Safeway Security, Inc.

Safeway Security, Inc. (SSI), provided security services to businesses across in the United States. About 98 percent of SSI's revenues were from uniformed guard services, although the company also provided investigative services, detection equipment, and surveillance systems. Its customers were mainly industrial, commercial, and retail firms.

In 1994, SSI's net income was $290,000 on revenues of $6.9 million. In the five years from 1989 to 1994, sales had grown at a compounded annual rate of more than 35 percent and profits had almost tripled. (See Exhibits 1, 2, and 3. ) In 1995, sales of its largest five customers was estimated to be 15% of its total sales. (See Exhibit 4)

SSI, like several of its major competitors, was a young company, founded in the late 70s. It was headquartered in Pittsburgh, where it had first begun operations. Between 1990 and 1995, SSI had expanded into ten other cities, first in the Midwest, then the East and Far West. (See Exhibit 5 ) Of its ten offices operating in 1995, six were profitable, two were hovering around breakeven, and two were in the red. (See Exhibit 6)

Tom Hastings, the president and founder of SSI, described his company's strategy:

We're a security company. More than 90 percent of our business is guarding property, mainly against fire, theft, and vandalism. Fire is the most serious threat to a business. If someone steals equipment, a company can still operate, but if the building burns, it has to close.

Fewer than one percent of our guards carry side-arms. It would be dangerous to arm the others since they are generally unskilled and in some cases have a low level of intelligence. They are hired as firewatch guards and not policemen. We try to match the mentality of the man to the require­ments of the job. We can't use highly skilled people on menial firewatch guard work.

We're not like some of the other guard companies with ex-FBI and ex-CIA men. We don't spend our time tracking the Mafia, Communists, or unfaithful wives. We're oriented toward property protection and our main goal is to make money.

SSI attempted to maintain above-average profitability by being selective in taking on new accounts, bidding for contracts at levels that would give reasonable profits, keeping tight control over costs, and minimizing overhead. For example, the corporate office was staffed by only six individuals: president (Mr. Hastings); treasurer and controller (Jack Mason); assistant controller (Steve Kennedy); and three secretaries.

Tom Hastings had set a minimum goal of 20 percent annual growth in profits and felt that this could be achieved through growth in SSI's guard business alone:

So far, we have not entered the equipment or central station segments of the industry. If an attractive acquisition came along, we'd make it. But meanwhile, there's plenty of room to grow as a guard company and we can meet our goals through internal growth alone.

COMPANY HISTORY

SSI bore the clear imprint of its president, Tom Hastings. His background and experience contrasted with that of his competitors and served to differentiate his company as well. Most of the newer guard companies had been founded by individuals involved in police or investigative work. For example, Wackenhut, the third largest company in the industry, was started by an ex-FBI agent. At least four of its top officers were formerly with the FBI, and its board of directors included a former director of the C.I.A., and a former director of Defense Intelligence. Even Pinkerton, the oldest and largest guard company, was started by President Lincoln's ex-bodyguard. Tom Hastings saw himself as fundamentally different:

I'm not an ex‑policeman. I have an excellent education, a four-year degree in psychology, which I earned selling encyclopedias door to door.

Sitting in his .plush office, with his feet resting comfortably on his desk, Tom Hastings reflected on his "Horatio Alger" past:

I was born in 1950 in the east end of Pittsburgh. I grew up in a depressed area. I never knew it, because everyone else I knew was as poor as we were. When I was 16, I became bored with school and dropped out. I lied about my age, joined the army and was sent to Europe. I was assigned to the MPs. When my tour of duty was finished and I left the service I wanted a government police job, but I could not qualify because of my lack of formal education. So, I went to work selling encyclopedias door to door. At each of the three companies I worked for I became their top salesman. In fact, I was making $500 a week before I was 21, when everyone else I knew was making $100.

