1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended JANUARY 2, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-14260 WACKENHUT CORRECTIONS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) FLORIDA 65-0043078 - ------------------------------- ------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4200 WACKENHUT DRIVE #100, PALM BEACH GARDENS, FLORIDA 33410-4243 - ------------------------------------------------------ ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER (INCLUDING AREA CODE): (561) 622-5656 - -------------------------------------------------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ----------------------------- ----------------------------------------- Common Stock, $0.01 Par Value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- None None - -------------------------------------------------------------------------------- Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 7, 2000, the aggregate market value of the 10,386,222 shares of Common Stock held by non-affiliates of the registrant was $104,519,107. At March 7, 2000, there were outstanding 22,386,992 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Parts of the Registrant's Proxy Statement for its 1999 Annual Meeting of Shareholders are incorporated by reference in Part III of this report. Parts of the Registrant's Annual Report to Shareholders for the fiscal year ended January 2, 2000 are incorporated by reference into Parts II and IV of this report. EXHIBIT INDEX IS LOCATED ON PAGE 28 PAGE 1 of 27
2 PART I ITEM 1. BUSINESS THE COMPANY Wackenhut Corrections Corporation ("the Company"), a 56% owned subsidiary of The Wackenhut Corporation ("TWC"), is an industry leader in the privatization of correctional facilities throughout the world. The Company was founded in 1984 as a division of TWC, a leading provider of professional security services. In 1986, the Company received its first contract, from the United States Immigration and Naturalization Service (the "INS"), to design, construct and manage a detention facility with a design capacity of 150 beds. As of January 2, 2000, the Company had 56 correctional, detention and healthcare facilities either under contract or award with an aggregate design capacity of 39,930 beds. Of these 56 facilities, 50 are currently in operation, and six are being developed by the Company. Of the facilities being developed, three are expected to commence operations during 2000 (two in the second quarter and one in the third quarter).* In addition, at January 2, 2000, the Company had outstanding written responses to Requests for Proposal ("RFPs") for three projects with an aggregate design capacity of 4,100 beds. The Company offers governmental agencies a comprehensive range of correctional and related institutional services to federal, state, local and overseas government agencies. Correctional services include the management of a broad spectrum of facilities, including male and female adult facilities; juvenile facilities; community corrections; work programs; prison industries; substance abuse treatment facilities; and mental health, geriatric and other special purpose institutions. Other management contracts include psychiatric health care, electronic home monitoring, prisoner transportation, correctional health services, and facility maintenance. The Company has an in-house capability for the design and construction of new facilities, and offers a full privatization package to government agencies, to include financing. The Company believes that its experience in delivering governmental agencies high quality, cost-effective correctional and related institutional services provides such agencies strong incentive to select the Company when renewing and awarding contracts. On November 1, 1998, the Company began management of the 350-bed South Florida State Psychiatric Hospital, representing a historic milestone for public sector mental health services and a significant diversification of the Company's service offerings. The Company has obtained and is pursuing construction and management contracts for correctional and detention facilities outside the United States and presently operates facilities in the United Kingdom and Australia. Through its wholly-owned subsidiary in Australia, Wackenhut Corrections Corporation Australia Pty Limited ("WCCA"), the Company manages four correctional facilities, six immigration detention centers, one correctional Health Care Services entity and one court escort contract. In the United Kingdom, the Company formed two joint ventures to pursue construction and management contracts for privatized correctional and detention facilities. Premier Custodial Group Limited ("PCG") a joint venture with Serco Limited, currently manages four correctional facilities, two court escort contracts and two electric monitoring services contracts and will commence management of one additional correctional facility. Under court escort contracts, a private company, on behalf of a governmental agency, transports prisoners between police stations, prisons and courts and is responsible for the custody of such prisoners during transportation and court appearances. Electronic monitoring services involve the electronic tagging of offenders sentenced to home incarceration. In February 1994, through Wackenhut Corrections (UK) Limited, the Company formed Premier Custodial Development ("PCD"), as a joint venture with a wholly-owned subsidiary of Kvaerner Construction Limited, for the design and construction of new detention facilities and prisons. The Company expects that PCD will bid * See note on page three regarding forward-looking statements. PAGE 2 of 27
3 with PCG for the design, construction management and finance of new correctional and detention facilities in the United Kingdom. In the majority of contracts, the Company manages facilities owned or leased by a governmental agency. The agency may finance the construction of such facilities through various methods including, but not limited to, the following: (i) a one time general revenue appropriation by the governmental agency for the cost of the new facility; (ii) general obligation bonds that are secured by either a limited or unlimited tax levy by the issuing entity; or (iii) lease revenue bonds or certificates of participation secured by an annual lease payment that is subject to annual or bi-annual legislative appropriations. In some instances, the Company may be required to own and/or finance the facility. The construction of these facilities will be financed through various methods including, but not limited to the following: (i) funds from equity offerings of the Company's stock; (ii) borrowings from banks or other institutions; or (iii) lease arrangements with third parties. The Company was incorporated in Florida in April, 1988. The Company's principal executive offices are located at 4200 Wackenhut Drive #100, Palm Beach Gardens, Florida 33410-4243, and its telephone number is (561) 622-5656. See the Company's Consolidated Financial Statements on pages 28 through 31 and Note 8 of Notes to Consolidated Financial Statements on pages 35 and 36 of the Company's 1999 Annual Report to Shareholders for financial information regarding domestic and international operations. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical matters, the matters discussed in this Form 10-K contain forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including but not limited to: general economic conditions; competitive factors and pricing pressures; shifts in market demand; the performance and needs of clients served by the Company; actual future costs of operating expenses; self-insurance claims and employee wages and benefits; possible changes in ownership positions of the Company's subsidiaries; and such other risks which may be described from time to time in the Company's SEC filings. These statements are marked with an " * ". PAGE 3 of 27
