0000950144-95-002369.txt : 19950816 0000950144-95-002369.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950144-95-002369 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950702 FILED AS OF DATE: 19950815 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: 95564133 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 07/02/95 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 July 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 1-5450 ------ 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 August 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 18 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 twenty-six weeks ended July 2, 1995 are not necessarily indicative of the results for the entire fiscal year ending December 31, 1995. Page 2 of 18 3 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED JULY 2, 1995 and JULY 3, 1994 (In thousands except per share data) (UNAUDITED)
1995 1994 ------------------------ REVENUES $ 193,371 $ 175,016 ------------------------ OPERATING EXPENSES: Payroll and related taxes 140,664 133,085 Other operating expenses 48,740 37,981 ------------------------ 189,404 171,066 ------------------------ OPERATING INCOME 3,967 3,950 ------------------------ OTHER INCOME (EXPENSE): Interest and receivable discount expense (758) (1,057) Interest and investment income 330 346 ------------------------ (428) (711) ------------------------ INCOME BEFORE INCOME TAXES 3,539 3,239 Provision for income taxes 1,300 1,134 Minority interest, net of income taxes 667 151 Equity income of foreign affiliates, net of income taxes (154) 1 ------------------------ NET INCOME $ 1,726 $ 1,953 ======================== EARNINGS PER SHARE $ 0.17 $ 0.20 ========================
See notes to Consolidated Financial Statements. Page 3 of 18 4 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE TWENTY-SIX WEEKS ENDED JULY 2, 1995 AND JULY 3, 1994 (In thousands except per share data) (UNAUDITED)
1995 1994 ------------------------ REVENUES $ 383,163 $ 345,991 ------------------------ OPERATING EXPENSES: Payroll and related taxes 282,272 261,383 Other operating expenses 93,869 77,363 ------------------------ 376,141 338,746 ------------------------ OPERATING INCOME 7,022 7,245 ------------------------ OTHER INCOME (EXPENSE): Interest and receivable discount expense (1,495) (2,044) Interest and investment income 655 772 ------------------------ (840) (1,272) ------------------------ INCOME BEFORE INCOME TAXES 6,182 5,973 Provision for income taxes 2,198 2,093 Minority interest, net of income taxes 1,038 268 Equity income of foreign affiliates, net of income taxes (379) (161) ------------------------ NET INCOME $ 3,325 $ 3,773 ======================== EARNINGS PER SHARE $ 0.34 $ 0.39 ========================
See notes to Consolidated Financial Statements. Page 4 of 18 5 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 2, 1995 AND JANUARY 1, 1995 (In thousands except share data) (UNAUDITED)
1995 1994 ------------------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,928 $ 13,808 Accounts receivable, less allowance for doubtful accounts of $1,465 in 1995 and $1,056 in 1994 72,944 100,425 Inventories 7,612 7,179 Other 16,305 16,233 ------------------------ 107,789 137,645 ------------------------ NOTES RECEIVABLE 1,493 1,646 ------------------------ MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT of casualty reinsurance subsidiary 10,888 11,495 ------------------------ PROPERTY AND EQUIPMENT, at cost 46,477 45,928 Accumulated depreciation (16,187) (15,102) ------------------------ 30,290 30,826 ------------------------ DEFERRED TAX ASSET, net 8,524 11,021 ------------------------ OTHER ASSETS: Investment in and advances to foreign affiliates, at cost, including equity in undistributed earnings of $2,881 in 1995 and $2,066 in 1994 8,267 6,165 Other 19,253 13,959 ------------------------ 27,520 20,124 ------------------------ $ 186,504 $ 212,757 ========================
See notes to Consolidated Financial Statements. Page 5 of 18 6 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 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 7,246 3,765 Accounts payable 14,257 14,839 Accrued payroll and related taxes 25,950 25,761 Accrued expenses 18,829 20,609 Deferred tax liability, net 208 596 ------------------------ 66,500 65,570 ------------------------ RESERVES FOR LOSSES of casualty reinsurance subsidiary 40,330 38,450 ------------------------ LONG-TERM DEBT 4,915 38,991 ------------------------ OTHER 4,829 4,029 ------------------------ MINORITY INTEREST 10,174 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 39,191 38,919 Retained earnings 23,552 21,681 Cumulative translation adjustment (3,757) (3,552) Unrealized gain (loss) on marketable securities (195) (554) ------------------------ 59,756 57,459 ------------------------ $ 186,504 $ 212,757 ========================
See notes to Consolidated Financial Statements. Page 6 of 18 7 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED JULY 2, 1995 AND JULY 3, 1994 (In thousands) (UNAUDITED)
