-----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, XlwkJJQh2jlj6Q1zXE42Ua1gBOBKU071bVrbv71bH0QBuJltN1NHW0AH1+fn90DT 8hwW9Ird7pnb/CM3h+BUxQ== 0000950144-95-001304.txt : 19950517 0000950144-95-001304.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950144-95-001304 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950402 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACKENHUT CORP CENTRAL INDEX KEY: 0000104030 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [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: 95537501 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 THE WACKENHUT CORPORATION FORM 10-Q 1 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 2, 1995 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 2, 1995, 3,858,885 shares of Series A and 5,794,539 shares of Series B of the registrant's Common Stock were issued and outstanding. Page 1 of 14 2 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 2, 1995 are not necessarily indicative of the results for the entire fiscal year ending December 31, 1995. Page 2 of 14 3 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED APRIL 2, 1995 AND APRIL 3, 1994 (In thousands except per share data) (UNAUDITED)
1995 1994 ----------------------------- REVENUES $ 194,832 $ 174,537 ----------------------------- OPERATING EXPENSES: Payroll and related taxes 141,608 128,298 Other operating expenses 50,169 42,944 ----------------------------- 191,777 171,242 ----------------------------- OPERATING INCOME 3,055 3,295 ----------------------------- OTHER INCOME (EXPENSE): Interest and receivable discount expense (737) (987) Interest and investment income 325 426 ----------------------------- (412) (561) ----------------------------- INCOME BEFORE INCOME TAXES 2,643 2,734 Provision for income taxes 898 959 Minority interest, net of income taxes 371 117 Equity income of foreign affiliates, net of income taxes (225) (162) ----------------------------- NET INCOME $ 1,599 $ 1,820 ============================= EARNINGS PER SHARE $ 0.17 $ 0.19 =============================
See notes to Consolidated Financial Statements. Page 3 of 14 4 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 2, 1995 AND JANUARY 1, 1995 (In thousands except share data) (UNAUDITED)
1995 1994 ---------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,509 $ 13,808 Accounts receivable (net of allowances for doubtful accounts of $1,334 in 1995 and $1,056 in 1994) 70,252 100,425 Inventories, net 7,148 7,179 Other 18,446 16,233 --------------------------- 108,355 137,645 --------------------------- NOTES RECEIVABLE 1,570 1,646 --------------------------- MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT of casualty reinsurance subsidiary 10,902 11,495 --------------------------- PROPERTY AND EQUIPMENT, at cost 46,046 45,928 Accumulated depreciation (15,870) (15,102) --------------------------- 30,176 30,826 --------------------------- DEFERRED TAX ASSET, NET 9,752 11,021 --------------------------- OTHER ASSETS: Investment in and advances to foreign affiliates, at cost, including equity in undistributed earnings of $2,674 in 1995 and $2,066 in 1994 6,950 6,165 Other 13,573 13,959 --------------------------- 20,523 20,124 --------------------------- $ 181,278 $ 212,757 ===========================
See notes to Consolidated Financial Statements. Page 4 of 14 5 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 2, 1995 AND JANUARY 1, 1995 (In thousands except share data) (UNAUDITED)
1995 1994 ------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 10 $ - Notes payable 3,345 3,765 Accounts payable 14,809 14,839 Accrued payroll and related taxes 28,331 25,761 Accrued expenses 19,406 20,609 Deferred tax liability, net 294 596 --------------------------- 66,195 65,570 --------------------------- RESERVES FOR LOSSES of casualty reinsurance subsidiary 39,364 38,450 --------------------------- LONG-TERM DEBT 3,470 38,991 --------------------------- OTHER 4,657 4,029 --------------------------- MINORITY INTEREST 9,071 8,258 --------------------------- 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, 5,794,539 issued 579 579 Additional paid-in capital 38,919 38,919 Retained earnings 22,550 21,681 Cumulative translation adjustment (3,654) (3,552) Unrealized gain (loss) on marketable securities (259) (554) --------------------------- 58,521 57,459 --------------------------- $ 181,278 $ 212,757 ===========================