In 1975, Mr. Hastings and another encyclopedia salesman, John Brown, formed Tab Burglar Alarm Company to sell burglar alarms to churches.

We sold a lot of burglar alarms, but after two years, we felt like we hadn't built anything. We didn't want to wake up at 40 still selling door to door. So, we each invested $2,000, formed SSI Security Company, and began a patrol service. We signed up customers for a one-year contract and asked them to pay the first six months in advance. For a while, we were robbing Peter to pay Paul, and that gave us our working capital. John and I would go out and sell during the day. Then at night I would put on a guard's uniform and John would chauffeur me around. I covered the first shift, from six to eleven, plus weekends and holidays. Then we hired Mike Collins, who is now our director of operations, to do the second shift from eleven to seven.

As SSI grew, I discovered that there was more to learn about security. So, I interviewed for a job at three of our largest competitors to meet their managers. Then I hired the best of the three, from Pinkerton, to run SSI. A while later, I hired a competitor's salesman. Our philosophy is that if we need expertise, we hire the best people available and pay them more than they were making previously.

SSI was successful from the start. John and I were both good salesmen and this was coupled with close control over finances. The keys were attention to detail and hard work. We each did three or four different jobs to keep costs down and only drew 80 dollars a week. When we first hired a manager and a salesman, they each were making more than John and I combined.

In 1990, a third of SSI's shares (220,000) were sold to the public at $5.75 per share[1] and the company launched an expansion program. Five branch offices were opened in 1990 and three more were opened in 1991. When the expansion program began, SSI management adopted a policy of capitalizing the first 12 months' start-up costs of new offices, and amortizing them over the next 30 months. Jack Mason explained:

The thing that brought this idea to our attention was that other companies were doing it, particularly Guardsmark, which is most comparable to us. It made sense, since we expected new offices to break even within 12 months. Unfortunately, that didn't necessarily happen. For example, Cincinnati was in the red for more than two years.

After continuous growth in profits, in 1992 SSI's earnings dropped precipitously from $0.35 per share to $0.05. Of this $0.30 drop, $0.18 was attributable to an accounting change. The earlier policy was revised and it was decided to expense start‑up costs as incurred.

More significant than the write‑off of deferred start-up costs was the poor performance of several branch offices. Ken Cooper, SSI's eastern regional manager and corporate personnel director, explained what went wrong with the company's expansion:

Tom had no experience in operating a national company. His outlook was optimistic, to say the least. He thought that there were a great number of people like himself around the country, people who were capable and eager to go into business for themselves, but just lacked the opportunity. He didn't realize that there aren't many people who could do what he did in Pittsburgh.

We advertised in national journals, and we put into business whoever convinced Tom he could succeed. We sent him back to his city, told him to open an office. The help we gave him was long-distance guidance and not very effective.

The former manager in Albany was typical. He was a fast talker and was able to get a lot of business right away. But he couldn't keep it. He was a policeman at heart, and not a manager. He couldn't supervise people or deliver the service that he promised.

Tom tried to counteract this with more and more guidance from corporate, and by replacing our branch managers. In four years, we had more than 20 managers in six of our branch offices, including at least five in Chicago alone. Despite these problems, we've had a satisfactory record of growth in both sales and profits.

Our problems were not unusual for this industry. In my opinion, the guard industry is filled with incompetents to a large extent. SSI has at least recognized our problems and made some fundamental changes to deal with them.

Operations

Each of SSI's offices was organized in a standard hierarchical structure as shown in the accompanying chart.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Each office had from one to three schedule supervisors. They in turn had up to four road supervisors reporting to them. Road supervisors were given the titles sergeant, lieutenant, or captain, depending on their length of service in the company and their performance. Each road supervisor had as many as 50 guards reporting to him.

