-----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, CQle0ebh59TJaeSYUtYLwxADXRZ37C1HCVvQ50IUR2EHck6uIFIjbMgocvMtfF2K /qsjLJBWiJXb6OZePbFaLw== 0000898430-97-001830.txt : 19970502 0000898430-97-001830.hdr.sgml : 19970502 ACCESSION NUMBER: 0000898430-97-001830 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970321 FILED AS OF DATE: 19970501 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PINKERTONS INC CENTRAL INDEX KEY: 0000078666 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [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: 000-03017 FILM NUMBER: 97593376 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 March 21, 1997 ------------------------------------------------- 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 April 18, 1997 was 8,364,355. ================================================================================ Pinkerton's, Inc. and Subsidiaries FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets- March 21, 1997 and December 27, 1996................................................... 3 Consolidated Statements of Earnings- For the Quarters Ended March 21, 1997 and March 22, 1996............................... 4 Consolidated Statements of Cash Flows- For the Quarters Ended March 21, 1997 and March 22, 1996.............................. 5 Notes to Consolidated Financial Statements................................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................... 7-8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................................... 9 Signatures.................................................................................. 10
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Pinkerton's, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands)
March 21, 1997 December 27, (Unaudited) 1996 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 16,763 $ 33,761 Investment in marketable securities 5,089 8,460 Accounts receivable (includes unbilled amounts of $33,258 in 1997 and $30,196 in 1996) 140,352 137,055 Less allowance for doubtful receivables 2,836 2,572 -------- -------- 137,516 134,483 -------- -------- Inventory 4,038 3,799 Prepaid expenses and taxes 10,527 11,566 Deferred income taxes 7,261 7,121 -------- -------- Total current assets 181,194 199,190 -------- -------- Equipment and leasehold improvements, net of accumulated depreciation and amortization of $28,302 in 1997 and $26,818 in 1996 15,619 14,977 Other assets: Intangible assets, net 75,556 57,311 Deferred income taxes 23,923 23,467 Other 21,896 20,336 -------- -------- 121,375 101,114 -------- -------- $318,188 $315,281 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,753 $ 9,790 Accrued liabilities 80,731 76,366 Current maturities of long-term debt 8,575 8,575 -------- -------- Total current liabilities 98,059 94,731 -------- -------- Accrued retirement benefits and other non-current liabilities 52,794 52,856 Long-term debt, less current maturities 36,351 37,313 Commitments and contingencies Stockholders' equity: Common stock 8 8 Additional paid-in capital 74,937 74,887 Other adjustments (6,869) (5,441) Retained earnings 62,908 60,927 -------- -------- 130,984 130,381 -------- -------- $318,188 $315,281 ======== ======== 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 -------------------------------- March 21, 1997 March 22, 1996 -------------- -------------- Service revenues $220,468 $200,036 Cost of services 194,333 176,850 -------- -------- Gross profit 26,135 23,186 Operating expenses 18,950 17,032 Amortization of intangible assets 2,620 2,136 -------- -------- Operating profit 4,565 4,018 Other (income) deductions: Interest income (333) (510) Interest expense 1,161 1,114 -------- -------- 828 604 -------- -------- Income before income taxes 3,737 3,414 Provision for income taxes 1,756 1,705 -------- -------- Net income $ 1,981 $ 1,709 ======== ======== Net income per common share $ .23 $ .20 ======== ======== Weighted average common shares and common share equivalents outstanding 8,622 8,408 ======== ========
See accompanying notes to consolidated financial statements. 4 Pinkerton's, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
For the Quarter Ended -------------------------------- March 21, 1997 March 22, 1996 -------------- -------------- Operating ActivitieS: Net income $ 1,981 $ 1,709 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets 2,620 2,136 Depreciation and other amortization 1,670 1,663 Provision for losses on doubtful receivables 243 239 Deferred income taxes (596) (598) Changes in assets, liabilities and stockholders' equity: Accounts receivable 656 (5,125) Inventory 292 526 Prepaid expenses and taxes 1,329 2,842 Other assets (1,762) (587) Accounts payable (1,915) (908) Accrued and other non-current liabilities (1,769) 5,270 Foreign currency revaluation of net assets (475) 121 -------- ------- Net cash provided by operating activities 2,274 7,288 -------- ------- Investing Activities: Purchase of marketable securities (3,081) (6,980) Sales/redemptions of marketable securities 6,452 1,599 Purchase of equipment and leasehold improvements (1,144) (1,166) Payments for net assets of acquired businesses, net of cash acquired (21,549) (2,753) -------- ------- Net cash used in investing activities (19,322) (9,300) -------- ------- Financing Activities: Exercise of stock options 50 22 -------- ------- Net cash provided by financing activities 50 22 -------- ------- Net decrease in cash (16,998) (1,990) Cash and cash equivalents at beginning of year 33,761 20,215 -------- ------- Cash and cash equivalents at end of period $ 16,763 $18,225 ======== =======
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 ended March 21, 1997 and March 22, 1996. 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 27, 1996 and the Company's 1996 Annual Report to Stockholders. The 1996 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 27, 1996 and for the year then ended. The results of operations for the fiscal quarters ended March 21, 1997 and March 22, 1996 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. