<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ________ to _______
Commission file number 1-5450
------
THE WACKENHUT CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0857245
- --------------------------------------------------------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
4200 Wackenhut Drive #100, Palm Beach Gardens, FL 33410-4243
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (561) 622-5656
--------------
- --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
At May 7, 1997, 3,855,582 shares of Series A were issued and outstanding and
10,879,016 shares of Series B of the registrant's Common Stock was outstanding
after deducting 87,000 shares held in treasury.
Page 1 of 18
<PAGE> 2
THE WACKENHUT CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The following consolidated financial statements of the Corporation have been
prepared in accordance with the instructions to Form 10-Q and therefore, omit or
condense certain footnotes and other information normally included in financial
statements prepared in accordance with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial
information for the interim periods reported have been made. Results of
operations for the thirteen weeks ended March 30, 1997 are not necessarily
indicative of the results for the entire fiscal year ending December 28, 1997.
Page 2 of 18
<PAGE> 3
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
MARCH 30, 1997 and MARCH 31, 1996
(In thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
REVENUES $ 242,134 $ 212,474
--------- ---------
OPERATING EXPENSES:
Payroll and related taxes 179,454 153,403
Other operating expenses 58,680 56,258
Provision for relocation costs -- 750
--------- ---------
238,134 210,411
--------- ---------
OPERATING INCOME 4,000 2,063
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense (335) (884)
Interest and investment income 912 1,055
--------- ---------
577 171
--------- ---------
INCOME BEFORE INCOME TAXES 4,577 2,234
Provision for income taxes 1,709 769
Minority interest, net of income taxes 1,309 827
Equity income of foreign affiliates, net of income taxes (409) (307)
--------- ---------
NET INCOME $ 1,968 $ 945
========= =========
EARNINGS PER SHARE $ 0.13 $ 0.08
========= =========
</TABLE>
See notes to Consolidated Financial Statements
Page 3 of 18
<PAGE> 4
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 30, 1997 AND DECEMBER 29, 1996
(In thousands except share data)
<TABLE>
<CAPTION>
1997
(Unaudited) 1996
----------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 51,675 $ 52,755
Accounts receivable, less allowance for doubtful accounts
of $2,074 in 1997 and $1,997 in 1996 132,927 131,325
Inventories 10,408 10,082
Other 33,449 26,412
--------- ---------
228,459 220,574
--------- ---------
NOTES RECEIVABLE 1,807 1,181
--------- ---------
MARKETABLE SECURITIES of casualty reinsurance subsidiary 12,615 14,753
--------- ---------
PROPERTY AND EQUIPMENT, at cost 49,369 46,726
Accumulated depreciation (12,873) (12,184)
--------- ---------
36,496 34,542
--------- ---------
OTHER ASSETS:
Investment in and advances to foreign affiliates, at cost 15,330 13,508
Other 46,114 39,360
--------- ---------
61,444 52,868
--------- ---------
$ 340,821 $ 323,918
========= =========
</TABLE>
See notes to Consolidated Financial Statements.
Page 4 of 18
<PAGE> 5
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 30, 1997 AND DECEMBER 29, 1996
(In thousands except share data)
<TABLE>
<CAPTION>
1997
(Unaudited) 1996
----------- ---------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 28,977 $ 20,488
Accrued payroll and related taxes 38,895 35,715
Accrued expenses 18,328 16,295
--------- ---------
86,200 72,498
--------- ---------
RESERVES FOR LOSSES of casualty reinsurance subsidiary 43,867 43,806
--------- ---------
LONG-TERM DEBT 5,485 5,890
--------- ---------
DEFERRED TAX LIABILITY, NET 1,926 1,165
--------- ---------
OTHER 11,968 11,372
--------- ---------
MINORITY INTEREST 42,206 40,958
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, 10,000,000 shares authorized -- --
Common stock, $.10 par value, 50,000,000 shares authorized:
Series A common stock, 3,855,582 issued and outstanding in 1997
and 3,858,885 in 1996 386 386
Series B common stock, 10,896,785 issued in 1997 and 10,902,199
issued in 1996 1,090 1,090
Additional paid-in capital 120,707 120,703
Retained earnings 32,362 31,347
Cumulative translation adjustment (4,099) (4,128)
Unrealized loss on marketable securities (177) (69)
Treasury stock at cost, 87,000 shares of Series B (1,100) (1,100)
--------- ---------
149,169 148,229
--------- ---------
$ 340,821 $ 323,918
========= =========
</TABLE>
See notes to Consolidated Financial Statements.
