-----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, l638YVwXJd4T3RKHavIqI34CeYj/AHAUBDn8iMXAPLNIOdpkd+O92uoWscz48Ib5 WX0qre19dcLSfTzwfBjteA== 0000912057-94-003914.txt : 19941121 0000912057-94-003914.hdr.sgml : 19941121 ACCESSION NUMBER: 0000912057-94-003914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941002 FILED AS OF DATE: 19941115 SROS: NYSE 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: 94560334 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 FORM 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 October 2, 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 November 7, 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 14 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 thirty-nine weeks ended October 2, 1994 are not necessarily indicative of the results for the entire fiscal year ending January 1, 1995. Page 2 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED OCTOBER 2, 1994 and OCTOBER 3, 1993 (In thousands except per share data) (UNAUDITED)
1994 1993 ------------------------ REVENUES $ 196,031 $ 165,111 ------------------------ OPERATING EXPENSES: Payroll and related taxes 138,161 122,786 Other operating expenses 54,007 39,656 ------------------------ 192,168 162,442 ------------------------ OPERATING INCOME 3,863 2,669 ------------------------ OTHER INCOME (EXPENSE): Interest expense (1,130) (1,062) Interest and investment income 487 461 Equity income of foreign affiliates 91 314 ------------------------ (552) (287) ------------------------ INCOME BEFORE INCOME TAXES 3,311 2,382 Provision for income taxes 1,066 624 Minority interest, net of income taxes of $135 and $68 263 131 ------------------------ INCOME BEFORE EXTRAORDINARY ITEM 1,982 1,627 Extraordinary item - early extinguishment of debt, net of income taxes of $457 887 -- ------------------------ NET INCOME $ 1,095 $ 1,627 ------------------------ ------------------------ EARNINGS PER SHARE: Income before extraordinary item $ .21 $ .17 Extraordinary item - early extinguishment of debt, net of income taxes (.10) -- ------------------------ NET INCOME $ .11 $ .17 ------------------------ ------------------------
See notes to Consolidated Financial Statements. Page 3 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993 (In thousands except per share data) (UNAUDITED)
1994 1993 ------------------------ REVENUES $ 551,030 $ 489,274 ------------------------ OPERATING EXPENSES: Payroll and related taxes 399,544 363,229 Other operating expenses 140,378 118,568 ------------------------ 539,922 481,797 ------------------------ OPERATING INCOME 11,108 7,477 ------------------------ OTHER INCOME (EXPENSE): Interest expense (3,174) (3,171) Interest and investment income 1,259 1,712 Equity income of foreign affiliates 334 1,360 ------------------------ (1,581) (99) ------------------------ INCOME BEFORE INCOME TAXES 9,527 7,378 Provision for income taxes 3,243 2,299 Minority interest, net of income taxes of $273 and $127 529 245 ------------------------ INCOME BEFORE EXTRAORDINARY ITEM 5,755 4,834 Extraordinary item - early extinguishment of debt, net of income taxes of $457 887 -- ------------------------ NET INCOME $ 4,868 $ 4,834 ------------------------ ------------------------ EARNINGS PER SHARE: Income before extraordinary item $ .60 $ .50 Extraordinary item - early extinguishment of debt, net of income taxes (.10) -- ------------------------ NET INCOME $ .50 $ .50 ------------------------ ------------------------
See notes to Consolidated Financial Statements. Page 4 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 2, 1994 AND JANUARY 2, 1994 (In thousands except share data) (UNAUDITED)
1994 1993 ------------------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 14,711 $ 7,821 Accounts receivable, less allowance for doubtful accounts of $1,301 in 1994 and $687 in 1993 98,573 94,937 Inventories 7,083 6,243 Other 16,829 14,760 ------------------------ 137,196 123,761 ------------------------ NOTES RECEIVABLE 1,722 2,085 ------------------------ MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT of casualty reinsurance subsidiary 14,555 24,843 ------------------------ PROPERTY AND EQUIPMENT, at cost 52,953 51,497 Accumulated depreciation (14,395) (13,374) ------------------------ 38,558 38,123 ------------------------ DEFERRED TAX ASSET, net 6,943 6,374 ------------------------ OTHER ASSETS: Investment in and advances to foreign affiliates, at cost, including equity in undistributed earnings of $1,921 in 1994 and $2,370 in 1993 5,999 5,742 Other 10,450 10,369 ------------------------ 16,449 16,111 ------------------------ $ 215,423 $ 211,297 ------------------------ ------------------------