1995 1994 ------------------------ CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES: Net Income $ 3,325 $ 3,773 Adjustments - Depreciation expense 2,254 2,088 Amortization expense 3,780 2,724 Provision for bad debts 584 356 Equity (income) loss, net of dividends (473) 290 Minority interests in net earnings 1,573 268 Other (205) (74) Changes in assets and liabilities, net of acquisitions and divestitures - Decrease (increase) in assets: Accounts receivable (8,031) 5,147 Inventories (2,887) (3,357) Other current assets (72) (2,978) Marketable securities and certificates of deposit (240) (1,190) Other assets (5,128) 1,840 Deferred tax asset 2,497 (447) (Decrease) increase in liabilities: Accounts payable and accrued expenses (2,987) (2,692) Accrued payroll and related taxes 189 2,051 Deferred tax liability - current (388) 496 Accrued retirement benefits and deferred compensation liability 800 439 Reserve for losses of casualty reinsurance subsidiary 1,880 940 ------------------------ NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (3,529) 9,674 ------------------------ CASH FLOWS USED IN INVESTING ACTIVITIES: Net proceeds from sale of Wackenhut Corrections Corporation stock 897 - Payments on notes receivable 153 146 Payment for acquisitions, net of cash - (935) Investment in and advances to foreign affiliates (1,286) (256) Capital expenditures (1,718) (2,638) Proceeds from sale of marketable securities of reinsurance subsidiary 1,206 757 Deferred charge expenditures (1,492) (645) ------------------------ NET CASH USED IN INVESTING ACTIVITIES (2,240) (3,571) ------------------------
(Continued) Page 7 of 18 8 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED JULY 2, 1995 AND JULY 3, 1994 (In thousands) (UNAUDITED) (Continued)
1995 1994 ------------------------ CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from issuance of debt 64,657 72,059 Payments on debt (95,242) (76,824) Cash proceeds from sales of trade receivables 34,928 - Dividends paid (1,454) (1,390) ------------------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,889 (6,155) ------------------------ NET (DECREASE) IN CASH AND CASH EQUIVALENTS (2,880) (52) Cash and Cash Equivalents, at beginning of period 13,808 7,821 ------------------------ CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 10,928 $ 7,769 ======================== SUPPLEMENTAL DISCLOSURES CASH PAID DURING THE PERIOD FOR: Interest $ 1,451 $ 1,973 Income taxes $ 2,143 $ 92 NON-CASH FINANCING ACTIVITY: Additional minority interests liability due to change in ownership in Wackenhut Corrections Corporation $ 623 $ -
See notes to Consolidated Financial Statements. Page 8 of 18 9 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 1, 1995. Certain prior year amounts have been reclassified to conform with current year financial statement presentation. 2. 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 July 2, 1995, $34,928,000 had been sold, and is presented as a reduction in accounts receivable in the accompanying balance sheet and as providing 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. 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. 3. LONG-TERM DEBT Long-term debt consisted of the following (in thousands):
JULY 2, January 1, 1995 1994 ------------------------ Revolving loans - 6.8% in 1995 and 7.0% 1994 $ 2,050 $ 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 752 947 Secured credit lines and other debt, principally of Australasian Correctional Management Pty., Ltd., varying interest rates from 5.9% to 8.5%, due 1997 to 2009 710 1,412 Other debt principally related to international subsidiaries 1,413 122 ------------------------ 4,925 38,991 Less - Current portion of long-term debt (10) - ------------------------ $ 4,915 $ 38,991 ========================
Page 9 of 18 10 4. BUSINESS SEGMENTS SECURITY GUARD SERVICES AND CORRECTIONAL SERVICES 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.
TWENTY-SIX WEEKS ENDED (THOUSANDS OF DOLLARS) JULY 2, 1995 JULY 3, 1994 ------------ ------------ REVENUES: Security guard services $ 337,119 $ 305,803 Correctional services 46,044 40,188 --------- --------- Total revenues 383,163 345,991 --------- --------- OPERATING INCOME: Security guard services 3,614 5,302 Correctional services 3,408 1,943 --------- --------- Total operating income 7,022 7,245 --------- --------- EQUITY INCOME (LOSS) OF AFFILIATES, NET OF TAXES: Security guard services 477 271 Correctional services (98) (110) --------- --------- Total equity income 379 161 --------- --------- CAPITAL EXPENDITURES: Security guard services 1,085 2,574 Correctional services 633 64 --------- --------- Total capital expenditures 1,718 2,638 --------- --------- DEPRECIATION AND AMORTIZATION EXPENSE: Security guard services 5,023 4,037 Correctional services 1,011 775 --------- --------- Total expenses 6,034 4,812 --------- --------- IDENTIFIABLE ASSETS AT JULY 2, 1995 AND JANUARY 1, 1995: Security guard services 152,054 184,739 Correctional services 34,450 28,018 --------- --------- Total identifiable assets 186,504 212,757 --------- ---------
Page 10 of 18 11 DOMESTIC AND INTERNATIONAL OPERATIONS A summary of domestic and international operations is shown below. Non-U.S. Operations of the corporation and its subsidiaries are conducted primarily in South American and Australia. The corporation carries its investments in affiliates (20% to 50% owned) under the equity method. U.S. income taxes which would be payable upon remittance of affiliates' earnings 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.