Page 5 of 18
<PAGE> 6
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1997 AND MARCH 31, 1996
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net Income $ 1,968 $ 945
Adjustments -
Depreciation expense 1,436 886
Amortization expense 2,305 2,554
Provision for bad debts 136 524
Equity income, net of dividends (633) (419)
Minority interests in net income 2,078 1,221
Other (365) 460
Changes in assets and liabilities, net of acquisitions and divestitures -
(Increase) decrease in assets:
Accounts receivable (2,140) (6,875)
Inventories (1,601) (1,081)
Other current assets (4,884) 746
Marketable securities (31) (36)
Other assets (4,450) 5,600
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 7,367 325
Accrued payroll and related taxes 3,180 (3,376)
Deferred tax liability, net 928 (117)
Reserve for losses of casualty reinsurance subsidiary 61 1,969
Other 596 324
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,951 3,650
------ ------
</TABLE>
(Continued)
Page 6 of 18
<PAGE> 7
THE WACKENHUT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1997 AND MARCH 31, 1996
(In thousands)
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Net proceeds from public offering of subsidiary's common stock $ -- $ 51,776
Proceeds from exercise of stock options of subsidiary 197 174
Payments for acquisitions -- (13,703)
Investment in and advances to foreign affiliates (977) (454)
Capital expenditures (2,905) (2,383)
Proceeds from sales (payments for purchases) of marketable securities of
casualty reinsurance subsidiary, net 1,970 (8,991)
Deferred charge expenditures (3,819) (1,115)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (5,534) 25,304
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from exercise of stock options -- 268
Purchase and cancellation of corporation's common stock (139) --
Proceeds from issuance of debt -- 8,783
Payments on debt (405) (2)
Proceeds from sales of accounts receivable -- 10,000
Dividends paid (953) (798)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,497) 18,251
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,080) 47,205
Cash and Cash Equivalents, at beginning of period 52,755 20,185
-------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 51,675 $ 67,390
======== ========
SUPPLEMENTAL DISCLOSURES
CASH PAID DURING THE PERIOD FOR:
Interest $ 470 $ 987
Income taxes $ 102 $ 45
</TABLE>
See notes to Consolidated Financial Statements.
Page 7 of 18
<PAGE> 8
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed for the quarterly financial reporting are the
same as those disclosed in Note 1 of the Notes to Consolidated Financial
Statements included in the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 29, 1996. Certain prior year amounts have been
reclassified to conform with current year financial statement presentation.
2. ACCOUNTS RECEIVABLE
The Corporation has entered into a three year agreement expiring in January 1998
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
$35,000,000. 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 March 30, 1997 and December 29, 1996,
there were no accounts receivable sold under this agreement.
3. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 30, December 29,
1997 1996
--------- ------------
<S> <C> <C>
Revolving loans - 6.3% in 1997 and 6.1% in 1996 $2,600 $2,800
Other debt principally related to WCC and international
subsidiaries 2,885 3,090
------ ------
$5,485 $5,890
====== ======
</TABLE>
4. INVESTMENT IN AFFILIATES
Equity in undistributed earnings of foreign affiliates approximated $6,385,000
and $5,540,000 at March 30, 1997 and December 29, 1996, respectively, and is
included in "Investment in and advances to foreign affiliates" in the
accompanying consolidated balance sheets.
Page 8 of 18
<PAGE> 9
THE WACKENHUT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following is a summary of condensed unaudited financial information
pertaining to foreign affiliates (in thousands):
MARCH 30,
1997
---------
Current assets $ 59,041
Noncurrent assets 16,965
Current liabilities 39,525
Noncurrent liabilities 12,054
Revenues 42,759
Operating income 3,147
Net income before taxes 2,262
5. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
requires the disclosure of basic and diluted earnings per share for periods
ending after December 15, 1997. The computation under SFAS No. 128 differs from
the primary and fully diluted earnings per share computed under APB Opinion No.
15 primarily in the manner in which potential common stock is treated. Basic
earnings per share is computed by dividing net income by the weighted-average
number of common shares outstanding. In the computation of diluted earnings per
share, the weighted-average number of common shares outstanding is adjusted for
the effect of all potential common stock.
