BORG WARNER SECURITY CORP, 424B5, 1999-06-11

BORG WARNER SECURITY CORP
424B5, 1999-06-11
DETECTIVE, GUARD & ARMORED CAR SERVICES

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<PAGE>

FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NUMBER 333-79041

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement is not complete and may be +
+changed. This prospectus supplement and the prospectus is not an offer to +
+sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer and sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion
Preliminary Prospectus Supplement dated June 11, 1999
PROSPECTUS SUPPLEMENT
(To prospectus dated June 7, 1999)
4,350,000 Shares
[LOGO]
Borg-Warner
Security Corporation
Common Stock

------------

All of the shares of common stock are being sold by certain shareholders of
Borg-Warner Security Corporation. The common stock trades on the New York Stock
Exchange under the symbol "BOR". On June 10, 1999, the last sale price of the
common stock as reported on the New York Stock Exchange was $17 per share.

We intend to change our name to Burns International Services Corporation.

Investing in the common stock involves risks which are described in the
"Risk Factors" section beginning on page S-8 of this prospectus supplement.

------------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price.................................... $ $
Underwriting discount.................................... $ $
Proceeds, before expenses, to selling shareholders....... $ $
</TABLE>

The underwriters may also purchase an additional 440,136 shares from one of
the selling shareholders at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus supplement to cover
over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

The shares of common stock will be ready for delivery in New York, New York
on or about June , 1999.

------------

Merrill Lynch & Co.
Credit Suisse First Boston
CIBC World Markets
Lehman Brothers

------------

The date of this prospectus supplement is June , 1999.
<PAGE>

TABLE OF CONTENTS

Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. S-3
Risk Factors............................................................. S-8
Capitalization........................................................... S-10
Selected Financial Data.................................................. S-11
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... S-13
Business................................................................. S-21
Management............................................................... S-29
Selling Shareholders..................................................... S-31
Shares Eligible for Future Sale.......................................... S-33
Underwriting............................................................. S-34
Legal Matters............................................................ S-36

Prospectus

About This Prospectus.................................................... 2
Where You Can Find More Information...................................... 2
Special Note Regarding Forward-Looking Statements........................ 3
Use of Proceeds.......................................................... 3
Borg-Warner Security Corporation......................................... 3
Market for Borg Warner's Common Stock and Dividend Policy................ 4
Description of Capital Stock............................................. 4
Selling Shareholders..................................................... 7
Plan of Distribution..................................................... 8
Legal Matters............................................................ 9
Experts.................................................................. 9
</TABLE>

----------------

FORWARD-LOOKING STATEMENTS

This prospectus supplement includes forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject
to risks, uncertainties and assumptions about our business, including among
other things:

. availability of qualified personnel and cost of labor

. liability for employee acts, injuries or omissions

. our ability to successfully identify and complete acquisitions

. competition

You should consider any forward-looking statements in light of the risks
and uncertainties described under "Risk Factors" in this prospectus supplement
and the other information contained or incorporated by reference in this
prospectus supplement and accompanying prospectus. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In light of these risks,
uncertainties, and assumptions, the future events in this prospectus supplement
may not occur.

----------------

You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the selling shareholders and the underwriters have not,
authorized any person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. The selling shareholders and the underwriters are not making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
supplement and the accompanying prospectus is accurate only as of the date on
the front cover of this prospectus supplement. Our business, financial
condition, results of operations and prospects may have changed since that
date.

S-2
<PAGE>

SUMMARY

This summary may not contain all of the information that may be important
to you. You should read the entire prospectus supplement and accompanying
prospectus, including the financial statements and related notes and other
documents that we have incorporated by reference, before making an investment
decision. The terms "Borg-Warner", "our" and "we" in this prospectus supplement
and the accompanying prospectus refer to "Borg-Warner Security Corporation" and
its subsidiaries, except where it is clear that the term means only the parent
company.

Our Company

We are the largest independent provider of physical security and related
outsourced security services in North America. We provide security solutions to
approximately 14,000 customers, including commercial and industrial businesses,
financial institutions, and healthcare, education, aviation, utility and
government facilities.

The services that we offer include:

. armed and unarmed physical security

. foot and vehicle patrol

. access control and monitoring

. background and drug screening

. investigative services

. contract staffing

. other specialized security and support services

In addition, through our alliances with ADT Security Services, Inc., a
leading provider of electronic security systems, and other security-related
firms, we are able to provide services such as:

. integrated electronic security systems (including intrusion and
fire detection, sprinkler and critical industrial process
monitoring, closed circuit television and access control)

. security consulting and systems design

Overview of the Protective Services Industry

In the protective services industry, businesses and government entities
are increasingly demanding total security solutions, often at multiple
locations or on a national basis, that combine high-quality physical and
electronic security services. We believe that we are well-positioned to respond
to these demands because of our size, the breadth of our service offerings,
consistency in our policies and procedures and our focus on quality of service
and delivery.

Physical security, which primarily consists of security officer and
patrol services, is the largest segment of the protective services industry.
Security officer services are typically divided into "proprietary" or
"outsourced" services. Under proprietary arrangements, users of security
officer services employ and manage their own security officers. Under
outsourced arrangements, companies such as ours provide security officer
services to customers.

S-3
<PAGE>

The total United States market for outsourced security officer services,
according to one study, has grown from approximately $9.2 billion in 1992 to
approximately $12.3 billion in 1997 (the most recent year for which
comprehensive data are available), which represents a compounded annual growth
rate of 6.1%. According to the same study, the market for outsourced security
officer services is projected to reach $17 billion in the United States by
2002, a compounded annual growth rate of 6.7%. Some of the factors contributing
to this projected growth are:

. increased security consciousness by businesses, government entities
and the general public

. increased outsourcing of security services

In addition to being a growing market, the protective services industry
is highly fragmented and consists of more than 14,000 companies in the
United States and more than 50,000 companies worldwide. No single company is
dominant in the outsourced security officer segment. Industry sources estimate
that the three largest companies in this segment have a combined U.S. market
share of approximately 20%.

Operating Strategy

We intend to strengthen our position as North America's largest supplier
of physical security and related security services and to enhance our
profitability. The key elements of our operating strategy include:

. Improving Customer and Employee Retention. Retention of customers
and employees is key to our growth and profit improvement
strategies. We continue to focus on improving our customer and
employee retention rates. Higher employee retention can improve
service quality, and therefore, improve customer retention. Through
continued implementation of these strategies, we intend to increase
revenues, decrease costs and enhance overall profitability.

. Focusing on Vertical Industry Segments. We are identifying specific
vertical industry segments that we believe have a growing need for
a full range of high-quality, reliable security services provided
from a single source. We have already identified the healthcare,
education, commercial real estate and banking and financial
segments.

. Marketing Total Security Solutions. In response to customer demand
and the trend toward outsourcing of security needs, we are focusing
on providing total security solutions to multi-location and
national accounts.

. Further Enhance Effective Risk Management. A key part of our
operating strategy is to continue to enhance our performance in
managing risk. As a result of our risk management and training and
safety programs, we have been able to proactively manage our
employee and general liability claims.

. Enhancing Our Sales and Marketing Capabilities. Our sales and
marketing strategies encompass consolidating most of our service
offerings under our principal brand name--Burns International--and
investing in vertical market and other training initiatives and
marketing programs.

Growth Strategy

Our growth strategy is based on the following:

. Capitalize on Outsourcing of Security Services. We believe that
our position as the nation's largest provider of high-quality
outsourced security officer and related services,

S-4
<PAGE>

combined with our nationwide network of offices and ability to
deliver total security solutions through alliances with ADT and
other security-related firms, favorably positions us to capitalize
on the trend toward outsourcing of security services.

. Provide Multi-Location and Nationwide Capability. Through our
approximately 300 offices and our dedication to providing
consistent high-quality service, we are able to provide uniformly
trained personnel and standardized operating procedures. In
addition, we are able to provide quality control monitoring, single
points of contact and technology that multi-location and national
accounts value.

. Cross-Sell Products and Services. We believe that significant
opportunities exist to cross-sell services such as background
screening, information and investigative services and contract
staffing to our customer base. We have recently instituted new
compensation structures for our salesforce that provide incentives
for acquiring and maintaining customer relationships and cross-
selling our products and services.

. Pursue Selected Acquisitions. We believe that significant
opportunities exist to increase our geographic penetration and
service offerings through the selective acquisition of smaller
companies.

RECENT DEVELOPMENTS

On June 1, 1999, John A. Edwardson was elected chairman of our board of
directors. In March 1999, Mr. Edwardson became president and chief executive
officer of our company and also joined our board of directors. Previously, Mr.
Edwardson was president and chief operating officer of United Airlines, Inc.
and, before that, executive vice president and chief financial officer of
Ameritech Corp.

On May 12, 1999, we announced a cash tender offer for all of our
outstanding $125 million aggregate principal amount of 9 5/8% senior
subordinated notes due 2007. We purchased $124.6 million aggregate principal
amount of the notes on June 10, 1999 at a price of 112.348%. Included in the
consideration was a consent payment of $25 per $1,000 principal amount of the
notes. At the same time, we repurchased an additional $0.2 million aggregate
principal amount of notes at a price of 109.848%. We have received the
necessary consents from the holders of the notes and have amended the indenture
relating to those notes to eliminate certain restrictive provisions. We
financed the purchase of the notes and the payment of the consent fee from
existing financing facilities and cash reserves.

On May 4, 1999, we announced a brand unification strategy under which we
intend to unify most of our security services under a single brand name, Burns
International, and, subject to shareholder approval, we plan to change our
company's name to Burns International Services Corporation. The brand
unification will enhance brand identity and eliminate market confusion with
Wells Fargo & Company and Borg-Warner Automotive, Inc.

On April 20, 1999, we announced plans to repurchase 4,350,000 shares of
common stock from some of the selling shareholders, all of whom are affiliated
with Merrill Lynch, at a price of $18.375 per share, or approximately $79.9
million, which represented a $0.50 discount to the closing price of the common
stock on the New York Stock Exchange on April 19, 1999. The repurchase will be
financed from existing financing facilities and cash reserves. The repurchase
transaction has been approved by our board of directors and all necessary
consents from our bank lenders and bondholders have been obtained. The closing
of this transaction is scheduled to occur on June 14, 1999.

S-5
<PAGE>

THE OFFERING

Common stock offered by the selling
shareholders........................ 4,350,000 shares (1)

Shares outstanding after offering... 19,631,816 (2)

Use of proceeds..................... We will not receive any proceeds from the
sale of common stock by the selling
shareholders in this offering.

Risk factors........................ See "Risk Factors" and the other
information included or incorporated by
reference in this prospectus supplement
and the accompanying prospectus for a
discussion of the factors you should
carefully consider before deciding to
invest in the shares of common stock.

NYSE symbol......................... "BOR"
- --------
(1) This number assumes that the over-allotment option is not exercised. If the
over-allotment option is exercised in full, one of the selling shareholders
will sell an additional 440,136 shares.
(2) This number excludes 3,504,663 shares of common stock authorized for
issuance under our employee and director incentive plans, under which we
had issued options to purchase 2,685,400 shares of common stock as of
April 30, 1999. This number also assumes consummation of our repurchase of
4,350,000 shares from some of the selling shareholders, which is scheduled
to occur on June 14, 1999.

S-6
<PAGE>

SUMMARY FINANCIAL INFORMATION

(millions of dollars, except for per share amounts)

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
--------------------------- -------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
-------- -------- -------- ------ ------
Statement of Operations
Data(a)
Net service revenues......... $1,470.1 $1,304.6 $1,323.4 $318.6 $330.5
Cost of services............. 1,231.4 1,100.7 1,116.7 269.1 277.4
Selling, general and
administrative expenses..... 154.4 134.3 155.7 35.7 37.7
Depreciation................. 12.8 5.0 4.2 1.0 1.2
Other expense, net........... 10.5 7.0 6.4 2.4 (0.2)
Interest expense and finance
charges..................... 27.2 16.7 15.5 4.2 3.8
-------- -------- -------- ------ ------
Earnings before income
taxes...................... 33.8 40.9 24.9 6.2 10.6
Provision for income taxes... 13.6 15.1 9.8 2.3 4.1
-------- -------- -------- ------ ------
Earnings from continuing
operations................. 20.2 25.8 15.1 3.9 6.5
Net earnings (loss)......... (14.6) 19.0 29.1 (15.2) 6.5
Earnings (loss) per common
share--basic:
Continuing operations....... $ 0.87 $ 1.10 $ 0.64 $ 0.17 $ 0.27
Net earnings (loss)......... $ (0.63) $ 0.81 $ 1.24 $(0.64) $ 0.27
Earnings (loss) per common
share--diluted:
Continuing operations....... $ 0.86 $ 1.07 $ 0.64 $ 0.16 $ 0.27
Net earnings (loss)......... $ (0.62) $ 0.79 $ 1.21 $(0.63) $ 0.27

Pro forma earnings per common
share--diluted:
Continuing operations(b).... $ 1.00 $ 1.07 $ 1.13 $ 0.22(c) $ 0.27(d)

<CAPTION>
As of December 31, As of
--------------------------- March 31,
1996 1997 1998 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data(a)
Cash & cash equivalents...... $ 15.4 $ 8.0 $ 105.7 $ 74.9
Net assets of discontinued
operations.................. 327.5 327.0 -- --
Total assets................. 728.9 625.9 431.9 447.4
Total debt................... 437.1 338.7 126.7 127.8
Shareholders' equity......... 41.2 65.0 96.9 105.1

Other Data
Accounts receivable sold,
net......................... $ 110.2 $ 102.4 $ 82.4 $ 35.0
</TABLE>
- --------
You should refer to the selected financial data and related footnote
information on pages S-11 and S-12 of this prospectus supplement.
(a) On January 24, 1997, our armored services unit entered into a business
combination with Loomis Armored, which is now known as Loomis, Fargo & Co.
We have retained a 49% ownership interest in Loomis, Fargo and account for
our investment using the equity method. The business combination affects
any comparison of our results for 1997 and subsequent periods to prior
periods because the armored unit was included in our results of operations
for 23 days in 1997 and for the full year 1996.
(b) Pro forma earnings per common share from continuing operations (diluted)
give effect to the armored services business combination in 1997, the sale
of the courier services and electronic security services businesses, the
related debt reduction, as well as certain related actions taken in 1998 as
if they had been consummated prior to January 1, 1996. The pro forma
earnings per common share from continuing operations (diluted) data are
intended for informational purposes only and are not necessarily indicative
of our future results of operations had the transactions occurred on the
indicated dates or been in effect for the periods presented and should be
read in conjunction with our historical Consolidated Financial Statements,
including the related notes, and the pro forma adjustments that are more
fully detailed on pages S-16 and S-17 of this prospectus supplement.
(c) Pro forma earnings per common share from continuing operations (diluted)
data for the three months ended March 31, 1998 give effect to the reduction
in interest expense resulting from debt reduction related to the armored
services business combination, as well as certain actions taken in 1998, as
if they had been consummated prior to January 1, 1996. These 1998 actions
are more fully discussed in the pro forma adjustments detailed on pages S-
16 and S-17 of this prospectus supplement and reflect the elimination of
expenses related to restructuring activities and the reduction in the
carrying value of certain intangible assets. The pro forma earnings per
common share from continuing operations (diluted) are intended for
informational purposes only and are not necessarily indicative of our
future results of operations had the transactions occurred on the indicated
dates or been in effect for the periods presented.
(d) The amount for the three months ended March 31, 1999 represents the actual
earnings per common share (diluted) as the pro forma adjustments are not
applicable.

