<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1995
Commission file number: 33-15419
BORG-WARNER SECURITY CORPORATION
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3408028
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State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
200 South Michigan Avenue, Chicago, Illinois 60604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312)322-8500
-------------
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
----- -----
On July 31, 1995 the registrant had 22,013,870 shares of Common Stock and
1,149,600 shares of Series 1 Non-Voting Common Stock outstanding.
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<PAGE>
-1-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
THREE MONTHS ENDED JUNE 30, 1995
INDEX
Page No.
--------
PART I. Financial Information
---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
at June 30, 1995 and December 31, 1994 . . . . . . . . . 2
Consolidated Statement of Earnings for
the three months ended June 30, 1995 and 1994 . . . . . . 3
Consolidated Statement of Earnings for
the six months ended June 30, 1995 and 1994 . . . . . . . 4
Condensed Consolidated Statement of Cash Flows for
the six months ended June 30, 1995 and 1994 . . . . . 5
Notes to the Consolidated
Financial Statements. . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 11
PART II. Other Information
-----------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 14
Item 2. Changes in Securities . . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 15
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
-2-
Part I. Financial Information
Item 1. Financial Statements
--------------------
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 13.3 $ 15.8
Receivables, net 115.2 106.7
Inventories 12.9 12.2
Other current assets 28.5 24.8
------ ------
Total current assets 169.9 159.5
Property, plant and equipment, at cost 518.2 537.7
Less accumulated depreciation 244.3 242.6
------ ------
Net property, plant and equipment 273.9 295.1
Net excess purchase price
over net assets acquired 280.2 286.5
Deferred tax asset 51.2 50.8
Other assets 59.8 38.4
------ ------
$835.0 $830.3
====== ======
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Notes payable $ 8.8 $ 14.5
Accounts payable and accrued expenses 175.3 181.8
------ ------
Total current liabilities 184.1 196.3
Long-term debt 473.6 454.0
Other long-term liabilities 131.4 136.2
Capital stock:
Common stock 0.3 0.2
Series I non-voting common stock - -
Other stockholders' equity 45.6 43.6
------ ------
Total stockholders' equity 45.9 43.8
------ ------
$835.0 $830.3
====== ======
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
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BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
<S> <C> <C>
1995 1994
------ ------
Net service revenues $467.3 $444.1
Cost of services 377.0 354.6
Selling, general and
administrative expenses 57.0 51.4
Depreciation 14.3 14.3
Amortization of excess purchase
price over net assets acquired 3.6 4.2
Other income - (0.4)
Interest expense and finance charges 14.4 12.3
------ ------
Earnings before income taxes 1.0 7.7
Provision for income taxes 0.4 3.1
------ ------
Net earnings $ 0.6 $ 4.6
====== ======
Net earnings per share $ .03 $ .20
====== ======
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
-4-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1995 1994
------ ------
<S> <C> <C>
Net service revenues $929.7 $883.2
Cost of services 749.4 704.2
Selling, general and
administrative expenses 114.7 104.1
Depreciation 29.2 28.6
Amortization of excess purchase
price over net assets acquired 7.4 8.3
Other income - (0.9)
Interest expense and finance charges 28.2 24.2
------ ------
Earnings before income taxes 0.8 14.7
Provision for income taxes 0.1 5.9
------ ------
Net earnings $ 0.7 $ 8.8
====== ======
Net earnings per share $ .03 $ .38
====== ======
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
-5-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
------- -------
<S> <C> <C>
OPERATING:
Net earnings $ 0.7 $ 8.8
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Non-cash charges to earnings:
Depreciation and amortization 36.6 36.9
Amortization of debt discounts 1.0 1.0
Changes in assets and liabilities:
Decrease in receivables 9.5 5.4
(Increase) in other current assets (4.4) (4.0)
Increase (Decrease) in accounts payable and accrued expenses (6.4) 5.1
Net change in other long-term assets and liabilities (6.3) (5.4)
Cash used for discontinued Centaur operations (2.0) -
------ ------
Net cash provided by operating activities 28.7 47.8
------ ------
INVESTING:
Capital expenditures and investments in sales-type
leases (27.6) (33.8)
Payments related to businesses acquired - (9.5)