See notes to Consolidated Financial Statements. Page 5 of 14 6 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED APRIL 2, 1995 AND APRIL 3, 1994 (UNAUDITED)
1995 1994 ------------------------------ CASH FLOWS PROVIDED BY (USED IN) (In thousands): OPERATING ACTIVITIES Net Income $ 1,599 $ 1,820 Adjustments - Depreciation expense 1,153 1,076 Amortization expense 1,244 1,274 Provision for bad debts 276 232 Equity income, net of dividends (287) (242) Minority interests in net earnings 562 117 Other (102) (243) Changes in assets and liabilities, net of acquisition and divestitures- (Increase) Decrease in assets: Accounts receivable 957 5,884 Cash proceeds from sales of trade receivables 28,940 - Inventories (560) (1,424) Other current assets (2,213) (288) Marketable securities and certificates of deposit (199) (762) Other assets (251) (350) Deferred tax asset 1,269 (408) Increase (Decrease) in liabilities: Accounts payable and accrued expenses (1,549) (4,615) Accrued payroll and related taxes 2,570 3,168 Deferred tax liability - current (302) 521 Accrued retirement benefits and deferred compensation liabilities 628 93 Reserve for losses of casualty reinsurance subsidiary 914 894 ------------------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 34,649 6,747 ------------------------------ INVESTING ACTIVITIES Net proceeds from sale of subsidiary's common stock 246 - Payments on notes receivable 76 72 Payment for acquisitions, net of cash acquired - (931) Investment in and advances to foreign affiliates (177) 507 Capital expenditures (503) (518) Proceeds from sale of marketable securities of reinsurance subsidiary 1,087 1,633 Deferred charge expenditures (16) (65) ------------------------------ NET CASH USED IN INVESTING ACTIVITIES 713 698 ------------------------------
(Continued) Page 6 of 14 7 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED APRIL 2, 1995 AND APRIL 3, 1994 (In thousands) (UNAUDITED) (Continued)
1995 1994 ------------------------------ CASH FLOWS PROVIDED BY (USED IN): FINANCING ACTIVITIES Proceeds from issuance of debt - 30,659 Payments on debt (35,931) (33,633) Dividends paid (730) (694) ------------------------------ NET CASH USED IN FINANCING ACTIVITIES (36,661) (3,668) ------------------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,299) 3,777 Cash and Cash Equivalents, at beginning of year 13,808 7,821 ------------------------------ CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 12,509 $ 11,598 ============================== SUPPLEMENTAL DISCLOSURES CASH PAID DURING THE YEAR FOR: Interest $ 773 $ 927 Income taxes $ 34 $ 70
See notes to Consolidated Financial Statements. Page 7 of 14 8 THE WACKENHUT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 1, 1995. Certain prior year amounts have been reclassified to conform with current year financial statement presentation. 1. ACCOUNTS RECEIVABLE In January 1995, the corporation entered into a $40,000,000, three year, revolving trade receivable securitization facility agreement to sell undivided fractional interests in a pool of eligible receivables. At April 2, 1995 $28,940,000 had been sold, and is presented as a reduction in accounts receivable in the accompanying balance sheet and as providing operating cash flow in the Consolidated Statement of Cash Flows. The costs associated with this program are based upon the purchasers' level of investment and cost of issuing commercial paper plus predetermined fees. The corporation will retain substantially the same risk of credit loss as if the receivables had not been sold. Such costs are included in "Interest and receivable discount expense," in the Consolidated Statement of Income. In January 1995, the corporation also prepaid the outstanding balance of the first mortgage note on the headquarters building with proceeds from the sale of eligible trade accounts receivable. 2. LONG-TERM DEBT Long-term debt consisted of the following (in thousands):
APRIL 2, JANUARY 1, 1995 1995 ---------------------------- Revolving loans - 7.0% in 1995 and 1994 $ 200 $ 20,450 First mortgage note on headquarters building - 7.1% - 16,060 Mortgage notes on buildings of international subsidiaries, varying interest rates from 11.0% to 11.4%, due in 2002 702 947 Secured credit lines and other debt, principally of Australasian Correctional Management Pty., Ltd., varying interest rates from 5.9% to 8.0% due 1997 to 2009 735 1,412 Other debt principally related to international subsidiaries 1,843 122 ---------------------------- 3,480 38,991 Less - Current portion of long-term debt (10) - ---------------------------- $ 3,470 $ 38,991 ============================
