<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
REGISTRATION NO. 333-03249
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
THE WACKENHUT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 8744 59-0857245
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
THE WACKENHUT CENTER
4200 WACKENHUT DRIVE #100
PALM BEACH GARDENS, FLORIDA 33410-4243
(561) 622-5656
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES P. ROWAN
THE WACKENHUT CENTER
4200 WACKENHUT DRIVE #100
PALM BEACH GARDENS, FLORIDA 33410-4243
(561) 622-5656
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies of all communications to:
STEPHEN K. RODDENBERRY
AKERMAN, SENTERFITT & EIDSON, P.A.
SUNTRUST INTERNATIONAL CENTER
ONE S.E. 3RD AVENUE, 28TH FLOOR
MIAMI, FLORIDA 33131-1704
(305) 374-5600
BRYAN E. DAVIS
MICHAEL R. MCALEVEY
ALSTON & BIRD
ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
(404) 881-7000
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
to this form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number and the effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------------------------
Series B Common Stock, par value $.10 per share....... 4,600,000 shares $19.625 $90,275,000 $31,129.31
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 600,000 shares subject to the option of the Underwriters to
purchase shares from the Registrant to cover overallotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE WACKENHUT CORPORATION
(CROSS REFERENCE SHEET PURSUANT TO ITEM 501 OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-2 LOCATION OR CAPTION
ITEM NUMBER AND CAPTION IN PROSPECTUS
----------------------------------------------- ----------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Outside Front Cover Page
2. Inside Front and Outside Back Cover Page of
Prospectus..................................... Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges............. Prospectus Summary; Selected Financial
Data; Risk Factors
4. Use of Proceeds................................ Use of Proceeds; Capitalization
5. Determination of Offering Price................ Outside Front Cover Page; Underwriting
6. Dilution....................................... Not Applicable
7. Selling Security Holders....................... Selling Shareholders
8. Plan of Distribution........................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered..... Outside Front Cover Page; Prospectus
Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel......... Legal Matters; Experts
11. Information with Respect to the Registrant..... Outside Front Cover Page; Available
Information; Incorporation of Certain
Information by Reference; Prospectus
Summary; Risk Factors; Use of Proceeds;
Price Range of Common Stock; Dividend
Policy; Capitalization; Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Description of Capital
Stock; Shares Eligible For Future Sale;
Financial Statements
12. Incorporation of Certain Information by
Reference...................................... Incorporation of Certain Information By
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED MAY 23, 1996
PROSPECTUS
LOGO
------------------------
Of the 4,000,000 shares of Series B Common Stock, par value $.10 per share
(the "Series B Common Stock") of The Wackenhut Corporation (the "Company") being
offered hereby, 2,000,000 shares are being sold by the Company and 2,000,000
shares are being sold by George R. Wackenhut, the Chairman of the Board and
Chief Executive Officer of the Company, and The George R. Wackenhut Retained
Annuity Trust (the "Selling Shareholders"). See "Selling Shareholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Shareholders. The rights of holders of the Series B Common Stock offered hereby
are identical in all respects to those of holders of the Company's Series A
Common Stock, par value $.10 per share (the "Series A Common Stock," and
together with the Series B Common Stock, the "Common Stock"), provided that the
holders of the Series A Common Stock have voting rights on matters presented to
shareholders while the holders of Series B Common Stock have no voting rights on
such matters except as may be afforded by applicable law. See "Description of
Capital Stock."
The Series B Common Stock is listed on the New York Stock Exchange under
the symbol "WAKB." On May 8, 1996, the last reported sales price for the Series
B Common Stock on the New York Stock Exchange was $19.00 per share. See "Price
Range of Common Stock."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SERIES B COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
- ------------------------------------------------------------------------------------------------------------
Per Share................................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------
Total(3).................................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company and the Selling
Shareholders estimated to be $590,000.
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 600,000 additional shares of Series B Common Stock
on the same terms and conditions as set forth above. If all such additional
shares are purchased by the Underwriters, the total Price to Public will be
$ , the total Underwriting Discounts and Commissions will be
$ , the total Proceeds to the Company will be $ and total
Proceeds to the Selling Shareholders will be $ . See
"Underwriting."
------------------------
The shares of Series B Common Stock are offered subject to prior sale,
when, as and if delivered to or accepted by the Underwriters, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
certificates for the Series B Common Stock will be ready for delivery at the
offices of Lazard Freres & Co. LLC in New York, New York on or about May ,
1996.
LAZARD FRERES & CO. LLC PRUDENTIAL SECURITIES INCORPORATED
The date of this Prospectus is May , 1996.
4,000,000 SHARES
THE WACKENHUT CORPORATION
SERIES B COMMON STOCK
<PAGE> 4
[PHOTOS]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A COMMON
STOCK, THE SERIES B COMMON STOCK OR THE COMMON STOCK OF WACKENHUT CORRECTIONS
CORPORATION AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following Regional Offices of the
Commission: Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission, Washington,
D.C. 20549 upon payment of prescribed fees. In addition, the Series A Common
Stock and the Series B Common Stock are listed on the New York Stock Exchange,
and the aforementioned materials may also be inspected at the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-2, including amendments thereto, relating to the Series B Common Stock offered
hereby (the "Registration Statement"). This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Series B Common Stock offered
hereby, reference is hereby made to the Registration Statement and the exhibits
and schedules filed as a part thereof, which may be obtained from the Commission
in the manner set forth above. Statements contained in this Prospectus
concerning the provisions or contents of any contract, agreement or any other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matters involved, and each statement shall be deemed qualified in its
entirety by such reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference: (1) Annual Report on Form 10-K for the fiscal
year ended December 31, 1995; and (2) Quarterly Report on Form 10-Q for the
thirteen weeks ended March 31, 1996. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall be not deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will furnish, without charge, to each person to whom a
Prospectus is delivered, upon written or oral request, a copy of the foregoing
Annual Report on Form 10-K and the foregoing Quarterly Report on Form 10-Q, in
each case other than exhibits thereto (unless such exhibits are specifically
incorporated by reference therein). Requests for such documents should be
submitted in writing to The Wackenhut Corporation, The Wackenhut Center, 4200
Wackenhut Drive #100, Palm Beach Gardens, Florida 33410-4243, Attention:
Corporate Secretary, or by telephone at (561) 622-5656.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated: (i) the information
contained in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised; (ii) all references herein to the number of shares
of Series A Common Stock, Series B Common Stock and Common Stock and per share
data have been adjusted to reflect a 100% stock dividend declared in 1992, a 25%
stock dividend declared in 1994, and a 25% stock dividend declared in 1995 (in
each such case, effected in the form of a stock split), see "Description of
Capital Stock;" and (iii) "Fiscal 1991," "Fiscal 1992," "Fiscal 1993," "Fiscal
1994" and "Fiscal 1995" refer to the Company's fiscal years ended December 29,
1991, January 3, 1993, January 2, 1994, January 1, 1995 and December 31, 1995,
respectively. This Prospectus contains certain forward-looking statements
involving risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in these forward-looking statements as a
result of certain of the factors set forth under "Risk Factors" and elsewhere in
this Prospectus.
THE COMPANY
GENERAL
The Company is a leading international provider of security-related and
other support services and a leading developer and manager of privatized
correctional and detention facilities. The Company provides security services,
food services and other related services to commercial and governmental
customers through its services business (the "Services Business"). Through its
55%-owned Wackenhut Corrections Corporation subsidiary ("WCC"), the Company also
provides correctional and detention facility design, development and management
services to governmental agencies (the "Correctional Business"). The Company has
approximately 45,000 full and part-time employees serving over 14,000 commercial
and governmental customers through an extensive network of offices and
operations in 48 states and 50 countries.
The Company was incorporated in 1958 to continue the business that was
originally established in 1954 by its Chairman and Chief Executive Officer,
George R. Wackenhut, to provide security-related services to commercial and
governmental customers. Since its founding, the Company has grown by: (i)
enhancing its position in its core security-related services business through
the development of specialized and upgraded services; (ii) targeting specific
segments of the security services industry; and (iii)expanding into a range of
other support services in response to a growing trend toward privatization of
governmental services and outsourcing by commercial customers of non-core
support functions.
The Company is the third largest security services organization in the
United States and is the leading United States-based provider of security
services abroad. In addition to its core security-related services, which
include guard and investigative services, the Company is a leader in the
development of specialized niche services. For example, in response to a growing
demand in the marketplace for security professionals with greater skill and
responsibility levels, the Company has developed its Custom Protection Officer
("CPO") program to provide highly specialized and trained security professionals
to a broad range of customers such as national retailers, banks and other
financial institutions and gated communities. CPOs are also used as supplemental
law enforcement forces by public transportation authorities and other
governmental entities. Moreover, in seeking to respond to the specialized needs
of its larger clients, the Company developed its national accounts ("National
Accounts") program to provide customized security services on a national or
regional level to large customers with multiple locations. The National Accounts
program provides customers with a high level of service by providing a dedicated
contact person within the Company who is responsible for coordinating their
accounts on a nationwide basis. The Company believes that the National Accounts
program may also enable it to expand the scope of services offered worldwide to
its National Account customers. Management believes that the high quality and
consistent service of its CPO and National Accounts programs provides the
Company with an opportunity to enhance long-term relationships with its clients.
As part of its strategy to respond to the growing trend toward
privatization of governmental services, in 1984 the Company entered into the
development and management of privatized correctional and detention
4
<PAGE> 7
facilities, a business which is now operated exclusively through WCC. As of May
8, 1996, WCC had contracts and awards to manage 28 correctional and detention
facilities, with a design capacity of 20,932 beds. From December 29, 1991 to
December 31, 1995, WCC's revenues increased from $37.9 million to $99.4 million
and operating income increased from $1.7 million to $7.2 million, representing
compound annual growth rates of 27.3% and 43.5%, respectively. In addition, from
December 29, 1991 to December 31, 1995, the Company increased its design
capacity of contracts at a compound annual growth rate of 37.4%. As of May 8,
1996, WCC's total equity market capitalization was approximately $572 million.
In addition to its expansion into the Correctional Business through WCC,
the Company has leveraged its management skills to expand into other support
services. In 1992, the Company entered into the food service business for
correctional institutions and, in January 1996, expanded its presence in this
market through the acquisition of contracts and certain assets of the
Correctional Food Services Division of Service America Corporation. In 1995, the
Company's Food Services Division had revenues of $34.7 million and the
Correctional Food Service Division of Service America Corporation, which the
Company acquired, had revenues of $41.1 million. Presently, only 10% of the
correctional foodservice market has been privatized. Consequently, the Company
believes that as privatization of correctional food services continues to gain
acceptance at state and local levels, the Food Services Division will have
opportunities for expansion. In addition to the services which the Company has
specifically targeted for expansion, the Company continues to explore and
selectively invest in other service businesses, including temporary services,
commercial and governmental support services, supplemental police services,
crash-fire-rescue services, fire protection services, and airport services.
BUSINESS STRATEGY
The Company's business strategy is focused on two primary objectives: (i)
enhancing its position as a leading international provider of security and
security-related services by distinguishing the type and quality of security
services it provides; and (ii) using its security service expertise and contacts
to offer other support services to its clients. Key elements of the Company's
business strategy are described below:
- ENHANCE LEADERSHIP POSITION OF CORE SECURITY-RELATED SERVICE
BUSINESS. The Company strives to enhance its market position by
attempting to provide the most reliable and consistent service in the
industry. The Company believes its security professionals provide quality
service because of its: (i) screening and hiring procedures; (ii)
extensive training; and (iii) well-organized supervisory and feedback
procedures. The Company's customer turnover ratio, the industry benchmark
for client satisfaction, has been significantly lower than the industry
average. Domestically, the Company experienced 9.1% client turnover
during 1995, a period in which the industry, the Company believes,
experienced an approximate 20% client turnover rate. Furthermore, the
Company's employee turnover ratio for traditional security guards has
averaged approximately half of what the Company believes to be the
industry average.
- DEVELOP SPECIALIZED SECURITY SERVICES. The Company has identified and
targeted National Accounts and CPOs as its primary growth areas in the
security services business and seeks to expand its market position in
these areas. Management believes that the high quality and consistent
service of its National Accounts and CPO programs provide the Company
with an opportunity to establish and enhance long-term relationships with
its clients.
- DEVELOP COMPLEMENTARY SUPPORT SERVICES. The Company will seek to expand
the scope of complementary support services it offers. The Company's
successful identification and development of the correctional business
and the foodservice business has provided it with the experience it
believes will allow it to develop other specialized programs and support
services such as temporary services, building maintenance, supplemental
police services, crash-fire-rescue services, fire protection services,
and non-security airport services.
5
<PAGE> 8
- GEOGRAPHIC EXPANSION. The Company seeks to increase revenues and enhance
earnings stability by continuing to expand its international presence.
Historical revenue growth has been centered in Central and South America
and, more recently, Western Europe. The Company has also been expanding
into Central and Eastern Europe, the former Soviet Union, the People's
Republic of China and other countries in the Far East in an attempt to
capitalize on recent economic developments and political reforms in these
areas. The Company believes this geographic diversity helps to protect
its revenues and earnings from adverse regional economic and business
cycles. In addition, the Company believes that its far reaching
geographic presence, which includes 50 countries worldwide, provides it
with an advantage when pursuing contracts with multi-national
corporations.
- CORRECTIONAL BUSINESS. WCC's objective is to enhance its position as one
of the leading providers of privatized correctional and detention
services. Key elements of WCC's business strategy include: (i) effective
management of projects; (ii) selective development of new business
opportunities; (iii) selective pursuit of acquisitions; (iv) expansion of
its scope of services; (v) expansion into international markets by
establishing alliances with strategic local partners; and (vi) limiting
capital risk.
- PURSUE SELECTED ACQUISITIONS. In addition to internal growth in the
security-related services business, the Company's growth strategy
includes the selected acquisition of other support service businesses.
For example, through its January 1996 acquisition of the Correctional
Food Service Division of Service America Corporation the Company has
established a leading position in the growing correctional food service
industry.
The Company's principal executive offices are located in The Wackenhut
Center at 4200 Wackenhut Drive #100, Palm Beach Gardens, Florida 33410-4243, and
its telephone number is (561) 622-5656.
THE OFFERING
<TABLE>
<S> <C>
Series B Common Stock Offered by:
The Company....................................... 2,000,000 shares
The Selling Shareholders.......................... 2,000,000 shares
-----------
Total........................................ 4,000,000 shares
-----------
-----------
Shares of Common Stock to be
Outstanding after the Offering:
Series A Common Stock............................. 3,858,885 shares
Series B Common Stock............................. 10,317,262 shares(1)
-----------
Total........................................ 14,176,147 shares
-----------
-----------
Use of Proceeds..................................... The Company currently intends to use
the net proceeds from this offering to
repay the outstanding balance on its
revolving loan, to repurchase a
portion of the receivables sold under
its accounts receivable
securitization facility, for possible
acquisitions, for systems and
technology upgrades and for general
corporate purposes. The Company's
growth strategy includes selective
acquisitions of businesses in
complementary market niches. See "Use
of Proceeds."
New York Stock Exchange Symbols:
Series A Common Stock............................. WAK
Series B Common Stock............................. WAKB
WCC Common Stock.................................. WHC
</TABLE>
- ---------------
(1) Excludes 699,813 shares of Series B Common Stock reserved for issuance upon
exercise of outstanding stock options granted under the Company's Key
Employee Long-Term Incentive Stock Option Plan. See Note 7 of Notes to
Consolidated Financial Statements.
6
<PAGE> 9
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL(1) -----------------------
------------------------------------------------------------------ APRIL 2, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Revenues....................... $570,411 $615,378 $659,256 $726,753 $796,732 $189,792 $212,474
Non-recurring charges.......... -- -- (1,726)(2) -- -- -- --
Write-down of headquarters
building..................... -- -- -- (8,700)(3) -- -- --
Provision for relocation
costs........................ -- -- -- -- -- -- (750 )(4)
Operating income............... 13,859 3,367(5) 4,496 6,592 15,774 3,055 2,063
Income before income taxes..... 11,867 1,588 3,371 3,002 13,733 2,643 2,234
Provision for income taxes..... 4,378 834 485 17 4,742 898 769
Income before extraordinary
charge and cumulative effect
of accounting change......... 7,721 1,137 3,609 2,272 7,260 1,599 945
Extraordinary charge-early
extinguishment of debt,
net of income taxes.......... -- -- (1,444) (887) -- -- --
Cumulative effect of accounting
change for income taxes...... -- 7,370 -- -- -- -- --
Net income..................... 7,721 8,507 2,165 1,385 7,260 1,599 945
========= ========= ========= ========= ========= ========= =========
EARNINGS PER SHARE(6):
Income before extraordinary
charge and cumulative effect
of accounting change......... $ .64 $ .09 $ .30 $ .19 $ .60 $ 0.13 $ 0.08
Extraordinary charge -- early
extinguishment of debt, net
of income taxes.............. -- -- (.12) (.08) -- -- --
Cumulative effect of accounting
change for income taxes...... -- .61 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income..................... $ .64 $ .70 $ .18(2) $ .11(3) $ .60 $ 0.13 $ 0.08 (4)
========= ========= ========= ========= ========= ========= =========
Weighted average shares
outstanding.................. 12,058,340 12,058,340 12,058,340 12,066,780 12,131,772 12,066,780 12,168,647
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1996
--------------------------------
ACTUAL AS ADJUSTED(7)
----------- --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................... $ 95,753 $121,623
Total assets...................................................................... 259,578 285,448
Current portion of long-term debt................................................. 11 11
Long-term debt.................................................................... 15,310 5,860
Total debt........................................................................ 15,321 5,871
Shareholders' equity.............................................................. 88,256 123,576
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the Sunday closest to the calendar year
end. Fiscal 1991, Fiscal 1993, Fiscal 1994 and Fiscal 1995 each included 52
weeks. Fiscal 1992 included 53 weeks.
(2) In Fiscal 1993, the Company recognized non-recurring charges of $1,726,000
($1,061,000 net of income taxes, or $.09 per share). A significant portion
of these charges was due to a $791,000 decrease in the value of guard
contracts acquired in 1991.
(3) In Fiscal 1994, the Company recognized a one time operating expense of
$8,700,000 ($5,350,000 net of income taxes, or $.44 per share) in connection
with the writedown of its former headquarters building.
(4) During the first quarter of 1996, the Company recognized a provision for
relocation costs in the amount of $750,000 ($461,000 net of income taxes, or
$.04 per share).
(5) In Fiscal 1992, operating income included a $1,500,000 provision for legal
expenses, a write-down of $1,900,000 in the balance of a note receivable, an
increase in the provision for doubtful accounts of $800,000, and a
$1,800,000 operating loss related to the decrease in revenue on a major
contract for Wackenhut Applied Technologies Center, Inc.
(6) Per share amounts are restated to reflect a 100% stock dividend declared
during Fiscal 1992, a 25% stock dividend declared during Fiscal 1994 and a
25% stock dividend declared during Fiscal 1995 (in each case, effected in
the form of a stock split).
(7) Adjusted to give effect to the sale of 2,000,000 shares of Series B Common
Stock offered by the Company hereby at an assumed offering price of $19.00
per share (after deduction of underwriting discounts and commissions and
estimated offering expenses) and the application of the net proceeds
therefrom. See "Use of Proceeds."
7
<PAGE> 10
RISK FACTORS
In connection with an investment in the shares of Series B Common Stock
offered hereby, prospective investors should consider carefully the following
factors which can affect the Company's current position and future prospects, in
addition to the other information set forth in this Prospectus. The following
factors and other information set forth in this Prospectus contain certain
forward-looking statements involving risks and uncertainties. The Company's
actual results could differ materially from the results anticipated in these
forward-looking statements as a result of certain factors set forth in this
section and elsewhere in this Prospectus.
REVENUE AND PROFIT GROWTH DEPENDENT ON EXPANSION. The Company's growth
will depend to a significant degree upon its ability to obtain additional
service contracts and correctional and detention facility development and
management contracts and to retain existing contracts. The Company anticipates
that there will be significant competition among: (i) providers of
security-related and other support services for service contracts and for the
renewal of such contracts upon expiration and (ii) operators of correctional and
detention facilities for development and management contracts for new facilities
and for the renewal of those contracts upon expiration. Accordingly, there can
be no assurance that the Company will be able to obtain contracts or to retain
contracts upon expiration thereof. Growth of the Correctional Business is
generally dependent on the development and management of new correctional and
detention facilities, since contracts to manage existing public facilities are
not typically offered to private operators. The rate of development of new
facilities and, therefore, the Correctional Business' potential for growth, will
depend on a number of factors, including crime rates and sentencing patterns in
countries in which WCC operates, governmental and public acceptance of the
concept of privatization, the number of facilities available for privatization
and WCC's ability to obtain awards for contracts and to integrate new facilities
into its management structure on a profitable basis. In addition, certain
jurisdictions recently have required the successful bidder to make a significant
capital investment in connection with the financing of a particular project.
WCC's ability to secure awards under such circumstances will, therefore, also
depend on WCC having sufficient capital resources. See "Business -- Business
Strategy."
GROWTH/ACQUISITION STRATEGY. The Company intends to grow both its Services
Business and its Correctional Business through internal expansion and through
selective acquisitions of additional companies or assets that would expand its
existing business. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional companies or assets or
successfully integrate such additional companies or assets into the Company
without substantial costs, delays or other problems. In addition, there can be
no assurance that companies acquired in the future will be profitable at the
time of their acquisition or will achieve levels of profitability that justify
the investment therein. Acquisitions may involve a number of special risks,
including, but not limited to, adverse short-term effects on the Company's
reported operating results, diversion of management's attention, dependence on
retaining, hiring and training key personnel, risks associated with
unanticipated problems or legal liabilities and amortization of acquired
intangible assets, some or all of which could have a material adverse effect on
the Company's operations and financial performance. See "Business -- Business
Strategy."
CAPITAL REQUIREMENTS TO FUND GROWTH. The Company's acquisition strategy
may require substantial capital. While the Company believes that its present
capital position will be sufficient to meet its capital requirements, future
acquisitions may require additional capital. Such capital may be obtained by
borrowings under the Company's existing credit facilities, through the issuance
of long-term or short-term indebtedness or through the issuance of equity
securities in private or public transactions. This could result in dilution of
existing equity positions and/or increased interest expense. There can be no
assurance that acceptable capital financing for future acquisitions can be
obtained on suitable terms, if at all. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
INTERNATIONAL OPERATIONS. In Fiscal 1993, Fiscal 1994, Fiscal 1995 and the
thirteen weeks ended March 31, 1996, revenues derived from the provision of
services to customers outside the United States accounted for approximately
12.7%, 15.3%, 18.1% and 16.6%, respectively, of the Company's consolidated
revenues. The Company anticipates that international revenues will continue to
account for a significant
8
<PAGE> 11
portion of consolidated revenues in the foreseeable future. The Company's
operating results, therefore, are subject to the risks inherent in international
operations, including various regulatory requirements, fluctuations in currency
exchange rates, political and economic changes and disruptions, tariffs or other
barriers, and difficulties in staffing and managing foreign operations. One or
more of these factors may have a material adverse effect on the Company's future
international operations and, consequently, on the Company's operating results.
See "Business -- International Group."
CONTRACTS WITH GOVERNMENTAL AGENCIES. The Company's service contracts with
governmental agencies are typically cost-reimbursable contracts providing the
Company with the opportunity to earn award fees based on the achievement of
performance goals. Award fees directly affect the Company's operating income
and, consequently, any reduction in such award fees may adversely affect the
Company's results of operations. The Company's service contracts with
governmental agencies and correctional and detention facility management
contracts are all subject to either annual or bi-annual governmental
appropriations. A failure by a governmental agency to receive such
appropriations could result in termination of the service or correctional or
detention facility management contract by such agency or a reduction of fees
payable to the Company. Even if funds are appropriated, the timing of such
appropriations may cause delays in payment which could negatively affect the
Company's cash flow. In addition, because of the concentration of the Company's
revenues attributable to agencies of the United States government, the budgeting
pressures faced by the United States government and agencies thereof could
result in the loss of existing contracts or reduce the Company's growth
potential in this area. These factors could have a material adverse effect on
the Company's results of operations. See "Business -- Government Services."
BUSINESS CONCENTRATION. Contracts with the United States Department of
Energy accounted for approximately 17% of the Company's consolidated revenues in
Fiscal 1995. Moreover, correctional contracts with governmental agencies of the
State of Texas accounted for 41%, 37% and 41% of WCC's revenues in Fiscal 1994,
Fiscal 1995 and the first quarter of 1996, respectively. Contracts with the New
South Wales Department of Corrective Services accounted for 15%, 13% and 11% of
WCC's revenues during Fiscal 1994, Fiscal 1995 and the first quarter of 1996,
respectively. Contracts with the Queensland Corrective Services Commission
accounted for 13% of WCC's revenues during Fiscal 1994, Fiscal 1995 and the
first quarter of 1996. Contracts with the Louisiana Department of Public Safety
and Corrections accounted for 13%, 11% and 11% of WCC's revenues in Fiscal 1994,
Fiscal 1995 and the first quarter of 1996 , respectively. The loss of, or a
significant decrease in, the Company's business with the Department of Energy or
WCC's business with the foregoing agencies could have a material adverse effect
on the Company's results of operations. See "Business -- Customers."
