<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 12, 1998
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission File Number: 1-11841
PINKERTON'S, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-5318100
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
15910 Ventura Boulevard, Suite 900, Encino, California 91436-2810
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 380-8800
Not Applicable
(Former name, former address, and formal fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares of the Registrant's Common Stock, par value $.001 per
share, outstanding on July 10, 1998 was 12,648,206.
================================================================================
<PAGE>
PINKERTON'S, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C>
Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheets-
June 12, 1998 and December 26, 1997....................................................3
Consolidated Statements of Operations-
For the Quarters and Six Periods Ended June 12, 1998 and June 13, 1997.................4
Consolidated Statements of Cash Flows-
For the Six Periods Ended June 12, 1998 and June 13, 1997..............................5
Notes to Consolidated Financial Statements...............................................6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................................8-10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...............................11
Item 6. Exhibits and Reports on Form 8-K..................................................11
Signatures..................................................................................12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Pinkerton's, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 12,
1998 December 26,
ASSETS (Unaudited) 1997
--------------------- ---------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,770 $ 24,243
Investment in marketable securities 22,000 -
Accounts receivable (includes unbilled amounts of
$30,016 in 1998 and $32,397 in 1997) 148,363 149,668
Less allowance for doubtful receivables 2,674 2,948
-------- --------
145,689 146,720
-------- --------
Inventory 4,634 4,190
Prepaid expenses 5,633 8,111
Deferred income taxes 6,652 6,129
-------- --------
Total current assets 199,378 189,393
-------- --------
Equipment and leasehold improvements, net of
accumulated depreciation and amortization of
$29,506 in 1998 and $29,685 in 1997 15,368 16,745
Other assets:
Intangible assets, net 58,946 68,210
Deferred income taxes 27,465 24,924
Other 25,560 24,924
-------- --------
111,971 118,058
-------- --------
$326,717 $324,196
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,910 $ 14,021
Accrued liabilities 86,146 80,198
Income taxes payable 5,035 -
Current maturities of long-term debt 8,575 8,575
-------- --------
Total current liabilities 112,666 102,794
-------- --------
Accrued retirement benefits and other non-current liabilities 54,370 52,754
Long-term debt, less current maturities 24,323 25,019
Commitments and contingencies
Stockholders' equity:
Common stock 13 12
Additional paid-in capital 76,251 75,329
Accumulated other comprehensive income (8,042) (7,368)
Retained earnings 67,136 75,656
-------- --------
135,358 143,629
-------- --------
$326,717 $324,196
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
Pinkerton's, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Periods Ended
------------------------------- -------------------------------
June 12, 1998 June 13, 1997 June 12, 1998 June 13, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Service revenues $234,301 $230,789 $465,596 $451,257
Cost of services 206,693 203,191 410,973 397,524
-------- -------- -------- --------
Gross profit 27,608 27,598 54,623 53,733
Operating expenses 24,154 19,900 46,009 38,850
Amortization of intangible assets 1,899 1,824 3,789 4,444
Write-down of long-lived assets and
other special charges 9,853 - 9,853 -
-------- -------- -------- --------
Operating profit (loss) (8,298) 5,874 (5,028) 10,439
Other (income) deductions:
Interest income (177) (360) (422) (693)
Interest expense 872 1,111 1,722 2,272
-------- -------- -------- --------
695 751 1,300 1,579
-------- -------- -------- --------
Income (loss) before income taxes (8,993) 5,123 (6,328) 8,860
Provision for income taxes 992 2,408 2,192 4,164
-------- -------- -------- --------
Net income (loss) $ (9,985) $ 2,715 $ (8,520) $ 4,696
======== ======== ======== ========
Basic earnings (loss) per share $(.79) $.22 $(.68) $.37
======== ======== ======== ========
Diluted earnings (loss) per share $(.79) $.21 $(.68) $.36
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
Pinkerton's, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Six Periods Ended
-----------------------------------------------------
June 12, 1998 June 13, 1997
------------------------- -------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (8,520) $ 4,696
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Amortization of intangible assets 3,789 4,444
Depreciation and other amortization 4,027 3,399
Provision for losses on doubtful receivables 479 290
Deferred income taxes (3,064) (1,612)
Write-down of long-lived assets and other special charges 7,891 -
Provision for relocation costs 1,962 -
Changes in assets, liabilities and stockholders' equity:
Accounts receivable 552 (5,728)
Inventory (444) 701
Prepaid expenses and taxes 2,478 2,678
Other assets (140) (2,670)
