installation, maintenance and other 24.6 29.8 53.0 58.3
----------- ------------ ------------ -----------
Total revenues 243.7 256.6 489.1 502.6
----------- ------------ ------------ -----------
Cost of Sales:
Costs of sales 125.3 132.1 257.2 262.2
Depreciation on revenue equipment 4.9 5.7 9.8 10.3
----------- ------------ ------------ -----------
Total cost of sales 130.2 137.8 267.0 272.5
----------- ------------ ------------ -----------
Gross margin 113.5 118.8 222.1 230.1
Operating expenses:
Selling, general and administrative 76.7 84.7 169.6 170.9
Provision for doubtful accounts 5.3 6.0 10.2 10.2
Restructuring charges -- -- 17.2 --
Research, development and engineering 6.9 6.1 13.4 11.5
Amortization of intangible assets 5.4 4.7 10.6 9.3
----------- ------------ ------------ -----------
Total operating costs and expenses 94.3 101.5 221.0 201.9
----------- ------------ ------------ -----------
Operating income (loss) 19.2 17.3 1.1 28.2
----------- ------------ ------------ -----------
Other (expenses) income:
Interest income 3.4 4.3 7.0 8.6
Interest expense (13.4) (12.0) (25.7) (23.6)
Litigation settlement -- -- (53.0) --
Other, net (1.2) (1.1) (3.1) (1.8)
----------- ------------ ------------ -----------
Total other (expenses) income (11.2) (8.8) (74.8) (16.8)
----------- ------------ ------------ -----------
Income (Loss) before income taxes 8.0 8.5 (73.7) 11.4
Provision (Benefit) for income taxes 2.6 2.4 (20.5) 3.2
----------- ------------ ------------ -----------
Net income (loss) $ 5.4 $ 6.1 $ (53.2) $ 8.2
=========== ============ ============ ===========
Basic and Diluted earnings (loss)
per common share $ 0.07 $ 0.08 $ (0.72) $ 0.11
=========== ============ ============ ===========
Cash dividends per common share $ -- $ 0.055 $ -- $ 0.110
=========== ============ ============ ===========
Number of shares used in computation
of Basic earnings (loss) per share 74.2 73.9 74.1 73.9
=========== ============ ============ ===========
Number of shares used in computation
of Diluted earnings (loss) per share 74.4 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)
Six Months
Ended December 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(53.2) $ 8.2
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 33.7 32.4
Restructuring charges, net 12.1 (3.6)
Litigation settlement charge 53.0 --
Net changes in operating assets and liabilities,
net of effects of acquisitions and divestitures:
Increase in receivables and sales-type leases (39.4) (35.3)
Increase in inventories (10.4) (10.3)
Increase in current and deferred income taxes
relating to restructuring and litigation charges (20.0) --
Other operating assets and liabilities, net (28.6) (3.3)
---------- ---------
Net cash used in operating activities (52.8) (11.9)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (15.0) (20.8)
Proceeds from sale of business, net 7.4 --
Increase in revenue equipment, net of deletions (16.4) (18.8)
Cash paid for acquisitions, net of cash acquired -- (14.8)
Additional investment in acquisitions (10.2) (8.6)
Other, net 2.2 0.7
---------- ---------
Net cash used in investing activities (32.0) (62.3)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings and other debt 77.3 37.1
Proceeds from issuance of common stock under employee
benefit plans and for acquisitions -- 3.5
Dividends paid -- (8.3)
Other, net 1.6 (0.4)
---------- ---------
Net cash provided by financing activities 78.9 31.9
---------- ---------
Net decrease in cash (5.9) (42.3)
Cash and cash equivalents at beginning of the year 21.7 113.7
---------- ---------
Cash and cash equivalents at end of the period $15.8 $ 71.4
========== =========
</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 six month period
ended December 31, 1997 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. Any probable losses associated with the Company's sale of
this business to STG will be recognized in future periods when
reasonably estimable. The effects of this adjustment on the Company's
previously reported consolidated financial statements for the six
months ended December 31, 1997 are as follows:
5
<PAGE> 7
Consolidated Condensed Statements of Operations:
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997
-------------------------------------
As Reported As Restated
----------- -----------
<S> <C> <C>
Restructuring Charges $ 29.2 $ 17.2
Operating (loss) income $(10.9) $ 1.1
Loss from continuing operations $(60.5) $(53.2)
Net loss $(60.5) $(53.2)
Basic and diluted loss per share $ (.82) $ (.72)
</TABLE>
Consolidated Condensed Balance Sheets:
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------
As Reported As Restated
----------- -----------
<S> <C> <C>
Total assets $1,729.8 $1,728.1
Total current liabilities $ 468.1 $ 459.1
Total shareholders' equity $ 702.6 $ 709.9