CORRECTIONAL CONTRACTS. WCC's facility management contracts typically have
terms ranging from one to five years. WCC has two contracts that will expire in
1996, one of which has a two-year renewal option which is automatically renewed
subject to legislative appropriation and one of which will be subject to
competitive re-bid. WCC's management contracts generally contain one or more
renewal options for terms ranging from one to five years. Only the contracting
governmental agency may exercise a renewal option. No assurance can be given
that any agency will exercise a renewal option in the future. Additionally, the
contracting governmental agency typically may terminate a facility contract
without cause by giving WCC adequate written notice. Furthermore, in certain
cases the development of facilities to be managed by WCC is subject to the
facility obtaining construction financing. Such financing may be obtained
through a variety of means, including without limitation, sale of tax-exempt
bonds or other obligations or direct governmental appropriation. The sale of
tax-exempt bonds may be adversely affected by changes in applicable tax laws or
adverse changes in the market for tax-exempt bonds or other obligations.
POTENTIAL LEGAL LIABILITY. The Company's provision of security-related
services and correctional and detention facility management services exposes the
Company to potential third-party claims or litigation by persons for personal
injury or other damages resulting from contact with Company personnel. In the
case of WCC, such damages may arise from a prisoner's escape or from a
disturbance or riot at a WCC-managed facility. WCC's management contracts
generally require WCC to indemnify the governmental agency against any damages
to which the governmental agency may be subject in connection with such claims
or litigation. Under principles of common law, the Company can generally be held
liable for wrongful acts or omissions of
9
<PAGE> 12
its agents or employees performed in the course and within the scope of their
agency or employment. In addition, some states have adopted statutes that
expressly impose on the Company legal responsibility for the conduct of its
agents and employees. While the Company maintains an insurance program that
provides coverage for certain liability risks, including personal injury, death
and property damage where the Company or WCC is found negligent, the laws of
many states limit or prohibit insurance coverage for liability for punitive
damages arising from willful, wanton or grossly negligent conduct. There can be
no assurance that the Company's insurance will be adequate to cover all
potential claims or damages. See "Business -- Business Regulations and Legal
Considerations; Legal Proceedings."
INFLATION. The Company's largest expense is personnel costs. A number of
the Company's security-related and correctional and detention facility
management contracts, including contracts with governmental agencies and
national accounts, provide for payments of either fixed fees or fees that
increase by only small amounts during their terms. If, due to inflation or other
causes, the Company must increase the wages and salaries of its employees at
rates faster than it can increase the fees charged under such contracts, the
Company's profitability would be adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Inflation."
COMPETITION. The security-related and other support service industries are
highly competitive and fragmented. The Company competes with a number of major
national companies, including, but not limited to, Borg-Warner Security
Corporation and Pinkerton's Inc., as well as local or regional security service
companies. Through WCC, the Company competes with a number of companies in the
correctional business, including Corrections Corporation of America, U.K.
Detention Services, Ltd. and U.S. Corrections Corporation. Some of the companies
with which the Company and WCC compete are larger and have greater resources
than the Company or WCC. The smaller local and regional companies with which the
Company and WCC compete may have better knowledge of the local conditions and be
better able to gain political and public acceptance. Potential competitors can
enter the Services Business or the Correctional Business without substantial
capital investment or previous experience. In addition, the Company and WCC may
compete in some markets with governmental agencies that provide security-related
or other support services and manage correctional facilities. See
"Business -- Competition."
ACCEPTANCE OF PRIVATIZATION OF TRADITIONAL PUBLIC FUNCTIONS. Privatization
of traditional governmental functions such as food service at prisons and the
management of correctional and detention facilities by private entities has not
achieved complete acceptance by either governments or the public. Some sectors
of the federal government and some state governments are legally unable to
delegate traditional management responsibilities, including management of
correctional and detention facilities, to private companies. The performance of
traditional government functions by private companies is not widely understood
by the public and has encountered resistance from certain groups, such as labor
unions, sheriff's departments and groups that believe certain functions,
including correctional and detention facility management should only be
conducted by governmental agencies. Such resistance may cause a change in public
and governmental acceptance of privatization in general. In addition, changes in
dominant political parties in any of the markets in which the Company or WCC
operates could result in significant changes to previously established views of
privatization in such markets.
GOVERNMENTAL REGULATION: OVERSIGHT, AUDITS AND INVESTIGATIONS. The
Company's Correctional Business and certain portions of its Services Business
are highly regulated by a variety of governmental authorities which oversee the
Company's businesses and operations. For example, with respect to the
Correctional Business, the contracting agency typically assigns full-time,
on-site personnel to a facility to monitor WCC's compliance with contract terms
and applicable laws and regulations. Failure by WCC to comply with contract
terms or regulations could expose it to substantial penalties, including the
loss of a facility management contract. In addition, changes in existing
regulations could require the Company to modify substantially the manner in
which it conducts business and, therefore, could have a material adverse effect
on the Company's results of operations. See "Business Regulation and Legal
Considerations."
Additionally, the Company's security-related and correctional contracts
give the contracting agency the right to conduct audits of the Company's
services provided or the facilities and operations managed by the
10
<PAGE> 13
Company for the agency, and such audits occur routinely. An audit involves a
governmental agency's review of the Company's compliance with the prescribed
policies and procedures established with respect to services provided or the
facility managed. The Company also may be subject to investigations as a result
of an audit or other causes.
UNCERTAINTY OF FUTURE DIVIDENDS. No assurance can be given that the
Company will continue its practice of paying regular quarterly dividends in the
future. The Company's ability to declare or pay dividends may be limited by the
terms of existing credit agreements. If the Company is permitted to pay
dividends, payment of such dividends will nevertheless be at the discretion of
the Company's Board of Directors and will depend on various factors, some of
which may be beyond the control of the Company. See "Dividend Policy."
DEPENDENCE UPON EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES. The continued
success of the Company is dependent to a significant degree upon the continuing
services of its executive officers. The loss or unavailability of any of the
Company's executive officers could have an adverse effect on the Company. The
Company does not have long-term employment contracts with any of its executive
officers. In addition, the Company is dependent upon its ability to hire and
retain senior operational employees. See "Management."
PRICE OF COMMON STOCK. The Company believes certain factors, such as sales
of Common Stock into the market by existing shareholders, fluctuations in
operating results of the Company or its competitors and market conditions
generally for similar stocks could cause the market price of the Common Stock to
fluctuate. In addition, any fluctuation in WCC's stock price may result in a
corresponding fluctuation in the Company's stock price.
CONTROL OF COMPANY. Prior to this Offering, George R. Wackenhut and his
wife, Ruth J. Wackenhut, individually and through trusts over which they have
sole dispositive and voting power, control approximately 50.004% of the issued
and outstanding voting common stock of the Company. Following the completion of
this offering, George R. Wackenhut and Ruth J. Wackenhut will continue to
control approximately 50.004% of the voting common stock of the Company. As a
result, George R. Wackenhut and Ruth J. Wackenhut will be able to control
virtually all matters requiring approval of the shareholders of the Company,
including the election of all of the directors.
ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Articles of
Incorporation (the "Articles") and Bylaws (the "Bylaws") may be deemed to have
anti-takeover effects and may delay, defer or prevent a takeover attempt that
shareholders might consider in their best interest. Pursuant to the Articles,
the Company's Board of Directors has the authority to issue shares of preferred
stock and to determine the rights, preferences, privileges and restrictions of
such shares without any further vote or action by the Company's shareholders.
Thus, the Company's Board of Directors could authorize and issue shares of
preferred stock with voting or conversion rights that could adversely affect the
voting rights of holders of the Common Stock. In addition, the issuance of
preferred stock under certain circumstances could have the effect of delaying or
preventing a change in control of the Company, since the terms of such preferred
stock could prohibit the Company's consummation of any merger, reorganization,
sale of substantially all of the assets, liquidation or other comparable
extraordinary transaction without the approval of the holders of such preferred
stock. Also, certain provisions of the Florida Business Corporation Act have
anti-takeover effects and may inhibit a non-negotiated merger or other business
combination. These provisions are intended to encourage any person interested in
acquiring the Company to negotiate with, and to obtain the approval of, the
Company's Board of Directors in connection with such a transaction. However,
certain of these provisions may discourage a future acquisition of the Company,
including an acquisition in which the shareholders might otherwise receive a
premium for their shares. As a result, shareholders who might desire to
participate in such a transaction may not have the opportunity to do so. See
"Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this offering, the
Company will have a total of 10,317,262 shares of Series B Common Stock
outstanding (10,917,262 shares if the Underwriters' over-allotment option is
exercised in full). Of these shares, the 4,000,000 shares offered hereby
(4,600,000 shares if the Underwriters' over-allotment option is exercised in
full) and 4,212,066 other shares of Series B Common Stock will be freely
tradeable by persons other than affiliates of the Company, without restriction
or need for registration under the Securities Act of 1933, as amended (the
"Securities Act"). All of the remaining outstanding 2,105,196 shares of Series B
Common Stock are "Restricted Securities" as defined by Rule 144
11
<PAGE> 14
promulgated under the Securities Act ("Rule 144"). Such shares will be eligible
for sale upon the expiration of certain lock-up agreements executed by the
Company, the Selling Shareholder and the Company's executive officers and
directors, subject to the manner of sale, volume, notice and information
requirements of Rule 144. As of May 8, 1996, the Company had outstanding
unexercised options to purchase 699,813 shares of Series B Common Stock under
the Company's Key Employee Long-Term Incentive Stock Option Plan (the "Stock
Option Plan"). The Company has registered the issuance of the Series B Common
Stock in connection with the exercise of options under the Stock Option Plan
and, consequently, such shares are available for sale in the public market
without restriction to the extent they are not held by affiliates as that term
is defined under Rule 144. Sales of substantial amounts of shares of Series B
Common Stock in the public market, or the availability of such shares for future
sale, could adversely affect the market price of Series B Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Series B Common Stock offered by the Company hereby (after deducting
underwriting discounts and commissions and estimated offering expenses) are
estimated to be approximately $35.3 million ($46.1 million if the Underwriters'
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of shares by the Selling Shareholders. The Company
currently intends to use a portion of the net proceeds to repay the outstanding
balance on its revolving loan (presently bearing interest at 6.0% and maturing
in January 1998), to repurchase a portion of the receivables sold under the
Company's accounts receivable securitization facility (approximately $50,000,000
as of May 8, 1996), approximately $13.7 million of which was sold to fund the
acquisition of the contracts and certain assets of the Correctional Food
Services Division of Service America Corporation in January 1996, for possible
future acquisitions, for systems and technology upgrades and for general
corporate purposes. The Company's growth strategy includes selective acquisition
of businesses in complementary market niches. While the Company may pursue
acquisitions of such businesses, there can be no assurance that suitable
acquisition candidates will be identified or that any acquisitions will be
consummated. See Note 2 of Notes to Consolidated Financial Statements for a
description of the Company's accounts receivable securitization facility,
including applicable funding costs and maturity. See also "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
12
<PAGE> 15
PRICE RANGE OF COMMON STOCK
The Series A Common Stock and the Series B Common Stock are listed on the
New York Stock Exchange under the symbols "WAK" and "WAKB," respectively. The
following table sets forth, for the periods indicated, the range of high and low
sales prices per share of the Series A Common Stock and Series B Common Stock,
as reported by the New York Stock Exchange:
<TABLE>
<CAPTION>
SERIES A SERIES B
------------ ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1994
------------------------------------------------------
First Quarter....................................... $ 9 1/4 $7 7/8 $ 7 3/8 $6 3/8
Second Quarter...................................... 9 3/4 8 1/8 7 1/2 6
Third Quarter....................................... 10 3/8 8 3/4 9 6 5/8
Fourth Quarter...................................... 10 1/4 7 1/4 8 7/8 6 7/8
1995
------------------------------------------------------
First Quarter....................................... $14 $8 3/8 $12 3/4 $8 1/2
Second Quarter...................................... 15 1/4 10 7/8 12 3/8 9
Third Quarter....................................... 12 3/4 11 1/8 11 1/4 9 7/8
Fourth Quarter...................................... 14 1/2 12 12 3/4 10 3/8
1996
------------------------------------------------------
First Quarter....................................... $20 3/8 $14 1/8 $17 1/8 $12 3/8
Second Quarter (through May 8, 1996)................ $26 $18 3/4 $20 1/2 $14 3/4
</TABLE>
On May 8, 1996, the last reported sales prices of the Series A Common Stock
and the Series B Common Stock on the New York Stock Exchange were $23 3/4 and
$19 per share, respectively, and there were approximately 863 holders of record
of the Series A Common Stock and 919 holders of record of the Series B Common
Stock.
DIVIDEND POLICY
The Company has paid cash dividends in equal per share amounts on
outstanding shares of Common Stock, as set forth below, for the periods
indicated. The determination of the amount of future cash dividends, if any, to
be declared and paid will be at the discretion of the Company's Board of
Directors and will depend on the Company's financial condition, earnings and
funds available from operations, capital expenditures, contractual restrictions,
future business prospects and such other matters as the Board of Directors of
the Company may deem relevant. Furthermore, the Company's ability to declare or
pay dividends may be limited by the terms of existing credit agreements. See
Note 5 of Notes to Consolidated Financial Statements. Accordingly, no assurance
can be given that the Company will be able to pay dividends in the future. The
shares offered hereby are not eligible for dividends declared in the second
quarter of Fiscal 1996.
<TABLE>
<S> <C>
1994
----------------------------------------------------------------------------
First Quarter............................................................. $.0575
Second Quarter............................................................ .0575
Third Quarter............................................................. .0575
Fourth Quarter............................................................ .0575
1995
----------------------------------------------------------------------------
First Quarter............................................................. $.0600
Second Quarter............................................................ .0600
Third Quarter............................................................. .0600
Fourth Quarter............................................................ .0600
1996
----------------------------------------------------------------------------
First Quarter............................................................. $.0650
</TABLE>
13
<PAGE> 16
CAPITALIZATION
The following table sets forth: (i) the actual capitalization of the
Company at March 31, 1996; and (ii) the capitalization of the Company at that
date as adjusted to give effect to the sale of the 2,000,000 shares of Series B
Common Stock offered by the Company hereby and the application of the estimated
net proceeds therefrom (the "Offering"), which are estimated to be $35.3 million
after deducting underwriting discounts and commissions and estimated offering
expenses. See "Use of Proceeds." The information set forth in the table should
be read in conjunction with the unaudited Consolidated Financial Statements of
the Company and Notes thereto included elsewhere or incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.................................................. $ 15,310 $ 5,860
Minority Interest............................................... 36,504 36,504
Common Stock, $.10 par value, 20,000,000 shares
authorized; Series A, 3,858,885 shares issued and
outstanding, and Series B, 8,309,762 shares issued
and outstanding at March 31, 1996 and 10,309,762 as
adjusted(1)(2)................................................ 1,217 1,417
Additional paid-in capital...................................... 64,934 100,054
Retained earnings............................................... 25,937 25,937
Other(3)........................................................ (3,832) (3,832)
-------- --------------
Total shareholders' equity.................................... 88,256 123,576
-------- --------------
Capitalization................................................ $140,070 $165,940
======== ==============
</TABLE>
- ---------------
(1) Excludes 707,313 shares reserved for issuance upon the exercise of
outstanding stock options under the Company's Key Employee Long-Term
Incentive Stock Option Plan. See Note 7 of Notes to Consolidated Financial
Statements.
(2) The Company has called a special meeting of the shareholders of the Company
to approve a proposal to increase the number of authorized shares of Common
Stock. See "Description of Capital Stock."
(3) Includes unrealized loss on marketable securities and cumulative translation
adjustment.
(4) Adjusted to give effect to the sale by the Company of 2,000,000 shares of
Common Stock offered hereby at an assumed public offering price of $19.00
per share and the application of the net proceeds therefrom. See "Use of
Proceeds."
14
<PAGE> 17
SELECTED FINANCIAL DATA
The selected financial data for the Company set forth below with respect to
the Statement of Income Data and Balance Sheet Data for and at the end of Fiscal
1991, Fiscal 1992, Fiscal 1993, Fiscal 1994 and Fiscal 1995 are derived from the
Consolidated Financial Statements of the Company. The selected financial data
with respect to Statement of Income Data for the thirteen weeks ended April 2,
1995 and March 31, 1996 and Balance Sheet Data at March 31, 1996 are derived
from the unaudited consolidated financial statements of the Company which, in
the opinion of management, reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of such data. The data
for the thirteen weeks ended March 31, 1996 are not necessarily indicative of
the results that may be expected for the entire fiscal year. The Selected
Financial Data should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL(1) ---------------------
---------------------------------------------------------- APRIL 2, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
STATEMENT OF INCOME DATA:
Revenues................................... $570,411 $615,378 $659,256 $726,753 $796,732 $189,792 $212,474
Non-recurring charges...................... -- -- (1,726)(2) -- -- -- --
Write-down of headquarters building........ -- -- -- (8,700)(3) -- -- --
Provision for relocation costs............. -- -- -- -- -- -- (750)(4)
Operating income........................... 13,859 3,367(5) 4,496 6,592 15,774 3,055 2,063
Income before income taxes................. 11,867 1,588 3,371 3,002 13,733 2,643 2,234
Provision for income taxes................. 4,378 834 485 17 4,742 898 769
Income before extraordinary charge and
cumulative effect of accounting change... 7,721 1,137 3,609 2,272 7,260 1,599 945
Extraordinary charge -- early
extinguishment of debt, net of income
taxes.................................... -- -- (1,444) (887) -- -- --
Cumulative effect of accounting change for
income taxes............................. -- 7,370 -- -- -- -- --
Net income................................. $ 7,721 $ 8,507 $ 2,165 $ 1,385 $ 7,260 $ 1,599 $ 945
======== ======== ======== ======== ======== ======== =========
EARNINGS PER SHARE(6):
Income before extraordinary charge and
cumulative effect of accounting change... $ .64 $ .09 $ .30 $ .19 $ .60 $ .13 $ .08
Extraordinary charge -- early
extinguishment of debt, net of income
taxes.................................... -- -- (.12) (.08) -- -- --
Cumulative effect of accounting change for
income taxes............................. -- .61 -- -- -- -- --
-------- -------- -------- -------- -------- --------- ---------
Net income................................. $ .64 $ .70 $ .18(2) $ .11(3) $ .60 $ .13 $ .08 (4)
Total dividends per share.................. $ .19 $ .20 $ .23 $ .23 $ .24 $ .06 $ .07
</TABLE>
<TABLE>
<CAPTION>
END OF FISCAL AT MARCH 31, 1996
------------------------------------------------------------ -------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(7)
-------- -------- -------- -------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital...................... $ 48,599 $ 56,932 $ 56,163 $ 75,589 $ 49,638 $ 95,753 $121,623
Total assets......................... 172,093 192,236 211,297 212,757 197,927 259,578 285,448
Current portion of long-term debt.... 730 730 10,456 -- 11 11 11
Long-term debt....................... 46,920 63,260 57,484 38,991 5,376 15,310 5,860
Total debt........................... 47,650 63,990 67,940 42,756 6,502 15,321 5,871
Shareholders' equity................. 42,847 47,587 47,362 57,459 62,904 88,256 123,576
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the Sunday closest to the calendar year
end. Fiscal 1991, Fiscal 1993, Fiscal 1994 and Fiscal 1995 each included 52
weeks. Fiscal 1992 included 53 weeks.
(2) In Fiscal 1993, the Company recognized non-recurring charges of $1,726,000
($1,061,000 net of income taxes, or $.09 per share). A significant portion
of these charges was due to a $791,000 decrease in the value of guard
contracts acquired in 1991.
(3) In Fiscal 1994, the Company recognized a one-time operating expense of
$8,700,000 ($5,350,000 net of income taxes, or $.44 per share) in connection
with the writedown of its former headquarters building.
(4) During the first quarter of 1996, the Company recognized a provision for
relocation costs in the amount of $750,000 ($461,000 net of income taxes, or
$.04 per share).
(5) In Fiscal 1992, operating income included a $1,500,000 provision for legal
expenses, a write-down of $1,900,000 in the balance of a note receivable, an
increase in the provision for doubtful accounts of $800,000, and a
$1,800,000 operating loss related to the decrease in revenue on a major
contract for Wackenhut Applied Technologies Center, Inc.
(6) Per share amounts are restated to reflect a 100% stock dividend declared
during Fiscal 1992, a 25% stock dividend declared during Fiscal 1994 and a
25% stock dividend declared during Fiscal 1995 (in each case, effected in
the form of a stock split).
(7) Adjusted to give effect to the sale of 2,000,000 shares of Series B Common
Stock offered by the Company hereby at an assumed offering price of $19.00
per share (after deduction of underwriting discounts and commissions and
estimated offering expenses) and the application of the net proceeds
therefrom. See "Use of Proceeds."
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception in 1954, the Company has become a leading international
provider of security-related and other support services and a leading developer
and manager of privatized correctional and detention facilities. The Company
provides security-related and other support services through the Services
Business and correctional services through the Correctional Business. Through
the Services Business, the Company provides physical security services, food
services and other related services to commercial and governmental customers.
Through the Correctional Business, the Company provides correctional and
detention facility design, development and management services to government
agencies. The Company is managed through three operating groups: the Domestic
Operations Group, the Government Services Group and the International Group. The
Services Business is operated through all three groups, while the Correctional
Business is operated by the Government Services Group exclusively through the
Company's 55%-owned WCC subsidiary. For presentation purposes, the financial
results of WCC are described separately from the results of the Government
Services Group's other operations.
From a well established base in its core security-related services
business, the Company has expanded into a range of other support services in
response to a trend toward privatization of governmental services and
outsourcing by commercial customers of non-core support functions. For example,
in 1984 the Company expanded into the Correctional Business which in Fiscal 1995
increased its revenues by 18.3% and operating income by 62.6% from Fiscal 1994.
Moreover, in Fiscal 1992 the Company entered the foodservice business for
correctional institutions, which in Fiscal 1995 generated $34.7 million in
revenues. The Company continues to expand its market presence in these areas
and, consistent with that strategy, acquired the contracts and certain assets of
the Correctional Food Service Division of Service America Corporation in early
1996. The Company continues to explore and may selectively invest in other
service businesses such as temporary services, building maintenance,
supplemental police services, crash-fire-rescue services, fire protection
services, and airport services.
During Fiscal 1995, the Company continued to achieve sustained growth.
Between Fiscal 1991 and Fiscal 1995, the Company's consolidated revenues
increased at a compound annual growth rate of 8.7%, including a 9.6% increase
from Fiscal 1994 to Fiscal 1995.
The Domestic Operations Group lead the growth in revenues of the Services
Business with an increase of 11.2% to $423.7 million in Fiscal 1995 from $380.9
million in Fiscal 1994, which was attributable to: (i) a significant increase in
revenues derived from the provision of core security-related services to
National Accounts; (ii) an increase in its CPO business; and (iii) expansion of
market share in the correctional foodservice business.
The International Group also achieved significant growth, with revenues
increasing 25.9% to $113.2 million in Fiscal 1995 from $89.9 million in Fiscal
1994. The increase in revenues was principally attributable to steady
geographical expansion, including expansion in the Central and South American
and European operations.
Government Services Group (excluding WCC) revenues decreased 6.5% to $166.0
million in Fiscal 1995 from $177.6 million in Fiscal 1994, primarily as a result
of reductions in government funding for security at United States Department of
Energy facilities. Contracts with the Department of Energy are typically cost
reimbursable contracts for which the Company can earn award fees based on
performance factors. Although award fee pools available to the Company have not
been reduced significantly, further reductions in revenues could impact profit
contribution from these contracts.
During Fiscal 1995, WCC continued to generate sustained growth. Between
Fiscal 1991 and Fiscal 1995, WCC generated compound annual revenue growth of
27.3%, which included an 18.3% increase in Fiscal 1995. Operating income
increased 62.6% in Fiscal 1995, and has grown from $1.7 million in Fiscal 1991
to $7.2 million in Fiscal 1995. Revenue and operating income increases reflect
an increase from eight facilities
16
<PAGE> 19
and 1.0 million compensated resident days in Fiscal 1991 to 16 facilities and
2.4 million compensated resident days in Fiscal 1995.
In December 1995, the Company sold its headquarters building in Coral
Gables, Florida, and subsequently relocated to a newly constructed, leased
building in Palm Beach Gardens, Florida. The move to a more efficient building
in a less expensive location should result in reduced annual operating costs.
However, a one-time $750,000 provision against first quarter 1996 earnings was
recorded for the cost of the move.
RESULTS OF OPERATIONS
The table below summarizes results of operations for the Company's two
business segments by organizational group.