Accounts payable (1,111) (1,028)
Accrued and other non-current liabilities 5,297 548
Income taxes payable 5,035 2,286
Foreign currency revaluation of net assets (2) (340)
-------- --------
Net cash provided by operating activities 18,229 7,664
-------- --------
INVESTING ACTIVITIES:
Purchase of marketable securities (22,000) (3,081)
Sales/redemptions of marketable securities - 9,534
Purchase of equipment and leasehold improvements (6,063) (3,867)
Payments for net assets of acquired businesses, net
of cash acquired - (21,453)
-------- --------
Net cash used in investing activities (28,063) (18,867)
-------- --------
FINANCING ACTIVITIES:
Principal payments on long-term debt (562) (592)
Exercise of stock options 923 153
-------- --------
Net cash provided by (used in) financing activities 361 (439)
-------- --------
Net decrease in cash and cash equivalents (9,473) (11,642)
Cash and cash equivalents at beginning of year 24,243 33,761
-------- --------
Cash and cash equivalents at end of period $ 14,770 $ 22,119
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
Pinkerton's, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) PRESENTATION OF FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by the Company and include all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position and the
results of operations as of and for the fiscal quarters and six periods ended
June 12, 1998 and June 13, 1997. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted, although the
Company believes the disclosures in these condensed consolidated financial
statements are adequate to make the information presented not misleading.
The following material is written with the presumption that the users of the
interim financial statements have read or have access to the Company's Form 10-K
filed with the Securities and Exchange Commission for the fiscal year ended
December 26, 1997 and the Company's 1997 Annual Report to Stockholders. The
1997 Annual Report contains the latest audited consolidated financial statements
and notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations as of December 26, 1997 and for
the year then ended. The results of operations for the fiscal quarters and six
periods ended June 12, 1998 and June 13, 1997 are not necessarily indicative of
the results for a full year.
(2) ACCOUNTING CYCLE
Pinkerton's fiscal year comprises the 52-week (or 53-week) period ending on the
Friday closest to December 31, within the reporting year. The Company's
quarterly reporting periods generally consist of three four-week periods for the
first, second and third quarters, and four four-week periods for the fourth
quarter.
(3) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Periods Ended
In thousands, ------------------------------ ------------------------------
except per share data June 12, 1998 June 13, 1997 June 12, 1998 June 13, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $(9,985) $ 2,715 $(8,520) $ 4,696
==================================================================
DENOMINATOR:
Denominator for basic earnings per
share - weighted average common
shares outstanding 12,630 12,549 12,610 12,548
Effect of dilutive securities:
Employee stock options - 434 - 409
------------------------------------------------------------------
Denominator for diluted earnings per
share - weighted average common
shares and dilutive potential
common shares outstanding 12,630 12,983 12,610 12,957
==================================================================
Basic earnings (loss) per share $ (.79) $ .22 $ (.68) $ .37
Diluted earnings (loss) per share $ (.79) $ .21 $ (.68) $ .36
==================================================================
</TABLE>
6
<PAGE>
For both the quarter and six periods ended June 12, 1998, employee stock options
relating to 694,000 shares, and for the six periods ended June 13, 1997,
employee stock options relating to 248,000 shares, were not included in the
computation of diluted earnings (loss) per share because the options' exercise
prices were greater than the average market price of the common shares, and
therefore, the effect would be antidilutive. In addition, employee stock
options relating to 591,000 shares and 624,000 shares for the quarter and six
periods ended June 12, 1998, respectively, were not included in the computation
of diluted (loss) per share because their effect is antidilutive due to the net
loss.
(4) COMPREHENSIVE INCOME
The Company adopted the reporting required in SFAS No. 130, Reporting
Comprehensive Income. The following table shows the Company's comprehensive
income:
<TABLE>
<CAPTION>
For the Quarter Ended For the Six Periods Ended
------------------------------ -------------------------------
In thousands June 12, 1998 June 13, 1997 June 12, 1998 June 13, 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (9,985) $2,715 $(8,520) $4,696
Other comprehensive income, net of tax:
Foreign currency translation
adjustments (397) 69 (674) (688)
------------------------------------------------------------------
Comprehensive income (loss) $(10,382) $2,784 $(9,194) $4,008
==================================================================
</TABLE>
(5) WRITE-DOWN OF LONG-LIVED ASSETS AND OTHER SPECIAL CHARGES
The Company accrued $1,962,000 for lease termination and moving costs in
connection with the finalization of a lease agreement on the new location for
corporate offices. The move is expected to commence in September, 1998.