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Quarters Ended March 21, 1997 and March 22, 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 $20.5 million, or 10.2%, from $200.0 million in the first quarter of 1996 to $220.5 million in the first quarter of 1997. Domestic Service Revenues - The Company's domestic service revenues increased by $7.5 million, or 4.4%, from $169.2 million in the first quarter of 1996 to $176.7 million in the first quarter of 1997. This increase reflects the revenues of acquired systems integration businesses of $3.9 million and service revenue increases of $3.6 million. International Service Revenues - Service revenues of the Company's international operations increased by $13.0 million, or 42.2%, from $30.8 million in the first quarter of 1996 to $43.8 million in the first quarter of 1997. This increase reflects the revenues of acquired businesses of $7.9 million, $5.0 million of additional business and foreign currency exchange increases of $0.1 million. Cost of Services and Gross Profit - The Company's cost of services increased by $17.4 million, or 9.8%, from $176.9 million in the first quarter of 1996 to $194.3 million in the first quarter of 1997. This increase was primarily due to payroll and related expenses accompanying the acquired revenues and the increase in service revenues, as described above, reduced by cost efficiencies resulting from the Company's ongoing efforts to reduce certain costs of services. Gross profit as a percentage of service revenues increased from 11.6% in the first quarter of 1996 to 11.9% in the first quarter of 1997. This increase reflects in part the cost efficiencies described above. Gross profit was also favorably impacted by the inclusion of the Company's security systems integration operations acquired after March 22, 1996, which typically experience higher gross margins than the Company's security service operations, and the operations of WKD Security GmbH, acquired on January 1, 1997. WKD has historically experienced higher gross margins than the Company's domestic security service operations. Operating Expenses - Operating expenses increased by $2.0 million, or 11.8%, from $17.0 million in the first quarter of 1996 to $19.0 million in the first quarter of 1997. As a percentage of service revenues, operating expenses were 8.6% for the quarter ended March 21, 1997 and 8.5% for the comparable 1996 period. The increased operating expenses were primarily due to the acquired revenues and increased service revenues described above. The Company's commitment to expanding its security systems integration service operations, which have both higher gross profit margins and operating expenses than the Company's security service operations, and to expenditures for new systems, quality processes and training programs to enhance customer value, are expected to continue to generate operating expense percentages higher than those experienced prior to 1996. 7 Amortization - Amortization of intangible assets increased by $0.5 million from $2.1 million in the first quarter of 1996 to $2.6 million in the first quarter of 1997. This reflects additional amortization of intangible assets arising from 1996 and 1997 acquisitions. Operating Profit - Operating profit was $4.6 million, or 2.1% of service revenues, for the first quarter of 1997 as compared to $4.0 million, or 2.0% of service revenues, for the same period last year. Operating profit increased as a percentage of revenues due to improved gross profit margins, partially offset by an increase in operating expenses discussed above. Income Taxes - The effective tax rate for the first quarter of 1997 was 47.0% as compared to 50.0% in 1996. The lower tax rate in 1997 is primarily attributable to the recognition of job related tax credits that are newly available to the Company. Financial Condition Capital Resources and Liquidity At March 21, 1997, the Company had $16.8 million in cash, a decrease of $17.0 million from December 27, 1996; and $5.1 million in marketable securities, a $3.4 million decrease from December 27, 1996. Net cash provided by operating activities of $2.3 million was reduced by $19.3 million of net cash payments relating to investing activities. The Company's principal investing activities during the first quarter of 1997 were acquisitions ($21.6 million), net redemptions of marketable securities ($3.4 million), and purchases of computer and other equipment ($1.1 million). 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 the foreseeable future. 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 Senior Notes. Semi-annual interest payments of approximately $1.8 million and $1.3 million related to the Senior Notes are due in June and December 1997, respectively. 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 the first quarter of 1997. At March 21, 1997 there were DM 18.0 million ($10.7 million) of cash borrowings outstanding under the revolving line of credit and $36.3 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 regular operating and capital requirements during the next 12 months. The Company also has access to capital markets, if necessary, to raise funds for acquisitions and other investments for business growth. 8 PART II. OTHER INFORMATION 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 The Registrant filed a Current Report on Form 8-K on January 16, 1997, reporting under Item 2 (Acquisition and Disposition of Assets), the acquisition of WKD Security GmbH, effective January 1, 1997. The Registrant filed an amendment to the Form 8-K on March 17, 1997, to include the audited financial statements of WKD Security GmbH as of and for the year ended December 31, 1996, and unaudited pro forma condensed consolidated financial statements of the Registrant and subsidiaries as of and for the year ended December 27, 1996. 9 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: May 1, 1997 BY: /S/ JAMES P. McCLOSKEY -------------------------------- James P. McCloskey ITS: Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 1, 1997 BY: /S/ STEVEN A. LINDSEY ------------------------------ Steven A. Lindsey ITS: Vice President and Controller (Principal Accounting Officer) 10 EX-11 2 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 Pinkerton's, Inc. COMPUTATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except per share data)
FOR THE QUARTER ENDED ------------------------------- MARCH 21, 1997 MARCH 22, 1996 -------------- -------------- Net income $1,981 $1,709 ====== ====== Weighted average number of common shares outstanding 8,363 8,346 Dilutive effect of outstanding stock 259 62 options ------ ------ Weighted average number of common shares, as adjusted, for calculation of earnings per share 8,622 8,408 ====== ====== Net income per common share $ .23 $ .20 ====== ======
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR 3-MOS DEC-27-1996 MAR-21-1997 DEC-30-1995 DEC-28-1996 DEC-27-1996 MAR-21-1997 33,761 16,763 8,460 5,089 137,055 140,352 2,572 2,836 3,799 4,038 199,190 181,194 41,795 43,921 26,818 28,302 315,281 318,188 94,731 98,059 37,313 36,351 0 0 0 0 74,895 74,945 55,486 56,039 315,281 318,188 906,247 220,468 906,247 220,468 791,877 194,333 791,877 194,333 86,994 21,327 1,635 243 2,253 828 23,488 3,737 11,038 1,756 12,450 1,981 0 0 0 0 0 0 12,450 1,981 1.46 .23 1.46 .23
-----END PRIVACY-ENHANCED MESSAGE-----