The basic and diluted earnings per share computed according to SFAS No. 128 for
the quarters ended March 30, 1997 and March 31, 1996 do not differ from the
primary earnings per share reported on the accompanying consolidated statements
of income.
6. SUBSEQUENT EVENT
On May 2, 1997, subsequent to the end of the First Quarter of 1997, the
Corporation purchased the assets of the Jim King Companies for approximately
$10.6 million in cash, 69,231 shares of Wackenhut Series B common stock and
assumed approximately $4.2 million in liabilities. The 69,231 shares were issued
at a per share price of $14.30 and increased outstanding Wackenhut Series B
common stock to 10,879,016 shares as of May 2, 1997.
Page 9 of 18
<PAGE> 10
7. 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. In the third quarter
of 1996, the Corporation entered into the professional employer business by
establishing Oasis Outsourcing, Inc., a majority owned subsidiary. The
financial information related to Oasis Outsourcing, Inc. is insignificant
and has been included in "Security-related and other support services".
Wackenhut Corrections Corporation, a subsidiary of the Corporation, provides
facility management and construction services to detention and correctional
facilities. Provided below is various financial information for each segment:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
(THOUSANDS OF DOLLARS) MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
REVENUES:
<S> <C> <C>
Security-related and other support services $200,907 $ 183,040
Correctional services 41,227 29,434
-------- ---------
Total revenues $242,134 $ 212,474
-------- ---------
OPERATING INCOME:
Security-related and other support services $ 728 $ 1,094
Correctional services 3,272 1,719
Provision for relocation costs -- (750)
-------- ---------
Total operating income $ 4,000 $ 2,063
-------- ---------
EQUITY INCOME OF AFFILIATES, NET OF TAXES:
Security-related and other support services $ 163 $ 265
Correctional services 246 42
-------- ---------
Total equity income $ 409 $ 307
-------- ---------
CAPITAL EXPENDITURES:
Security-related and other support services $ 633 $ 1,848
Correctional services 2,272 535
-------- ---------
Total capital expenditures $ 2,905 $ 2,383
-------- ---------
DEPRECIATION AND AMORTIZATION EXPENSE:
Security-related and other support services $ 2,593 $ 2,604
Correctional services 1,148 836
-------- ---------
Total expenses $ 3,741 $ 3,440
-------- ---------
IDENTIFIABLE ASSETS AT MARCH 30, 1997 AND
DECEMBER 29, 1996:
Security-related and other support services $229,915 $ 217,107
Correctional services 110,906 106,811
-------- ---------
Total identifiable assets $340,821 $ 323,918
-------- ---------
</TABLE>
Page 10 of 18
<PAGE> 11
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
investments in affiliates (20% to 50% owned) under the equity method. U.S.
income taxes which would be payable upon remittance of affiliates' earnings to
the Corporation are provided currently. Minority interest in consolidated
foreign subsidiaries have been reflected net of applicable income taxes on the
accompanying financial statements. A summary of domestic and international
operations is shown below.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
(THOUSANDS OF DOLLARS) MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
REVENUES:
Domestic operations $201,980 $ 177,258
International operations 40,154 35,216
-------- ---------
Total revenues $242,134 $ 212,474
-------- ---------
OPERATING INCOME:
Domestic operations $ 3,157 $ 2,312
International operations 843 501
Provision for relocation costs -- (750)
-------- ---------
Total operating income $ 4,000 $ 2,063
-------- ---------
EQUITY INCOME OF AFFILIATES, NET OF TAXES:
Domestic operations $ -- $ --
International operations 409 307
-------- ---------
Total equity income $ 409 $ 307
-------- ---------
CAPITAL EXPENDITURES:
Domestic operations $ 2,734 $ 2,200
International operations 171 183
-------- ---------
Total capital expenditures $ 2,905 $ 2,383
-------- ---------
DEPRECIATION AND AMORTIZATION EXPENSE:
Domestic operations $ 2,620 $ 2,650
International operations 1,121 790
-------- ---------
Total expenses $ 3,741 $ 3,440
-------- ---------
IDENTIFIABLE ASSETS AT MARCH 30, 1997 AND
DECEMBER 29, 1996:
Domestic operations $310,123 $ 294,066
International operations 30,698 29,852
-------- ---------
Total identifiable assets $340,821 $ 323,918
-------- ---------
</TABLE>
Page 11 of 18
<PAGE> 12
THE WACKENHUT CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Corporation provides security-related and other support services through the
Services Business and correctional services through the Correctional Business.
