-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Pb6bmoHlryjW6UJzZkkuARJf2tup1cP59v8VMcFrVGP+oIq6ksy5eOfTrFM8HMLI 1e24YS6SXJj7i4mmQTw0WA== 0000912057-94-001760.txt : 19940520 0000912057-94-001760.hdr.sgml : 19940520 ACCESSION NUMBER: 0000912057-94-001760 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACKENHUT CORP CENTRAL INDEX KEY: 0000104030 STANDARD INDUSTRIAL CLASSIFICATION: 7381 IRS NUMBER: 590857245 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05450 FILM NUMBER: 94528766 BUSINESS ADDRESS: STREET 1: 1500 SAN REMO AVE CITY: CORAL GABLES STATE: FL ZIP: 33146 BUSINESS PHONE: 3056665656 MAIL ADDRESS: STREET 1: 1500 SAN REMO AVENUE CITY: CORAL GABLES STATE: FL ZIP: 33146 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended April 3, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from________ to _______ Commission file number 0-2514 ------ The Wackenhut Corporation - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 59-0857245 - - -------------------------------------------------------------------------------- (State of incorporation or organization) (I.R.S. Employer Identification No.) 1500 San Remo Avenue, Coral Gables, FL 33146 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (305) 666-5656 -------------- - - -------------------------------------------------------------------------------- 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 Section 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 [ ] At April 3, 1994, 3,858,885 shares of Series A and 3,864,287 shares of Series B of the registrant's Common Stock were issued and outstanding. Page 1 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following consolidated financial statements of the Corporation have been prepared in accordance with the instructions to Form 10-Q and therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial information for the interim periods reported have been made. Results of operations for the thirteen weeks ended April 3, 1994 are not necessarily indicative of the results for the entire fiscal year ending January 1, 1995. Page 2 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED APRIL 3, 1994 AND APRIL 4, 1993 (In thousands except per share data) (UNAUDITED)
1994 1993 ------------------------ REVENUES $ 174,537 $162,112 ------------------------ OPERATING EXPENSES: Payroll and related taxes 128,298 119,681 Other operating expenses 43,036 39,350 ------------------------ 171,334 159,031 ------------------------ OPERATING INCOME 3,203 3,081 ------------------------ OTHER INCOME (EXPENSE): Interest expense (895) (1,033) Interest and investment income 426 711 Equity income of foreign affiliates 246 219 ------------------------ (223) (103) ------------------------ INCOME BEFORE INCOME TAXES 2,980 2,978 Provision for income taxes 1,043 1,056 Minority interest, net of income taxes 117 63 ------------------------ NET INCOME $ 1,820 $ 1,859 ------------------------ ------------------------ EARNINGS PER SHARE: $ 0.24 $ 0.24 ------------------------ ------------------------
See notes to Consolidated Financial Statements. Page 3 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 3, 1994 AND JANUARY 2, 1994 (In thousands except share data) (UNAUDITED)
1994 1993 ----------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 11,598 $ 7,821 Accounts receivable, less allowance for doubtful accounts of $976 in 1994 and $687 in 1993 88,902 94,937 Inventories, net 6,658 6,243 Other 15,339 14,760 ----------------------- 122,497 123,761 ----------------------- NOTES RECEIVABLE 2,013 2,085 ----------------------- MARKETABLE SECURITIES AND -- CERTIFICATES OF DEPOSIT of casualty reinsurance subsidiary 23,500 24,843 ----------------------- PROPERTY AND EQUIPMENT, at cost 51,372 51,497 Accumulated depreciation (13,383) (13,374) ----------------------- 37,989 38,123 ----------------------- DEFERRED TAX ASSET, NET 6,782 6,374 ----------------------- OTHER ASSETS: Investment in and advances to foreign affiliates, at cost, including equity in undistributed earnings of $2,044 in 1994 and $2,370 in 1993 5,457 5,742 ----------------------- Other 13,009 10,369 ----------------------- 18,466 16,111 ----------------------- $211,247 $211,297 ----------------------- -----------------------
See notes to Consolidated Financial Statements. Page 4 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 3, 1994 AND JANUARY 2, 1994 (In thousands except share data) (UNAUDITED)
1994 1993 ---------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 5,683 $ 10,456 Accounts payable 14,566 16,711 Accrued payroll and related taxes 25,612 22,444 Accrued expenses 22,083 22,124 Deferred tax liability, net 521 - ---------------------- 68,465 71,735 ---------------------- RESERVES FOR LOSSES of casualty reinsurance subsidiary 34,394 33,500 ---------------------- LONG-TERM DEBT 59,283 57,484 ---------------------- MINORITY INTEREST 1,333 1,216 ---------------------- SHAREHOLDERS' EQUITY: Preferred stock, 10,000,000 shares authorized - - Common stock, $.10 par value, 20,000,000 shares authorized; Series A common stock, 3,858,885 issued 386 386 Series B common stock, 3,864,287 issued 386 386 Additional paid-in capital 26,234 26,234 Retained earnings 24,393 23,268 Cumulative translation adjustment (3,301) (3,058) Unrealized gain (loss) on marketable securities (326) 146 ---------------------- 47,772 47,362 ---------------------- $211,247 $211,297 ---------------------- ----------------------