S-7
<PAGE>

RISK FACTORS

Investing in the common stock will provide you with an equity interest in
our company. The performance of your shares will be affected by the risks
inherent in our business, including competition, general economic and market
conditions and industry conditions. The value of your investment may increase
or decline and could result in a loss. You should carefully consider the
following factors as well as other information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus before
you decide to invest in our common stock.

Our industry is sensitive to increases in labor costs and has high rates of
employee turnover

The physical security industry is labor intensive and is affected by the
availability of qualified personnel and the cost of labor. In our industry,
employee turnover has historically been high. Employee turnover results in
additional recruiting, screening and training costs, which can have an adverse
effect on our profitability. We also incur increased costs as a result of
higher wages and increased overtime costs when labor is scarce, whether due to
low unemployment rates or other factors. Even when our contracts allow us to
pass on increased costs to our customers, competitive pressures may prevent us
from raising billing rates to cover all of our increased costs.

Our business exposes us to liability claims from others

Our business exposes us to risks of liability for employee actions,
injuries (including workers' compensation claims) or omissions. Although we
carry various types of insurance, including workers' compensation, automobile
and general liability insurance, these insurance policies generally include
deductibles which we have to pay. While we believe our insurance coverage is
adequate for our needs, there can be no assurance that we will be able to
purchase adequate amounts of insurance in the future at acceptable prices.
Successful claims against us for amounts greater than our insurance coverage
could have a material adverse effect on our business, financial condition and
results of operations. In addition to the risk of paying monetary damages,
liability claims against us, even if ultimately unsuccessful, can generate
adverse publicity for our business.

Restrictive provisions in our debt instruments may adversely affect our growth
strategy and ability to obtain additional financing

At March 31, 1999, on a pro forma basis after giving effect to the
repurchase of $124.8 million aggregate principal amount of our 9 5/8% senior
subordinated notes due 2007 and related consent payment and the repurchase of
4,350,000 common shares from some of the selling shareholders, we would have
had outstanding debt of approximately $90.7 million, comprised primarily of
borrowings under existing bank credit facilities. In addition, we would have
sold approximately $95 million of our accounts receivable pursuant to a
revolving accounts receivable facility that allows us to sell up to $120
million of accounts receivable. We may incur additional indebtedness in the
future to finance acquisitions, capital expenditures, working capital and other
purposes. Our ability to incur additional debt may be limited by restrictions
in existing bank credit facilities. If we default in our obligation to comply
with these restrictions, our creditors could take actions against our company
which could have a material adverse effect on our business.

We may not be able to realize all of the anticipated benefits from future
acquisitions

We expect that a portion of our future growth will come from a number of
smaller acquisitions. However, no assurance can be given that we will be able
to make any acquisitions at prices we consider reasonable, or at all. In
addition, even if we acquire new businesses, we may not be able to realize all
of the anticipated benefits if we are not able to successfully integrate them,
if we fail to discover significant liabilities or if we fail to retain a
substantial portion of their customers and employees.

S-8
<PAGE>

We have adopted anti-takeover provisions that may prevent a change of control
of our company and may adopt additional anti-takeover provisions in the future.

Our certificate of incorporation authorizes our board of directors to
issue preferred stock without shareholder approval. If our board of directors
elects to issue preferred stock, it could be more difficult for a third party
to acquire our company. In addition, our certificate of incorporation and
bylaws contain several provisions that could make it difficult for a third
party to acquire control of our company without the cooperation of our board of
directors. These provisions include staggered board of director elections, a
prohibition on shareholders calling special shareholder meetings, a requirement
for 80% affirmative votes by holders of our outstanding common stock to amend
our bylaws or to remove directors for cause and advance notice requirements to
nominate candidates for the board of directors or to introduce proposals at
annual shareholder meetings. After the offering, we may adopt additional anti-
takeover provisions, including but not limited to, a shareholder rights plan.

PRICE RANGE OF COMMON STOCK

Our common stock trades on the New York Stock Exchange under the symbol
"BOR". The following table sets forth, for the quarters indicated, the range of
high and low sales prices (as reported on the New York Stock Exchange composite
tape) for our common stock. On June 10, 1999, the last reported sales price of
our common stock on the New York Stock Exchange was $17 per share. As of April
30, 1999, there were approximately 150 holders of record of the common stock.

<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ----
<C> <S> <C> <C>
1997 March 31........................................ $15 1/8 $10 1/8
June 30......................................... 18 13 3/4
September 30.................................... 19 9/16 16 1/8
December 31..................................... 19 3/4 15 1/4
1998 March 31........................................ 19 11/16 15 15/16
June 30......................................... 24 3/4 17 7/8
September 30.................................... 23 1/16 13 1/4
December 31..................................... 20 1/16 13 1/16
1999 March 31........................................ 20 11/16 14 11/16
June 30 (through June 10)....................... 19 15 3/8
</TABLE>

S-9
<PAGE>

CAPITALIZATION

The following table sets forth our historical capitalization as of March
31, 1999 and pro forma capitalization as of March 31, 1999 after giving effect
to (1) the repurchase of approximately $124.8 million of the total $125 million
aggregate principal amount of our 9 5/8% senior subordinated notes due 2007 and
the related consent payment for total consideration of $140.2 million and (2)
the repurchase of 4,350,000 shares of our common stock from some of the selling
shareholders for total consideration of $79.9 million plus related transaction
expenses, net of tax, of $1.0 million. The net cash required for the retirement
of the notes, including related costs and tax benefits, was approximately
$132.9 million. On a pro forma basis, the repurchase of the notes was financed
by cash of $66.6 million, bank facilities of $6.3 million, and the sale of
$60.0 million of accounts receivable. Approximately $3.9 million of deferred
fees and unamortized discount related to these notes were written off as part
of this transaction. You should read the following information in conjunction
with our historical financial statements and related notes.

<TABLE>
<CAPTION>
As of March 31, 1999
---------------------------------------
Notes Stock
Repurchase Repurchase Pro
Actual Adjustments Adjustments Forma
------- ----------- ----------- ------
(millions of dollars)
<S> <C> <C> <C> <C>
Cash and cash equivalents............. $ 74.9 $ (66.6) $ -- $ 8.3
======= ======= ====== ======
Short-term debt:
Notes payable....................... $ 3.3 $ -- $ -- $ 3.3
------- ------- ------ ------
Long-term debt:
Bank facilities..................... 0.0 6.3 80.9 87.2
9 5/8% senior subordinated notes due
2007............................... 124.5 (124.3) -- 0.2
------- ------- ------ ------
Total long-term debt.............. 124.5 (118.0) 80.9 87.4
------- ------- ------ ------
Total balance sheet debt.......... $ 127.8 $(118.0) $ 80.9 $ 90.7
======= ======= ====== ======
Shareholders' equity:
Common stock........................ $ 0.2 $ -- $ -- $ 0.2
Capital in excess of par value...... 36.8 36.8
Retained earnings................... 77.3 (12.0) 65.3
Accumulated comprehensive loss...... (1.4) (1.4)
------- ------- ------ ------
112.9 (12.0) 100.9
Less treasury common stock.......... (7.8) (80.9) (88.7)
------- ------- ------ ------
Total shareholders' equity........ $ 105.1 $ (12.0) $(80.9) $ 12.2
======= ======= ====== ======
Total capitalization.............. $ 158.0 $ (63.4) $ -- $ 94.6
======= ======= ====== ======
</TABLE>

Long-term debt does not include amounts available to be drawn under
issued and outstanding standby letters of credit. As of March 31, 1999, these
standby letters of credit totaled $85.4 million. In addition, long-term debt
does not include amounts sold under our $120 million non-recourse revolving
accounts receivable facility. As of March 31, 1999, $35.0 million of accounts
receivable had been sold, or $95.0 million on a pro forma basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".

Total capitalization consists of total balance sheet debt, less cash and
cash equivalents, plus shareholders' equity.

S-10
<PAGE>

SELECTED FINANCIAL DATA

The following table sets forth selected financial information for Borg-
Warner Security Corporation. The information is derived from our audited
consolidated financial statements. Previously reported results have been
restated to reflect the May 29, 1998 sales of our electronic security business
and our courier services business. See "Business--Discontinued Operations". As
a result, these businesses are reflected in discontinued operations for all
years presented. In addition, our armored security services unit entered into a
business combination with Loomis Armored in January 1997. The combined company,
known as Loomis, Fargo & Co., is accounted for under the equity method. The
armored security services unit was included in our results of operations for 23
days in 1997 and full years 1996, 1995 and 1994. The selected financial data
should be read in connection with the 1998 Consolidated Financial Statements
and accompanying notes.

<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- --------- ---------
<CAPTION>
(millions of dollars, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data(a)
Net service revenues...... $1,420.6 $1,453.8 $1,470.1 $1,304.6 $1,323.4 $ 318.6 $ 330.5
Cost of services.......... 1,192.6 1,219.9 1,231.4 1,100.7 1,116.7 269.1 277.4
Selling, general and
administrative expenses.. 156.1 153.3 154.4 134.3 155.7 35.7 37.7
Depreciation.............. 14.8 14.7 12.8 5.0 4.2 1.0 1.2
Other expense, net........ 12.6 10.5 10.5 7.0 6.4 2.4 (0.2)
Interest expense and
finance charges.......... 23.8 26.3 27.2 16.7 15.5 4.2 3.8
-------- -------- -------- -------- -------- --------- ---------
Earnings before income
taxes and discontinued
operations and
extraordinary item...... 20.7 29.1 33.8 40.9 24.9 6.2 10.6
Provision for income
taxes(b)................. 0.4 13.1 13.6 15.1 9.8 2.3 4.1
-------- -------- -------- -------- -------- --------- ---------
Earnings from continuing
operations before
discontinued operations
and extraordinary item.. 20.3 16.0 20.2 25.8 15.1 3.9 6.5
Net earnings (loss)(c)... $ 13.1 $ 1.2 $ (14.6) $ 19.0 $ 29.1 $ (15.2) $ 6.5
Earnings (loss) per common
share--basic:
Continuing operations.... $ 0.88 $ 0.69 $ 0.87 $ 1.10 $ 0.64 $ 0.17 $ 0.27
Discontinued operations.. (0.31) (0.44) (1.50) (0.29) 0.87 (0.81) --
Extraordinary item....... -- (0.20) -- -- (0.27) -- --
-------- -------- -------- -------- -------- --------- ---------
Net earnings (loss)...... $ 0.57 $ 0.05 $ (0.63) $ 0.81 $ 1.24 $ (0.64) $ 0.27
Earnings (loss) per common
share--diluted:
Continuing operations.... $ 0.87 $ 0.68 $ 0.86 $ 1.07 $ 0.64 $ 0.16 $ 0.27
Discontinued operations.. (0.31) (0.43) (1.48) (0.28) 0.83 (0.79) --
Extraordinary item....... -- (0.20) -- -- (0.26) -- --
-------- -------- -------- -------- -------- --------- ---------
Net earnings (loss)...... $ 0.56 $ 0.05 $ (0.62) $ 0.79 $ 1.21 $ (0.63) $ 0.27
Average common shares
outstanding--basic (in
thousands)............... 22,893 23,097 23,266 23,475 23,575 23,598 23,900
Average common share and
equivalents outstanding--
diluted (in thousands)... 23,170 23,399 23,517 24,075 23,958 24,306 24,238

<CAPTION>
As of December 31, As of
------------------------------------------------ March 31,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------------
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data(a)
Cash and cash equivalents
available ............... $ 13.3 $ 17.3 $ 15.4 $ 8.0 $ 105.7 $ 74.9
Net assets of discontinued
operations............... 360.4 369.7 327.5 327.0 -- --
Total assets.............. 780.2 808.6 728.9 625.9 431.9 447.4
Total debt................ 455.0 479.0 437.1 338.7 126.7 127.8
Shareholders' equity(d)... 43.8 49.7 41.2 65.0 96.9 105.1
Other Data
Accounts receivable sold,
net(e)................... $ 112.0 $ 88.9 $ 110.2 $ 102.4 $ 82.4 $ 35.0
</TABLE>

(footnotes on following page)

S-11
<PAGE>

- --------
(a) On January 24, 1997, our armored services unit entered into a business
combination with Loomis Armored, which is now known as Loomis, Fargo & Co.
We have retained a 49% ownership interest in Loomis, Fargo and account for
our investment using the equity method. The business combination affects
any comparison of our results for 1997 and subsequent periods to prior
periods because the armored unit was included in our results of operations
for 23 days in 1997 and for the full years 1994 through 1996.
(b) Income taxes for the year ended December 31, 1994 reflect certain
adjustments related to changes in tax basis.
(c) In 1998 and 1995, we incurred extraordinary charges of $6.3 million and
$4.7 million related to the early retirement of debt. In 1998 and 1996, we
discontinued our electronic security services business and our courier
services unit, respectively, both of which were sold in 1998. Both
businesses were accounted for as discontinued operations, resulting in
earnings (loss) after tax from discontinued operations of $20.3 million,
($6.8) million, $(34.8) million, ($10.1) million and ($7.4) million in
1998, 1997, 1996, 1995, and 1994, respectively, and a loss after tax of
($19.1) million from discontinued operations in the three months ended
March 31, 1998.
(d) No cash dividends were declared during the years ended December 31, 1994
through 1998, nor during the three months ended March 31, 1999.
(e) As of December 31, 1994 through 1998, and as of March 31, 1999, we had sold
receivables under various facilities. The above amounts represented the net
receivables sold at the date indicated.