<TABLE>
<CAPTION>
FISCAL THIRTEEN WEEKS ENDED
------------------------------------------------------------ ----------------------------------
% CHANGE % CHANGE % CHANGE
VS. FISCAL VS. FISCAL APRIL 2, MARCH 31, VS. PERIOD
1993 1994 1993 1995 1994 1995 1996 IN 1995
-------- -------- ---------- -------- ---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Services Business
Domestic Operations Group... $336,048 $380,941 13.4% $423,743 11.2% $101,751 $119,401 17.4%
Government Services Group
(excluding WCC)........... 184,915 177,613 (3.9) 166,035 (6.5) 41,403 39,499 (4.6)
International Group......... 82,759 89,900 8.6 113,205 25.9 24,737 24,259 (1.9)
Other....................... 1,019 1,222 19.9 1,141 (6.6) 690 84 (87.8)
Inter-Group Revenues........ (4,269) (6,949) -- (6,823) -- (2,263 ) (203 ) --
-------- -------- ----- -------- ----- --------- --------- ----------
600,472 642,727 7.0 697,301 8.5 166,318 183,040 10.1
Correctional
Business -- WCC............. 58,784 84,026 42.9 99,431 18.3 23,474 29,434 25.4
-------- -------- ----- -------- ----- --------- --------- ----------
Consolidated Revenues......... $659,256 $726,753 10.2% $796,732 9.6% $189,792 $212,474 12.0%
-------- -------- ----- -------- ----- --------- --------- ----------
OPERATING INCOME:
Services Business
Domestic Operations Group... $ 10,434 $ 12,977 24.4% $ 13,501 4.0% $ 2,922 $ 2,935 0.4%
Government Services Group
(excluding WCC)........... 3,499 5,162 47.5 2,871 (44.4) 895 1,098 22.7
International Group......... 2,164 2,992 38.3 2,783 (7.0) 480 192 (60.0)
Corporate Expenses and
Underwriting Losses....... (13,047) (10,285) 21.2 (10,610) (3.2) (2,832 ) (3,131 ) (10.6)
-------- -------- ----- -------- ----- --------- --------- ----------
3,050 10,846 255.6 8,545 (21.2) 1,465 1,094 (25.3)
Correctional
Business -- WCC............. 1,446 4,446 207.5 7,229 62.6 1,590 1,719 8.1
Write-down of Headquarters
Building.................... -- (8,700) -- -- -- -- -- --
Provision for relocation
costs....................... -- -- -- -- -- -- (750 ) --
-------- -------- ----- -------- ----- --------- --------- ----------
Consolidated Operating
Income...................... $ 4,496 $ 6,592 46.6% $ 15,774 139.3% $ 3,055 $ 2,063 (32.5)%
-------- -------- ----- -------- ----- --------- --------- ----------
</TABLE>
COMPARISON OF THIRTEEN WEEKS ENDED MARCH 31, 1996 TO
THIRTEEN WEEKS ENDED APRIL 2, 1995
REVENUES
Consolidated revenues increased 12.0% to $212.5 million in the thirteen
weeks ended March 31, 1996 (the "First Thirteen Weeks of 1996") from $189.8
million in the thirteen weeks ended April 2, 1995 (the "First Thirteen Weeks of
1995").
SERVICES BUSINESS
Services Business revenues increased 10.1% to $183.0 million in the First
Thirteen Weeks of 1996 from $166.3 million in the First Thirteen Weeks of 1995.
17
<PAGE> 20
Domestic Operations Group. Domestic Operations Group revenues increased
17.4% to $119.4 million in the First Thirteen Weeks of 1996 from $101.8 million
in the First Thirteen Weeks of 1995. Within the Domestic Operations Group,
revenues from the Security Services Division increased 12.1% to $89.0 million in
the First Thirteen Weeks of 1996 from $79.4 million in the First Thirteen Weeks
of 1995. The Security Services Division 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 14.9% during the First Thirteen Weeks of 1996 compared to the First
Thirteen Weeks of 1995. Revenues of the Food Division almost doubled during the
First Thirteen Weeks of 1996 to $15.8 million, compared to revenues of $8.3
million for the First Thirteen Weeks 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. Revenues from the
Nuclear Division remained relatively unchanged from the First Thirteen Weeks of
1995, reflecting the maturation of the nuclear power industry and limited
opportunities for growth in this market.
Government Services Group. Government Services Group revenues (excluding
WCC) decreased 4.6% to $39.5 million in the First Thirteen Weeks of 1996 from
$41.4 million for the First Thirteen Weeks of 1995. Within the Government
Services Group, revenues of Wackenhut Services, Inc. decreased 3.6% to $34.4
million in the First Thirteen Weeks of 1996 from $35.7 million in the First
Thirteen Weeks of 1995, principally due to reductions in government funding for
security at United States Department of Energy facilities. Management believes
this reduction in funding will continue to affect Government Services Group
revenues and operating income. Revenues of Wackenhut Educational Services, Inc.
decreased $4.4 million to $1.3 million in the First Thirteen Weeks of 1996 due
to the loss of two contracts in Fiscal 1995. However, revenues of Wackenhut of
Australia Pty., Ltd., which was acquired in July of last year, amounted to $3.8
million in the First Thirteen Weeks of Fiscal 1996.
International Group. International Group revenues remained relatively
unchanged during the First Thirteen Weeks of 1996 compared to the same period in
1995, as a result of the deconsolidation in the fourth quarter of 1995 of the
former subsidiary in Chile, which is now a minority-owned affiliate. Revenues of
the Chilean operation for the First Thirteen Weeks of 1995 amounted to $4.2
million. Excluding the effect of the Chilean operation, revenues of the
International Group increased approximately $3.7 million.
CORRECTIONAL BUSINESS
Correctional Business revenues increased 25.4% to $29.4 million in the
First Thirteen Weeks of 1996 from $23.5 million in the First Thirteen Weeks of
1995. The increase was attributable principally to an increase in compensated
resident days resulting from the opening of three domestic facilities (Moore
Haven Correctional Facility in Florida, and John R. Lindsey Unit and Willacy
County Unit in Texas) in the second half of Fiscal 1995 and in the First
Thirteen Weeks of 1996. In addition, revenues of Australasian Correctional
Management Pty Limited ("ACM") increased 11.1% or $713,000, resulting
principally from the expansion of the Arthur Gorrie Correctional Centre in
Wacol, Australia.
OPERATING INCOME
Consolidated operating income, which included a $750,000 provision for
relocation costs in the First Thirteen Weeks of 1996, decreased 32.5% to $2.1
million in the First Thirteen Weeks of 1996 from $3.1 million in the First
Thirteen Weeks of 1995. Excluding relocation costs, consolidated operating
income decreased 7.9%.
SERVICES BUSINESS
Operating income from the Services Business decreased 25.3% to $1.1 million
in the First Thirteen Weeks of 1996 from $1.5 million in the First Thirteen
Weeks of 1995.
Domestic Operations Group. Domestic Operations Group operating income
remained relatively unchanged at $2.9 million in the First Thirteen Weeks of
1996 compared to the First Thirteen Weeks of 1995. Increases in the profit
contributions of the core security-related and foodservice businesses were
offset by
18
<PAGE> 21
higher group overhead costs and greater absorption of direct corporate general
and administrative expenses which increased as a result of higher payroll
related costs.
Government Services Group. Government Services Group (excluding WCC)
operating income increased 22.7% to $1.1 million in the First Thirteen Weeks of
1996 compared to $895,000 in the First Thirteen Weeks of 1995. The increase was
principally due to recaptured allowable general and administrative expenses from
a contract with the United States Department of Energy, and anticipated award
fee revenues in other contracts with the United States Department of Energy.
However, this increase was partially offset by operating losses from the new
security services subsidiary in Australia, Wackenhut of Australia Pty., Ltd.,
which recorded an operating loss of approximately $500,000 in the First Thirteen
Weeks of 1996. Currently, the Company 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
Australia.
International Group. International Group operating income decreased 60% to
$192,000 in the First Thirteen Weeks of 1996 from $480,000 for the First
Thirteen Weeks of 1995. Increases in operating losses in Canada, Ecuador,
Venezuela, and the deconsolidation of operations in Chile offset increases in
operating income in other countries.
CORPORATE EXPENSES AND UNDERWRITING LOSSES
The increase in corporate expenses and underwriting losses resulted
principally from increases in variable general and administrative
personnel-related costs principally attributed to the Headquarters relocation
and general growth.
CORRECTIONAL BUSINESS
Operating income from the Correctional Business increased 8.1% to $1.7
million in the First Thirteen Weeks of 1996 from $1.6 million for the First
Thirteen Weeks of 1995. The increase was principally attributable to the
increase in domestic facility management services as a result of the opening of
two facilities in the second half of 1995 and one facility in January 1996.
OTHER INCOME/EXPENSE
Other income was $171,000 in the First Thirteen Weeks of 1996 compared to
other expense of $412,000 for the First Thirteen Weeks of 1995 due to two
principal factors. First, interest and investment income increased $730,000 and
included interest income of approximately $641,000 from the investment of the
net proceeds of WCC's public offering in January 1996. Second, interest expense
increased $147,000 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 Company
principally to effect the foodservice acquisition, to begin 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 Thirteen Weeks of 1996, decreased 15.5% to $2.2
million from $2.6 million in the First Thirteen Weeks of 1995.
The combined federal and state effective income tax rate was 34.4% for the
First Thirteen Weeks of 1996 and 34.0% for the First Thirteen Weeks of 1995,
respectively. The higher effective rate in the First Thirteen Weeks 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.
19
<PAGE> 22
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased to $827,000 in
the First Thirteen Weeks of 1996 from $371,000 in the First Thirteen Weeks 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 36.4%
to $307,000 in the First Thirteen Weeks of 1996 from $225,000 in the First
Thirteen Weeks 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 Company's equity income of the Chilean
operations.
NET INCOME
Net income decreased to $945,000 in the First Thirteen Weeks of 1996, or
$0.08 per share, after the $750,000 provision for relocation costs ($461,000 net
of income taxes), compared to $1.6 million or $0.13 per share for the First
Thirteen Weeks of 1995.
COMPARISON OF FISCAL 1995 TO FISCAL 1994
REVENUES
Consolidated revenues increased 9.6% to $796.7 million in Fiscal 1995 from
$726.7 million in Fiscal 1994.
SERVICES BUSINESS
Services Business revenues increased 8.5% to $697.3 million in Fiscal 1995
from $642.7 million in Fiscal 1994.
Domestic Operations Group. Domestic Operations Group revenues increased
11.2% to $423.7 million in Fiscal 1995 from $380.9 million in Fiscal 1994.
Within the Domestic Operations Group, revenues from the Security Services
Division increased 11.2% to $336.2 million in Fiscal 1995 from $302.4 million in
Fiscal 1994 as a result of: (i) a significant increase in revenues derived from
the provision of security-related services to National Accounts; and (ii) an
increase in its CPO business reflecting the growing demand for the specialized
services offered in this area. Revenues from the Food Services Division
increased 39.6% to $34.7 million in Fiscal 1995 from $24.9 million in Fiscal
1994, reflecting the Company's increased presence in the growing correctional
foodservice market. Revenues from the Nuclear Division remained relatively
unchanged from Fiscal 1994 to Fiscal 1995, reflecting the maturation of the
nuclear power industry and limited opportunities for growth in this market.
Government Services Group. Government Services Group revenues (excluding
WCC) decreased 6.5% to $166.0 million in Fiscal 1995 from $177.6 million in
Fiscal 1994. Within the Government Services Group, revenues of Wackenhut
Services, Inc. decreased 5.6% to $146.7 million in Fiscal 1995 from $155.5
million in Fiscal 1994, principally due to reductions in government funding for
security at United States Department of Energy facilities. Management believes
this reduction in funding will continue to affect Government Services Group
revenues and operating income. Revenues of Wackenhut Educational Services, Inc.
decreased 40.3% to $13.1 million in Fiscal 1995 from $22.0 million in Fiscal
1994, principally due to the loss of two contracts. The decrease in Government
Services Group revenues in Fiscal 1995 was partially offset by revenues of $6.1
million generated by the Wackenhut of Australia subsidiary, which was acquired
in Fiscal 1995, and provides security-related services.
International Group. International Group revenues increased 25.9% to
$113.2 million in Fiscal 1995 from $89.9 million in Fiscal 1994, as this group
continued to experience steady geographical expansion. The increase in revenues
was principally attributable to: (i) increased revenues from Central and South
American operations, where revenues increased 21.2% to $83.4 million in Fiscal
1995 from $68.8 million in Fiscal 1994; and (ii) increased revenues from
European operations, which increased 40.0% to $15.0 million in Fiscal 1995
20
<PAGE> 23
from $10.7 million in Fiscal 1994. The increase in international revenues
reflects returns on past investment in new markets as well as continuing
increased demand for physical security services in those geographic regions
serviced by the Company.
CORRECTIONAL BUSINESS
The Correctional Business revenues increased 18.3% to $99.4 million in
Fiscal 1995 from $84.0 million in Fiscal 1994. Of the increase in Fiscal 1995
revenues, $11.9 million was generated by domestic operations and $3.5 million
was generated by operations in Australia.
The increase in domestic revenues of WCC in Fiscal 1995 was primarily
attributable to an increase in compensated resident days to 1.9 million in
Fiscal 1995 from 1.7 million in Fiscal 1994, reflecting: (i) increased occupancy
at two facilities opened in late 1994; (ii) the opening of two facilities in the
second half of 1995; and (iii) the expansion of one facility in 1995. The
increase in domestic revenues also reflected management fees generated from the
development of four facilities.
The increase in international revenues of WCC in Fiscal 1995 was primarily
attributable to an increase in compensated resident days to 420,000 in Fiscal
1995 from 371,000 in Fiscal 1994, reflecting the expansion of one facility in
Australia, and an increase in management fees generated from the development of
another facility in Australia.
In Fiscal 1995, "pass-through" revenues and expenses were reclassified to
exclude amounts related to construction and design activities, consistent with
industry practice. As a result, only management fees for development and design
services are included in revenues. All prior periods have been restated to
reflect this reclassification. See Note 1 of Notes to the Consolidated Financial
Statements.
OPERATING INCOME
Consolidated operating income increased to $15.8 million in Fiscal 1995
from $6.6 million in Fiscal 1994, which included an $8.7 million write-down of
the headquarters building in Fiscal 1994.
SERVICES BUSINESS
Operating income from the Services Business decreased 21.2% to $8.5 million
in Fiscal 1995 from $10.8 million in Fiscal 1994.
Domestic Operations Group. Domestic Operations Group operating income
increased 4.0% to $13.5 million in Fiscal 1995 from $13.0 million in Fiscal
1994. The growth in operating income within the Domestic Operations Group was a
result of: (i) continued strong performance in the core security-related
services business, particularly in National Accounts; (ii) increased demand for
Custom Protection Officers; (iii) continued development of the foodservice
business.
Government Services Group. Government Services Group (excluding WCC)
operating income decreased 44.4% to $2.9 million in Fiscal 1995 from $5.2
million in Fiscal 1994, reflecting: (i) lower than expected ratings at one
facility, resulting in a decrease in award fees paid to the Company by the
United States Department of Energy for such facility; and (ii) the termination
of two contracts in Wackenhut Educational Services, Inc.
International Group. International Group operating income decreased 7.0%
to $2.8 million in Fiscal 1995 from $3.0 million in Fiscal 1994. The principal
contribution to operating income of the International Group was made by
subsidiaries in Central and South America and Europe. However, development costs
in the Far East and Africa substantially offset gains in Central and South
America and Europe.
CORRECTIONAL BUSINESS
WCC operating income increased 62.6% to $7.2 million in Fiscal 1995 from
$4.4 million in Fiscal 1994.
21
<PAGE> 24
WCC domestic operating income increased 112.3% to $4.5 million in Fiscal
1995 from $2.1 million in Fiscal 1994, reflecting: (i) increased occupancy at
two facilities opened in late Fiscal 1994; (ii) the opening of two facilities in
the second half of Fiscal 1995; and (iii) the expansion of one facility in
Fiscal 1995. The increase in domestic operating income also reflected management
fees generated from the development of four facilities.
WCC international operating income increased 17.3% to $2.7 million in
Fiscal 1995 from $2.3 million in Fiscal 1994. The increase in operating income
reflects the expansion of one facility in Australia and management fees
generated from the development of another facility in Australia.
OTHER EXPENSE
Other expense decreased 43.2% to $2.0 million in 1995 from $3.6 million in
1994, principally due to a decrease of $1.7 million in interest expense
attributable to a reduction in funding requirements. In addition there was a
decrease of $199,000 in interest and investment income which was principally due
to a decrease in fixed income securities investment holdings of the Company's
captive reinsurance subsidiary. The proceeds from the Company's sales of these
securities were used primarily to reduce the Company's debt.
INCOME BEFORE INCOME TAXES
Income before income taxes increased to $13.7 million in Fiscal 1995 from
$3.0 million in Fiscal 1994, which included an $8.7 million write-down of the
headquarters building in Fiscal 1994.
The combined federal and state effective income tax rate was 34.5% for
Fiscal 1995 and 0.6% for Fiscal 1994, respectively. The lower effective rate in
Fiscal 1994 primarily reflected reductions in the statutory rate attributable to
tax exempt interest income, targeted job credits and the utilization of capital
loss carryforwards which was significantly higher in 1994.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased to $2.4 million
in Fiscal 1995 from $1.0 million in Fiscal 1994, reflecting the increase in
earnings of WCC and other majority-owned international subsidiaries of the
Company.
EQUITY INCOME OF FOREIGN AFFILIATES
Equity income of foreign affiliates (net of income taxes) increased 120.6%
to $631,000 in Fiscal 1995 from $286,000 in Fiscal 1994 primarily resulting from
increased earnings of security services affiliates in South America and Europe
and decreased losses from WCC's joint venture in the United Kingdom.
EXTRAORDINARY CHARGE
In Fiscal 1994, the Company prepaid a note to an insurance company and
recognized an extraordinary charge of $887,000 (net of income taxes) for the
early extinguishment of such debt.
NET INCOME
Net income increased to $7.3 million in Fiscal 1995, or $0.60 per share,
compared to $1.4 million, or $0.11 per share in Fiscal 1994, after the $887,000
extraordinary charge and the write-down of the headquarters building ($5.4
million net of income taxes).
COMPARISON OF FISCAL 1994 TO FISCAL 1993
REVENUES
Consolidated revenues increased 10.2% to $726.7 million in Fiscal 1994 from
$659.2 million in Fiscal 1993.
22
<PAGE> 25
SERVICES BUSINESS
Revenues from the Services Business increased 7.0% to $642.7 million in
Fiscal 1994 from $600.5 million in Fiscal 1993.
Domestic Operations Group. Domestic Operations Group revenues increased
13.4% to $380.9 million in Fiscal 1994 from $336.0 million in Fiscal 1993.
Revenues from the Security Services Division of the Domestic Operations Group
contributed $37.4 million to this increase in Fiscal 1994 largely due to the
success in obtaining National Accounts with major corporations in the second
half of Fiscal 1993 and in Fiscal 1994. In Fiscal 1994 the Company was also
awarded a $34.7 million contract with the State of Hawaii to supply security
services at eight airports. CPO revenues increased $14.3 million (35.9%) over
Fiscal 1993. Revenues of the Nuclear Division remained essentially flat in
Fiscal 1994, reflecting the maturation of the nuclear power industry and limited
opportunities for growth in this market. Food Services Division revenues
increased 36.0% to $24.9 million in Fiscal 1994 from $18.3 million in Fiscal
1993.
Government Services Group. Government Services Group revenues (excluding
WCC) decreased 3.9% to $177.6 million in Fiscal 1994 from $184.9 million in
Fiscal 1993. Revenues of Wackenhut Services, Inc. decreased $8.1 million as a
result of reductions in manpower requirements by the Department of Energy. The
decrease in the Government Services Group revenues in Fiscal 1994 was partially
offset by an increase at Wackenhut Educational Services, Inc. of $3.4 million
(18.4%) over Fiscal 1993.
International Group. The International Group revenues increased 8.6% to
$89.9 million in Fiscal 1994 from $82.8 million in Fiscal 1993 primarily due to
growth in Central and South America.
CORRECTIONAL BUSINESS
Correctional Business revenues increased 42.9% to $84.0 million in Fiscal
1994 from $58.8 million in Fiscal 1993. This increase was primarily generated by
international operations due to the consolidation of ACM and the opening of two
facilities in Fiscal 1994.
OPERATING INCOME
Consolidated operating income, which included an $8.7 million write-down of
the headquarters building in Fiscal 1994, increased to $6.6 million in Fiscal
1994 from $4.5 million in Fiscal 1993.
SERVICES BUSINESS
Operating income from the Services Business increased to $10.8 million in
Fiscal 1994 from $3.0 million in Fiscal 1993.
Domestic Operations Group. Domestic Operations Group operating income
increased 24.4% to $13.0 million in Fiscal 1994 from $10.4 million in Fiscal
1993. This increase was principally due to improvements in the profit
contribution of the core security-related services business.
Government Services Group. Government Services Group operating income
(excluding WCC) increased 47.5% to $5.2 million in Fiscal 1994 from $3.5 million
in Fiscal 1993. The increase was principally due to higher award fees resulting
from excellent ratings at Department of Energy facilities. In addition, two
unprofitable divisions of the Government Services Group which had combined
losses of $2.0 million in Fiscal 1993 were sold in that year.
International Group. International Group operating income increased 38.3%
to $3.0 million in Fiscal 1994 from $2.2 million in Fiscal 1993. This increase
was principally due to growth in Central and South America.
CORPORATE EXPENSES AND UNDERWRITING LOSSES
The decrease in Corporate Expenses and Underwriting Losses in Fiscal 1994
resulted principally from a decrease in underwriting losses of the Company's
captive reinsurance subsidiary.
23
<PAGE> 26
CORRECTIONAL BUSINESS
Operating income from the Correctional Business increased 207.5% to $4.4
million in Fiscal 1994 from $1.4 million in Fiscal 1993. This increase was
primarily attributable to the consolidation of ACM and the opening of two
facilities.
OTHER EXPENSE
Other expense was $3.6 million in Fiscal 1994 compared to $1.1 million in
Fiscal 1993, resulting from the following factors. First, interest expense
amounted to $5.1 million and exceeded the previous year by $874,000. Second, the
liquidation of investments of the captive reinsurance subsidiary to reduce
corporate debt resulted in lower interest and investment income ($1.6 million)
to the Company.
INCOME BEFORE INCOME TAXES
Income before income taxes, which included an $8.7 million write-down of
the headquarters building in Fiscal 1994, was $3.0 million in Fiscal 1994
compared to $3.4 million in Fiscal 1993.
The provision for income taxes in 1994 was $17,000, reflecting an effective
income tax rate of 0.6% due to partial utilization of capital loss
carryforwards, targeted job tax credits and tax exempt interest income of the
captive reinsurance subsidiary. The effective income tax rate was 14.4% in
Fiscal 1993 due to similar factors, and a favorable federal income tax
adjustment of $637,000 that resulted from a revenue agent's examination for the
years 1980 to 1986.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased $637,000
reflecting the sale of a minority interest in WCC.
EQUITY INCOME OF FOREIGN AFFILIATES
Equity income of foreign affiliates (net of income taxes) decreased
$799,000 to $286,000 in Fiscal 1994 from $1.1 million in Fiscal 1993, mainly as
a result of the consolidation of ACM in Fiscal 1994.
INCOME BEFORE EXTRAORDINARY CHARGE
Income before extraordinary charge was $2.3 million or $0.19 per share in
Fiscal 1994. In Fiscal 1993, net income before extraordinary charge was $3.6
million, or $0.30 per share, restated for the stock dividends declared in Fiscal
1995 and Fiscal 1994.
EXTRAORDINARY CHARGE
In Fiscal 1994, the Company prepaid a senior note to an insurance company
and recognized an extraordinary charge for the early extinguishment of debt in
the amount of $887,000 (net of income taxes). The Company also recognized a $1.4
million extraordinary charge (net of income taxes) for the early extinguishment
of another senior note in Fiscal 1993.
NET INCOME
Net income, which included an $8.7 million ($5.4 million net of income
taxes) write-down of the Company's headquarters building, was $1.4 million in
Fiscal 1994, or $0.11 per share, compared to $2.2 million, or $0.18 per share in
1993, both restated for stock dividends declared in Fiscal 1995 and Fiscal 1994.
24
<PAGE> 27
INFLATION
Management believes that inflation has not had a material effect on the
Company's results of operations during the past three fiscal years and the First
Thirteen Weeks of 1996. However, many of the Company's service contracts provide
for either fixed management fees or for fees that increase by only small amounts
during the terms of the contracts. Since personnel costs represent the Company's
largest expense, inflation could have a substantial adverse effect on the
Company's results of operations in the future to the extent that wages and
salaries increase at a faster rate than the per diem or fixed rates received by
the Company for its services.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds have been, and are expected to
continue to be, cash flows from operations and borrowings under lines of credit
provided by banks in the United States and abroad. Cash and cash equivalents
amounted to $67.4 million at March 31, 1996 compared to $20.2 million at
December 31, 1995. Cash and cash equivalents at March 31, 1996 includes $54.2
million of the cash and cash equivalents of WCC which were not available for use
by the Company. In addition, $1.5 million serves as collateral for certain
obligations of the Company's captive reinsurance subsidiary.
The Company has additional sources of liquidity available in the form of a
$50 million revolving line of credit and a $50 million accounts receivable
securitization facility. Additionally, at March 31, 1996, WCC had in place a $15
million revolving line of credit, and subsidiaries of the Company and WCC had in
place credit agreements with banks providing Australian $10.5 million
(approximately $8.2 million U.S. at March 31, 1996). WCC's $15 million revolving
line of credit contains certain covenants that restrict WCC's ability to pay
dividends to the Company.
At March 31, 1996, the Company had $9.5 million outstanding under its $50
million revolving line of credit and $37.2 million outstanding in the form of
letters of credit securing reserves of the captive reinsurance subsidiary and
other corporate transactions. The unused portion of the revolving line of credit
was $3.4 million at March 31, 1996. In addition, at March 31, 1996, the Company
had sold $45 million of accounts receivable under its accounts receivable
securitization facility. Under the terms of the accounts receivable
securitization facility, the Company retains substantially the same risk of
credit loss as if receivables had not been sold under this facility. At March
31, 1996, WCC and the subsidiaries of the Company and WCC had $5.9 million
outstanding under their credit agreements. At March 31, 1996 and December 31,
1995, the ratio of total debt to total capitalization was 14.8% and 9.4%,
respectively.
