-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QQgggTcQl6EMdH6Ab6C/hxFvBx+JSs4d/9DddEhlSi5LuCfBU1rXRIDTpDkr+yJH 7fl3XOucqjmQ1jkMXacI2Q== 0000950144-96-005479.txt : 19960816 0000950144-96-005479.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950144-96-005479 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96612326 BUSINESS ADDRESS: STREET 1: 4200 WACKENHUT DRIVE STREET 2: #100 CITY: PALM BEACH GARDEN STATE: FL ZIP: 33410 BUSINESS PHONE: 4026916429 MAIL ADDRESS: STREET 1: P O BOX 109603 CITY: PALM BEACH GARDEN STATE: FL ZIP: 33410 10-Q 1 WACKENHUT CORPORATION FORM 10-Q 06/30/96 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 June 30, 1996 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.) 4200 Wackenhut Drive #100, Palm Beach Gardens, FL 33410-4243 - ------------------------------------------ ------------------------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (561) 622-5656 - -------------------------------------------------------------------------------- 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, 1996, 3,858,885 shares of Series A and 10,862,512 shares of Series B of the registrant's Common Stock were issued and outstanding. Page 1 of 22 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 June 30, 1996 are not necessarily indicative of the results for the entire fiscal year ending December 29, 1996. Page 2 of 22 3 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED JUNE 30, 1996 and JULY 2, 1995 (In thousands except per share data) (UNAUDITED)
1996 1995 ------------------------------- REVENUES $ 222,904 $ 193,371 ------------------------------- OPERATING EXPENSES: Payroll and related taxes 163,281 140,664 Other operating expenses 55,902 48,740 ------------------------------- 219,183 189,404 ------------------------------- OPERATING INCOME 3,721 3,967 ------------------------------- OTHER INCOME (EXPENSE): Interest expense (979) (758) Interest and investment income 1,110 330 ------------------------------- 131 (428) ------------------------------- INCOME BEFORE INCOME TAXES 3,852 3,539 Provision for income taxes 1,422 1,300 Minority interest, net of income taxes 923 667 Equity income of foreign affiliates, net of income taxes (400) (154) ------------------------------- NET INCOME $ 1,907 $ 1,726 =============================== EARNINGS PER SHARE $ 0.15 $ 0.15 ===============================
See notes to Consolidated Financial Statements. Page 3 of 22 4 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE TWENTY-SIX WEEKS ENDED JUNE 30,1996 AND JULY 2, 1995 (In thousands except share data) (UNAUDITED)
1996 1995 ----------------------------------- REVENUES $ 435,378 $ 383,163 ----------------------------------- OPERATING EXPENSES: Payroll and related taxes 316,684 282,272 Other operating expenses 112,160 93,869 Provision for relocation costs 750 - ----------------------------------- 429,594 376,141 ----------------------------------- OPERATING INCOME 5,784 7,022 ----------------------------------- OTHER INCOME (EXPENSE): Interest expense (1,863) (1,495) Interest and investment income 2,165 655 ----------------------------------- 302 (840) ----------------------------------- INCOME BEFORE INCOME TAXES 6,086 6,182 Provision for income taxes 2,191 2,198 Minority interest, net of income taxes 1,750 1,038 Equity income of foreign affiliates, net of income taxes (707) (379) ----------------------------------- NET INCOME $ 2,852 $ 3,325 =================================== EARNINGS PER SHARE $ 0.23 $ 0.28 ===================================
See notes to Consolidated Financial Statements. Page 4 of 22 5 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995 (In thousands except share data)
(Unaudited) 1996 1995 ----------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 64,237 $ 20,185 Accounts receivable, less allowance for doubtful accounts of $1,796 in 1996 and $1,268 in 1995 120,417 77,121 Inventories 6,277 6,798 Other 21,301 18,058 ----------------------------------- 212,232 122,162 ----------------------------------- NOTES RECEIVABLE 10,613 10,540 ----------------------------------- MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT of casualty reinsurance subsidiary 13,641 5,774 ----------------------------------- PROPERTY AND EQUIPMENT, at cost 32,818 29,132 Accumulated depreciation (10,578) (9,851) ----------------------------------- 22,240 19,281 ----------------------------------- DEFERRED TAX ASSET, net 1,203 6,170 ----------------------------------- OTHER ASSETS: Investment in and advances to foreign affiliates, at cost, including equity in undistributed earnings of $4,823 in 1996 and $4,098 in 1995 11,648 10,984 Other 36,265 23,016 ----------------------------------- 47,913 34,000 ----------------------------------- $ 307,842 $ 197,927 ===================================
See notes to Consolidated Financial Statements. Page 5 of 22 6 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995 (In thousands except share data)
1996 1995 ----------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 11 $ 11 Notes payable - 1,115 Accounts payable 15,322 16,032 Accrued payroll and related taxes 34,416 33,793 Accrued expenses 19,509 21,456 Deferred tax liability, net - 117 ----------------------------------- 69,258 72,524 ----------------------------------- RESERVES FOR LOSSES of casualty reinsurance subsidiary 41,543 40,118 ----------------------------------- LONG-TERM DEBT 8,012 5,376 ----------------------------------- OTHER 7,582 8,027 ----------------------------------- MINORITY INTEREST 37,401 8,978 ----------------------------------- SHAREHOLDERS' EQUITY: Preferred stock, 10,000,000 shares authorized - - Common stock, $.10 par value, 50,000,000 shares authorized: Series A common stock, 3,858,885 issued and outstanding in 1996 and 1995 386 386 Series B common stock, 10,862,512 issued and outstanding in 1996 and 8,272,887 in 1995 1,086 827 Additional paid-in capital 119,411 39,644 Retained earnings 27,052 25,790 Cumulative translation adjustment (3,768) (3,702) Unrealized loss on marketable securities (121) (41) ----------------------------------- 144,046 62,904 ----------------------------------- $ 307,842 $ 197,927 ===================================
See notes to Consolidated Financial Statements. Page 6 of 22 7 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996 AND JULY 2, 1995 (In thousands) (UNAUDITED)