Dick Schwab, the manager of the Pittsburgh office, explained what was involved in meeting a customer's need for guards:

The first step is to determine the requirements for the job: how many hours and the number of guards. We always have a number of part‑time men available as well as full-time men who are on call on their days off or holidays, on a rotating basis.[2] If we need to hire additional men for a big job, we put a newspaper ad in. Of course, we then have to train the new men before they can go out on a job.[3]

We have to be careful about who we pick for a particular client. All guards can't work at all facilities. We try to pick clean looking men for public exposure jobs.

The road supervisor is responsible for setting the guard up at a site. He evaluates the property, sets up the rounds, and instructs the guard. Sometimes it's fairly complicated. The guard has to know how often to make the rounds, what to look for, where the telephones and fire equipment are, which people are authorized to be let in, who to contact in emergencies, and where the gas, electric, and water turnoffs are.

Once the guard is on the job, we have to make sure the customer stays satisfied. All sorts of problems can arise guards may be late, sloppy, drunk, or sleeping. When these problems come up, we have to respond properly. There's no margin of error in this business. If I find a guard sleeping or drinking, I'll fire him on the spot and stay there myself until a relief man arrives.

Branch Management

SSI management had gradually come to the realization that a lack of capable and qualified branch managers was a critical constraint on the company's future expansion and could hurt the performance of existing offices. Two major changes had been made in attempting to deal with this problem:

  1. An additional level of managers was added to the organization with the creation of regional manager positions between the branch offices and the corporate office (see organization chart in Exhibit 7) ;
  2. An entire new set of criteria was established for hiring management personnel.

In 1992, SSI's management made an organizational change that created regional manager positions between the branch managers and the corporate office. Ken Cooper, who was eastern regional manager (in addition to being corporate personnel director) described his regional manager's job:

I supervise the management of three offices  – Chicago, Albany, and New York. In theory, I have two main functions. The first is to act as a line of communication, transferring good ideas between the branch offices and also serving as a buffer between Tom and the branch managers. The second is to placate clients who are upset. Clients feel important if a branch manager says he's bringing in an expert from out of town to solve their problems. To most clients, being from more than 50 miles away makes you an expert.

The way things really work, I'm more involved in boosting up weak branch managers than I should be. I have to keep on top of all aspects of what's going on in each of the three offices. I keep close watch on their financial performance and accounts receivable collections, do most of the key hiring, and provide most of the expertise in the security field. My involvement varies by office according to how strong the manager is. I try to give my branch managers as much responsibility as possible, if they're competent. But, developing good managers is a slow process.

Jack Mason felt that the regional managers gave the company an added capability for turning around offices which were performing poorly:

The corporate office is dependent on the regional managers for timely evaluation of the branches and working out their problems. For example, last summer, in Newark, profit margins had dropped to half their normal level. The regional manager spent six weeks in that office. It was a training exercise for the staff. He showed them how to properly run the office, and the margins returned to the expected level.

Before we had regional managers all we could do was make periodic visits to the offices. When there were problems, we usually ended up replacing the office manager.

In January 1995, SSI's management adopted new policies for hiring management personnel, which represented a 180° turn for the company. Formerly, SSI's branch managers were either ex-police officers, security specialists, or former employees of competing guard companies. The main criteria were whether they impressed Tom Hastings and whether he believed they could do the job. Under the new policy, SSI decided to hire only individuals who were educated in management or had supervisory experience. They then attempted to train them in the security industry. Rather than relying solely on gut feelings in selecting among applicants, they used a standardized formal procedure developed by an outside consultant.

One major point of contention was the new requirement of a college degree for all branch managers. Ken Cooper and Jack Mason both pushed for this, although Tom Hastings was initially opposed to it. In the end, it was included in the requirements, with the understanding that there could be exceptions.

In addition to the stricter selection standards, a new approach to training was introduced. Ken Cooper explained how the old training program worked:

In the past, future managers spent six months in an existing branch as a scheduler. This is the key job in the branch office. The scheduler has to see to it that the number of guards requested are available when needed. Guards sometimes get sick or simply don't show up for work, and the number requested is subject to change. This goes on 24 hours around the clock. That's what makes this job the most difficult in terms of petty frustration. When we assigned a trainee to be a scheduler, he learned a lot about the business, but it was also an endurance test, to see if he had the guts and will to stick with the job.