See notes to Consolidated Financial Statements. Page 5 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 2, 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 $ 1,841 $ 10,456 Accounts payable 16,867 16,711 Accrued payroll and related taxes 26,342 22,444 Accrued expenses 30,349 22,124 Deferred tax liability, net 495 -- ------------------------ 75,894 71,735 ------------------------ RESERVES FOR LOSSES of casualty reinsurance subsidiary 35,994 33,500 ------------------------ LONG-TERM DEBT 34,773 57,484 ------------------------ MINORITY INTEREST 6,686 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 in 1994 and 1993 issued and outstanding 386 386 Series B common stock, 5,795,080 in 1994 and 3,858,885 in 1993 issued and outstanding 580 386 Additional paid-in capital 38,919 26,234 Retained earnings 25,857 23,268 Cumulative translation adjustment (3,275) (3,058) Unrealized gain (loss) on marketable securities (391) 146 ------------------------ 62,076 47,362 ------------------------ $ 215,423 $ 211,297 ------------------------ ------------------------
See notes to Consolidated Financial Statements. Page 6 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993 (In thousands) (UNAUDITED)
1994 1993 ------------------------ CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income $ 4,868 $ 4,834 Adjustments - Depreciation expense 3,300 3,420 Amortization expense 3,927 3,820 Provision for bad debts 492 399 Equity income, net of dividends (128) (1,305) Minority interests in net earnings 529 245 Other (217) (599) Changes in assets and liabilities, net of effects of purchase of controlling interest in foreign subsidiaries: Decrease (increase) in assets: Accounts receivable (4,047) 1,629 Inventories (4,001) (3,505) Other current assets (1,778) 153 Marketable securities and certificates of deposit 9,751 (1,441) Other assets 1,812 869 Deferred tax asset (569) 114 (Decrease) increase in liabilities: Accounts payable and accrued expenses 6,606 (7,103) Accrued payroll and related taxes 3,898 5,385 Deferred tax liability - current 495 (42) Reserve for losses of casualty reinsurance subsidiary 2,494 1,902 ------------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 27,432 8,775 ------------------------ CASH FLOWS USED IN INVESTING ACTIVITIES: Net proceeds from sale of Wackenhut Corrections Corporation stock 17,626 -- Payments on notes receivable 363 844 Payment for acquisitions, net of cash (935) -- Investment in and advances to foreign affiliates (706) (1,868) Capital expenditures (3,311) (2,674) Deferred charge expenditures (169) -- ------------------------ NET CASH USED IN INVESTING ACTIVITIES 12,868 (3,698) ------------------------
(Continued) Page 7 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993 (In thousands) (UNAUDITED) (Continued)
1994 1993 ------------------------ CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from issuance of debt 137,209 71,452 Payments on debt (168,535) (72,670) Dividends paid (2,084) (2,084) ------------------------ NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (33,410) (3,302) ------------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 6,890 1,775 Cash and Cash Equivalents, at beginning of period 7,821 4,899 ------------------------ CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 14,711 $ 6,674 ------------------------ ------------------------ SUPPLEMENTAL DISCLOSURES CASH PAID DURING THE PERIOD FOR: Interest $ 3,095 $ 3,090 Income taxes $ 434 $ 1,479 NON-CASH FINANCING ACTIVITY: Stock split in the form of a 25% dividend declared during 1994 $ 193 $ --
See notes to Consolidated Financial Statements. Page 8 of 14 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 consisted of the following (in thousands):
October 2, January 2, 1994 1994 ------------------------ Senior note payable - 10.2% $ -- $ 25,000 Revolving loan - 5.7% in 1994 and 4.2% in 1993 19,000 26,150 First mortgage note on headquarters building - 5.9% in 1994 and 4.3% in 1993 16,243 16,790 Revolving line of credit - Wackenhut Corrections Corporation Australia Pty., Ltd. 5.8% in 1994 1,371 -- ------------------------ 36,614 67,940 Less - Current portion of long-term debt (1,841) (10,456) ------------------------ $ 34,773 $ 57,484 ------------------------ ------------------------