Through the Services Business, the Corporation provides physical security
services, food services, and other related services to commercial and
governmental customers. Through the Correctional Business, the Corporation
provides correctional and detention facility design, development and management
services to government agencies. The Services Business is managed through two
operating groups: the North American Operations Group and the International
Operations Group. The Correctional Business is operated through the
Corporation's 55%-owned Wackenhut Corrections Corporation subsidiary ("WCC").
The Correctional Business includes the Australian subsidiary and United Kingdom
affiliate of WCC. In the third quarter of 1996, the Corporation entered into the
professional employer organization ("PEO") business by establishing Oasis
Outsourcing, Inc., a majority owned subsidiary. As of the First Quarter of 1997,
Oasis had approximately 1,000 employees under contract.
FINANCIAL CONDITION
Reference is made to Item 7, Part II of the Corporation's Annual Report on Form
10-K for the fiscal year ended December 29, 1996 for further discussion and
analysis of information pertaining to the Corporation's financial condition.
Page 12 of 18
<PAGE> 13
RESULTS OF OPERATIONS
The table below summarizes the Corporation's results of operations by the
Corporation's two business segments by organizational group. The following
discussion and analysis should be read in conjunction with the Corporation's
consolidated financial statements and the notes thereto.
<TABLE>
<CAPTION>
(In thousands)
--------------------------------------
FIRST % First
QUARTER Change Quarter
1997 vs. 1996 1996
------- -------- -------
<S> <C> <C> <C>
REVENUES
SERVICES BUSINESS
North American Operations Group $ 168,345 7.8 $ 156,152
International Operations Group 28,671 12.8 25,413
Other 3,891 163.8 1,475
--------- ---------
200,907 9.8 183,040
CORRECTIONAL BUSINESS
Wackenhut Corrections Corporation 41,227 40.1 29,434
--------- ---------
$ 242,134 14.0 $ 212,474
========= =========
OPERATING INCOME
SERVICES BUSINESS
North America Operations Group $ 4,611 20.2 $ 3,835
International Operations Group 110 74.6 63
Corporate Expenses and Underwriting Losses (3,993) 42.4 (2,804)
--------- ---------
728 (33.5) 1,094
CORRECTIONAL BUSINESS
Wackenhut Corrections Corporation 3,272 90.3 1,719
Provision for Relocation Costs -- -- (750)
--------- ---------
$ 4,000 93.9 $ 2,063
========= =========
</TABLE>
COMPARISON OF THIRTEEN WEEKS ENDED MARCH 30, 1997 AND THIRTEEN WEEKS ENDED
MARCH 31, 1996
REVENUES
Consolidated revenues increased 14.0% to $242.1 million in the thirteen weeks
ended March 30, 1997 (the "First Quarter of 1997") from $212.5 million in the
thirteen weeks ended March 31, 1996 (the "First Quarter of 1996").
Page 13 of 18
<PAGE> 14
SERVICES BUSINESS
Services Business revenues increased 9.8% to $200.9 million in the First Quarter
of 1997 from $183.0 million in the First Quarter of 1996.
NORTH AMERICAN OPERATIONS GROUP. Revenues of the North American Operations Group
increased 7.8% to $168.3 million in the First Quarter of 1997 from $156.2
million in the First Quarter of 1996. The Security Services Division of the
North American Operations Group continued to increase its revenue base due
principally to an increase of approximately 500,000 billable hours over the same
quarter last year, which was principally attributable to the emphasis in its
national accounts program. In addition, the Custom Protection Officer(R)
business revenues increased 32.6% to $22.8 million during the First Quarter of
1997 compared to $17.2 million from the First Quarter of 1996. Revenues of the
Food Services Division increased 22.1% to $19.3 million in the First Quarter of
1997 from $15.8 million in the First Quarter of 1996, and revenues of the
Nuclear Division increased slightly to $14.3 million in the First Quarter of
1997 from $13.8 million in the First Quarter of 1996. However, revenues of the
WSI Division decreased 11.9% to $30.3 million in the First Quarter of 1997 from
$34.4 million in the First Quarter of 1996, due principally to reductions in
government funding at U.S. Department of Energy facilities and the loss of the
Strategic Petroleum Reserve contract with DynMcDermott. Management believes this
reduction in funding will continue to affect Wackenhut Services, Inc.'s revenues
and operating income.