Proceeds from sales of other assets 1.0 3.0
------ ------
Net cash (used in) investing activities (26.6) (40.3)
------ ------
FINANCING:
Net increase (decrease) in notes payable (5.7) 3.5
Increases in long-term debt 59.7 33.6
Reductions in long-term debt (41.1) (28.4)
Net (decrease) in receivables sold (18.0) (10.0)
Sales of treasury common stock 0.5 0.7
------ ------
Net cash (used in) financing activities (4.6) (0.6)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2.5) 6.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15.8 11.2
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13.3 $ 18.1
====== ======
</TABLE>
(See accompanying notes to financial statements)
<PAGE>
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The financial statements of Borg-Warner Security Corporation and
Consolidated Subsidiaries ("Company") have been prepared in accordance with
the instructions to Form 10-Q. The statements are unaudited, but include all
adjustments, consisting of normal recurring items, which the Company considers
necessary for a fair presentation of the information set forth herein. The
results of operations for the three and six month periods ended June 30, 1995
are not necessarily indicative of the results to be expected for the entire
year.
(2) The allowance for doubtful accounts was $5.9 million at June 30, 1995 and
$7.7 million at December 31, 1994. The accumulated amortization on excess
purchase price over net assets acquired was $85.9 million at June 30, 1995 and
$78.5 million at December 31, 1994. The outstanding balance of receivables
sold at June 30, 1995 was $94.0 million, compared with $112.0 million sold at
December 31, 1994.
Net cash payments for interest and income taxes were as follows (in millions
of dollars):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
----- -----
<S> <C> <C>
Interest paid $28.4 $22.6
Income taxes refunded (0.6) (7.5)
</TABLE>
(3) The Company's provisions for income taxes for the three and six month
periods ended June 30, 1995 and 1994 reflect estimated annual tax rates for
the year applied to federal, state and foreign income.
<PAGE>
-7-
(4) The following tables summarize the capitalization of the Company at June
30, 1995 and December 31, 1994 (in millions of dollars):
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
-------------------- -------------------
DEBT Current Long-Term Current Long-Term
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Bank borrowings (at an average rate of
7.4% in 1995 and 5.4% in 1994; and
7.2% at June 30, 1995) $ - $ 50.0 $ - $ 88.0
Bank revolving commitment
loan due through 1999 (at an average
rate of 8.2% in 1995 and 7.6% in 1994;
and 8.1% at June 30, 1995) - 164.9 - 105.2
8% notes (face amount of $100 million
due 1996) - 98.5 - 97.5
Unsecured notes (at an average
rate of 6.6% in 1995 and 5.9% in 1994;
and 7.3% at June 30, 1995) 0.7 0.9 5.3 1.3
Capital lease liability (at an average
rate of 8.4% in 1995 and 9.2% in 1994;
and 8.4% at June 30, 1995) 8.1 10.3 9.2 13.0
9-1/8% senior subordinated notes
due 2003 - 149.0 - 149.0
---- ------ ----- ------
Total notes payable and long-term debt $8.8 $473.6 $14.5 $454.0
==== ====== ===== ======
STOCKHOLDERS' EQUITY June 30, December 31,
1995 1994
------ ------------
Common stock:
Common stock $ 0.3 $ 0.2
Series I non-voting common stock - -
Preferred stock - -
Capital in excess of par value 29.6 30.9
Notes receivable - management stock purchase (0.4) (1.0)
Retained earnings 30.4 29.7
Cumulative translation adjustment (0.2) (0.5)
------ ------
59.7 59.3
Less treasury common stock, 2,004,524 shares
in 1995 and 2,237,344 shares in 1994, at cost (13.8) (15.5)
------ ------
Total stockholders' equity $ 45.9 $ 43.8
====== ======
</TABLE>
<PAGE>
-8-
<TABLE>
<CAPTION>
CAPITAL STOCK - NUMBER OF SHARES June 30, December 31,
(Thousands of shares) 1995 1994
-------- ------------
<S> <C> <C>
Common Stock, $.01 par value:
Authorized 50,000.0 50,000.0
Issued 22,446.1 22,435.7
Outstanding 22,012.0 21,758.4
Series I non-voting common stock,
$.01 par value:
Authorized 25,000.0 25,000.0
Issued 2,720.0 2,720.0
Outstanding 1,149.6 1,160.0
Preferred stock, $.01 par value:
Authorized 5,000.0 5,000.0
Issued and outstanding - -
</TABLE>
In March 1995, the Company amended its revolving and letter of credit
agreements with respect to covenants related to earnings, leverage, fixed
charge coverage, net worth, capital expenditures and acquisitions. In
connection with the renegotiation of financial covenants required to be
maintained under its receivables transfer facility, the Company has agreed to
increased reserve requirements and certain other changes. In addition, the
maturity date of this facility has been changed to September 30, 1995 from
November 1997.