With the new training procedure for branch managers, trainees spent from four to six months learning all facets of a branch operation. They carried out the scheduling function but also learned the details of every other function performed in a branch office.

Branch managers were paid a base salary of approximately, $25,000 – $28,000 per year, plus a possible annual bonus of up to about $5,000.

Corporate Staff

During the past few years, Tom Hastings had attempted to build a strong, young management team at the corporate level. He had delegated almost all responsibility for day-to-day decisions to Jack Mason. A management advisory board, consisting of Jack, Steve Kennedy, and the eastern and central regional managers, had taken a more active role in corporate policy decisions. Tom Hastings explained:

In 1989, I hired Jack as controller. He was working for our accounting firm and knew our business well. Our philosophy is that everybody should have a back-up man, so in 1992, Jack hired Steve and moved up to treasurer. Although Jack is only 28 and Steve is two years younger, those two really coordinate the entire operation for me. They are both CPAs and stay right on top of the numbers.

I delegate anything they are capable of doing. In fact, the most difficult part of my job is finding new challenges for them.

Five of SSI's nine branches outside of Pittsburgh reported on a dotted line to Jack while the other four reported to Steve. The branch offices sent detailed monthly reports to the regions. These were consolidated, and abbreviated reports were sent to corporate. Then a sum­mary report was prepared and sent to the branches to compare their relative performance.

In the past, the reporting relationship of the branch offices had been informal, but it had gradually become more standardized as the number of branches increased. Jack Mason had developed a new format, which was to begin in May, 1995. It required the branches to report in seven key areas:

  • New accounts for the month.
  • Terminated accounts for the month.
  • Training costs.
  • Overtime costs.
  • Uniforms outstanding.
  • Accounts receivable past due.
  • Personnel changes.

In addition, each month Steve and Jack compared monthly hours billed for guards to hours on payroll for guards. Where these differed by more than one-half hour they were investigated. All of SSI's accounting was centralized and done on the company's computer in the corporate office. Invoices were paid through the corporate office and had to be approved by either Steve or Jack. All salary increases had to be approved by them as well, and even petty cash slips were sent to the corporate office for their review.

Branch managers were informed of unwarranted or unwise expenditures. In the few cases where these continued, they were deducted from the manager's paycheck. Managers could also be personally responsible for bad debts when these resulted from an incomplete credit check. These were deducted from their bonuses, but not from their regular pay. Jack Mason commented on these practices:

We rarely resort to making the managers pay out of their own pockets, and even then the amounts involved are relatively small. But this po­tential threat keeps them honest and paying attention to what they are spending money on.

Marketing

SSI management felt that the main area in which' the company could effectively compete for customers was in service, mainly professionalism in setting up the guard and in responsiveness to customer complaints. Tom Hastings commented:

The whole thing revolves around maintaining a personal interest in the client and properly supervising the guards. Price is a factor, but in most cases it's not the most important.

SSI's experience had demonstrated that demand for guards was relatively inelastic with respect to changes in price. In 1992, in an attempt to increase market penetration, SSI had lowered its rates in Albany. Demand increased only slightly and profits dropped sharply. In Cleveland, SSI had taken the opposite tack and priced their guards at the high end of the scale. They had done this for several years with excellent results. In that market, SSI was recognized for high-quality service and the higher rates were expected. In fact, in the past, clients had at times expressed surprise when lower rates were quoted.

It was believed that the industry would eventually move in the direction of cost-plus bidding. Clients were becoming more sophisticated, and recognizing that they were getting what they paid for. As Ken Cooper explained:

Clients have seen the $4.25 guard and are not happy with him. He's not what was promised.

