<PAGE> 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 OCTOBER 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM TO
--------- --------
COMMISSION FILE NUMBER 1-5450
------
THE WACKENHUT CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0857245
- --------------------------------------------------------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
1500 San Remo Avenue, Coral Gables, FL 33146
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (305) 666-5656
- --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
At November 10, 1995, 3,858,885 shares of Series A and 5,829,539 shares of
Series B of the registrant's Common Stock were issued and outstanding.
Page 1 of 17
<PAGE> 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 thirty-nine weeks ended October 1, 1995 are not necessarily
indicative of the results for the entire fiscal year ending December 31, 1995.
Page 2 of 17
<PAGE> 3
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
OCTOBER 1, 1995 and OCTOBER 2, 1994
(In thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
REVENUES $ 203,637 $ 191,192
--------------------------
OPERATING EXPENSES:
Payroll and related taxes 145,571 138,161
Other operating expenses 53,672 49,168
--------------------------
199,243 187,329
--------------------------
OPERATING INCOME 4,394 3,863
--------------------------
OTHER INCOME (EXPENSE):
Interest and receivable discount expense (772) (1,130)
Interest and investment income 271 487
--------------------------
(501) (643)
--------------------------
INCOME BEFORE INCOME TAXES 3,893 3,220
Provision for income taxes 1,325 1,036
Minority interest, net of income taxes 703 261
Equity income of foreign affiliates, net of income taxes (91) (59)
--------------------------
INCOME BEFORE EXTRAORDINARY ITEM 1,956 1,982
Extraordinary item - early extinguishment of debt,
net of income taxes -- 887
--------------------------
NET INCOME $ 1,956 $ 1,095
==========================
INCOME PER SHARE:
Income before extraordinary item $ 0.16 $ 0.16
Extraordinary item - early extinguishment of debt,
net of income taxes -- (0.07)
--------------------------
INCOME PER SHARE $ 0.16 $ 0.09
==========================
</TABLE>
See notes to Consolidated Financial Statements.
Page 3 of 17
<PAGE> 4
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTY-NINE WEEKS ENDED
OCTOBER 1, 1995 AND OCTOBER 2, 1994
(In thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
REVENUES $ 586,800 $ 537,183
--------------------------
OPERATING EXPENSES:
Payroll and related taxes 427,843 399,544
Other operating expenses 147,541 126,531
--------------------------
575,384 526,075
--------------------------
OPERATING INCOME 11,416 11,108
--------------------------
OTHER INCOME (EXPENSE):
Interest and receivable discount expense (2,267) (3,174)
Interest and investment income 926 1,259
--------------------------
(1,341) (1,915)
--------------------------
INCOME BEFORE INCOME TAXES 10,075 9,193
Provision for income taxes 3,523 3,129
Minority interest, net of income taxes 1,741 529
Equity income of foreign affiliates, net of income taxes (470) (220)
--------------------------
INCOME BEFORE EXTRAORDINARY ITEM 5,281 5,755
Extraordinary item - early extinguishment of debt,
net of income taxes -- (887)
--------------------------
NET INCOME $ 5,281 $ 4,868
==========================
INCOME PER SHARE:
Income before extraordinary item $ 0.44 $ 0.47
Extraordinary item - early extinguishment of debt,
net of income taxes -- (0.07)
--------------------------
INCOME PER SHARE $ 0.44 $ 0.40
==========================
</TABLE>
See notes to Consolidated Financial Statements.
Page 4 of 17
<PAGE> 5
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1995 AND JANUARY 1, 1995
(In thousands except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,096 $ 13,808
Accounts receivable, less allowance for doubtful accounts
of $1,705 in 1995 and $1,056 in 1994 79,674 100,425
Inventories 8,442 7,179
Other 17,313 16,233
--------------------------
110,525 137,645
--------------------------
NOTES RECEIVABLE 1,414 1,646
--------------------------
MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT
of casualty reinsurance subsidiary 10,957 11,495
--------------------------
PROPERTY AND EQUIPMENT, at cost 48,379 45,928
Accumulated depreciation (17,252) (15,102)
--------------------------
31,127 30,826
--------------------------
DEFERRED TAX ASSET, net 8,679 11,021
--------------------------
OTHER ASSETS:
Investment in and advances to foreign affiliates, at cost, including equity
in undistributed earnings of $3,050 in 1995 and $2,066 in 1994 9,516 6,165
Other 22,670 13,959
--------------------------
32,186 20,124
--------------------------
$ 194,888 $ 212,757
==========================
</TABLE>
See notes to Consolidated Financial Statements.
