-----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, FPiGyaCgl4bnNAcGZe1s5WRge3qo45WttGVx508t/McGGR4OBkW3Zp57pv0cKnx7 TfYCTt+nrXptZYcj49/zJA== 0000898430-96-003361.txt : 19970307 0000898430-96-003361.hdr.sgml : 19970307 ACCESSION NUMBER: 0000898430-96-003361 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960614 FILED AS OF DATE: 19960729 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PINKERTONS INC CENTRAL INDEX KEY: 0000078666 STANDARD INDUSTRIAL CLASSIFICATION: 7381 IRS NUMBER: 135318100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11841 FILM NUMBER: 96600069 BUSINESS ADDRESS: STREET 1: 15910 VENTURE BOULEVARD SUITE 900 CITY: ENCINO STATE: CA ZIP: 91436-3095 BUSINESS PHONE: 8183808800 MAIL ADDRESS: STREET 1: 15910 VENTURA BLVD., SUITE 900 CITY: ENCINO STATE: CA ZIP: 91436-2810 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 14, 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: 1-11841 PINKERTON'S, INC. (Exact name of registrant as specified in its charter) Delaware 13-5318100 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 15910 Ventura Boulevard, Suite 900, Encino, California 91436-2810 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (818) 380-8800 Not Applicable (Former name, former address, and formal 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 --- --- The number of shares of the Registrant's Common Stock, par value $.001 per share, outstanding on July 12, 1996 was 8,350,269. PINKERTON'S, INC. AND SUBSIDIARIES FORM 10-Q INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets- June 14, 1996 and December 29, 1995........................................... 3 Consolidated Statements of Earnings- For the Quarters and Six Periods Ended June 14, 1996 and June 16, 1995........ 4 Consolidated Statements of Cash Flows- For the Quarters and Six Periods Ended June 14, 1996 and June 16, 1995........ 5 Notes to Consolidated Financial Statements...................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 7-9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders....................... 10 Item 6. Exhibits and Reports on Form 8-K.......................................... 10 Signatures......................................................................... 11
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PINKERTON'S, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
June 14, 1996 December 29, (Unaudited) 1995 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 29,844 $ 20,215 Investment in marketable securities 21,407 19,396 Accounts receivable (includes unbilled amounts of $24,788 in 1996 and $28,981 in 1995) 118,169 113,127 Less allowance for doubtful receivables 2,774 2,881 -------- -------- 115,395 110,246 -------- -------- Inventory 2,115 2,516 Prepaid expenses and taxes 6,147 13,762 Deferred income taxes 7,283 6,836 -------- -------- Total current assets 182,191 172,971 -------- -------- Equipment and leasehold improvements, net of accumulated depreciation & amortization of $24,304 in 1996 and $21,619 in 1995 13,909 14,017 Other assets: Intangible assets, net 57,570 60,895 Deferred income taxes 25,185 23,612 Other 17,295 15,849 -------- -------- 100,050 100,356 -------- -------- $296,150 $287,344 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,854 $ 7,304 Accrued liabilities 68,770 66,867 Income taxes payable 2,290 - Current maturities of long-term debt 8,575 8,575 -------- -------- Total current liabilities 85,489 82,746 -------- -------- Accrued retirement benefits and other non-current liabilities 58,282 56,598 Long-term debt, less current maturities 34,275 34,275 Commitments and contingencies Stockholders' equity: Preferred stock - 15 Common stock 8 8 Additional paid-in capital 74,558 74,463 Other adjustments (9,695) (9,238) Retained earnings 53,233 48,477 -------- -------- 118,104 113,725 -------- -------- $296,150 $287,344 ======== ========
See accompanying notes to consolidated financial statements. 3 Pinkerton's, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In thousands, except per share data)