INTERNATIONAL OPERATIONS GROUP. International Operations Group revenues
increased 12.8% to $28.7 million in the First Quarter of 1997 from $25.4 million
in the First Quarter of 1996. The European Division revenues increased 31.8% to
$5.8 million in the First Quarter of 1997 from $4.4 million in the First Quarter
of 1996. The American Division revenues increased 8.6% to $15.1 million in the
First Quarter of 1997 from $13.9 million in the First Quarter of 1996. Revenues
of Wackenhut of Australia Pty., Ltd. increased slightly to $4.0 million in the
First Quarter of 1997 from $3.8 million in the First Quarter of 1996.
CORRECTIONAL BUSINESS
Correctional Business revenues increased 40.1% to $41.2 million in the First
Quarter of 1997 from $29.4 million in the First Quarter of 1996. During the
First Quarter of 1997, WCC opened 5 new facilities and increased the number of
compensated resident days to 1,071,000 from 749,000 during the First Quarter of
1996.
OPERATING INCOME
Consolidated operating income increased 93.9% to $4.0 million in the First
Quarter of 1997. Operating income of $2.1 million for the First Quarter of 1996
included a provision of $750,000 for relocation costs.
Page 14 of 18
<PAGE> 15
SERVICES BUSINESS
Operating income from the Services Business decreased 33.5% to $728,000 in the
First Quarter of 1997 from $1.1 million in the First Quarter of 1996. The
decrease in operating income is largely due to an operating loss by Oasis
Outsourcing, Inc. of $333,000. Oasis Outsourcing, Inc. is a majority owned
subsidiary which began operations in the third quarter of 1996.
NORTH AMERICAN OPERATIONS GROUP. The operating income of the North American
Operations Group increased 20.2% to $4.6 million in the First Quarter of 1997
from $3.8 million in the First Quarter of 1996. Security Services Division
operating income increased 16.0% to $2.9 million in the First Quarter of 1997
from $2.5 million in the First Quarter of 1996 due to consistent increases in
billable hours and stable profit margins on increased revenues. WSI Division
operating income decreased 16.7% to $1.0 million in the First Quarter of 1997
from $1.2 million in the First Quarter of 1996 due to declining revenue.
INTERNATIONAL OPERATIONS GROUP. International Operations Group operating income
increased slightly to $110,000 in the First Quarter of 1997. Wackenhut of
Australia Pty., Ltd. had an operating loss of $514,000 in the First Quarter of
1997 compared to an operating loss of $500,000 in the First Quarter of 1996.
Wackenhut of Australia Pty., Ltd. is expected to generate operating losses
throughout fiscal 1997, and management continues to monitor the operations of
this subsidiary closely; management is also evaluating the book value of
goodwill amounting to $3,018,000 for the purchase of security service contracts
by Wackenhut of Australia Pty., Ltd. in 1995, and is considering several
alternatives in relation to its operations.
CORPORATE EXPENSES AND UNDERWRITING LOSSES
Corporate expenses and underwriting losses increased 42.4% to $4.0 million in
the First Quarter of 1997 from $2.8 million in the First Quarter of 1996,
excluding relocation costs of $750,000 in 1996.
During the First Quarter of 1997, the corporation deferred additional costs
related to the development of information systems. Approximately $5.4 million of
costs related to systems development has been deferred as of March 30, 1997.
Management continues to evaluate the costs of these projects on a regular basis.
CORRECTIONAL BUSINESS
WCC's operating income increased by 90.3% to $3.3 million in the First Quarter
of 1997 from $1.7 million in the First Quarter of 1996, reflecting the increase
in compensated resident days.
OTHER INCOME/EXPENSE
Other income was $577,000 in the First Quarter of 1997 compared to other income
of $171,000 for the comparable period in 1996. Interest and investment income
decreased to $912,000 in the First Quarter of 1997 from $1.1 million in the
First Quarter of 1996. Interest expense decreased by $549,000 during the same
period compared to the First Quarter of 1996 due principally to decreases in the
level of corporate bank borrowings and fees incurred under the accounts
receivable securitization facility.