1996 1995 ----------------------------------- CASH FLOWS USED IN OPERATING ACTIVITIES: Net Income $ 2,852 $ 3,325 Adjustments - Depreciation expense 1,870 2,254 Amortization expense 6,553 3,780 Provision for bad debts 766 584 Equity income, net of dividends (963) (473) Minority interests in net income 2,662 1,573 Other (109) (205) Changes in assets and liabilities, net of acquisitions and divestitures - (Increase) decrease in assets: Accounts receivable (11,062) (8,031) Inventories (1,767) (2,887) Other current assets (3,243) (2,021) Marketable securities and certificates of deposit (12) (240) Other assets (1,543) (3,179) Deferred tax asset, net 4,967 2,497 Increase (decrease) in liabilities: Accounts payable and accrued expenses (3,739) (3,714) Accrued payroll and related taxes 623 916 Deferred tax liability, net (117) (388) Reserve for losses of casualty reinsurance subsidiary 1,425 1,880 Other (444) 800 ----------------------------------- NET CASH USED IN OPERATING ACTIVITIES (1,281) (3,529) -----------------------------------
(Continued) Page 7 of 22 8 THE WACKENHUT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996 AND JULY 2, 1995 (In thousands) (UNAUDITED) (Continued)
1996 1995 ----------------------------------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Net proceeds from public offering of subsidiary's common stock 51,606 - Proceeds from exercise of stock options of subsidiary 320 897 Payments on notes receivable 153 Payments for acquisitions (13,703) - Investment in and advances to foreign affiliates 349 (1,286) Capital expenditures (4,615) (1,718) Proceeds from sales (payments for purchases) of marketable securities of casualty reinsurance subsidiary, net (7,980) 1,206 Deferred charge expenditures (2,482) (1,492) ----------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 23,495 (2,240) ----------------------------------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Net proceeds from public offering of the company's common stock 54,166 - Proceeds from exercise of stock options 779 - Proceeds from issuance of debt 9,871 64,657 Payments on debt (8,388) (95,242) Proceeds from sales (payments for repurchases) of accounts receivable (33,000) 34,928 Dividends paid (1,590) (1,454) ----------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 21,838 2,889 ----------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,052 (2,880) Cash and Cash Equivalents, at beginning of period 20,185 13,808 ----------------------------------- CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 64,237 $ 10,928 =================================== SUPPLEMENTAL DISCLOSURES CASH PAID DURING THE PERIOD FOR: Interest $ 1,939 $ 1,451 Income taxes $ 131 $ 2,143
See notes to Consolidated Financial Statements. Page 8 of 22 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 December 31, 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 three year agreement to sell on an on-going basis, an undivided interest in a defined pool of eligible receivables up to a maximum of $40,000,000. In December 1995, the accounts receivable securitization facility was increased to $50,000,000. 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 Expense," in the Consolidated Statements of Income. At June 30, 1996, $2,000,000 of accounts receivable had been sold under this agreement. The defined pool of accounts receivable sold at June 30, 1996 approximates fair value. The Corporation retains substantially the same risk of credit loss as if the receivables had not been sold. 3. LONG-TERM DEBT
JUNE 30, December 31, 1996 1995 ----------------------------------- Revolving loans - 6.1% in 1996 and 6.2% in 1995 $ 1,850 $ 1,400 Other debt principally related to WCC and international subsidiaries 6,173 3,987 ----------------------------------- 8,023 5,387 Less - Current portion of long-term debt (11) (11) ----------------------------------- $ 8,012 $ 5,376 ===================================
4. THE WACKENHUT CORPORATION'S STOCK OFFERING During the second quarter of 1996, the Corporation sold 2,500,000 shares of Series B common stock in connection with a public offering at a price of $23.50 per share. Net proceeds of approximately $54,166,000 from the offering will be used to repay the outstanding balance on the revolving loan, to repurchase a portion of the receivables sold under the accounts receivable securitization facility, for possible future acquisitions, for systems and technology upgrades and for general corporate purposes. Page 9 of 22 10 5. BUSINESS SEGMENTS SECURITY-RELATED AND OTHER SUPPORT SERVICES AND CORRECTIONAL SERVICES The Corporation's principal business consists of security-related and other support services to commercial and governmental clients. WCC provides facility management and construction services to detention and correctional facilities. Provided below is various financial information for each segment:
TWENTY-SIX WEEKS ENDED ------------------------------------ (THOUSANDS OF DOLLARS) JUNE 30, 1996 JULY 2, 1995 ------------- ------------ REVENUES: Security-related and other support services $372,528 $337,119 Correctional services 62,850 46,044 -------- -------- Total revenues $435,378 $383,163 -------- -------- OPERATING INCOME: Security-related and other support services $ 2,902 $ 3,614 Correctional services 3,632 3,408 Provision for relocation costs (750) - -------- -------- Total operating income $ 5,784 $ 7,022 -------- -------- EQUITY INCOME (LOSS) OF AFFILIATES, NET OF TAXES: Security-related and other support services $ 525 $ 477 Correctional services 182 (98) -------- -------- Total equity income $ 707 $ 379 -------- -------- CAPITAL EXPENDITURES: Security-related and other support services $ 3,508 $ 1,085 Correctional services 1,107 633 -------- -------- Total capital expenditures $ 4,615 $ 1,718 -------- -------- DEPRECIATION AND AMORTIZATION EXPENSE: Security-related and other support services $ 6,817 $ 5,023 Correctional services 1,606 1,011 -------- -------- Total expenses $ 8,423 $ 6,034 -------- -------- IDENTIFIABLE ASSETS AT JUNE 30, 1996 AND DECEMBER 31, 1995: Security-related and other support services $212,218 $159,087 Correctional services 95,624 38,840 -------- -------- Total identifiable assets $307,842 $197,927 -------- --------
Page 10 of 22 11 DOMESTIC AND INTERNATIONAL OPERATIONS 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. A summary of domestic and international operations is shown below.