3. WACKENHUT CORRECTIONS CORPORATION INITIAL PUBLIC OFFERING In August 1994, Wackenhut Corrections Corporation ("WCC"), a formerly wholly owned subsidiary of the Corporation, completed an initial public offering (the "IPO"). WCC received net proceeds of approximately $17,626,000 from the IPO. The Corporation has reflected amounts received in excess of its investment in WCC, less the approximate 27% minority interest, as an increase in additional-paid-in capital. 4. STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND On October 29, 1994, the Corporation's Board of Directors, at its regular quarterly meeting, declared a stock split to be effected in the form of a twenty-five percent (25%) stock dividend, payable on January 9, 1995 to stockholders of record at the close of business on December 22, 1994. The stock split to be effected in the form of a 25% stock dividend, is payable in Series B common stock to holders of the Corporation's Series A and B shares. The accompanying financial statements have been retroactively restated to reflect the stock split. Page 9 of 14 THE WACKENHUT CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION On August 2, 1994, Wackenhut Corrections Corporation, a subsidiary of the Corporation ("WCC"), sold 1,900,000 shares of common stock at an offering price of $9.00 per share in connection with its initial public offering ("IPO"). On September 1, 1994, an additional 285,000 shares related to the overallotment option were sold. Net proceeds of $17,626,000 from the IPO were used to repay bank debt and indebtedness to the Corporation which the Corporation used on August 2, 1994 to prepay the $12,500,000 Senior Note due September 30, 2000 at a premium of $1,344,000 before income taxes. 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 STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS : Consolidated revenues increased $30,920,000 (18.7%) in the third quarter of 1994 compared to the same quarter last year. The increase was principally attributable to the Government Services Group which contributed $14,993,000 to the increase. Australasian Correctional Management Pty., Ltd (ACM), which has been consolidated for the first time this year, contributed $6,400,000 in revenues during the third quarter of 1994 and WCC recorded an increase in construction and design revenues of $5,502,000. The Security Services Division reported increased revenues of $11,417,000 during the third quarter of 1994 principally due to new contracts with Allied Signal and the Department of Transportation of the State of Hawaii and an overall increase in billable guard hours and billing rates. Payroll and related taxes increased $15,375,000 (12.5%) and other operating expenses increased $14,351,000 (36.2%) in the third quarter of 1994 versus the third quarter last year. The increase can be attributed to the increase in revenues mentioned above and to the consolidation of ACM. Revenues derived from ACM and the construction contracts have a larger portion of non-labor costs than other services provided by the Corporation. Operating income was $1,194,000 (44.7%) higher in the third quarter of 1994 than in the same quarter in 1993. An increase in operating income of $924,000 resulted from the consolidation of ACM and the increase in construction and design activities. In addition, the Government Services Group benefited from the sale and discontinuation of Wackenhut Monitoring Inc. and Wackenhut Applied Technologies Center Incorporated, which had combined operating losses of $340,000 in the third quarter of 1993. Page 10 of 14 Equity income of foreign affiliates decreased $223,000 in the third quarter of 1994 versus 1993 as a result of the consolidation of ACM. Minority interest expense increased $132,000, net of income taxes, due to the decrease in ownership by the Corporation in WCC as a result of its IPO during the third quarter of 1994. Income before provision for income taxes was $929,000 (39.0%) higher in the third quarter of 1994 versus 1993. The effective income tax rate was lower than the combined Federal and state corporate tax rates for both quarters of 1994 and 1993 due to targeted job tax credits, tax exempt interest income and capital loss carryforwards. Income before extraordinary item was $1,982,000 and $1,627,000 at the end of the third quarter of 1994 and 1993, respectively, or an increase of $355,000 (21.8%). In August 1994, the Corporation prepaid the remaining $12,500,000 senior note to an insurance company. This prepayment resulted in an extraordinary charge for early extinguishment of debt in the amount of $887,000 (net of applicable income taxes). Net income decreased to $1,095,000 from $1,627,000 in the third quarter of 1994 compared to the third quarter of 1993 due to the factors described above. CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTY-NINE WEEKS: Consolidated revenues were $551,030,000 during the first nine months of 1994 as compared to $489,274,000 during the equivalent period in 1993, or an increase of $61,756,000 (12.6%). The Security Services Division of the Domestic Operations Group contributed $33,270,000 to the increase in revenues for the nine months ended October 2, 1994. This increase was attributable to several new national contracts obtained in the second and third quarters of 1993 and an overall increase in billable guard hours and billing rates. Revenues of the Government Services Group were $21,477,000 higher in the first nine months of 1994 compared to the same period in 1993. The consolidation of