WCC anticipates making cash investments in connection with future
acquisitions. In addition, in line with a developing industry trend toward
requiring private operators to make capital investments in facilities and to
enter into direct financing arrangements in connection with the development of
such facilities, WCC plans to use part of the net proceeds of $51.8 million from
the January 1996 public offering of shares of its common stock to finance
start-up costs, leasehold improvements and equity investments in facilities, if
appropriate, in connection with undertaking new contracts. In connection with
the award of one project, WCC recently has agreed to make an approximate $4.0
million equity investment in the project and to assist in the financing of the
project by guaranteeing up to approximately $20.0 million of the permanent
pass-through financing. The governmental entity that has contracted for the
project is the ultimate pass-through source of payments and the recourse
obligations of WCC and the subsidiary through which it will hold its investment
in the project are substantially limited in type and likelihood. WCC and its
subsidiary have made application to restructure the pass-through financing to a
non-recourse basis. WCC has structured the transaction so that the financing for
the project will be repaid from funds generated by the project. In addition, to
the extent that WCC elects to receive dividends from its subsidiary, it will be
required to arrange for a letter of credit in favor of the subsidiary to provide
security for the payment of certain possible future tax obligations of the
subsidiary. The letter of credit will not be issued any earlier than the second
half of 1997 and, consequently, any financing arrangements with respect to such
letter of credit have not been determined. The Company does not believe that the
issuance of the letter of credit will have a material impact on its liquidity or
capital resources or the liquidity or capital resources of WCC.
25
<PAGE> 28
Net cash generated by operating activities was $3.7 million for the First
Thirteen Weeks of 1996 compared to $5.7 million in the First Thirteen Weeks of
1995.
Cash provided by investing activities amounted to $25.3 million in the
First Thirteen Weeks of 1996. Net proceeds from the public offering of WCC of
$51.8 million in 1996 were partially offset by payments of $13.7 million for the
acquisition of the contracts and certain assets of the Correctional Food
Services Division of Service America Corporation. Capital expenditures of $2.4
million reflect the investment in leasehold improvements in the new headquarters
building, purchases of equipment related to the provision of security-related
services and investments in facilities by WCC.
Cash provided by financing activities was $18.3 million for the First
Thirteen Weeks of 1996. Cash proceeds under the Company's accounts receivable
securitization facility with two banks amounted to $10.0 million. The Company
increased by $8.8 million the amount outstanding under its revolving line of
credit with two banks.
Cash dividends paid in the First Thirteen Weeks of 1996 amounted to
$798,000.
Current cash requirements consist of amounts needed for capital
expenditures, increased working capital needs resulting from corporate growth,
payment of liabilities incurred in the operation of the Company's business, the
renovation or construction of correctional facilities by WCC, possible
acquisitions and the payment of dividends. The Company continues to expand its
domestic and international businesses and to pursue major contracts, some of
which may require substantial initial cash outlays, which are partially or fully
recoverable over the original term of the contract.
In January 1996, WCC sold 2.3 million shares of its common stock at a price
of $24.00 per share. Such proceeds were only available to WCC. The offering
resulted in net proceeds to WCC of approximately $51.8 million. Management
believes that cash on hand, internally generated cash flows and available lines
of credit will be adequate to support currently planned business expansion and
various obligations incurred in the operation of the Company's business, both on
a near term and long term basis.
BUSINESS
GENERAL
The Company is a leading international provider of security-related and
other support services and a leading developer and manager of privatized
correctional and detention facilities. The Company provides security services,
food services and other related services to commercial and governmental
customers through its Services Business. Through its Correctional Business, the
Company also provides correctional and detention facility design, development
and management services to governmental agencies. The Company has approximately
45,000 full and part-time employees serving over 14,000 commercial and
governmental customers through an extensive network of offices and operations in
48 states and 50 countries.
The Company was incorporated in 1958 to continue the business that was
originally established in 1954 by its Chairman and Chief Executive Officer,
George R. Wackenhut, to provide security-related services to commercial and
governmental customers. Since its founding, the Company has grown by: (i)
enhancing its position in its core security-related services business through
the development of specialized and upgraded services; (ii) targeting specific
segments of the security services industry; and (iii)expanding into a range of
other support services in response to a growing trend toward privatization of
governmental services and outsourcing by commercial customers.
The Company is the third largest security services organization in the
United States and is the leading United States-based provider of security
services abroad. In addition to its core security-related services, which
include guard and investigative services, the Company is a leader in the
development of specialized niche services. For example, in response to a growing
demand in the marketplace for security professionals with greater skill and
responsibility levels, the Company has developed its CPO program to provide
highly specialized and trained security professionals to a broad range of
customers such as national retailers, banks
26
<PAGE> 29
and other financial institutions and gated communities. CPOs are also used as
supplemental law enforcement forces by public transportation authorities and
other governmental entities. Moreover, in seeking to respond to the specialized
needs of its larger clients, the Company developed its National Accounts program
to provide customized security services on a national or regional level to large
customers with multiple locations. The National Accounts program provides
customers with a high level of service by providing a dedicated contact person
with the Company who is responsible for coordinating their accounts on a
nationwide basis. The Company believes that the National Accounts program may
also enable it to expand the scope of services offered worldwide to its National
Account customers. Management believes that the high quality and consistent
service of its CPO and National Accounts programs provide the Company with an
opportunity to enhance long-term relationships with its clients.
As part of its strategy to respond to the growing trend toward
privatization of governmental services, in 1984 the Company entered into the
development and management of privatized correctional and detention facilities,
a business which is now operated exclusively through WCC. As of May 8, 1996, WCC
had contracts and awards to manage 28 correctional and detention facilities,
with a design capacity of 20,932 beds. From December 29, 1991 to December 31,
1995, WCC's revenues increased from $37.9 million to $99.4 million and operating
income increased from $1.7 million to $7.2 million, representing compound annual
growth rates of 27.3% and 43.5%, respectively. In addition, from December 29,
1991 to December 31, 1995, the Company increased its design capacity of
contracts at a compound annual growth rate of 37.4%. As of May 8, 1996, WCC's
total equity market capitalization was approximately $572 million.
In addition to its expansion into the Correctional Business through WCC,
the Company has leveraged its management skills to expand into other support
services. In 1992, the Company entered into the foodservice business for
correctional institutions and, in January 1996, expanded its presence in this
market through the acquisition of contracts and certain assets of the
Correctional Food Services Division of Service America Corporation. In 1995, the
Company's Food Services Division had revenues of $34.7 million and the
Correctional Food Service Division of Service America Corporation, which the
Company acquired, had revenues of $41.1 million. Presently, only 10% of the
correctional foodservice market has been privatized. Consequently, the Company
believes that as privatization of correctional food services continues to gain
acceptance at state and local levels, the Food Services Division will have
opportunities for expansion. In addition to the services which the Company has
specifically targeted for expansion, the Company continues to explore and
selectively invest in other service businesses, including temporary services,
commercial and governmental support services, supplemental police services,
crash-fire-rescue services, fire protection services, and airport services.
BUSINESS STRATEGY
The Company's business strategy is focused on two primary objectives: (i)
enhancing its position as a leading international provider of security and
security-related services by distinguishing the type and quality of security
services it provides; and (ii) using its security service expertise and contacts
to offer other support services to its clients. Key elements of the Company's
business strategy are described below:
- ENHANCE LEADERSHIP POSITION OF CORE SECURITY-RELATED SERVICE
BUSINESS. The Company strives to enhance its market position by
attempting to provide the most reliable and consistent service in the
industry. The Company believes its security professionals provide quality
service because of its: (i) screening and hiring procedures; (ii)
extensive training; and (iii) well-organized supervisory and feedback
procedures. The Company's customer turnover ratio, the industry benchmark
for client satisfaction, has been significantly lower than the industry
average. Domestically, the Company experienced 9.1% client turnover
during 1995, a period in which the industry, the Company believes,
experienced an approximate 20% client turnover rate. Furthermore, the
Company's employee turnover ratio for security guards has averaged
approximately half of what the Company believes to be the industry
average.
- DEVELOP SPECIALIZED SECURITY SERVICES. The Company has identified and
targeted National Accounts and CPOs as its primary growth areas in the
security services business and seeks to expand its market
27
<PAGE> 30
position in these areas. Management believes that the high quality and
consistent service of its National Accounts and CPO programs provide the
Company with an opportunity to establish and enhance long-term
relationships with its clients.
- DEVELOP COMPLEMENTARY SUPPORT SERVICES. The Company will seek to expand
the scope of complementary support services it offers. The Company's
successful identification and development of the correctional business
and the foodservice business has provided it with the experience it
believes will allow it to develop other specialized programs and support
services such as temporary services, building maintenance, supplemental
police services, crash-fire-rescue services, fire protection services,
and airport services.
- GEOGRAPHIC EXPANSION. The Company seeks to increase revenues and enhance
earnings stability by continuing to expand its international presence.
Historical revenue growth has been centered in Central and South America
and, more recently, Western Europe. The Company has also been expanding
into Central and Eastern Europe, the former Soviet Union, the People's
Republic of China and other countries in the Far East in an attempt to
capitalize on recent economic developments and political reforms in these
areas. The Company believes this geographic diversity helps to protect
its revenues and earnings from adverse regional economic and business
cycles. In addition, the Company believes that its far reaching
geographic presence, which includes 50 countries worldwide, provides it
with an advantage when pursuing contracts with multi-national
corporations.
- CORRECTIONAL BUSINESS. WCC's objective is to enhance its position as one
of the leading providers of privatized correctional and detention
services. Key elements of WCC's business strategy include: (i) effective
management of projects; (ii) selective development of new business
opportunities; (iii) selective pursuit of acquisitions; (iv) expansion of
its scope of services; (v) expansion into international markets by
establishing alliances with strategic local partners; and (vi) limiting
capital risk.
- PURSUE SELECTED ACQUISITIONS. In addition to internal growth in the
security-related services business, the Company's growth strategy
includes the selected acquisition of other support service businesses.
For example, through its January 1996 acquisition of the Correctional
Food Services Division of Service America Corporation, the Company has
established a leading position in the growing correctional foodservice
industry.
MARKETS
SERVICES BUSINESS. The private security-related services industry includes
guard and investigative services, alarm monitoring services, security consulting
services, armored car transport and other security services. According to an
industry study by The Freedonia Group, Inc., dated June 1995 (the "Freedonia
Report"), the total private security-related services industry had revenues of
approximately $16.6 billion in 1994, which are projected to increase to $26.1
billion by the year 2000, a compound annual growth rate of 7.9%. The largest and
most visible component of the industry is the guard and investigative services
component which also accounts for the largest portion of the Company's revenues.
According to the Freedonia Report, the guard and investigative services market,
including security consulting services, had revenues of approximately $11.6
billion in 1994, which are projected to increase to $17.9 billion by the year
2000, a compound annual growth rate of 7.6%.
Guard and investigative services are often characterized within the
industry as either "proprietary" or "contract," depending on the service
provider. Under proprietary arrangements, end users of the services employ,
schedule and manage their own security officers and detectives. In contrast,
contract services are provided to end users pursuant to contracts with
independent security-related service firms such as the Company. The Company
believes that the advantages to clients of using contract security service
providers rather than providing services internally on a proprietary basis are
three-fold: (i) the client may realize cost and administrative savings; (ii) the
client is freed to concentrate on its core competencies; and (iii) the client
may be able to reduce labor management concerns with security-related employees,
who are employed by the Company. According to the Freedonia Report, the total
market for contract guard and investigative services
28
<PAGE> 31
was approximately 66% of the total contract security-related services market.
In addition to its presence in guard and investigative services, the
Company has identified opportunities in related services markets, such as
correctional food services. Only 10% of prisons and jails in the United States
have privatized their food services, of which the Company's market share is
approximately one-third. The Company believes that trends in privatization will
result in growth opportunities in this market component.
CORRECTIONAL BUSINESS. The trend in the United States and other countries
toward privatization of government services and functions has increased as
governments have faced continuing pressure to control costs and improve the
quality of services. Governmental agencies responsible for correctional and
detention facilities have privatized facilities in an attempt to address these
pressures. During the period from 1984 to 1995, the worldwide number of beds
under management at privatized correctional and detention facilities increased
from 885 to 63,595, with the majority of this growth occurring since 1989.
During 1995, the worldwide number of beds under management or construction at
privatized correctional and detention facilities increased 29.4% to 63,595 from
49,154 in 1994.
WCC markets its services in the United States to federal, state and local
governmental agencies. According to reports on privatization from the Private
Corrections Project Center for Studies in Criminology and Law, University of
Florida (the "Privatization Reports"), 18 states and Puerto Rico had awarded
management contracts to private companies at December 31, 1994. At December 31,
1995, there were a total of 92 facilities with a design capacity of 57,609 beds
privatized in the United States, of which the Company was awarded 24 facilities
with a design capacity of 13,029 beds. Federal agencies have privatized
Immigration and Naturalization Service detention facilities and United States
Marshal detention facilities. State agencies have privatized state prisons,
community corrections facilities, chemical dependency treatment centers,
intermediate sanction facilities, juvenile offender facilities, pre-release
centers, work program facilities and state jail facilities. Local agencies have
privatized city jail facilities and transfer facilities.
In the United Kingdom, the Home Office, the chief British governmental body
responsible for law enforcement, awarded its first contract for a
privately-managed prison in 1991. At December 31, 1995, there were a total of
six facilities with a design capacity of 3,584 beds privatized in the United
Kingdom, including one managed by a WCC joint venture, with a design capacity of
850 beds. The Home Office has stated that new correctional and detention
facilities in England and Wales will be privatized. Therefore, WCC believes that
significant growth opportunities exist in the United Kingdom. The Home Office is
also privatizing court escort services. In December 1995, the Company's joint
venture, PPS, was awarded contracts to perform court escort services in two
regions of the United Kingdom.
In Australia, Queensland privatized its first facility in 1989. At December
31, 1995, there were a total of six privatized facilities with a design capacity
of 2,402 beds privatized in Australia, of which WCC currently manages three
facilities with a design capacity of 1,778 beds (which includes the design
capacity of the Sale, Australia facility which is presently under construction).
29
<PAGE> 32
COMPANY ORGANIZATION
The Company's business can be divided into the Services Business and
Correctional Business. The Services Business, which encompasses all business of
the Domestic Operations Group and the International Group, and all business of
the Government Services Group except for the operations of WCC, provides
security-related and other support services for commercial and governmental
clients. The Correctional Business, which consists exclusively of the business
conducted through WCC, provides correctional and detention facility design,
development and management services to government agencies. Provided below is
financial information for each business segment for Fiscal 1993, Fiscal 1994,
Fiscal 1995, and the Thirteen Weeks Ended March 31, 1996. The following table
sets forth the contribution to consolidated revenues and operating income by
each of the Company's business segments. See Note 14 of Notes to Consolidated
Financial Statements and Note 6 of Notes to Consolidated Financial Statements in
the Company's Quarterly Report on Form 10-Q, incorporated by reference herein
(which also includes a summary of domestic and international operations).
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
FISCAL 1993 FISCAL 1994 FISCAL 1995 MARCH 31, 1996
---------------- ----------------- ---------------- ----------------
BUSINESS SEGMENT AMOUNT % AMOUNT % AMOUNT % AMOUNT %
- ----------------------------------- -------- --- -------- ---- -------- --- -------- ---
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Services......................... $600,472 91% $642,727 88% $697,301 88% $183,040 86%
Correctional..................... 58,784 9 84,026 12 99,431 12 29,434 14
-------- --- -------- ---- -------- --- -------- ---
Total Revenues................. $659,256 100% $726,753 100% $796,732 100% $212,474 100%
Operating Income:
Services......................... $ 3,050 68% $ 10,846 71% $ 8,545 54% $ 1,094 39%
Correctional..................... 1,446 32 4,446 29 7,229 46 1,719 61
-------- --- -------- ---- -------- --- -------- ---
Operating Income before
write-down of headquarters
building and provision for
relocation costs............... 4,496 100% 15,292 100% 15,774 100% $ 2,813 100%
Write-down of headquarters
building....................... -- (8,700) -- --
Provision for relocation costs... -- -- -- (750)
-------- -------- -------- --------
Total Operating Income......... $ 4,496 $ 6,592 $ 15,774 $ 2,063
</TABLE>
SERVICES BUSINESS
The Services Business is conducted through three separate operating groups:
the Domestic Operations Group, the Government Services Group (excluding WCC) and
the International Group. The following table sets forth the contribution of each
operating group to the total revenues and total operating income of the Services
Business during Fiscal 1993, Fiscal 1994, Fiscal 1995, and the Thirteen Weeks
Ended March 31, 1996.
<TABLE>
<CAPTION>
REVENUES
-------------------------------------------------------------------------------------
THIRTEEN WEEKS
ENDED
FISCAL 1993 FISCAL 1994 FISCAL 1995 MARCH 31, 1996
---------------- ---------------- ---------------- ----------------
OPERATING GROUP AMOUNT % AMOUNT % AMOUNT % AMOUNT %
- ------------------------------------ -------- --- -------- --- -------- --- -------- ---
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic Operations................. $336,048 56% $380,941 59% $423,743 61% $119,401 65%
Government Services (excluding
WCC).............................. 184,915 31 177,613 28 166,035 24 39,499 22
International....................... 82,759 14 89,900 14 113,205 16 24,259 13
Other............................... 1,019 -- 1,222 -- 1,141 -- 84 --
Inter-Group Revenues................ (4,269) (1) (6,949) (1) (6,823) (1) (203) --
-------- --- -------- --- -------- --- -------- ---
Total Services Business Revenues.... $600,472 100% $642,727 100% $697,301 100% $183,040 100%
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
OPERATING INCOME
-------------------------------------------------------------------------------------
THIRTEEN WEEKS
ENDED
FISCAL 1993 FISCAL 1994 FISCAL 1995 MARCH 31, 1996
---------------- ---------------- ---------------- ----------------
OPERATING GROUP AMOUNT % AMOUNT % AMOUNT % AMOUNT %
- ------------------------------------ -------- --- -------- --- -------- --- -------- ---
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic Operations................. $ 10,434 65% $ 12,977 61% $ 13,501 70% $ 2,935 69%
Government Services (excluding
WCC).............................. 3,499 22 5,162 25 2,871 15 1,098 26
International....................... 2,164 13 2,992 14 2,783 15 192 5
-------- --- -------- --- -------- --- -------- ---
Operating Income Before Corporate
Expenses and Underwriting
Losses............................ 16,097 100% 21,131 100% 19,155 100% 4,225 100%
Corporate Expenses and Underwriting
Losses............................ (13,047) (10,285) (10,610) (3,131)
-------- -------- -------- --------
Total Services Business Operating
Income............................ $ 3,050 $ 10,846 $ 8,545 $ 1,094
</TABLE>
DOMESTIC OPERATIONS GROUP. The Domestic Operations Group has historically
provided over half of the Company's consolidated revenues. This group provides
security-related and other support services throughout the United States. The
Domestic Operations Group is subdivided into the following divisions: the
Security Services Division, the Nuclear Division and the Food Services Division.
In conducting its Services Business, the Company has adopted a quality
management approach. General management responsibilities for each operating
group are vested in a small group of managers located at Company headquarters.
Day-to-day management responsibility for each group is vested in field managers
who have primary responsibility for client contact and satisfaction. Field
managers are selected through an intensive screening process and receive what
the Company believes is state-of-the-art training. Supervisory personnel from
Company headquarters periodically visit sites and carefully monitor operating
results.
Security Services Division. Through its Security Services Division, the
Company furnishes security officers (armed and unarmed) to protect its clients'
property against fire, theft, intrusion, vandalism and other physical harm.
Specialized security services offered by the Company include executive
protection, fire protection services and airport services. The Company also
provides security consulting services including security assessment and program
development, specialized training programs for security guards, fire-crash-
rescue personnel, and investigative services for attorneys, financial
institutions and retail and industrial businesses.
The Company will attempt to further enhance its market position in the
security-related services industry through internal growth by continuing to: (i)
pursue domestic and international National Accounts; (ii) differentiate its
security-related services within the industry by emphasizing its CPO program;
and (iii) market the Company's services to specialized market niches such as
gated residential communities and hospitals.
The Company intends to emphasize attracting and retaining National Accounts
that require security-related services on a national or regional level at
multiple locations. Such clients include retail chains, banks, manufacturers and
restaurant chains. Management believes that such clients value the flexibility
and service provided by a dedicated single point of contact with the Company
through the National Accounts program.
For its CPO program, the Company recruits law enforcement academy
graduates, former military police, members of elite military units and college
graduates with criminology-related degrees. These recruits are prepared for
critical security assignments after completing a Company training program that
surpasses any state or local requirements for security officer licensing. Only
about 6% of initial applicants for the Company's CPO program are eventually
hired by the Company. CPOs perform such functions as prisoner transportation in
Maryland and Colorado, neighborhood and downtown security in Florida, transit
security in Wisconsin and California, rest-stop security in Florida and other
supplemental law enforcement-related services. Management believes that services
provided by CPOs distinguish the Company's services from those of the
competition by providing highly specialized and trained security personnel
capable of undertaking and accepting responsibilities that are beyond the
capabilities of traditional security guards.
31
<PAGE> 34
The contracts of the Security Services Division with private industry
usually are for a one year term. Most of these contracts are subject to
termination by either party on 30 days prior notice. Billing rates are based on
a specified rate per hour and generally are subject to renegotiation or
escalation if related costs increase because of changes in minimum wage laws or
certain other events beyond the control of the Company.
The Company designs and engineers integrated security programs using both
security officers and electronic equipment. These services include planning
master security programs for particular facilities, custom designing security
systems, procuring requisite electronic equipment, managing contracts and
construction, training security personnel, and reviewing and evaluating security
programs. Contracts for these integrated security-related services generally
provide for a fixed fee and are awarded by competitive bidding.
The Company complements security services provided to its clients with
investigative services, such as employee background screening and insurance
fraud investigations. The Company maintains a national research center with the
latest information-gathering technology for public records and a "fraud-waste-
criminal" hotline for employees of clients to report workplace abuses. Clients
ordinarily are charged an hourly rate for investigative services and a flat rate
for background record searches.
Nuclear Division. The Company provides specialized security-related
services for nuclear power generating facilities owned by public and private
utility companies. The Company provides highly trained and qualified security
personnel, emergency planning, electronic detection equipment and integrated
security systems to these utility companies. The terms of contracts entered into
by the Nuclear Division generally are multi-year and include a variety of fee
arrangements. The Company's experience with requirements and standards of the
Nuclear Regulatory Commission ("NRC") enable it to assist customers in ensuring
NRC compliance.
Food Services Division. The Company's correctional foodservice business,
the second largest in the industry, provides over 31 million meals annually to
over 115 jail and prison facilities in 27 states throughout the United States.
Food for regular, therapeutic and religious diets is prepared using conventional
or cook-chill methods. The Company provides a quality assurance program that
encompasses all aspects of the foodservice business. Specifically, the Company
provides product testing and menu development through its staff of nutritional
experts, which includes professional dietitians. Also, to ensure high quality of
service and product, facility audits are conducted on an on-going basis. The
Company bids for foodservice contracts and provides food services on a cost per
meal basis. Complete foodservice management, commissary, laundry and janitorial
programs are available to correctional clients.
On January 5, 1996, the Company acquired the contracts and certain assets
of the Correctional Food Services Division of Service America Corporation, which
had revenues of approximately $41.1 million in 1995. The Company paid a cash
purchase price of approximately $13.7 million.
Only 10% of the correctional foodservice business was privatized as of
December 31, 1995. Consequently, the Company sees substantial opportunity to
expand its operations in the Food Services Division, especially in light of the
recent trend toward privatization of certain governmental services.
Additionally, the correctional foodservice business has high barriers to entry,
including the need for substantial expertise to comply with strict governmental
dietary requirements and the capital resources necessary to finance start-up
costs and maintain inventory levels. The Company believes that its in-house
staff of highly-trained professional dietitians and managers provides it with a
competitive advantage. The Company intends to concentrate on expanding its Food
Services Division through internally-generated growth and selected acquisitions.
GOVERNMENT SERVICES GROUP. In Fiscal 1995, the Government Services Group
generated approximately 21% of the Company's consolidated revenues. The
Government Services Group business is conducted primarily through WCC and
Wackenhut Services Inc. ("WSI"). For a discussion of WCC, see "Business --
Correctional Business." Through WSI, the Government Services Group provides
security services primarily to United States federal government entities and has
established a commercial client base in Australia. Services provided by WSI
range from basic security and administrative support to specialized emergency
response teams. These response teams are staffed with highly trained personnel,
many with prior governmental
32
<PAGE> 35
intelligence experience. These response teams are equipped with sophisticated
weaponry and engage in such specialized activities as aerial assault and
rapelling operations.
In the United States, WSI provides security-related services at 11
sensitive government installations. For example, the Company has held the
operations and maintenance contract for security services at the Savannah River
Site in South Carolina since 1983, the single largest government contract for
security-related services. Since 1990, the Company has managed security services
at the Rocky Flats Environmental Technology Site near Denver and since 1964, has
managed security services at the Nevada Test Site near Las Vegas. Since 1986,
WSI also has provided security as a sub-contractor at the U.S. Strategic
Petroleum Reserves in Texas and Louisiana. Since 1984, WSI has overseen training
and resource development for the United States Department of Energy at the
Central Training Academy in Albuquerque, New Mexico.
The Company's service contracts with governmental agencies are typically
cost-reimbursable contracts providing the Company the ability to earn award fees
based upon the achievement of performance goals. The Company's service contracts
with governmental agencies are subject to annual governmental appropriations.
Through the Government Services Group the Company also operates its
accelerated access authorization program. This program provides background
investigation and research services in support of individual clearances required
for employment at United States Department of Energy sites. Currently, this
program provides services at two facilities.
INTERNATIONAL GROUP. In Fiscal 1995, the International Group accounted for
approximately 14% of the Company's consolidated revenues. The International
Group's business is conducted primarily through Wackenhut International, Inc.