Page 5 of 17
<PAGE> 6
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 1995 AND JANUARY 1, 1995
(In thousands except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 34 $ --
Notes payable 4,960 3,765
Accounts payable 16,782 14,839
Accrued payroll and related taxes 28,259 25,761
Accrued expenses 20,611 20,609
Deferred tax liability, net -- 596
--------------------------
70,646 65,570
--------------------------
RESERVES FOR LOSSES of casualty reinsurance subsidiary 40,945 38,450
--------------------------
LONG-TERM DEBT 6,008 38,991
--------------------------
OTHER 4,959 4,029
--------------------------
MINORITY INTEREST 10,753 8,258
--------------------------
SHAREHOLDERS' EQUITY:
Preferred stock, 10,000,000 shares authorized -- --
Common stock, $.10 par value, 20,000,000 shares authorized; -- --
Series A common stock, 3,858,885 issued and outstanding
in 1995 and 1994 386 386
Series B common stock, 8,251,645 issued and outstanding in 1995
and 5,794,539 in 1994 825 579
Additional paid-in capital 39,579 38,919
Retained earnings 24,538 21,681
Cumulative translation adjustment (3,615) (3,552)
Unrealized (loss) on marketable securities (136) (554)
--------------------------
61,577 57,459
--------------------------
$ 194,888 $ 212,757
==========================
</TABLE>
See notes to Consolidated Financial Statements.
Page 6 of 17
<PAGE> 7
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 1, 1995 AND OCTOBER 2, 1994
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 5,281 $ 4,868
Adjustments -
Depreciation expense 3,304 3,300
Amortization expense 6,058 5,262
Provision for bad debts 840 492
Equity income, net of dividends (611) (128)
Minority interests in net earnings 2,638 802
Other (57) (217)
Changes in assets and liabilities, net of acquisitions and
divestitures - Decrease (increase) in assets:
Accounts receivable (12,898) (4,047)
Inventories (4,755) (4,001)
Other current assets (2,000) (2,051)
Marketable securities and certificates of deposit (300) 413
Other assets (8,585) 477
Deferred tax asset 2,342 (569)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses 1,607 5,711
Accrued payroll and related taxes 2,417 3,898
Deferred tax liability - current (596) 495
Accrued retirement benefits and deferred compensation liability 930 895
Reserve for losses of casualty reinsurance subsidiary 2,495 2,494
------------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (1,890) 18,094
------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Net proceeds from sale of Wackenhut Corrections Corporation stock 975 17,626
Payments on notes receivable 232 363
Payment for acquisitions, net of cash -- (935)
Investment in and advances to foreign affiliates (2,455) (706)
Capital expenditures (3,527) (3,311)
Proceeds from sale of marketable securities of reinsurance subsidiary 1,256 9,338
Deferred charge expenditures (2,566) (169)
------------------------
NET CASH USED IN INVESTING ACTIVITIES (6,085) 22,206
------------------------
</TABLE>
(Continued)
Page 7 of 17
<PAGE> 8
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 1, 1995 AND OCTOBER 2, 1994
(In thousands)
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of debt 121,267 137,209
Payments on debt (153,021) (168,535)
Proceeds from the exercise of stock options 270 --
Cash proceeds from sales of trade receivables 32,929 --
Dividends paid (2,182) (2,084)
--------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (737) (33,410)
--------------------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (8,712) 6,890
Cash and Cash Equivalents, at beginning of period 13,808 7,821
--------------------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 5,096 $ 14,711
==========================
SUPPLEMENTAL DISCLOSURES
CASH PAID DURING THE PERIOD FOR:
Interest $ 2,295 $ 3,095
Income taxes $ 2,166 $ 434
NON-CASH FINANCING ACTIVITIES:
Additional minority interests liability due to change in ownership in
Wackenhut Corrections Corporation $ 743 $ --
Stock split in the form of a 25% dividend declared during 1995 and 1994 $ 242 $ 193
Impact on equity from the tax benefit related to the exercise of options
issued under WCC's non-qualified stock option plan $ 162 $ --
</TABLE>
See notes to Consolidated Financial Statements.