Other write-downs for goodwill and fixed assets associated with the Company's
United Kingdom and System Integration operations were recorded in the second
quarter. These write-downs and other costs amounted to $7,891,000. The Company
has determined that these assets are not recoverable and has written them off.
(6) NEWLY ISSUED ACCOUNTING STANDARDS
The Company will implement the provisions of Financial Accounting Standards
Board No. 133, Accounting for Derivative Instruments and Hedging Activities,
effective June 15, 1999. The Company expects that the implementation of this
new accounting standard will not have a material impact on the reported earnings
per share.
(7) SUBSEQUENT EVENTS
The Board of Directors has authorized the repurchase of up to 500,000 shares of
the Company's common stock. These shares may be purchased in the open market
with the timing and terms of such purchases to be determined by management based
on market conditions. Any such purchases would be made from cash on-hand and
any shares acquired would be held as treasury shares.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE QUARTERS AND SIX PERIODS ENDED JUNE 12, 1998 AND
JUNE 13, 1997.
Pinkerton's fiscal year comprises the 52-week (or 53-week) period ending on the
Friday closest to December 31, within the reporting year. The Company's
quarterly reporting periods consist of three four-week periods for the first,
second and third quarters, and four four-week periods for the fourth quarter.
RESULTS OF OPERATIONS
Service Revenues -
The Company's service revenues increased by $3.5 million, or 1.5%, from $230.8
million in the second quarter of 1997 to $234.3 million in the second quarter of
1998. For the six periods ended June 12, 1998 and June 13, 1997, service
revenues increased by $14.3 million, or 3.2%, from $451.3 million in 1997 to
$465.6 in 1998.
Domestic Service Revenues -
The Company's domestic service revenues increased by $5.3 million, or 2.9%, from
$185.9 million in the second quarter of 1997 to $191.2 million in the second
quarter of 1998. For the six periods ended June 12, 1998 and June 13, 1997,
domestic service revenues increased by $19.6 million, or 5.4%, from $362.6
million in 1997 to $382.2 million in 1998. These increases reflect revenues
from additional business.
International Service Revenues -
Service revenues of the Company's international operations decreased by $1.8
million, or 4.0%, from $44.9 million in the second quarter of 1997 to $43.1
million in the second quarter of 1998. For the six periods ended June 12, 1998
and June 13, 1997, service revenues of the Company's international operations
decreased by $5.3 million or 6.0%, from $88.7 million in 1997 to $83.4 million
in 1998. The decrease in the second quarter reflects reductions arising from
currency fluctuations of $1.3 million and a $0.5 million decrease resulting
primarily from lower revenues at the Company's United Kingdom subsidiary. The
decrease in the six periods reflects reductions arising from currency
fluctuations of $2.6 million and a $2.7 million decrease resulting primarily
from lower revenues at the Company's United Kingdom subsidiary.
Cost of Services and Gross Profit -
The Company's cost of services increased by $3.5 million, or 1.7%, from $203.2
million in the second quarter of 1997 to $206.7 million in the second quarter of
1998. Cost of services in the first six periods of 1997 increased by $13.5
million, or 3.4%, from $397.5 in 1997 to $411.0 million in 1998. This increase
was primarily due to payroll and related expenses accompanying the increase in
service revenues, noted above and higher insurance and risk costs.
Gross profit as a percentage of service revenues decreased from 12.0% in the
second quarter of 1997 to 11.8% in the second quarter of 1998. For the six
periods ended June 12, 1998 and June 13, 1997, the gross profit percentage
decreased from 11.9% in 1997 to 11.7% in 1998.