For the Quarter Ended For the Six Periods Ended ---------------------------------------- ------------------------------------------- June 14, 1996 June 16, 1995 June 14, 1996 June 16, 1995 ------------- ------------- ------------- ------------- Service revenues $200,918 $195,442 $400,954 $393,763 Cost of services 176,928 175,882 353,778 355,452 -------- -------- -------- -------- Gross profit 23,990 19,560 47,176 38,311 Operating expenses 17,207 13,899 34,239 27,422 Amortization of intangible assets 2,114 1,892 4,250 3,935 -------- -------- -------- -------- Operating profit 4,669 3,769 8,687 6,954 Other (income) deductions: Interest income (565) (816) (1,075) (1,482) Interest expense 1,258 1,538 2,372 2,712 Other (1,962) - (1,962) - -------- -------- -------- -------- (1,269) 722 (665) 1,230 -------- -------- -------- -------- Income before income taxes 5,938 3,047 9,352 5,724 Provision for income taxes 2,891 1,484 4,596 2,690 -------- -------- -------- -------- Net income $ 3,047 $ 1,563 $ 4,756 $ 3,034 ======== ======== ======== ======== Net income per common share $ .36 $ .19 $ .56 $ .36 ======== ======== ======== ======== Weighted average common shares and common share equivalents outstanding 8,563 8,303 8,485 8,318 ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 4 Pinkerton's, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
For the Six Periods Ended ----------------------------------- June 14, 1996 June 16, 1995 ------------- ------------- OPERATING ACTIVITIES: Net income $ 4,756 $ 3,034 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets 4,250 3,935 Depreciation and other amortization 3,010 2,671 Provision for losses on doubtful receivables 582 566 Changes in assets, liabilities and stockholders' equity: Accounts receivable (4,687) (2,244) Inventory 671 (1,362) Prepaid expenses and taxes 7,642 2,979 Deferred income taxes (2,020) (4,143) Other assets (1,517) (1,033) Accounts payable (1,704) 840 Accrued and other non-current liabilities 3,737 2,612 Income taxes payable 2,290 - Foreign currency revaluation of net assets (350) 262 -------- -------- Net cash provided by operating activities 16,660 8,117 -------- -------- INVESTING ACTIVITIES: Purchase of marketable securities (10,925) (33,630) Sales/redemptions of marketable securities 8,914 21,020 Purchase of equipment and leasehold improvements (2,616) (2,679) Payments for net assets of acquired businesses, net of cash acquired (2,484) (40) -------- -------- Net cash (used in) investing activities (7,111) (15,329) -------- -------- FINANCING ACTIVITIES: Principal repayment of long-term debt - (8,575) Exercise of stock options 95 22 Redemption of preferred stock (15) (1) -------- -------- Net cash provided by (used in) financing activities 80 (8,554) -------- -------- Net increase (decrease) in cash 9,629 (15,766) Cash and cash equivalents at beginning of year 20,215 27,744 -------- -------- Cash and cash equivalents at end of period $ 29,844 $ 11,978 ======== ========
See accompanying notes to consolidated financial statements. 5 Pinkerton's, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) PRESENTATION OF FINANCIAL INFORMATION The consolidated financial statements included herein have been prepared by the Company and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the fiscal quarters and six periods ended June 14, 1996 and June 16, 1995. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. The following material is written with the presumption that the users of the interim financial statements have read or have access to the Company's Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 29, 1995 and the Company's 1995 Annual Report to Stockholders. The 1995 Annual Report contains the latest audited consolidated financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 29, 1995 and for the year then ended. The results of operations for the fiscal quarters and six periods ended June 14, 1996 and, June 16, 1995 are not necessarily indicative of the results for a full year. (2) ACCOUNTING CYCLE Pinkerton's fiscal year comprises the 52-week (or 53-week) period ending on the Friday closest to December 31, within the reporting year. The Company's quarterly reporting periods generally consist of three four-week periods for the first, second and third quarters, and four four-week periods for the fourth quarter. (3) OTHER INCOME During the second quarter of 1996, the Company entered into an agreement with the previous owner related to the acquisition of Pinkerton's, Inc. by California Plant Protection, Inc. in 1988. As a result of this agreement, the Company received a cash payment of $5.2 million in the second quarter of 1996. Of this amount, $3.2 million represents a recovery of income and other taxes paid on behalf of the previous owner and recorded in the balance sheet; the remaining amount of $2.0 million is recorded as other income in the second quarter of 1996. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER AND SIX PERIODS ENDED JUNE 14, 1996. Pinkerton's fiscal year comprises the 52-week (or 53-week) period ending on the Friday closest to December 31, within the reporting year. The Company's quarterly reporting periods consist of three four-week periods for the first, second and third quarters, and four four-week periods for the fourth quarter. RESULTS OF OPERATIONS Service Revenues - The Company's service revenues increased by $5.5 million, or 2.8%, from $195.4 million in the second quarter of 1995 to $200.9 million in the second quarter of 1996. For the six periods ended June 14, 1996 and June 16, 1995, service revenues increased by $7.2 million, or 1.8%, from $393.8 million in 1995 to $401.0 million in 1996. Domestic Service Revenues - The Company's domestic service revenues increased by $3.4 million, or 2.1%, from $164.4 million in the second quarter of 1995 to $167.8 million in the second quarter of 1996. For the six periods ended June 14, 1996 and June 16, 1995, domestic service revenues increased by $4.5 million, or 1.4%, from $332.5 million in 1995 to $337.0 million in 1996. The increase in the second quarter reflects the revenues of systems integration businesses acquired of $6.2 million less service reductions of $2.8 million. The increase in the six periods reflects revenues of system integration businesses acquired of $12.3 million less service reductions of $7.8 million. The service reductions occurred primarily as a result of an active program to improve profitability by eliminating unprofitable accounts. International Service Revenues - Service revenues of the Company's international operations increased by $2.1 million, or 6.8%, from $31.0 million in the second quarter of 1995 to $33.1 million in the second quarter of 1996. For the six periods ended June 14, 1996 and June 16, 1995, service revenues of the Company's international operations increased by $2.7 million, or 4.4%, from $61.3 million in 1995 to $64.0 million in 1996. The increase in the second quarter reflects $3.4 million of additional business offset by foreign currency exchange reductions of $1.3 million. The increase for the six periods primarily results from $4.6 million of additional business offset by foreign currency exchange reductions of $1.9 million. Cost of Services and Gross Profit - The Company's cost of services increased by $1.0 million, or 0.6%, from $175.9 million in the second quarter of 1995 to $176.9 million in the second quarter of 1996. Cost of services in the first six periods of 1996 decreased by $1.7 million, or 0.5%, from $355.5 million in 1995 to $353.8 million in 1996. The increase in the second quarter was primarily due to payroll and related expenses accompanying the increase in service revenues described above reduced by cost efficiencies achieved during the quarter. The decrease in the six periods year- to-date results primarily from the impact of cost efficiencies resulting from the Company's ongoing efforts to reduce the cost of services. Gross profit as a percentage of service revenues increased from 10.0% in the second quarter of 1995 to 11.9% in the second quarter of 1996. For the six periods ended June 14, 1996 and June 16, 1995, the gross profit percentage increased from 9.7% in 1995 to 11.8% in 1996. These increases reflect the changes in cost of services discussed above. Gross profit was also favorably impacted by the inclusion of the Company's security systems integration service operations, which 7 typically experience higher gross margins than the Company's security service operations. The security systems integration service operations were acquired after the second quarter of 1995. Operating Expenses - Operating expenses increased by $3.3 million, or 23.7%, from $13.9 million in the second quarter of 1995 to $17.2 million in the second quarter of 1996. For the six periods ended June 14, 1996 and June 16, 1995, operating expenses increased by $6.8 million, or 24.8%, from $27.4 million in 1995 to $34.2 million in 1996. As a percentage