Page 8 of 17
<PAGE> 9
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed for the quarterly financial reporting are the
same as those disclosed in Note 1 of the Notes to Consolidated Financial
Statements included in the Corporation's Annual Report on Form 10-K for the
fiscal year ended January 1, 1995. Certain prior year amounts have been
reclassified to conform with current year financial statement presentation.
2. ACCOUNTS RECEIVABLE
In January 1995, the Corporation entered into a $40,000,000, three year,
revolving trade receivable securitization facility agreement to sell undivided
fractional interests in a pool of eligible receivables. At October 1, 1995,
$32,929,000 had been sold, and is presented as a reduction in accounts
receivable in the accompanying balance sheet and as providing cash flow in the
Consolidated Statement of Cash Flows. The costs associated with this program
are based upon the purchasers' level of investment and cost of issuing
commercial paper plus predetermined fees. Such costs are included in "Interest
and receivable discount expense," in the Consolidated Statement of Income. In
January 1995, the Corporation also prepaid the outstanding balance of the first
mortgage note on the headquarters building with proceeds from the sale of
eligible trade accounts receivable.
3. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 1, January 1,
1995 1995
---------------------------
<S> <C> <C>
Revolving loans - 6.7% in 1995 and 7.0% 1994 $ 250 $ 20,450
First mortgage note on headquarters building - 7.1% -- 16,060
Mortgage notes on buildings of international subsidiaries, varying
interest rates from 11.0% to 11.4%, due in 2002 791 947
Secured credit lines and other debt, principally of Australasian
Correctional Management Pty., Ltd., varying interest rates
from 5.9% to 8.5%, due 1997 to 2009 756 1,412
Revolving line of credit for Australian subsidiary - 8.0% 3,112
Other debt principally related to international subsidiaries 1,133 122
------------------------
6,042 38,991
Less - Current portion of long-term debt (34) --
------------------------
$ 6,008 $ 38,991
========================
</TABLE>
Page 9 of 17
<PAGE> 10
4. STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND
On October 31, 1995, the Corporation's Board of Directors, at its regular
quarterly meeting, declared a stock split to be effected in the form of a
twenty-five percent (25%) stock dividend, payable on January 9, 1996 to
stockholders of record at the close of business on December 22, 1995. The stock
split to be effected in the form of a 25% stock dividend, is payable in Series
B common stock to holders of the Corporation's Series A and B shares. The
accompanying financial statements have been retroactively restated to reflect
the stock split.
5. BUSINESS SEGMENTS
SECURITY GUARD SERVICES AND CORRECTIONAL SERVICES
The Corporation's principal business consists of security guard services to
commercial and governmental clients. The company's Wackenhut Corrections
Corporation subsidiary ("WCC"), provides facility management and construction
services to detention and correctional facilities.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
(THOUSANDS OF DOLLARS) OCTOBER 1, 1995 OCTOBER 2, 1994
--------------- ---------------
<S> <C> <C>
REVENUES:
Security guard services $ 514,999 $ 476,130
Correctional services 71,801 61,053
--------- ---------
Total revenues $ 586,800 $ 537,183
========= =========
OPERATING INCOME:
Security guard services $ 6,083 $ 7,991
Correctional services 5,333 3,117
--------- ---------
Total operating income $ 11,416 $ 11,108
========= =========
EQUITY INCOME (LOSS) OF AFFILIATES, NET OF TAXES:
Security guard services $ 617 $ 390
Correctional services (147) (170)
--------- ---------
Total equity income $ 470 $ 220
========= =========
CAPITAL EXPENDITURES:
Security guard services $ 2,191 $ 2,933
Correctional services 1,336 378
--------- ---------
Total capital expenditures $ 3,527 $ 3,311
========= =========
DEPRECIATION AND AMORTIZATION EXPENSE:
Security guard services $ 7,748 $ 5,766
Correctional services 1,614 1,461
--------- ---------
Total expenses $ 9,362 $ 7,227
========= =========
IDENTIFIABLE ASSETS AT OCTOBER 1, 1995 AND JANUARY 1, 1995:
Security guard services $ 155,467 $ 182,424
Correctional services 39,421 30,333
--------- ---------
Total identifiable assets $ 194,888 $ 212,757
========= =========
</TABLE>
Page 10 of 17
<PAGE> 11
DOMESTIC AND INTERNATIONAL OPERATIONS
A summary of domestic and international operations is shown below. Non-U.S.