("WII").
Since its inception in 1967, the Company's international operations have
grown to include a network of subsidiaries, partnerships and affiliates in over
50 countries under WII. Management believes the Company's international
presence, through the operations of WII, is larger than any of its domestic
competitors. The Company believes that its risk exposure in international
operations conducted through WII is reduced substantially by the fact that the
vast majority of its international operations are structured through joint
ventures with parties who operate in the given market. These parties often
provide valuable insight into local markets, in addition to sharing financial
responsibility for the venture. WII also provides a greater variety of services
than the Company offers domestically. These services include, among other
things, central station monitoring, armored cars and janitorial services. The
Company believes that this experience will be valuable in assisting the
Company's domestic expansion into new support service areas.
The Company's goal is to increase its international presence by further
developing existing markets and by expanding into new markets. Most recently,
WII has expanded into Central and Eastern Europe, the former Soviet Union, the
People's Republic of China and other countries in the Far East in an attempt to
capitalize on recent economic developments and political reforms in these areas.
In addition to providing traditional security services to commercial customers
at overseas locations, WII provides security for the U.S. Department of State at
embassies and missions in 23 locations. WII also provides protective services at
NASA space shuttle support sites in Africa. Major competitors of WII include
large United States-based companies with operations overseas, sizable foreign
concerns such as Group 4 and Securitas, and local and regional companies.
CORRECTIONAL BUSINESS
The Company's Correctional Business is conducted through the operations of
WCC. WCC is a leading developer and manager of privatized correctional and
detention facilities in the United States, the United Kingdom and Australia. WCC
was founded in 1984 as a division of the Company to capitalize on emerging
opportunities in the private correctional services market. WCC presently has
awards/contracts to manage 28 correctional and detention facilities with an
aggregate design capacity of 20,932 beds, 18 of which are currently in
operations, nine of which are under development by WCC and one of which is being
developed by a third party. WCC offers governmental agencies a comprehensive
range of prison management services from individual consulting projects to the
integrated design, construction and management of correctional and
33
<PAGE> 36
detention facilities. In addition to providing the fundamental services relating
to the security of facilities and the detention and care of inmates, WCC has
built a reputation as an effective provider of a wide array of in-facility
rehabilitative and educational programs, such as chemical dependency counseling
and treatment, basic education, and job and life skills training. The Company
believes that WCC's experience in delivering a full range of quality
privatization services on a cost-effective basis to governmental agencies
provides such agencies strong incentives to choose WCC when awarding new
contracts or renewing existing contracts.
In the United States, there is a growing trend toward privatization of
correctional and detention services as governments have faced continuing
pressure to control costs and improve the quality of services. According to the
Privatization Reports, the design capacity of privately-managed correctional and
detention facilities in the United States has increased significantly over the
last ten years. The majority of this growth has occurred since 1989, as the
number of correctional and detention facilities under contract for private
management increased from 26 facilities with a design capacity of 10,973 beds in
1989 to 104 facilities with a design capacity of 63,595 beds in 1995. Even after
such growth, according to the Privatization Reports, only 3.0% of inmates in
United States correctional and detention facilities were housed in
privately-managed facilities at December 31, 1994. The Company believes that
many factors have contributed to industry growth, the most important of which
are increasing inmate populations and the demonstrated ability of private
entities to design, construct and manage facilities on a cost-effective basis.
International recognition of the benefits of private sector management of
correctional and detention facilities also continues. WCC has contracts to
manage four of the 12 facilities that have been privatized in the United Kingdom
and Australia. In particular, WCC believes that significant growth opportunities
exist in the United Kingdom since the Home Office, the chief British
governmental body responsible for law enforcement, adopted a policy in 1993 to
privatize all new prisons in England and Wales, as well as some existing prisons
and court escort services. In December 1995, WCC entered into two contracts to
provide court escort services in the West Midlands and Southeast Areas of
England, commencing in May 1996. Under court escort contracts, a private company
on behalf of a governmental agency, transports prisoners between prisons, police
stations and courts and is responsible for the custody of such prisoners during
transportation and court appearances.
WCC's objective is to enhance its position as one of the leading developers
and managers of privatized correctional and detention facilities. Key elements
of WCC's business strategy include: (i) effective management of projects; (ii)
selective development of new business opportunities; (iii) aggressive pursuit of
acquisitions; (iv) expanded scope of services; (v) expansion into international
markets by establishing alliances with strategic local partners; and (vi)
limiting capital risk.
In September 1994, WCC completed an initial public offering ("IPO") in
which it sold 2,185,000 shares of common stock at an offering price of $9 per
share. Following the completion of the IPO, the Company owned approximately
73.3% of the issued and outstanding shares of common stock of WCC. In January
1996, WCC completed a subsequent public offering of 2,300,000 shares of common
stock at an offering price of $24 per share, which resulted in the Company
owning approximately 55% of the issued and outstanding shares of common stock of
WCC.
CUSTOMERS
During Fiscal 1995, the Company provided services to more than 14,000
customers. The Company's largest customer was the United States Department of
Energy, which accounted for approximately 17% of the Company's consolidated
revenue in Fiscal 1995. The service contracts at the Savannah River site (8%)
and the Rocky Flats Plant (5%) are the largest of the Company's contracts with
the United States Department of Energy. Contracts with governmental agencies of
the State of Texas accounted for 41%, 37% and 41% of WCC's revenues in Fiscal
1994, Fiscal 1995 and the First Thirteen Weeks of 1996, respectively. Contracts
with the New South Wales Department of Corrective Services accounted for 15%,
13% and 11% of WCC's revenues during Fiscal 1994, Fiscal 1995 and the First
Thirteen Weeks of 1996, respectively. Contracts with the Queensland Corrective
Services Commission accounted for 13% of WCC's revenues during Fiscal 1994,
Fiscal 1995 and the First Thirteen Weeks of 1996. Contracts with the Louisiana
Department of Public Safety
34
<PAGE> 37
and Corrections accounted for 13%, 11% and 11% of WCC's revenues in Fiscal 1994,
Fiscal 1995 and the First Thirteen Weeks of 1996, respectively.
COMPETITION
The Company is the third largest security and protective services
organization in the United States and a leading provider of such services
worldwide. The Company competes domestically and internationally with
Borg-Warner Security Company and Pinkerton's, Inc. The Company also competes
with numerous local and regional security services companies. The top five
providers of services similar to those provided by the Company account for less
than 25% of the security-services market in the United States. Competition in
the security-related and other support services business is intense and is based
primarily on price in relation to quality of service, the scope of services
performed, and the extent of employee training and supervision. However,
potential competitors can enter the security-related and other support services
business without substantial capital investment or expense.
WCC competes primarily on the basis of the quality and range of services
offered, and its experience and reputation, both domestically and
internationally, in the design and management of facilities. WCC competes with a
number of companies domestically and internationally, such as Corrections
Corporation of America, Esmor Correctional Services, Inc., Group 4 International
Corrections Service, Securicor Group, U.K. Detention Services, Ltd., and United
States Corrections Corp. Some of the competitors are larger and have greater
resources than WCC. WCC also competes on a localized basis in some markets with
small companies that may have better knowledge of the local conditions and may
be better able to gain political and public acceptance. Potential competitors
can enter the correctional business without substantial capital investment or
experience. In addition, in some markets WCC competes with governmental agencies
that are responsible for the development and management of correctional
facilities.
EMPLOYEES
The Company's principal business is labor intensive, and is affected
substantially by the availability of qualified personnel and the cost of labor.
As of May 8, 1996, the Company had over 45,000 full and part-time employees,
most of whom are security officers and other personnel providing physical
security services. The Company has not experienced any material difficulty in
employing sufficient numbers of suitable security officers. Security officers
and other personnel supplied by the Company to its clients are employees of the
Company, even though stationed regularly at a client's premises. A small
percentage of the employees of the Company are covered by collective bargaining
agreements. Relations with employees have been generally satisfactory. At May 8,
1996, WCC had 3,359 full-time employees and 140 part-time employees. Employees
at four of WCC's facilities are unionized.
BUSINESS REGULATIONS AND LEGAL CONSIDERATIONS
The Company is subject to numerous city, county, and state firearm and
occupational licensing laws that apply to security officers and private
investigators. Many states have laws requiring training and registration of
security officers, regulating the use of badges and uniforms, and imposing
minimum bond, surety, or insurance standards. Many foreign countries have laws
that restrict the Company's ability to render certain services, including laws
prohibiting security-related services or limiting foreign investment.
The industry in which WCC operates is subject to national, federal, state
and local regulations in the United States, United Kingdom and Australia which
are administered by a variety of regulatory authorities. Generally, prospective
providers of correctional services must be able to detail their readiness to,
and must, comply with a variety of applicable state and local regulations,
including education, health care and safety regulations. WCC's contracts
frequently include extensive reporting requirements and require supervision and
on-site monitoring by representatives of contracting governmental agencies.
WCC's Kyle New Vision Chemical Dependency Treatment Center is licensed by the
Texas Department of Criminal Justice to provide substance abuse treatment.
Certain states, such as Florida and Texas, deem prison guards to be peace
officers
35
<PAGE> 38
and require WCC personnel to be licensed and may make them subject to background
investigation. State law also typically requires corrections officers to meet
certain training standards.
In addition, many state and local governments are required to enter into a
competitive bidding procedure before awarding contracts for products or
services. The laws of certain jurisdictions may also require the Company to
award subcontracts on a competitive basis or to subcontract with businesses
owned by women or members of minority groups.
The failure to comply with applicable laws, rules or regulations or the
loss of any required license could have a material adverse effect on the
Company's business, financial condition and results of operations. Furthermore,
the current and future operations of the Company may be subject to additional
regulations as a result of, among other factors, new statutes and regulations
and changes in the manner in which existing statutes and regulations are or may
be interpreted or applied. Any such additional regulations could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company may, under certain circumstances, be responsible for the
actions of its employees and agents. Under the common law of negligence in many
states, the Company can be held vicariously liable for wrongful acts or
omissions of its agents or employees performed in the course and within the
scope of their agency or employment. In addition, some states have statutes that
expressly impose on the Company legal responsibility for the conduct of its
agents or employees. The nature of the security-related services provided by the
Company (such as armed security officers and fire rescue) may expose it to
greater risks of liability for employee acts or omissions than are posed to
other businesses. The Company maintains public liability insurance to mitigate
against this exposure, although the laws of many states limit or prohibit
insurance coverage of liability for punitive damages arising from willful,
wanton or grossly negligent conduct.
PROPERTIES
The Company relocated its executive offices to The Wackenhut Center, a
newly constructed building located at 4200 Wackenhut Drive, Palm Beach Gardens,
Florida, in March 1996. The Wackenhut Center contains approximately 93,250
square feet and is leased from P.G.A. Professional Center, Ltd., for an initial
term of 15 years, with consecutive options to extend the term of the lease for
three additional five year periods. This lease, as amended, requires annual
rental payments in the amount of $1,789,301 during the initial 15 year term,
with a provision for the pass through of certain operating cost increases or
decreases that exceed a certain threshold. These potential adjustments are not
expected to be material.
WCC owns a 66,000 square foot building in Aurora, Colorado, which is
operated by WCC as a detention center under a contract with the United States
Government. The Company owns a 15,000 square foot warehouse building in Miami,
Florida. In addition, the Company owns two buildings in Ecuador and one each in
the Dominican Republic, Costa Rica and Puerto Rico that are used for the
operations of its foreign subsidiaries in those countries. All other offices of
the Company are leased. The aggregate annual rent for all non-cancelable
operating leases of office space, automobiles, data processing and other
equipment is approximately $6,994,000. The Company owns substantially all
uniforms, firearms, and accessories used by its security officers.
LEGAL PROCEEDINGS
The Company 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 Company 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 for any such claim or litigation.
36
<PAGE> 39
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Executive Officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ ---------------------------------------------
<S> <C> <C>
George R. Wackenhut....................... 76 Chairman of the Board and
Chief Executive Officer
Richard R. Wackenhut...................... 48 President, Chief Operating Officer and
Director
Alan B. Bernstein......................... 48 Executive Vice President and President,
Domestic Operations Group
Fernando Carrizosa........................ 52 Senior Vice President, International
Operations
Timothy P. Cole........................... 52 Executive Vice President and President,
Government Services Group
Robert C. Kneip........................... 48 Senior Vice President, Corporate Planning and
Development
James P. Rowan............................ 62 Vice President, General Counsel and Assistant
Secretary
Daniel E. Mason........................... 50 Vice President and Chief Financial Officer,
Domestic Operations Group
Ruth J. Wackenhut......................... 73 Secretary
Julius W. Becton, Jr. .................... 61 Director
Richard G. Capen, Jr. .................... 61 Director
Anne N. Foreman........................... 48 Director
Edward L. Hennessy, Jr. .................. 68 Director
Paul X. Kelley............................ 67 Director
Nancy Clark Reynolds...................... 68 Director
Thomas P. Stafford........................ 65 Director
</TABLE>
GEORGE R. WACKENHUT has been Chairman of the Board and Chief Executive
Officer of the Company since April 26, 1986. He was President of the Company
from the time it was founded until April 26, 1986. He formerly was a Special
Agent of the Federal Bureau of Investigation. Mr. Wackenhut is also a director
of WCC. Mr. Wackenhut is on the Dean's Advisory Board of the University of Miami
School of Business. He is on the National Council of Trustees, Freedoms
Foundation at Valley Forge, and the President's Advisory Council for the Small
Business Administration, Region IV. He is a past participant in the Florida
Governor's War on Crime and a past member of the Law Enforcement Council,
National Council on Crime and Delinquency, and the Board of Visitors of the U.S.
Army Military Police School and the Board of Directors of SSJ Medical
Development, Inc., Miami, Florida. Mr. Wackenhut is also a member of the
American Society for Industrial Security. He was a recipient in 1990 of the
Labor Order of Merit, First Class, from the government of Venezuela. Mr.
Wackenhut received his B.S. degree from the University of Hawaii and his M.Ed.
degree from Johns Hopkins University. Mr. Wackenhut is married to Ruth J.
Wackenhut, Secretary of the Company. His son, Richard R. Wackenhut, is President
and Chief Operating Officer of the Company and also a Director.
RICHARD R. WACKENHUT has been President and Chief Operating Officer of the
Company and a member of the Board of Directors since April 26, 1986, and was
formerly Senior Vice President of Operations from 1983 to 1986. He was Manager
of Physical Security from 1973 to 1974. He also served as Manager, Development
at the Company's Headquarters from 1974 to 1976; Area Manager, Columbia, South
Carolina, from 1976 to 1977; District Manager, Columbia, South Carolina from
1977 to 1979; Director, Physical
37
<PAGE> 40
Security Division at Corporate Headquarters from 1979 to 1980; Vice President,
Operations from 1981 to 1982; and Senior Vice President, Domestic Operations
from 1982 to 1983. Mr. Wackenhut is Director of Wackenhut del Ecuador, S.A.;
Wackenhut UK Limited; Wackenhut Dominicana, S.A.; and several domestic
subsidiaries of the Company, including WCC. He is a member of the St. Thomas
University Advisory Board. He is also a member of the American Society for
Industrial Security, the International Association of Chiefs of Police and the
International Security Management Association. He received his B.A. degree from
The Citadel in 1969 and completed the Advanced Management Program of the Harvard
University School of Business Administration in 1987. Mr. Wackenhut is the son
of George R. Wackenhut, Chairman of the Board and Chief Executive Officer of the
Company, and Ruth J. Wackenhut, Secretary of the Company.
ALAN B. BERNSTEIN has been Executive Vice President of the Company and
President, Domestic Operations Group since April 27, 1991. Prior to that, Mr.
Bernstein was Senior Vice President, Domestic Operations from 1986 to 1991. He
has been employed by the Company since 1976, except for a brief absence during
1982 when he was a partner in a family-owned security alarm business in New York
State. Mr. Bernstein has served in the following positions with the Company or
its subsidiaries: Vice President of Domestic Operations, 1985; Vice President,
Corporate Business Development, 1984; Acting President, Wackenhut Systems
Corporation, 1983; Director of Integrated Guard Security, 1981; and Manager of
Wackenhut Electronic Systems Corporation (Miami) from 1976 to 1981. He received
his B.S.E.E. degree from the University of Rochester, and an M.B.A. degree from
Cornell University.
FERNANDO CARRIZOSA has been Senior Vice President, International Operations
since January 28, 1989. Mr. Carrizosa was Vice President of International
Operations from January 31, 1988 to January 28, 1989. He joined Wackenhut de
Colombia in 1968 as Manager of Investigations. He was promoted to Manager of
Human Resources, and then to Assistant to the President in 1974. He moved to
Headquarters as a trainee in 1974, and was promoted to Manager of Latin American
Operations in 1980, a capacity in which he served until 1983. Mr. Carrizosa also
served as Executive Vice President of Wackenhut International, 1983 to 1984 and
President of Wackenhut International, 1984 to 1988. He is a Director of several
subsidiaries and affiliates of the Company. He received a B.B.A. from
Universidad Javeriana in Colombia, and an M.B.A. with honors from Florida
International University in 1976.
TIMOTHY P. COLE has been Executive Vice President and President, Government
Services Group since April 27, 1991. Mr. Cole was Senior Vice President
Government Services from 1989 to 1991. He joined the Company as President of
Wackenhut Services, Inc. in 1988. Mr. Cole was associated with the Martin
Marietta Corporation from 1982 to 1988 and served in various capacities,
including Program Director and Director of Subcontracts. He received his B.B.A.
degree from the University of Oklahoma and his M.B.A. from Pepperdine
University. Mr. Cole completed the Advanced Management Program of the Harvard
University Graduate School of Business Administration in 1987. Mr. Cole is also
the Chairman of the Board of Directors of WCC.
ROBERT C. KNEIP has been the Senior Vice President, Corporate Planning and
Development of the Company since 1988. He joined the Company in 1982. Mr. Kneip
has held various positions in the Company including Director, Power Generating
Services; Director, Contracts Management; Vice President, Contracts Management;
and Vice President, Planning and Development. Prior to joining the Company, Mr.
Kneip was employed by the Atomic Energy Commission, the Nuclear Regulatory
Commission and Dravo Utility Constructors, Inc. He received a B.A. (Honors) from
the University of Iowa, and an M.A. and Ph.D. from Tulane University.
JAMES P. ROWAN is Vice President and General Counsel, and Assistant
Secretary of the Company. He joined the Company in 1979 as Assistant General
Counsel, became Associate General Counsel in 1982 and a Vice President in 1986.
He is an attorney admitted to the Bar of the States of Indiana, Iowa and
Michigan. He holds degrees of B.S.C. (Accounting) and J.D. (Law) from the
University of Iowa.
DANIEL E. MASON has been Vice President and Chief Financial Officer,
Domestic Operations Group since June 1992. Prior to that he was Controller,
Domestic Operations, since joining the Company in June 1990. Mr. Mason came to
the Company from Coastal Corporation, where he was Corporate Controller of its
Miami-based, refined products marketing subsidiary, Coastal Fuels Marketing,
Inc. During his eleven years at
38
<PAGE> 41
Coastal, he held various positions including Manager of Accounting Services,
Director of Planning and Analysis, and Division Controller, Retail Operations.
Mr. Mason received his B.S. in Accounting from Florida International University
and an M.B.A. from the University of Miami.
RUTH J. WACKENHUT has been Secretary of the Company since 1958. She is
married to George R. Wackenhut, Chairman of the Board and Chief Executive
Officer of the Company and her son, Richard R. Wackenhut, is President and Chief
Operating Officer of the Company and also a director.
JULIUS W. BECTON, JR. has served as a Director of the Company since 1994.
He was the President of Prairie View A&M University, Texas from 1989 to 1994,
and has had a public service career that included two key government positions
preceded by service in the U.S. Army, during which he attained the rank of
Lieutenant General. While in the Army, General Becton commanded the 1st Cavalry
Division and the VII Corp, and was the Deputy Commanding General of the U.S.
Army Training and Doctrine Command. He is a veteran of three wars: World War II,
the Korean War and Vietnam. After departing the Army in 1983, he served as
Director of the Office of U.S. Foreign Disaster Assistance, and from 1985 to
1989 was the Director of the Federal Emergency Management Agency. He was later
Chief Operating Officer for American Coastal Industries, Inc. He is on the Board
of Directors of Illinois Tool Works, Inc., a multinational manufacturer of
highly engineered assemblies and systems, and the Marine Spill Response
Corporation. He is Vice Chairman (elect) for the Association of U.S. Army and a
member of the Advisory Council to the Board of Visitors at The Citadel. He is a
member of the Defense Science Board Readiness Task Force, and the Department of
Defense Army Advisory Panel. He serves on the board of several civic and public
service organizations. He received numerous U.S. Army service and valor awards,
including the Distinguished Service Medal and the Distinguished Service Award
for his service as the Director of the Federal Emergency Management Agency. He
has a B.S. from Prairie View A&M University, and an M.A. in economics from the
University of Maryland. He has been awarded honorary Doctor of Laws degrees by
three universities.
RICHARD G. CAPEN, JR. has served as a Director of the Company since 1993.
He is an author, speaker and has been corporate director of four other
corporations since 1993. From 1992 to 1993 he was United States Ambassador to
Spain. He was Vice Chairman and Director of Knight Ridder, Inc. (1989-91), and
Chairman and Publisher of The Miami Herald (1983-89). During his years as
Publisher of The Miami Herald, the newspaper received five Pulitzer Prizes and
was honored twice as one of the top ten dailies in America. Ambassador Capen
started his newspaper career in 1961 with Copley Newspapers in San Diego,
California. From 1968 to 1971, Ambassador Capen was a senior civilian official
with the U.S. Department of Defense, where he served first as Deputy Assistant
Secretary of Defense for Public Affairs and subsequently as Assistant to the
Secretary of Defense for Legislative Affairs. In 1971, he was awarded the
Defense Department's highest civilian decoration for his leadership. Ambassador
Capen has served as director of several public corporations, and as a member of
advisory boards at Stanford and Duke Universities. He is a member of the Board
of Directors of Carnival Corporation, Freedom Communications, Inc., New Economy
Fund, a mutual fund, and Smallcap World Fund, a mutual fund. Ambassador Capen is
a 1956 graduate of Columbia University which he attended on an NROTC
scholarship.
ANNE NEWMAN FOREMAN has served as a Director of the Company since 1993. She
served as the Under Secretary of the United States Air Force from September 1989
until January 1993. Prior to her tenure as Under Secretary, she was General
Counsel of the Department of the Air Force and a member of the Department's
Intelligence Oversight Board. Mrs. Foreman served in the White House as
Associate Director of Presidential Personnel for National Security (1985-1987)
and practiced law with the Washington office of the Houston-based law firm of
Bracewell and Patterson, and with the British solicitors Boodle Hatfield, Co.,
in London, England (1979-1985). Mrs. Foreman is a former member of the career
Foreign Service, having served in Beirut, Lebanon, Tunis, Tunisia, and the U.S.
Mission to the United Nations in New York. She was a U.S. delegate to the 31st
Session of the U.N. General Assembly and to the 62nd Session of the U.N.
Economic and Social Council. Mrs. Foreman received a B.A. degree, Magna Cum
Laude, from the University of Southern California and a M.A, (History) from the
same institution. She also holds a J.D. from the American University and was
awarded an Honorary Doctorate of Laws from Troy State University. Mrs. Foreman
is a member of Phi Beta Kappa, has been a member of numerous Presidential
delegations, and was twice awarded the Air Force Medal for Distinguished
Civilian Service.
39
<PAGE> 42
EDWARD L. HENNESSY, JR. has served as a Director of the Company since 1993.
He is a member of the Board of Directors of Lockheed Martin, The Bank of New
York, and Walden Residential Properties, Inc. He is a Trustee of The Catholic
University of America, a Director of the Coast Guard Academy Foundation, Inc.,
founding President of the Tri-County Scholarship Fund and Treasurer of the March
of Dimes. He served as Chairman of the Board and Chief Executive Officer of
Allied-Signal, Inc. from 1979 to 1991. He was previously Executive Vice
President and member of the Board of Directors and Executive Committee of United
Technologies Corporation, Senior Vice President for Administration and Finance
for Hueblein, Inc. and Controller with AT&T Corporation. He is a Trustee of the
Catholic University of America, a Director of the Coast Guard Academy
Foundation, Inc., founding President of the Tri-County Scholarship Fund and
Treasurer of the March of Dimes. He was a member of the President's Private
Sector Survey on Cost Control, the (New Jersey) Governor's Management
Improvement Plan, Inc., and the Tender Offer Advisory Committee of the
Securities and Exchange Commission. He also is a member of the Conference Board,
Inc. and the Economic Club of New York. He has numerous honorary degrees and is
a graduate of Fairleigh Dickinson University in New Jersey, where he is a
Trustee and Chairman of the University's Board.
PAUL X. KELLEY has served as a Director of the Company since 1988. He has
been the Vice Chairman of Cassidy and Associates, Inc., a government relations
firm in Washington, D.C. since 1989. He is also on the Board of Directors of
Allied-Signal, Inc., an aerospace, automotive products, and engineered materials
company; GenCorp, Inc., a propulsion, defense electronics, and ordinance
company; London Life Insurance Company, a Canadian life insurance company; PHH
Corporation, a vehicle and relocation management services company; Saul Centers,
Inc., a real estate investment trust; Sturm, Ruger and Co., Inc., a small arms
company; and UST, Inc., a tobacco products, wine and smoker accessories company.
