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Exhibit 1
KROLL-O'GARA REPORTS SECOND QUARTER 2000 RESULTS
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NEW YORK, AUGUST 15, 2000 - The Kroll-O'Gara Company (Nasdaq-NMM: KROG) today
announced revenues of $78.3 million for the second quarter of 2000. This
compares with revenues of $80.5 million reported in the second quarter of 1999.
Gross profit was $27.7 million for the second quarter of 2000, compared with
$32.2 million in the same period last year. Gross profit margin was 35.3% in the
second quarter of this year, compared with 40.0% in the second quarter of 1999.
Net loss before expenses associated with the proposed separation of the
Company's principal operating segments, merger/integration-related expenses and
transaction expenses associated with the terminated Blackstone Group transaction
was $2.6 million, or $0.12 per diluted share, in the second quarter of 2000. In
1999 net income before merger/integration-related expenses and restructuring
charge was $5.0 million or $0.22 per diluted share. The Company reported a loss
of $4.3 million or $0.19 per diluted share for the second quarter of 2000
compared with net income of $0.3 million or $0.01 per diluted share in the
second quarter of 1999.
For the six-month period ended June 30, 2000, net sales were $163.0 million,
compared with $152.0 million for the same period in 1999. Net loss before
separation expenses, merger/integration-related expenses and transaction
expenses associated with the terminated Blackstone Group transaction was $1.5
million, or $0.07 per diluted share, in the first half of 2000. In 1999 net
income before merger/integration expenses, restructuring charge and cumulative
effect of an accounting change was $8.8 million or $0.39 per diluted share. The
Company reported a loss of $4.7 million, or $0.21 per diluted share, for the
first six months of 2000, compared with net income of $2.8 million, or $0.12 per
diluted share, in the same period of last year.
The primary reason for the lower revenues in the second quarter of 2000 was the
lag between the Company's Security Products & Services Group completing one U.S.
Government contract at the end of the first quarter of 2000 and beginning a new
contract in the third quarter of 2000. Additionally, revenues at the Security
Products & Services Group for the second quarter of 2000 were lower than
anticipated due to a delay in beginning production of the latest contract with
the U.S. Military to produce 360 HMMWVs (this work began in earnest in the third
quarter), and vehicle recalls by two manufacturers in France in order to fix
certain items in the base vehicle used for a popular cash-in-transit vehicle as
well as a base vehicle used for a popular armored passenger sedan. Revenue
anticipated in the second quarter in connection with the new HMMWV contract will
be spread out over the next three quarters. Additionally, the Company expects
that the repaired base units will be delivered to the Company's manufacturing
facilities in France beginning in the next 45 days. The Security Products
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KROLL-O'GARA/ PAGE 2
and Services Group took actions on August 14, 2000 to eliminate certain
positions at its Fairfield, Ohio facility that are expected to save
approximately $2.0 million on an annualized basis. While net sales in the
Investigations and Intelligence Group increased by 5.4% to $49.0 million this
quarter, its gross profit decreased primarily due to a softening in the demand
for financial services and business intelligence and investigations services,
which have higher gross margins. Additionally, we opened new offices in
Santiago, Chile and Rio de Janeiro, Brazil, during the quarter, resulting in
certain one-time start-up costs.
Net sales at Securify, the Company's Information Security Group, decreased due
to a continuing focus on development of this Group's software product
capabilities and the related inability to establish a firm customer base until
the development of the business is complete.
Operating expenses, excluding separation expenses, merger/integration-related
expenses and transaction expenses associated with the terminated Blackstone
Group transaction, were $27.6 million for the second quarter of 2000, compared
with $23.4 million for the same period last year. The increase was primarily
attributable to higher depreciation and amortization and bad debt expenses, and
higher expenses related to the additional legal, accounting, insurance and
information system costs required to administer the growth experienced by the
Company from acquisitions completed in December 1998 and in 1999. In addition,
the Company continued to build Securify's business by additional investment in
the development of the Group's staff and software products capabilities.
In a joint statement, Jules B. Kroll and Wilfred T. "Bill" O'Gara, Co-Chief
Executive Officers, said, "We continue to progress toward the separation of the
Security Products and Services Group and the Investigations and Intelligence
Group into two distinct companies. Pending receipt of favorable tax rulings and
stockholder approval, we expect to complete this transaction later this year or
early next year. When completed, Kroll-O'Gara shareholders will own shares in
two publicly traded companies, each a strong branded franchise with excellent
market positions and outstanding management. We are excited about the potential
of each of these businesses."
Messrs. Kroll and O'Gara will host a conference call on Wednesday, August 16,
2000 to discuss Kroll-O'Gara's second quarter results. The call will begin at
9:00AM EDT. To participate in the call, analysts and investors should dial (800)
521-5469 (domestic) (303) 224-6998 (international) and ask to be connected to
the Kroll-O'Gara teleconference. There will be a replay of the call beginning at
10:00AM EDT on August 16, 2000 through 7:00PM EDT on August 23, 2000. The
dial-in number for the replay is (800) 625-5288 (domestic) (303) 804-1855
(international) and the password is 790961.The Investigations & Intelligence
Group (Kroll Risk Consulting Services) provides financial services, including
forensic accounting, business valuation, insolvency, turnaround, asset tracing
and pre-acquisition due diligence. It provides business investigations and
intelligence, including litigation support, monitoring and intellectual property
infringement investigations. Its corporate services include pre-employment
background checking, drug testing, surveillance and vendor integrity programs.