</TABLE>
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 quarter of fiscal 1998, net of the reversal of $12.0 million
described in Note 2, totaled $44.0 million with an after-tax impact of
$29.0 million. Included in the total of $44.0 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 December 31, 1997:
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 --
------ ------ ------ ----- ----- ------ ----- -----
Total.......................... $ 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, ------------------- December 31,
1997 Cash Non-Cash 1997
--------- ---- -------- ----------
<S> <C> <C> <C> <C>
Product rationalization, related
equipment charges and other................ $ 1.5 $ -- $ -- $1.5
Closure of facilities and related costs...... 5.7 (0.4) 0.1 5.4
Employee termination and related costs...... 3.3 (3.3) -- --
----- ----- ----- ----
Total.................................... $10.5 $(3.7) $ 0.1 $6.9
===== ===== ===== ====
</TABLE>
1997/1998 Reserve(1)
<TABLE>
<CAPTION>
Accrual Accrual
Balance at 1998 Utilization Balance at
1997 June 30, Additions ----------------- December 31,
Provision 1997 (Reversals) Cash Non-Cash 1997
--------- --------- ----------- ----- -------- ----------
<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 (2.6) 13.1
Closure of facilities(2)........... -- (2.9) (2.9)
Employee termination and related
costs............................ 0.5 0.5 20.4 (2.6) -- 18.3
Non-core business divestitures..... 16.9 16.9 (12.0) -- -- 4.9
----- ----- ----- ----- ----- -----
Total.......................... $26.8 $23.9 $17.2 $(2.2) $(4.0) $34.9
===== ===== ===== ===== ===== =====
Inventory write downs recorded
as a component of
cost of sales(2)................. -- (4.2) 1.9 (2.3)
----- ----- ----- ----- ----- -----
Total.......................... $26.8 $19.7 $17.2 $(2.2) $(2.1) $32.6
===== ===== ===== ===== ===== =====
</TABLE>
- ---------------------------------
(1) Certain amounts related to non-core business divestitures have been
restated. See Note 2.
(2) Amounts classified directly to the impaired assets.
7
<PAGE> 9
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 December 31, 1997
and June 30, 1997 are summarized as follows :
<TABLE>
<CAPTION>
December 31 June 30
----------- ---------
<S> <C> <C>
Accounts receivable $ 319.1 $ 291.2
Allowance for doubtful accounts (36.6) (39.6)
--------- ---------
Total accounts receivable, net $ 282.5 $ 251.6
Less: Amounts due in 1 year, net (282.5) (251.6)
--------- ---------
Total noncurrent accounts receivable , net $ -- $ --
========= =========
Deferred receivables $ 5.0 $ 7.3
Installment receivables 44.1 46.0
Allowance for doubtful accounts (9.1) (7.8)
Unearned interest and maintenance (15.3) (18.0)
---------- ---------
Total deferred and installment receivables, net 24.7 27.5
---------- ---------
Less: Amounts due in 1 year, net (17.1) (17.6)
---------- ---------
Total noncurrent deferred and
installment receivables, net $ 7.6 $ 9.9
========== =========
Sales-type leases-minimum lease payments receivable $ 224.5 $ 215.5
Allowance for uncollectible minimum lease payments (17.9) (16.4)
Unearned interest and maintenance (36.2) (36.1)
---------- ---------
Total sales-type leases, net 170.4 163.0
---------- ---------
Less: Amounts due in 1 year, net (37.0) (34.4)
---------- ---------
Total noncurrent sales-type leases, net $ 133.4 $ 128.6
========== =========
Total customer receivables $ 477.6 $ 442.1
Less: Amounts due in 1 year, net 336.6 303.6
---------- ---------
Total noncurrent customer receivables $ 141.0 $ 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", for
the transfer of receivables that occurred subsequent to January 1,
1997. 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 receivable sales. All other transfers
of receivables are treated as a financing transaction. 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.
8
<PAGE> 10
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 $161.9 at December
31, 1997. 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 as per SFAS
No. 128:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
December 31, December 31,
------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NUMERATOR:
Net income (loss)(a) $ 5.4 $ 6.1 $(53.2) $ 8.2
===== ===== ====== =====
DENOMINATOR:
Basic EPS - weighted average shares 74.2 73.9 74.1 73.9
Dilutive effect: Stock options .2 .3 .2 .2
----- ----- ------ -----
Diluted EPS - weighted average shares 74.4 74.2 74.3 74.1
===== ===== ====== =====
Basic earnings (loss) per share $0.07 $0.08 $(0.72) $ .11
===== ===== ====== =====
Diluted earnings per share $0.07 $0.08 -- (b) $ .11
===== ===== ====== =====
</TABLE>
- -----------------------
(a) The net loss for the six months ended December 31,1997 has been
restated. See Note 2.