of service revenues, operating expenses were 8.6% and 8.5% respectively, for the quarter and six periods ended June 14, 1996, and 7.1% and 7.0%, respectively, for the comparable 1995 periods. The increased operating expense percentage reflects the operations of the Company's security systems integration service operations which have both higher gross profit margins and operating expenses than the Company's security service operations. Operating expenses also reflect the Company's ongoing expenditures for quality processes and training programs implemented to enhance customer value. Amortization - Amortization of intangible assets increased by $0.2 million from $1.9 million in the second quarter of 1995 to $2.1 million in the second quarter of 1996. For the six periods ended June 14, 1996 and June 16, 1995, amortization increased $0.4 million from $3.9 million in 1995 to $4.3 million in 1996. This reflects additional amortization of intangible assets arising from acquisitions made after the second quarter of 1995. Operating Profit - Operating profit was $4.7 million, or 2.3% of service revenues, for the second quarter of 1996 as compared to $3.8 million, or 1.9% of service revenues, for the same period last year. For the six periods ended June 14, 1996, operating profit was $8.7 million, or 2.2% of service revenues, as compared to $7.0 million, or 1.8% of service revenues, in the corresponding 1995 period. Operating profit increased due to improved gross profit margins, partially offset by an increase in operating expenses discussed above. OTHER INCOME During the second quarter of 1996, the Company entered into an agreement with the previous owner related to the acquisition of Pinkerton's, Inc. by California Plant Protection, Inc. in 1988. As a result of this agreement, the Company received a cash payment of $5.2 million in the second quarter of 1996. Of this amount, $3.2 million represents a recovery of income and other taxes paid on behalf of the previous owner and recorded in the balance sheet; the remaining amount of $2.0 million is recorded as other income in the second quarter of 1996. Income Taxes - The effective tax rate for the six periods ended June 14, 1996 was 49.1% as compared to 47.0% in 1995. The higher tax rate in 1996 is primarily attributable to certain non-U.S. losses that provide no tax benefit as well as a reduction in targeted jobs tax credits that expired in 1995. FINANCIAL CONDITION CAPITAL RESOURCES AND LIQUIDITY At June 14, 1996, the Company had $29.8 million in cash, an increase of $9.6 million from December 29, 1995; and $21.4 million in marketable securities, a $2.0 million increase from December 29, 1995. Net cash provided by operating activities of $16.6 million and net cash provided by financing activities of $0.1 million were reduced by $7.1 million of net cash payments relating to investing activities. The Company's principal investing activities during the first six 8 periods of 1996 were net purchases of marketable securities ($2.0 million), acquisitions ($2.5 million), and purchases of computer and other equipment ($2.6 million). The Company's principal financing activity during the first six periods of 1996 was $0.1 million of cash receipts related to the exercise of stock options. The Company has an acquisitions program intended to implement its strategy to become a world-class, global security solutions provider. The Company also has an ongoing program to replace capital equipment as required. Both of these activities will continue for at least the balance of 1996. Pinkerton's cash needs during the first six months of each year are greater because of higher payroll taxes. In addition, the Company is required to make annual principal payments of approximately $8.6 million (in the month of June) through the year 2000 in repayment of its long-term debt. Semi-annual interest payments of approximately $2.2 million and $1.8 million related to the long-term debt are due in June and December 1996, respectively. The principal and interest payments described above to be made in June 1996 occur in the Company's third fiscal quarter. The Company has an unsecured revolving credit facility with a group of banks for borrowings up to $70.0 million, of which $50.0 million may be letters of credit. The facility also provides for a possible increase up to $100.0 