TWENTY-SIX WEEKS ENDED ------------------------------- (THOUSANDS OF DOLLARS) JUNE 30, 1996 JULY 2, 1995 ------------- ------------ REVENUES: Domestic operations $ 365,765 $ 320,984 International operations 69,613 62,179 --------- ---------- Total revenues $ 435,378 $ 383,163 --------- ---------- OPERATING INCOME: Domestic operations $ 6,140 $ 4,899 International operations 394 2,123 Provision for relocation costs (750) - --------- ---------- Total operating income $ 5,784 $ 7,022 --------- ---------- EQUITY INCOME OF AFFILIATES, NET OF TAXES: Domestic operations $ - $ - International operations 707 379 --------- ---------- Total equity income $ 707 $ 379 --------- ---------- CAPITAL EXPENDITURES: Domestic operations $ 3,644 $ 1,277 International operations 971 441 --------- ---------- Total capital expenditures $ 4,615 $ 1,718 --------- ---------- DEPRECIATION AND AMORTIZATION EXPENSE: Domestic operations $ 4,782 $ 4,788 International operations 3,641 1,246 --------- ---------- Total expenses $ 8,423 $ 6,034 --------- ---------- IDENTIFIABLE ASSETS AT JUNE 30, 1996 AND DECEMBER 31, 1995: Domestic operations $ 248,863 $ 141,431 International operations 58,979 56,496 --------- ---------- Total identifiable assets $ 307,842 $ 197,927 --------- ----------
Page 11 of 22 12 THE WACKENHUT CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Corporation provides security-related and other support services through the Services Business and correctional services through the Correctional Business. Through the Services Business, the Corporation provides physical security services, food services and other related services to commercial and governmental customers. Through the Correctional Business, the Corporation provides correctional and detention facility design, development and management services to government agencies. The Services Business is managed through two operating groups: the North American Operations Group and the International Operations Group. The Correctional Business is operated through the Corporation's 55%-owned Wackenhut Corrections Corporation subsidiary ("WCC"). The Correctional Business includes the Australian subsidiary and United Kingdom affiliate of WCC. FINANCIAL CONDITION During the second quarter of 1996, the Corporation sold 2,500,000 shares of its Series B common stock in connection with a public offering at a price of $23.50 per share, before deducting underwriting discounts and commissions and estimated offering expenses. Net proceeds of approximately $54,166,000 from the offering will be used to repay the outstanding balance on the revolving loan, to repurchase a portion of the receivables sold under the accounts receivable securitization facility, for possible future acquisitions, for systems and technology upgrades and for general corporate purposes. In January 1996, WCC sold 2,300,000 shares of its common stock in connection with a public offering at a price of $24.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses. Net proceeds of approximately $51,606,000 from WCC's offering will be used for possible future acquisitions, capital investments in new facilities, working capital requirements and general corporate purposes. Reference is made to Item 7, Part II of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 for further 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. Page 12 of 22 13 COMPARISON OF THIRTEEN WEEKS ENDED JUNE 30, 1996 AND THIRTEEN WEEKS ENDED JULY 2, 1995 REVENUES Consolidated revenues increased 15.3% to $222.9 million in the thirteen weeks ended June 30, 1996 (the "Second Quarter of 1996") from $193.4 million in the thirteen weeks ended July 2, 1995 (the "Second Quarter of 1995"). SERVICES BUSINESS Services Business revenues increased 10.9% to $189.5 million in the Second Quarter of 1996 from $170.8 million in the Second Quarter of 1995. North American Operations Group. North American Operations Group revenues increased 12.8% to $163.8 million in the Second Quarter of 1996 from $145.2 million in the Second Quarter of 1995. The North American Operations Group continued to increase its revenue base, primarily as a result of obtaining and maintaining contracts with major national accounts and continuing success in the Custom Protection Officer ("CPO") business. The CPO business revenues increased 9.8% during the Second Quarter of 1996 compared to the Second Quarter of 1995. Revenues of the Food Division almost doubled during the Second Quarter of 1996 to $17.6 million, compared to revenues of $9.4 million for the Second Quarter of 1995, reflecting the acquisition of the contracts and certain assets of the Correctional Food Services Division of Service America Corporation and new business development. International Operations Group. International Operations Group revenues increased 4.2% to $24.7 million in the Second Quarter of 1996 from $23.7 million in the Second Quarter of 1995. During the fourth quarter of 1995 the former subsidiary in Chile was deconsolidated and is now a minority-owned affiliate. Revenues of the Chilean operation for the Second Quarter of 1995 amounted to $4.7 million. Excluding the effect of the Chilean operation, revenues of the International Operations Group increased approximately $5.7 million. Revenues of Wackenhut of Australia Pty., Ltd., which was acquired in July of last year, amounted to $2.3 million in the Second Quarter of 1996. CORRECTIONAL BUSINESS Correctional Business revenues increased 48.1% to $33.4 million in the Second Quarter of 1996 from $22.6 million in the Second Quarter of 1995. The increase in revenues in the Second Quarter of 1996 was primarily attributable to increased compensated resident days resulting from the opening of two facilities in the second half of 1995 (Moore Haven Correctional Facility in Florida, and John R. Lindsey Unit in Texas), one facility that opened in the first half of 1996 (Willacy County Unit in Texas), one facility for which WCC assumed correctional services in 1996 (Delaware County Prison in Pennsylvania) and the expansion of two facilities in the second half of 1995 (Arthur Gorrie Correctional Centre in Australia, and Allen Correctional Center in Louisiana). Page 13 of 22 14 OPERATING INCOME Consolidated operating income decreased 6.2% to $3.7 million in the Second Quarter of 1996. SERVICES BUSINESS Operating income from the Services Business decreased 15.9% to $1.8 million in the Second Quarter of 1996 from $2.1 million for the same period last year. North American Operations Group. North American Operations Group operating income remained relatively unchanged at $4.6 million from the Second Quarter of 1995. Increases in the profit contribution of the core security-related and foodservice businesses were offset by higher group overhead costs and greater absorption of direct corporate general and administrative expenses which increased as a result of higher payroll related costs. International Operations Group. International Operations Group incurred an operating loss of $765,000 in the Second Quarter of 1996 compared to operating income of $580,000 for the same period in 1995. The operating loss in the Second Quarter of 1996 was primarily due to the operating losses from the new security services subsidiary in Australia, Wackenhut of Australia Pty., Ltd., which recorded an operating loss of approximately $852,000 in the Second Quarter of 1996. Currently, the Corporation is in the process of aligning its organizational structure in Australia to that of its other security operations in order to enhance operational efficiency and to increase its revenue base in that country. Increases in operating losses in Venezuela, decreases in operating income in Ecuador and the deconsolidation of operations