This Group also
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KROLL-O'GARA/ PAGE 3
provides clients with corporate security, including security architecture and
planning, as well as computer forensics.
The Security Products & Services Group (O'Gara-Hess & Eisenhardt Armoring)
provides commercial and military armored vehicles, other armoring systems,
advanced security and driver training, crisis management and engineering
services.
The Information Security Group (Securify) provides network and system security
services, all aspects of data security, including product evaluation assessment,
security policy development, security architecture and design as well as public
key infrastructure consulting services.
The Kroll-O'Gara Company is a leading global provider of a broad range of
specialized products and services designed to supply solutions to a variety of
security needs. Based in New York, NY and Fairfield, OH, Kroll-O'Gara employs
more than 2,800 people in more than 60 offices and plants around the world. More
information about Kroll-O'Gara and Securify can be found on the Web at
www.kroll-ogara.com.
The statements in this release relating to Kroll-O'Gara's business plans are
forward-looking statements within the meaning of the federal securities laws.
These statements are subject to substantial risks and uncertainties. There can
be no assurance that the plan of separation described above, or any other plan
of separation, will be finalized or, if finalized, that the separation will be
completed. Completion of any transaction will be subject to a number of
conditions, including, among others, shareholder approval, regulatory approvals
and receipt of a private letter ruling from the Internal Revenue Service that
the separation will be tax free to Kroll-O'Gara and its shareholders.
If a plan of separation is finalized, Kroll-O'Gara will send a definitive proxy
statement to shareholders and will request their proxies at that time.
SHAREHOLDERS SHOULD READ THE PROXY STATEMENT WHEN IT IS AVAILABLE SINCE IT WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE SEPARATION AND THE PARTICIPANTS IN THE
SEPARATION. The proxy statement will be available for free from the web site
maintained by the Securities & Exchange Commission (http://www.sec.gov) and will
be available free from the Company.
This press release does not constitute an offer of any security. Any offer will
be made pursuant to an effective registration statement under the Securities Act
of 1933, which also will be available on the SEC's web site. The prospectus
contained in any registration statement will be mailed to shareholders along
with other proxy solicitation materials and will be available to shareholders
without charge from the Company.
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<CAPTION>
The Kroll-O'Gara Company
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Three Months Ended Six Months Ended
(in thousands, except per share data) June 30, June 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NET SALES Security Products and Services $ 24,298 $ 28,755 $ 54,650 $ 57,475
Investigations and Intelligence 48,991 46,487 98,001 84,623
Voice and Data Communications 4,039 4,029 8,588 7,463
Information Security 947 1,271 1,810 2,480
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78,275 80,542 163,049 152,041
COST OF SALES Security Products and Services 18,713 18,755 40,466 38,901
Investigations and Intelligence 27,787 25,167 54,978 46,798
Voice and Data Communications 3,294 3,761 7,216 6,640
Information Security 813 624 2,051 1,214
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50,607 48,307 104,711 93,553
GROSS PROFIT Security Products and Services 5,585 10,000 14,184 18,574
Investigations and Intelligence 21,204 21,320 43,023 37,825
Voice and Data Communications 745 268 1,372 823
Information Security 134 647 (241) 1,266
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27,668 32,235 58,338 58,488
Operating expenses 27,610 23,360 55,541 42,880
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Operating income before restructuring, merger, failed merger
and separation expenses 58 8,875 2,797 15,608
Separation expenses 676 -- 676 --
Failed Merger expenses 680 -- 2,000 --
Merger expenses 348 2,886 438 3,094
Restructuring expense -- 3,856 -- 4,365
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Operating income (loss) (1,646) 2,133 (317) 8,149
OTHER INCOME (EXPENSE):
Interest expense (1,498) (847) (2,872) (1,875)
Interest income 58 20 106 286
Other, net (93) (265) (197) (216)
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Income before provision for income taxes (3,179) 1,041 (3,280) 6,344
Provision for income taxes 1,102 776 1,380 2,773
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Net income before cumulative effect of accounting change (4,281) 265 (4,660) 3,571
Cumulative effect of accounting change, net -- -- -- (778)
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Net income (loss) $ (4,281) $ 265 $ (4,660) $ 2,793
Diluted earnings (loss) per share before restructuring, merger,
failed merger and separation expenses $ (0.12) $ 0.22 $ (0.07) $ 0.39
Diluted earnings (loss) per share $ (0.19) $ 0.01 $ (0.21) $ 0.12
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Diluted weighted average common shares outstanding 22,278 22,480 22,267 22,548
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