TWENTY-SIX WEEKS ENDED (THOUSANDS OF DOLLARS) JULY 2, 1995 JULY 3, 1994 ------------ ------------ REVENUES: Domestic operations $ 320,984 $ 294,589 International operations 62,179 51,402 --------- --------- Total revenues 383,163 345,991 --------- --------- OPERATING INCOME: Domestic operations 4,899 5,270 International operations 2,123 1,975 --------- --------- Total operating income 7,022 7,245 --------- --------- EQUITY INCOME (LOSS) OF AFFILIATES, NET OF TAXES: Domestic operations - - International operations 379 161 --------- --------- Total equity income 379 161 --------- --------- CAPITAL EXPENDITURES: Domestic operations 1,277 1,714 International operations 441 924 --------- --------- Total capital expenditures 1,718 2,638 --------- --------- DEPRECIATION AND AMORTIZATION EXPENSE: Domestic operations 4,788 3,864 International operations 1,246 948 --------- --------- Total expenses 6,034 4,812 --------- --------- IDENTIFIABLE ASSETS AT JULY 2, 1995 AND JANUARY 1, 1995: Domestic operations 144,248 181,933 International operations 42,256 30,824 --------- --------- Total identifiable assets 186,504 212,757 --------- ---------
Page 11 of 18 12 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 (2ND QUARTER 1995 VERSUS 2ND QUARTER 1994) Consolidated revenues increased $18.4 million (10%) for the second quarter of 1995 compared to the same quarter in 1994. The Corporation's business is divided into two major segments: security guard and correctional services. The two business segments of the Corporation conduct their businesses principally in the United States, although they also conduct a significant portion of their business overseas. The Corporation's security guard services revenues increased by $16.6 million (11%), from $154.2 million to $170.8 million during the second quarter of 1995 compared to the same period last year. The increase was attributed principally to increases in domestic security guard service revenues which increased $8.4 million over the comparable period last year due principally to new business, including national contracts with IBM and Northern Telecom. The food services division continued to expand its revenue base and recorded an increase in revenues of $3.8 million (68%) attributable to 8 new contracts acquired in the second half of 1994 and in the first quarter of 1995. The Corporation's international security services revenues increased $4.8 million in the second quarter of 1995 compared to the same quarter last year. The Corporation continued to expand its revenue base in Latin America and Eastern Europe. Revenues increased in Chile, Uruguay, and Russia due to new branch openings in Krasnodar and St. Petersburg. The Corporation's correctional services revenues are derived principally from the management and construction of correctional facilities. In addition, the corrections division has a wholly-owned subsidiary in Australia and participates in a partnership in the United Kingdom. Correctional services revenues were $1.7 million higher in the second quarter of 1995 compared to the second quarter of 1994. This increase was attributed principally to new facility management contracts in Coke County and Lockhart, Texas which started in October and August 1994, respectively. In addition, the division derived additional revenues from management of the construction of the Moore Haven and South Bay correctional facilities located in Florida. Revenues of the Australian subsidiary of Wackenhut Corrections Corporation ("WCC") amounted to $6.2 million for the second quarter of 1995 compared with $5.1 million for the same period last year. The increase is primarily due to expansion of the Arthur Gorrie Correctional Center in Queensland, Australia and an increase in compensated resident days between the two periods compared. Page 12 of 18 13 Payroll and related taxes increased $7.6 million (6%) compared to the second quarter of 1994, and other operating expenses increased $10.8 million (28%). The increase in labor costs was consistent with the growth in revenues of the security guard services business, whereas the increase in other operating expenses was attributable principally to higher revenues of the food and corrections services divisions which are less labor intensive than other aspects of the Corporation's business. Operating income in the second quarter of 1995 was only $17,000 higher than for the same quarter in 1994. Operating income of the security guard services business was $795,000 lower during this quarter due primarily to a decrease in award fee revenues from a contract with the Department of Energy as a result of lower than expected ratings at one facility. In addition, the loss of two contracts with the Department of Labor for the administration of two Job Corps Centers represented a decrease of approximately $339,000 in operating income. The international security guard services business also recorded lower operating income in the second quarter of 1995 compared to the same quarter last year as a result of higher administrative expenses associated with new business development, principally in the Far East and Africa. These decreases were partially offset by an improvement in the profit contribution of the domestic security guard services business. Operating