Recognizes $43 million gain on sale of Wells Fargo Alarm Services Business
CHICAGO, Aug. 3 /PRNewswire/ -- Borg-Warner Security Corporation
(NYSE: BOR) today reported second quarter 1998 net earnings per diluted share
of $1.20 compared with net earnings per diluted share of $0.17 for the second
quarter 1997. The results reflect the impact of significant corporate
restructuring activity, including the recognition of an after-tax gain of $43
million from the May 29 sale of Wells Fargo Alarm Services. For the first six
months of 1998, net earnings per diluted share were $0.57 compared with net
earnings per diluted share of $0.34 in the first six months of 1997. Second
quarter and year-to-date earnings per share results compare as follows:
Second Quarter Six Months YTD
1998 1997 1998 1997
Continuing Operations $(.16) $.24 $ -- $.48
Discontinued Operations 1.62 (.07) .83 (.14)
Extraordinary Item (.26) -- (.26) --
Net Earnings $1.20 $.17 $.57 $.34
CONTINUING OPERATIONS
Revenues in the second quarter of 1998 were $323.9 million, compared with
$317.1 million in the second quarter of 1997, an increase of 2.1 percent.
Broad-based domestic growth was partially offset by the impact of withdrawal
from certain low-margin business in early 1998. For the first six months of
1998, revenues were $642.5 million compared with $643.5 million for the first
six months of 1997. The six month revenue decrease is attributable to the
January 1997 disposition of the company's Wells Fargo Armored business through
the formation of Loomis, Fargo & Co. Excluding the armored services business,
revenues in the first six months of 1998 grew by 2.3 percent to $642.5 million
versus $628.2 million in the first six months of 1997.
Included in earnings from continuing operations is the company's minority
interest in Loomis, Fargo & Co. For the first six months of 1998, Borg-Warner
Security recorded an after-tax loss of $0.5 million compared with net earnings
of $3.0 million (including an after-tax gain of $2.2 million) recognized in
the first six months of 1997. Management believes that many of the factors
contributing to this decrease have been addressed and that quarterly
comparisons will be more favorable for the remainder of the year.
The second quarter and year-to-date loss from continuing operations in
1998 also reflects an $8.6 million, or $.36 per diluted share, non-recurring
after-tax charge associated with the restructuring of administrative support
operations following the sale of Wells Fargo Alarm Services together with the
revaluation of certain assets.
Finally, earnings from continuing operations were adversely affected by a
$0.5 million increase in net interest expense. This increase primarily
reflects the short-term investment of cash proceeds from the sale of the alarm
services unit at lower yielding interest rates while the company restructures
its generally higher cost debt facilities.
DISCONTINUED OPERATIONS
Second quarter and year-to-date 1998 earnings from discontinued operations
reflect a net $42.5 million after-tax gain on the sale of the company's Wells
Fargo Alarm Services business. For the first six months of 1998, this gain is
partially offset by a $15.9 million after-tax charge to write-off the
company's investment in Pony Express Courier and to provide for costs
associated with its disposition.
EXTRAORDINARY ITEM
The company recorded a $6.3 million extraordinary charge, net of tax, in
the second quarter 1998 representing the call premium related to redemption of
its 9 1/8% senior subordinated notes and the write-off of certain deferred
financing fees.
FINANCIAL POSITION
Total net debt at June 30, 1998 was $32.7 million compared with $443.5
million at December 31, 1997. The decreased debt reflects proceeds received
from the sale of Wells Fargo Alarm Services. To date, these proceeds have
been applied to redeem the company's 9 1/8% senior subordinated notes and
eliminate balances on its revolving credit facility.
COMMENTARY ON RESULTS
Joe Adorjan, chairman and chief executive officer, stated, "By concluding
the sale of both Wells Fargo Alarm Services and Pony Express Courier during
the quarter, we have significantly enhanced our financial capability to pursue
value-creating opportunities for profitable growth. Our business continues to
show improvement despite continued tight labor markets." Adorjan further
stated the company remains optimistic about the future and prospects for
achieving the company's stated growth targets.
COMPANY DESCRIPTION
Borg-Warner Security Corporation is North America's leading provider of
security services. The company offers a complete range of security solutions
under the Burns and Wells Fargo brand names.
