SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
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Name of Registrant as Specified in Its Charter:
Borg-Warner Security Corporation
Name of Person(s) Filing Proxy Statement:
Borg-Warner Shareholders Committee
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DEFINITIVE PROXY STATEMENT
BORG-WARNER SHAREHOLDERS COMMITTEE
25 Louisiana Avenue
Washington, D.C. 20001
Tel: (202) 624-8100
Fax: (202) 624-6833
INDEPENDENT SHAREHOLDER SOLICITATION
Re: Borg-Warner Security Corp..
ANNUAL MEETING: APRIL 25, 1995
10:00 a.m.
200 S. Michigan Ave.
Chicago, Ill.
Released to shareholders
March 7, 1995
Dear fellow Borg-Warner Security Corp. shareholder,
You may well be disappointed in the performance of Borg-
Warner Security Corp. We are writing to offer what we believe is
a necessary reform in turning around our company: establishing
an independent director as a chairman of the board.
Here is the record under the tenure of the current Chairman
and CEO Donald Trauscht:
* The company stock slid from a high of nearly $22 in
January 1994 to $7, which it reached February 1, 1995.
* The company reported earnings of 3 cents a share for the
fourth quarter of 1994, compared with 48 cents a share in the
same quarter last year. Before accounting for tax accruals,
the company actually lost $10 million in the forth quarter.
* In January, 1995, Borg-Warner attributed its problems, in
part, to "an unusually high rate of external theft, which
caused unusually high cargo losses and higher insurance
premiums," explained company spokesman Joe Allen to Reuters.
in January 1995 (emphasis added). We feel this is a disquieting
admission for a security company.
* After disclosing disappointing earnings in the third
quarter of 1994, the company said that "the escalating rate of
violent armed attacks against armored and automated-teller-
machine personnel is dramatically increasing security costs and
insurance premiums throughout the industry." (emphasis added)
[GRAPH OF STOCK HISTORY FROM IPO TO 2/95:]
Date Borg-Warner closing price
2/93 21
3/93 20.6
4/93 21.25
5/93 20.8
6/93 20.6
7/93 19.25
8/93 21.4
9/93 19.75
10/93 20
11/93 20.25
12/93 20.5
1/94 21.8
2/94 18.5
3/94 16.8
4/94 14.8
5/94 14.25
6/94 11.25
7/94 11.25
8/94 12.1
9/94 10.8
10/94 10.4
11/94 9.4
12/94 9.75
1/95 8.12
2/95 6.6
* Similar problems plagued the company in 1993, when a memo
to all Wells Fargo Armored/ATM associates pointed out that its
$18 million in claims and insurance premiums associated with
theft, negligence, worker's compensation, vehicle accidents
and general liability claims "is almost double the profit
income of the company."
* Crain's Chicago Business identified the company as
"biggest loser" of the week in stock trading between Jan. 30 and
Feb. 3.
* Competitor Brinks reported an 18% increase in its 4th
quarter earnings, compared with the 4th quarter of 1993.
Brinks reported record operating profit in 1994. Brinks
competes with Borg-Warner's guard and armored truck units.
[GRAPH COMPARING STOCK PRICES:]
Date Borg-Warner closing price Dow Jones Index and
(Indexed to 100) Commercial Services
(Indexed to 100)
2/93 100 457.797 100
3/93 98.09524 457 99.82591
4/93 101.1905 434 94.80184
5/93 99.04762 443 96.76778
6/93 98.09524 498 108.7818
7/93 91.66667 493 107.6897
8/93 101.9048 487 106.379
9/93 94.04762 484 105.7237
10/93 95.2381 474 103.5393
11/93 96.42857 477 104.1947
12/93 97.61905 491 107.2528
1/94 103.8095 516 112.7137
2/94 88.09524 496 108.345
3/94 80 456 99.60747
4/94 70.47619 470 102.6656
5/94 67.85714 472 103.1025
6/94 53.57143 455 99.38903
7/94 53.57143 465 101.5734
8/94 57.61905 496 108.345
9/94 51.42857 481 105.0684
10/94 49.52381 477 104.1947
11/94 44.7619 457 99.82591
12/94 46.42857 463 101.1365
1/95 38.66667 470 102.6656
2/95 31.42857 498 108.7818
This graph compares the percentage change in share prices
of Borg-Warner Security Corp. and the Dow Jones Industrial &
Commercial Services Index. This index was used by the company in
its 1994 proxy, where it is described as tracking "the price
performance of equity securities of companies that provide
services to other commercial enterprises." This graph illustrates
what would have happened if $100 were invested in Borg-Warner
in February 1993, compared with $100 invested in the index.
In November, 1994, Standard & Poors along with Duff & Phelps
placed Borg-Warner on "watch" for a possible downgrade of its
long-term debt. In February, 1995, Standard & Poors reiterated
that it held the company on "CreditWatch" with "negative
implications." S&P explained that the "potential for covenant
violations at future periods remains due to continued subpar
financial performance." (emphasis added)
* On November 21, 1994 Reuters reported that "Due to lower
than expected earnings from the company's transportation and
alarm units, Borg-Warner expects that at year end it may not
be in compliance with all of its bank covenants."