Operations of the Corporation and its subsidiaries are conducted primarily in
South American and Australia. The Corporation carries its investments in
affiliates (20% to 50% owned) under the equity method. U.S. income taxes which
would be payable upon remittance of affiliates' earnings to the Corporation are
provided currently. Minority interest in consolidated foreign subsidiaries have
been reflected net of applicable income taxes on the accompanying financial
statements for 1995 and 1994.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
(THOUSANDS OF DOLLARS) OCTOBER 1, 1995 OCTOBER 2, 1994
--------------- ---------------
<S> <C> <C>
REVENUES:
Domestic operations $486,858 $456,589
International operations 99,942 80,594
-------- --------
Total revenues $586,800 $537,183
======== ========
OPERATING INCOME:
Domestic operations $ 7,687 $ 8,474
International operations 3,729 2,634
-------- --------
Total operating income $ 11,416 $ 11,108
======== ========
EQUITY INCOME (LOSS) OF AFFILIATES, NET OF TAXES:
Domestic operations -- --
International operations $ 470 $ 220
-------- --------
Total equity income $ 470 $ 220
======== ========
CAPITAL EXPENDITURES:
Domestic operations $ 1,405 $ 730
International operations 2,122 2,581
-------- --------
Total capital expenditures $ 3,527 $ 3,311
======== ========
DEPRECIATION AND AMORTIZATION EXPENSE:
Domestic operations $ 7,508 $ 5,572
International operations 1,854 1,655
-------- --------
Total expenses $ 9,362 $ 7,227
======== ========
IDENTIFIABLE ASSETS AT OCTOBER 1, 1995 AND JANUARY 1, 1995:
Domestic operations $132,731 $163,864
International operations 62,157 48,893
-------- --------
Total identifiable assets $194,888 $212,757
======== ========
</TABLE>
Page 11 of 17
<PAGE> 12
THE WACKENHUT CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
Reference is made to Item 7, Part II of the Corporation's Annual Report on Form
10-K for the fiscal year ended January 1, 1995 for discussion and analysis of
information pertaining to the Corporation's financial condition.
RESULTS OF OPERATIONS
PERIOD-TO-PERIOD COMPARISONS (3RD QUARTER 1995 VERSUS 3RD QUARTER 1994)
Consolidated revenues increased $12.4 million (6.5%) for the third quarter of
1995 compared to the same quarter in 1994. The Corporation's business is
divided into two major segments: security guard and correctional services. The
two business segments of the Corporation conduct their businesses principally
in the United States, although they also conduct a significant portion of their
business overseas.
The Corporation's security guard services revenues increased by $7.6 million
(4.4%), from $170.3 million to $177.9 million during the third quarter of 1995
compared to the same period last year. The increase was attributed principally
to increases in domestic security guard service revenues which increased $9.9
million over the comparable period last year due principally to new business,
including national contracts with Tenneco, Dell Computers, and Nissan. The food
services division continued to expand its revenue base and recorded an increase
in revenues of $2.4 million (35%) attributable to 8 new contracts acquired in
the fourth quarter of 1994 through the first nine months of 1995. The
Corporation's international security services revenues increased $4.9 million
in the third quarter of 1995 compared to the same quarter last year. The
Corporation continued to expand its revenue base in Latin America, Africa and
Eastern Europe. Revenues increased in Ecuador, Ivory Coast, and Russia due to
new branch openings in Krasnodar and St. Petersburg.