in Chile offset increases in operating income in other countries. CORPORATE EXPENSES AND UNDERWRITING LOSSES Corporate expenses and underwriting losses decreased 33.9% to $2.0 million in the Second Quarter of 1996 from $3.0 million in the Second Quarter of 1995. CORRECTIONAL BUSINESS WCC's operating income increased by 5.2% to $1.9 million in the Second Quarter of 1996 from $1.8 million in the Second Quarter of 1995 due to additional income from the opening of three new facilities, assumption of correctional services at one facility, and two expansions, partially offset by higher general and administrative expenses. OTHER INCOME/EXPENSE Other income was $131,000 in the Second Quarter of 1996 compared to other expense of $428,000 for the comparable period in 1995. Interest and investment income increased $780,000 including interest income of approximately $553,000 from the investment of the net proceeds of WCC's public offering in January 1996. This increase was partially offset by an increase in interest expense of $221,000 due principally to the increase in the level of corporate bank borrowings and fees incurred under the accounts receivable securitization facility. Proceeds from the additional bank borrowings and sales of receivables under the accounts receivable securitization facility were used by the Corporation Page 14 of 22 15 principally to effect the foodservice acquisition, for the improvement of its information systems, and to penetrate the Australian security-services market. INCOME BEFORE INCOME TAXES Income before income taxes increased 8.8% to $3.9 million in the Second Quarter of 1996 from $3.5 million in the Second Quarter of 1995. The combined federal and state effective income tax rate was 36.0% for the Second Quarter of 1996 and 35.7% for the same period in 1995. The higher effective rate in the Second Quarter of 1996 was due to: (i) the statutory elimination of targeted job tax credits; and (ii) a decrease in tax exempt income of the captive reinsurance subsidiary. MINORITY INTEREST EXPENSE Minority interest expense (net of income taxes) increased to $923,000 in the Second Quarter of 1996 from $667,000 in the Second Quarter of 1995, reflecting principally the increase in earnings of and the public ownership in WCC. EQUITY INCOME OF FOREIGN AFFILIATES Equity income of foreign affiliates (net of income taxes) increased 159.7% to $400,000 in the Second Quarter of 1996 from $154,000 in the Second Quarter of 1995, primarily resulting from increased earnings of security services affiliates in South America and Europe, the joint venture of WCC in the United Kingdom, and the inclusion of the Corporation's equity income of the Chilean operations. NET INCOME Net income increased to $1,907,000 in the Second Quarter of 1996, or $0.15 per share compared to $1,726,000 or $0.15 per share for the Second Quarter of 1995. COMPARISON OF TWENTY-SIX WEEKS ENDED JUNE 30, 1996 AND TWENTY-SIX WEEKS ENDED JULY 2, 1995 REVENUES Consolidated revenues increased 13.6% to $435.4 million in the twenty-six weeks ended June 30, 1996 (the "First Half of 1996") from $383.2 million in the twenty-six weeks ended July 2, 1995 (the "First Half of 1995"). SERVICES BUSINESS Services Business revenues increased 10.5% to $372.5 million in the First Half of 1996 from $337.1 million in the First Half of 1995. Page 15 of 22 16 North American Operations Group. North American Operations Group revenues increased 12.3% to $320.0 million in the First Half of 1996 from $284.9 million in the First Half of 1995. The North American Operations Group continued to increase its revenue base, primarily as a result of obtaining and maintaining contracts with major national accounts and continuing success in the CPO business. The CPO business revenues increased 11.8% during the First Half of 1996 compared to the First Half of 1995. Revenues of the Food Division almost doubled during the First Half of 1996 to $33.4 million, compared to revenues of $17.7 million for the First Half of 1995, reflecting the acquisition of the contracts and certain assets of the Correctional Food Services Division of Service America Corporation and new business development. International Operations Group. International Operations Group revenues increased 9.1% to $50.4 million in the First Half of 1996 from $46.2 million in the First Half of 1995. During the fourth quarter of 1995 the former subsidiary in Chile was deconsolidated and is now a minority-owned affiliate. Revenues of the Chilean operation for the First Half of 1995 amounted to $8.9 million. Excluding the effect of the Chilean operation, revenues of the International Operations Group increased approximately $13.1 million. Revenues of Wackenhut of Australia Pty., Ltd., which was acquired in July of last year, amounted to $6.1 million in the First Half of 1996. CORRECTIONAL BUSINESS Correctional Business revenues increased 36.5% to $62.9 million in the First Half of 1996 from $46.0 million in the First Half of 1995. The increase in revenues in the First Half of 1996 was primarily attributable to increased compensated resident days resulting from the opening of two facilities in the second half of 1995 (Moore Haven Correctional Facility in Florida, and John R. Lindsey Unit in Texas), one facility that opened in the first half of 1996 (Willacy County Unit in Texas), one facility for which WCC assumed correctional services in 1996 (Delaware County Prison in Pennsylvania) and the expansion of two facilities in the second half of 1995 (Arthur Gorrie Correctional Centre in Australia, and Allen Correctional Center in Louisiana). OPERATING INCOME Consolidated operating income, which included a $750,000 provision for relocation costs in the First Half of 1996, decreased 17.6% to $5.8 million. Excluding relocation costs, consolidated operating income decreased 7.0%. SERVICES BUSINESS Operating income from the Services Business decreased 19.7% to $2.9 million in the First Half of 1996 from $3.6 million for the same period last year. North American Operations Group. North American Operations Group operating income increased 11.0% to $9.2 million in the First Half of 1996 from $8.3 million in the First Half of 1995. Increases in the profit contribution of the core security-related and foodservice businesses were partially offset by higher group overhead costs and greater absorption of direct corporate general and administrative expenses which increased as a result of higher payroll related costs. Page 16 of 22 17 International Operations Group. International Operations Group incurred an operating loss of $1.0 million in the First Half of 1996 compared to operating income of $1.1 million for the same period in 1995. The operating loss in the First Half of 1996 was primarily due to the operating losses from the new security services subsidiary in Australia, Wackenhut of Australia Pty., Ltd., which recorded an operating loss of approximately $1.2 million in the First Half of 1996. Currently, the Corporation is in the process of aligning its organizational structure in Australia to that of its other security operations in order to enhance operational efficiency and to increase its revenue base in that country. Increases in operating losses in Venezuela, decreases in operating income in Ecuador and the deconsolidation of operations in Chile offset increases in operating income in other countries. CORPORATE EXPENSES AND UNDERWRITING LOSSES Corporate expenses and underwriting losses decreased 6.8% to $5.4 million in the First Half of 1966 from $5.8 million in the First Half of 1995. CORRECTIONAL BUSINESS WCC's operating income increased by 6.6% to $3.6 million in the First Half of 1996 from $3.4 million in the First Half of 1995 due to