Page 8 of 14 9 3. BUSINESS SEGMENTS WACKENHUT CORRECTIONS CORPORATION The corporation's principal business consists of security guard services to commercial and governmental clients. A subsidiary of the corporation, Wackenhut Corrections Corporation ("WCC"), provides facility management and construction services to detention and correctional facilities. WCC operates in a different industry segment than other divisions of the corporation. A summary of financial data of WCC is presented below:
Thirteen Weeks Ended -------------------- April 2, 1995 April 3, 1994 ------------- ------------- Revenues Facility management $21,631 $19,113 Construction and design 6,883 3,782 ------- ------- 28,514 22,895 ------- ------- Operating income before general corporate office expenses 2,306 1,655 Equity loss of affiliates, net of income taxes 78 - Assets at April 2, 1995 and January 1, 1995 31,474 30,333 Capital expenditures 443 82 Depreciation expense 185 140 Identifiable assets of equity affiliates at April 2, 1995 and January 1, 1995 1,775 3,420
NON-U.S. OPERATIONS A summary of financial data for foreign operations is shown below. Non-U.S. operations of the corporation and its subsidiaries are conducted primarily in South America and Australia. Profit is before the allocation of corporate office general and administrative expenses and income taxes.
Thirteen Weeks Ended -------------------- April 2, 1995 April 3, 1994 ------------- ------------- Revenues $30,672 $25,371 Income before general corporate office expense and income taxes 1,688 958 Assets at April 2, 1995 and January 1, 1995 51,945 48,893
The corporation carries its investments in affiliates (20% to 50% owned) on the equity method. U.S. income taxes which would be payable upon remittance of affiliates' earning to the corporation are provided currently. Minority interest in consolidated foreign subsidiaries have been reflected net of applicable income taxes on the accompanying financial statements for 1995 and 1994. Page 9 of 14 10 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 1, 1995 for discussion and analysis of information pertaining to the Corporation's financial condition. RESULTS OF OPERATIONS PERIOD-TO-PERIOD COMPARISONS (1ST QUARTER 1995 VERSUS 1ST QUARTER 1994) The following discussion and analysis should be read in conjunction with the Corporation's consolidated financial statements and the notes thereto. Consolidated revenues increased $20,295,000 (11.6%) in the first quarter of 1995 compared to the same quarter in 1994. This increase is principally attributed to the Security Services Division which reported an increase in revenues of $12,562,000 from new national contracts. Wackenhut Corrections Corporation reported increased construction and design revenues of $3,100,000 related to the Moore Haven and South Bay (Florida) contracts and increased facility management revenues of $2,518,000 related to the Coke County and Lockhart Female (Texas) facilities. The Food Services Division reported increased revenues of $3,600,000 attributable to new contracts acquired during 1994 and 1995. Payroll and related taxes increased $13,310,000 (10.4%) compared to 1994 as a result of the growth in business from the new security contracts. Other operating expenses increased $7,225,000 (16.8%) in the first quarter of 1995 compared to the same period last year. This increase was due primarily to revenue growth and related increases of $2,859,000 in correctional facilities construction, management and operating expenses, as well as a $2,321,000 increase in food costs associated with new contracts. General increases in other operating expenses were experienced by domestic, government and international operations contributing to the remaining increase in this expense category. Operating income decreased $240,000 (7.3%) during the first quarter of 1995 compared to the same period last year. A significant portion of the decrease in operating income can be attributed to the absence of one-time profits from the American Airlines strike and the Florida Department of Transportation Interstate Highway contract which were reported in the first quarter of 1994 by the Security Services Division. The remainder of the decrease was primarily due to increased business development costs in the