Operating Expenses -
Operating expenses increased by $4.3 million, or 21.6%, from $19.9 million in
the second quarter of 1997 to $24.2 million in the second quarter of 1998. For
the six periods ended June 12, 1998 and June 13, 1997, operating expenses
increased by $7.1 million, or 18.3%, from $38.9 million in 1997 to $46.0 million
in 1998. As a percentage of service revenues, operating expenses were 10.3% and
9.9% respectively for the quarter and six periods ended June 12, 1998, and 8.6%
for both the comparable 1997 periods. Higher operating expenses in the second
quarter resulted from
8
<PAGE>
higher operating expenses at the Company's systems integration businesses,
continuing high operating expenses at the Company's United Kingdom subsidiary as
well as the Company's share of losses from its equity investment in Chile
amounting to $691,000.
Higher operating expenses for the first half reflect the items discussed above
as well a provision for closing an administrative office in Germany recorded in
the first quarter.
Write-Down of Long-Lived Assets and Other Special Charges -
The Company accrued $1,962,000 for lease termination and moving costs in
connection with the finalization of a lease agreement on the new location for
corporate offices. The move is expected to commence in September, 1998.
Other write-downs for goodwill and fixed assets associated with the Company's
United Kingdom and System Integration operations were recorded in the second
quarter. These write-downs and other costs amounted to $7,891,000. The Company
has determined that these assets are not recoverable and has written them off.
Amortization of Intangible Assets-
Amortization of intangible assets increased by $0.1 million from $1.8 million in
the second quarter of 1997 to $1.9 million in the second quarter of 1998. This
increase reflects a change in amortization in the second quarter of 1997 related
to an adjustment to a preliminary estimate of intangible assets related to the
WKD acquisition and additional amortization from 1997 acquisitions, partially
offset by the completion during the latter part of 1997 of the amortization of
several intangible assets.
For the six periods ended June 12, 1998 and June 13, 1997, amortization
decreased $0.6 million, from $4.4 million in 1997 to $3.8 million in 1998,
primarily reflecting the completion during the latter part of 1997 of the
amortization of several intangible assets, partially offset by additional
amortization from 1997 acquisitions.
Operating Profit (Loss) -
Operating loss was $8.3 million, or (3.5%) of service revenues, for the second
quarter of 1998 as compared to an operating profit of $5.9 million, or 2.5% of
service revenues, for the same period last year. For the six periods ended June
12, 1998, operating loss was $5.0 million, or (1.1%), of service revenues as
compared to an operating profit of $10.4 million, or 2.3%, in the corresponding
1997 period. Operating profit decreased as a percentage of revenues due to a
decrease in the gross profit margin, higher operating expenses discussed above
and the write-down of long-lived assets and other special charges also discussed
above.
Income Taxes -
The Company's positive tax provision in the quarter and year-to-date, in spite
of an overall loss, reflects the non-deductibility of the Company's write-down
of goodwill and other intangibles previously discussed. The incremental
statutory rate for the six months ended June 12, 1998 and June 13, 1997 was 40%
(35% federal and 5% state).
9
<PAGE>
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
At June 12, 1998, the Company had $14.8 million in cash, a decrease of $9.5
million from December 26, 1997; and $22.0 million in marketable securities, a
$22.0 million increase from December 26, 1997. Net cash provided by operating
activities of $18.2 million and $0.4 million of net cash provided by financing
activities was reduced by $28.1 million of net cash payments relating to
investing activities. The Company's principal financing activities during the
first six periods of 1998 were $0.5 million of payments on the revolving line of
credit and $0.9 million of cash receipts related to the exercise of stock
options. The Company's principal investing activities during the first six
periods of 1998 were net purchases of marketable securities ($22.0 million) and
the purchase of computer and other equipment ($6.1 million).
Pinkerton's cash needs during the first six months of each year are greater
because of higher payroll taxes. In addition, the Company is required to make
annual principal payments of approximately $8.6 million (in the month of June)
through the year 2000 in repayment of its Senior Notes. Semi-annual interest
payments of approximately $1.3 million and $0.9 million related to the Senior
Notes are due in June and December 1998, respectively. The principal and
interest payments described above to be made in June 1998 occur in the Company's
third fiscal quarter.
The Company has an acquisitions program intended to implement its strategy to
become a world-class, global security solutions provider. The Company also has
an ongoing program to replace capital equipment and upgrade systems as required.
Both of these activities will continue for the foreseeable future.
The Company has an unsecured revolving credit facility with a group of banks for
borrowings up to $100.0 million, of which $50.0 million may be letters of
credit. No cash borrowings have been made during the first six periods of 1998.