S-12
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Significant Events

On May 12, 1999, we announced a cash tender offer for all of our
outstanding $125 million principal amount of 9 5/8% senior subordinated notes
due 2007. We purchased $124.6 million aggregate principal amount of the notes
on June 10, 1999 at a price of 112.348%. Included in the purchase price is a
consent payment of $25 per $1,000 principal amount of the notes. At the same
time, we repurchased an additional $0.2 million aggregate principal amount of
notes at a price of 109.848%. We have received consents from the holders of the
notes and have amended the indenture relating to those notes to eliminate
certain restrictive provisions. We financed the purchase of the notes and the
payment of the consent fee from existing financing facilities and cash
reserves.

On May 4, 1999, we announced plans to unify most of our security services
under a single brand name, Burns International, and, subject to shareholder
approval, we plan to change our company's name to Burns International Services
Corporation. As part of this brand unification strategy, we entered into an
agreement on March 30, 1999 with Wells Fargo & Company to relinquish our
royalty-free license to use the "Wells Fargo" name in the security field. In
return, Wells Fargo & Company granted our company a royalty-free license to use
the "Wells Fargo" name and mark for a two-year period from the date of that
agreement and has provided a payment that is intended to cover the costs of
brand unification. The brand unification will enhance brand identity and
eliminate market confusion with Wells Fargo & Company and Borg-Warner
Automotive, Inc.

On April 20, 1999, we announced plans to repurchase 4,350,000 shares of
common stock from some of the selling shareholders, all of whom are Merrill
Lynch affiliated entities, at a price of $18.375 per share, or approximately
$79.9 million, which represents a $0.50 discount to the closing price of the
common stock on the New York Stock Exchange on April 19, 1999. The repurchase
will be financed from existing financing facilities and cash reserves. The
transaction has been approved by our board of directors and all necessary
consents from our bank lenders and bondholders have been obtained. The closing
of this transaction is expected to occur on June 14, 1999.

On August 10, 1998, as part of a settlement of a then-pending $100
million claim against us by the Mission Trust relating to Centaur, the
discontinued property and casualty insurance subsidiary of our predecessor, we
agreed to pay the Mission Trust $4 million and one-third of any dividend or
other distribution that may be paid to us after rehabilitation of Centaur. Any
future payments will not have an adverse effect on our earnings. The parties
have subsequently finalized and executed settlement and release agreements and
the case was dismissed with prejudice on April 28, 1999.

On July 31, 1998, we entered into an agreement with Borg-Warner
Automotive, Inc., whereby we sold our rights to the "Borg-Warner" name and mark
in the security field. Borg-Warner Automotive, Inc. granted us an exclusive,
royalty-free license to use the "Borg-Warner" name and mark in the security
field for a four-year period.

On July 3, 1998, we redeemed $150 million principal amount of our 9 1/8%
senior subordinated notes due 2003. This resulted in an after-tax extraordinary
charge of $6.3 million in the second quarter.

On May 29, 1998, we sold our electronic security services business to
ADT, a subsidiary of Tyco International, Ltd., for approximately $425 million
plus the assumption of $6 million of debt by ADT. As a result of this
transaction, we recorded a net after-tax gain of $42.5 million.

On May 29, 1998, we sold our courier services business. We recorded a
$15.9 million after-tax charge in the first quarter of 1998 to reduce our
investment in this business and to provide for costs associated with its
disposition. We did not record a gain or loss as a result of completing the
sale of the unit.

S-13
<PAGE>

On January 24, 1997, our armored services unit entered into a business
combination with Loomis Armored, which is now known as Loomis, Fargo & Co. We
have retained a 49% ownership interest in Loomis, Fargo and account for our
investment under the equity method. The business combination impacts the
comparison of our results for 1997 and subsequent periods to prior periods
because the armored unit was included in our results of operations for 23 days
in 1997 and for the full year in 1996.

Results of Operations

Three Months Ended March 31, 1999 and 1998

Revenues

Net service revenues for the three months ended March 31, 1999 increased
$11.9 million, or 3.7% over the comparable 1998 period. Excluding the effect of
non-renewal of low-margin contracts, revenue grew by 5.8%. Of this growth, 3.4%
came from 1998 business acquisitions and the remainder from a combination of
new accounts, increased billing rates and increased customer retention rates.

Costs and Expenses

Cost of services for the three months ended March 31, 1999 increased $8.3
million, or 3.1% over the comparable 1998 period. Expressed as a percentage of
revenue, cost of services was 83.9% and 84.5% for the three months ended March
31, 1999 and the three months ended March 31, 1998, respectively. Gross profit
margins for the same periods increased to 16.1% from 15.5% as our business mix
improved and increased billing rates offset wage rate increases.

Selling, general and administrative expenses for the three months ended
March 31, 1999 increased $2.0 million, or 5.6% over the comparable 1998 period.
Expressed as a percentage of revenue, selling, general and administrative
expenses were 11.4% and 11.2% for the three months ended March 31, 1999 and the
three months ended March 31, 1998, respectively. Increased costs reflected
higher expenses to invest in our sales and marketing force, development of new
administrative and employment centers and upgrading of financial and operating
information systems.

Other net (income) expense includes our share of the Loomis, Fargo net
earnings. We recorded $0.2 million in equity income for the three months ended
March 31, 1999 compared to a net loss of $0.4 million for the same period of
1998. Other income also included $1.5 million from a favorable insurance
settlement in March 1999. Also included is amortization expense of $1.5 million
in the three months ended March 31, 1999 and $2.0 million for the comparable
period in 1998.

Net Interest Expense and Finance Charges

Net interest expense for the three months ended March 31, 1999 was $3.8
million, a 9.5% decrease from the comparable 1998 period, despite approximately
$0.5 million in non-recurring costs associated with the phase-out of the
previous accounts receivable financing facility beginning in January 1999. This
decrease reflected lower debt levels and lower borrowing costs.

Loss from Discontinued Operations

The 1998 loss from discontinued operations reflected a $15.9 million
after-tax charge to reduce our investment in our former courier services
operation, to provide for costs associated with its disposition and for further
anticipated losses prior to its sale. Also included is a $3.2 million loss from
our discontinued alarm services business.

S-14
<PAGE>

Years Ended December 31, 1998, 1997 and 1996

Revenues

<TABLE>
<CAPTION>
Year Ended December 31, 1997 vs. 1996 1998 vs. 1997
-------------------------- Percent Percent
1996 1997 1998 Change Change
-------- -------- -------- ------------- -------------
(millions of dollars)
<S> <C> <C> <C> <C> <C>
Physical Security
Services............... $1,223.8 $1,289.3 $1,323.4 5.3% 2.6%
Armored Security
Services............... 246.3 15.3 -- NM NM
-------- -------- --------
Total Revenues......... $1,470.1 $1,304.6 $1,323.4 -11.3% 1.4%
</TABLE>

Physical security services revenue increased in 1998 principally due to
new business growth, acquisitions, higher billing rates and improved customer
retention, which offset the non-renewal of low-margin contracts and other
customer losses. Excluding the effect of acquisitions which closed in 1998,
revenue for 1998 would have been $1,310.9 million. Physical security services
revenue increased in 1997 primarily for the same reasons as in 1998, except
that there were no acquisitions in 1997.

International Operations

International revenues for 1998 were $121.1 million compared with $116.9
million in 1997 and $110.3 million in 1996. International operations are
primarily in Canada, the United Kingdom and Colombia.

Costs and Expenses

Cost of services for 1998 increased $16.0 million or 1.5% over 1997. Cost
of services for 1997 decreased $130.7 million or 10.6% from 1996, reflecting
the inclusion of armored security services for only 23 days in 1997 as compared
to all of 1996. Cost of services, as a percentage of revenues, was 84.4%, 84.4%
and 83.8% in 1998, 1997 and 1996, respectively. Gross profit margins were
15.6%, 15.6% and 16.2% over the same three periods. Gross margins remained
stable despite higher labor costs resulting from continued tight labor markets.
Wage increases were offset by better pricing and improved employee retention
which resulted in lower recruiting and training expenses. The decreased gross
margins from 1996 to 1997 were primarily a result of the Loomis, Fargo
combination.

Selling, general and administrative expenses for 1998 increased $21.4
million or 15.9% over 1997. Selling, general and administrative expenses for
1997 decreased $20.1 million or 13.0% from 1996, primarily due to the inclusion
of costs related to the armored security services for only 23 days in 1997 as
compared to all of 1996. Selling, general and administrative expenses, as a
percentage of revenues, were 11.8%, 10.3% and 10.5% for the years 1998, 1997
and 1996, respectively. The 1998 increase reflects a $14.4 million pretax
provision recorded in the second quarter 1998. This provision was comprised of
the following:

. severance and lease termination costs totaling $2.1 million
resulting from the reorganization of administrative operations,
including the closure and consolidation of certain offices,
subsequent to the sale of the electronic security services
business

. $5.5 million resulting from a review of the recoverability of
certain intangible assets

. $2.3 million related to the final settlement of matters resulting
from prior dispositions

. $4.5 million related to certain other asset valuation allowances
and provisions

Excluding this charge, selling, general and administrative expenses were
10.7%, as a percentage of revenues, for 1998, versus 10.3% in 1997. The
remaining increase is primarily related to increased expenses to strengthen our
marketing capabilities and to address Year 2000 issues.

Depreciation expense was $4.2 million, $5.0 million and $12.8 million for
the years 1998, 1997 and 1996, respectively. The 1998 and 1997 decreases were
primarily due to the Loomis, Fargo combination.

S-15
<PAGE>

Other net expense includes the results from our share of the Loomis,
Fargo joint venture. We recorded $0.1 million of earnings for our share of
Loomis, Fargo in 1998 compared with net earnings of $1.1 million in 1997 (which
included an after-tax gain of $2.2 million relating to the business
combination). Excluding Loomis, Fargo, other expense consisted of amortization
expense and was $6.5 million, $8.1 million and $10.5 million in 1998, 1997 and
1996, respectively. The 1998 and 1997 decreases were principally a result of
reduced amortization expenses in connection with the Loomis, Fargo combination
in 1997 and the revaluation of certain intangible assets in 1998.

Net Interest Expense and Finance Charges

Net interest expense attributed to continuing operations, including the
amortization of financing costs, decreased to $15.5 million in 1998 from $16.7
million in 1997 and $27.2 million in 1996. The 1998 decrease was primarily
related to lower average debt levels and decreased borrowing costs. The 1997
decrease was principally due to proceeds received from the Loomis, Fargo
combination and improved terms under the subsequent refinancing of bank
borrowings.

Extraordinary Item

We recorded a $6.3 million extraordinary charge (which is net of a $4.1
million tax benefit) in the second quarter of 1998 in connection with the early
redemption of $150 million principal amount of our 9 1/8% senior subordinated
notes due 2003 and the write-off of related deferred financing fees.

Pro Forma Consolidated Statement of Operations

The following Pro Forma Consolidated Statements of Operations give effect
to the armored services business combination in 1997, the sale of the courier
and electronic security businesses, the related debt reduction, as well as
certain related actions taken in 1998 as if they had been consummated prior to
January 1, 1996. They also assume that the $14.4 million pretax provision
described above had been recorded prior to that date.

The Pro Forma Consolidated Statements of Operations are intended for
informational purposes only and are not necessarily indicative of our future
results of operations had the transactions occurred on the indicated dates or
been in effect for the periods presented. You should read the Pro Forma
Consolidated Statements of Operations in conjunction with our historical
Consolidated Financial Statements, including the related notes.