<PAGE>
-9-
(5) Earnings per common share are based on average outstanding common shares
and common share equivalents. Common share equivalents recognize the dilutive
effects of common shares which may be issued in the future upon exercise of
certain stock options. The number of shares used in the computation of
earnings per share were as follows (in thousands of shares):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average common shares
outstanding 23,101 22,897 23,027 22,876
Common stock equivalents 195 288 203 271
------ ------ ------ ------
Total used for computation
of per share earnings 23,296 23,185 23,230 23,147
====== ====== ====== ======
</TABLE>
(6) The Company's discontinued property and casualty insurance subsidiary
("Centaur") ceased writing insurance in 1984 and has been operating under
rehabilitation since September 1987. Rehabilitation is a process supervised
by the Illinois Director of Insurance to attempt to compromise claim
liabilities at an aggregate level that is not in excess of Centaur's assets.
In rehabilitation, Centaur's assets are currently being used to satisfy claim
liabilities under direct insurance policies written by Centaur. Any remaining
assets will be applied to Centaur's obligations to other insurance companies
under reinsurance contracts. If all of Centaur's obligations are not
satisfied through rehabilitation, it is possible that satisfaction could be
sought from the Company for Centaur's liabilities.
The foregoing has resulted in one pending lawsuit against the Company, certain
of its current and former subsidiaries, and directors and officers of certain
current and former subsidiaries for recovery of alleged damages incurred
because of Centaur's failure to satisfy its reinsurance obligations. The
lawsuit seeks in excess of $100 million for current losses, future losses and
other damages and also seeks punitive damages. The Company believes that any
damages for failure to satisfy reinsurance obligations are solely the
responsibility of Centaur and that the resolution of the lawsuit relating to
Centaur, including the Company's indemnification obligations to certain former
officers and directors, will not have a material adverse effect on its
financial position or future operating results; however, no assurance can be
given as to the ultimate outcome with respect to such lawsuit.
<PAGE>
-10-
The Company and certain of its current and former subsidiaries have been
identified by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties("PRPs") at several
hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and equivalent state laws and, as
such, may be liable for the cost of cleanup and other remedial activities at
these sites. Responsibility for cleanup and other remedial activities at a
Superfund site is typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters individually or in the
aggregate will have a material adverse effect on its financial position or
future operating results, generally either because the maximum potential
liability at a site is not large or because liability will be shared with
other PRPs, although no assurance can be given with respect to the ultimate
outcome of any such liability. Based on its estimate of allocations of
liability among PRPs, the probability that other PRPs, many of whom are large,
solvent public companies, will fully pay the costs allocated to them,
currently available information concerning the scope of contamination at such
sites, estimated remediation costs at such sites, estimated legal fees and
other factors, the Company has made provisions for indicated environmental
liabilities in the aggregate amount of approximately $11 million (relating to
environmental matters with respect to discontinued operations of the Company).