At June 12, 1998 there were DM 13.0 million ($7.2 million) of cash borrowings
outstanding under the revolving line of credit and $29.5 million in letters of
credit had been issued by the Company to secure obligations under the Company's
self-insurance programs. The Company believes existing liquid resources, cash
generated from operations and funds available under the revolving credit
facility are sufficient for all planned operating and capital requirements. The
Company also has access to capital markets, if necessary, to raise funds for
working capital, capital spending and other investments for business growth.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve estimates, assumptions and
uncertainties, and accordingly, actual results could differ materially from
those expressed in the forward-looking statements. Such uncertainties include,
among others, the factors referred to in the Company's Annual Report on Form 10-
K for the fiscal year ended December 26, 1997.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of Stockholders of the Company was held on
April 30, 1998. At the Annual Meeting the stockholders elected three
directors of the Company for a term of three years, approved an
amendment to the 1995 Pinkerton Performance and Equity Incentive Plan
to increase the number of shares with respect to which awards may be
made under the Plan, and ratified the selection of the Company's
independent auditors for the current fiscal year.
The votes for the election of directors were:
<TABLE>
<CAPTION>
Shares Voted "FOR" Shares "WITHHELD"
------------------ -----------------
<S> <C> <C>
Gerald D. Murphy 10,927,952 197,527
J. Kevin Murphy 10,927,502 197,977
William H. Webster 10,926,911 198,568
</TABLE>
The votes for the approval of the amendment to the 1995 Pinkerton
Performance and Equity Incentive Plan were:
<TABLE>
<CAPTION>
Shares Voted "FOR" Shares voted "AGAINST" Abstentions/ Non-Votes
- ------------------ ---------------------- ----------------------
<S> <C> <C>
7,482,710 2,907,780 734,989
</TABLE>
The votes for the ratification of the selection of independent auditors
were:
<TABLE>
<CAPTION>
Shares Voted "FOR" Shares voted "AGAINST" Abstentions / Non-Votes
- ------------------ ---------------------- -----------------------
<S> <C> <C>
11,119,024 2,271 4,184
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Fifth Amendment to the 1995 Pinkerton Performance and Equity
Incentive Plan
10.2 Sixth Amendment to the 1995 Pinkerton Performance and Equity
Incentive Plan
27.1 Financial Data Schedule
27.2 Financial Data Schedule (Restated)
(b) Form 8-K
No Current Reports on Form 8-K were filed during the period covered by
this report.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PINKERTON'S, INC.
Date: July 24, 1998 BY: /S/ JAMES P. McCLOSKEY
-----------------------------------
James P. McCloskey
ITS: Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: July 24, 1998 BY: /S/ STEVEN A. LINDSEY
-----------------------------------
Steven A. Lindsey
ITS: Vice President and Controller
(Principal Accounting Officer)
12
<PAGE>
FIFTH AMENDMENT TO THE
1995 PINKERTON PERFORMANCE AND EQUITY INCENTIVE PLAN
The 1995 Pinkerton Performance and Equity Incentive Plan is hereby amended
to replace in its entirety the first sentence of Section 4(a) - Maximum Number
of Shares of Common Stock with the following sentence:
The maximum number of shares of Common Stock in respect of which Awards may
be granted under the Plan, subject to adjustment as provided in Section 15
of the Plan, shall be Two Million, Two Hundred Ninety-Six Thousand, Eighty-
Seven (2,296,087).
IN WITNESS THEREOF, the undersigned authorized officer of Pinkerton's, Inc.
certifies that the foregoing Amendment has been duly approved and adopted by the
Board of Directors on December 18, 1997 and the stockholders on April 30, 1998.
PINKERTON'S, INC.
By: /s/ C. Michael Carter
---------------------------
C. Michael Carter
Executive Vice President, General
Counsel and Corporate Secretary
<PAGE>
SIXTH AMENDMENT TO THE
1995 PINKERTON PERFORMANCE AND EQUITY INCENTIVE PLAN
The 1995 Pinkerton Performance and Equity Incentive Plan is hereby amended
by deleting it its entirety Section 7(a) thereof and substituting the following
in lieu therefor:
"(a) Automatic Stock Option Grants to Non-Employee Directors.
