Safeway
Security, Inc.
Safeway Security, Inc. (SSI), provided security
services to businesses across in the
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
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:
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:
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.