4 FACILITIES The following table summarizes certain information with respect to facilities currently under management contract or award for management by the Company (or a subsidiary or joint venture of the Company) at January 2, 2000. <TABLE> <CAPTION> Commencement Facility Name Company Design Facility Security of Current Renewal Location Role Capacity Type Level Contract Term Option ------------- -------- -------- -------- -------- ------------ ---- ------ <S> <C> <C> <C> <C> <C> <C> <C> CORRECTIONAL FACILITIES FEDERAL GOVERNMENT CONTRACTS: Aurora INS Processing Construction/ 300 INS Detention Minimum/ May 1999 1 year Three Center, Aurora, Management Facility Medium One-year Colorado (6) Queens Private Construction/ 200 INS Detention Minimum/ June 1999 1 year One, Correctional Facility, Management Facility Medium One-year Queens, New York (6) Taft Correctional Management 2,048 Federal Low/ August 1997 3 years Seven, Institution Prison Minimum One-year Taft, California STATE GOVERNMENT CONTRACTS: Allen Correctional Management 1,538 State Prison Medium/ December 1998 2 years None Center Maximum Kinder, Louisiana Bayamon Correctional Design/ 500 State Prison Medium March 1997 5 years One, Facility Construction/ Five-year Bayamon, Puerto Rico Consultation/ Management Bridgeport Correctional Construction/ 520 Pre-Release Center Minimum September 1995 5 years None Center Management Bridgeport, Texas Central Texas Parole Renovation/ 623 Parole Violator All levels September 1999 Varies Varies Violator Facility Management Facility/U.S. (1) (1) San Antonio, Texas Marshal and INS Detention Facility Central Valley Design/ 550 State Community Medium December 1997 10 years None Community Correctional Construction/ Correctional Facility Management Facility McFarland, California (6) Charlotte County Design/ 1,000 State Prison Medium 3rd Quarter 2002* (2) (2) Correctional Facility Construction/ (Estimated) Charlotte County, Management Virginia Cleveland Correctional Management 520 State Prison Minimum January 1999 1 2/3 Two Center years One-year Cleveland, Texas </TABLE> PAGE 4 of 27
5 <TABLE> <CAPTION> Commencement Facility Name Company Design Facility Security of Current Renewal Location Role Capacity Type Level Contract Term Option ------------- -------- -------- -------- -------- ------------ ---- ------ <S> <C> <C> <C> <C> <C> <C> <C> Coke County Juvenile Design/ 200 Juvenile Offender Medium/ March 1999 2 years Unlimited, Justice Facility Construction/ Facility Maximum Two-year Coke County, Texas Management Desert View Community Design/ 568 State Community Medium December 1997 10 years None Correctional Facility Construction/ Correctional Adelanto, California (6) Management Facility East Mississippi Design/ 500 Mental Health All levels April 1999 5 years One, Correctional Facility Construction/ Correctional Two-year Meridian , Mississippi Management Facility Golden State Community Design/ 550 State Community Medium December 1997 10 years None Correctional Facility Construction/ Correctional McFarland, California Management Facility (6) Guadalupe County Design/ 600 State Prison All levels January 1999 3 years Annual Correctional Facility Construction/ Santa Rosa, Management New Mexico (6) John R. Lindsey Design/ 1,031 State Jail Minimum/ September 1998 3 years Two Correctional Facility Consultation/ Facility Medium One-year Jack County, Texas Management Karnes County Management 579 State Prison/ Minimum/ September 1999 Varies Varies Correctional Center U.S. Marshal and Medium (1) (1) Karnes City, Texas (6) INS Detention Facility Kyle Correctional Construction/ 520 State Prison/ Minimum September 1995 5 years None Facility Management/ In-Prison (New Vision) Chemical Chemical Kyle, Texas (3) Dependency Dependency Treatment Treatment Center Lawton Correctional Design/ 1,800 State Prison All levels July 1999 1 year Three Facility Construction/ One-Year Lawton, Oklahoma (6) Management Lea County Correctional Design/ 1,200 State Prison All levels May 1998 3 years Annual Facility Construction/ Hobbs, New Mexico (6) Management Lockhart Renaissance Design/ 500 Work Program Minimum January 1999 1 year Four Facility Construction/ Facility One-year Lockhart, Texas Management Lockhart Secure Work Design/ 500 Work Program Minimum January 1999 1 year Four Program Facility Construction/ Facility One-year Lockhart, Texas Management Marshall County Design/ 1,000 State Prison Medium June 1996 5 years Unlimited, Correctional Facility Construction/ Two-year Holly Springs, Management Mississippi McFarland Community Construction/ 224 State Community Minimum February 1999 2 1/2 years None Correctional Facility Management Correctional McFarland, California Facility (6) Michigan Youth Design/ 480 Juvenile Maximum July 1999 4 years Two, Correctional Facility Construction/ Four-year Baldwin, Michigan Management </TABLE> PAGE 5 of 27
6 <TABLE> <CAPTION> Commencement Facility Name Company Design Facility Security of Current Renewal Location Role Capacity Type Level Contract Term Option ------------- -------- -------- -------- -------- ------------ ---- ------ <S> <C> <C> <C> <C> <C> <C> <C> Moore Haven Design/ 750 State Prison Medium July 1998 2 years Unlimited, Correctional Facility Construction/ Two-year Moore Haven, Florida Management North Texas Renovation/ 400 Intermediate Minimum September 1999 1 year None Intermediate Sanction Management Sanction Facility Facility Fort Worth, Texas Ronald McPherson Design/ 600 State Prison All levels July 1999 2 years Unlimited, Correctional Facility Construction/ Two-year Newport, Arkansas Management Scott Grimes Design/ 600 State Prison All levels July 1999 2 years Unlimited, Correctional Facility Construction/ Two-year Newport, Arkansas Management South Bay Correctional Design/ 1,436 State Prison Medium/ February 1997 3 years Unlimited, Facility Construction/ (9) Close Custody Two-year South Bay, Florida Management Willacy County Unit Design/ 1,000 State Jail Minimum September 1998 3 years Two Raymondville, Texas Consultation/ Facility One-year Management Val Verde Correctional Design/ 784 Local Detention All levels 3rd Quarter 2000* (2) None Facility Construction/ Facility/County (Estimated) Del Rio, Texas Management Jail LOCAL GOVERNMENT CONTRACTS: Broward County Work Design/ 300 Community Work Non-secure February 1998 5 years Unlimited, Release Center Construction/ Release Center Two-year Broward County, Management Florida (6) George W. Hill Design/ 1,562 County Jail All levels July 1998 5 years None Correctional Facility Construction/ Facility Thornton, Management Pennsylvania Jena Juvenile Justice Design/ 276 Juvenile Center All levels December 1998 25 years None Center Construction/ Jena, Louisiana Management San Diego Detention Renovation/ 876 Local Detention Maximum 2nd Quarter 2000* 15 years None Facility Management Facility (Estimated) San Diego, California INTERNATIONAL CONTRACTS: Arthur Gorrie Management 945 Reception and All levels July 1992 10 years None Correctional Centre Remand Centre Wacol, Australia H.M Prison Ashfield Management 400 Youth Prison Medium/ November 1999 25 years None Pucklechurch, UK Maximum Auckland Central Remand Management 384 National Prison Medium/ 2nd Quarter 2000* 5 years None Prison Maximum (Estimated) Auckland, New Zealand </TABLE> * See note on page three regarding Forward-looking statements. PAGE 6 of 27
7 <TABLE> <CAPTION> Commencement Facility Name Company Design Facility Security of Current Renewal Location Role Capacity Type Level Contract Term Option ------------- -------- -------- -------- -------- ------------ ---- ------ <S> <C> <C> <C> <C> <C> <C> <C> Court Escort & Custody Management NA Court Custody/ All levels June 1996 6 1/2 years None Service Transport-Escort West Midlands, England Court Escort & Custody Management NA Court Custody/ All levels May 1996 6 1/2 years None Service Transport-Escort South East Area, England Curtin Immigration Management 1000 Immigration All levels October 1999 3 years Two Reception & Processing Detention (7) Three-year Centre Derby, Western Australia Hassockfield Secure Design/ 40 Youth Training Medium September 1999 15 years None Training Centre Construction/ Centre Medomsley, England Management H.M. Prison and Youth Management 1,111 National Prison All levels October 1999 10 years None Offender Institution Doncaster Doncaster, England Fulham Correctional Design/ 660 State Prison Minimum/ March 1997 5 years Five Centre Consultation/ Medium Three-year Victoria, Australia Management Junee Correctional Construction/ 600 State Prison Minimum/ April 1999 2 years None Centre Management Medium Junee, Australia H.M. Prison Kilmarnock Management 500 National Prison All levels March 1999 25 years None Kilmarnock, Scotland H.M. Prison Lowdham Management 524 National Prison Medium February 1998 25 years None Grange Nottinghamshire, England Louis Trichardt Maximum Design/ 3,024 National Prison Maximum 1st Quarter 2002* (2) None Security Prison Construction/ (Estimated) Northern Province, Management Republic of South Africa Maribyrnong Management 80 Immigration All levels December 1997 3 years Two Immigration Detention Detention Three-year Centre Melbourne, Australia Melbourne Custody Management 80 Court Security/ N/A September 1998 3 years None Centre, Melbourne, Custody Centre Australia H. M. Prison Moreton Design/ 800 National Prison Medium 3rd Quarter 2001* 25 years None Lane Construction/ and Therapeutic (Estimated) Marchington, England Management Community New Brunswick Youth Design/ N/A Province Juvenile All levels October 1997 25 years None Centre (4) Consultation/ Facility New Brunswick, Canada Maintenance Pacific Shores Management N/A Health Care N/A January 1998 3 years Two Healthcare Services One-year Victoria, Australia (8) Perth Immigration Management 40 Immigration All levels December 1997 3 years Two Detention Centre Detention Three-year Perth, Australia Port Hedland Management 700 Immigration All levels December 1997 3 years Two Immigration Reception & Detention Three-year Processing Centre Port Hedland, Australia </TABLE> * See note on page three regarding Forward-looking statements. PAGE 7 of 27