income of the correctional services business increased $812,000 during the quarter. New facilities under management increased the number of beds under contracts to 15,500. The Australian subsidiary of WCC contributed $323,000 to the increase in operating income of the correctional services business during this quarter as a result of the increased beds under contract at the Arthur Gorrie facility during 1995. Additional operating income was derived from management of construction projects mentioned above. Other expense was $283,000 lower in the second quarter of this year than for the same period last year, principally due to the decrease of $299,000 in interest and receivable discount expense. The Corporation benefited from a reduction in funding requirements, although this benefit was partially offset by higher interest rates. The combined Federal and state effective income tax rate of 36.7% and 35% for the second quarter of 1995 and 1994 respectively, included reductions attributable to tax exempt interest, capital loss carryforwards and targeted job credits. The effective tax rate was higher in the second quarter of 1995 than for the comparable period last year due to a reduction in targeted job credits. Minority interest (net of income taxes) increased $516,000 during the second quarter of 1995 compared to 1994 reflecting the increase in public ownership in WCC. Equity income of foreign affiliates (net of income taxes) was $155,000 higher this quarter, when compared to the same quarter in 1994. First, equity income of international affiliates of the security guard services business increased $65,000 during the quarter. The improvement was attributable principally to affiliates in Argentina and Greece. In addition, losses of the correctional services partnership in the United Kingdom were significantly less than those for the second quarter of 1994. Net income was $227,000 (12%) lower for the second quarter of 1995 than for the same quarter in 1994 due to the factors mentioned above. Page 13 of 18 14 PERIOD-TO-PERIOD COMPARISONS (FIRST HALF FISCAL 1995 VERSUS FIRST HALF FISCAL 1994) Consolidated revenues increased $37.2 million (11%) for the first half of 1995 compared to the same period in 1994. The Corporation's security guard services revenues increased by $31.3 million (10%), from $305.8 million to $337.1 million during the first half of 1995 compared to the same period last year. The increase was attributed principally to increases in domestic security guard service revenues which increased $23.8 million over the comparable period last year due principally to new business, including national contracts with IBM and Northern Telecom. The food services division continued to expand its revenue base and recorded an increase in revenues of $7.4 million (72.0%) attributable to 8 new contracts acquired in the second half of 1994 and in the first quarter of 1995. International security guard services revenues increased $8.5 million in the first half of 1995 compared to the same period last year. The Corporation continued to expand its revenue base in Latin America and Eastern Europe. Revenue increased in Chile, Uruguay, and Russia, due to new branch openings in Krasnodar and St. Petersburg. Correctional services revenues were $5.9 million higher in the first half of 1995 compared to the first half of 1994. This increase was attributed principally to new facility management contracts in Coke County and Lockhart, Texas which started in October and August 1994, respectively. In addition, the division derived additional revenues from management of the construction of the Moore Haven and South Bay facilities. Revenues of the Australian subsidiary of WCC amounted to $12.7 million for the first half of 1995 compared with $10.4 million for the same period last year. The increase is primarily due to the Gorrie facility expansion and continued increase in compensated resident days between the two periods compared. Payroll and related taxes increased $20.9 million (8.0%) compared to the first half of 1994, and other operating expenses increased $16.5 million (21.3%). The increase in labor costs was consistent with the growth in revenues of the security guard services business, whereas the increase in other operating expenses was attributable principally to higher revenues of the food and corrections services divisions which are less labor intensive than other aspects of the Corporation's business. Operating income in the first half of 1995 was $223,000 lower than for the same period in 1994. Operating income of the security guard services business was $1.7 million lower during this period due partially 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 half of 1994, as well as the decrease in award fee revenues from a contract with the Department of Energy as a result of lower than expected ratings at one facility during the first half of 1995. In addition, the loss of two contracts with the Department of Labor for the administration of Job Corps Centers represented a decrease of approximately $339,000 in operating income in the first half of 1995. The remainder of the decrease is 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. The international security guard services business also