<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
------------------ ------------------ ------------------
(millions of dollars, except for per share amounts)
<S> <C> <C> <C>
Net service revenues.... $ 1,323.4 $ -- $ 1,323.4
Cost of services........ 1,116.7 -- 1,116.7
Selling, general and
administrative
expenses............... 155.7 (15.4)(a)(b) 140.3
Depreciation............ 4.2 -- 4.2
Other expense, net...... 6.4 (1.4)(b)(c) 5.0
Interest expense and
finance charges........ 15.5 (3.5)(d) 12.0
------------------ --------------- ------------------
Earnings before income
taxes................ 24.9 20.3 45.2
Provision for income
taxes.................. 9.8 8.3 (h) 18.1
------------------ --------------- ------------------
Earnings from
continuing
operations........... $ 15.1 $ 12.0 $ 27.1
================== =============== ==================
Earnings per common
share (diluted):
Continuing
operations........... $ 0.64 $ 0.49 $ 1.13
Average diluted shares
outstanding (in
thousands)............. 23,958 -- 23,958
</TABLE>

S-16
<PAGE>

<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(millions of dollars, except for
per share amounts)
<S> <C> <C> <C>
Net service revenues................ $1,304.6 $ (15.3) (e) $1,289.3
Cost of services.................... 1,100.7 (12.9) (e) 1,087.8
Selling, general and administrative
expenses........................... 134.3 0.1 (b)(e)(f) 134.4
Depreciation........................ 5.0 (0.5) (e) 4.5
Other expense, net.................. 7.0 (0.6) (c)(g) 6.4
Interest expense and finance
charges............................ 16.7 (3.8) (d) 12.9
-------- ------- --------
Earnings before income taxes...... 40.9 2.4 43.3
Provision for income taxes.......... 15.1 2.3 (h) 17.4
-------- ------- --------
Earnings from continuing
operations....................... $ 25.8 $ 0.1 $ 25.9
======== ======= ========
Earnings per common share (diluted):
Continuing operations............. $ 1.07 -- $ 1.07
Average diluted shares outstanding
(in thousands)..................... 24,075 -- 24,075
<CAPTION>
Year Ended December 31, 1996
-----------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(millions of dollars, except for
per share amounts)
<S> <C> <C> <C>
Net service revenues................ $1,470.1 $(246.3) (e) $1,223.8
Cost of services.................... 1,231.4 (204.5) (e) 1,026.9
Selling, general and administrative
expenses........................... 154.4 (22.3) (b)(e) 132.1
Depreciation........................ 12.8 (7.0) (e) 5.8
Other expense, net.................. 10.5 (4.1) (c)(e) 6.4
Interest expense and finance
charges............................ 27.2 (13.8) (d) 13.4
-------- ------- --------
Earnings before income taxes...... 33.8 5.4 39.2
Provision for income taxes.......... 13.6 2.1 (h) 15.7
-------- ------- --------
Earnings from continuing
operations....................... $ 20.2 $ 3.3 $ 23.5
======== ======= ========
Earnings per common share (diluted):
Continuing operations............. $ 0.86 $ 0.14 $ 1.00
Average diluted shares outstanding
(in thousands)..................... 23,517 23,517
</TABLE>
- --------
(a) Eliminates the $14.4 million ($8.6 million net of tax) charge in the 1998
second quarter resulting from the reorganization of administrative support
operations following the sale of the electronic security services business,
the reduction of certain intangible assets and other provisions.
(b) Eliminates expenses relating to restructuring activities and other
provisions.
(c) Reflects reduction in the carrying value of certain intangible assets.
(d) Reflects the interest expense reduction as if the sale of Wells Fargo Alarm
had occurred prior to January 1, 1996 with the proceeds applied to
eliminate $150 million principal amount of 9 1/8% notes, borrowings under
the Company's bank credit line and the remainder used to reduce usage of
the accounts receivable facility.
(e) Elimination of revenues and expenses associated with the armored security
services operation.
(f) Eliminates a $1.9 million ($1.1 million net of tax) pension curtailment
gain recorded in the third quarter of 1997.
(g) Eliminates the $2.2 million gain recorded in the first quarter of 1997 for
the sale of the armored security services operation.
(h) Reflects the tax effect of pro forma adjustments by applying an estimated
federal, state and foreign tax rate of 40% to the pro forma earnings before
income taxes.

S-17
<PAGE>

Liquidity and Capital Resources

Net cash provided by continuing operations improved to $20.2 million for
the period ended March 31, 1999 from $5.5 million for the period ended March
31, 1998. The $14.7 million increase from the period ended March 31, 1998
reflected higher earnings from continuing operations and a payment from Wells
Fargo that is intended to cover the costs of our brand unification strategy.
See "Business--Trademarks and Patents". In addition, other cash flow related to
discontinued operation for the period ended March 31, 1999, consisted of $2.2
million of aggregate payments to settle retained liabilities related to
discontinued operations.

Cash provided by continuing operations in 1998 was $30.7 million,
reflecting earnings of $15.1 million and non-cash charges of $16.6 million.
Overall, net assets of continuing operations increased by $1.0 million.
Excluding the sale of our electronic security services business to ADT, the
combined losses and cash commitments associated with discontinued operations
more than offset the net cash provided from continuing operations.

In 1997, net cash provided by continuing operations was $13.0 million
while net cash used by discontinued operations was $7.1 million.

Net balance sheet debt increased by $31.9 million from $21.0 million at
December 31, 1998 to $52.9 million at March 31, 1999. The increased debt level
parallels a reduction in the sale of interests in accounts receivable by a
special purpose subsidiary of ours. We elected to reduce funding from sales of
interests in accounts receivable, net of cash deposits held back and based on
the amount of eligible receivables in the pool, from $82.4 million at December
31, 1998 to $35.0 million at March 31, 1999.

In 1998, we reduced our net balance sheet debt by $309.7 million and the
balance of our net accounts receivable sold by $20.0 million. The principal
source of those funds was the sale of Wells Fargo Alarm Services, Inc. to ADT
for $425.0 million plus the assumption of $6.0 million of debt by ADT. After
taxes this transaction generated approximately $369 million.

In 1997, we reduced our net balance sheet debt by $91.0 million and the
balance of our net accounts receivable sold by $7.8 million. The combination of
Wells Fargo Armored with Loomis Armored generated approximately $92.9 million
of cash inflow.

We maintained a $225 million bank credit facility at March 31, 1999 and
December 31, 1998. A maximum of $125 million of this facility is available for
issuances of letters of credit. At March 31, 1999 and December 31, 1998, there
were no borrowings under the bank facility. Any borrowings under the bank
facility would mature on March 31, 2002. Standby letters of credit totaled
$85.4 million and $93.2 million at March 31, 1999 and December 31, 1998,
respectively.

We have maintained various facilities allowing for aggregate sales of
interests in accounts receivable of up to $120 million. We ceased selling
accounts receivable under the previous facility on January 1, 1999. A new
facility was put in place beginning in January 1999 which also allows for
aggregate sales of up to $120 million of accounts receivable. The new facility
is scheduled to conclude in 2003.

Cash and cash equivalents increased by $97.7 million from $8.0 million at
December 31, 1997 to $105.7 million at December 31, 1998 and decreased by $30.8
million from $105.7 million at December 31, 1998 to $74.9 million at March 31,
1999, primarily due to our curtailed usage of our accounts receivable facility.
From July 1998 to May 1999, $50 million of this amount was restricted under the
terms of the bank credit facility.

S-18
<PAGE>

We believe that our cash flow from operations, together with existing
cash and financing capacity, is adequate to meet our capital needs.

Disclosures about Market Risk

We have minimal market risk exposures which are primarily related to
changes in interest rates. Our policy is to manage interest rate exposures with
a blend of fixed and floating rate borrowings and, from time to time, with
interest rate swap agreements that hedge outstanding borrowings. We entered
into no interest rate swap agreements during the three months ended March 31,
1999 or during 1998. As of March 31, 1999 and December 31, 1998, our long-term
indebtedness consisted of fixed rate debt of $124.5 million and $124.4 million,
respectively. We also maintain a revolving bank credit facility with a total
commitment of $225 million, which carries variable interest rates (based on
LIBOR or the prime rate). At March 31, 1999 and December 31, 1998, there were
no borrowings under the bank facility. In addition, we can sell up to $120
million of accounts receivable on a revolving basis under an accounts
receivable securitization arrangement. The funding costs associated with
proceeds received from sales of receivables under this arrangement, which is
accounted for under SFAS No. 125, are based on short-term commercial paper
rates. Currently, we do not use foreign currency forward contracts and we do
not have any material foreign currency exposure.

Year 2000

Since the inception of computers, software applications were programmed
to identify a year as a two-digit data field. In the new millennium, computer
applications and software may recognize the year 2000 as two zeros (00) or
1900. This incorrect date recognition could cause systems and software
malfunctions that could have a material effect on business operations.

Company's Readiness

To ensure minimal business interruption due to computer failure, we have
performed a review of all software and computer applications for Year 2000
compliance. Both "IT systems" and "non-IT systems" were reviewed. IT systems
refer to all purchased and internally developed software applications and
programs. Non-IT systems refer to various business machines that have
"embedded" computer language, examples of which are computer integrated
circuits ("chips") and telephone switches. The review was completed using
company technicians as well as outside consulting firms.

System date remediation is being conducted in phases. First, all relevant
computer systems were assessed as to functionality and to determine the Year
2000 impact. Second, for those systems and software found to be non-compliant
or in need of upgrading, corrective steps have been, and will be taken, such as
the reprogramming or purchasing of replacement system software. Finally, all
systems and software modifications will be tested and then implemented at all
necessary levels. We have completed the assessment and corrective phases for
all operationally crucial systems. We are currently testing and implementing
the systems.

Specifically, the proprietary source-to-gross payroll system has been
remediated and in production since November 1997. The packaged gross-to-net
payroll system will be Year 2000 compliant with a new vendor release in the
second quarter of 1999. The general ledger, accounts payable, accounts
receivable and invoicing systems will be replaced with new purchased, compliant
software by the end of the third quarter of 1999. The upgraded proprietary
logistical security guard scheduling system is Year 2000 compliant and has been
installed and tested in approximately 45% of all sites. We expect that all
upgrades, replacements, installations and testing will be completed in all
material aspects by December 1, 1999.

S-19
<PAGE>

Risks and Contingency Plans

Operationally, the worst case scenario would be the failure of the
payroll or guard scheduling systems. In that event, the payroll system would be
backed up by a manual/automated system for the processing of paychecks and the
scheduling system is backed up by an on-line, time-entry system that would
prevent any material business interruption.

The likely financial and non-financial impact of non-compliant third
party computer systems on us has not been quantified, as we cannot predict
other businesses' Year 2000 efforts. However, no single customer or third party
vendor of ours could likely generate a material adverse impact on our
operations. We will continue to assess its exposure to any potential risks.

Costs of Compliance

To date, we have spent approximately $0.6 million toward remediation of
our Year 2000 problems, which includes computer consultant costs. We estimate
that the remaining cost of compliance will not be material. Independent of the
Year 2000 issue, we have been in the process of both upgrading and replacing
certain systems and obsolete hardware to enhance their functionality.

S-20
<PAGE>

BUSINESS

We are the largest independent provider of physical security and related
outsourced security services in North America. We provide security solutions to
approximately 14,000 customers, including commercial and industrial businesses,
financial institutions and healthcare, education, aviation, utility and
government facilities.

The services that we offer include:

. armed and unarmed physical security

. foot and vehicle patrol

. access control and monitoring

. background and drug screening

. investigative services

. contract staffing

. other specialized security and support services

In addition, through our alliances with ADT, a leading provider of
electronic security systems, and other security-related firms, we are able to
provide services such as:

. integrated electronic security systems (including intrusion and
fire detection, sprinkler and critical industrial process
monitoring, closed circuit television and access control)

. security consulting and systems design

Overview of the Protective Services Industry

In the protective services industry, businesses and government entities
are increasingly demanding total security solutions, often at multiple
locations or on a national basis, that combine high quality physical and
electronic security services. We believe that we are well-positioned to respond
to these demands because of our size, the breadth of our service offerings,
consistency in our policies and procedures and our focus on quality of service
and delivery.

The total United States market for outsourced security officer services,
according to one study, has grown from approximately $9.2 billion in 1992 to
approximately $12.3 billion in 1997 (the most recent year for which
comprehensive data are available), which represents a compounded annual growth
rate of 6.1%. According to the same study, outsourced security officer services
are projected to reach $17 billion in the United States by 2002, representing a
compounded annual growth rate of 6.7%. Some of the factors contributing to this
projected growth are:

. Increased Security Consciousness by Businesses, Government
Entities and the General Public. Businesses, government entities
and the general public are placing increased emphasis on safety
and recognizing the need for security officer and other services
to protect

S-21
<PAGE>

them against theft, terrorism and other crimes. We believe that
businesses and governments will increasingly look to private
security services to complement the work of traditional public law
enforcement agencies.

. Increased Outsourcing of Security Services. We believe that the
protective services industry will continue to benefit from the
trend by businesses and other users to outsource their security
needs. We believe that outsourcing of security services enables
users to receive a broader range and higher quality of security
services at a lower cost than proprietary security services.

In addition to being a growing market, the protective services industry
is highly fragmented and consists of more than 14,000 companies in the
United States and more than 50,000 companies worldwide. No single company is
dominant in the outsourced security officer segment. Industry sources estimate
that the three largest companies in the outsourced security officer segment
have a combined U.S. market share of approximately 20%.

Operating Strategy

We intend to strengthen our position as North America's largest supplier
of physical security and related security services and enhance our
profitability. The key elements of our operating strategy include:

. Improving Customer and Employee Retention. Retention of customers
and employees is key to our growth and profit improvement
strategies. As a result of retention programs we have implemented,
we have improved our customer and employee retention rates for
three consecutive years. We have established regional
administrative service centers to improve both quality and
efficiency by standardizing best practices with appropriate
systems support. These improvements have enhanced our ability to
recruit and staff jobs promptly, confirm on-time security officer
presence and compliance with client requirements and communicate
incidents to clients in a timely and effective manner. We are also
continuing to invest in employee screening programs, utilizing
methods such as police record checks, references, credit checks
and drug screening, and in security officer training. We have
opened employment centers to provide recruiting and training
programs. We have made changes to our compensation program to
reward salespeople for establishing and maintaining profitable
accounts and long-term customer relationships and for marketing
total security solutions to our clients. Higher employee retention
can improve service quality, and therefore, improve customer
retention. Through continued implementation of these strategies,
we intend to increase revenues, decrease costs and enhance overall
profitability.

. Focusing on Vertical Industry Segments. We are identifying
specific vertical industry segments for increased penetration and
development. We believe that these markets have a growing need for
a full range of high-quality, reliable security services provided
from a single source. We further believe that these markets offer
us the potential to cross-sell investigative, background
screening, contract staffing and other related services. In
addition to our traditional aviation, energy and governmental
segments, we have already identified the healthcare, education,
commercial real estate and banking and financial segments for
increased penetration. Over time, we believe that significant
opportunities exist in several additional industry segments to
implement our vertical marketing strategy.

. Marketing Total Security Solutions. In response to customer demand
and the trend toward outsourcing of security needs, we have
focused on providing total security solutions through our own
efforts and strategic alliances with ADT and other security-
related firms. We believe that we are well positioned to
effectively and profitably provide total security solutions to
multi-location and national accounts. In addition, our alliance
with ADT allows us to offer security solutions that combine
electronic security with physical security services.

S-22
<PAGE>

. Enhancing Our Sales and Marketing Capabilities. An important
component of our operating strategy is to enhance our sales and
marketing capability.

. We are consolidating most of our service offerings under our
principal brand name--Burns International--and, subject to
shareholder approval, changing the name of our company to Burns
International Services Corporation. We believe that use of the
Burns International name will improve market recognition of our
company and its range of services and eliminate confusion
associated with operating under a variety of names, including
the Borg-Warner and Wells Fargo names.