(b) Excluded as result is anti-dilutive.
9
<PAGE> 11
7) INVENTORY
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
----------------- -------------
<S> <C> <C>
Finished goods $ 160.3 $ 145.0
Raw materials and parts 54.9 58.8
Work-in-process 21.4 24.9
--------- -----------
236.6 228.7
Less allowance for excess and obsolete inventory (30.3) (29.1)
--------- -----------
Total inventories, net $ 206.3 $ 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.
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 six months
ended December 31, 1997 and 1996 were $11.4 and $43.1, respectively.
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.
10
<PAGE> 12
At December 31, 1997, 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>
$5.0 May 1999 7.75% 1 Month LIBOR
4.5 September 1999 5.84% 1 Month LIBOR
4.5 May 2000 6.16% 1 Month LIBOR
1.5 April 2000 6.58% 1 Month LIBOR
0.7 April 1999 4.60% 1 Month LIBOR
0.6 August 1998 4.80% 1 Month LIBOR
0.4 May 1998 4.94% 1 Month LIBOR
0.4 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 December 31, 1997 were 5.8% and
6.5%, 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 to the Company
the differential between the fixed rate to be received on the
receivables sold under this program and the floating rate to be paid
to the purchasers of the receivables. As of December 31, 1997 the
notional amount of this interest rate swap agreement was 55.8
million. The interest rate agreement will expire when the underlying
receivables are paid down. At December 31, 1997 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 10.5%.
(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
December 31, 1997 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% multiplied by the notional amount. At December 31, 1997 there was
no such excess.
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.
11
<PAGE> 13
At December 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 1999, as follows:
1998 1999
- ------------------------------------------------------------------------------
French Francs $ 34.2 $ 33.5
British Pounds 12.1 9.4
German Marks 50.1 33.7
Italian Lire 35.3 12.0
Spanish Pesetas -- 14.4
Other 11.2 (10.2)
- ------------------------------------------------------------------------------
Total $142.9 $ 92.8
- ------------------------------------------------------------------------------
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
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 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.
12
<PAGE> 14
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. Subsequent to the class action settlement referred
to below, plaintiffs advised the Company they intend to seek leave
from the Court to file an amended consolidated complaint, including
allegations arising from such settlement.
Further, in May and July 1997, actions were filed in federal court
against the Company and certain of its current and former officers and
certain of its current and former directors by two of the Company's
three directors and officers liability insurance carriers during the
period December 15, 1994 to December 15, 1995. The insurance contracts
at issue in the suits provide $10.0 each in policy limits and are in
excess to $10.0 in primary directors and officers liability insurance
for the period. The complaints seek, among other things, (i)
rescission of the above-referenced insurance contracts; (ii)
reformation of the insurance contracts 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, 1997; and (iii) a declaratory judgment
that the above-referenced insurance contracts do not afford coverage
for defendants for any loss arising out of such actions and
proceeding. The complaints allege, among other things, that in the
Company's applications for these insurance contracts 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 has reached an agreement to settle the above-referenced
class actions. The agreement provides, among other things, for the
payment by the Company of approximately $53.0. The agreement has been
submitted to the Court for approval. The Company expects to recover a
portion of the settlement fund and related expenses from its primary
directors and officers liability insurance policy, which has a policy
limit of $10.0. In addition, the Company is seeking payment from its
excess insurance carriers having combined policy limits of $20.0. As
noted above, the Company is currently in litigation with such excess
carriers. A pretax charge of $53.0, with an after-tax effect of $37.0,
has been recorded by the Company for payments to be made in connection
with this settlement.
The Company intends to vigorously defend against the derivative
actions and insurance carrier actions referred to above, and to
vigorously pursue the recovery of insurance proceeds from such excess
directors and officers insurance carriers. In light of the uncertainty
as to the outcome of these actions, the Company has not recorded a
provision for any liability or recovery that may result from those
actions.
13
<PAGE> 15
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 SIX MONTHS ENDED DECEMBER 31,
1997 COMPARED TO THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1996
The following discussion of operating results excludes the effects of
restructuring charges (and the reversal of certain of such charges)
and net litigation charges recorded in fiscal 1998, which are
discussed in the Notes to Consolidated Condensed Financial Statements
included herein.