additional income from the opening of three new facilities, assumption of correctional services at one facility, and two expansions, partially offset by higher general and administrative expenses. OTHER INCOME/EXPENSE Other income was $302,000 in the First Half of 1996 compared to other expense of $840,000 for the comparable period in 1995 due to two principal factors. First, interest and investment income increased $1,510,000 including interest income of approximately $1,194,000 from the investment of the net proceeds of WCC's public offering in January 1996. Second, interest expense increased $368,000 due principally to the increase in the level of corporate bank borrowings and fees incurred under the accounts receivable securitization facility. Proceeds from the additional bank borrowings and sales of receivables under the accounts receivable securitization facility were used by the Corporation principally to effect the foodservice acquisition, for the improvement of its information systems, and to penetrate the Australian security-services market. INCOME BEFORE INCOME TAXES Income before income taxes, which included a $750,000 provision for relocation costs in the First Half of 1996, decreased 1.6% to $6.1 million from $6.2 million in the First Half of 1995. The combined federal and state effective income tax rate was 36.0% for the First Half of 1996 and 35.7% for the same period in 1995. The higher effective rate in the First Half was due to: (i) the statutory elimination of targeted job tax credits; and (ii) a decrease in tax exempt income of the captive reinsurance subsidiary. Page 17 of 22 18 MINORITY INTEREST EXPENSE Minority interest expense (net of income taxes) increased to $1.8 million in the First Half of 1996 from $1.0 million in the First Half of 1995, reflecting principally the increase in earnings of and the public ownership in WCC. EQUITY INCOME OF FOREIGN AFFILIATES Equity income of foreign affiliates (net of income taxes) increased 86.5% to $707,000 in the First Half of 1996 from $379,000 in the First Half of 1995, primarily resulting from increased earnings of security services affiliates in South America and Europe, the joint venture of WCC in the United Kingdom, and the inclusion of the Corporation's equity income of the Chilean operations. NET INCOME Net income decreased to $2,852,000 in the First Half of 1996, or $0.23 per share, after the $750,000 provision for relocation costs ($461,000 net of income taxes), compared to $3,325,000 or $0.28 per share for the First Half of 1995. Page 18 of 22 19 THE WACKENHUT CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Corporation is presently, and is from time to time, subject to claims arising in the ordinary course of its business. In certain of such actions plaintiffs request punitive or other damages that may not be covered by insurance. In the opinion of management, the various asserted claims and litigation in which the Corporation is currently involved will not materially affect its financial position or future operating results, although no assurance can be given with respect to the ultimate outcome from any such claims or litigation. ITEM 2. CHANGES IN SECURITIES The Corporation increased the number of authorized shares of the Corporation's Common Stock from 20,000,000 shares, par value $.10 per share, to 50,000,000 shares, par value of $.10 per share, with 3,858,885 shares designated as Series A Common Stock and 46,141,115 shares designated as Series B Common Stock. 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 30, 1996 in Palm Beach Gardens, 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 3,293,145 8,837 Richard G. Capen, Jr. 3,293,545 8,437 Anne Newman Foreman 3,293,618 8,364 Edward L. Hennessy, Jr. 3,293,145 8,837 Paul X. Kelley 3,294,830 7,152 Nancy Clark Reynolds 3,294,800 7,182 Thomas P. Stafford 3,293,145 8,837 George R. Wackenhut 3,294,660 7,322 Richard R. Wackenhut 3,295,403 6,579
Page 19 of 22 20 Tabulations of the results of other matters voted upon at the Annual Meeting is as follows: Proposal No. 2 Appointment of Independent Certified Public Accountants - FOR.....3,296,552 AGAINST.....3,593 ABSTAIN.....1,836 Proposal No. 3 Approval of Non-Employee Director Stock Option Plan - FOR.....2,619,502 AGAINST.....371,004 ABSTAIN.....16,569 Proposal No. 4 Proposal to set aside a total of 900,000 shares of series B Common Stock of the corporation to be utilized for future issuance under the Key Employee Long Term Incentive Stock Plan - FOR.....2,555,079 AGAINST.....422,980 ABSTAIN.....18,245 A Special Meeting of the holders of the Series A Common Stock and the Series B Common Stock of The Wackenhut Corporation was held on May 23, 1996 in Palm Beach Gardens, Florida. A tabulation of the results of matters voted upon at the Special Meeting is as follows: Proposal No. 1 Proposal to amend Article III of the Corporation's Articles of Incorporation to increase the number of authorized shares of the Corporation's Common Stock from 20,000,000 shares, par value $.10 per share, to 50,000,000 shares, par value $.10 per share, with 3,858,885 shares designated as Series A Common Stock and 46,141,115 shares designated as Series B Common Stock -
SERIES A SERIES B --------- --------- FOR 2,048,358 4,202,587 AGAINST 191,949 370,569 ABSTAIN 2,218 3,160
Proposal No. 2 Proposal to amend Article III of the Corporation's Articles of Incorporation to confirm that one class or series of the Corporation's capital stock may be issued (by action of the Board of Directors without the necessity of further shareholder action) through a share dividend or a stock split on shares of another class or series of the Corporation's capital stock -
SERIES A SERIES B --------- --------- FOR 2,100,940 4,213,706 AGAINST 139,612 360,199 ABSTAIN 1,973 2,411
Page 20 of 22 21 Proposal No 3 Proposal to ratify, confirm and approve prior issuances by the Corporation of shares of one series of the Corporation's Common Stock to holders of another series of the Corporation's Common Stock, through a share dividend, a stock split, or otherwise -
SERIES A SERIES B --------- --------- FOR 2,098,385 4,207,045 AGAINST 141,543 364,715 ABSTAIN 2,597 4,556
ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a). Exhibits - Exhibit 3.1 - Articles of Incorporation as amended 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 1996 Page 21 of 22 22 THE WACKENHUT CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q for the twenty-six weeks ended June 30, 1996 to be signed on its behalf by the undersigned hereunto duly authorized. THE WACKENHUT CORPORATION DATE: August 12, 1996 /s/ JUAN D. MIYAR -------------------------------------- Juan D. Miyar, Duly Authorized Officer and Chief Accounting Officer Page 22 of 22 EX-3.1 2 AMENDED ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 STATE OF FLORIDA [SEAL] DEPARTMENT OF STATE I certify from the records of this office that THE WACKENHUT CORPORATION, is a corporation organized under the laws of the State of Florida, filed on December 4, 1958. The document number of this corporation is 217838. I further certify that said corporation has paid all fees and penalties due this office through December 31, 1996, that its most recent annual report was filed on May 1, 1996, and its status is active. I further certify that said corporation has not filed Articles of Dissolution. GIVEN UNDER MY HAND AND THE GREAT SEAL OF THE STATE OF FLORIDA AT TALLAHASSEE, THE CAPITAL, THIS THE FIFTH DAY OF JULY, 1996 [SEAL] /s/ Sandra B. Mortham ----------------------- Sandra B. Mortham Secretary of State 2 STATE OF FLORIDA [SEAL] DEPARTMENT OF STATE I certify the attached is a true and correct copy of the Amended and Restated Articles of Incorporation, as amended