Correctional services revenues were $4.9 million higher in the third quarter of
1995 compared to the third quarter of 1994. This increase was attributed
principally to new facility management contracts in Coke County and Lockhart,
Texas which started in October and August 1994, respectively. In addition, the
division derived additional revenues from management of the construction of the
Moore Haven correctional facility located in Florida. Revenues of the
Australian subsidiary of Wackenhut Corrections Corporation ("WCC") amounted to
$7.0 million for the third quarter of 1995 compared with $6.1 million for the
same period last year. The increase is primarily due to expansion of the Arthur
Gorrie Correctional Center in Queensland, Australia and an increase in
compensated resident days between the two periods compared.
Page 12 of 17
<PAGE> 13
Payroll and related taxes increased $7.4 million (5.4%) compared to the third
quarter of 1994, and other operating expenses increased $4.5 million (9.2%).
The increase in labor costs was consistent with the growth in revenues of the
security guard services business, whereas the increase in other operating
expenses was attributable principally to higher revenues of the food and
corrections services divisions which are less labor intensive than other
aspects of the Corporation's business.
Operating income in the third quarter of 1995 was $531,000 higher than for the
same quarter in 1994. Operating income of the security guard services business
was $285,000 lower during this quarter due primarily to the loss of two
contracts with the Department of Labor for the administration of two Job Corps
Centers, which represented a decrease of approximately $534,000 in operating
income. The international security guard services business recorded higher
operating income in the third quarter of 1995 compared to the same quarter last
year, primarily due to an increase in higher margin contracts in South America
as well as cost cutting measures, principally in Africa.
Operating income of the correctional services business increased $751,000
during the quarter. New facilities under management increased the number of
beds under contracts to 15,500. The Australian subsidiary of WCC contributed
$923,000 to the increase in operating income of the correctional services
business during this quarter as a result of the increased beds under contract
at the Arthur Gorrie facility during 1995. Additional operating income was
derived from management of the construction project mentioned above.
Other expense was $142,000 lower in the third quarter of this year than for the
same period last year, principally due to the decrease of $358,000 in interest
and receivable discount expense and a $216,000 decrease in investment income.
The Corporation benefited from a reduction in funding requirements, although
this benefit was partially offset by higher interest rates.
The combined Federal and state effective income tax rates of 34.0% and 32.2%
for the third quarter of 1995 and 1994 respectively, included reductions
attributable to tax exempt interest, capital loss carryforwards and targeted
job credits. The effective tax rate was higher in the third quarter of 1995
than for the comparable period last year due to a reduction in targeted job
credits.
Minority interest (net of income taxes) increased $442,000 during the third
quarter of 1995 compared to 1994 reflecting the increase in public ownership in
WCC.
Equity income of foreign affiliates (net of income taxes) was $32,000 higher
this quarter, when compared to the same quarter in 1994. First, equity income
of international affiliates of the security guard services business increased
$21,000 during the quarter. The improvement was attributable principally to
affiliates in Argentina and Greece. In addition, losses of the correctional
services partnership in the United Kingdom were significantly less than those
for the third quarter of 1994.
Net income was $26,000 (1.3%) lower for the third quarter of 1995 than for the
same quarter in 1994 before the extraordinary charge of $887,000 for the early
extinguishment of debt in the third quarter last year. After the extraordinary
charge, net income increased $861,000 from the third quarter 1994 compared to
the third quarter 1995 due to the factors mentioned above.
Page 13 of 17
<PAGE> 14
PERIOD-TO-PERIOD COMPARISONS (FIRST NINE MONTHS 1995 VERSUS FIRST NINE MONTHS
1994)
Consolidated revenues increased $49.6 million (9.2%) for the first nine months
of 1995 compared to the same period in 1994.