8 <TABLE> <CAPTION> Commencement Facility Name Company Design Facility Security of Current Renewal Location Role Capacity Type Level Contract Term Option ------------- -------- -------- -------- -------- ------------ ---- ------ <S> <C> <C> <C> <C> <C> <C> <C> Premier Monitoring Management N/A Home Detention Non-secure January 1999 5 years None Services Limited Services Norfolk, England Villawood Immigration Management 300 Immigration All levels November 1997 3 Years Two Detention Centre Detention Three- year Sydney, Australia Woomera Immigration Management 1000 Immigration All levels November 1999 3 years Two Reception & Processing Detention (7) Three-year Centre Woomera, South Australia OTHER FACILITIES South Florida State Design/ 350 State Psychiatric N/A November 1998 5 years Three Hospital Construction/ Hospital Five-year Pembroke Pines, Florida Management Atlantic Shores Hospital Management 72 Psychiatric N/A (5) (5) (5) Fort Lauderdale, Florida Hospital </TABLE> (1) This facility is occupied by inmates under several contracts with varying terms and renewal options. The terms of these contracts range from two weeks to an indefinite period and the renewal option features range from no option to unlimited renewals. (2) Contract terms have yet to be negotiated. (3) The Company operates a chemical dependency treatment center located in this facility under a separate contract. This contract is for a one-year term expiring August 31, 2000. (4) The Company holds a contract for maintenance only of this facility. (5) The Company purchased this facility and provides services on an individual patient basis, therefore, there are no contracts with government agencies subject to terms and/or renewals. (6) The Company leases these facilities from Correctional Properties Trust. (7) This facility represents additional services under the current detention services contractual agreement with the Department of Immigration and Multicultural Affairs (DIMA), and is subject to a six-week termination clause depending on client needs. (8) The Company provides comprehensive healthcare services to 9 government-operated prisons under this contract. (9) The Company provides detention services to 152 detainees being held under the provisions of Florida's "Jimmy Ryce Act" at the South Bay Facility in South Bay, Florida. In April 1998 the Company sold three facilities owned by it and the rights to acquire four other facilities to Correctional Properties Trust ("CPV"), a Maryland real estate investment trust. CPV purchased an eighth facility directly from a government entity. In October, 1998 the Company sold the completed portion of a ninth facility to CPV. During Fiscal 1999, CPV acquired a 600-bed expansion of the ninth facility and the right to acquire a tenth facility. Subsequent to January 2, 2000, CPV purchased an eleventh facility that the Company had the right to acquire. The facilities were then leased to the Company under operating leases. See Item 2 - "Properties." PAGE 8 of 27
9 The Company offers services that go beyond simply housing inmates. The Company's wide array of in-facility rehabilitative and educational programs differentiates it from many competitors who lack the experience or resources to provide such programs. Inmates at most facilities managed by the Company can also receive basic education through academic programs designed to improve inmates' literacy levels and to offer the opportunity to acquire General Education Development ("GED") certificates. Most Company-managed facilities also offer vocational training for in-demand occupations to inmates who lack marketable job skills. In addition, most Company-managed facilities offer life skills/transition planning programs that provide inmates job search training and employment skills, anger management skills, health education, financial responsibility training, parenting skills and other skills associated with becoming productive citizens. For example, at the Lockhart Work Program Facility, Lockhart, Texas, the Company, as part of its job training program, recruited firms from private industry to employ inmates at the facility. Inmates who participate in such programs receive job skills training and are paid at least the minimum wage. The inmates' earnings are used to compensate victims, defray the inmates' housing costs and support their dependents. This program is being expanded to the Company's correctional facilities in South Bay and Moore Haven, Florida. The Company also offers counseling, education and/or treatment to inmates with alcohol and drug abuse problems at thirty-three of the facilities it manages. The Company believes that its program at the Kyle New Vision Chemical Dependency Treatment Center is the largest privately managed in-prison program of this nature in the United States. The Company operates each facility in accordance with the Company-wide policies and procedures and with the standards and guidelines required under the relevant contract. For many facilities, the standards and guidelines include those established by the American Correctional Association ("ACA"). The ACA, an independent organization of corrections professionals, establishes correctional facility standards and guidelines that are generally acknowledged as a benchmark by governmental agencies responsible for correctional facilities. Many of the Company's contracts for facilities in the United States require the Company to seek accreditation of the facility. The Company has sought and received ACA accreditation for eighteen of the facilities it manages. Contracts to design and construct or to redesign and renovate facilities may be financed in a variety of ways. See also "Business -Facility Design, Construction and Finance." If the project is financed using direct governmental appropriations, using proceeds of the sale of bonds or other obligations issued prior to the award of the project or by the Company directly, then financing is in place when the contract relating to the construction or renovation project is executed. If the project is financed using project-specific tax-exempt bonds or other obligations, the construction contract is generally subject to the sale of such bonds or obligations. Generally, substantial expenditures for construction will not be made on such a project until the tax-exempt bonds or other obligations are sold; and, if such bonds or obligations are not sold, construction and, therefore, management of the facility may either be delayed until alternative financing is procured or development of the project will be entirely suspended. If the project is self-financed by the Company, then financing is in place prior to the commencement of construction. When the Company is awarded a facility management contract, appropriations for the first annual or bi-annual period of the contract's term have generally already been approved, and the contract is subject to governmental appropriations for subsequent annual or bi-annual periods. PAGE 9 of 27