. We are investing in vertical market and other training
initiatives and marketing programs. As a result of these
efforts, we believe our sales force will be better able to
cross-sell our products, market total security solutions and
implement best practices to support multi-location and national
accounts.

Growth Strategy

Our growth strategy is based on the following:

. Capitalize on Outsourcing of Security Services. We intend to
capitalize on the continuing trend of businesses to outsource
security services that have historically been performed in-house.
We believe that demand for outsourced security services will
continue to increase due to the increasing need for high-quality
security services by security-conscious businesses and other users
of protective services. We further believe that our customers can
benefit from outsourcing their security needs to us because we are
often able to reduce their total security costs while providing a
broader range and higher quality of service. We believe that our
position as the nation's largest provider of high-quality
outsourced security officer and related services, combined with
our nationwide network of offices and ability to deliver total
security solutions through alliances with ADT and other security-
related firms, positions us to capitalize on the trend toward
outsourcing of security services.

. Provide Multi-Location and Nationwide Capability. As businesses
seek to centralize purchasing decisions and reduce the number of
vendor relationships, the ability to provide security services on
a regional and national basis is becoming essential to obtaining
many large accounts. Through our approximately 300 offices and our
dedication to providing consistent high-quality service, we are
able to provide uniformly trained personnel and standardized
operating procedures. In addition, we are able to provide quality
control monitoring, single points of contact and technology that
multi-location and national accounts value.

. Cross-Sell Products and Services. We believe that significant
opportunities exist to cross-sell services such as background
screening, information and investigative services and contract
staffing to our customer base. Supported by our alliances with ADT
and other security services firms, we are able to offer total
security solutions which combine physical and electronic security
services. We have recently instituted new incentive structures for
our sales force for acquiring and maintaining customer
relationships and cross-selling our products and services. In
addition to increasing revenues and profitability, we believe that

S-23
<PAGE>

cross-selling products and offering total security solutions will
further improve our client retention rate.

. Pursue Selected Acquisitions. The protective services industry in
the United States is highly fragmented with over 14,000 companies.
The three largest companies comprise approximately 20% of the
market. We believe that significant opportunities exist to
increase our geographic penetration and service offerings through
the selective acquisition of smaller companies. Through successful
integration of these acquisitions and retention of their clients
and employees, we expect to be able to realize cost savings and
productivity gains resulting from economies of scale.

Description of Our Business

Security Officer Services

We supply outsourced uniformed and plainclothed security officers, who
may or may not be armed, to perform a wide variety of tasks. These security
officers patrol and monitor commercial, financial, industrial, residential and
governmental facilities providing deterrence against crime and breach of
governmental security regulations and detection of fire, accidents and other
emergencies. The security officers also monitor electronic security systems and
control public and employee access to facilities. Specialized assignments
include nuclear and conventional electric power plant security, pre-departure
screening of passengers and luggage at airports, access control at health care
and educational facilities, background screening, investigative services and
contract staffing services.

We have approximately 75,000 employees. Security officers undergo a
standardized pre-employment screening program that features mandatory drug
screening, criminal record checks at the county and municipal court level and
verification of consumer credit reports, social security information and
drivers' license records. Security officers receive classroom orientation and
field training in safety, first aid and security techniques and in the handling
of specific problems applicable to particular industries or situations.

Physical security service contracts generally provide for services on a
continuing basis and generally are terminable by either party upon 30 to 60
days' notice. Charges for services are negotiated with customers and are based
upon payment of a specified amount per service hour. Typically, such charges
are adjusted for any change in any law, ruling or collective bargaining
agreement causing a change in work hours, wage rates, working conditions or
other costs. Screening and investigative services are generally provided under
specific arrangements, with charges varying according to the nature of the
assignment.

Sales and Marketing

We market our services to potential clients in the United States, Canada,
the United Kingdom and Colombia through a network of local sales teams,
regional managers and a national accounts sales team. Our total sales force
consists of approximately 170 general and branch managers and 200 salespeople.
Increasingly, our sales force is targeting selected vertical industry segments,
such as healthcare, education, commercial real estate and banking and finance.
We also bid on contracts involving governmental agencies. In addition, we
maintain a separate sales team to focus on multi-location and national
accounts. To further enhance our sales and marketing efforts, we are investing
in training initiatives and marketing materials to assist our sales force with
these specialized customers and with cross-selling efforts. Commissions and
other types of variable compensation comprise a significant portion of our
sales force compensation. In addition, we have made changes to our compensation
program to reward salespeople for establishing and maintaining profitable
accounts and long-term relationships, for cross-selling our products and for
providing total security solutions for our clients.

S-24
<PAGE>

In connection with our sale of Wells Fargo Alarm Services, Inc. to ADT on
May 29, 1998, we have entered into a strategic alliance with ADT to jointly
promote the sale of total security solutions consisting of physical and
electronic security services to our respective customers. Each company has
agreed to work with the other to:

. identify customers who desire both physical and electronic
security services and, jointly or independently, submit bids to
those customers

. actively pursue and recommend sales leads, customer contacts and
joint proposals

The strategic alliance better positions us and ADT to:

. utilize our patrol and alarm response, security officers,
background screening, investigative services and other related
security services

. utilize ADT integrated electronic systems capability, alarm and
fire systems, ADT closed circuit television and access control
systems and related security services

The intent of the strategic alliance is to create a reciprocal preferred
supplier relationship as long as the other company's services are competitive
in terms of price, quality, performance and other pertinent characteristics,
available on a timely basis to meet customer needs and not precluded by
customer preference or specification. The strategic alliance continues until
April 2001 and is subject to automatic annual renewal thereafter unless
terminated by either party.

Loomis, Fargo & Co.

Loomis Fargo operates nationwide and in Puerto Rico to provide armored
ground transportation services, ATM services and cash vault and related
services to financial institutions and commercial customers.

Loomis, Fargo & Co. was established in January 1997. We contributed
substantially all of the assets and some of the liabilities of our armored
transport unit to it in exchange for 49% of Loomis Fargo's outstanding common
stock and a cash payment of approximately $105 million (net of transaction
costs, but subject to certain adjustments). We also agreed to indemnify Loomis
Fargo against certain other claims, including claims relating to cargo losses
and taxes, most of which have since been resolved. See "Legal Proceedings."

Under a stockholders agreement between us and the former Loomis
shareholders, Loomis Fargo's board of directors consists of seven directors:
three directors nominated by us, three directors nominated by the former Loomis
shareholders, and the Loomis Fargo chief executive officer. The number of
directors that may be designated pursuant to the stockholder agreement may be
adjusted if either we or the former Loomis shareholders reduce their ownership
stake in Loomis Fargo. The stockholder agreement provides that the vote of five
of the seven directors is required for Loomis Fargo to engage in certain
specified activities, such as mergers, asset sales, issuances of equity and
amendments to its charter and bylaws. In addition, the stockholder agreement
prohibits the transfer of Loomis Fargo common stock by either party for three
years following the closing without the prior consent of the other party. After
the three-year period, Loomis Fargo common stock may be transferred only in
accordance with the provisions of the stockholder agreement, which include
rights of first refusal and co-sale rights.

Employees

Our business is labor intensive and, accordingly, is affected by the
availability of qualified personnel and the cost of labor. Although the
protective services industry is characterized generally by high employee
turnover, we believe our experience compares favorably with that of the
industry. We have not experienced any

S-25
<PAGE>

material difficulty in employing suitable numbers of qualified security
officers and other employees. We consider our relations with our employees to
be generally satisfactory.

We are party to collective bargaining agreements with various local
unions covering approximately 6,100 employees. The collective bargaining
agreements expire at various dates from 1999 to 2001 and relate, among other
things, to wages, hours and conditions of employment. Under section 9(b)(3) of
the National Labor Relations Act, if a union admits to membership, or is
affiliated directly or indirectly with a union that admits to membership of
employees other than security officers, an employer of security officers can
refuse to bargain with such union and such union cannot be certified as the
representative of a unit of security officers. As a result, we have in many
instances refused to recognize or withdrawn recognition of labor organizations
that admit as members employees other than security officers.

Competition

We compete with major national and international firms and numerous
smaller regional and local companies providing similar services. Competition in
the physical security industry is based on price in relation to the quality of
service, the scope of services performed, the extent and quality of security
officer supervision, recruiting and training and name recognition.

Regulation

Due to the nature of the our business, our operations are subject to a
variety of federal, state, county and municipal laws, regulations and licensing
requirements. In addition, many states have laws requiring training and
registration of security officers, regulating the use of badges, identification
cards and uniforms and imposing minimum bond surety and insurance requirements.
We believe that our operations are in substantial compliance with those laws,
regulations and requirements. Federal legislation has been introduced on more
than one occasion relating to security officer qualification and training.
Similar legislation is pending in several states. We generally support the
creation of standards for the industry and do not expect that the establishment
of such standards will have a material effect on our operations.

From time to time, in the ordinary course of business, we become subject
to penalties or fines as the result of licensing irregularities or the
misconduct of one or more of our agents or employees. In addition, under
principles of common law, we can generally be held liable for acts or omissions
of our agents or employees performed in the course and scope of their
employment. In addition, some states have statutes that expressly impose legal
responsibility on us for the conduct of our employees.

Risk Management

The nature of the services we provide potentially exposes us to risks of
liability for employee acts, injuries (including workers' compensation claims)
or omissions. We generally obtain customer indemnification or liability
limitations in our contracts to mitigate this risk exposure. We carry insurance
of various types, including workers' compensation, automobile and general
liability coverage. These policies include deductibles per occurrence for which
we are self-insured. We obtain insurance at rates and upon terms that we
negotiate periodically with various underwriters. Our loss experience and, to
some extent, that of other protective services companies, affect the premium
rates we are charged. Although there are limitations and uncertainty as to the
availability of insurance coverage for punitive damages in certain states in
which we operate, we do not believe that these limitations and uncertainties
are likely to be material, based upon our prior experience with punitive
damages claims. We also attempt to manage our risk liability through analysis
of customer facilities, customer profiles and employee screening, training,
supervision and evaluation. We also conduct ongoing company-wide programs aimed
at limiting workers' compensation and general liability claims.

S-26
<PAGE>

Discontinued Operations

Electronic Security Services. On May 29, 1998, we sold our electronic
security services business, Wells Fargo Alarm Services, Inc., to ADT Security
Services Inc., a subsidiary of Tyco International, Ltd. for approximately $425
million plus the assumption of approximately $6 million of debt by ADT. We
recorded a net after-tax gain of $42.5 million for the transaction in the
second quarter of 1998. As a result of the sale, the division's results have
been restated and reflected as discontinued operations for all periods
presented in our consolidated financial statements. Subsequently, we entered
into a strategic alliance agreement with ADT for the furnishing of electronic
and physical security services to our respective clients. See "--Sales and
Marketing." In May 1999, we made a claim to ADT for indemnification under the
purchase agreement for approximately $17 million of tax payments associated
with the election under Section 338(h)(10) of the Internal Revenue Code. ADT
has disputed the amount of the claim and we are attempting to resolve the
issue.

Pony Express. On May 29, 1998, we also sold our courier services
business, Pony Express Delivery Services, Inc. In the first quarter of 1998, we
recorded a $15.9 million after-tax charge to reduce our investment in this
business and to provide for costs associated with the disposition. We did not
record any further gain or loss as a result of completing the sale. Since
September 1996, we had treated the courier services unit as a discontinued
operation. The unit transported time-sensitive packages for commercial
businesses and non-negotiable financial documents for Federal Reserve banks and
financial institutions under the Pony Express(R) service mark.

Trademarks and Patents

We maintain several service marks of importance to our business. We
believe that our rights in these marks are adequately protected and of
unlimited duration. While we have patents we consider to be important to the
overall conduct of our business, we do not consider any particular patent, or
group of related patents, essential to our operations. We do not expect the
expiration of any of our United States and foreign patents, individually or in
the aggregate, to have any material effect on our financial condition or
results of operations.

On May 4, 1999, we announced a brand unification strategy under which we
intend to unify most of our security services under a single brand name, Burns
International. In addition, on May 4, 1999, we announced that, subject to
shareholder approval, we plan to change our company's name to Burns
International Services Corporation. The brand unification will eliminate
existing market confusion associated with operating under a variety of names,
including the "Wells Fargo" and "Borg-Warner" names.

As part of this brand unification strategy, we entered into an agreement
on March 30, 1999 with Wells Fargo & Company to relinquish our royalty-free
license to use the "Wells Fargo" name in the security field. In return, Wells
Fargo & Company granted our company a royalty-free license to use the "Wells
Fargo" name and mark for a two-year period from the date of that agreement and
has provided a payment that is intended to cover the costs of brand
unification. We entered into an agreement with Borg-Warner Automotive, Inc.,
effective July 31, 1998, whereby we sold our rights to the "Borg-Warner" name
and mark in the security field. Borg-Warner Automotive, Inc. granted us an
exclusive, royalty-free license to use the "Borg-Warner" name and mark in the
security field for a four-year period.

Properties

Our company and its subsidiaries maintain general offices in various
cities in the United States, Canada, the United Kingdom and Colombia. At
December 31, 1998, we occupied approximately 300 branch and satellite offices,
all but one of which were leased. We lease approximately 57,000 square feet of
office space in Chicago, Illinois for our executive offices. However, we
currently sublease 23,000 square feet of that office space to third parties. We
believe that our properties are in good condition and are adequate to meet our
current and reasonably anticipated needs.

S-27
<PAGE>

Legal Proceedings

We are presently, and will from time to time be, subject to claims and
suits arising in the ordinary course of our business. In some of these actions,
plaintiffs request punitive or other damages that may not be covered by
insurance. In addition, we have been subject to claims and suits relating to
certain discontinued operations. The most important of these legal proceedings
are discussed below. We believe that the various asserted claims and litigation
in which we are currently involved will not materially affect our financial
position or future operating results, although no assurance can be given with
respect to the ultimate outcome for any such claim or litigation. We believe
that we have established adequate provisions for litigation liabilities in our
financial statements in accordance with generally accepted accounting
principles. These provisions include both legal fees and possible outcomes of
legal proceedings (including the environmental matters discussed below).