to date, for THE WACKENHUT CORPORATION, a corporation organized under the laws of the State of Florida, as shown by the records of this office. The document number of this corporation is 217838. GIVEN UNDER MY HAND AND THE GREAT SEAL OF THE STATE OF FLORIDA AT TALLAHASSEE, THE CAPITAL, THIS THE FIFTH DAY OF JULY, 1996 /s/ Sandra B. Mortham ----------------------- [SEAL] Sandra B. Mortham Secretary of State 3 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE WACKENHUT CORPORATION ------------------------ The articles of incorporation of The Wackenhut Corporation, originally filed with the Secretary of State of Florida on December 4, 1958, under the corporate name of Security Services Corp., are hereby restated as follows: ARTICLE I The name of this Corporation shall be: THE WACKENHUT CORPORATION ARTICLE II The purpose for which the corporation is formed and the principal objects of business to be carried on by it are as follows: (a) To contract for and provide any of the functions of Services of a private investigative agency, uniformed or ununiformed personnel, management consultation, advice, plans, surveys and systems for the safety, security control, protection and efficiency of persons, business, industrial and governmental firms and agencies. (b) To engage in and carry on the business of manufacturing and producing, buying, selling or otherwise dealing in or with goods, wares and merchandise of every kind and description and to acquire, own, use, sell and convey, mortgage or otherwise encumber any real estate or personal property in whole or in part and in any manner whatever to acquire, own, dispose of franchises, licenses, options or rights in any real estate or personal property or other property interests. (c) To engage in and carry on a general brokerage commission, forwarding and exporting and importing business and to act as factors, agents, commission merchants and dealers in the buying, selling or dealing in of goods, wares and merchandise of all kinds and descriptions. (d) To conduct and engage in any business, occupation or enterprise and to exercise any power or authority which may be done by a private corporation organized and existing under and by virtue of Chapter 608, Florida Statute, it being the intention that this corporation may conduct and transact any business lawfully authorized and not prohibited by said Chapter 608, Florida Statutes. 4 ARTICLE III The maximum amount of shares of stock that this corporation shall be authorized to issue shall be 30,000,000 shares which are to be divided into two classes as follows: 20,000,000 shares of Common Stock, par value $.10 per share, and 10,000,000 shares of Preferred Stock. The Common Stock may be created and issued from time to time in one or more series with voting rights for each series as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof and determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. ARTICLE IV The principal place of business of this corporation shall be at 3280 Ponce de Leon Blvd., Coral Gables, Florida, or at such other place as may be designated by the Board of Directors from time to time. This corporation shall have full power and authority to transact business and to establish offices or agencies at such places as may be in the best interests of this corporation. ARTICLE V This corporation is to exist perpetually. ARTICLE VI The amount of capital with which this corporation will begin business is Five Hundred Dollars. ARTICLE VII The business of this corporation shall be conducted by a Board of Directors consisting of not less than three (3) nor more than nineteen (19) members, the exact number to be determined from time to time in the by-laws of this Corporation. The Board of Directors shall have sole authority to adopt or amend by-laws for the government of this corporation. ARTICLE VIII The names and post office addresses of the members of the first Board of Directors, the President, and the Secretary and the Treasurer are: 2 5 G. DAVID PARRISH................................. 220 Security Trust President and Director Bldg., Miami, Florida JOHN T. WOITESEK................................. 220 Security Trust Secretary and Director Bldg., Miami, Florida GENE ESSNER...................................... 220 Security Trust Treasurer and Director Bldg., Miami, Florida
ARTICLE IX The name and post office address of each subscriber of these Articles of Incorporation, the number of shares of stock each agrees to take and the value of the consideration therefor (the sum of which values is not less than the amount of capital specified in Article VI) are: G. DAVID PARRISH.................................. 220 Security Trust 167 shares $167.00 Bldg., Miami, Florida JOHN T. WOITESEK.................................. 220 Security Trust 167 shares $167.00 Bldg., Miami, Florida GENE ESSNER....................................... 220 Security Trust 167 shares $167.00 Bldg., Miami, Florida -------- $500.00 =======
ARTICLE X The corporation shall have the following powers: (a) To acquire all or any part of the good will, rights, property and business of any person, firm, association or corporation heretofore or hereafter engaged in any business similar to any business which the corporation has the power to conduct and to hold, utilize, enjoy and in any and all manner dispose of the whole or any part of the rights, property and business so acquired, and to assume in connection therewith any liabilities of any person, firm, association or corporation. (b) To apply for, obtain, purchase, or otherwise acquire, any patents, copyrights, licenses, trademarks, trade names, rights, processes, formulas and the like, which may seem capable of being used for any of the purposes of the corporation; and to use, exercise, develop, grant licenses in respect of, sell and otherwise turn to account the same. (c) To carry out all or any part of the aforesaid objects and purposes, and to conduct its business in all or any part of its branches, in any or all states, territories, districts and possessions of the United States of America and in foreign countries. 3 6 (d) The corporation shall be authorized to exercise and enjoy all of the powers, rights and privileges granted to or conferred upon corporations organized under the laws of the State of Florida now or hereafter in force, and the enumeration of any powers shall not be deemed to exclude any powers, rights or privileges so granted or conferred. ARTICLE XI The Board of Directors, by the affirmative vote of a majority of the Directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all Directors for services to the corporation as directors, officers or otherwise. The authority vested in the Board of Directors by this Article XI shall include, in addition to the authority to establish salaries, the authority to establish the payment of bonuses, stock options and pension and profit-sharing plans. ARTICLE XII No holder of any of the shares of the capital stock of the corporation shall be entitled as of right to purchase or to subscribe for any unissued stock of any class, or any additional shares of any class, whether presently or hereinafter authorized, and also including without limitation, bonds, certificates of indebtedness, debentures, or other securities convertible into stock of the corporation or carrying any right to purchase stock of any class. Such unissued stock, or additional authorized issue of any stock, or other securities convertible into stock or carrying any right to purchase stock, may be issued and disposed of, pursuant to resolutions of the Board of Directors, to such persons, firms, corporations or associations and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its