FORWARD LOOKING INFORMATION
Risks and uncertainties that may affect projections include the cost and
availability of labor, the ability to manage the risks associated with the
services provided by the company, the ability to acquire other security
businesses at attractive prices and successfully integrate such acquisitions
into existing operations, and the other factors listed in Exhibit 99 to the
company's Form 1O-K for the year ended December 31, 1997.
For a copy of this press release or for additional information, contact
the company's web site at http://www.Borg-WarnerSecurity.com or http://www.prnewswire.com.
INCOME STATEMENT
SECOND QUARTER
($ MILLIONS, EXCEPT PER SHARE)
Change
1998 1997 $ %
Net Service Revenues $323.9 $317.1 $6.8 2.1%
Cost of Services 273.0 267.0 6.0 2.2%
Gross Margin 50.9 50.1 0.8 1.6%
% of Revenues 15.7% 15.8%
Selling, General & Administrative 50.0 33.7 16.3 48.4%
% of Revenues 15.4% 10.6%
Depreciation 1.0 1.2 (0.2) -16.7%
% of Revenues 0.3% 0.4%
Other Expense, Net 2.1 1.8 0.3 16.7%
Earnings (Loss) before Interest
and Taxes (2.2) 13.4 (15.6) -116.4%
Interest Expense & Finance Charges 4.2 3.7 0.5 13.5%
Earnings (Loss) before Income Taxes (6.4) 9.7 (16.1) -166.0%
Provision (Benefit) for Income Taxes (2.4) 4.0 (6.4) -160.0%
Earnings (Loss) from Continuing
Operations (4.0) 5.7 (9.7) -170.2%
Gain (Loss) from Discontinued
Operations, Net of Income Taxes 39.4 (1.6) 41.0 -2562.5%
Earnings before Extraordinary Item 35.4 4.1 31.3 763.4%
Extraordinary Item:
Loss from Early Extinguishment
of Debt (6.3) -- (6.3) --
Net Earnings $29.1 $4.1 $25.0 609.8%
Earnings (Loss) per
Share - Diluted
Continuing Operations ($0.16) $0.24 ($0.40) -166.7%
Discontinued Operations 1.62 (0.07) 1.69 -2414.3%
Extraordinary Item (0.26) -- (0.26) --
Net Earnings $1.20 $0.17 $1.03 605.9%
INCOME STATEMENT
SIX MONTHS
($ MILLIONS, EXCEPT PER SHARE)
Change
1998 1997 $ %
Net Service Revenues $642.5 $643.5 ($1.0) -0.2%
Cost of Services 542.1 542.0 0.1 0.0%
Gross Margin 100.4 101.5 (1.1) -1.1%
% of Revenues 15.6% 15.8%
Selling, General & Administrative 85.7 70.9 14.8 20.9%
% of Revenues 13.3% 11.0%
Depreciation 2.0 2.8 (0.8) -28.6%
% of Revenues 0.3% 0.4%
Other Expense, Net 4.5 1.7 2.8 164.7%
Earnings before Interest and Taxes 8.2 26.1 (17.9) -68.6%
Interest Expense & Finance Charges 8.4 9.0 (0.6) -6.7%
Earnings (Loss) before Income Taxes (0.2) 17.1 (17.3) -101.2%
Provision (Benefit) for Income Taxes (0.1) 5.7 (5.8) -101.8%
Earnings (Loss) from
Continuing Operations (0.1) 11.4 (11.5) -100.9%
Gain (Loss) from Discontinued Operations,
Net of Income Taxes 20.3 (3.3) 23.6 -715.2%
Earnings before Extraordinary Item 20.2 8.1 12.1 149.4%
Extraordinary Item:
Loss from Early Extinguishment
of Debt (6.3) -- (6.3) --
Net Earnings $13.9 $8.1 $5.8 71.6%
Earnings (Loss) per Share - Diluted
Continuing Operations -- $0.48 ($0.48) -100.0%
Discontinued Operations 0.83 (0.14) 0.97 -692.9%
Extraordinary Item (0.26) -- (0.26) --
Net Earnings $0.57 $0.34 $0.23 67.6%
SOURCE Borg-Warner Security Corporation
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Related links:
http://www.Borg-WarnerSecurity.com
Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 120940
CONTACT:
Jeff Cartwright, Analysts, 312-322-8836, or
Lynne Glovka, Media, 312-322-8511, both of Borg-Warner Security
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