See notes to Consolidated Financial Statements. Page 5 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED APRIL 3, 1994 AND APRIL 4, 1993 (In thousands) (UNAUDITED)
1994 1993 ------------------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income $ 1,820 $ 1,859 Adjustments - Depreciation expense 1,076 1,110 Amortization of uniforms 1,053 775 Amortization of deferred charges 221 320 Provision for bad debts 232 (193) Equity income, net of dividends (242) (207) Minority interests in net earnings 117 63 Other (243) (302) Changes in assets and liabilities, net of effects of purchase of controlling interest in foreign subsidiaries and divestitures: Decrease (increase) in assets: Accounts receivable 5,884 2,885 Inventories (1,424) (1,516) Other current assets (288) 633 Marketable securities and certificates of deposit 871 814 Other assets (350) (785) Deferred tax asset (408) (412) (Decrease) increase in liabilities: Accounts payable and accrued expenses (4,522) (3,350) Accrued payroll and related taxes 3,168 3,543 Deferred tax liability - current 521 55 Reserve for losses of casualty - reinsurance subsidiary 894 152 ------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,380 5,444 ------------------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Payments on notes receivable 72 - Payment for acquisitions, net of working capital acquired (931) - Investment in and advances to foreign affiliates 507 (300) Capital expenditures (518) (1,072) Deferred charge expenditures (65) - ------------------- NET CASH USED IN INVESTING ACTIVITIES (935) (1,372) -------------------
(Continued) Page 6 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED APRIL 3, 1994 AND APRIL 4, 1993 (In thousands) (UNAUDITED)
1994 1993 ------------------ CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from issuance of debt 30,659 31,552 Payments on debt (33,633) (32,583) Dividends paid (694) (694) ------------------ NET CASH USED IN FINANCING ACTIVITIES (3,668) (1,725) ------------------ NET INCREASE - IN CASH AND CASH EQUIVALENTS 3,777 2,347 Cash and Equivalents, at beginning of year 7,821 4,899 ------------------ CASH AND EQUIVALENTS, AT END OF YEAR $ 11,598 $ 7,246 ------------------ ------------------ SUPPLEMENTAL DISCLOSURES CASH PAID DURING THE YEAR FOR: Interest $ 927 $ 1,008 Income taxes $ 70 $ 59
See notes to Consolidated Financial Statements. Page 7 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The accounting policies followed for the quarterly financial reporting are the same as those disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the Corporation's Annual Report on Form 10-K for the fiscal year ended January 2, 1994. Certain prior year amounts have been reclassified to conform with current year financial statement presentation. 2. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
APRIL 3, January 2, 1994 1994 -------------------- Senior note payable - 10.2% $ 12,500 $ 25,000 Revolving loan - 4.5% in April 1994 and 4.2% in January 1994 33,850 26,150 First mortgage note on headquarters building - 4.6% in April 1994 and 4.3% in January 1994 16,607 16,790 Revolving line of credit - Wackenhut Corrections Corporation Australia, Pty., Ltd. 2,009 - ------------------ 64,966 67,940 Less - Current portion of long-term debt (5,683) (10,456) ------------------ $ 59,283 $ 57,484 ------------------ ------------------
Page 8 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Reference is made to Item 7, Part II of the Corporation's Annual Report on Form 10-K for the fiscal year ended January 2, 1994 for discussion and analysis of information pertaining to the Corporation's financial condition. RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Corporation's consolidated financial statements and the notes thereto. Consolidated revenues - increased $12,425,000 (7.7%) in the first quarter of 1994 compared to the same quarter in 1993. This increase is principally attributed to the Security Services Division which reported an increase in revenues of $11,048,000. The addition of various major national and state contracts acquired during the later part of 1993 contributed to the increase in revenues of the Security Services Division. During the first quarter of 1994, Wackenhut Corrections Corporation increased its equity in Australasian Correctional Management, Pty., Ltd. (ACM) to 100%. ACM, previously a 50% joint venture, manages and operates two correctional facilities in Australia. During the first quarter of 1994, ACM contributed approximately $5,000,000 to the increase in revenues. The increase in revenues of Wackenhut Corrections more than offset the reduction in revenues within other areas of the Government Services Group, primarily from the reduction in Department of Energy (DOE) business since the second half of 1993. This decrease in DOE revenues has not affected award fees. Payroll and related taxes increased $8,617,000 (7.2%) compared to 1993 as a result of the growth in business from the new security contracts