Environmental Proceedings. We and certain of our 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 a number of 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. In addition, we have or may have liability for
environmental matters at properties presently or previously owned or leased by
us. Based on currently available information, we believe that none of these
matters individually or in the aggregate will have a material adverse affect on
our 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 our 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, indemnification
obligations in favor of us from the current owners of certain sold or
discontinued operations, estimated legal fees and other factors, we have made
provisions as of March 31, 1999, for indicated environmental liabilities in our
financial statements in the aggregate amount of approximately $4 million
(relating to environmental matters with respect to our discontinued
operations). While estimates of liability for environmental matters can vary
over time due to, among other things, changes in laws, technology or available
information, we believe that such provisions for indicated environmental
liabilities have been established on a basis consistent with generally accepted
accounting principles.

Loomis, Fargo Indemnification Claims. In 1998, Loomis, Fargo made various
claims against us for indemnification under the contribution agreement dated
November 28, 1996 for certain cargo losses and environmental and other matters.
As a result of various settlement agreements we entered into with Loomis,
Fargo, most of the indemnification obligations, including the cargo and
environmental claims, have been resolved. We do not expect that the amounts
payable by us in connection with the resolution of these claims or in
connection with the remaining unresolved claims will have a material effect on
our business or financial condition.

Centaur Litigation. The discontinued property and casualty insurance
subsidiary ("Centaur") of our predecessor ceased writing insurance in 1984 and
has been operating under rehabilitation since September 1987. On August 10,
1998, we and the Mission Trust agreed to settle their pending suit against us,
subject to court approval. The suit had alleged damages in excess of $100
million because of Centaur's failure to satisfy its reinsurance obligations. As
part of the settlement we agreed to pay the Mission Trust $4 million and one-
third of any dividend or other distribution that may be paid to us after
rehabilitation of Centaur. Any future payments will not have an adverse effect
on our earnings. Separately, the Mission Trust and Centaur agreed to an
uncontested liquidated claim in the Centaur estate for which we are not liable.
The parties have finalized and executed settlement and release agreements and
the case was dismissed with prejudice on April 28, 1999.

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<PAGE>

MANAGEMENT

Directors

Set forth below are the names, ages, principal occupation and certain
other information concerning the directors of our company as of June 1, 1999.

<TABLE>
<CAPTION>
Name Age Position With Company
---- --- ---------------------
<C> <C> <S>
John A. Edwardson.......... 49 Chairman of the Board (since June 1999),
Director since 1999 Chief Executive Officer and President (since
March 1999). Former President from July 1994
to September 1998 and Chief Operating
Officer from April 1995 to September 1998 of
United Airlines, Inc. Former Executive Vice
President and Chief Financial Officer from
March 1991 to July 1994 of Ameritech Corp.
Mr. Edwardson is also a director of
Household International and Focal
Communications Corporation.
J. Joe Adorjan............. 60 Chairman of the Board (January 1996 to May
Director since 1993 1999), Chief Executive Officer (October 1995
to March 1999) and President (April 1995 to
March 1999) of the Company. Mr. Adorjan was
President of Emerson Electric Col., a
manufacturer of electronic, electrical and
other products, from 1992 to 1995. Mr.
Adorjan is also a director of The
Earthgrains Company, ESCO Electronics
Corporation, Goss Graphic Systems, Inc.,
Loomis, Fargo & Co., Hussmann Corporation
and Illinova Corporation.
James J. Burke, Jr......... 47 Partner and director of Stonington Partners,
Director since 1987 Inc., an investment firm ("Stonington"),
since 1993 and director of Merrill Lynch
Capital Partners ("MLCP"), an investment
firm, since 1985. Mr. Burke was Managing
Partner of MLCP from 1993 to 1994 and was
President and Chief Executive Officer of
MLCP from 1987 to 1993. Mr. Burke is also a
director of Ann Taylor Stores Corporation,
Education Management Corporation, Pathmark
Stores, Inc., Supermarket General Holdings
Corp. and United Artists Theatre Circuit,
Inc.
Albert J. Fitzgibbons III.. 53 Partner and director of Stonington, since
Director since 1987 1993, and director of MLCP, since 1988. Mr.
Fitzgibbons was a Partner of MLCP from 1993
to 1994 and was Executive Vice President of
MLCP from 1988 to 1993. Mr. Fitzgibbons is
also a director of Dictaphone Corporation,
Merisel, Inc. and United Artists Theatre
Circuit, Inc.
Arthur F. Golden........... 53 Partner of Davis Polk & Wardwell, a law
Director since 1996 firm, since 1978.
Dale W. Lang............... 66 President of KX Acquisition Corp., an owner
Director since 1993 and operator of television stations, since
1992. Retired Chairman of Lang
Communications, Inc., a magazine publishing
company.
Robert A. McCabe........... 64 Chairman of Pilot Capital Corporation, an
Director since 1993 investment firm, since 1999. Former
president from 1987 to 1999. Mr. McCabe is
also a director of Atlantic Bank, Church &
Dwight Co., Inc., Thermo Electron
Corporation and Thermo Optek, Inc.
Alexis P. Michas........... 41 Managing Partner and director of Stonington
Director since 1987 Partners, Inc., since 1993 and director of
MLCP since 1989. Mr. Michas was Senior Vice
President of MLCP from 1989 to 1993 and a
Managing Director in the Investment Banking
Division of Merrill Lynch & Co., Inc.
("ML&Co."), a financial services company,
from 1991 to 1994. Mr. Michas is also a
director of Blue Bird Corporation, Borg-
Warner Automotive, Inc., Dictaphone
Corporation, Goss Graphic Systems, Inc. and
Packard BioScience Company.
</TABLE>

S-29
<PAGE>

<TABLE>
<CAPTION>
Name Age Position With Company
---- --- ---------------------
<C> <C> <S>
Andrew McNally IV...... 59 Retired Chairman and Chief Executive Officer of
Director since 1996 Rand McNally, a publishing and map making
company, Mr. McNally was Chairman and Chief
Executive Officer from 1993 to 1997 and
President and Chief Executive officer from 1978
to 1993 of Rand McNally. Mr. McNally is also a
director of Hubbell Incorporated, Mercury
Finance Co., Morgan Stanley Funds and Zenith
Electronics Corporation.
H. Norman Schwarzkopf.. 64 Author and lecturer since 1991, Mr. Schwarzkopf
Director since 1993 was a general in the United States Army until
his retirement in 1991. Mr. Schwarzkopf is also
a director of Home Shopping Network, Inc.,
Kuhlman Corporation and Remington Arms Company,
Inc.
Donald C. Trauscht..... 65 Chairman of the BW Capital Corporation, a
Director since 1987 private investment company, since 1996. Mr.
Trauscht was Chairman of the Board, Chief
Executive and President of the Company from 1992
to 1995. Mr. Trauscht is also a director of Blue
Bird Corporation, ESCO Electronics Corporation,
Hydac International Corporation, Cordant
Technologies Inc., Global Motorsports Group,
Inc. and Wynn's International Inc.

On June 1, 1999, Mr. Edwardson was elected chairman of our board of
directors. Mr. Adorjan, who had previously held the position of chairman, will
continue to serve as a member of the board of directors. At the February 2,
1999 Board of Directors meeting, the board adopted a resolution establishing a
mandatory retirement age of 70 for members of the board of directors, subject
to the discretionary right of the Chief Executive Officer to extend the term of
any director beyond the mandatory retirement age. On March 1, 1999, the board
of directors increased the size of the board of directors from ten to twelve.

Executive Officers

Set forth below are the names, ages, positions and certain other
information concerning the executive officers of our company as of June 1,
1999.

<CAPTION>
Name Age Position With Company
---- --- ---------------------
<C> <C> <S>
John A. Edwardson 49 Chairman of the Board, Chief Executive Officer
and President
John D. O'Brien 57 Senior Vice President
Timothy M. Wood 51 Vice President, Finance
Robert E. T. Lackey 51 Vice President, General Counsel and Secretary
</TABLE>

Mr. O'Brien has been Senior Vice President of our company since 1993 and
was Vice President of our company from 1987 to 1993. Mr. O'Brien is also
President of Borg-Warner Protective Services Corporation and a director of
Loomis, Fargo & Co.

Mr. Wood has been Vice President, Finance of our company since 1994 and
was Vice President and Controller from 1987 to 1994 and is also a director of
Loomis, Fargo & Co.

Mr. Lackey has been Vice President, General Counsel and Secretary of our
company since 1997 and was Vice President, General Counsel and Secretary of
Transamerica Commercial Finance Corp. from 1991 to 1995.

Each of the executive officers named above was elected by the Board of
Directors to serve in the office indicated until his successor is elected and
qualified.

S-30
<PAGE>

SELLING SHAREHOLDERS

The following table sets forth information about the selling shareholders
participating in this offering.

<TABLE>
<CAPTION>
Shares Owned Percentage of Shares Owned
Prior to Share Outstanding Stock After the
Buy- Prior to Share Shares Sold in Offering and
back and the Buy-back and the Share Amount Share Buy-
Name Offering Offering Buy-back Offered back
- ---- -------------- ----------------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Merchant Banking L.P.
No. 1.................. 500,000 2.1% 263,317 236,683 0
Merrill Lynch Capital
Appreciation
Partnership No. VIII,
L.P.................... 6,628,615 27.6% 3,490,856 2,901,512(1) 0
ML Offshore LBO
Partnership No. VIII... 168,524 * 88,751 74,157(2) 0
Merrill Lynch & Co.
Foundation, Inc........ 788,892 3.3% 0 788,892 0
ML IBK Positions, Inc... 1,209,190 5.0% 420,298 348,756(3) 440,136(4)
--------- ---- --------- --------- -------
Total................ 9,295,221 38.8% 4,263,222 4,350,000 440,136(5)
========= ==== ========= ========= =======
</TABLE>
- -------
* Represents less than one percent.
(1) Based on an assumed public offering price of $17 per share, this entity
intends to distribute 236,247 shares to its partners in the anticipated
share distribution described below. The number of shares to be sold by such
entity may be adjusted subject to the amount of shares actually
distributed.
(2) Based on an assumed public offering price of $17 per share, this entity
intends to distribute 5,616 shares to its partners in the anticipated share
distribution described below. The number of shares to be sold by such
entity may be adjusted subject to the amount of shares actually
distributed.
(3) In addition, ML IBK Positions, Inc. has granted the underwriters an option
to purchase up to an additional 440,136 shares solely to cover over-
allotments, if any.
(4) Assumes no exercise of the over-allotment option. After the offering and
the share buy-back, ML IBK Positions, Inc. will own approximately 2.2% of
our outstanding common stock (0% if the underwriters exercise their over-
allotment option in full).
(5) After the offering, approximately 818,001 shares of common stock will still
be owned by Merrill Lynch affiliated entities not participating in this
offering. In addition, if the over-allotment option is not exercised, ML
IBK Positions, Inc. will own 440,136 shares of common stock. See "Selling
Shareholders" in the accompanying prospectus.

Merrill Lynch Capital Appreciation Partnership No. VIII, L.P. and ML
Offshore LBO Partnership No. VIII are limited partnerships and, assuming a
public offering price of $17 per share in this offering, are expected to
distribute an aggregate of 241,863 shares of our common stock to their partners
who have elected to receive their partnership interests in the form of our
common stock instead of in cash through the sale of common stock in this
offering. Any shares that are to be distributed by these selling shareholders
to their partners in excess of the amounts shown in the above table will be
replaced in this offering by additional shares sold by ML IBK Positions, Inc.
The number of over-allotment shares will be reduced to the extent that the
actual public offering price is greater than $17 per share, and the number of
over-allotment shares will be increased to the extent that the actual public
offering price is less than $17 per share.

As a condition to receiving shares instead of cash proceeds, these
partners have agreed to be bound by the same lock-up provisions as the selling
shareholders for a period of 90 days after the date of this prospectus
supplement. The selling shareholders have advised us that this distribution is
expected to occur as soon as practicable after 90 days from the date of this
prospectus supplement or, if the underwriters consent, at an earlier time.

On April 19, 1999, we entered into a stock purchase agreement with
Merchant Banking L.P. No. I, Merrill Lynch Capital Appreciation Partnership No.
VIII, L.P., ML Offshore LBO Partnership No. VIII, ML Employees LBO Partnership
No. I, L.P. and ML IBK Positions, Inc. pursuant to which we agreed to buy back
4,350,000 shares of our common stock from those selling shareholders at a
purchase price of $18.375 per share, subject to our obtaining necessary
consents from our lending banks and holders of our outstanding senior
subordinated notes. The stock purchase agreement may be terminated by either
the selling shareholders or us if the closing does not occur by July 20, 1999.
The closing is currently scheduled to occur on June 14, 1999.

S-31
<PAGE>

In an amendment entered into on June 10, 1999 to the stock purchase
agreement, we agreed to use all reasonable efforts to keep the shelf
registration statement of which the accompanying prospectus is a part
continuously effective, subject to agreed exceptions, until the earlier of 365
days after the date of this prospectus supplement (as extended by any blackout
periods imposed by us) or the date on which all the shares registered have been
sold. We also agreed to bear all registration expenses (as defined in the
agreement), excluding underwriting discounts, broker fees and commissions and
transfer taxes relating to shares sold under this prospectus supplement.

We entered into a registration rights agreement in 1987 with the selling
shareholders and other Merrill Lynch affiliated entities that are shareholders
of our company. Under this registration rights agreement, we granted these
shareholders rights entitling them, under specified circumstances, to cause us
to register for sale all or part of their shares of common stock. In the 1987
registration rights agreement, we agreed to indemnify these shareholders, their
officers, directors, partners and agents and each person who controls each of
these shareholders against certain liabilities which they might incur in
connection with the sale of any shares under a registration statement filed
pursuant to the exercise of their registration rights. The registration rights
agreement also provides for rights of contribution if indemnification is not
available.