10 FACILITY MANAGEMENT CONTRACTS Other than listed in the following table, no other single customer accounted for 10% or more of the Company's total revenues for Fiscal 1999, 1998, and 1997. Customer 1999 1998 1997 -------- ---- ---- ---- Various agencies of the State of Texas... 19% 25% 32% State of Florida Correctional Privatization Committee ................. 19% 11% 13% Except for its contract for the Taft Correctional Institution, South Florida State Hospital, and the facilities in the United Kingdom and Australia, all of which provide for fixed monthly rates, the Company's facility management contracts provide that the Company is compensated at an inmate or patient per diem rate based upon actual or guaranteed occupancy levels. Such compensation is invoiced in accordance with applicable law and is paid on a monthly basis. All of the Company's contracts are subject to either annual or bi-annual legislative appropriations. A failure by a governmental agency to receive appropriations could result in termination of the contract by such agency or a reduction of the management fee payable to the Company. To date, the Company has not encountered a situation where appropriations have not been made to a governmental agency with regard to the Company's contracts, although no assurance can be given that the governmental agencies will continue to receive appropriations in all cases. The Company's facility management contracts typically have original terms ranging from one to ten years and give the governmental agency at least one renewal option, generally for a term ranging from one to five years. The following table summarizes the number of the Company's contracts expiring each year: EXPIRATION NUMBER OF CONTRACTS ---------- ------------------- 2000 17 2001 10 2002 7 2003 4 2004 1 Thereafter 14 -- 53 Refer to "Business-Facilities" table for detail of the renewal options for these contracts. The remainder of the Company's contracts are either in negotiation currently or have varied renewal options that are dependent upon the agency contracted with, the type of inmate, and other factors. Except as described below, to date, all renewal options under the Company's management contracts have been exercised. However, in connection with the exercise of the renewal option, the contracting government agency or the Company typically has requested changes or adjustments to the contract terms. The Company's contracts typically allow a contracting governmental agency to terminate a contract for cause by giving the Company written notice ranging from 30 to 180 days. No contracts have been terminated prior to the end of the contract term, except for the Company's contract for the operation of the Travis County Community Justice Center. This contract was discontinued in 1999 based on PAGE 10 of 27
11 the mutual decision between the Company, the Texas Department of Criminal Justice State Jail Division and Travis County, Texas. The Company also had a contract that did not extend for the full term, which was for the management of the Monroe County, Florida jail. By mutual agreement of the Company and the Monroe County Board of Commissioners, the contract was discontinued in 1990 on an amicable basis. In addition, in connection with the Company's management of such facilities, the Company is required to comply with all applicable local, state and federal laws and related rules and regulations. The Company's contracts typically require it to maintain certain levels of insurance coverage for general liability, workers' compensation, vehicle liability, and property loss or damage. If the Company does not maintain the required categories and levels of coverage, the contracting governmental agency may be permitted to terminate the contract. Presently, the Company, through TWC, has general liability insurance coverage of $55 million per occurrence and in the aggregate. See "Business -- Insurance." In addition, the Company is required under its contracts to indemnify the contracting governmental agency for all claims and costs arising out of the Company's management of facilities and in some instances the Company is required to maintain performance bonds. FACILITY DESIGN, CONSTRUCTION AND FINANCE The Company provides governmental agencies consultation and management services relating to the design and construction of new correctional and detention facilities and the redesign and renovation of older facilities. As of January 2, 2000, the Company has provided service for the design and construction of twenty-eight facilities and for the redesign and renovation of two facilities and has contracts to design and construct four new facilities and renovate one new facility. The Company is willing to perform consultation and management services for the design and construction or redesign and renovation of a facility regardless of whether it has been awarded the contract for the management of such facility. See table in "Business - Facilities." Under its construction and design management contracts, the Company agrees to be responsible for overall project development and completion. The Company makes use of an in-house staff of architects and operational experts from various corrections disciplines (e.g., security, medical service, food service, inmate programs and facility maintenance) as part of the decision team that participates from conceptual design through final construction of the project. When designing a facility, the Company's architects seek to utilize, with appropriate modifications, prototype designs the Company has used in developing prior projects. The Company believes that the use of such proven designs allows it to reduce cost overruns and construction delays and to reduce the number of guards required to staff a facility, thus controlling costs both to construct and to manage the facility. Security is maintained because the Company's facility designs increase the area of vision under surveillance by guards and make use of additional electronic surveillance. The Company typically acts as the primary developer on construction contracts for facilities and subcontracts with local general contractors. Where possible, the Company subcontracts with construction companies with which it has previously worked. The Company has an in-house team of design, construction and prison security experts that coordinate all aspects of the development with subcontractors and provide site-specific services. It has been the Company's experience that it typically takes 9 to 24 months to construct a facility after the contract is executed and financing approved. The Company may also propose to contracting governmental agencies various financing structures for construction finance. The governmental agency may finance the construction of such facilities through various methods including, but not limited to, the following: (i) a one time general revenue appropriation by the government agency for the cost of the new facility, (ii) general obligation bonds that are secured PAGE 11 of 27
12 by either a limited or unlimited tax levy by the issuing governmental entity, or (iii) lease revenue bonds or certificates of participation secured by an annual lease payment that is subject to annual or bi-annual legislative appropriations. The Company may also act as a source of financing or as a broker in any regard with respect to any financing. In these cases, the construction of such facilities may be financed through various methods including, but not limited to, the following: (i) funds from equity offerings of the Company's stock; (ii) borrowing from banks or other institutions; or (iii) lease arrangements with third parties. Of the 56 facilities managed or contracted to be managed by the Company, 38 are funded using one of the above-described financing vehicles, and 18 are or will be directly leased. However, alternative financing arrangements may be required for certain facilities. A growing trend in the correctional and detention industry requires private operators to make capital investments in new facilities and enter into direct financing arrangements in connection with the development of such facilities. By participating in such projects, private operators achieve economic benefits and tax advantages that are not typically available in connection with more traditional arrangements. MARKETING The Company views governmental agencies responsible for state correctional facilities in the United States and governmental agencies responsible for correctional facilities in the United Kingdom and Australia as its primary potential customers. The Company's secondary customers include the INS, other federal and local agencies in the United States and other foreign governmental agencies. Governmental agencies responsible for correctional and detention facilities generally procure goods and services through RFPs. A typical RFP requires bidders to provide detailed information, including, but not limited to, descriptions of the following: the services to be provided by the bidder, its experience and qualifications, and the price at which the bidder is willing to provide the services (which services may include the renovation; improvement or expansion of an existing facility; or the planning, design and construction of a new facility). As part of the Company's process of responding to RFPs, management meets with appropriate personnel from the requesting agency to best determine the prospective client's distinct needs. If the project fits within the Company's strategy, the Company then will submit a written response to the RFP. The Company estimates that it typically spends between $50,000 and $150,000 when responding to an RFP. The Company has engaged and intends in the future to engage independent consultants. Activities of the independent consultants include assisting the Company in developing privatization opportunities and in responding to RFPs, monitoring the legislative and business climate and maintaining relationships with existing clients. There are several critical events in the marketing process. These include issuance of an RFP by a governmental agency, submission of a response to the RFP by the Company, the award of a contract by a governmental agency and the commencement of construction or management of a facility. The Company's experience has been that a period of approximately five to ten weeks is generally required from the issuance of an RFP to the submission of the Company's response to the RFP; that between one and four months elapse between the submission of the Company's response and the agency's award for a contract; and that between one and four months elapse between the award of a contract and the commencement of construction or management of the facility. If the facility for which an award has been made must be constructed, the Company's experience is that construction usually takes between 9 and 24 months; therefore, management of a newly constructed facility typically commences between 10 and 28 months after the governmental agency's award. PAGE 12 of 27