The Corporation's security guard services revenues increased by $38.9 million
(8.2%), from $476.1 million to $515.0 million during the first nine months of
1995 compared to the same period last year. The increase was attributed
principally to increases in domestic security guard service revenues which
increased $34.1 million over the comparable period last year due principally to
new business, including national contracts with IBM, Northern Telecom, Tenneco,
Dell Computers and Nissan. The food services division continued to expand its
revenue base and recorded an increase in revenues of $9.8 million (57%)
attributable to 8 new contracts acquired in the fourth quarter of 1994 through
the first nine months of 1995. International security guard services revenues
increased $13.4 million in the first nine months of 1995 compared to the same
period last year. The Corporation continued to expand its revenue base in Latin
America, Africa and Eastern Europe. Revenues increased in Chile, Ecuador, Ivory
Coast and Russia due to new branch openings in Krasnodar and St. Petersburg.
Correctional services revenues were $10.7 million higher in the first nine
months of 1995 compared to the first nine months of 1994. This increase was
attributed principally to new facility management contracts in Coke County and
Lockhart, Texas which started in October and August 1994, respectively. In
addition, the division derived additional revenues from management of the
construction of the Moore Haven facility. Revenues of the Australian subsidiary
of WCC amounted to $19.7 million for the first nine months of 1995 compared
with $16.5 million for the same period last year. The increase is primarily due
to the Gorrie facility expansion and continued increase in compensated resident
days between the two periods compared.
Payroll and related taxes increased $28.3 million (7.1%) compared to the first
nine months of 1994, and other operating expenses increased $21.0 million
(16.6%). The increase in labor costs was consistent with the growth in revenues
of the security guard services business, whereas the increase in other
operating expenses was attributable principally to higher revenues of the food
and corrections services divisions which are less labor intensive than other
aspects of the Corporation's business.
Operating income in the first nine months of 1995 was $308,000 higher than for
the same period in 1994. Operating income of the domestic security guard
services business was $1.0 million lower during this period due partially to
the absence of one-time profits from the American Airlines strike and the
Florida Department of Transportation Interstate Highway contract which were
reported in the first nine months of 1994, as well as the decrease in award and
base fee revenues on two contracts with the Department of Energy as a result of
higher than expected workforce reductions. In addition, the loss of two
contracts with the Department of Labor for the administration of two Job Corps
Centers represented a decrease of approximately $914,000 in operating income.
The remainder of the decrease is primarily due to increased business
development costs in the Government Services Group which have resulted from
efforts to capitalize on opportunities in the privatization of government
services. The international security guard services business also recorded
lower operating income in the first nine months of 1995 compared to the same
period last year as a result of increased wage pressures in South America as
well as a reduction in the Federal government's budget for foreign embassy
guard contracts. These decreases were partially offset by cost cutting measures
principally in Africa.
Page 14 of 17
<PAGE> 15
Operating income of the correctional services business increased $2.2 million
during the first nine months of 1995. New facilities under management increased
the number of beds under contracts to 15,500. The Australian subsidiary of WCC
contributed $918,000 to the increase in operating income of the correctional
services business during the first nine months of 1995 primarily as a result of
the increased number of beds at the Gorrie facility during 1995. Additional
operating income was derived from management of the construction project
mentioned above.
Other expense was $574,000 lower in the first nine months of this year than for
the same period last year, principally due to the decrease of $907,000 in
interest and receivable discount expense, and the concurrent decrease of
$333,000 in interest and investment income principally due to a decline in
fixed income securities investment holdings.
The combined Federal and state effective income tax rates of 35.0% and 34.0%
for the first nine months of 1995 and 1994 respectively, included reductions
attributable to tax exempt interest, capital loss carryforwards and targeted
job credits. The effective tax rate was higher in the first nine months of 1995
than for the comparable period last year due to a reduction in targeted job
credits.
Minority interest (net of income taxes) increased $1.2 million during the
first nine months of 1995 compared to 1994 reflecting the increase in public
ownership in WCC.