* Major shareholders have abandoned their positions,
including Ariel, the second largest shareholder which sold its
entire 9% stake of the company, Hartford Fire Insurance, National
City Bank/Columbus, and Prudential Insurance Co. In the fourth
quarter of 1994, Wood Island Associates, Delphi Management,
and Russell Frank each reduced their positions by at least
100,000 shares.
These are critical times for Borg-Warner. As the cascading
stock price, credit-rating alerts and loan renegotiations attest,
our company's own security is on the line. Shareholders deserve
careful, independent scrutiny over the decisions that will
determine the fate of our company.
THE PROPOSAL:
We question whether the board's current structure allows it
to exercise the oversight necessary to steer this company on a
path of earnings growth. The company's governance rules include
measures that we believe frustrate shareholder accountability,
including a classified board, an 80% supermajority voting
requirement to make changes, and restrictions of shareholders
calling a special meeting.
In reforming what we believe to be board insulation from
shareholder accountability, we maintain that the first step is
establishing an independent chairman.
We have alerted company management that we intend to bring
the following resolution to shareholders at the company's annual
meeting:
Resolved: That the Chairman of the Board of directors must
be an independent director who does not also hold the position of
Chief Executive Officer.
We do not know whether the company will include this
proposal in its proxy materials, but regardless, we will present
this proposal at the meeting. If the proposal is approved by a
majority of shares, we hope the board will select a chairman who
is not a company manager. Because this resolution does not amend
the bylaws, the Board may lawfully view this proposal as
precatory under Delaware law, where the company is incorporated.
This means that even if a majority of shares approves the
proposal, it may not have any effect unless the board acts on it;
just because it is approved does not mean the board must act on
it.
We urge you to support this proposal.
BORG-WARNER SHAREHOLDERS COMMITTEE
The sole members of the shareholder committee at this time
are William B. Patterson, Director of Corporate Affairs,
International Brotherhood of Teamsters ("IBT"), and Thomas
Metzinger, IBT Director of Investments.
MANAGEMENT COMPENSATION-
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL
SHAREHOLDERS
The committee incorporates herein by reference the
discussion of these subjects in the Company's 1994 proxy
statement and the forthcoming 1995 proxy statement.
PROPOSALS FOR 1996 MEETINGS
Stockholders who wish to have their proposals considered for
inclusion in the Company's proxy statement should deliver their
proposals in writing to the Company at 200 South Michigan Avenue,
Chicago, Ill., 60604, by a date that will be identified in the
Company's upcoming proxy statement.
IMPORTANT INFORMATION RE: ELECTION OF DIRECTORS AND
VOTING RIGHTS
We have not supplied you with a proxy card at this time
because at the 1995 meeting, shareholders will be also asked to
vote in the election for board of directors and may be asked to
vote on other matters (currently unknown to the Committee). Once
those nominees have been announced, we will revise our proxy
materials to include the nominees and any other matters to be
voted upon. We will make these revised materials available to
shareholders so they may direct our votes on these other matters.
The Committee does not know of any contest for the board of
directors and does not intend to engage in one. Giving the
Committee a proxy will not give the Committee any discretionary
voting authority.
We incorporate by reference the additional information about
voting requirements contained in the Company's 1995 proxy
statement, such as the record date and outstanding shares.
According to the company's 1994 proxy statement, there were
21,731,057 shares of Common Stock issued and outstanding. Each
share of Common Stock entitled the holder to one vote. Holders of
the Company's Series I Non-Voting Common Stock are not entitled
to notice of, or to vote at, the Annual Meeting. Last year, the
record date was March 15, 1994.
REVOCATION RIGHTS
A proxy card is revocable at any time prior to being voted
by (1) executing a new proxy card; or (2) attending and voting at
the meeting; or (3) delivering written notice of revocation to
the Company or to the authorized agents of the employee benefit
plan through which your stock is held. Only your latest-dated
proxy card will be counted.
SOLICITATION OF PROXIES
We expect to solicit proxies by mail, telephone, telecopier and
personal interviews. We will ask trustees, brokers, custodians
and other nominees to forward solicitation materials to the
beneficial owners of common stock, and reimburse them for their
reasonable out-of-pocket expenses. Proxies will be solicited by
Committee members and by members and employees of IBT, who do not
receive any additional compensation for such solicitations. No
other specially engaged employees have been employed to solicit
shareholders.
The Committee is sponsored by the IBT, which owns 100 shares
of Borg-Warner's common stock. Other shareholders are invited to
join the Committee. The cost of solicitation is being borne by
IBT. While the exact cost of the solicitation is not at this
time known, it is estimated at $1,000. About 4,000 employees of
the Pony Express Courier Corp., a wholly owned subsidiary of
Borg-Warner Security Corp., are represented by IBT. Pony Express
has never entered into a collective bargaining agreement, and in
the past 12 months, Pony Express employees have gone on strike at
several locations.
* * *
For more information contact:
Borg-Warner Shareholders Committee
25 Louisiana Avenue
Washington, DC 20001
Fax 202-624-6833
Telephone: 202-624-8100