Government Services Group which have resulted from efforts to capitalize on opportunities in the privatization of government services. Page 10 of 14 11 THE WACKENHUT CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Interest and receivable discount expense decreased $250,000 due to reductions in funding requirements partially offset by increased interest rates. Interest and investment income decreased $101,000 during the first quarter of 1995 compared to the same period in 1994 principally due to a decrease in fixed income securities investment holdings. Minority interest increased $254,000, net of applicable taxes, during the same period in 1995 compared to 1994 reflecting the public ownership in the earnings of Wackenhut Corrections Corporation and an increase in profits from foreign affiliates. Net income was $1,599,000 in the first quarter of 1995, compared to $1,820,000 in the same period in 1994. The combined Federal and state effective income tax rates of 34% and 35% for the first quarter of 1995 and 1994 respectively, included reductions in the statutory corporate tax rate attributable to targeted job credits, tax exempt interest and capital loss carryforwards. Page 11 of 14 12 THE WACKENHUT CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the first quarter of 1994, the Corporation and its insurance carriers settled a $6,000,000 judgment for $4,500,000. The Corporation's insurance carriers contributed funds for that settlement, but these carriers dispute their legal obligation for the amounts paid. In the opinion of management, after consultation with outside counsel, it is more likely than not that the judgment will be covered by the Corporation's insurance carriers. In a second Case, a former employee has obtained a $1.8 million judgment against the Corporation comprised almost entirely of punitive damages. The Corporation is cautiously optimistic that its appeal will result in the diminution of the punitive damages awarded. Finally, in a case alleging tortious interference with contract and other related torts, plaintiff claims multimillion dollar damages, which the insurance carrier for the Corporation has denied coverage. The Corporation denies these claims and intends to vigorously defend the action. While there can be no assurance that reserves provided by the Corporation are adequate, management has made its best estimate of the potential exposure in these matters. The nature of the Corporation's business results in claims for damages arising from the conduct of its employees or others. In the opinion of management, there are no other pending legal proceedings that would have a material effect on the consolidated financial statements of the Corporation. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. Page 12 of 14 13 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 (for SEC use only) (b) Reports on Form 8-K - The Corporation filed a Form 8-K dated January 30, 1995 to report that it would take a special, one-time charge of $8.7 million in the fourth quarter of fiscal 1994 to provide for a loss resulting from the write-down in the carrying value of its headquarters building in Coral Gables, Florida. This charge resulted from management's decision to sell the Corporation's headquarters building. Page 13 of 14 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: May 12, 1995 /s/ Richard C. DeCook ------------------------------------------ Richard C. DeCook, Senior Vice President - Finance and Chief Financial Officer (Duly Authorized Officer) DATE: May 12, 1995 /s/ Juan D. Miyar ------------------------------------------ Juan D. Miyar, Vice President - Accounting Services and Corporate Controller (Principal Accounting Officer) Page 14 of 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FORM 10-Q FOR THE THREE MONTHS ENDED APRIL 2, 1995. 0 3-MOS DEC-31-1995 APR-02-1995 1 12,509 10,902 71,586 (1,334) 7,148 108,355 46,046 (15,870) 181,278 66,195 3,470 965 0 0 57,556 181,278 0 194,832 0 191,777 0 247 412 2,643 898 0 0 0 0 1,599 0.17 0 INCLUDES $18,446 OF OTHER CURRENT ASSETS INCLUDES $39,364 RESERVE FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY, $9,071 MINORITY INTEREST AND $4,657 OTHER LIABILITIES INTEREST AND RECEIVABLE DISCOUNT EXPENSE OF $737 NET OF INTEREST AND INVESTMENT INCOME OF $325 INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES - NET OF INCOME TAXES OF $371 AND (225) RESPECTIVELY
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