He is the former Commandant of the Marine Corps, having retired as a four-star
General in 1987. As a Marine officer, he commanded an infantry battalion in
Vietnam during 1966; and during 1970 to 1971, he commanded the 1st Marine
Regiment, the last Marine ground combat unit to leave Vietnam. He later
commanded the 4th Marine Division, and was the first commander of the Rapid
Development Joint Task Force, a four service force headquartered in Florida. He
is the recipient of numerous awards for valor and distinguished service during
over 37 years of active military service. General Kelley has a B.S. in economics
from Villanova University and is a graduate of the Air War College. He has been
awarded honorary doctoral degrees by four major universities.
NANCY CLARK REYNOLDS has served as a Director of the Company since 1986.
She has been Senior Consultant of The Wexler Group, a governmental relations and
public affairs consulting firm in Washington, D.C. since 1990, having previously
served in the positions of Vice-Chairman and President of the same firm since
1983. She currently serves as a Director of Sears, Roebuck & Co., Allstate
Insurance Company and the Norrell Corporation, a temporary personnel firm. She
is a member of the Board of the National Park Foundation, the Central Africa
Foundation, and a trustee of the Smithsonian Museum of the American Indian. She
is a past president of the Business and Government Relations Council. She was
formerly a Director of the Chicago Mercantile Exchange, G.D. Searle & Co., and
Viacom International. From 1977 to 1982, she was a Vice President of the Bendix
Corporation. She received her B.A. degree in English from Goucher College and an
Honorary Degree of Laws from Gonzaga University.
THOMAS P. STAFFORD has served as a Director of the Company since 1991. He
is a Consultant for General Technical Services, Inc., a consulting firm, which
he joined in 1984. He is also Vice Chairman and co-founder in 1982 of Stafford,
Burke and Hecker, Inc., a Washington-based consulting firm. After serving as an
astronaut for a number of years, he retired in 1979 from the Air Force as Deputy
Chief of Staff for Research, Development and Acquisition and served as Vice
Chairman of Gibraltar Exploration Limited until 1984. Lt. Gen. Stafford is also
Chairman of the Board of Omega Watch Corporation of America and is a Director of
Allied Signal; CMI Corporation; Fisher Scientific International, Inc.; Pacific
Scientific Company; Seagate Technology, Inc.; Tractor, Inc.; Tremont
Corporation; and Wheelbrator Technologies, Inc.
40
<PAGE> 43
SELLING SHAREHOLDERS
The Selling Shareholders, George R. Wackenhut and the George R. Wackenhut
Retained Annuity Trust, have agreed to sell, subject to the terms and conditions
of the Underwriting Agreement, as defined herein, an aggregate of 2,000,000
shares of the Series B Common Stock. Of these Shares, 710,114 will be sold by
George R. Wackenhut and 1,289,886 will be sold by the George R. Wackenhut
Retained Annuity Trust. George R. Wackenhut is the founder of the Company and
has been its Chief Executive Officer, Chairman of the Board and a director since
the Company's inception.
The Selling Shareholders now beneficially own, and after completion of the
offering made by this Prospectus will beneficially own, the following amount of
the issued and outstanding Series B Common Stock:
<TABLE>
<CAPTION>
SHARES OF SERIES B SHARES OF SERIES B
COMMON STOCK SHARES OF SERIES B COMMON STOCK TO
OWNED COMMON STOCK BE OWNED
BEFORE OFFERING TO BE SOLD AFTER OFFERING
----------------------- -------------------- --------------------
NAME OF SELLING SHAREHOLDER AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
- ----------------------------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
George R. Wackenhut(1)....... 4,105,196(2)(3) 49.4% 710,114 8.5% 2,105,196 20.4%
George R. Wackenhut Retained
Annuity Trust(1)........... 1,358,065 16.3% 1,289,886 15.5% 1,358,065 13.2%
</TABLE>
- ---------------
(1) The shares being offered by George R. Wackenhut and the George R. Wackenhut
Retained Annuity Trust will be borrowed from Ruth J. Wackenhut, Mr.
Wackenhut's wife, and the Ruth J. Wackenhut Retained Annuity Trust,
respectively. In each case, the borrowing shareholders will be obligated to
repay the borrowing by delivering to the lending shareholders shares equal
in number to the borrowed shares ("Identical Shares") five days after
demand by the lending shareholders; and, upon demand, the lending
shareholders will receive from the borrowing shareholders amounts equal to
dividends and other distributions on the Identical Shares. The lending
shareholders may from time to time demand a pledge of collateral by the
borrowing shareholders to secure the borrowing shareholders' obligations to
repay Identical Shares to the lending shareholders.
(2) Of the 4,105,196 shares of Series B Common Stock beneficially owned by
George R. Wackenhut, 1,358,065 shares are owned through the George R.
Wackenhut Retained Annuity Trust, 1,305,741 shares are owned through the
Ruth J. Wackenhut Retained Annuity Trust, 731,276 are owned in the name of
George R. Wackenhut and 710,114 are owned in the name of Ruth J. Wackenhut.
(3) Excludes 77,375 shares of Series B Common Stock subject to options held by
George R. Wackenhut. If these options plus all other outstanding options
had been exercised prior to the offering made by this Prospectus, Mr.
Wackenhut would have owned approximately 46.2% of the issued and
outstanding Series B Common Stock and all directors and executive officers
(including Mr. Wackenhut) as a group would have owned approximately 48.9%
of the issued and outstanding shares of Series B Common Stock.
The Selling Shareholders also now beneficially own, and after the
completion of the offering made by this Prospectus will continue to beneficially
own, the following amount of the Series A Common Stock:
<TABLE>
<CAPTION>
SHARES OF SERIES A
COMMON STOCK OWNED
BEFORE AND AFTER
OFFERING
-----------------------
NAME OF SELLING SHAREHOLDER AMOUNT PERCENT
------------------------------------------------------------- --------- -------
<S> <C> <C>
George R. Wackenhut.......................................... 1,929,606(1) 50.004 %
George R. Wackenhut Retained Annuity Trust................... 980,968 25.421 %
</TABLE>
- ---------------
(1) Of the 1,929,606 shares of Series A Common Stock beneficially owned by
George R. and Ruth J. Wackenhut, 980,968 shares are owned through the
George R. Wackenhut Retained Annuity Trust and 948,638 shares are owned
through the Ruth J. Wackenhut Retained Annuity Trust.
After the sale of the Series B Common Stock offered by this Prospectus,
George R. Wackenhut will beneficially own 1,929,606 shares (50.004%) of Series A
Common Stock and 2,105,196 shares (20.4%) of the Series B Common Stock.
Accordingly, following this offering, George R. Wackenhut will continue to
control the Company, including the ability to elect the entire Board of
Directors, through his beneficial ownership of Series A Common Stock.
41
<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 50,000,000 shares of Common
Stock, par value $.10 per share, of which 3,858,885 shares are authorized to be
issued as Series A Common Stock and 46,141,115 shares are authorized to be
issued as Series B Common Stock, and 10,000,000 shares of preferred stock (the
"Preferred Stock"). The Series A Common Stock and the Series B Common Stock are
identical in all respects, provided that the Series B Common Stock has no right
to vote except as may be afforded by applicable law. None of the Preferred Stock
is outstanding. 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.
The following descriptions of the Common Stock and the Preferred Stock are
based on the Articles and Bylaws and applicable Florida law.
COMMON STOCK
Each holder of Series A Common Stock is entitled to one vote for each share
held of record on all matters presented to shareholders, including the election
of directors, while each share of Series B Common Stock has no voting rights
except as may be afforded by applicable law. Other than the difference in voting
rights, Series A Common Stock and Series B Common Stock are identical.
In the event of a liquidation, dissolution or winding up of the Company,
the holders of the Common Stock are entitled to share equally and ratably in the
assets of the Company, if any, remaining after paying all debts and liabilities
of the Company and the liquidation preferences of any outstanding Preferred
Stock. The Common Stock has no preemptive rights or cumulative voting rights and
no redemption, sinking fund or conversion provisions.
Holders of the Common Stock are entitled to receive dividends if and when
declared by the Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any Preferred Stock that may
be issued and outstanding and subject to any dividend restrictions in the
Company's credit facilities. No dividend or other distribution (including
redemptions or repurchases of shares of capital stock) may be made if after
giving effect to such distribution, the Company would not be able to pay its
debts as they become due in the usual course of business, or if the Company's
total assets would be less than the sum of its total liabilities plus the amount
that would be needed at the time of a liquidation to satisfy the preferential
rights of any holders of Preferred Stock. See "Dividend Policy."
All of the Series B Common Stock offered hereby, when issued and sold, will
be validly issued, fully paid and nonassessable.
The transfer agent and registrar for the Series B Common Stock is Chemical
Mellon Shareholder Services, L.L.C.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of the authorized Preferred
Stock into series and fix and determine the designations, preferences and
relative rights and qualifications, limitations or restrictions thereon of any
series so established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion privileges. As of the date of this
Prospectus, the Board of Directors has not authorized any series of Preferred
Stock, and there are no plans, agreements or understandings for the
authorization or issuance of any shares of Preferred Stock. The issuance of
Preferred Stock with voting rights or conversion rights may adversely affect the
voting power of the Common Stock, including the loss of voting control to
others. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company.
42
<PAGE> 45
CERTAIN PROVISIONS OF FLORIDA LAW
Florida corporations are subject to several anti-takeover provisions that
apply to public companies, unless such corporation has elected to opt out of
those provisions in its Articles of Incorporation or Bylaws. Florida
corporations are generally subject to the "affiliated transactions" and
"control-share acquisition" provisions of the Florida Business Corporation Act.
The Company has elected to opt out of the "control-share acquisition" statute,
but remains subject to the "affiliated transaction" statute. The "affiliated
transaction" statute requires that, subject to certain exceptions, an
"affiliated transaction" be approved by the holders of two-thirds of the voting
shares other than those beneficially owned by an "interested shareholder" or by
a majority of disinterested directors. In addition, Florida law limits the
personal liability of a corporate director for monetary damages, except where
the director (i) breaches a fiduciary duty and (ii) such breach constitutes or
includes a violation of criminal law, a transaction from which the directors
derived an improper personal benefit, an unlawful distribution or any other
reckless, wanton or willful act or misconduct.
INDEMNIFICATION AND LIMITED LIABILITY
Pursuant to the Articles, Bylaws and indemnification agreements between the
Company and each of its officers and directors, the Company is obligated to
indemnify each of its directors and officers to the fullest extent permitted by
law with respect to all liability and loss suffered, and reasonable expense
incurred, by such person in any action, suit or proceeding in which such person
was or is made or threatened to be made a party or is otherwise involved by
reason of the fact that such person is or was a director or officer of the
Company. The Company may be obligated to advance the reasonable expenses of
indemnified directors or officers in defending such proceedings if the
indemnified party agrees to repay all amounts advanced should it be ultimately
determined that such person is not entitled to indemnification.
The Company maintains an insurance policy covering directors and officers
under which the insurer agrees to pay, subject to certain exclusions, for any
claim made against the directors and officers of the Company for a wrongful act
for which they may become legally obligated to pay or for which the Company is
required to indemnify its directors or officers.
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this offering, the Company will have 10,317,262 shares
of Series B Common Stock outstanding (10,917,262 if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 4,000,000
shares of Series B Common Stock offered hereby (4,600,000 if the Underwriters'
over-allotment option is exercised in full), and 4,212,066 other shares of
Series B Common Stock will be freely tradeable without restriction or further
registration under the Securities Act, unless owned or purchased by "affiliates"
of the Company, as that term is defined in Rule 144, as described below. All of
the remaining outstanding 2,105,196 shares of Series B Common Stock are
"Restricted Securities," as that term is defined in Rule 144. All shares held by
the Selling Shareholders and executive officers and directors of the Company are
subject to the Lock-Up Agreements (as defined below).
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance with
the Rule) who has beneficially owned Restricted Securities for at least two
years would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1% of the outstanding shares of Series B
Common Stock (approximately 103,173 shares based upon the number of shares
outstanding after this offering) or the reported average weekly trading volume
on the New York Stock Exchange for the four weeks preceding the sale. Sales
under Rule 144 are also subject to certain manner of sale restrictions and
notice requirements and to the availability of current public information
concerning the Company. Persons who have not been affiliates of the Company for
at least three months and who have held their shares for more than three years
are entitled to sell Restricted Securities without regard to the volume, manner
of sale, notice and public information requirements of Rule 144.
As of May 8, 1996, the Company had outstanding unexercised options to
purchase 699,813 shares of Series B Common Stock under the Stock Option Plan.
The Company has registered the issuance of the
43
<PAGE> 46
Series B Common Stock in connection with the exercise of options under the Stock
Option Plan and, consequently, such shares are available for sale in the public
market without restriction to the extent they are not held by affiliates as that
term is defined under Rule 144.
The Company, the Selling Shareholders, Ruth J. Wackenhut, the Ruth J.
Wackenhut Retained Annuity Trust and the Company's executive officers and
directors have agreed that, except for issuances and sales pursuant to this
Prospectus, except for issuances or sales of up to 200,000 shares of Series B
Common Stock pursuant to the exercise of employee stock options outstanding on
the date of this Prospectus, which issuances or sales may be effected at any
time after the date of this Prospectus, and except for transfers among George R.
Wackenhut, Ruth J. Wackenhut, the George R. Wackenhut Retained Annuity Trust
and/or the Ruth J. Wackenhut Retained Annuity Trust, they will not, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose of (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) any shares of Series B Common Stock or other capital
stock of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Series B Common Stock or other capital stock of
the Company for a period of 120 days from the date of this Prospectus, without
the prior written consent of Lazard Freres & Co. LLC, on behalf of the
Underwriters (the "Lock-Up Agreements").
44
<PAGE> 47
UNDERWRITING
Under the terms and subject to conditions set forth in the underwriting
agreement (the "Underwriting Agreement") among the Company, the Selling
Shareholders and each of the Underwriters named below (the "Underwriters"), for
whom Lazard Freres & Co. LLC and Prudential Securities Incorporated are acting
as the representatives (the "Representatives"), each of the Underwriters has
severally agreed to purchase, and the Company and the Selling Shareholders have
agreed to sell, the respective number of shares of Series B Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Lazard Freres & Co. LLC...........................................................
Prudential Securities Incorporated................................................
---------
Total........................................................................... 4,000,000
========
</TABLE>
The Company and the Selling Shareholders are obligated to sell and the
Underwriters are obligated to purchase all of the 4,000,000 shares of Series B
Common Stock offered hereby if any are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives that the several Underwriters propose to offer the shares
offered hereby directly to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a discount of $ to certain other dealers.
After the offering made by this Prospectus, the offering price and such
concessions may be changed by the Representatives.
The Company has granted to the Underwriters an option exercisable for 30
days from the date of this Prospectus, to purchase up to 600,000 additional
shares of Series B Common Stock at the offering price, less underwriting
discounts and commissions, as set forth on the cover page of this Prospectus.
The Underwriters may exercise such option solely for the purpose of covering
over-allotments incurred in the sale of the shares of Series B Common Stock
offered hereby. To the extent such option to purchase is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
and the Company will be obligated to sell approximately the same percentage of
such additional shares as the number set forth next to such Underwriter's name
in the preceding table bears to 4,000,000.
The Company, the Selling Shareholders, Ruth J. Wackenhut, the Ruth J.
Wackenhut Retained Annuity Trust and the Company's executive officers and
directors have agreed to be bound by the Lock-Up Agreements.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities
that may be incurred in connection with this offering, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Series B Common Stock offered
hereby will be passed upon for the Company and George R. Wackenhut, as Selling
Shareholder, by Akerman, Senterfitt & Eidson, P.A., Miami, Florida, for the
George R. Wackenhut Retained Annuity Trust by Tescher Chaves Rubin Forman &
Muller, P.A., Miami, Florida, and for the Underwriters by Alston & Bird,
Atlanta, Georgia.
45
<PAGE> 48
EXPERTS
The financial statements and schedule of the Company for each of the three
years in the periods ended January 2, 1994, January 1, 1995 and December 31,
1995, respectively, included in and incorporated by reference in this Prospectus
and the Registration Statement have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their reports thereon
appearing elsewhere herein or in the Registration Statement, and are included
herein in reliance upon the authority of that firm as experts in giving said
reports.
46
<PAGE> 49
THE WACKENHUT CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets at January 1, 1995, December 31, 1995 and March 31, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the Fiscal Years Ended January 2, 1994, January
1, 1995 and December 31, 1995, and for the Thirteen Weeks ended April 2, 1995 and
March 31, 1996 (unaudited).......................................................... F-4
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended January 2,
1994, January 1, 1995 and December 31, 1995, and for the Thirteen Weeks ended March
31, 1996 (unaudited)................................................................ F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended January 2, 1994,
January 1, 1995 and December 31, 1995, and for the Thirteen Weeks ended April 2,
1995 and March 31, 1996 (unaudited)................................................. F-6
Notes to the Consolidated Financial Statements........................................ F-8
</TABLE>
F-1
<PAGE> 50
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
The Wackenhut Corporation:
We have audited the accompanying consolidated balance sheets of The
Wackenhut Corporation (a Florida corporation) and subsidiaries as of January 1,
1995 and December 31, 1995, and the related consolidated statements of income,
cash flows and shareholders' equity for each of the three fiscal years in the
period ended December 31, 1995. These financial statements are the
responsibility of the corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Wackenhut Corporation
and subsidiaries as of January 1, 1995 and December 31, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 22, 1996.
F-2
<PAGE> 51
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31, MARCH 31,
1995 1995 1996
---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT SHARE DATA)
ASSETS
CURRENT ASSETS
Cash and cash equivalents......................................... $ 13,808 $ 20,185 $ 67,390
Accounts receivable, less allowance for doubtful accounts of
$1,056 in 1994, $1,268 in 1995 and $1,588 in 1996............... 100,425 77,121 73,472
Inventories....................................................... 7,179 6,798 6,047
Other............................................................. 16,233 18,058 18,060
---------- ------------ ------------
137,645 122,162 164,969
---------- ------------ ------------
NOTES RECEIVABLE.................................................... 1,646 10,540 10,435
---------- ------------ ------------
MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT -- CASUALTY
REINSURANCE SUBSIDIARY............................................ 11,495 5,774 14,681
---------- ------------ ------------
PROPERTY AND EQUIPMENT, AT COST..................................... 45,928 29,132 31,204
Accumulated depreciation.......................................... (15,102) (9,851) (10,191)
---------- ------------ ------------
30,826 19,281 21,013
---------- ------------ ------------
DEFERRED TAX ASSET, NET............................................. 11,021 6,170 570
---------- ------------ ------------
OTHER ASSETS
Investment in and advances to foreign affiliates, at cost,
including equity in undistributed earnings of $2,066 in 1994,
$4,098 in 1995 and $4,371 in 1996............................... 6,165 10,984 11,711
Other............................................................. 13,959 23,016 36,199
---------- ------------ ------------
20,124 34,000 47,910
---------- ------------ ------------
$212,757 $197,927 $259,578
========= ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt................................. $ -- $ 11 $ 11
Notes payable..................................................... 3,765 1,115 --
Accounts payable.................................................. 14,839 20,223 14,686
Accrued payroll and related taxes................................. 25,761 29,602 32,369
Accrued expenses.................................................. 17,095 21,456 22,150
Deferred tax liability, net....................................... 596 117 --
---------- ------------ ------------
62,056 72,524 69,216
---------- ------------ ------------
RESERVES FOR LOSSES -- CASUALTY REINSURANCE SUBSIDIARY.............. 38,450 40,118 42,087
---------- ------------ ------------
LONG-TERM DEBT...................................................... 38,991 5,376 15,310
---------- ------------ ------------
OTHER............................................................... 7,543 8,027 8,205
---------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4, 11 and 13)...............
MINORITY INTEREST................................................... 8,258 8,978 36,504
---------- ------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized..................... -- -- --
Common stock, $.10 par value, 20,000,000 shares authorized
Series A, 3,858,885 issued and outstanding in 1994, 1995 and
1996.......................................................... 386 386 386
Series B, 5,794,539 issued and outstanding in 1994, 8,272,887 in
1995 and 8,309,762 in 1996.................................... 579 827 831
Additional paid-in capital........................................ 38,919 39,644 64,934
Retained earnings................................................. 21,681 25,790 25,937
Cumulative translation adjustment................................. (3,552) (3,702) (3,671)
Unrealized loss on marketable securities.......................... (554) (41) (161)
---------- ------------ ------------
57,459 62,904 88,256
---------- ------------ ------------
$212,757 $197,927 $259,578
========= ============ ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
<PAGE> 52
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEAR ---------------------
------------------------------ APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
REVENUES................................. $659,256 $726,753 $796,732 $189,792 $212,474
-------- -------- -------- --------- ---------
OPERATING EXPENSES
Payroll and related taxes.............. 491,408 538,297 587,644 141,608 153,403
Other operating expenses............... 161,626 173,164 193,314 45,129 56,258
Write-down of headquarters building.... -- 8,700 -- -- --
Non-recurring charges.................. 1,726 -- -- -- --
Provision for relocation costs......... -- -- -- -- 750
-------- -------- -------- --------- ---------
654,760 720,161 780,958 186,737 210,411
-------- -------- -------- --------- ---------
OPERATING INCOME......................... 4,496 6,592 15,774 3,055 2,063
-------- -------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense....................... (4,230) (5,104) (3,356) (737 ) (884 )
Interest and investment income......... 3,105 1,514 1,315 325 1,055
-------- -------- -------- --------- ---------
(1,125) (3,590) (2,041) (412 ) 171
-------- -------- -------- --------- ---------
INCOME BEFORE INCOME TAXES............... 3,371 3,002 13,733 2,643 2,234
PROVISION FOR INCOME TAXES............... 485 17 4,742 898 769
MINORITY INTEREST, NET OF INCOME TAXES... 362 999 2,362 371 827
EQUITY INCOME OF FOREIGN AFFILIATES, NET
OF INCOME TAXES........................ (1,085) (286) (631) (225 ) (307 )
-------- -------- -------- --------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE....... 3,609 2,272 7,260 1,599 945
EXTRAORDINARY CHARGE -- EARLY
EXTINGUISHMENT OF DEBT, NET OF INCOME
TAXES.................................. (1,444) (887) -- -- --
-------- -------- -------- --------- ---------
NET INCOME..................... $ 2,165 $ 1,385 $ 7,260 $ 1,599 $ 945
======== ======== ======== ========= =========
EARNINGS PER SHARE:
Income before extraordinary charge..... $ 0.30 $ 0.19 $ 0.60 $ 0.13 $ 0.08
Extraordinary charge -- early
extinguishment of debt, net of
income taxes........................ (0.12) (0.08) -- -- --
-------- -------- -------- --------- ---------
Net income..................... $ 0.18 $ 0.11 $ 0.60 $ 0.13 $ 0.08
======== ======== ======== ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 53
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31, 1995
AND THIRTEEN WEEKS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
FISCAL
------------------------------- MARCH 31,
1993 1994 1995 1996
------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT SHARE DATA)
COMMON STOCK
Series A
Balance, beginning and end of year and thirteen week
period.............................................. $ 386 $ 386 $ 386 $ 386
Number of shares, all years, beginning and end,
3,858,885...........................................
------- ------- ------- -----------
Series B
Balance, beginning of year and thirteen week period... 386 386 579 827
25% stock dividends effected in the form of stock
splits in 1994 and 1995............................. -- 193 242 --
Proceeds from the exercise of stock options........... -- -- 6 4
------- ------- ------- -----------
Balance, end of year and thirteen week period......... 386 579 827 831
Number of shares, end of year, 3,858,885 in 1993,
5,794,539 in 1994, 8,272,887 in 1995 and 8,309,762
in 1996.............................................