and the consolidation of ACM. Other operating expenses increased $3,686,000 (9.4%) compared to the same period last year. Operating income increased $122,000 (4.0%) during the first quarter of 1994 compared to the same period last year. A significant portion of the increase in operating income can be attributed to new national and state contracts of the Security Services Division and to the consolidation of ACM, the Australian subsidiary of Wackenhut Corrections Corporation. In addition, the sale of the monitoring business late in 1993, discontinuance of the operations of Wackenhut Applied Technology Center, Inc. and scaling down the Investigative Division contributed $588,000 to the improvement in operating income for the first quarter quarter of 1994 compared to the first quarter of 1993. These increases were partially offset by a decrease in profit margins in the traditional guard business and the loss of a major contract in South America. Although profit margins in the traditional guard business were lower in the first quarter of 1994 than in the same period in 1993, they have continued their modest but stable increase since the second half of 1993. Page 9 of 18 THE WACKENHUT CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Interest and investment income decreased $285,000 during the first quarter of 1994 compared to the same period in 1993 principally due to a decrease in realized marketable security gains. Minority interest increased $54,000, net of applicable taxes, during the same period in 1994 compared to 1993 due to a general - increase in profits from existing subsidiaries and the initial consolidation of new subsidiaries, principally in Russia. Net income was $1,820,000 in the first quarter of 1994, compared to $1,859,000 in the same period in 1993. The combined Federal and state effective income tax rates of 35.0% and 35.5% for the first quarters of 1994 and 1993 respectively, included reductions in the statutory corporate tax rate attributable to targeted job credits, tax exempt interest and capital loss carryforwards. Page 10 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The nature of the Corporation's business results in claims or litigation alleging that the Corporation is liable for damages arising from the conduct of its employees or others. During the first quarter of 1994, the company settled the PALLAZOLA case referred to in the Corporation's Annual Report on Form 10-K for the fiscal year ended January 2, 1994 and dropped its appeal. The Corporation's insurance carriers contributed on a loan basis to provide funds for that settlement. These carriers dispute their obligation to bear the cost of such settlement, but it is the opinion of management, after consultation with outside counsel, that it is more likely than not that the cost will eventually be found to be the responsibility of the liability insurers of the Corporation. While there can be no absolute assurance that the reserves provided by the Corporation would be sufficient to cover any shortfall, management believes it has provided adequate reserves for its potential exposure in this matter. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. Page 11 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION (continued) ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of the Corporation was held on April 29, 1994 in Coral Gables, Florida. All directors nominated for election were elected in an uncontested election. A tabulation of the results is as follows:
Name Votes for Votes Withheld - - ---- --------- -------------- Richard G. Capen, Jr. 3,344,081 136,032 Norman A. Carlson 3,344,576 135,537 Anne Newman Foreman 3,344,244 135,869 Edward L. Hennessy, Jr. 3,344,579 135,534 Paul X. Kelley 3,344,544 135,569 Robert Q. Marston 3,344,556 135,557 Jorge L. Mas Canosa 3,344,591 135,522 Nancy Clark Reynolds 3,344,591 135,522 Thomas P. Stafford 3,344,544 135,569 George R. Wackenhut 3,343,880 136,233 Richard R. Wackenhut 3,344,349 135,764
The other matter voted upon at the Annual Meeting was the ratification of the action of the Board of Directors in appointing the firm of Arthur Andersen & Co. to be the independent certified public accountants of the Corporation for the fiscal year 1994, and to perform such other services as may be requested. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K EXHIBIT 1- Amendment to Note Agreement between The Wackenhut Corporation and The Principal Mutual Life Insurance Company ("Principal Mutual") dated March 4, 1994. EXHIBIT 2- Amendment to Note Agreement between The Wackenhut Corporation and NationsBank of Florida dated March 1, 1994. The Corporation did not file a Form 8-K during the first quarter of 1994. Page 12 of 18 THE WACKENHUT CORPORATION AND SUBSIDIARIES 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 thereunto duly authorized. THE WACKENHUT CORPORATION DATE: May 13, 1994 /s/ Richard C. DeCook _________________________________________ Richard C. DeCook, Senior Vice President- Finance and Chief Financial Officer DATE: May 13, 1994 /s/ Juan D. Miyar _________________________________________ Juan D. Miyar, Vice President-Accounting Services and Corporate Controller Page 13 of 18 EXHIBIT 1 March 4, 1994 