13 BUSINESS PROPOSALS The Company pursues both domestic and international projects. At January 2, 2000, the Company had outstanding written responses to RFPs for 3 projects with a total of 4,100 beds. The Company also is pursuing prospects for other projects for which it has not yet submitted, and may not submit, a response to an RFP. No assurance can be given that the Company will be successful in its efforts to receive additional awards with respect to any proposals submitted. INSURANCE Presently, the Company is named insured under a liability insurance program (the "Insurance Program") maintained by TWC. The Insurance Program includes general comprehensive liability, automobile liability and workers' compensation coverage for TWC and all of its domestic subsidiaries. The Insurance Program consists of primary and excess insurance coverage. The primary coverage consists of up to $5 million of coverage per occurrence with no aggregate coverage limit. The excess coverage consists of up to $50 million of coverage per occurrence and in the aggregate. The Company believes such limits are adequate to insure against the various liability risks of its business. The premium paid by the Company to TWC for coverage under the Insurance Program in 1999 was approximately $9.4 million, representing premiums paid to a captive reinsurance company that is wholly owned by TWC. The Company believes that the premiums it is charged under the Insurance Program are comparable to those that would be charged by a third party insurer. The facility management contracts and various state statutes require the Company to maintain such insurance and the management contracts provide that the contracting agency may terminate the contract if the Company fails to maintain the required insurance coverages. Under the Insurance Program, the first $1 million of expenses and losses per occurrence were reinsured by TWC's wholly-owned captive reinsurance company during Fiscal 1999. EMPLOYEES AND EMPLOYEE TRAINING At January 2, 2000, the Company had 8,922 full-time employees. Of such full-time employees, 87 were employed at the Company's headquarters and 8,835 were employed at facilities. The Company employs management, administrative and clerical, security, educational services, health services and general maintenance personnel. The Company's correctional officer employees at George W. Hill Correctional Facility (Pennsylvania), Queens Private Correctional Facility (New York), and Junee Correctional Centre, Arthur Gorrie Correctional Centre, Fulham Correctional Centre and Immigration Detention Services (Australia) are members of unions. The Company has entered into a contract with the union for the correctional officers at the Queens Private Correctional Facility and Junee Correctional Centre, however, the Company has not entered into a contract with the other two unions. Other than the contracts described above, the Company has no union contracts or collective bargaining agreements. The Company believes its relations with its employees are good. Under the laws applicable to most of the Company's operations, and internal Company policy, the Company's corrections officers are required to complete a minimum amount of training prior to employment. At least 160 hours of training by the Company is required under most state laws before an employee is allowed to work in a position that will bring him or her in contact with inmates. Florida law requires that the correction officers receive 520 hours of training. The Company's training programs meet or exceed all applicable requirements. PAGE 13 of 27
14 The Company's training begins with approximately 40 hours of instruction regarding Company policies, operational procedures and management philosophy. Training continues with an additional 120 hours of instruction covering legal issues, rights of inmates, techniques of communication and supervision, interpersonal skills and job training relating to the particular position to be held. Each Company employee who has contact with inmates receives a minimum of 40 hours of additional training each year, and each manager receives at least 24 hours of training each year. At least 222 hours of training is required for United Kingdom employees and 240 hours of training is required for Australian employees before such employees are allowed to work in positions that will bring them into contact with inmates. Company employees in the United Kingdom and Australia receive a minimum of 40 hours of additional training each year. COMPETITION The Company competes primarily on the basis of the quality and range of services offered, its experience (both domestically and internationally) in the design, construction and management of privatized correctional and detention facilities, and its reputation. The Company competes with a number of companies, including, but not limited to, Corrections Corporation of America, Correctional Services Corporation, Group 4 International Corrections Service, U.K. Detention Services, Ltd., Cornell Corrections Corporation, Securicor Group and Prison Realty Trust. Some of the Company's competitors are larger and have greater resources than the Company. The Company also competes in some markets with small local companies that may have a better knowledge of the local conditions and may be better able to gain political and public acceptance. Potential competitors can enter the Company's business without a substantial capital investment or experience in management of correctional or detention facilities. In addition, in some markets, the Company may compete with governmental agencies that are responsible for correctional facilities. NON-U.S. OPERATIONS Although most of the operations of the Company are within the United States, its international operations make a significant contribution to income. International operations of the Company provide correctional and detention facilities management in Australia and the United Kingdom. A summary of domestic and international operations is presented below: <TABLE> <CAPTION> 1999 1998 1997 -------- -------- -------- <S> <C> <C> <C> REVENUES Domestic operations ..................................................... $371,333 $264,642 $167,223 International operations ................................................ 67,151 48,117 39,707 ======== ======== ======== Total revenues ....................................................... $438,484 $312,759 $206,930 ======== ======== ======== OPERATING INCOME Domestic operations ..................................................... $ 18,939 $ 18,649 $ 12,388 International operations ................................................ 7,102 3,852 4,157 -------- -------- -------- Total operating income ............................................... $ 26,041 $ 22,501 $ 16,545 ======== ======== ======== LONG-LIVED ASSETS Domestic operations ..................................................... $ 39,005 $ 28,944 $ 34,061 International operations ................................................ 4,355 4,061 4,693 -------- -------- -------- Total long-lived assets .............................................. $ 43,360 $ 33,005 $ 38,754 ======== ======== ======== </TABLE> PAGE 14 of 27