Mr. Cooper saw an increasing client awareness of this and a willingness to pay more for better quality services. Recently, SSI had put more emphasis on a security survey for customers as a means of expanding demand for their guards, and to make more explicit the role and functions of the guard. In some cases, when it appeared likely that they would get the account, they provided this service free of charge.

Management believed that high market share in a local area offered several important advantages. These included:

1.       Better exposure in the marketplace, which attracted new business and tended to further increase share.

2.       Higher profitability due to economies of scale. These were most significant up to approximately $2,000,000 in revenues per year, and resulted from absorption of overhead over a greater number of guards and increased flexibility in the utilization of personnel.

In most cities, the largest guard company had well below 50 percent of the market and there were several strong competitors. SSI held its strongest position in Pittsburgh where it was the largest guard company with 35 – 40 percent of the market. In contrast, most of SSI's branch offices had 10 percent or less market share.

SSI was not in enough cities to effectively compete for most national contracts, but management felt that these were not a major factor in the industry. Generally, clients recognized that a given company's offices varied widely, and thus used the best guard company in each of their locations.

THE FUTURE

SSI's top officers all saw a promising future for the company, and felt that whatever threats the company faced were not imminent. Ken Cooper commented:

We're most heavily dependent on firewatch, and there's no way that equipment will replace the guard in this function. Equipment will only detect a fire, it won't find the source or do anything about it. Sprinklers are not the answer, since they can do more damage than the fire the', nut out. The insurance companies know the value of a guard ‑ they knock 10 to 20 percent off fire insurance rates for having one. Our real threats are internal and from the government. We have to clean house, which we're already doing, and try to fight restrictive legislation, like mandatory training requirements. If that's enacted, it will add to outside guard company costs but won't apply to in-house guards.

Jack Mason felt that a long‑term technological threat existed, but there was no need to act on it now:

There's going to come a day when guard services are the horse and buggy of the security industry, and right now we're totally unprepared for it. At some future time well have to get into equipment and systems, and when that time comes we'll hire experts or make an acquisition. But now, we have room to grow in our area of expertise.

Tom Hastings also saw a promising future for SSI, with little trouble on the horizon:

The only business growing faster than ours is crime. Ten years ago, no one ever thought of guards in restaurants, motels, or retail stores, but in the cities you now need them. Today, every home is a fortress. We're the caretakers of a sick society and until society changes, we're going to grow. But, long term, I'd like to get into three new areas: armored cars, electronic systems coordinated with guard service, and building maintenance and janitorial services.

We're going to have to get into electronics eventually. The only question is the timing. In the last few years, the equipment companies have been sought after and bid up to unrealistic prices. Most of these companies are people working out of the back of their car. The big companies like Honeywell, IBM, and Westinghouse are moving cautiously in this field. I think we'll move in after the shakeout.

Janitorial services is a natural for us. It's a lot like the guard business, and we would be selling to the same people who purchase our guard services. We have over a million dollars in cash and securities. We are considering acquisitions and would like to make several a year, but most of what we see is junk. Several large companies have wanted to acquire us. When they ask if we're interested, I respond by saving "for the right price." Our business has appeal to a large company. We are in a growth industry. When the economy gets bad, and plants shut down, our business gets better because they need guards to watch the property. When the econ­omy improves, our business also gets better.

Last week we were offered eight dollars a share in cash for our stock which is selling for less than four dollars. I turned it down because I think we're worth more.

What we'll probably do is just continue in the guard business and expand into new markets. We're considering licensing our name and management procedures in secondary markets, and we'll continue to open our own new branches in major cities.


EXHIBIT 1

SAFEWAY SECURITY, INC.