Via Telecopier and Federal Express The Wackenhut Corporation 1500 San Remo Avenue Coral Gables, FL 33146-3036 Attn: Richard DeCook Chief Financial Officer Dear Mr. DeCook: Reference is made to the Note Agreement, dated as of September 30, 1990 (as amended from time to time, referred to herein as the "Note Agreement"), by and between The Wackenhut Corporation (the "Company"), Massachusetts Mutual Life Insurance Company ("Massachusetts Mutual") and Principal Mutual Life Insurance Company ("Principal Mutual" and, together with Massachusetts Mutual, the "Noteholders"). Pursuant to the Note Agreement, the Company issued, and Noteholders purchased senior promissory notes of the Company (collectively, the "Notes") in the aggregate principal amount of $25,000,000.00 due September 30, 2000. With the Company having prepaid all of such Notes as were previously held by Massachusetts Mutual, Principal Mutual is now the only holder of any of the Notes. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Note Agreement. By their execution hereof as provided below, the Company and Principal Mutual agree and consent to the following amendments and waiver, but only as to the extent expressly provided herein, and subject to the terms and conditions set forth below. 1. FIXED CHARGE COVERAGE RATIO. Section 5.10 shall be amended in its entirety to read as follows: 5.10 FIXED CHARGE COVERAGE RATIOS. (a) The Company will at all times keep and maintain the ratio of Net Income Available for fixed Charges, determined as of the last day of each fiscal quarter for the immediately preceding Four-Quarter Period, to Fixed Charges for such Four-Quarter Period, at not less than 1.75:1.00. (b) During each of the first, second and third quarters of the fiscal year immediately following the fiscal year ended January 2, 1994, the Company will at all times keep and maintain the ratio of Net Income Available for Fixed Charges, determined as of the last day of each such fiscal quarter for such quarter, to Fixed Charges for such quarter, at not less than 2.00:1.00. Page 14 of 18 Page 2 2. DEFINITION OF "NET INCOME AVAILABLE FOR FIXED CHARGES". The definition of "NET INCOME AVAILABLE FOR FIXED CHARGES" in Section 8.1 of the Note Agreement shall be amended in its entirety to read as follows: "NET INCOME AVAILABLE FOR FIXED CHARGES" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period and (iii) Fixed Charges of the Company and its Restricted Subsidiaries during such period; provided, however, that solely for the purposes of computing Net Income Available for Fixed Charges for any Four-Quarter Period which includes the fourth quarter of the fiscal year ended January 2, 1994, the amount of $4,074,000 shall be added to said sum in determining whether the Company is in compliance with Section 5.10(a). 3. LIMITED WAIVER. Principal Mutual hereby waives compliance by the Company with the requirements of Section 5.10 of the Note Agreement for the fiscal quarter ended January 2, 1994 to the extent, and only to the extent, that such requirements existed prior to the effectiveness of the amendments made by this letter agreement. 4. CONDITIONS PRECEDENT. The waiver and amendments made and granted by Principal Mutual herein are expressly subject to and shall be effective only upon the satisfaction of the following conditions: 4.1 The Company and Principal Mutual shall have executed this letter agreement. 4.2 As of the date of execution hereof by the Company, no Default or Event of Default under the Note Agreement (except for any Default or Event of Default which has been either waived by Principal Mutual or the subject of a previous amendment to the Note Agreement) shall exist or be continuing, after giving effect to the amendments set forth herein. 4.3 The representation and warranties of the Company referred to in Section 3.1 of the Note Agreement, shall be true and complete in all material respects, as if made on and as of the date hereof (except as to those representations and warranties which are made as of a specific date, which shall be true and complete in all material respects as of such specific date). 4.4 The representations of the Company referred to in Section 4 hereof shall be true and complete in all material respects. 5. REPRESENTATIONS OF THE COMPANY. The Company, by its execution and delivery of this letter agreement, hereby represents and warrants to Principal Mutual as follows: Page 15 of 18 Page 3 5.1 As of the date of this letter agreement, no Default or Event of Default under the Note Agreement, or under any other agreement to which the Company is subject, exists or is continuing, after giving effect to the amendments set forth herein. 5.2 The representations and warranties of the Company referred to in Section 3.1 of the Note Agreement (as modified by letter agreement dated July 21, 1993) are true and correct and complete in all material respects as if made on the date hereof, except as to those representations and warranties made as of a specific date, which are true and correct and materially complete as of such date. 5.3 No dissolution proceedings with respect to the Company have been commenced or are contemplated, and there had been no material adverse change in the business, conditions or operations (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole since September 30, 1990, except as previously disclosed to Principal Mutual. 