recorded lower operating income in the first half of 1995 compared to the same period last year as a result of higher administrative expenses associated with new business development, principally in the Far East and Africa. These decreases were partially offset by an improvement in the profit contribution of the domestic security guard service business. Page 14 of 18 15 Operating income of the correctional services business increased $1.5 million during the first half of 1995. New facilities under management increased the number of beds under contracts to 15,500. The Australian subsidiary of WCC contributed $654,000 to the increase in operating income of the correctional services business during the first half of 1995 primarily as a result of the increased number of beds at the Gorrie facility during 1995. Additional operating income was derived from management of construction projects mentioned above. Other expense was $432,000 lower in the first half of this year than for the same period last year, principally due to the decrease of $549,000 in interest and receivable discount expense, and the concurrent decrease of $117,000 in interest and investment income principally due to a decline in fixed income securities investment holdings. The combined Federal and state effective income tax rate of 35.6% and 35.0% for the first half of 1995 and 1994 respectively, included reductions attributable to tax exempt interest, capital loss carryforwards and targeted job credits. The effective tax rate was higher in the first half of 1995 than for the comparable period last year due to a reduction in targeted job credits. Minority interest (net of income taxes) increased $770,000 during the first half of 1995 compared to 1994 reflecting the increase in public ownership in WCC. Equity income of foreign affiliates (net of income taxes) was $218,000 higher in the first half, when compared to the same period in 1994. First, equity income of international affiliates of the security guard services business increased $65,000 during the first half of 1995. The improvement was attributable principally to affiliates in Argentina and Greece. In addition, losses of the correctional services partnership in the United Kingdom were significantly less than those for the first half of 1994. Net income was $448,000 (12%) lower for the first half of 1995 than for the first half of 1994 due to the factors mentioned above. Page 15 of 18 16 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 2, 1995 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 The Annual Meeting of Shareholders of the Corporation was held on April 28, 1995 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 ---- --------- -------------- Julius W. Becton 3,573,949 10,438 Richard G. Capen, Jr. 3,574,729 9,658 Anne Newman Foreman 3,574,186 10,201 Edward L. Hennessy, Jr. 3,574,639 9,478 Paul X. Kelley 3,573,337 11,050 Robert Q. Marston 3,574,187 10,200 Jorge L. Mas Canosa 3,546,110 38,277 Nancy Clark Reynolds 3,573,811 10,576 Thomas P. Stafford 3,573,602 10,785 George R. Wackenhut 3,573,687 10,700 Richard R. Wackenhut 3,574,325 10,062
Other matters voted upon at the Annual Meeting were the ratification of the action of the Board of Directors in appointing the firm of Arthur Andersen LLP to be the independent certified public accountants of the Corporation for the fiscal year 1995, and to perform such other services as may be requested and the approval of The Wackenhut Corporation Annual Bonus Plan for Designated Executive Officers. Page 16 of 18 17 Tabulation of the results of voting on these matters is as follows: Proposal to approve the appointment of Arthur Andersen LLP - FOR.....3,574,121 AGAINST.....5,484 ABSTAIN.....4,782 Proposal to approve The Wackenhut Corporation Annual Bonus Plan for Designated Executive Officers - FOR.....3,375,841 AGAINST.....178,946 ABSTAIN.....28,800 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 did not file a Form 8-K during the second quarter of 1995. Page 17 of 18 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: August 14, 1995 /s/ RICHARD C. DECOOK ------------------------------------------ Richard C. DeCook, Senior Vice President - Finance and Chief Financial Officer (Duly Authorized Officer) DATE: August 14, 1995 /s/ JUAN D. MIYAR ------------------------------------------ Juan D. Miyar, Vice President - Accounting Services and Corporate Controller (Chief Accounting Officer) Page 18 of 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 2, 1995. 1,000 6-MOS DEC-31-1995 JAN-02-1995 JUL-02-1995 10,928 10,888 75,902 1,465 7,612 107,789 46,477 (16,187) 186,504 66,500 4,915 965 0 0 58,791 186,504 0 383,163 0 376,141 0 584 840 6,182 2,198 0 0 0 0 3,325 0.34 0.00 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 JULY 2, 1995, $34,928,000 HAD BEEN SOLD AND IS INCLUDED AS A REDUCTION IN ACCOUNTS RECEIVABLE IN THIS SCHEDULE. INCLUDES $16,305 OF OTHER CURRENT ASSETS INCLUDES $40,330 RESERVE FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY, $10,174 MINORITY INTEREST AND $4,829 OTHER LIABILITIES INTEREST AND RECEIVABLE DISCOUNT EXPENSE OF $1,495 NET OF INTEREST AND INVESTMENT INCOME OF $655 INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES - NET OF INCOME TAXES OF $1,038 AND (379) RESPECTIVELY