------- ------- ------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year and thirteen week period..... 26,234 26,234 38,919 39,644
Increase due to initial public offering of subsidiary's
common stock and exercise of stock options............ -- 12,685 327 25,026
Proceeds from the exercise of stock options............. -- -- 398 264
------- ------- ------- -----------
Balance, end of year and thirteen week period........... 26,234 38,919 39,644 64,934
------- ------- ------- -----------
RETAINED EARNINGS
Balance, beginning of year and thirteen week period..... 23,880 23,268 21,681 25,790
Net income.............................................. 2,165 1,385 7,260 945
Dividends............................................... (2,777) (2,779) (2,909) (798)
25% stock dividend effected in the form of a stock
split................................................. -- (193) (242) --
------- ------- ------- -----------
Balance, end of year and thirteen week period........... 23,268 21,681 25,790 25,937
------- ------- ------- -----------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, beginning of year and thirteen week period..... (3,395) (3,058) (3,552) (3,702)
Translation adjustment.................................. 337 (494) (150) 31
------- ------- ------- -----------
Balance, end of year and thirteen week period........... (3,058) (3,552) (3,702) (3,671)
------- ------- ------- -----------
UNREALIZED (LOSS) GAIN ON MARKETABLE SECURITIES
Balance, beginning of year and thirteen week period..... 96 146 (554) (41)
Net unrealized (losses) gains for the year.............. 50 (700) 513 (120)
------- ------- ------- -----------
Balance, end of year and thirteen week period........... 146 (554) (41) (161)
------- ------- ------- -----------
TOTAL SHAREHOLDERS' EQUITY....................... $47,362 $57,459 $62,904 $88,256
------- ------- ------- -----------
DIVIDENDS PER SHARE
Restated for the effects of the 25% stock dividends
effected in the form of stock splits declared in 1994
and 1995.............................................. $ 0.23 $ 0.23 $ 0.24 $ 0.07
======== ======== ======== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 54
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEARS ---------------------
---------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
------- ------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
CASH FLOWS PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income......................................... $ 2,165 $ 1,385 $ 7,260 $ 1,599 $ 945
Adjustments --
Depreciation expense............................. 4,354 4,374 4,489 1,153 886
Amortization expense............................. 6,787 7,544 7,682 1,244 2,554
Provision for bad debts.......................... 735 508 863 276 524
Equity income, net of dividends.................. (1,487) (202) (562) (287 ) (419 )
Minority interests in net income................. 548 1,514 3,579 562 1,221
Write-down of headquarters building.............. -- 8,700 -- -- --
Extraordinary loss on early extinguishment of
debt........................................... 2,348 1,344 -- -- --
Other............................................ (75) (495) (424) (102 ) 460
Changes in assets and liabilities, net of
acquisitions and divestitures --
(Increase) Decrease in assets:
Accounts receivable............................ (9,607) (5,745) (14,200) 957 (6,875 )
Inventories.................................... (4,985) (5,137) (5,497) (560 ) (381 )
Other current assets........................... (3,006) (1,154) (5,207) (2,213 ) (2 )
Marketable securities and certificates of
deposit..................................... (3,116) (1,352) 329 (199 ) (36 )
Other assets................................... (2,947) (3,567) (2,233) (251 ) 48
Deferred tax asset, net........................ 624 (4,647) 4,529 1,269 5,600
Increase (Decrease) in liabilities:
Accounts payable and accrued expenses.......... 234 (2,981) 7,047 (1,549 ) (5,672 )
Accrued payroll and related taxes.............. 5,482 3,280 3,934 2,570 2,767
Deferred tax liability, net.................... (545) 596 (479) (302 ) (117 )
Reserves for losses of casualty reinsurance
subsidiary.................................. 7,573 4,950 1,668 914 1,969
Other.......................................... 534 4,122 484 628 178
------- ------- -------- --------- ---------
Net Cash Provided By Operating Activities... $ 5,616 $13,037 $ 13,262 $ 5,709 $ 3,650
------- ------- -------- --------- ---------
</TABLE>
(Continued)
F-6
<PAGE> 55
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEARS ---------------------
--------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
INVESTING ACTIVITIES
Net proceeds from public offerings of
subsidiary's common stock................... $ -- $ 17,626 $ -- $ -- $ 51,776
Net proceeds from exercise of stock options of
subsidiary.................................. -- -- 1,147 246 174
Payments on notes receivable.................. 852 438 76 --
Payments for acquisitions, net of cash
acquired.................................... -- (935) (2,606) -- (13,703 )
Investment in and advances to foreign
affiliates.................................. (1,310) (732) (1,410) (177 ) (454 )
Capital expenditures.......................... (3,409) (5,091) (6,857) (503 ) (2,383 )
Proceeds from sales (payments for purchases)
of marketable securities of casualty
reinsurance subsidiary, net................. -- 14,000 6,227 1,087 (8,991 )
Deferred charge expenditures.................. -- (701) (7,430) (16 ) (1,115 )
Sale of headquarters building................. -- -- 1,675 -- --
--------- --------- --------- --------- ---------
Net Cash Provided By (Used In)
Investing Activities................. (3,867) 24,605 (9,254) 713 25,304
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of debt................ 113,270 196,411 314,365 -- 8,783
Payments on debt.............................. (109,320) (225,287) (344,491) (35,931 ) (2 )
Dividends paid................................ (2,777) (2,779) (2,909) (730 ) (798 )
Proceeds from the exercise of stock options... -- -- 404 -- 268
Proceeds from sales of accounts receivable.... -- -- 35,000 28,940 10,000
--------- --------- --------- --------- ---------
Net Cash Provided By (Used In)
Financing Activities................. 1,173 (31,655) 2,369 (7,721 ) 18,251
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 2,922 5,987 6,377 (1,299 ) 47,205
CASH AND CASH EQUIVALENTS,
AT BEGINNING OF YEAR AND THIRTEEN WEEK
PERIOD........................................ 4,899 7,821 13,808 13,808 20,185
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, AT END OF YEAR AND
THIRTEEN WEEK PERIOD.......................... $ 7,821 $ 13,808 $ 20,185 $ 12,509 $ 67,390
========== ========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year and thirteen week
period for:
Interest.................................... $ 4,172 $ 4,209 $ 3,366 773 987
Income taxes................................ 1,545 1,119 1,531 34 45
Non-cash financing and investing activities:
Note received related to sale of
headquarters building..................... -- -- 9,000 -- --
Note received related to sale of
subsidiary................................ 1,250 -- -- -- --
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE> 56
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 1, 1995 AND DECEMBER 31,
1995
(TABULAR INFORMATION: IN THOUSANDS EXCEPT PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal year
The corporation's fiscal year ends on the Sunday closest to the calendar
year end. Fiscal years 1993, 1994 and 1995 each included 52 weeks.
Basis of financial statement presentation
The consolidated financial statements include the accounts of the
corporation and its subsidiaries, including its casualty reinsurance subsidiary.
All significant intercompany transactions and balances have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform with
current year presentation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Minority interest
The minority interest expense represents principally the separate public
ownership in Wackenhut Corrections Corporation (WCC) and the ownership by
foreign investors in several subsidiaries of Wackenhut International,
Incorporated.
Income taxes
The corporation accounts for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Earnings per share
Earnings per share are computed using the average number of common shares
outstanding, including common stock equivalents and reflects the declaration of
the 25% stock dividends effected in the form of stock splits in 1994 and 1995.
Prior years' earnings per share have been restated to give effect to the stock
splits. The average number of shares and common stock equivalents outstanding
was 12,058,340, 12,066,780, and 12,131,772 in 1993, 1994 and 1995, respectively.
Cash and cash equivalents
The corporation considers highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The effect on cash
flows of exchange rate changes in foreign currency has not been significant for
any of the fiscal years presented.
F-8
<PAGE> 57
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Alarm systems and electronics inventories are carried at the lower of cost
or market, on a first-in first-out basis. Uniform inventories are carried at
amortized cost.
Revenues
Revenue is recognized as services are provided. During fiscal years 1993,
1994 and 1995, the largest client of the corporation was the U.S. Department of
Energy, accounting for approximately 24%, 20% and 17% respectively, of the
corporation's consolidated revenues.
Fair value of financial instruments
The carrying amount of cash and cash equivalents, accounts receivable,
other receivables, notes receivable, notes payable and accounts payable
approximates fair value. Marketable securities are classified as
available-for-sale in accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Marketable securities are recorded
at fair value and unrealized holding gains and losses are excluded from earnings
and reported as a net amount in a separate component of shareholders' equity.
Realized gains and losses from the sale of securities are based on specific
identification of the security. The fair value of marketable securities and
certificates of deposit is presented under "wholly-owned casualty reinsurance
subsidiary" in Note 4 of these financial statements. The carrying value of
long-term debt (including current portion) approximates fair value.
Interest rate swaps
The corporation has entered into two interest rate swap agreements in order
to manage interest rate costs. Under the terms of the interest rate swaps, the
corporation agrees with counterparties to exchange at specific intervals, the
difference between fixed rate (5.2% and 6.87%) and floating rate (5.66% for both
swaps) interest amounts calculated in reference to an agreed-upon notional
principal amount. Interest to be paid or received is accrued over the life of
the agreement as an adjustment to interest expense.
Newly Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock-Based Compensation," which requires adoption in fiscal
1996. SFAS No. 123 requires that the corporation's financial statements include
certain disclosures about stock-based employee compensation arrangements and
permits the adoption of a change in accounting for such arrangements. Changes in
accounting for stock-based compensation are optional and the corporation plans
to adopt only the disclosure requirements in 1996.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires adoption in fiscal 1996. SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The impact of adopting this statement is
not expected to have a material impact upon the corporation's results of
operations or financial position.
Foreign currency translation
Foreign currency transactions and financial statements (except for
countries with highly inflationary economies) are translated into U.S. dollars
at current exchange rates, except for revenues, costs and expenses
F-9
<PAGE> 58
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which are translated at average exchange rates during each reporting period.
Adjustments resulting from translation of financial statements are reflected as
a separate component of shareholders' equity. The financial statements of
subsidiaries located in highly inflationary economies are remeasured as if the
functional currency were the U.S. dollar. The remeasurement of their local
currencies into U.S. dollars creates translation adjustments which are included
in the statements of income.
(2) ACCOUNTS RECEIVABLE SECURITIZATION
In January 1995, the corporation entered into a three-year agreement with
two financial institutions 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 December 31, 1995, $35,000,000 of accounts
receivable had been sold under this agreement. The defined pool of accounts
receivable sold at December 31, 1995 approximates fair value. The corporation
retains substantially the same risk of credit loss as if the receivables had not
been sold.
(3) PROPERTY AND EQUIPMENT AND DEPRECIATION METHODS
Property and equipment are stated at cost, less accumulated depreciation.
The corporation uses principally the straight-line method of depreciation for
property and equipment. The components of property and equipment and their
estimated lives are as follows:
<TABLE>
<CAPTION>
YEARS 1994 1995
------------ ------- -------
<S> <C> <C> <C>
Land................................................ -- $ 4,444 $ 1,451
Buildings and improvements.......................... 20 to 33 1/3 24,722 10,121
Furniture and fixtures.............................. 5 to 20 3,608 3,910
Equipment........................................... 5 to 20 9,026 9,448
Automobiles and trucks.............................. 3 4,128 4,202
------- -------
$45,928 $29,132
======= =======
</TABLE>
In the fourth quarter of 1995, the corporation sold its headquarters
building located in Coral Gables, Florida. In 1994, the building was written
down by $8,700,000 to reflect the estimated realizable value based on a third
party valuation. The corporation sold its headquarters building in exchange for
a $9,000,000 note (bearing interest at 6.5% and maturing in December 1997) and
$1,675,000 in cash (after payment of related expenses) which resulted in no
additional gain or loss on the transaction.
(4) WHOLLY-OWNED CASUALTY REINSURANCE SUBSIDIARY
The corporation has a wholly-owned casualty insurance subsidiary which
reinsures a portion of the corporation's workers' compensation and general and
automobile liability insurance. Incurred losses are recorded as reported.
Provision is made to cover losses incurred but not reported. Loss reserves are
computed based on actuarial studies and, in the opinion of management, are
adequate. Future adjustments of the amounts recorded as of December 31, 1995,
resulting from a continuous review process as well as differences between
estimates and ultimate payments, will be reflected in the corporation's
consolidated statements of
F-10
<PAGE> 59
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income as such adjustments become determinable. A summary of operations for the
last three fiscal years is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Premiums recognized................................... $ 16,282 $ 17,900 $ 17,642
Loss expense.......................................... (20,863) (18,499) (18,239)
-------- -------- --------
Underwriting loss..................................... (4,581) (599) (597)
Investment income..................................... 2,033 1,486 2,245
-------- -------- --------
$ (2,548) $ 887 $ 1,648
======== ======== ========
</TABLE>
Premiums paid by the corporation to the reinsurance subsidiary of
$16,282,000, $17,900,000 and $17,642,000, for the fiscal years ended 1993, 1994
and 1995, respectively, have been eliminated in consolidation.
Marketable securities and certificates of deposit, carried at fair value,
consisted of the following at January 1, 1995 and December 31, 1995:
<TABLE>
<CAPTION>
1994 1995
FAIR 1994 FAIR 1995
VALUE COST VALUE COST
------- ------- ------ ------
<S> <C> <C> <C> <C>
Municipal Bonds..................................... $ 7,332 $ 7,899 $1,556 $1,559
Government Bonds.................................... 968 975 844 847
Preferred Stock..................................... 1,713 2,040 1,980 2,040
Other............................................... 1,482 1,482 1,394 1,394
------- ------- ------ ------
$11,495 $12,396 $5,774 $5,840
------- ------- ------ ------
</TABLE>
The unrealized loss on marketable securities of $901,000 and $66,000 at
January 1, 1995 and December 31, 1995, respectively, has been reflected in the
accompanying consolidated balance sheets net of applicable income taxes. The
corporation has placed in trust, in favor of certain insurance companies,
$1,345,000 in time deposits and $9,300,000 in cash and cash equivalents, and has
issued irrevocable standby letters of credit for $31,392,000. Municipal bonds
mature in 2018, government bonds mature in periods after 10 years and
certificates of deposit mature within one year. As of December 31, 1995,
marketable securities and certain other investments of the corporation's
reinsurance subsidiary have specific restrictions on future sales.
(5) NOTES PAYABLE AND LONG-TERM DEBT
At December 31, 1995 the corporation had an outstanding note payable of
$1,115,000 which represented short-term borrowings of an international
subsidiary incurred for working capital, bearing interest at 8.0%, with a
maturity in 1996.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1995
------- ------
<S> <C> <C>
Revolving loan -- 7.0% in 1994 and 6.2% in 1995..................... $20,450 $1,400
First mortgage note on headquarters building -- 7.1%................ 16,060 --
Other debt principally related to WCC and international
subsidiaries...................................................... 2,481 3,987
------- ------
38,991 5,387
Less -- current portion of long-term debt........................... -- 11
------- ------
$38,991 $5,376
======= ======
</TABLE>
F-11
<PAGE> 60
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1994, the corporation used short-term borrowings to prepay the
first $12,500,000 of its senior notes. In August 1994, the corporation prepaid
the remaining $12,500,000 of senior notes to an insurance company with proceeds
from WCC's initial public offering (IPO) (see Note 10). The prepayments resulted
in extraordinary charges of $1,444,000 ($2,348,000 before tax) or $.12 per share
in 1993 and $887,000 ($1,344,000 before tax) or $.08 per share in 1994.
In January 1995, the corporation prepaid the outstanding balance on the
first mortgage note with proceeds from the sales of accounts receivable under
the securitization facility. The corporation also used proceeds from the
accounts receivable securitization to reduce the outstanding balance of the
revolving loan.
At year end, the corporation had in place a revolving credit agreement with
one bank under which the corporation may borrow up to $50,000,000. The unused
portion of the revolving line of credit was $12,640,000 at December 31, 1995
after deducting $35,960,000 in outstanding letters of credit. The interest
payable is, at the corporation's option, a function of the applicable LIBOR or
certificate of deposit rates. The agreement requires, among other things, that
the corporation maintain a minimum consolidated net worth, as defined, and
limits certain payments and distributions.
In December 1994, WCC entered into a revolving credit agreement with a bank
under which the subsidiary may borrow up to $15,000,000 until September 30,
2002. The corporation is not a guarantor of the revolving credit agreement which
requires, among other things, that WCC maintain a minimum tangible net worth, as
defined, and limits certain payments and distributions.
Aggregate annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ANNUAL MATURITY
---------------------------------------------------------------------- ---------------
<S> <C>
1996.................................................................. $ 11
1997.................................................................. 763
1998.................................................................. 4,399
1999.................................................................. 13
2000.................................................................. 15
Thereafter............................................................ 186
-------
$ 5,387
============
</TABLE>
The corporation is a party to two offsetting interest rate swaps with Union
Bank of Switzerland and Bank of America Illinois at year end. The notional
principal amount under both agreements was $81,200,000 and the agreements expire
in December 1998. Based on the interest rates in effect at December 31, 1995,
the corporation was not exposed to a material loss in the event that either
party failed completely to perform according to the terms of the contract.
(6) PREFERRED AND COMMON STOCK
The board of directors has authorized 10,000,000 shares of preferred stock.
In October 1994 and in 1995, the board of directors declared 25% stock
dividends, effected in the form of stock splits. The 1995 stock dividend was
payable on January 9, 1996 to stockholders of record at the close of business on
December 22, 1995. Prior periods' per share data have been restated. The stock
dividends were paid in series B common stock to holders of the corporation's
series A and B shares. Series B common stock has all the rights and privileges
of the series A common stock with the exception of voting privileges.
(7) STOCK INCENTIVE AND STOCK OPTION PLANS
Key employees of the corporation and its subsidiaries are eligible to
participate in the Key Employee Long-Term Incentive Stock Plan (incentive stock
plan). Under the incentive stock plan, options for the corporation's common
stock are granted to participants as approved by the Nominating and Compensation
F-12
<PAGE> 61
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Committee of the corporation's board of directors (committee). Under terms of
the incentive stock plan, options are granted at prices not less than the fair
market value at date of grant (or as otherwise determined by the committee),
become exercisable after a minimum of six months, and expire no later than ten
years after the date of grant. The committee may grant incentive stock options
or non-qualified stock options. Options are subject to adjustment upon the
occurrence of certain events, including stock splits and stock dividends.
At December 31, 1995, 1,707,185 shares of series B common stock were
reserved for issuance, including 1,149,997 shares available for future grants or
awards.
Changes in outstanding non-qualified stock options for series B common
stock, as adjusted for 25% stock dividends in 1994 and 1995, are as follows:
<TABLE>
<CAPTION>
STOCK OPTION PRICE
OPTIONS PER SHARE
------- --------------
<S> <C> <C>
Granted in 1994............................................ 390,938 $6.16
Granted in 1995............................................ 218,750 $10.80
Exercised in 1995.......................................... (52,500) $6.16
-------
Outstanding at December 31, 1995........................... 557,188 $6.16 - $10.80
=======
</TABLE>
At December 31, 1995, 338,438 options with an exercise price of $6.16 were
exercisable. The remaining 218,750 options with an exercise price of $10.80
become exercisable in January 1996.
At December 31, 1995, options were outstanding with expiration dates
ranging from April 2004 to January 2005.
On January 30, 1996, the corporation granted 202,000 non-qualified stock
options to purchase shares of the corporation's series B common stock at
$14.00 per share. The options become exercisable in January 1997 and expire in
January 2006.
(8) RETIREMENT AND DEFERRED COMPENSATION PLANS
The corporation has a noncontributory defined benefit pension plan covering
certain of its executives. Retirement benefits are based on years of service,
employees' average compensation for the last five years prior to retirement and
social security benefits. The plan currently is not funded. The corporation
purchases and is the beneficiary of life insurance policies for each participant
enrolled in the plan.
The assumptions for the discount rate and the average increase in
compensation used in determining the pension expense and funded status
information are 7.5% and 4.0%, respectively.
Total pension expense for 1993, 1994 and 1995 was $236,000, $267,000 and
$329,000, respectively. The present value of accumulated pension benefits at
year end 1993, 1994 and 1995 was $1,161,000, $1,400,000 and $1,895,000,
respectively and is included in "Other liabilities" in the accompanying
consolidated balance sheets.
The corporation has established non-qualified deferred compensation
agreements with certain senior executives providing for fixed annual benefits
ranging from $100,000 to $175,000 payable upon retirement at approximately age
60 for a period of 20 years. In the event of death before retirement, annual
benefits are paid for a period of 10 years. Benefits are funded by life
insurance contracts purchased by the corporation. The cost of these agreements
is being charged to expense and accrued using a present value method over the
expected terms of employment. The charge to expense for fiscal 1993, 1994 and
1995 was $403,000, $444,000 and $468,000, respectively. The liability for
deferred compensation was $2,629,000 and $3,274,000 at year-end 1994 and 1995,
respectively and is included in "Other liabilities" in the accompanying
consolidated balance sheets.
F-13
<PAGE> 62
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES
The provision (credit) for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------
1993 1994 1995
----- ------- ------
<S> <C> <C> <C>
Federal income taxes:
Current.................................................... $ 669 $ 3,014 $ 581
Deferred................................................... (385) (3,112) 3,578
----- ------- ------
284 (98) 4,159
State income taxes:
Current.................................................... 252 527 104
Deferred................................................... (51) (412) 479
----- ------- ------
201 115 583
----- ------- ------
Total.............................................. $ 485 $ 17 $4,742
===== ======= ======
</TABLE>
Deferred income taxes resulted from timing differences in the recognition
of revenues and expenses for tax and financial reporting purposes. The tax
effects of the principal timing differences are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------
1993 1994 1995
----- ------- -------
<S> <C> <C> <C>
Senior note prepayment premium.............................. $(904) $ 904 $ --
Income of foreign subsidiaries and affiliates............... 972 1,186 1,336
Reserve for losses of reinsurance subsidiary................ (462) (8) (1,222)
Reserve for claims of employee health trust................. (148) (1,191) (412)
Building write-down......................................... -- (3,350) 2,976
Deferred compensation....................................... (268) (398) (491)
Depreciation................................................ 106 (486) (824)
Amortization of deferred charges............................ 173 205 2,601
Other, net.................................................. 95 (386) 93
----- ------- -------
$(436) $(3,524) $ 4,057
===== ======= =======
</TABLE>
The reconciliation of income tax computed at the federal statutory tax rate
(34%) to income tax expense is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Provision using statutory federal tax rate................... $1,146 $1,021 $4,670
Capital loss carryforward utilization........................ (228) (814) (330)
Targeted jobs tax credits.................................... (109) (235) (117)
Tax exempt interest.......................................... (321) (295) (167)
Other, net................................................... (204) 225 103
------ ------ ------
284 (98) 4,159
State income taxes........................................... 201 115 583
------ ------ ------
$ 485 $ 17 $4,742
====== ====== ======
</TABLE>
The tax effect of the extraordinary charge for the early extinguishment of
debt during fiscal 1993 and 1994 amounted to $904,000 and $457,000, respectively
(see Note 5).
F-14
<PAGE> 63
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net non-current deferred tax asset at January 1, 1995
and December 31, 1995 are shown below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
1994 1995
------- -------
<S> <C> <C>
Reserve for losses of reinsurance subsidiary....................... $ 5,270 $ 6,492
Income of foreign subsidiaries and affiliates...................... (5,614) (6,950)
Reserve for claims of employee health trust........................ 4,692 5,104
Reserve for legal and other expenses............................... 899 430
Capital loss carryforward.......................................... 150 162
Deferred compensation.............................................. 2,660 3,133
Depreciation....................................................... (363) 439
Building write-down................................................ 3,350 373
Deferred charges................................................... -- (3,238)
Other, net......................................................... 127 387
------- -------
11,171 6,332
Valuation allowance...................................... (150) (162)
------- -------
Deferred tax asset, net.................................. $11,021 $ 6,170
======= =======
</TABLE>
The components of the net current deferred tax liability at January 1, 1995
and December 31, 1995 are shown below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
1994 1995
------- -------
<S> <C> <C>
Amortization of uniforms and accessories........................... $ 1,818 $ 1,774
Accrued vacation pay............................................... (1,033) (1,242)
Other, net......................................................... (189) (415)
------- -------
Deferred tax liability, net.............................. $ 596 $ 117
======= =======
</TABLE>
At December 31, 1995, the corporation had available a capital loss
carryforward of $421,000 of which $391,000 expires in 1998 and $30,000 expires
in 2000. The deferred tax asset arising from the capital loss carryforward has
been fully reserved due to the uncertainty of the corporation's ability to
generate future capital gains.
(10) WACKENHUT CORRECTIONS CORPORATION PUBLIC OFFERINGS
WCC, formerly a wholly-owned subsidiary of the corporation, sold 2,185,000
shares of common stock at an offering price of $9.00 per share in connection
with its initial public offering in 1994. Net proceeds of approximately
$17,626,000 from the IPO were used to repay bank debt and indebtedness to the
corporation. Following the offering, WCC had 8,185,000 shares outstanding of
which the corporation owned approximately 73%.
During 1995, the exercise of 354,697 non-qualified stock options of WCC
reduced the corporation's ownership in WCC to approximately 70% at December 31,
1995.
In January 1996, WCC sold 2,300,000 shares of common stock at a price of
$24.00 per share. Net proceeds of approximately $51,764,000 from the offering
will be used for possible future acquisitions, capital investments in new
facilities, working capital requirements and general corporate purposes. After
the offering, the corporation's ownership in WCC was reduced to approximately
55%.
F-15
<PAGE> 64
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The board of directors of WCC has granted non-qualified stock options to
purchase common stock which, if fully exercised, would reduce the corporation's
ownership in WCC to approximately 52%.
(11) WACKENHUT MONITORING SYSTEMS BUSINESS
In 1993, the corporation sold its Wackenhut Monitoring Systems subsidiary
in exchange for a $1,250,000 note and $100,000 cash which resulted in a loss of
approximately $95,000. In connection with this transaction, the corporation has
guaranteed indebtedness related to certain operating leases which totaled
approximately $2,402,000 at December 31, 1995 and expire from 1996 to 1997.
(12) NON-RECURRING CHARGES
In the fourth quarter of 1993, the corporation recognized non-recurring
charges of $1,726,000. A significant portion of these charges was due to a
$791,000 decrease in the value of guard contracts acquired in 1991. The
remaining components of the non-recurring charges consist principally of
write-downs of various long-term assets, none of which are individually
significant to the consolidated financial statements.
(13) COMMITMENTS AND CONTINGENCIES
The nature of the corporation's business results in claims for damages
arising from the conduct of its employees or others. In the opinion of
management, there are no pending legal proceedings that would have a material
effect on the consolidated financial statements of the corporation.