discretion. The Corporation shall indemnify every person who was or is a party or is or was threatened to be made a party to any action, suit or proceeding whether civil, criminal, administrative or investigative by reason of the fact he is or was a director, officer, employee, or agent, or is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust employee benefit plan or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by him in connection with such action, suit or proceeding, (except in such cases involving gross negligence or willful misconduct) in the performance of their duties, to the full extent permitted by applicable law. Such indemnification may, in the discretion of the Board of Directors, including advances of his expenses in advance of final disposition subject to the provisions of applicable law. Such right of indemnification shall not be exclusive of any right to which any director, officer, employee, agent or controlling stockholder of the Corporation may be entitled as a matter of law. 4 7 The foregoing restated articles of incorporation which integrate the original articles of incorporation of The Wackenhut Corporation and the amendments thereto, without further modification, were duly adopted at a Quarterly Meeting of the Board of Directors of the Corporation held on January 25, 1992 and duly adopted by the shareholders of the Corporation on April 24, 1992. IN WITNESS WHEREOF, the undersigned President and Chief Operating Officer and the Assistant Secretary of the Corporation have executed these Restated Articles of Incorporation this 5th day of May, 1992. /s/ RICHARD R. WACKENHUT -------------------------------------- Richard R. Wackenhut President and Chief Operation Officer /s/ JAMES P. ROWAN -------------------------------------- James P. Rowan Assistant Secretary 5 8 CERTIFICATE I, the undersigned Vice President and Assistant Secretary of The Wackenhut Corporation, a Florida corporation (the "Corporation"), pursuant to the provisions of Section 607.1007(4) of the Florida Business Corporation Act, does certify as follows: (a) The name of the Corporation is THE WACKENHUT CORPORATION. (b) Article III of the Corporation's Articles of Incorporation is amended to read as follows: ARTICLE III The maximum number of shares of stock that the Corporation shall be authorized to issue shall be 30,000,000 shares which are to be divided into two classes as follows: 20,000,000 shares of Common Stock, par value $.10 per share; and 10,000,000 shares of Preferred Stock. The Common Stock may be created and issued from time to time in one or more series with voting rights for each series as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. (c) The foregoing amendment to the Articles of Incorporation of the Corporation was duly proposed by the Corporation's Board of Directors on January 25, 1992 and approved by the Corporation's shareholders on April 24, 1992, pursuant to Section 607.1003 of the Florida Business Corporation Act. The number of votes cast in favor of the amendment by the shareholders of the Corporation was sufficient for approval of the amendment. IN WITNESS WHEREOF, the undersigned has hereunto executed the Certificate this 2nd day of November, 1992. /s/ James P. Rowan ---------------------------------- James P. Rowan, Vice President and Assistant Secretary 9 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE WACKENHUT CORPORATION, A FLORIDA CORPORATION Pursuant to provisions of Section 607.1006 of the Florida Business Corporation Act, The Wackenhut Corporation, a Florida corporation (the "Corporation"), hereby adopts the following Articles of Amendment for the purpose of amending the numbers, designations and classes of capital stock which the Corporation is authorized to issue. (a) The name of this corporation is The WACKENHUT CORPORATION. (b) The following amendment was duly adopted by the Corporation's Board of Directors pursuant to Section 607.1002 of the Florida Business Corporation Act without shareholder action and shareholder action on this amendment was not required. Article III of the Corporation's Articles of Incorporation is amended to read as follows: ARTICLE III The maximum number of shares of stock that the Corporation shall be authorized to issue shall be 30,000,000 shares which are to be divided into two classes as follows: 20,000,000 shares of Common Stock, par value $0.10 per share, of which 4,108,885 shares are authorized to be issuable as Series A Common Stock and 4,108,885 shares are authorized to be issuable as Series B Common Stock; and 10,000,000 shares of Preferred Stock. The Common Stock may be created and issued from time to time in one or more series with voting rights for each series as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. 10 The Corporation has authorized the issuance of a series of Common Stock consisting of 4,108,885 shares of voting Common Stock, par value $.10 per share which shall be designated as the Series A Common Stock. The Corporation has authorized the issuance of a series of Common Stock consisting of 4,108,885 shares of non-voting Common Stock, par value $.10 per share which shall be designated as the Series B Common Stock. The Series A Common Stock and the Series B Common Stock shall be identical in all respects except that the Series B Common Stock shall have no right to vote. (c) The foregoing amendment to the Articles of Incorporation of the Corporation was duly adopted by the Corporation's Board of Directors on October 31, 1992, pursuant to Section 607.1002 of the Florida Business Corporation Act. (d) In accordance with Section 607.0123 (1)(a) of the Florida Business Corporation Act, this amendment shall be effective upon filing of these Articles of Amendment by the Department of State of the State of Florida. The undersigned President of the Corporation has executed these Articles of Amendment this 31st day of October, 1992. THE WACKENHUT CORPORATION, a Florida corporation By: /s/ R. R. Wackenhut --------------------------------- Richard R. Wackenhut, President and Director 2 11 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE WACKENHUT CORPORATION, a Florida Corporation Pursuant to provisions of Section 607.1006 of the Florida Business Corporation Act, The Wackenhut Corporation, a Florida corporation (the "Corporation"), hereby adopts the following Articles of Amendment for the purpose of amending the numbers, designations and classes of capital stock which the Corporation is authorized to issue. (a) The name of this corporation is THE WACKENHUT CORPORATION. (b) The following amendment was duly adopted by the Corporation's Board of Directors pursuant to Section 607.1002 of the Florida Business Corporation Act without shareholder action and shareholder action on this amendment was not required. Article III of the Corporation's Articles of Incorporation is amended to read as follows: ARTICLE III The maximum number of shares of stock that the Corporation shall be authorized to issue shall be 30,000,000 shares which are to be divided into two classes as follows: 20,000,000 shares of Common Stock, par value $0.10 per share, of which 4,108,885 shares are authorized to be issued as Series A Common Stock and 4,133,885 shares are authorized to be issued as Series B Common Stock; and 10,000,000 shares of Preferred Stock. The Common Stock may be created and issued from time to time in one or more series with voting rights for each series as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. 