Detailed Income Statement 1992‑94

 

1994

1993

1992

 

$

%

$

%

$

%

 

(000s)

 

(000s)

 

(000s)

 

 

 

 

 

 

 

 

Income

6,937

100.0

5,231

100.0

4,175

100.0

Expenses:

 

 

 

 

 

 

Salaries and Wages

 

 

 

 

 

 

      Guards

4,306

62.1

3,139

60.0

2,421

58.0

      Investigative

3

5

16

      Supervisory and administrative

871

12.9

769

14.7

685

16.4

Payroll taxes

424

6.1

296

5.7

226

5.4

Profit sharing and pension

36

0.5

38

0.7

35

0.8

Depreciation

61

0.8

57

1.1

52

1.2

Advertising and selling

28

‑0.4

39

0.7

40

0.1

Rent

32

‑0.5

29

0.6

28

0.7

Guard supplies

30

‑0.4

14

0.3

26

0.6

Bad debts

25

‑0.4

7

0.1

16

0.4

Interest

1

Other

488

7.0

339

6.5

436

10.4

      Total

6,304

90.8

4,732

90.5

3,896

93.3

Earnings before income taxes and minority interest

633

9.1

499

9.5

279

6.7

Income taxes

320

4.6

247

4.7

149

3.6

Minority interest in subsidiary

23

18

0.3

12

0.3

      Net income

290

4.2

234

4.5

32

0.8

 

 

 

 

 

 

 

Earnings per share

$0.40

 

$0.34

 

$0.05

 

 

 

 

 

 

 

 

Guard hours (in thousands)

1034

 

817

 

678

 

Average guard fees/hour

$6.71

 

$6.40

 

$6.16

 

Average guard wages/hour

$4.17

 

$3.84

 

$3.57

 

 

EXHIBIT 2

SAFEWAY SECURITY, INC.

Balance Sheet‑June 30, 1994

Assets

 

Current assets:

 

      Cash

$ 73,668

      Cash – savings

40,077

      Short‑term marketable securities‑at cost (which approximates market)

408,668

Accounts receivable‑trade (Less allowance for doubtful accounts of $15,000)

1,132,828

Other current assets

     26,365

      Total current assets

1,681,606

Other assets:

 

      Investments in preferred stock (quoted market $173,500)

225,173

      Deferred income taxes

23,384

      Cash value of life insurance

   10,600

 

259,157

 

 

Property and equipment‑at cost:

 

      Land and land improvements

51,727

      Buildings and building improvements

197,754

      Furniture and equipment

175,454

      Guard uniforms

   89,360

 

514,295

Less accumulated depreciation

(134,986)

 

379,309

 

2,320,072

 

 

 

 

Liabilities and Stockholders' Equity

 

Current liabilities:

 

      Accounts payable

82,013

      Accrued salaries and wages

162,843

      Accrued and withheld payroll taxes

105,414

      Taxes on income

79,940

      Accrued expenses‑other

  36,343

            Total current liabilities

   466,553

Minority interest in subsidiary stockholders' equity:

     72,185

      Common stock - par value 60.05 authorized, 2,000,000 shares; issued,732,833 shares

36,642

      Additional paid‑in capital

805,663

      Retained earnings

    985,529

 

1,827,834

      Less treasury stock – 17,088 shares

   (46,500)

 

1,781,334

 

2,320,072

EXHIBIT 3

SAFEWAY SECURITY, INC.

Summary Income Statement 1985‑94

 

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

Income (000s)

765

945

1,139

1,328

1,369

2,076

2,760

4,175

5,231

6,937

Expenses (000s)

731

879

1,030

1,188

1,417

1,725

2,283

3,896

4,732

6,304

Income before taxes (000s)

 

34

 

66

 

110

 

139

 

212

 

350

 

477

 

279

 

499

 

633

Net income (000s)

22

38

62

76

106

163

231

32

234

290

% of income

2.9%

4%

5.4%

5.7%

7.7%

7.9%,

8.4%

0.8%

4.5%

4.2%

E.P.S

$0.04

$0.07

$0.11

$0.14

$0.19

$0.28

$0.35

$0.05

$0.34

$0.40

 

EXHIBIT 4

SAFEWAY SECURITY, INC.