Page 15 of 18
<PAGE> 16
INCOME BEFORE INCOME TAXES
Income before income taxes, which included a $750,000 provision for relocation
costs in 1996, increased 104.9% to $4.6 million in the First Quarter of 1997
from $2.2 million in the First Quarter of 1996.
The combined federal and state effective income tax rate was 37.0% for the First
Quarter of 1997 and 36.0% for the same period in 1996. The higher effective rate
in the First Quarter of 1997 was due to a smaller benefit from permanent
differences relative to increased taxable income.
MINORITY INTEREST EXPENSE
Minority interest expense (net of income taxes) increased to $1.3 million in the
First Quarter of 1997 from $827,000 in the First Quarter of 1996, 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 to $409,000
in the First Quarter of 1997 from $307,000 in the First Quarter of 1996,
primarily resulting from increased earnings of the joint venture of WCC in the
United Kingdom.
NET INCOME
Net income increased to $1,968,000 in the First Quarter of 1997, or $0.13 per
share, compared to $945,000 or $0.08 per share for the First Quarter of 1996.
Page 16 of 18
<PAGE> 17
THE WACKENHUT CORPORATION AND SUBSIDIARIES
------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
The Corporation 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 Corporation 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 from any such claims or
litigation.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
- --------------------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a). Exhibits -
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b). Reports on Form 8-K
The Corporation did not file a Form 8-K during the first quarter of
1997.
Page 17 of 18
<PAGE> 18
THE WACKENHUT CORPORATION AND SUBSIDIARIES
------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Quarterly Report on Form 10-Q for the thirteen
weeks ended March 30, 1997 to be signed on its behalf by the undersigned
hereunto duly authorized.
THE WACKENHUT CORPORATION
DATE: May 13, 1997 /s/ JUAN D. MIYAR
---------------------------------------
Juan D. Miyar, Duly Authorized Officer
and Vice President Corporate Controller
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 30,
1997.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<EXCHANGE-RATE> 1
<CASH> 51,675
<SECURITIES> 12,615<F1>
<RECEIVABLES> 132,927<F2>
<ALLOWANCES> 2,074
<INVENTORY> 10,408
<CURRENT-ASSETS> 228,459<F3>
<PP&E> 49,369
<DEPRECIATION> 12,873
<TOTAL-ASSETS> 340,821
<CURRENT-LIABILITIES> 86,200
<BONDS> 5,485
0
0
<COMMON> 1,476
<OTHER-SE> 147,693
<TOTAL-LIABILITY-AND-EQUITY> 340,821<F4>
<SALES> 0
<TOTAL-REVENUES> 242,134
<CGS> 0
<TOTAL-COSTS> 238,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 136
<INTEREST-EXPENSE> 335
<INCOME-PRETAX> 4,577
<INCOME-TAX> 1,709
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,968<F5>
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.00
<FN>
<F1>MARKETABLE SECURITIES AND CERTIFICATES OF DEPOSIT ARE CLASSIFIED AS
NON-CURRENT ASSETS ON THE BALANCE SHEET.
<F2>THE CORPORATION HAS ENTERED INTO A THREE YEAR AGREEMENT EXPIRING IN JANUARY
1998 WITH TWO FINANCIAL INSTITUTIONS TO SELL, ON AN ONGOING BASIS, AN UNDIVIDED
INTEREST IN A DEFINED POOL OF ELIGIBLE RECEIVABLES UP TO A MAXIMUM OF $35
MILLION. AS OF MARCH 30, 1997 THERE WERE NO BALANCES OUTSTANDING UNDER THE
ACCOUNT RECEIVABLES SECURITIZATION AGREEMENT.
<F3>INCLUDES $33,449 OF OTHER CURRENT ASSETS.
<F4>INCLUDES $43,867 RESERVE FOR LOSSES OF CASUALTY REINSURANCE SUBSIDIARY,
$42,206 MINORITY INTEREST, $1,926 DEFERRED TAX LIABILITY NET AND $11,968 OTHER
LIABILITIES.
<F5>INCLUDES MINORITY INTEREST AND EQUITY INCOME OF FOREIGN AFFILIATES - NET OF
INCOME TAXES OF $1,309 AND $(409) RESPECTIVELY.
</FN>
</TABLE>