If any environmental liability claim relating to the Company's former chemical
and plastics business is made, the Company is indemnified by the purchaser of
such business, General Electric Company. Since the disposition, the Company
has notified General Electric Company of various claims made with respect to
the Company's former chemical and plastic business and General Electric
Company has assumed all of such claims and has not contested its
indemnification obligations. There is no dollar limitation on the General
Electric Company's indemnification and there are no other material limitations
or exclusions with respect thereto. If any environmental liability claim
relating to the operations of the Company's discontinued automotive subsidiary
is made, the Company will be indemnified by such former subsidiary.
The Company believes that the various asserted claims and litigation in which
it is involved will not materially affect its financial position or future
operating results, although no assurance can be given with respect to the
ultimate outcome of any such claim or litigation.
<PAGE>
-11-
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
RESULTS OF OPERATIONS
---------------------
Consolidated net service revenue for the three and six month periods ended June
30, 1995 increased 5% over the comparable 1994 periods. The revenue increases
resulted from higher volume, rate increase programs and recognition of Alarm
unit revenue under sales-type leases. The revenue contributed by each of the
Company's business units was as follows (in millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------ ------ ------- -------
<S> <C> <C> <C> <C>
Guard $307.7 $298.4 $609.7 $589.4
Alarm 63.1 49.9 128.3 102.5
Armored 56.8 51.7 113.4 103.8
Courier 39.7 44.1 78.3 87.5
------ ------ ------ ------
Total $467.3 $444.1 $929.7 $883.2
====== ====== ====== ======
</TABLE>
Consolidated revenue for the three and six month periods ended June 30, 1995
includes $9.9 million and $20.7 million, respectively, related to recognition
of certain alarm services contracts as sales-type leases. There was no
comparable activity in 1994. Excluding the impact of the sales-type leases,
consolidated revenue for the three and six month periods ended June 30, 1995
increased 3% over the comparable 1994 periods.
Operating profit, which is pretax earnings before interest expense and
unallocated corporate expenses, declined 21% and 24% for the second quarter and
first six months of 1995, respectively, as compared to 1994. The decline in
operating profit primarily reflects lower margins earned by the business units
as direct costs, primarily labor costs, outpaced the Company's ability to
implement price increases under the current competitive market conditions.
Guard revenue increased 3% in the second quarter and first six months of 1995
compared to the same periods in 1994. The increase is primarily due to increased
guard hours and higher average billing rates. Operating profit declined 6% and
4% for the second quarter and first half of 1995, respectively, primarily
because of higher wages and increased amounts of unbilled overtime. Labor costs
have been adversely impacted by an increased security officer turnover rate and
continued low unemployment rates in certain labor markets.
<PAGE>
-12-
The Company is continuing to consolidate its guard services administrative
support staff and certain field operations to reduce overhead costs and provide
customers with more streamlined and standardized service.
Alarm revenue increased 26% and 25% for the second quarter and first half of
1995, respectively, compared to the comparable 1994 periods. Excluding the
impact of the sales-type leases, the revenue increases were 4% and 5% for the
same periods, primarily as a result of higher direct sales of commercial alarm
installations and higher service revenue on residential operations. The increase
in revenue related to sales-type leases will be offset in future periods by
reduced rental revenue from equipment under operating leases. Alarm's operating
profit declined 30% and 45% for the second quarter and first six months of 1995,
respectively. Alarm has kept prices stable in an attempt to lower cancellation
rates; however, customer cutbacks and closures have adversely affected Alarm's
cancellation rate. Increased operating expenses reflect efforts to improve
customer service and to increase residential market penetration.
Armored revenue increased 10% and 9% for the second quarter and first six months
of 1995, respectively, compared to 1994. The increases resulted primarily from
increased prices and higher volume in the armored transport and ATM service
operations. Operating profit in the second quarter of 1995 was unchanged from
the prior-year period, and increased 10% for the first six months of 1995
compared to 1994. During the second half of 1994 the Company experienced an
escalating rate of cargo losses and increased security costs. Although actual
loss experience has improved significantly, the Company is maintaining its
provision for reserves at a higher level through the first half of 1995. The
unit continues to invest in programs for improvements in both safety and service
quality.