Messrs. Burke, Fitzgibbons and Michas, three of our directors, are also
directors of Merrill Lynch Capital Partners, Inc., which manages Merrill Lynch
Capital Appreciation Partnership No. VIII, L.P. and ML Offshore LBO Partnership
No. VIII. Merrill Lynch Capital Partners, Inc. has informed us that it intends
to request that these directors resign from our board as its representatives
upon closing of this offering. We, however, intend to request that these
directors remain on our board as independent directors for a three-year
transitional period.

S-32
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering and after giving effect to our
repurchase of 4,350,000 shares of our common stock from several of the selling
shareholders, approximately 19,631,816 shares of our common stock will be
outstanding. All of the 4,350,000 shares of our common stock that the selling
shareholders are selling in this offering (assuming no exercise of the
underwriters' over-allotment option), together with approximately 13,781,816
additional shares currently outstanding (after giving effect to our repurchase
of 4,350,000 shares), will be freely transferable without restriction under the
Securities Act unless held by an affiliate of ours. All of the remaining
1,500,000 shares (1,059,864 shares if the over-allotment option granted to the
underwriters is exercised in full) and any shares held by our affiliates are
"restricted securities" within the meaning of Rule 144 under the Securities Act
and may not be sold except pursuant to an effective registration statement or
under an exemption from registration under the Securities Act, including the
exemption contained in Rule 144.

The accompanying prospectus is part of an effective registration
statement that would permit the selling shareholders named therein to sell
their remaining shares in one or more transactions. We have agreed to use our
reasonable efforts to keep that shelf registration statement continuously
effective, subject to agreed exceptions, until the earlier of 365 days after
the date of this prospectus supplement (subject to extension if we suspend the
use of the registration statement) or the date on which all of the shares have
been sold. In addition, holders of restricted shares may sell in reliance on
Rule 144. Rule 144 contains volume and other resale limitations. Under Rule
144(k), however, a person (or persons whose shares are aggregated) who has not
been an affiliate of ours at the time of sale and has not been an affiliate
during the three months immediately preceding the sale may sell its restricted
shares without regard to volume and other resale limitations of Rule 144
provided that a period of at least two years has elapsed from the later of the
date the shares were acquired from us or from an affiliate of ours.

The selling shareholders and other persons receiving restricted shares as
part of the partnership distributions described under "Selling Shareholders"
have generally agreed not to sell any shares of common stock other than the
shares in this offering for a period of 90 days from the date of this
prospectus supplement. For a description of these lock-up arrangements, see
"Underwriting".

We cannot predict what effect, if any, future sales of our common stock
or the availability of our common stock for future sale will have on the market
price of our shares. Sales of substantial amounts of our common stock
(including shares issued upon the exercise of employee stock options) in the
public market, or the perception that those sales could occur, could have a
negative effect on the market price of our common stock.

S-33
<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement
among our company, the selling shareholders and each of the underwriters named
below, the selling shareholders severally have agreed to sell to the
underwriters, and each of the underwriters, severally and not jointly, has
agreed to purchase from the selling shareholders, the number of shares of
common stock set forth opposite its name below.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Credit Suisse First Boston Corporation................................
CIBC World Markets Corp...............................................
Lehman Brothers Inc...................................................
---------
Total........................................................ 4,350,000
=========
</TABLE>

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First
Boston Corporation, CIBC World Markets Corp. and Lehman Brothers Inc. are
acting as representatives of the several underwriters.

In the purchase agreement, the several underwriters have agreed, subject
to the terms and conditions set forth in the purchase agreement, to purchase
all of the shares of common stock being sold under the terms of such agreement
if any of the shares of common stock being sold under the terms of that
agreement are purchased. In the event of a default by an underwriter, the
purchase agreement provides that, in certain circumstances, the purchase
commitments of the nondefaulting underwriters may be increased or the purchase
agreement may be terminated.

The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and
certain other conditions. The underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part.

The underwriters have advised us and the selling shareholders that they
propose initially to offer the shares of common stock to the public at the
public offering price set forth on the cover page of this prospectus supplement
and to certain dealers at such price less a concession not in excess of $
per share. The underwriters may allow, and such dealers may reallow, a discount
not in excess of $ per share of to certain other dealers. After the
offering, the public offering price, concession and discount may change.

The following table shows the per share and total public offering price,
underwriting discount to be paid by the selling shareholders to the
underwriters and the proceeds before expenses to the selling shareholders. This
information is presented assuming either no exercise or full exercise by the
underwriters of their over-allotment option.

<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price............................. $ $ $
Underwriting discount............................. $ $ $
Proceeds before expenses, to the selling
shareholders..................................... $ $ $
</TABLE>

The expenses of the offering, exclusive of the underwriting discounts and
commissions, are estimated at $310,000 and will be borne by us.

S-34
<PAGE>

One of the selling shareholders will grant an option to the underwriters,
exercisable for 30 days after the date of this prospectus supplement, to
purchase up to an aggregate of 440,136 additional shares of common stock at the
public offering price set forth on the cover page of this prospectus
supplement, less the underwriting discount. The underwriters may exercise this
option solely to cover over-allotments, if any, made on the sale of the common
stock offered hereby. To the extent that the underwriters exercise this option,
each of the underwriters will be obligated, subject to certain conditions, to
purchase a number of additional shares of common stock proportionate to such
underwriter's initial commitment reflected in the foregoing table.

Our common stock is listed on the New York Stock Exchange under the
symbol "BOR". Because we are an affiliate of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, one of the underwriters, the offering is being conducted in
accordance with Conduct Rule 2720 of the National Association of Securities
Dealers, Inc. In accordance with Conduct Rule 2720, no NASD member
participating in the distribution is permitted to confirm sales to accounts
over which it exercises discretionary authority without prior specific written
consent of the customer.

Pursuant to a registration rights agreement entered into among
shareholders who currently own approximately 10,200,000 shares (5,850,000
shares after giving effect to the repurchase by us of 4,350,000 shares, which
is scheduled to occur on June 14, 1999) of our common stock (including the
selling shareholders) and us, each holder of at least 1% of the outstanding
shares of our common stock who is a party thereto or an assignee of rights
thereunder is required to agree, for a period beginning seven days before, and
ending 120 days after, the date of this prospectus supplement, not to effect
any public sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of our common stock or any securities convertible into or
exchangeable for our common stock, or any rights or warrants to acquire our
common stock. The representatives have agreed to shorten the 120-day period
after the date of this prospectus supplement to 90 days. In addition, certain
of the selling shareholders that are Merrill Lynch investment partnerships will
be distributing, assuming a price to public of $17 per share in this offering,
approximately 241,863 shares of our common stock owned by them to their
partners pursuant to the distribution described under "Selling Shareholders" in
this prospectus supplement. As a condition to receiving shares of our common
stock in that distribution, those partners have agreed to be bound by the same
lock-up provisions as the selling shareholders for a period of 90 days. This
distribution is expected to occur as soon as practicable after 90 days from the
date of this prospectus supplement, or such other date that the representatives
consent to.

We and our executive officers and directors and all of the selling
shareholders will agree, with certain exceptions, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of the
underwriters, for a period beginning seven days before, and ending 90 days
after the date of this prospectus supplement, not to, directly or indirectly,

. offer, pledge, sell, contract to sell, sell any option or contract
to purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend or otherwise dispose of or
transfer any shares of our common stock or any securities
convertible into or exchangeable or exercisable for or repayable
with our common stock (other than options or shares of our common
stock issuable upon exercise of options which expire during such
lock-up period), whether now owned or later acquired by the person
executing the agreement or with respect to which the person
executing the agreement later acquires the power of disposition,
or file a registration statement under the Securities Act relating
to any shares of our common stock, or

. enter into any swap or any other agreement or any transaction that
transfers, in whole or part, directly or indirectly, the economic
consequence of ownership of our common stock whether any such swap
or transaction is to be settled by delivery of our common stock or
other securities, in cash or otherwise.

Upon consummation of this offering (assuming no exercise by the
underwriters of their over-allotment option), it is expected that the lock-up
agreements will cover an aggregate of approximately 2.8 million shares of our
common stock.

S-35
<PAGE>

Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters to
bid for and purchase our common stock. As an exception to these rules, the
underwriters are permitted to engage in certain transactions that stabilize the
price of our common stock. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of our common stock.

If the underwriters create a short position in our common stock in
connection with this offering, i.e., if they sell more shares of common stock
than are set forth on the cover of this prospectus supplement, the underwriters
may also elect to reduce any short position by purchasing shares in the open
market. In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.

Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the underwriters
will engage in such transactions or that such transactions, once commenced,
will not be discontinued without notice.

Merrill Lynch, Pierce, Fenner & Smith Incorporated may use this
prospectus supplement for offers and sales related to market-making
transactions in our common stock. Merrill Lynch, Pierce, Fenner & Smith
Incorporated may act as principal or agent in these transactions, and the sales
will be made at market prices or at negotiated prices related to prevailing
market prices at the time of sale.

We and the selling shareholders have agreed to indemnify the underwriters
against some liabilities, including liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in respect of
those liabilities.

Each of the representatives and their affiliates engages in transactions
with, and performs services for, us in the ordinary course of business and has
engaged, and may in the future engage, in commercial or investment banking
transactions with our company, for which it has received or will receive, as
the case may be, customary compensation. If the underwriters exercise in full
their option to cover over-allotments, the ownership of common stock by the
Merrill Lynch affiliated entities after giving effect to this offering and the
distribution of common stock by certain selling shareholders to their partners
will be less than five percent. For information regarding the ownership by
Merrill Lynch affiliated entities of our common stock, the proposed
distribution by certain of the selling shareholders to their partners and the
representation of affiliates of Merrill Lynch & Co., Inc. on the board of our
company, see the "Management" and "Selling Shareholders" sections of this
prospectus supplement and "Selling Shareholders" in the prospectus.

LEGAL MATTERS

Davis Polk & Wardwell, New York, New York will pass upon the validity of
the shares of common stock for us. Arthur F. Golden, one of our directors, is a
partner of Davis Polk & Wardwell. Shearman & Sterling, New York, New York will
pass upon certain legal matters with respect to the shares of common stock for
the underwriters.

S-36
<PAGE>

PROSPECTUS
June 7, 1999

5,850,000 Shares

Borg-Warner Security Corporation

Common Stock

----------------

This prospectus relates to the sale of up to 5,850,000 shares of common
stock, par value $.01 per share, of Borg-Warner Security Corporation by several
of our existing shareholders.

----------------

The common stock is listed on the New York Stock Exchange under the
symbol "BOR". On June 3, 1999, the last sale price of the common stock was $15
7/8 per share.

----------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
About this Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
Special Note Regarding Forward-Looking Statements.......................... 3
Use of Proceeds............................................................ 3
Borg-Warner Security Corporation........................................... 3
Market for Borg-Warner's Common Stock and Dividend Policy.................. 4
Description of Capital Stock............................................... 4
Selling Shareholders....................................................... 7
Plan of Distribution....................................................... 8
Legal Matters.............................................................. 9
Experts.................................................................... 9
</TABLE>

----------------

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission utilizing a "shelf" registration
process. Under this shelf process, the selling shareholders named in this
prospectus may sell up to 5,850,000 shares of common stock from time to time.
Each time any of these selling shareholders sells common shares, we will
provide a prospectus supplement that will contain specific information about
the terms of that offering. The prospectus supplement may also add, update or
change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information".

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. You may also read and copy these
documents at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling shareholders sell all of the securities
covered by this prospectus:

. Annual Report on Form 10-K for the year ended December 31, 1998

. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999

2
<PAGE>

You may request a copy of these filings, at no cost, by writing or
telephoning us at our principal executive offices at the following address:

Borg-Warner Security
Corporation
200 South Michigan
Avenue
Chicago, Illinois 60604
Attention: Corporate
Secretary
Tel: (312) 322-8500

You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. Neither we
nor the selling shareholders are making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of these documents.

We have also filed or incorporated by reference exhibits with the
registration statement. You should read the exhibits carefully for provisions
that may be important to you.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We are designating any statements in this prospectus that are not
historical facts as "forward-looking statements" for the purpose of the safe
harbor provided by Section 21E of the Exchange Act and Section 27A of the
Securities Act. These forward-looking statements are necessarily estimates
reflecting the best judgment of our senior management and involve a number of
risks and uncertainties that could cause actual results to differ materially
from those suggested by the forward-looking statements. Such forward-looking
statements should, therefore, be considered in light of the risk, uncertainties
and other information listed in Exhibit 99 to our annual report on Form 10-K
incorporated into this prospectus. See "Where You Can Find More Information."

USE OF PROCEEDS

We will not receive any proceeds from the sale of these shares.

BORG-WARNER SECURITY CORPORATION

We are the largest independent provider of physical security and related
outsourced security services in North America. As a result of our significant
market presence, breadth of product offerings and strategic alliances, we are
well positioned to service local, multi-location and national accounts and
provide total security solutions to our customers.

We provide guard services, as well as background screening, contract
employment and investigative services, to approximately 14,000 clients in the
United States, Canada, United Kingdom and Colombia. We service these clients
with approximately 73,000 employees in approximately 300 offices under the
Wells Fargo(R), Burns(R), Globe(R) and other service marks.

On May 4, 1999, we announced that, subject to shareholder approval, we
plan to change our name to Burns International Services Corporation.

3
<PAGE>

Our headquarters is at 200 South Michigan Avenue, Chicago, Illinois
60604, where our telephone number is (312) 322-8500.

MARKET FOR BORG-WARNER'S COMMON STOCK AND DIVIDEND POLICY

As of April 30, 1999, there were approximately 150 holders of record of
the common stock.

We have neither paid nor declared any cash dividends on our common stock
during the last two years. The payment of dividends by us is prohibited under
the terms of some of our debt instruments. We currently intend to retain
earnings for acquisitions, working capital, capital expenditures, general
corporate purposes and reduction of outstanding indebtedness. Accordingly, we
do not expect to be able to nor do we expect to pay cash dividends in the
foreseeable future.