15 The Company has affiliates (50% or less owned) that provide correctional and detention facilities management in the United Kingdom. The following table summarizes certain financial information pertaining to these unconsolidated foreign affiliates, on a combined basis, for the last three fiscal years. <TABLE> <CAPTION> (000'S) 1999 1998 1997 - ------- -------- -------- -------- <S> <C> <C> <C> STATEMENT OF OPERATIONS DATA Revenues ........................................ $147,274 $ 91,071 $ 51,009 Operating income ................................ 11,048 7,032 3,884 Net income ...................................... 6,618 4,163 2,209 BALANCE SHEET DATA Current Assets .................................. $ 44,213 $ 25,274 $ 14,595 Noncurrent Assets ............................... 230,581 145,433 517 Current liabilities ............................. 26,774 17,769 8,115 Noncurrent liabilities .......................... 232,961 141,165 4,029 Stockholders' equity ............................ 15,059 11,773 2,968 </TABLE> BUSINESS REGULATIONS AND LEGAL CONSIDERATIONS The industry in which the Company operates is subject to national, federal, state, and local regulations in the United States, United Kingdom, Australia and Puerto Rico which are administered by a variety of regulatory authorities. Generally, prospective providers of corrections services must be able to detail their readiness to, and must comply with, a variety of applicable state and local regulations, including education, health care and safety regulations. The Company's contracts frequently include extensive reporting requirements and require supervision and on-site monitoring by representatives of contracting governmental agencies. The Company's Kyle New Vision Chemical Dependency Treatment Center is licensed by the Texas Commission on Alcohol and Drug Abuse to provide substance abuse treatment. Certain states, such as Florida and Texas, deem correctional officers to be peace officers and require Company personnel to be licensed and subject to background investigation. State law also typically requires corrections officers to meet certain training standards. In addition, many state and local governments are required to enter into a competitive bidding procedure before awarding contracts for products or services. The laws of certain jurisdictions may also require the Company to award subcontracts on a competitive basis or to subcontract with businesses owned by women or members of minority groups. The failure to comply with any applicable laws, rules or regulations or the loss of any required license could have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, the current and future operations of the Company may be subject to additional regulations as a result of, among other factors, new statutes and regulations and changes in the manner in which existing statutes and regulations are or may be interpreted or applied. Any such additional regulations could have a material adverse effect on the Company's business, financial condition and results of operations. COMMITMENTS AND CONTINGENCIES On August 31, 1999, the Company announced the mutual decision between the Company, the Texas Department of Criminal Justice State Jail Division ("TDCJ") and Travis County, Texas to discontinue the Company's contract for the operation of the Travis County Community Justice Center. The contract PAGE 15 of 27
16 was discontinued effective November 8, 1999. The Company is involved in discussions with TDCJ regarding close-out of all contract claims. The Company cannot predict the outcome of these discussions at this time. In New Mexico, the Company has been in discussions with the State's Department of Corrections and the Legislative Finance Committee and has submitted proposed contract modifications regarding additional compensation for physical plant modification and increased staffing at Guadalupe County Correctional Facility and Lea County Correctional Facility which have been implemented by the Company. At this time no agreement has been reached regarding these contract modifications. ITEM 2. PROPERTIES The Company leases its corporate headquarters office space in Palm Beach Gardens, Florida, from TWC. In addition, the Company leases office space for its regional offices in Austin, Texas; Irvine, California; Lake Charles, Louisiana; and Sydney, Australia. The Company also leases the space for the following facilities it manages under operating leases: (i) Aurora INS Processing Center; (ii) Broward County Work Release Center; (iii) Central Texas Parole Violator Facility; (iv) Central Valley Community Correctional Facility; (v) Coke County Juvenile Justice Facility; (vi) Desert View Community Correctional Facility; (vii) Golden State Community Correctional Facility; (viii) Guadalupe County Correctional Facility; (ix) Jena Juvenile Justice Center; (x) Karnes County Correctional Center; (xi) Lawton Correctional Facility; (xii) Lea County Correctional Facility; (xiii) McFarland Community Correctional Facility; (xiv) Michigan Youth Correctional Facility; (xv) North Texas Intermediate Sanction Facility; (xvi) Queens Private Correctional Facility. The Company owns a 72-bed psychiatric hospital in Fort Lauderdale, Florida which it purchased and renovated in 1997. In December 1997, the Company entered into a $220 million operating lease facility that was established to acquire and develop new correctional institutions used in its business. As a condition of this facility, the Company unconditionally agreed to guarantee certain obligations of First Security Bank, N.A., a party to the aforementioned operating lease facility. As of January 2, 2000, approximately $88.7 million of this operating lease facility was utilized for properties under development. ITEM 3. LEGAL PROCEEDINGS In Caldwell County, Texas a grand jury was convened to investigate allegations of sexual misconduct and document tampering by individuals employed or formerly employed by the Company at the Lockhart facilities. This grand jury has been dismissed and issued no indictments. In Travis County, Texas, a grand jury took testimony regarding sexual misconduct by individuals employed or formerly employed by the Company at the Travis County Community Justice Center. This grand jury indicted twelve of the Company's former facility employees for various types of sexual misconduct. Management believes these indictments are not expected to have any material financial impact on the Company. Eleven of the twelve indicted former employees already resigned from or had been terminated by the Company as a result of Company-initiated investigations over the course of the prior three years. The Company is not providing counsel to assist in the defense of these twelve individuals. PAGE 16 of 27
17 The District Attorney in Travis County continues to review Company documents for alleged document tampering at the Travis County Facility. At this time the Company cannot predict the outcome of this investigation. The nature of the Company's business results in claims or litigation against the Company for damages arising from the conduct of its employee or others. Except for the litigation set forth above and routine litigation incidental to the business of the Company, there are no pending material legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject. The Company believes that if the outcome of the proceedings to which it is currently a party is unfavorable, the Company could have a material adverse effect upon its operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference from Page 19 of the Registrant's 1999 Annual Report to Shareholders. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated by reference from Pages 20 and 21 of the Registrant's 1999 Annual Report to Shareholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by these items is incorporated by reference from Pages 22 through 27 of the Registrant's 1999 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated by reference from Pages 28 through 39 of the Registrant's 1999 Annual Report to Shareholders except for the Financial Statement and Schedule listed in Item 14 (a)(2) of this Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PAGE 17 of 27