Courier revenue declined 10% in the second quarter and first six months of 1995
compared to 1994. The lower revenue results from a reduced volume of traditional
financial document shipments. This lost volume has been partially offset by
increased activity in the unit's package express business. Operating profit
declined sharply in 1995 compared to 1994 due to the reduced revenues against a
fixed cost base in established route structures. Pricing pressures are expected
to continue in this business because of excess capacity combined with continued
consolidation within the banking industry. The courier unit will continue its
efforts to improve margins by utilizing excess capacity in its current route
structures and through internal cost reduction efforts.
Interest expense and finance charges increased 17% in the second quarter and
first half of 1995 over the comparable 1994 periods due both to higher market
interest rates combined with increased rates under the March 1995 credit
agreement amendment. The income tax provision recorded in the first half of 1995
includes an adjustment to deferred income taxes of $.2 million. This adjustment
occurred from a change in the tax basis of certain liabilities as a result of
sales and settlements.
<PAGE>
-13-
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
Current liabilities exceeded current assets at June 30, 1995 and December 31,
1994 due to the sale of receivables pursuant to a receivable transfer facility.
The outstanding balance of sold receivables was $94 million and $112 million at
June 30, 1995 and December 31, 1994, respectively. The proceeds of these sales
were applied to reduce long-term debt. The levels of receivables, inventory and
current liabilities are partly seasonal in nature and are influenced by the
timing of billings, collections and payrolls. The Company's policy is to keep
working capital as low as is operationally feasible to minimize related carrying
costs.
Net cash provided by operating activities was $28.7 million in the first six
months of 1995 compared with $47.8 million in the comparable 1994 period. The
decrease is primarily the result of lower earnings combined with fluctuations in
working capital requirements, including payroll accruals. Long-term debt
increased to $473.6 million at June 30, 1995 compared with $454.0 million at
December 31, 1994 due primarily to the decrease in receivables sold under the
receivables transfer facility. Total debt (including receivables sold) declined
slightly. The Company expects that continuing operations, together with existing
credit facilities and replacements thereof, will generate sufficient cash to
fund current operating requirements and capital expenditures.
To avoid potential non-compliance with the covenants contained in its revolving
and letter of credit agreements, the Company amended these facilities in March
1995 with respect to covenants related to earnings, leverage, fixed charge
coverage, net worth, capital expenditures and acquisitions. In connection with
the renegotiation of financial covenants required to be maintained under its
receivables transfer facility, the Company has agreed to increased reserve
requirements and certain other changes. In addition, the maturity date of this
facility has been changed to September 30, 1995 from November 1997.
The Company is currently negotiating $690 million in financing through a
syndicate of banks and other financial institutions. The new financing will
replace existing debt facilities, including the $100 million principal amount of
8% notes due 1996 and the Company's existing revolving credit, letter of credit
and receivables transfer facilities. The new financing facility is subject to
certain conditions, including successful syndication and other customary closing
matters.
As discussed more fully in Note 6 of the Notes to Consolidated Financial
Statements, various complaints seeking substantial dollar amounts have been
filed against the Company. In each of these cases, the Company believes that it
has a defendable position or has adequate reserves to protect the Company from
material losses. The Company believes that it has established adequate
provisions for litigation liabilities in its financial statements in accordance
with generally accepted accounting principles.
The Company believes that none of these matters individually or in the aggregate
will have a material adverse effect on its financial position or future
operating results, although no assurance can be given with respect to the
ultimate outcome of any such proceeding.
<PAGE>
-14-
Part II. Other Information
Item 1. Legal Proceedings
-----------------
As previously reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, Centaur Insurance Company ("Centaur"), the Company's
discontinued property and casualty insurance subsidiary, has been operating
under rehabilitation since September 1987. Rehabilitation is a process
supervised by the Illinois Director of Insurance to attempt to compromise
Centaur's liabilities at an aggregate level that is not in excess of its assets.