5.4 This Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company. 6. MISCELLANEOUS 6.1 It is expressly understood and agreed that the amendments contained herein shall not constitute either (a) a modification, alteration or amendment of the terms, conditions, and covenants of the Note Agreement or the Notes, both of which shall remain unchanged and in full force and effect, except as otherwise specifically set forth herein, or (b) a waiver, release or limitation upon the exercise by Principal Mutual of any of the rights, legal or equitable, hereunder except as to matters as to which Principal Mutual herein expressly consents or waives compliance and only for the relevant time period set forth herein. Nothing herein is intended or shall be construed to release or relieve the Company in any way or to any extent from any of the obligations, covenants or agreements imposed upon the Company by the Note Agreement or the Notes or otherwise, or from the consequences of any default thereunder, except as to matters as to which the undersigned expressly agree herein. 6.2 The Note Agreement, as amended hereby, and the Notes are in all respects ratified and confirmed, and all the terms, conditions and provisions thereof shall be and remain in full force and effect. 6.3 The execution of this letter agreement by Principal Mutual shall not in any way constitute, or be construed as, a waiver of any provision of, or of any Default or Event of Default under, the Note Agreement except as expressly provided herein, nor shall it constitute Page 16 of 18 Page 4 an agreement or obligation of Principal Mutual to give its consent to any future waiver, consent or amendment of the Note Agreement or to any future transaction which would, absent consent of Principal Mutual, constitute a Default or Event of Default under the Note Agreement. 6.4 This letter agreement may be executed in as many counterparts as may be deemed necessary or convenient and by the different parties hereto on separate counterparts (provided that the Company will execute each counterpart), and each of which, when so executed, shall be deemed to be an original, but all such counterparts shall constitute but one and the same agreement. 6.5 This letter agreement shall be deemed effective as of the date hereof, provided that the provisions and the conditions precedent set forth in Section 4 hereof have been completely satisfied. 6.6 From and after the effective date hereof, each reference in the Note Agreement to "this Agreement", "hereof", or "hereunder" or words of like import, and all references to the Note Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature shall be deemed to mean the Note Agreement, as modified and amended by this letter agreement. 6.7 This letter agreement (a) shall be binding on the parties hereto and their respective successors and assigns and shall insure to the benefit of the parties hereto and their respective successors and assigns, (b) constitutes the entire agreement among the parties hereto with respect to the matters addressed herein, and (c) shall be governed by and construed and enforced in accordance with the laws of the State of Florida. The Wackenhut Corporation By Richard C. DeCook ----------------- Its Senior Vice President - C.F.O. ------------------------------ Principal Mutual Life Insurance Company By John D. Cleavenger ------------------ Its Counsel ------- By Joseph P. McLaughlin -------------------- Its Counsel ------- Page 17 of 18 EX-2 2 EXHIBIT 2 EXHIBIT 2 March 1, 1994 Mr. Juan D. Miyar Vice President & Controller The Wackenhut Corporation 1500 San Remo Avenue Coral Gables, FL 33146-3009 RE: TEMPORARY AMENDMENT TO SECTION 7.10 (THE "FIXED CHARGE COVERAGE RATIO") OF THE AMENDED AND RESTATED REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT BY AND AMONG THE WACKENHUT CORPORATION AND NATIONSBANK OF FLORIDA DATED JULY 1, 1993 (THE "CREDIT AGREEMENT") Dear Juan: Pursuant to Wackenhut's request, NationsBank has agreed to amend the calculation of the Fixed Charge Coverage Ratio contained in the above referenced Credit Agreement for the four quarter period ending January 2, 1994 and for the four quarter periods ending on Wackenhut's following three quarter ends. For purposes of calculating the Fixed Charge Coverage Ratio, Wackenhut may add back to Net Income the non-recurring charges of $1,726,000 and the extraordinary charge related to early extinguishment of debt reported in its financial statements date January 2, 1994. The amendment to the calculation of the Fixed Charge Coverage Ratio described herein is effective only for the four quarter period ending January 2, 1994 and the four quarter periods ending on Wackenhut's following three quarter ends. After that time, the calculation of the Fixed Charge Coverage Ratio will be made as set forth in the Credit Agreement. Juan, please let me know if you have any questions regarding this temporary amendment. Sincerely, /s/ John A. Miller John A. Miller Vice President (305) 577-5422 Page 18 of 18 -----END PRIVACY-ENHANCED MESSAGE-----