The corporation leases office space, data processing equipment and
automobiles under non-cancelable operating leases expiring between 1996 and
2011. The corporation has entered into a lease for new corporate headquarters in
Palm Beach Gardens, Florida, commencing in early 1996. The lease requires annual
payments of $1,764,750 for an initial term of 15 years with 3 five-year options
to extend the term of the lease. Rent expense for the fiscal years ended January
2, 1994, January 1, 1995 and December 31, 1995 was $6,312,000, $4,993,000, and
$6,994,000, respectively. The minimum commitments under these leases and the 15
year lease for the new corporate headquarters are as follows:
<TABLE>
<CAPTION>
MINIMUM
YEAR COMMITMENT
------------------------------------------------------------------------- ----------
<S> <C>
1996..................................................................... $ 6,870
1997..................................................................... 5,224
1998..................................................................... 3,737
1999..................................................................... 2,969
2000..................................................................... 2,084
Thereafter............................................................... 18,437
----------
$ 39,321
=========
</TABLE>
F-16
<PAGE> 65
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) 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. A subsidiary of the
corporation, Wackenhut Corrections Corporation, provides facility management and
construction services to detention and correctional facilities. Provided below
is various financial information for each segment:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Security-related and other support services......... $600,472 $642,727 $697,301
Correctional services............................... 58,784 84,026 99,431
-------- -------- --------
Total revenues.............................. 659,256 726,753 796,732
-------- -------- --------
Operating Income:
Security-related and other support services......... 3,050 10,846 8,545
Correctional services............................... 1,446 4,446 7,229
Write-down of headquarters building................. -- (8,700) --
-------- -------- --------
Total operating income...................... 4,496 6,592 15,774
-------- -------- --------
Equity income (loss) of foreign affiliates, net of
taxes:
Security-related and other support services......... 824 617 744
Correctional services............................... 261 (331) (113)
-------- -------- --------
Total equity income......................... 1,085 286 631
-------- -------- --------
Capital expenditures:
Security-related and other support services......... 3,083 4,829 4,137
Correctional services............................... 326 262 2,720
-------- -------- --------
Total capital expenditures.................. 3,409 5,091 6,857
-------- -------- --------
Depreciation and amortization expense:
Security-related and other support services......... 9,040 9,631 9,868
Correctional services............................... 2,101 2,287 2,303
-------- -------- --------
Total expenses.............................. 11,141 11,918 12,171
-------- -------- --------
Identifiable assets:
Security-related and other support services......... 192,149 182,424 159,087
Correctional services............................... 19,148 30,333 38,840
-------- -------- --------
Total identifiable assets................... $211,297 $212,757 $197,927
======== ======== ========
</TABLE>
F-17
<PAGE> 66
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Domestic and International Operations
Non-U.S. operations of the corporation and its subsidiaries are conducted
primarily in South America and Australia. The corporation carries its investment
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 in the
accompanying financial statements. A summary of domestic and international
operations is shown below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Domestic operations................................. $575,733 $615,727 $652,723
International operations............................ 83,523 111,026 144,009
-------- -------- --------
Total revenues.............................. $659,256 $726,753 $796,732
-------- -------- --------
Operating Income:
Domestic operations................................. $ 2,904 $ 10,630 $ 11,407
International operations............................ 1,592 4,662 4,367
Write-down of headquarters building................. -- (8,700) --
-------- -------- --------
Total operating income...................... $ 4,496 $ 6,592 $ 15,774
-------- -------- --------
Equity income of foreign affiliates, net of taxes:
Domestic operations................................. $ -- $ -- $ --
International operations............................ 1,085 286 631
-------- -------- --------
Total equity income......................... $ 1,085 $ 286 $ 631
-------- -------- --------
Capital expenditures:
Domestic operations................................. $ 1,932 $ 1,498 $ 2,911
International operations............................ 1,477 3,593 3,946
-------- -------- --------
Total capital expenditures.................. $ 3,409 $ 5,091 $ 6,857
-------- -------- --------
Depreciation and amortization expense:
Domestic operations................................. $ 9,240 $ 9,751 $ 9,512
International operations............................ 1,901 2,167 2,659
-------- -------- --------
Total expenses.............................. $ 11,141 $ 11,918 $ 12,171
-------- -------- --------
Identifiable assets:
Domestic operations................................. $179,565 $163,864 $141,431
International operations............................ 31,732 48,893 56,496
-------- -------- --------
Total identifiable assets................... $211,297 $212,757 $197,927
-------- -------- --------
</TABLE>
F-18
<PAGE> 67
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the corporation and its subsidiaries
for the fiscal years ended January 1, 1995 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Revenues...................................... $171,522 $175,016 $191,205 $189,010
Income (loss) from operations(1).............. 3,203 4,042 3,863 (4,516)
Income (loss) before extraordinary charge..... 1,820 1,953 1,982 (3,483)
Extraordinary charge -- early extinguishment
of debt, net of income taxes(1)............. -- -- (887) --
-------- -------- -------- --------
Net income (loss)............................. $ 1,820 $ 1,953 $ 1,095 $ (3,483)
-------- -------- -------- --------
Earnings (loss) per share:(2)
Income (loss) before extraordinary charge... $ 0.15 $ 0.16 $ 0.17 $ (0.29)
Extraordinary charge........................ -- -- (0.08) --
-------- -------- -------- --------
Net income (loss)................... $ 0.15 $ 0.16 $ 0.09 $ (0.29)
======== ======== ======== ========
1995
Revenues...................................... $189,792 $193,371 $203,637 $209,932
Income from operations........................ 3,055 3,967 4,394 4,358
Net income.................................... 1,599 1,726 1,956 1,979
Earnings per share(2)......................... $ 0.13 $ 0.15 $ 0.16 $ 0.16
======== ======== ======== ========
</TABLE>
- ---------------
(1) In the fourth quarter of 1994, the carrying value of the headquarters
building was written down to its estimated realizable value and a charge of
$8,700,000 was recognized (see Note 3). Additionally, an extraordinary
charge of $887,000 (after tax) or $.08 per share, was recognized in the
third quarter of 1994 for the early retirement of senior debt (see Note 5).
(2) Earnings per share have been restated to include the 25% stock dividend
effected in the form of a stock split, declared on October 29, 1994 and
paid on January 9, 1995 and the 25% stock dividend effected in the form of
a stock split, declared on October 31, 1995 and paid on January 9, 1996
(see Notes 1 and 6).
F-19
<PAGE> 68
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 69
- ------------------------------------------------------------------
- ------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF SERIES B COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE
SHARES OF SERIES B COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.......................... 3
Prospectus Summary............................. 4
Risk Factors................................... 8
Use of Proceeds................................ 12
Price Range of Common Stock.................... 13
Dividend Policy................................ 13
Capitalization................................. 14
Selected Financial Data........................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 16
Business....................................... 26
Management..................................... 37
Selling Shareholders........................... 41
Description of Capital Stock................... 42
Shares Eligible for Future Sale................ 43
Underwriting................................... 45
Legal Matters.................................. 45
Experts........................................ 46
Index to Financial Statements.................. F-1
- -----------------------------------------------------
- -----------------------------------------------------
</TABLE>
- ------------------------------------------------------------------
- ------------------------------------------------------------------
4,000,000 SHARES
LOGO
THE
WACKENHUT
CORPORATION
SERIES B COMMON STOCK
------------------------
PROSPECTUS
------------------------
LAZARD FRERES & CO. LLC
PRUDENTIAL SECURITIES INCORPORATED
MAY , 1996
- ------------------------------------------------------------------
- ------------------------------------------------------------------
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance of the securities
being registered are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................... $ 31,129
NASD Filing Fees.......................................................... 5,000
Printing Expenses......................................................... 235,000
Accounting Fees and Expenses.............................................. 250,000
Legal Fees and Expenses................................................... 200,000
Blue Sky Fees and Expenses................................................ 10,000
Transfer Agent and Registrar Fees and Expenses............................ 10,000
Miscellaneous............................................................. 8,871
--------
Total................................................................ $750,000
========
</TABLE>
- ---------------
* All amounts except the Securities and Exchange Commission Registration Fee and
the NASD Fee are estimated.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Registrant, a Florida corporation, is empowered by Section 607.0850 of
the Florida Business Corporation Act, subject to the procedures and limitations
stated therein, to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the Company), by reason of the
fact that he is or was a director, officer, employee, or agent of the Company or
is or was serving at the request of the Company as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise against liability incurred in connection with such proceeding,
including any appeal thereof, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 607.0850 also empowers a Florida corporation to indemnify any
person who was or is a party to any proceeding by or in the right of the Company
to procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of another
Company, partnership, joint venture, trust, or other enterprise, against
expenses and amounts paid in settlement not exceeding, in the judgment of the
board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof, if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper. To
the extent that a director, officer, employee or agent of a Company has been
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses actually and reasonably incurred by him in
connection therewith.
The indemnification and advancement of expenses provided pursuant to
Section 607.0850 are not exclusive, and a Company may make any other or further
indemnification or advancement of expenses of any of its directors, officers,
employees or agents, under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
However, a director, officer, employee or agent is not entitled to
indemnification or
II-1
<PAGE> 71
advancement of expenses if a judgment or other final adjudication establish that
his actions, or omissions to act, were material to the cause of action so
adjudicated and constitute (a) a violation of the criminal law, unless the
director, officer, employee or agent had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b) a
transaction from which the director, officer, employee or agent derived an
improper personal benefit; (c) in the case of a director, a circumstance under
which the liability provisions of Section 607.0834 of the Florida Business
Corporation Act, relating to a director's liability for voting in favor of or
asserting to an unlawful distribution, are applicable; or (d) willful misconduct
or a conscious disregard for the best interests of the Company in a proceeding
by or in the right of the Company to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
The Registrant's bylaws provide that the Registrant 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 Registrant 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, include 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 shareholder of the Registrant may be entitled as a matter of law.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with the Offering, including
certain liabilities under the Securities Act of 1933, as amended.
Under the Company's indemnification agreements with its officers and
directors it is obligated to indemnify each of its officers and directors to the
fullest extent permitted by law with respect to all liability and loss suffered,
and reasonable expense incurred, by such person, in any action suit or
proceeding in which such person was or is made or threatened to be made a party
or otherwise involved by reason of the fact that such person was a director or
officer of the Company. The Company is also obligated to pay the reasonable
expenses of indemnified directors or officers in defending such proceeding if
the indemnified party agrees to repay all amounts advanced should it be
ultimately determined that such person is not entitled to indemnification.
The Company maintains an insurance policy covering directors and officers
under which the insurer agrees to pay, subject to certain exclusions, for any
claim made against the directors and officers of the Company for a wrongful act
for which they may become legally obligated to pay or for which the Company is
required to indemnify its directors or officers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S> <C>
* 1.1 -- Form of Underwriting Agreement
4.1 -- Amended and Restated Articles of Incorporation, as amended
* 4.2 -- Revolving Credit and Reimbursement Agreement dated January 5, 1995 by and among
The Wackenhut Corporation, NationsBank of Florida, N.A. and Bank of America
Illinois, as Lenders, and NationsBank of Florida, N.A., as Agent (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal year ended
January 1, 1995)
</TABLE>
II-2
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S> <C>
* 4.3 -- Letter dated June 8, 1995 concerning the Revolving Credit and Reimbursement
Agreement dated January 5, 1995 by and among The Wackenhut Corporation,
NationsBank of Florida, N.A., and Bank of America Illinois, as Lenders, and
NationsBank of Florida, N.A., as Agent (incorporated by reference to the
Registrants' Form 10-K Annual Report for the fiscal year ended December 31, 1995)
* 4.4 -- Letter dated August 24, 1995 concerning the Revolving Credit and Reimbursement
Agreement dated January 5, 1995 by and among The Wackenhut Corporation,
NationsBank of Florida, N.A., as Agent (incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal year ended December 31, 1995)
* 4.5 -- Amendment dated March 28, 1996 to the Revolving Credit and Reimbursement Agreement
dated January 5, 1995 by and among The Wackenhut Corporation, NationsBank, N.A.
(South), as successor to NationsBank of Florida, N.A., and Bank of America
Illinois, as Lenders and NationsBank, N.A. (South), a successor to NationsBank of
Florida, N.A., as Agent (incorporated by reference to the Registrant's Form 10-Q
Quarterly Report for the thirteen weeks ended March 31, 1996).
* 4.6 -- Letter dated April 26, 1996 amending the Revolving Credit and Reimbursement
Agreement dated January 5, 1995 by and among The Wackenhut Corporation,
NationsBank, N.A. (South), a successor to NationsBank of Florida, N.A., and Bank
of America Illinois, as Lenders, and NationsBank, N.A. (South), a successor to
NationsBank of Florida, N.A., as Agent (incorporated by reference to the
Registrant's Form 10-Q Quarterly Report for the thirteen weeks ended March 31,
1996).
* 4.7 -- Receivables Purchase Agreement dated as of January 5, 1995 among The Wackenhut
Corporation, as Seller, Receivables Capital Corporation and Enterprise Funding
Corporation, each as a Purchaser, Bank of America National Trust and Savings
Association and NationsBank of North Carolina, N.A., each as a Managing Agent, and
Bank of America National Trust and Savings Association, as the Administrative
Agent (incorporated by reference to the Registrant's Form 10-K Annual Report for
the fiscal year ended January 1, 1995)
* 4.8 -- First Amendment dated December 15, 1995 to the Receivables Purchase Agreement
dated as of January 5, 1995 among The Wackenhut Corporation, as Seller,
Receivables Capital Corporation and Enterprise Funding Corporation, each as a
Purchaser, Bank of America National Trust and Savings Association and NationsBank
of North Carolina, N.A., each as a Managing Agent, and Bank of America National
Trust and Savings Association, as the Administrative Agent (incorporated by
reference to the Registrants Form 10-K Annual Report the fiscal year ended
December 31, 1995)
* 4.9 -- $15,000,000 Credit Agreement dated as of December 12, 1994 between Wackenhut
Corrections Corporation, as Borrower, and Barnett Bank of South Florida, N.A., as
Lender (incorporated by reference to the Registrant's Form 10-K Annual Report for
the fiscal year ended January 1, 1995)
* 4.10 -- Amended and Restated Revolving Credit and Reimbursement Agreement dated July 1,
1993 between The Wackenhut Corporation and NationsBank of Florida, National
Association (incorporated by reference to the Registrant's Form 10-K Annual Report
for the fiscal year ended January 2, 1994)
* 4.11 -- Amendment dated May 18, 1994 to the Amended and Restated Revolving Credit and
Reimbursement Agreement dated July 1, 1993 between The Wackenhut Corporation and
NationsBank of Florida, N.A. (incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended December 31, 1995)
</TABLE>
II-3
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <S> <C>
* 4.12 -- Amendment dated March 7, 1995 to the Amended and Restated Revolving Credit and
Reimbursement Agreement dated July 1, 1993 between The Wackenhut Corporation and
NationsBank of Florida, N.A. (incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended January 1, 1995)
* 5.1 -- Form of Opinion of Akerman, Senterfitt & Eidson, P.A., Counsel to the Company
*10.1 -- Form of Deferred Compensation Agreement for Executive Officers: Alan B. Bernstein,
Richard R. Wackenhut, Fernando Carrizosa, Timothy P. Cole and Robert C. Kneip
(incorporated by reference to the Registrant's Form 10-K Annual Report for the
fiscal year ended January 2, 1994)
*10.2 -- Amendments to the Deferred Compensation Agreements for Executive Officers
(incorporated by reference to the Registrant's Form 10-K Annual Report for the
fiscal year ended December 29, 1991)
*10.3 -- Executive Retirement Plan (incorporated by reference to the Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1995)
*10.4 -- Amended Split Dollar arrangement with George R. and Ruth J. Wackenhut
(incorporated by reference to the Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1995)
*10.5 -- Office Lease dated April 18, 1995 by and between The Wackenhut Corporation and
Daniel S. Catalfumo, as Trustee under F.S. 689.071 (incorporated by reference to
the Registrants' Form 10-K Annual Report for the year ended December 31, 1995)
*10.6 -- First Amendment dated November 3, 1995 to Office Lease dated April 18, 1995 by and
between The Wackenhut Corporation and Daniel S. Catalfumo, as Trustee under F.S.
689.071 (incorporated by reference to the Registrant's Form 10-K Annual Report for
the fiscal year ended December 31, 1995).
*10.7 -- $9,000,000 Promissory Note dated December 21, 1995 between The Wackenhut
Corporation and ACP-Atrium CG, L.P., a Florida limited partnership (incorporated
by reference to the Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995).
*10.8 -- Purchase Money Real Estate Mortgage, Assignment and Security Agreement dated
December 31, 1995 between The Wackenhut Corporation and ACP-Atrium CG, L.P., a
Florida limited partnership (incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended December 31, 1995).
*10.9 -- Key Employee Long-Term Incentive Stock Plan dated July 1991 (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
*23.1 -- Consent of Arthur Andersen LLP
*23.2 -- Consent of Akerman, Senterfitt & Eidson, P.A. (included in opinion filed as
Exhibit 5.1)
*24.1 -- Powers of Attorney
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled
II-4
<PAGE> 74
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Palm
Beach Gardens, State of Florida, on the 23rd day of May, 1996.
THE WACKENHUT CORPORATION
By: *
George R. Wackenhut
Chairman of the Board, Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------------------------
<S> <C> <C>
* Chairman of the Board Chief May 23, 1996
George R. Wackenhut Executive Officer and Director
(Principal Executive Officer)
* Vice President and Chief May 23, 1996
Daniel E. Mason Financial Officer, Domestic
Operations (Principal
Financial Officer)
* Vice President -- Accounting May 23, 1996
Juan D. Miyar Services and Corporate
Controller (Principal
Accounting Officer)
Julius W. Becton, Jr. * Director May 23, 1996
* Director May 23, 1996
Richard G. Capen, Jr.
Director May , 1996
Anne N. Foreman
Director May , 1996
Edward L. Hennessy, Jr.
* Director May 23, 1996
Paul X. Kelley
* Director May 23, 1996
Nancy Clark Reynolds
</TABLE>
II-6
<PAGE> 76
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------------------------
<S> <C> <C>
* Director May 23, 1996
Thomas P. Stafford
* Director May 23, 1996
Richard R. Wackenhut
By: /s/ Daniel E. Mason
Daniel E. Mason
Attorney-in-fact
</TABLE>
II-7
<PAGE> 77
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ --------------------------------------------------------------------- ------------
<C> <S> <C> <C>
* 1.1 -- Form of Underwriting Agreement
4.1 -- Amended and Restated Articles of Incorporation (incorporated by
reference to the Registrant's Form 10-K Annual Report for the fiscal
year ended December 31, 1995)
* 4.2 -- Revolving Credit and Reimbursement Agreement dated January 5, 1995 by
and among The Wackenhut Corporation, NationsBank of Florida, N.A. and
Bank of America Illinois, as Lenders, and NationsBank of Florida,
N.A., as Agent (incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended January 1, 1995)
* 4.3 -- Letter dated June 8, 1995 concerning the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The
Wackenhut Corporation, NationsBank of Florida, N.A., and Bank of
America Illinois, as Lenders, and NationsBank of Florida, N.A., as
Agent (incorporated by reference to the Registrants' Form 10-K Annual
Report for the fiscal year ended December 31, 1995)
* 4.4 -- Letter dated August 24, 1995 concerning the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The
Wackenhut Corporation, NationsBank of Florida, N.A., as Agent
(incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1995)
* 4.5 -- Amendment dated March 28, 1996 to the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The
Wackenhut Corporation, NationsBank, N.A. (South), as successor to
NationsBank of Florida, N.A., and Bank of America Illinois, as
Lenders and NationsBank, N.A. (South), a successor to NationsBank of
Florida, N.A., as Agent (incorporated by reference to the
Registrant's Form 10-Q Quarterly Report for the thirteen weeks ended
March 31, 1996).
* 4.6 -- Letter dated April 26, 1996 amending the Revolving Credit and
Reimbursement Agreement dated January 5, 1995 by and among The
Wackenhut Corporation, NationsBank, N.A. (South), a successor to
NationsBank of Florida, N.A., and Bank of America Illinois, as
Lenders, and NationsBank, N.A. (South), a successor to NationsBank of
Florida, N.A., as Agent (incorporated by reference to the
Registrant's Form 10-Q Quarterly Report for the thirteen weeks ended
March 31, 1996).
* 4.7 -- Receivables Purchase Agreement dated as of January 5, 1995 among The
Wackenhut Corporation, as Seller, Receivables Capital Corporation and
Enterprise Funding Corporation, each as a Purchaser, Bank of America
National Trust and Savings Association and NationsBank of North
Carolina, N.A., each as a Managing Agent, and Bank of America
National Trust and Savings Association, as the Administrative Agent
(incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended January 1, 1995)
* 4.8 -- First Amendment dated December 15, 1995 to the Receivables Purchase
Agreement dated as of January 5, 1995 among The Wackenhut
Corporation, as Seller, Receivables Capital Corporation and
Enterprise Funding Corporation, each as a Purchaser, Bank of America
National Trust and Savings Association and NationsBank of North
Carolina, N.A., each as a Managing Agent, and Bank of America
National Trust and Savings Association, as the Administrative Agent
(incorporated by reference to the Registrants Form 10-K Annual Report
the fiscal year ended December 31, 1995)
* 4.9 -- $15,000,000 Credit Agreement dated as of December 12, 1994 between
Wackenhut Corrections Corporation, as Borrower, and Barnett Bank of
South Florida, N.A., as Lender (incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal year ended
January 1, 1995)
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ --------------------------------------------------------------------- ------------
<C> <S> <C> <C>
* 4.10 -- Amended and Restated Revolving Credit and Reimbursement Agreement
dated July 1, 1993 between The Wackenhut Corporation and NationsBank
of Florida, National Association (incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal year ended
January 2, 1994)
* 4.11 -- Amendment dated May 18, 1994 to the Amended and Restated Revolving
Credit and Reimbursement Agreement dated July 1, 1993 between The
Wackenhut Corporation and NationsBank of Florida, N.A. (incorporated
by reference to the Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1995)
* 4.11 -- Amendment dated March 7, 1995 to the Amended and Restated Revolving
Credit and Reimbursement Agreement dated July 1, 1993 between The
Wackenhut Corporation and NationsBank of Florida, N.A. (incorporated
by reference to the Registrant's Form 10-K Annual Report for the
fiscal year ended January 1, 1995)
* 5.1 -- Form of Opinion of Akerman, Senterfitt & Eidson, P.A., Counsel to the
Company
*10.1 -- Form of Deferred Compensation Agreement for Executive Officers: Alan
B. Bernstein, Richard R. Wackenhut, Fernando Carrizosa, Timothy P.
Cole and Robert C. Kneip (incorporated by reference to the
Registrant's Form 10-K Annual and Report for the fiscal year ended
January 2, 1994)
*10.2 -- Amendments to the Deferred Compensation Agreements for Executive
Officers (incorporated by reference to the Registrant's Form 10-K
Annual and Report for the fiscal year ended December 29, 1991)
*10.3 -- Executive Retirement Plan (incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995)
*10.4 -- Amended Split Dollar arrangement with George R. and Ruth J. Wackenhut
(incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1995)
*10.5 -- Office Lease dated April 18, 1995 by and between The Wackenhut
Corporation and Daniel S. Catalfumo, as Trustee under F.S. 689.071
(incorporated by reference to the Registrants' Form 10-K Annual
Report for the year ended December 31, 1995)
*10.6 -- First Amendment dated November 3, 1995 to Office Lease dated April
18, 1995 by and between The Wackenhut Corporation and Daniel S.
Catalfumo, as Trustee under F.S. 689.071 (incorporated by reference
to the Registrant's Form 10-K Annual Report for the fiscal year ended
December 31, 1995).
*10.7 -- $9,000,000 Promissory Note dated December 21, 1995 between The
Wackenhut Corporation and ACP-Atrium CG, L.P., a Florida limited
partnership (incorporated by reference to the Registrant's Form 10-K
Annual Report for the fiscal year ended December 31, 1995).
*10.8 -- Purchase Money Real Estate Mortgage, Assignment and Security
Agreement dated December 31, 1995 between The Wackenhut Corporation
and ACP-Atrium CG, L.P., a Florida limited partnership (incorporated
by reference to the Registrant's Form 10-K Annual Report for the
fiscal year ended December 31, 1995).
*10.9 -- Key Employee Long-Term Incentive Stock Plan dated July 1991
(incorporated by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended December 31, 1995).
*23.1 -- Consent of Arthur Andersen LLP
*23.2 -- Consent of Akerman, Senterfitt & Eidson, P.A. (included in opinion
filed as Exhibit 5.1)
*24.1 -- Powers of Attorney
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 4.1
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.
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 resignations, preferences, limitations, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights,
<PAGE> 2
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:
<TABLE>
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<S> <C> <C> <C>
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
=======
</TABLE>
2
<PAGE> 3
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.
(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.
3
<PAGE> 4
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
4
<PAGE> 5
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 the 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 4,108,885 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
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.
<PAGE> 6
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
<PAGE> 7
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 the 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
10,000,0000 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.
<PAGE> 8
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 4,133,665 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 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
<PAGE> 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:
(a) The name of the 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 4,108,895 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.
<PAGE> 10
The Corporation has authorized the issuance of 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 adopted 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/ J.P. Rowan
---------------------------
Title: Vice President
------------------------
James P. Rowan
<PAGE> 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:
(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 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 3,858,885 shares are designated to be issuable as Series A
Common Stock and 16,141,115 shares are designated 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.
The Corporation has authorized the issuance of a series of Common Stock
consisting of 3,858,885 shares of voting Common Stock, par value $0.10 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 16,141,115
shares of non-voting Common Stock, par value $0.10 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
October 31, 1995, without shareholder action, pursuant to Section 607.0602 of
the Florida Business Corporation Act.
<PAGE> 12
(d) In accordance with Section 607.0123 of the Florida Business
Corporation Act, this amendment shall be effective on October 31, 1995.
The undersigned director of the Corporation has executed these Articles
of Amendment this 12th day of March, 1995.
THE WACKENHUT CORPORATION,
a Florida corporation
By: /s/ G. R. Wackenhut
--------------------------------------
Name: G. R. Wackenhut
------------------------------------
Title: Director
2
<PAGE> 13
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED 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 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 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 Amended and Restated 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 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 sufficent 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/ James P. Rowan
----------------------------------
James P. Rowan
Vice President, General Counsel
and Assistant Secretary
5