million of borrowings (of which $50.0 million may be letters of credit) upon certain conditions. No cash borrowings have been made during 1996. At July 1, 1996 no amounts were outstanding under the cash borrowing facility and $39.1 million in letters of credit had been issued by the Company to secure obligations under the Company's self-insurance programs. The Company believes existing liquid resources, cash generated from operations and funds available under the revolving credit facility are sufficient for its acquisition program and operating and capital requirements during the next 12 months. The Company also has access to capital markets, if necessary, to raise funds for working capital, capital spending, acquisitions and other investments for business growth. 9 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 1996 Annual Meeting of Stockholders of the Company was held on April 26, 1996. At the Annual Meeting the stockholders elected two directors of the Company for a term of three years, approved the Second Amendment to the 1995 Pinkerton Performance and Equity Incentive Plan, ratified the selection of the Company's independent auditors for the current fiscal year, and voted against a stockholder proposal requesting that the Board of Directors take the necessary steps to declassify the Board so that all directors are elected annually. The votes for the election of directors were: Shares Voted "FOR" Shares "WITHHELD" ------------------ ----------------- Denis R. Brown 7,647,979 61,298 Peter H. Dailey 7,688,407 20,870 The votes for the approval of the Second Amendment to the 1995 Pinkerton Performance and Equity Incentive Plan were: Shares Voted "FOR" Shares voted "AGAINST" Abstentions/ Non-Votes ------------------ ---------------------- ---------------------- 6,409,389 1,100,262 147,155 The votes for the ratification of the selection of independent auditors were: Shares Voted "FOR" Shares voted "AGAINST" Abstentions/ Non-Votes ------------------ ---------------------- ---------------------- 7,661,669 41,153 6,455 The votes for the stockholder proposal requesting that the Board of Directors take the necessary steps to declassify the Board were: Shares Voted "FOR" Shares voted "AGAINST" Abstentions/ Non-Votes ------------------ ---------------------- ---------------------- 1,740,931 5,222,266 43,078 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11. Computation of Earnings Per Share (Unaudited) 27. Financial Data Schedule (b) Reports on Form 8-K None. 10 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. PINKERTON'S INC. Date: July 26, 1996 BY: /s/ JAMES P. McCLOSKEY --------------------------------- James P. McCloskey ITS: Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: July 26, 1996 BY: /s/ STEVEN A. LINDSEY --------------------------------- Steven A. Lindsey ITS: Controller (Principal Accounting Officer) 11 EX-11 2 COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) Exhibit 11 Pinkerton's, Inc. COMPUTATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except per share data)
For the Quarter Ended For the Six Periods Ended ---------------------------------- --------------------------------------- June 14, 1996 June 16, 1995 June 14, 1996 June 16, 1995 ------------- ------------- ------------- ------------- Net income $ 3,047 $ 1,563 $ 4,756 $ 3,034 ======== ======== ======== ======== Weighted average number of common shares outstanding 8,347 8,296 8,347 8,296 Dilutive effect of outstanding stock options 216 7 138 22 -------- -------- -------- -------- Weighted average number of common shares, as adjusted, for calculation of earnings per share 8,563 8,303 8,485 8,318 ======== ======== ======== ======== Net income per common share $ .36 $ .19 $ .56 $ .36 ======== ======== ======== ========
EX-27 3 FINANCIAL DATA SCHEDULE / ARTICLE 5
5 1,000 YEAR 6-MOS DEC-29-1995 JUN-14-1996 DEC-31-1994 DEC-30-1995 DEC-29-1995 JUN-14-1996 20,215 29,844 19,396 21,407 113,127 118,169 2,881 2,774 2,516 2,115 172,971 182,191 35,636 38,213 21,619 24,304 287,344 296,150 82,746 85,489 34,275 34,275 0 0 15 0 74,471 74,566 39,239 43,538 287,344 296,150 862,793 400,954 862,793 400,954 771,172 353,778 771,172 353,778 69,011 35,945 1,719 582 2,870 1,297 18,021 9,352 7,521 4,596 0 0 0 0 0 0 0 0 10,500 4,756 1.26 .56 1.26 .56
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