REVENUES
Revenues of $243.7 for the second quarter of fiscal 1998 decreased
5.0%, as compared to revenues of $256.6 for the same period in fiscal
1997. Revenues of $489.1 for the six months ended December 31, 1997
decreased 2.7%, as compared to revenues of $502.6 for the six months
ended December 31, 1996. Fiscal 1998 results were negatively affected
by the strengthening of the U.S. dollar and the related impact of
foreign currency translation, resulting in a reduction in revenues of
approximately $9.7 for the second quarter and $22.9 for the first six
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 U.S.
dollar and the divestiture of non-core businesses, fiscal 1998
revenues increased approximately 7.5% for the second quarter and 9.3%
for the first six months, as compared with the same periods in fiscal
1997.
Consolidated Electronic Article Surveillance ("EAS") systems revenues
remained relatively unchanged from the second quarter of fiscal 1997
with $124.6 of revenues in the second quarter of fiscal 1998, as
compared to $126.4 in the year ago quarter, and increased 3.7% to
$251.2 in the first six months of fiscal 1998 from the comparable
period of fiscal 1997. The increase in EAS revenues for the first six
months of fiscal 1998 over the comparable period in the prior year
resulted principally from Ultra-Max product line revenues, which
increased 25.8% as compared to the year ago period. These increases
were offset by decreases of 18.0%, when compared to the prior year
period, in revenues from the Company's SensorStrip Checkout
technology, which is sold principally in Europe.
Integrated Security Systems ("ISS"), which includes CCTV, Access
Control and Intelligent Tagging and Tracking systems, revenues
decreased 5.2% to $81.7 and 9.0% to $159.6 for the second quarter and
the first six months of fiscal 1998, respectively, as compared with
the same periods of fiscal 1997. The decreases were principally due to
a decline in revenues as a result of divested non-core businesses.
14
<PAGE> 16
Revenues generated by the Commercial/Industrial Worldwide Operations
("C/I Worldwide") decreased 22.7% and 18.2% in the second quarter and
first six months of fiscal 1998, respectively, as compared to fiscal
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. Excluding the effect on revenues of
non-core businesses and foreign exchange, C/I Worldwide indirect
revenues increased 12.2% and 14.4% in the second quarter and the first
six months of fiscal 1998, respectively, 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 annual 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 second quarter and first six months of fiscal 1998, North
America Retail revenues increased 3.0% and 7.8%, respectively, as
compared to the same periods for fiscal 1997. Market penetration
continues to increase in the following market segments: hardware,
music, sporting goods, cosmetics, fragrances, discounters, mass
merchants and hypermarkets. Excluding the effect on revenues of
non-core businesses, North America Retail revenues increased 5.5% and
10.8% in the second quarter and first six months of fiscal 1998,
respectively, as compared with the same periods from fiscal 1997. In
addition, source tagging unit label volume increased 58.7% for the
first six months of fiscal 1998 as compared to the same periods of
fiscal 1997.
Europe Retail revenues decreased 5.2% and 10.4% for the second quarter
and first six months of fiscal 1998, respectively, 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
increased approximately 1.0% for the quarter and decreased 1.8% on a
year to date basis. The Company expects Europe Retail revenues will
continue to remain flat. Market conditions as well as a high overhead
structure reflect the challenges that precipitated the profit
improvement actions the Company announced in August 1997.
International Retail revenues, which includes Latin America, Asia
Pacific and the Middle East, increased 11.5% and 25.8% for the second
quarter and first six 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
21.5% and 46.2% in the second quarter and first six months of fiscal
1998, respectively, as compared to the same periods of fiscal 1997, as
a result of the acquisition of the Company's Argentina distributor in
October 1997 and increased revenues in Brazil. Excluding the effect of
acquisitions, Latin America revenues for the second quarter and first
six months of fiscal 1998 increased 6.3% and 19.7%, respectively, as
compared to the same periods in fiscal 1997.
GROSS MARGINS, OPERATING EXPENSES AND OPERATING INCOME
Gross margins on revenues were 46.6% and 45.4.0% for the three and six
month periods ended December 31, 1997, respectively, compared with
46.3% and 45.8% for the comparable periods of the prior year. The
relatively stable gross margins reflect improved procurement as well
as manufacturing efficiencies at certain plants, offset by intense
price competition in certain market segments.
15
<PAGE> 17
Selling, general and administrative expenses, as a percentage of total
revenues, was 31.5% and 34.7% for the second quarter and first six
months of fiscal 1998, respectively, as compared to 33.0% and 34.0%
for the comparable periods in fiscal 1997. The decrease in expenses as
a percentage of revenues for the second quarter of fiscal 1998
reflects the initial benefit from the cost reduction efforts
implemented as a result of the restructuring actions announced during
the first quarter of fiscal 1998.