18 PART III The information required by Items 11, 12, and 13 of Form 10-K (except such information as is furnished in a separate caption "Executive Officers of the Company" and included in Part III, below) will be contained in, and is incorporated by reference from, the proxy statement (with the exception of the Board Compensation Committee Report and the Performance Graph) for the Company's 2000 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report. ITEM 10. EXECUTIVE OFFICERS OF THE COMPANY The executive officers of the Company are as follows: <TABLE> <CAPTION> Name Age Position ---- --- -------- <S> <C> <C> George R. Wackenhut 80 Chairman of the Board and Director George C. Zoley 50 Vice Chairman of the Board, Chief Executive Officer, and Director Wayne H. Calabrese 49 President and Chief Operating Officer John G. O'Rourke 49 Senior Vice President, Chief Financial Officer, and Treasurer Carol M. Brown 45 Senior Vice President, Health Services John J. Bulfin 46 Senior Vice President and General Counsel John M. Hurley 52 Senior Vice President, Operations Donald H. Keens 56 Senior Vice President, International Services David N.T. Watson, CPA 34 Vice President - Finance, Controller, Chief Accounting Officer, and Assistant Treasurer </TABLE> GEORGE R. WACKENHUT is the Chairman of the Board. He was the Chief Executive Officer of The Wackenhut Corporation ("TWC") from the time it was founded until February 18, 2000. He was President of TWC from the time it was founded until April 26, 1986. He formerly was a Special Agent of the Federal Bureau of Investigation. He is a former member of the Board of Directors of SSJ Medical Development, Inc., Miami, Florida, a member of the Board of Trustees of Correctional Properties Trust ("CPV"), and is on the Dean's Advisory Board of the University of Miami School of Business. He is on the National Council of Trustees, Freedoms Foundation at Valley Forge and the President's Advisory Council for the Small Business Administration, Region IV. He is a past participant in the Florida Governor's War on Crime and a past member of the Law Enforcement Council, National Council on Crime and Delinquency, and the Board of Visitors of the U.S. Army Military Police School. He is also a member of the American Society for Industrial Security. He was a recipient in 1990 of the Labor Order of Merit, First Class, from the government of Venezuela and in 1999 was awarded the distinguished Ellis Island Medal of Honor by the National Ethnic Coalition of Organizations. Also in 1999, he was inducted into the West Chester University Hall of Fame and the Athlete's Hall of Fame in Delaware County, Pennsylvania. Mr. Wackenhut received his B.S. degree from the University of Hawaii and his M.Ed. degree from John Hopkins University. GEORGE C. ZOLEY has served as Vice Chairman of the Board since January 1997. Previously he had served as President and Director of the Company since it was incorporated in 1988, and Chief Executive Officer since April, 1994. Dr. Zoley established the correctional division for TWC in 1984 and was, and continues to be, a major factor in the company's development of its privatized correctional and detention facility business. Dr. Zoley is also a director of each of the entities through which the Company conducts its international operations and a Trustee of CPV. From 1981 through 1988, as manager, director, and then Vice President of Government Services of Wackenhut Services, Inc. PAGE 18 of 27
19 ("WSI"), Dr. Zoley was responsible for the development of opportunities in the privatization of government services by WSI. Currently Dr. Zoley serves as a Senior Vice President of The Wackenhut Corporation. Prior to joining WSI, Dr. Zoley held various administrative and management positions for city and county governments in South Florida. Dr. Zoley holds Masters and Doctorate degrees in Public Administration. WAYNE H. CALABRESE has served as President since January 1997, Chief Operating Officer since January 1996, a director of the Company since April, 1998, and as Executive Vice President of the Company from 1994 to 1996. Mr. Calabrese is also a director of each of the entities through which the Company conducts its international operations. Mr. Calabrese served as Chief Executive Officer of Australasian Correctional Management, Pty Ltd., a subsidiary of the Company, from 1991 until he returned to the United States in 1994. Mr. Calabrese joined the Company as Vice President, Business Development in 1989, became Executive Vice President in 1994 and became Chief Operating Officer in 1996. Mr. Calabrese's prior experience in the public sector includes positions as Assistant City Law Director in Akron, Ohio; and Assistant County Prosecutor, and later, Chief of the County Bureau of Support for Summit County, Ohio. Mr. Calabrese was also Legal Counsel and Director of Development for the Akron Metropolitan Housing Authority. Prior to joining the Company, Mr. Calabrese was engaged in the private practice of law as a partner in the Akron law firm of Calabrese, Dobbins and Kepple. JOHN G. O'ROURKE has served as Chief Financial Officer and Treasurer of the Company since April, 1994, and has been the Senior Vice President, Finance of the Company since June, 1991. Prior to joining the Company Mr. O'Rourke spent twenty years as an officer in the United States Air Force where his most recent position was as the Strategic Division Chief in the Office of the Secretary of the Air Force, responsible for acquisitions and procurement matters for strategic bomber aircraft. CAROL M. BROWN has served as Senior Vice President, Health Services of the Company since August, 1990, and as President of the Company's healthcare subsidiary, Atlantic Shores Healthcare, Inc., since April 1997. Ms. Brown is a certified specialist in correctional health care management. From 1988 until joining the Company Ms. Brown was a Consultant for medical case management and workers' compensation in South Florida for Health and Rehabilitation Management, Inc. From 1987 to 1988, Ms. Brown was Medical Manager for Metlife Healthcare of South Florida. Ms. Brown was an Administrator for health care services for Medical Personnel Pool, Inc. from 1985 to 1987 and for Upjohn Healthcare from 1981 to 1985. JOHN J. BULFIN was appointed Senior Vice President and General Counsel on January 1, 2000. Prior to joining the Company, Mr. Bulfin was a founding partner of the law firm Wiederhold, Moses, Bulfin & Rubin. Mr. Bulfin earned his law degree from Loyola (Chicago) University and his bachelor's degree from Regis College. Mr. Bulfin is a member of the American Bar Association, the Palm Beach County Bar Association, the Association of Trial Lawyers of America, the American Board of Trial Advocates, the Florida Defense Lawyers Association, and is currently on the Personal Injury and Wrongful Death Committee of the Palm Beach County Bar Association. JOHN M. HURLEY was appointed Senior Vice President, Operations on January 1, 2000, and has been with the Company since 1998 when he became the Facility Administrator (warden) of the company's 1,318-bed correctional facility in South Bay, Florida. Mr. Hurley completed 25 years of distinguished service in the Federal Bureau of Prisons (BOP) prior to joining the Company. While with the BOP, he served as the warden of several major correctional institutions, including a maximum security penitentiary, and earlier, at the BOP's largest correctional facility. His staff assignments in the PAGE 19 of 27
20 BOP included Director of the Staff Training Academy; Deputy Assistant Director, Community Corrections and Detention Division; and Correctional Programs Administrator of the Correctional Programs Division. He has a B.A. in Sociology from the University of Iowa, and a Certificate in Public Administration from the University of Southern California. DONALD H. KEENS was appointed Senior Vice President, International Services on January 1, 2000 and has been with the Company since 1994. Prior to the appointment to his present position he served as the Managing Director of Australasian Correctional Management, Pty Ltd., a subsidiary of the Company; and from 1994 to 1997 as Managing Director of Premier Prison Services, Ltd., a United Kingdom joint venture of the Company. Mr. Keens followed a law enforcement career in Zimbabwe from 1962 to 1980, with the final rank of police superintendent; and was Director and General Manager for a prison and court services company in the United Kingdom from 1980 to 1993. He is a graduate of Crosby College of Quality; and is qualified as a Professional Member SA of the Institute of Management Services (PMS), and a Senior Member of the Institute of Organization and Methods (SIOM). DAVID N.T. WATSON, CPA has served as Vice President - Finance since July, 1999 and as Controller, Assistant Treasurer, and Chief Accounting Officer of the Company since November, 1994. From 1989 until joining the Company, Mr. Watson was with the Miami office of Arthur Andersen LLP where his most recent position was Manager, in the Audit and Business Advisory Services Group. Mr. Watson has a B.A. in Economics from the University of Virginia and an M.B.A. from Rutgers, the State University of New Jersey. Mr. Watson is a member of the American Institute of Certified Public Accountants and the Florida Institute of Certified Public Accountants. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Report of Independent Certified Public Accountants - This item is incorporated by reference from Page 40 of the Registrant's 1999 Annual Report to Shareholders. The following consolidated financial statements of the Company, included in the Registrant's 1999 Annual Report to its Shareholders for the fiscal year ended January 2, 2000, are incorporated by reference in Part II, Item 8: Consolidated Balance Sheets - January 2, 2000 and January 3, 1999 - Page 29 Consolidated Statements of Income - Fiscal years ended January 2, 2000, January 3, 1999 and December 28, 1997 - Page 28 Consolidated Statements of Cash Flows - Fiscal years ended January 2, 2000, January 3, 1999, and December 28, 1997 - Page 30 Consolidated Statements of Shareholders' Equity and Comprehensive Income - Fiscal years ended January 2, 2000, January 3, 1999, and December 28, 1997 - Page 31 Notes to Consolidated Financial Statements - Pages 32 through 39 PAGE 20 of 27