12 The Corporation has authorized the issuance of a series of Common Stock consisting of 4,108,885 shares of voting Common Stock, par value $.10 per share which shall be designated as the Series A Common Stock. The Corporation has authorized the issuance of a series of Common Stock consisting of 4,132,885 shares of non-voting Common Stock, par value $.10 per share which shall be designated as the Series B Common Stock. The Series A Common Stock and the Series B Common Stock shall be identical in all respects except that the Series B Common Stock shall have no right to vote. (c) The foregoing amendment to the Articles of Incorporation of the Corporation was duly authorized by the Corporation's Board of Directors on April 24, 1993, pursuant to Section 607.1002 of the Florida Business Corporation Act. (d) In accordance with Section 607.0123(1)(a) of the Florida Business Corporation Act, this amendment shall be effective upon filing of these Articles of Amendment by the Department of State of the State of Florida. The undersigned Chairman of the Board and Chief Executive Officer of the Corporation has executed these Articles of Amendment this 17th day of June, 1993. THE WACKENHUT CORPORATION, a Florida corporation By: /s/ G. R. WACKENHUT --------------------------------- George R. Wackenhut, Chairman of the Board and Chief Executive Officer 2 13 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE WACKENHUT CORPORATION, a Florida Corporation Pursuant to provisions of Section 607.1006 of the Florida Business Corporation Act, The Wackenhut Corporation, a Florida corporation (the "Corporation"), hereby adopts the following Articles of Amendment: (a) The name of this corporation is THE WACKENHUT CORPORATION. (b) The following amendment was duly adopted by the Corporation's Board of Directors pursuant to Section 607.1002 of the Florida Business Corporation Act without shareholder action and shareholder action on this amendment was not required. Article III of the Corporation's Articles of Incorporation is amended to read as follows: ARTICLE III The maximum number of shares of stock that the Corporation shall be authorized to issue shall be 30,000,000 shares which are to be divided into two classes as follows: 20,000,000 shares of Common Stock, par value $0.10 per share, of which 4,108,885 shares are authorized to be issued as Series A Common Stock and 6,420,000 shares are authorized to be issued as Series B Common Stock; and 10,000,000 shares of Preferred Stock. The Common Stock may be created and issued from time to time in one or more series with voting rights for each series as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. 14 The Corporation has authorized the issuance of a series of Common Stock consisting of 4,108,885 shares of voting Common Stock, par value $.10 per share which shall be designated as the Series A Common Stock. The Corporation has authorized the issuance of a series of Common Stock consisting of 6,420,000 shares of non-voting Common Stock, par value $.10 per share which shall be designated as the Series B Common Stock. The Series A Common Stock and the Series B Common Stock shall be identical in all respects except that the Series B Common Stock shall have no right to vote. (c) The foregoing amendment to the Articles of Incorporation of the Corporation was duly authorized by the Corporation's Board of Directors on April 29, 1995, pursuant to Section 607.1002 of the Florida Business Corporation Act. (d) In accordance with Section 607.0123 (1)(a) of the Florida Business Corporation Act, this amendment shall be effective upon filing of these Articles of Amendment with the Department of State of the State of Florida. The undersigned officer of the Corporation has executed these Articles of Amendment this 5th day of May, 1995. THE WACKENHUT CORPORATION, a Florida corporation By: /s/ James P. Rowan --------------------------------- Name: James P. Rowan -------------------------------------- Title: Vice President 5 15 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE WACKENHUT CORPORATION, a Florida Corporation Pursuant to provisions of Section 607.1006 of the Florida Business Corporation Act, The Wackenhut Corporation, a Florida corporation (the "Corporation"), hereby adopts the following Articles of Amendment: (a) The name of this corporation is The Wackenhut Corporation. (b) Article III of the Corporation's Articles of Incorporation is amended to read as follows: ARTICLE III The maximum number of shares of stock that the Corporation shall be authorized to issue shall be 60,000,000 shares which are to be divided into two classes as follows: 50,000,000 shares of Common Stock, par value $0.10 per share, of which 3,858,885 shares are designated as Series A Common Stock and 46,141,115 shares are designated as Series B Common Stock; and 10,000,000 shares of Preferred Stock. The Series A Common Stock and the Series B Common Stock may be issued from time to time as determined by the Board of Directors of the Corporation. The Series A Common Stock and the Series B Common Stock shall be identical in all respects except that the Series B Common Stock shall have no right to vote. The Preferred Stock may be created and issued from time to time in one or more series with such designations, preferences, limitations, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof as determined by the Board of Directors of the Corporation and set forth in the resolution or resolutions providing for the creation and issuance of the stock in such series. Shares of one class or series of the Company's capital stock may be issued through a stock dividend or stock split on shares of another class or series of the Company's capital stock. (c) The foregoing amendment to the Articles of Incorporation of the Corporation was duly authorized by the Corporation's Board of Directors on April 30, 1996, and pursuant to Section of 607.1003 of the Florida Business Corporation Act was recommended to the holders of the Corporation's Series A Common Stock and Series B Common Stock in a Proxy Statement 16 dated May 13, 1996. At a Special Meeting of Shareholders held on May 23, 1996, the foregoing amendment was approved by the holders of the Series A Common Stock and the Series B Common Stock, with each series voting separately, The number of votes cast for the foregoing amendment by the holders of the Series A Common Stock and the Series B Common Stock, with each series voting separately, were sufficient for approval by each such series. (d) In accordance with Section 607.0123 of the Florida Business Corporation Act, this amendment shall be effective immediately upon filing with the Florida Department of State. The undersigned Vice President, General Counsel and Assistant Secretary of the Corporation has executed these Articles of Amendment this 23rd day of May, 1996. THE WACKENHUT CORPORATION, a Florida corporation By: /s/ J. P. Rowan --------------------------------- James P. Rowan Vice President, General Counsel and Assistant Secretary 2 EX-27 3 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 JUNE 30, 1996. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 64,237 13,641 120,417 1,796 6,277 212,232 32,818 10,578 307,842 69,268 8,012 0 0 1,472 142,574 307,842 0 435,378 0 429,594 0 766 1,863 6,086 2,191 0 0 0 0 2,852 0.23 0.00 IN JANUARY 1995, THE CORPORATION ENTERED INTO A THREE YEAR AGREEMENT TO SELL UNDIVIDED FRACTIONAL INTEREST IN A POOL OF ELIGIBLE RECEIVABLES UP TO A MAXIMUM OF $40,000 WHICH WAS INCREASED TO $50,000. AT JUNE 30, 1996, $2,000 HAD BEEN SOLD AND IS INCLUDED AS A REDUCTION IN ACCOUNTS RECEIVABLE ON THIS SCHEDULE. INCLUDES $21,301 OF OTHER CURRENT ASSETS. INCLUDES $41,543 RESERVES FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY, $37,401 MINORITY INTEREST AND $7,582 OTHER LIABILITIES. INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES - NET OF INCOME TAXES OF $1,750 AND $(707) RESPECTIVELY.
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