Research, development and engineering expenses increased to 2.8% and
2.7% of revenue in the three and six months ended December 31, 1997,
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 developments in
all product categories.
Operating income for the three and six months ended December 31, 1997
was $19.2, or 7.9% of revenues, and $18.3, or 3.7% of revenues,
respectively, versus $17.3, or 6.7% and $28.2, or 5.6% of revenues,
respectively, for the comparable period of fiscal 1997.
INTEREST EXPENSE, OTHER INCOME AND TAXES
Net interest expense of $11.2 and $21.8 for the second quarter and
first six months of fiscal 1998, respectively, reflected an increase
of $2.4 and $5.0, respectively, over the comparable periods of fiscal
1997. This increase is partially due to additional interest expense
related to the shareholder settlement charge recorded in the first
quarter of 1998. The remaining increase is primarily due to increased
debt levels outstanding during the period.
The benefit for income taxes for the first six months of fiscal 1998,
including the restructuring and litigation charge, is based on an
estimated effective annual consolidated tax benefit rate of 28.4%
compared to an estimated effective annual consolidated tax provision
rate of 29.0% utilized for the first six months of fiscal 1997. The
tax benefit for the current year related primarily to the
restructuring and litigation charges recorded during fiscal 1998.
The Company reported net income of $5.4, or $0.07 per share, and a net
loss of $4.2, or $0.06 per share, for the second quarter and first six
months of fiscal 1998, respectively, as compared to net income of
$6.1, or $0.08 per share, and $8.2, or $0.11 per share, respectively,
for the same periods of fiscal 1997, as a result of the factors
discussed above. Including the restructuring and litigation charges,
the Company reported a net loss of $53.2, or $0.72 per share, for the
first six months of fiscal 1998
16
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended December 31, 1997, cash flow used in
operating activities was $52.8 compared with cash used in operations
for the six month period ended December 31, 1996 of $11.9. The use of
cash in the six month period ended December 31, 1997 was primarily a
result of increases in customer receivables and receivables due from
financing institutions related to the Company's various securitization
programs and included as a component of other assets.
The Company's investing activities used $32.0 of cash in the six month
period ended December 31, 1997, compared to $62.3 of cash used in the
six month period ended December 31, 1996. The investing activity in
fiscal 1998 was principally due to capital expenditures of $15.0,
increases in the Company's investment in revenue equipment of $16.4
and additional investments in acquisitions of $10.2; 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 six month period ended December 31, 1997, financing activities
generated $78.9 of cash as compared to $31.9 in the six month period
ended December 31, 1996. Cash flows from financing activities were
principally due to additional borrowings of approximately $77.3,
primarily from the Company's unsecured revolving credit facility. The
Company's percentage of total debt to total capital was 45.8% at
December 31, 1997 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 $11.1 decrease in
the cumulative translation adjustment for the six months ended
December 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 currency at December 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.
As a result of the agreement to settle a series of shareholder class
action suits filed during 1995, the Company recorded a pretax charge
of $53.0 during the first quarter of fiscal 1998. The Company believes
that the liquidity provided by existing cash and financing
arrangements is sufficient to meet the Company's funding requirements
for such settlement.
17
<PAGE> 19
At December 31, 1997, the Company's primary source of liquidity
consisted of cash and a committed line of credit totaling
approximately $250.0, of which approximately $73.0 was utilized, and
receivable financing agreements totaling approximately $270.0, of
which approximately $153.0 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. Under the most restrictive covenant,
$57.3 of additional borrowings are permitted at December 31, 1997.
Additional receivable financing capacity is in place under the
Company's financing agreements which meet the provision for
off-balance sheet treatment under SFAS No. 125. The Company believes
that the liquidity provided by future operations, existing cash and
the financing arrangements described above, along with additional
financing sources that the Company believes would be available to it,
will be 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 review of the
Company's operations and cost structure. In addition, during fiscal
1997, the Company announced further restructuring actions which
included the divestiture of non-core businesses 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.
The Company expects to 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
possible losses become reasonably estimable.
18
<PAGE> 20
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:
19
<PAGE> 21
Inventory and assessment completed August 31, 1999
All Critical components in testing September 30, 1999
Critical components Year 2000 compliant November 30, 1999
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.
20
<PAGE> 22
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.
21
<PAGE> 23
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.
27) Financial Data Schedule (for SEC use only)
(Amended schedule is filed herewith).
b) Reports on Form 8-K:
There were no reports on Form 8-K filed
during the three - month period ended
December 31, 1997.
22
<PAGE> 24
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
23
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