ACM in 1994 contributed $16,500,000 to the increase in revenues during the nine months ended October 2, 1994, and construction and design services contributed $12,900,000 to the increase in revenues during the same period in 1993. These increases were partially offset by a $7,818,000 decrease in revenues related to Department of Energy business. Payroll and related taxes increased $36,315,000 (10.0%) and other operating expenses increased $21,810,000 (18.4%) during the first nine months of 1994 compared to the same period in 1993. These increases in costs resulted from the growth of business from new security contracts, the consolidation of ACM and increases in construction and design expenses incurred during 1994 as a result of the increase in related revenues. The revenues derived from ACM and construction contracts have a larger portion of non-labor costs than other services provided by the Corporation. Operating income increased to $11,108,000 from $7,477,000 for the first nine months of 1994 compared to the same period last year, or an increase of $3,631,000 (48.6%). The Security Services Division was able to capitalize on higher revenues associated with new contracts acquired during the second and third quarters of 1993. The Government Services Group benefited from the sale and discontinuation of non-core businesses which incurred operating losses of $1,404,000 in the first nine months of 1993. Operating income increased $2,100,000 in 1994 over the first nine months of 1993 due to the consolidation of ACM along with the increase in construction and design activities. Page 11 of 14 Other expenses (net) amounted to $1,581,000 and $99,000 during the first nine months ended October 2, 1994 and October 3, 1993, respectively. The increase during 1994 was principally due to a reduction of $1,026,000 in equity income of foreign affiliates, which included equity income of ACM during 1993. In addition, interest and investment income declined $453,000 in the first nine months of 1994 due to a decrease in gains on sale of investments of the casualty reinsurance subsidiary. Income before provision for income taxes was $2,149,000 (29.1%) higher for the first nine months of 1994 versus the same period in 1993. The provision for income taxes was lower than the combined Federal and state corporate tax rates for both periods in 1994 and 1993 due to targeted jobs tax credits, tax exempt interest income and capital loss carryforwards. The effective Federal income tax rate for 1993 was further reduced by a favorable IRS audit adjustment. Minority interest expense, net of income taxes, increased $284,000 during the first nine months of 1994 when compared to the same period in 1993 due to the IPO of WCC which resulted in a decrease in ownership in the subsidiary by the Corporation. Net income before extraordinary item was $5,755,000 and $4,834,000 during the first nine months of 1994 and 1993, respectively, or an increase of $921,000 (19.1%). In August 1994, the Corporation prepaid the remaining $12,500,000 Senior Note to an insurance company. This prepayment resulted in an extraordinary charge for early extinguishment of debt in the amount of $887,000 (net of applicable income taxes). Net income decreased $34,000 during the first nine months of 1994 compared to the same period in 1993 due to the factors described above. Page 12 of 14 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. Reference is made to Item 1, Part II of the Corporation's Quarterly Report on Form 10-Q for the quarterly period ended April 3, 1994 for legal proceedings. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a). Exhibits - Exhibit 27 - Financial Data Schedule (b). Reports on Form 8-K - On August 12, 1994, the Corporation filed a Form 8-K to report the initial public offering of Wackenhut Corrections Corporation, a subsidiary of the Corporation. After the completion of the sale, the Corporation owns 73.3% of the issued and outstanding shares of common stock of the subsidiary. Financial statements and pro forma financial information were not required since the transaction did not meet materiality requirements. Page 13 of 14 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: November 11, 1994 /s/ RICHARD C. DECOOK ------------------------------------------ Richard C. DeCook, Senior Vice President - Finance and Chief Financial Officer DATE:November 11, 1994 /s/ JUAN D. MIYAR ------------------------------------------ Juan D. Miyar, Vice President - Accounting Services and Corporate Controller Page 14 of 14 EX-27 2 EXHIBIT 27
5 1,000 9-MOS JAN-01-1995 JAN-03-1994 OCT-02-1994 14,711 0 99,874 (1,301) 7,083 137,196 52,953 (14,395) 215,423 75,894 34,773 966 0 0 61,110 215,423 551,030 551,030 0 539,922 1,581 0 0 9,527 3,243 5,755 0 887 0 4,868 .50 0
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