5 Largest Accounts

Annual Billings

Account

1990

1995

#1

$117,000

$520,000

#2

108,000

432,000

#3

88,000

161,000

#4

66,000

155,000

#5

    53,000

     130,000

Total

$498,000

$1,398,000

% Total Sales

24.0%

15.8% (est.)

 

EXHIBIT 5

SAFEWAY SECURITY, INC.

Branch Offices

Location

Date Opened

Cleveland

June

1990

Philadelphia

July

1990

Cincinnati

September

1990

Chicago

October

1990

Los Angeles

November

1990

Trenton, N.J.*

December

1990

Albany, N.Y.

February

1991

New York

July

1991

Newark, N.J.

September

1991

San Francisco

July

1993

* Consolidated with Newark office in December 1991.

 

EXHIBIT 6

Sales and Profits (000s) by Office and Changes In Branch Management

1993‑95 (estimate)

 

 

1995 Estimate*

1994

1993

Office

 

(7/1/94‑6/30/95)

(7/1/93‑6/30/94)

(7/1/92‑6/30/93)

#1

Revenues

$544

 

$ 494

 

$ 517

 

 

Profit **

8

 

3

 

15

 

 

Branch manager replaced

1/95

 

2/94

 

6/93

 

 

 

 

 

 

 

 

 

#2

Revenues

368

 

376

 

245

 

 

Profit **

(1)

 

5

 

(5)

 

 

Branch manager replaced

7/94

 

4/94

 

3/93

 

 

 

 

 

 

 

 

 

#3

Revenues

474

 

511

 

394

 

 

Profit **

(1)

 

13

 

 

 

Branch manager replaced

 

12/93

 

 

 

 

 

 

 

 

 

 

#4

Revenues

459

 

315

 

175

 

 

Profit **

8

 

1

 

(15)

 

 

Branch manager replaced

5/95

 

 

6/93

 

 

 

 

 

 

 

 

 

#5

Revenues

3,667

 

2,894

 

2,484

 

 

Profit **

276

 

237

 

214

 

 

Branch manager replaced

 

11/93

 

 

 

 

 

 

 

 

 

 

#6

Revenues

206

 

55

 

 

 

Profit **

(8)

 

(25)

 

 

 

Branch manager replaced

 

2/94

 

 

 

 

 

 

 

 

 

 

#7

Revenues

1,252

 

831

 

218

 

 

Profit **

28

 

19

 

(11)

 

 

Branch manager replaced

10/94

 

7/93

 

 

 

 

 

 

 

 

 

 

#8

Revenues

523

 

381

 

302

 

 

Profit **

10

 

3

 

(1)

 

 

Branch manager replaced

 

 

 

 

 

 

 

 

 

 

 

#9

Revenues

1,060

 

778

 

572

 

 

Profit **

100

 

47

 

37

 

 

Branch manager replaced

 

 

 

 

 

 

 

 

 

 

 

#10

Revenues

306

 

368

 

359

 

 

Profit **

(7)

 

10

 

20

 

 

Branch manager replaced

 

9/93

 

 

 

Branch manager replaced

 

 

1/94

 

 

 

*      Based on 11 months actual.

**    After‑tax profit includes allocation of regional managers’ expenses, but not corporate overhead. Management's targets for branch office profitability were:

Revenues (000s)           Profit as a Percent of Revenues

          350                                        0%

          500                                     3.5%

       1,000                                     5.0%

 


EXHIBIT 7

Organizational Chart

 

President

Tom Hastings

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



[1] In 1995, Tom Hastings and John Brown each controlled one‑third of the outstanding shares. John Brown had retired from the company in 1993.

[2] It was estimated that 75% of SSI’s guards were full-time employees.

[3] The length of training varied according to the nature of the assignment and the state's legal requirements, if any. It was generally from four to 20 hours per guard.