--------------------------------------------------------
Notwithstanding any other provision of the Plan, each Non-Employee Director
shall receive on the day of each annual stockholders meeting of the Company
during the term of the Plan, a Non-Qualified Stock Option to purchase 4,500
shares of Common Stock provided that the Non-Employee Director continues in
office after such annual meeting. Each such Non-Qualified Stock Option shall
have a term of ten years and shall not be exercisable unless the holder thereof
shall have continued in office until the business day immediately preceding the
date of the following year's annual stockholders meeting. Except as provided in
Section 13 of the Plan, no Stock Option may be exercised by a Non-Employee
Director unless the holder thereof is at the time of such exercise a member of
the Board and has been continuously a member of the Board since the date such
Non-Qualified Stock Option was granted. The price per share of Common Stock to
be paid by the Non-Employee Director shall equal the Fair Market Value of one
share of Common Stock on the date the Non-Qualified Option is granted and the
purchase price of the shares of Common Stock as to which such an option is
exercised shall be paid only in cash."
IN WITNESS THEREOF, the undersigned authorized officer of Pinkerton's, Inc.
certifies that the foregoing Amendment has been duly approved and adopted by the
Board of Directors on April 30, 1998.
PINKERTON'S, INC.
By: /s/ C. Michael Carter
-------------------------
C. Michael Carter
Executive Vice President, General
Counsel and Corporate Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-26-1997 JUN-12-1998
<PERIOD-START> DEC-27-1996 DEC-27-1997
<PERIOD-END> DEC-26-1997 JUN-12-1998
<CASH> 24,243 14,770
<SECURITIES> 0 22,000
<RECEIVABLES> 149,668 148,363
<ALLOWANCES> 2,948 2,674
<INVENTORY> 4,190 4,634
<CURRENT-ASSETS> 189,393 199,378
<PP&E> 46,430 44,874
<DEPRECIATION> 29,685 29,506
<TOTAL-ASSETS> 324,196 326,717
<CURRENT-LIABILITIES> 102,794 112,666
<BONDS> 25,019 24,323
0 0
0 0
<COMMON> 75,341 76,264
<OTHER-SE> 68,288 59,094
<TOTAL-LIABILITY-AND-EQUITY> 324,196 135,358
<SALES> 1,001,889 465,596
<TOTAL-REVENUES> 1,001,889 465,596
<CGS> 877,016 410,973
<TOTAL-COSTS> 877,016 410,973
<OTHER-EXPENSES> 97,551 59,172
<LOSS-PROVISION> 885 479
<INTEREST-EXPENSE> 2,897 1,300
<INCOME-PRETAX> 23,540 (6,328)
<INCOME-TAX> 8,807 2,192
<INCOME-CONTINUING> 14,733 (8,520)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,733 (8,520)
<EPS-PRIMARY> 1.17 (.68)
<EPS-DILUTED> 1.12 (.68)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-13-1997
<PERIOD-START> DEC-28-1996
<PERIOD-END> JUN-13-1997
<CASH> 22,119
<SECURITIES> 2,007
<RECEIVABLES> 147,007
<ALLOWANCES> 3,154
<INVENTORY> 3,629
<CURRENT-ASSETS> 188,286
<PP&E> 45,722
<DEPRECIATION> 30,218
<TOTAL-ASSETS> 326,086
<CURRENT-LIABILITIES> 106,311
<BONDS> 35,759
0
0
<COMMON> 75,048
<OTHER-SE> 58,884
<TOTAL-LIABILITY-AND-EQUITY> 326,086
<SALES> 451,257
<TOTAL-REVENUES> 451,257
<CGS> 397,524
<TOTAL-COSTS> 397,524
<OTHER-EXPENSES> 43,004
<LOSS-PROVISION> 290
<INTEREST-EXPENSE> 1,579
<INCOME-PRETAX> 8,860
<INCOME-TAX> 4,164
<INCOME-CONTINUING> 4,696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,696
<EPS-PRIMARY> .37<F1>
<EPS-DILUTED> .36<F1>
<FN>
<F1>EARNINGS PER SHARE OF THE REGISTRANT HAVE BEEN RESTATED TO REFLECT A
THREE-FOR-TWO STOCK SPLIT DISTRIBUTED ON AUGUST 27, 1997 AND TO REFLECT THE
APPLICATION OF SFAS NO. 128, "EARNINGS PER SHARE."
</FN>
</TABLE>