Equity income of foreign affiliates (net of income taxes) was $250,000 higher
in the first nine months, when compared to the same period in 1994. The
improvement was attributable principally to affiliates in Argentina and Greece.
In addition, losses of the correctional services partnership in the United
Kingdom were significantly less than those for the first nine months of 1994.
Net income was $474,000 (8.2%) lower for the third quarter of 1995 than for the
same period in 1994 before the extraordinary charge of $887,000 for the early
extinguishment of debt in the third quarter last year. After the extraordinary
charge, net income increased $413,000 for the first nine months of 1994
compared to the first nine months of 1995 due to the factors mentioned above.
Page 15 of 17
<PAGE> 16
THE WACKENHUT CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the Corporation's business results in claims or litigation
alleging that the Corporation is liable for damages arising from the conduct of
its employees or others.
Reference is made to Item 1, Part II of the Corporation's Quarterly Report on
Form 10-Q for the quarterly period ended April 2, 1995 for legal proceedings.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Reference is made to Item 4, Part II of the Corporation's Quarterly Report on
Form 10-Q for the quarterly period ended July 2, 1995 for matters submitted to
a vote of security holders.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). Exhibits
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b). Reports on Form 8-K
The Corporation did not file a Form 8-K during the third quarter of 1995.
Page 16 of 17
<PAGE> 17
THE WACKENHUT CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WACKENHUT CORPORATION
DATE: November 10, 1995 /s/ RICHARD C. DECOOK
------------------------------------------
Richard C. DeCook, Senior Vice President -
Finance and Chief Financial Officer
(Duly Authorized Officer)
DATE: November 10, 1995 /s/ JUAN D. MIYAR
------------------------------------------
Juan D. Miyar, Vice President - Accounting
Services and Corporate Controller
(Chief Accounting Officer)
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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 OCTOBER 1,
1995.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> OCT-01-1995
<EXCHANGE-RATE> 1
<CASH> 5,096
<SECURITIES> 10,957<F1>
<RECEIVABLES> 81,379<F2>
<ALLOWANCES> 1,705
<INVENTORY> 8,442
<CURRENT-ASSETS> 110,525<F3>
<PP&E> 48,379
<DEPRECIATION> 17,252
<TOTAL-ASSETS> 194,888
<CURRENT-LIABILITIES> 70,646
<BONDS> 6,008
<COMMON> 1,211
0
0
<OTHER-SE> 60,366
<TOTAL-LIABILITY-AND-EQUITY> 194,888<F4>
<SALES> 0
<TOTAL-REVENUES> 586,800
<CGS> 0
<TOTAL-COSTS> 575,384
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 840
<INTEREST-EXPENSE> 1,341<F5>
<INCOME-PRETAX> 10,075
<INCOME-TAX> 3,523
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,281<F6>
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0
<FN>
<F1>MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT ARE CLASSIFIED AS NON-CURRENT
ASSETS ON THE BALANCE SHEET.
<F2>IN JANUARY 1995, THE CORPORATION ENTERED INTO A $40 MILLION, THREE YEAR
REVOLVING TRADE RECEIVABLE SECURITIZATION FACILITY AGREEMENT TO SELL UNDIVIDED
FRACTIONAL INTERESTS IN A POOL OF ELIGIBLE RECEIVABLES. AT OCT. 1, 1995, $32.9
MILLION HAVE BEEN SOLD AND ARE INCLUDED AS A REDUCTION IN ACCOUNTS RECEIVABLE
ON THIS SCHEDULE.
<F3>INCLUDES $17,313 OF OTHER CURRENT ASSETS
<F4>INCLUDES $40,945 RESERVE FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY, $10,753
MINORITY INTEREST AND $4,959 OTHER LIABILITIES
<F5>INTEREST AND RECEIVALBE DISCOUNT EXPENSE OF $2,267 NET OF INTEREST AND
INVESTMENT INCOME OF $926
<F6>INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES - NET OF
INCOME TAXES OF $1,741 AND $(470) RESPECTIVELY
</FN>
</TABLE>