The foregoing has resulted in one pending lawsuit against the Company for
recovery of alleged damages incurred as a result of Centaur's failure to satisfy
its reinsurance obligations.
In June 1988, the Insurance Commissioner of the State of California as trustee
of Mission Insurance Trust and four other affiliated insurance companies filed a
complaint in the Superior Court of the State of California, County of Los
Angeles, against the Company and certain of its current and former subsidiaries
alleging damages resulting from the failure of Centaur to satisfy its
reinsurance obligations. This lawsuit alleges damages to plaintiff, as Trustee
of Mission Insurance Company, Mission National Insurance Company, Enterprise
Insurance Company, Holland-America Insurance Company and Mission Reinsurance
Corporation, based on (i) conduct justifying piercing the corporate veil, (ii)
fraud and (iii) negligent misrepresentation. The complaint was amended in 1989
to add 11 former officers and directors of the Company's current and former
subsidiaries as defendants and to allege additional causes of action based on
(i) breach of fiduciary duty and imposition of personal liability, (ii)
fraudulent conveyance, (iii) constructive trust and (iv) conspiracy and to add a
claim for punitive damages. The complaint was further amended in February 1995
to allege additional causes of action based on negligence and breach of the
covenant of good faith and fair dealing. The second amended complaint seeks
judgment for current losses, future losses and other damages in an amount
alleged to exceed $100 million.
In 1989, the Company filed a motion to dismiss or stay the action, pending
resolution of Centaur's rehabilitation in Illinois. The court declined to
dismiss the action, but entered an order staying the action until the
rehabilitation proceeding is resolved, except that the parties may pursue
discovery to preserve evidence. In 1992, the Centaur rehabilitator filed a
motion to intervene and dismiss the complaint on the grounds that the plaintiff
lacked standing and that its claims were not ripe for adjudication. The motion
is pending. In 1993, six of the 11 individual defendants were dismissed from the
lawsuit. In September 1994, the court effectively lifted its stay. Active
discovery is now being pursued. The Company intends to defend this lawsuit
vigorously.
<PAGE>
-15-
Item 2. Changes in Securities
---------------------
Inapplicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On April 25, 1995, the Company held its annual meeting of
stockholders. At such meeting, J. Joe Adorjan, James J. Burke,
Jr., Albert J. Fitzgibbons, III were elected as directors to
serve for a term of three years. Each of Neal F. Farrell, Dale W.
Lang, Jr., Robert A. McCabe, Alexis Michas, H. Norman Schwarzkopf
and Donald C. Trauscht continued to serve as directors following
the meeting. At such meeting, 17,443,671 shares were voted (and
114,906 shares were withheld) for the election of Mr. Adorjan,
17,514,954 shares were voted (and 37,766 shares were withheld)
for the election of Mr. Burke, and 17,515,762 shares were voted
(and 36,958 shares were withheld) for the election of Mr.
Fitzgibbons.
At such meeting, the Company's stockholders ratified the
appointment of Deloitte & Touche LLP as auditors by a vote of
17,537,342 shares in favor, 7,983 shares against and 3,252 shares
abstained. The Company's stockholders also rejected a proposal
offered at the meeting to separate the offices of Chairman and
Chief Executive Officer by a vote of 637,176 shares in favor,
14,242,681 shares against, 82,960 shares abstained and 2,589,903
shares not voting as broker non-votes.
Item 5. Other Information
-----------------
Effective August 1, 1995, Neal F. Farrell resigned from his
positions as officer and director of the Company in connection
with his retirement.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(A) Exhibits:
27 - Financial Data Schedule
(B) Reports on Form 8-K:
None
<PAGE>
-16-
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.
Borg-Warner Security Corporation
--------------------------------
(Registrant)
By /s/ Timothy M. Wood
------------------------
(Signature)
Timothy M. Wood
Vice President, Finance
(Principal Financial and Accounting Officer)
Date: August 11, 1995
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