High and low closing sales prices (as reported on the New York Stock
Exchange composite tape) for the common stock for each quarter during 1997 and
1998 and through June 3, 1999 were:

<TABLE>
<CAPTION>
Quarter Ended High Low
------------- --------- ---------
<S> <C> <C>
1997
March 31............................................ $15 1/8 $10 1/8
June 30............................................. 18 13 3/4
September 30........................................ 19 9/16 16 1/8
December 31......................................... 19 3/4 15 1/4
1998
March 31............................................ 19 11/16 15 15/16
June 30............................................. 24 3/4 17 7/8
September 30........................................ 23 1/16 13 1/4
December 31......................................... 20 1/16 13 1/16
1999
March 31............................................ 20 9/16 14 11/16
June 30 (through June 3)............................ 19 15 3/8
</TABLE>

DESCRIPTION OF CAPITAL STOCK

The following table shows our authorized and outstanding capital stock at
April 30, 1999:

<TABLE>
<CAPTION>
Number of Shares Number of Shares
Authorized Outstanding
---------------- ----------------
<S> <C> <C>
Common Stock............................ 50,000,000 23,981,816
Non-Voting Common Stock................. 25,000,000 0
Preferred Stock......................... 5,000,000 0
</TABLE>

In addition, as of April 30, 1999, we had issued options to purchase
2,685,400 shares of common stock. On April 19, 1999, we agreed to buy-back
4,350,000 shares of the common stock from several of the selling shareholders.
See "Selling Shareholders".

Common Stock

The common stock and non-voting common stock have the same terms except
for voting rights and some of the conversion features described below.

4
<PAGE>

Each share of common stock entitles the holder to one vote in the
election of directors and all other matters submitted to a vote of our
shareholders. Holders of common stock do not have cumulative voting rights. The
non-voting common stock has no voting rights, except when required by law or
when a proposed amendment to our certificate of incorporation would adversely
affect the special rights, powers or preferences of the non-voting common
stock.

Holders of shares of common stock and non-voting common stock, treated as
a single class, are entitled to receive cash dividends when, as and if declared
by our board of directors out of funds legally available for the payment of
dividends. However, we do not expect to pay cash dividends in the forseeable
future. In addition, some of our debt instruments restrict our ability to pay
dividends on our capital stock. If we issue any preferred stock, the holders of
that preferred stock will be entitled to receive their dividends before any
dividends are paid on shares of common stock and non-voting common stock.

Since some of our institutional shareholders are subject to regulatory
requirements that forbid or limit their right to own our voting stock, our
certificate of incorporation allows those shareholders to convert their common
stock into non-voting common stock on a share-for-share basis to comply with
regulatory requirements. Thereafter, these investors can reconvert their non-
voting common stock into common stock on a share-for-share basis in connection
with the sale, distribution or other disposition of their shares in a
transaction meeting the requirements specified in the certificate of
incorporation and to the extent permitted by regulatory requirements.

If we are liquidated, each share of common stock and non-voting common
stock, treated as a single class, will share equally in any assets available
for distribution after payment in full of all other claims on our assets,
including any liquidation preference payable to holders of any preferred stock
outstanding at the time of liquidation.

Holders of shares of common stock and non-voting common stock have no
preemptive rights to purchase additional shares of any class of our capital
stock or any other securities of ours. All of the outstanding shares of common
stock and non-voting common stock are fully paid and non-assessable.

The transfer agent for the common stock is The Bank of New York.

Preferred Stock

Our certificate of incorporation authorizes our board of directors to
establish one or more series of preferred stock to determine the terms and
rights of that series, including

. the designation of that series

. the number of shares of that series, including any right of the
board of directors to increase or decrease that number

. the dividend rate of that series and whether dividends will be
cumulative or non-cumulative

. dividend payment dates

. any redemption rights and redemption prices, including any
provisions for a sinking fund

. whether the shares of that series will be convertible into any
other security of our company or any other company, and the terms
and conditions of any conversion, including the conversion price
or conversion rate

. any restrictions on issuance of shares of the same series or any
other class or series

. any voting rights

5
<PAGE>

The board of directors can issue authorized shares of preferred stock and
common stock without any further action by the stockholders, except when
stockholder action is required by applicable law or the rules of any stock
exchange or automated quotation system on which our securities are listed or
traded.

Although our board of directors has no intention at the present time of
doing so, it could issue a series of preferred stock that could, depending on
the terms of that series, impede the completion of a merger, tender offer or
other takeover attempt. The board of directors will decide to issue any shares
of preferred stock based on its judgment as to the best interests of our
company and its stockholders. However, it is possible that an issuance of
preferred stock may discourage an acquisition attempt or other transaction that
some, or a even a majority, of our stockholders believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then current market price of the stock.

The Delaware General Corporation Law

Our company is a Delaware corporation subject to Section 203 of the
Delaware General Corporation Law. Section 203 provides, in general, that a
corporation may not engage in any business combination with any "interested
stockholder" for a three-year period following the date that person becomes an
interested stockholder unless

. the board of directors approves the business combination or the
transaction which resulted in the person becoming an interested
stockholder prior to the time the person becomes an interested
stockholder

. upon consummation of the transaction which results in the person
becoming an interested stockholder, the interested stockholder
owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced or

. on or after the date the person becomes an interested stockholder,
the business combination is approved by the board of directors and
the affirmative vote of at least 66 2/3% of the outstanding voting
stock not owned by the interested stockholder.

An interested stockholder is generally defined to mean any person who is
the owner of 15% or more of the outstanding voting stock of the corporation or
any affiliate or associate of that person. Section 203 may make it more
difficult for an "interested stockholder" to effect a business combination with
our company for a three-year period unless the stockholders elect to exclude
our company from the provisions of Section 203.

Certificate of Incorporation and Bylaws

Our certificate of incorporation and bylaws contain some provisions that
could make an acquisition of our company by means of a tender offer or proxy
contest more difficult. Some of these provisions include:

Classified Board. Our board of directors is divided into three classes.
As a result, approximately one-third of the board of directors is elected each
year, making it more difficult for stockholders to change the composition of
the board. The bylaws provide that the total number of directors will be fixed
by a majority of the board of the directors, but cannot consist of more than
seventeen or less than three directors. In addition, under our certificate of
incorporation, vacancies on the board will be filled by an affirmative vote of
a majority of the remaining directors, even if they make up less than a quorum.
If we issue any preferred stock, and that preferred stock has the right to
elect directors, the provisions described in this paragraph may be modified.

Removal of Directors. Under our certificate of incorporation and bylaws,
directors can be removed only for cause and only by the affirmative vote of the
holders of at least 80% of the outstanding voting stock, voting as a single
class.

Stockholder Action. Stockholders can only take action at annual or
special meetings of stockholders and cannot take action through written
consents in lieu of a meeting. The bylaws provide that special meetings

6
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of stockholders can be called only by the board of directors. Stockholders
cannot call a special meeting or order the board of directors to call a special
meeting. In addition, the only business that can be conducted at a special
meeting of stockholders is the business specified in the notice of meeting
given by the board of directors.

Advance Notice Procedures. The Bylaws establish a stockholder notice
procedure for stockholders to make nominations of candidates for election as
directors or bring other business before an annual meeting of shareholders. The
only nominations or other business proposed by stockholders that will be
considered at an annual meeting are those for which proper notice has been
given. In general, notice has to be given no more than 90 days and no less than
60 days prior to the first anniversary of the previous year's annual meeting,
except when the meeting is advanced by more than 20 days or delayed by more
than 60 days. If the meeting is so advanced or delayed or if the meeting is a
special meeting, then notice has to be given no earlier than 90 days before the
meeting and not later than the later of (i) 60 days prior to the meeting and
(ii) 10 days after public announcement of the meeting.

Amendment. The certificate of incorporation provides that the affirmative
vote of at least 80% of the outstanding voting stock, voting as a single class,
is required to amend the provisions described above relating to prohibition of
stockholder action without a meeting, the number, election and term of the
directors, and the removal of the directors. In addition, the bylaws can be
amended by the vote of the board of the directors or the holders of at least
80% of the outstanding voting stock, voting as a single class.

Further Information

In addition to the above summary, you should refer to our certificate of
incorporation and bylaws, which we have filed as exhibits to our annual report
on Form 10-K, for other provisions that may be important to you. See "Where You
Can Find More Information."

SELLING SHAREHOLDERS

The shares being offered by this prospectus may be offered by the
shareholders listed below or by pledgees, donees, transferees or other
successors in interest that receive the shares as a gift, partnership
distribution or other non-sale related transfer.

<TABLE>
<CAPTION>
Percentage of
Shares Owned Outstanding
prior to Stock prior to Shares
Share Buy- Share Buy-back Shares Sold Maximum Owned
back and the and the In Share Amount After the
Name Offering Offering Buy-back Offered Offering**
- ---- ------------ -------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Merrill Lynch KECALP
L.P. 1986.............. 40,000 * -- 40,000 0
Merrill Lynch KECALP
L.P. 1987.............. 200,000 * -- 200,000 0
Merchant Banking L.P.
No. I.................. 500,000 2.1% 263,317 236,683 0
ML Venture Partners II,
L.P.................... 500,000 2.1% -- 500,000 0
Merrill Lynch Capital
Appreciation
Partnership No. VIII,
L.P.................... 6,628,615 27.6% 3,490,856 3,137,759 0
ML Offshore LBO
Partnership No. VIII... 168,524 * 88,751 79,773 0
ML Employees LBO
Partnership No. I,
L.P.................... 164,779 * 86,778 78,001 0
ML IBK Positions, Inc... 1,998,082 8.3% 420,298 1,577,784 0
---------- ---- --------- --------- ---
10,200,000 42.5% 4,350,000 5,850,000 0
========== ==== ========= ========= ===
</TABLE>
- --------
* Represents less than one percent.
** Assuming all the shares are sold.

7
<PAGE>

The selling shareholders may sell all or part of the shares covered by
this prospectus and as a result no estimate can be given as to the number of
shares that will be held by any selling shareholder upon the termination of any
offering made by this prospectus.

The selling shareholders acquired the shares being offered by this
prospectus in connection with a leveraged buy-out of our predecessor company in
1987. In 1993, we completed our initial public offering, including the listing
of our shares on the New York Stock Exchange. As indicated above, on April 19,
1999 we agreed to purchase 4,350,000 shares of our common stock, and to use
commercially reasonable efforts to file a registration statement with the SEC
to enable the selling shareholders to sell their remaining shares in one or
more transactions. We expect to execute an amendment to the stock purchase
agreement in connection with the closing of the share purchase to provide for
registration rights.

Messrs. Burke, Fitzgibbons and Michas, three of our directors, are also
directors of Merrill Lynch Capital Partners Inc., which manages Merrill Lynch
Capital Appreciation Partnership No. VIII, L.P. and ML Offshore LBO Partnership
No. VIII. Pursuant to the stock purchase agreement, one of these three
directors will resign from our board on the first anniversary of the closing of
the share purchase, and the other two on the second and third anniversaries,
respectively.

PLAN OF DISTRIBUTION

The selling shareholders (and donees, transferees or other successors in
interest that receive shares from a selling shareholder as a gift, partnership
distribution or other non-sale related transfer) may distribute the shares
covered by this prospectus from time to time in one or more of the following
transactions:

. through brokers, acting as principal or agent, in transactions
(which may involve block transactions) on the New York Stock
Exchange, in the over-the-counter market or through private sales
or special offerings

. to underwriters who will acquire the shares for their own account
and resell them in one or more transactions

. to lenders, if the selling shareholders have pledged shares as
collateral to secure loans, credit or other financing arrangements
and the creditor forecloses on the shares

. put or call options written by the selling shareholders on the
shares

. short sales of shares or

. any other legally available means.

The price at which any of the shares are sold in any of the transactions
described above will be negotiated at the time of transaction and may be based
on the market price of the shares at that time.

Underwriters or other agents participating in an offering made pursuant
to this prospectus (as amended or supplemented from time to time) may receive
underwriting discounts and commissions under the Securities Act, and they may
allow or reallow discounts or concessions to other dealers. Brokers or agents
participating in transactions described by this prospectus may receive
brokerage or agent's commissions or fees. The selling

8
<PAGE>

shareholders may sell shares to or through broker-dealers who may receive
compensation in the form of discounts, concessions or commissions from the
selling shareholders and/or the purchasers of the shares and that compensation
might be in excess of customary commissions.

At the time a particular offering of any shares is made with this
prospectus, to the extent required by law, we will prepare and deliver a
prospectus supplement setting forth the amount of shares being offered and the
terms of the offering, including the purchase price or public offering price,
the name or names of any underwriters, dealers or agents, the purchase price
paid by any underwriter for any shares purchased from the selling shareholders,
any discounts, commissions and other items constituting compensation from the
selling shareholders and any discounts, commissions or concessions allowed or
filed or paid to dealers.

We have been advised that, as of the date hereof, the selling
shareholders have made no arrangement with any broker for the sale of their
shares. The selling shareholders and any underwriters, brokers or dealers
involved in the sale of the shares may be considered "underwriters" as that
term is defined by the Securities Act, although the selling shareholders
disclaim such status. We may agree in the registration rights agreement or in
an underwriting agreement to indemnify the selling shareholders, their
officers, directors, partners, and agents, any underwriter and each person or
entity who controls such selling shareholder or underwriter, against certain
liabilities which may be incurred in connection with the sale of the shares
under this prospectus. In addition, the selling shareholders may agree to
indemnify us against certain liabilities. The registration rights agreement or
underwriting agreement may also provide for rights of contribution if
indemnification is not available.

If Merrill, Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of
some of the selling shareholders, participates in any offering of our shares,
that offering will be conducted in compliance with Section 2720 of the Conduct
Rules of the National Association of Securities Dealers, Inc.

LEGAL MATTERS

Davis Polk & Wardwell, New York, New York will pass upon the validity of
the shares of common stock for us. Arthur F. Golden, one of our directors, is a
partner of Davis Polk & Wardwell.

EXPERTS

The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from our Annual Report on Form 10-
K for the year ended December 31, 1998, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are incorporated
herein by reference, and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.

9
<PAGE>

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4,350,000 Shares
[LOGO]
Borg-Warner
Security Corporation
Common Stock

---------------------------------
PROSPECTUS SUPPLEMENT

---------------------------------

Merrill Lynch & Co.
Credit Suisse First Boston
CIBC World Markets
Lehman Brothers

June , 1999

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