21 2. FINANCIAL STATEMENT SCHEDULES. Schedule II - Valuation and Qualifying Accounts - Page 26 All other schedules specified in the accounting regulations of the Securities and Exchange Commission have been omitted because they are either inapplicable or not required. 3. EXHIBITS. THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS ANNUAL REPORT: Exhibit Number Description ------- ----------- 3.1** Amended and Restated Articles of Incorporation of the Company dated May 16, 1994. 3.2** Bylaws of the Company. 4.1 Amended and Restated Credit Agreement, dated December 18, 1997, by and among Wackenhut Corrections Corporation, NationsBank, National Association, Scotia Banc, Inc. and the Lenders Party thereto from time to time. 4.2 Amended and Restated Participation Agreement, dated June 19, 1997, among Wackenhut Corrections Corporation, First security Bank, National Association, the Various Bank and other Lending Institutions which are Partners thereto from time to time, Scotia Banc Inc., and NationsBank, National Association. 4.3 Amended and Restated Lease Agreement, dated as of June 19, 1997, between First Security Bank, National Association and Wackenhut Correction Corporation. 4.4 Guaranty and Suretyship Agreement, dated December 18, 1997, by and among the Guarantors parties thereto and NationsBank, National Association. 4.5 Third Amended and Restated Trust Agreement, dated as of June 19, 1997, among, NationsBank, National Association, and other financial institutions parties thereto and First security Bank, National Association. 4.6* Amended and Restated Credit Agreement, dated December 3, 1999, by and among Wackenhut Corrections Corporation, Bank of America, N.A., ScotiaBanc, Inc. and the Lenders Party thereto from time to time. 10.1+** Wackenhut Corrections Corporation Stock Option Plan. 10.2+** Wackenhut Corrections Corporation 1994 Stock Option Plan. 10.3+** Form of Indemnification Agreement between the Company and its Officers and Directors. 10.4+*** Wackenhut Corrections Corporation Senior Officer Retirement Plan. 10.5+*** Wackenhut Corrections Corporation Director Deferral Plan. 10.6+*** Wackenhut Corrections Corporation Senior Officer Incentive Plan. 10.7 Services Agreement dated as of January 3, 1994 between the Company and TWC (incorporated by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1, as amended, Registration Number 33-79264). 10.8*** Services Agreement effective as of January 1, 1996 between the Company and TWC. 10.9 Lease Agreement effective as of January 3, 1994 between the Company and TWC (incorporated by reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1, as amended, Registration Number 33-79264) 10.10 Revolving Credit Facility Agreement dated December 12, 1994 between the Company and Barnett Bank of South Florida, N.A. (incorporated by reference to Exhibit 10.106 of the Company's Annual Report on Form 10-K for the Fiscal Year ended January 1, 1995). 10.11**** Form of Master Agreement to Lease between CPT Operating Partnership L.P. and Wackenhut Corrections Corporation; Form of Lease Agreement between CPT Operating Partnership L.P. and Wackenhut Corrections Corporation; Form Right to Purchase Agreement between Wackenhut Corrections Corporation and CPT Operating Partnership L.P.; and, Form of Option agreement between Wackenhut Corrections Corporation and CPT Operating Partnership L.P. 10.12+* Wackenhut Corrections Corporation 1999 Stock Option Plan. 13.0* Annual Report to Shareholders for the year ended January 2, 2000, beginning with page 19 (to be filed only to the extent required by the instructions to exhibits for reports on this Form 10-K). 21.1* Subsidiaries of the Company. 23.1* Consent of Independent Certified Public Accountants. 24.1* Powers of Attorney (included as part of the signature page hereto). 27.1* Financial Data Schedule (for SEC use only) PAGE 21 of 27
22 * Filed herewith. ** Incorporated herein by reference to exhibit of the same number filed in the Company's Registration Statement, as amended, on Form S-1 (Registration Number 33-79264) *** Incorporated herein by reference to exhibit of the same number filed in the Company's Registration Statement, as amended, on Form S-1 (Registration Number 33-80785) **** Incorporated by reference to Exhibits 10.2, 10.3, 10.4, and 10.5 of the Company's Registration Statement on Form S-3 (Registration Number 333-46681). + Management contract or compensatory plan, contract or agreement as defined in Item 402(a) (3) of Regulation S-K. (b) Reports on Form 8-K. The Company did not file a current report on Form 8-K during the fourth quarter of Fiscal year 1999. - ----------------------------------- PAGE 22 of 27
23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WACKENHUT CORRECTIONS CORPORATION Date: March 30, 2000 /s/ John G. O'Rourke -------------------------------------------- JOHN G. O'ROURKE Senior Vice President - Finance, Treasurer & Chief Financial Officer Each person whose signature appears below hereby constitutes and appoints John G. O'Rourke, Senior Vice President -Finance, Treasurer and Chief Financial Officer; David N.T. Watson, Vice President -Finance, Controller, Chief Accounting Officer, and Assistant Treasurer; John J. Bulfin, General Counsel; and Francis E. Finizia, Corporate Counsel and Assistant Secretary; and each of them, the true and lawful attorneys-in-fact and agents of the undersigned, with full power undersigned, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Date: March 30, 2000 /s/ George C. Zoley ------------------------------------------- GEORGE C. ZOLEY Vice Chairman of the Board and Chief Executive Officer (principal executive officer) Date: March 30, 2000 /s/ John G. O'Rourke ------------------------------------------- JOHN G. O'ROURKE Senior Vice President - Finance, Treasurer & Chief Financial Officer (principal financial officer) Date: March 30, 2000 /s/ David N.T. Watson ------------------------------------------- DAVID N.T. WATSON Vice President of Finance, Controller, Chief Accounting Officer, & Assistant Treasurer (principal accounting officer) PAGE 23 of 27
24 Date: March 30, 2000 /s/ George R. Wackenhut ------------------------------------------- GEORGE R. WACKENHUT Director Date: March 30, 2000 /s/ Richard R. Wackenhut ------------------------------------------- RICHARD R. WACKENHUT Director Date: March 30, 2000 /S/ Wayne H. Calabrese ------------------------------------------- WAYNE H. CALABRESE Director Date: March 30, 2000 /s/ Norman A. Carlson ------------------------------------------- NORMAN A. CARLSON Director Date: March 30, 2000 /s/ Benjamin R. Civiletti ------------------------------------------- BENJAMIN R. CIVILETTI Director Date: March 30, 2000 /s/ Manuel J. Justiz ------------------------------------------- MANUEL J. JUSTIZ Director Date: March 30, 2000 /s/ John F. Ruffle ------------------------------------------- JOHN F. RUFFLE Director Date: March 30, 2000 /s/ Richard H. Glanton ------------------------------------------- RICHARD H. GLANTON Director PAGE 24 of 27
25 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Wackenhut Corrections Corporation's 1999 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 15, 2000. Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The schedule listed above in item 14(a)2 of the Corporation's Annual Report on Form 10-K for the fiscal year ended January 2, 2000 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP West Palm Beach, Florida, February 15, 2000. PAGE 25 of 27
26 SCHEDULE II WACKENHUT CORRECTIONS CORPORATION VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL YEARS ENDED, JANUARY 2, 2000, JANUARY 3, 1999, AND DECEMBER 28, 1997 (IN THOUSANDS) <TABLE> <CAPTION> Balance At Charged to Charged Deductions, Balance At Beginning Cost and to Other Actual End of Description of Period Expenses Accounts Charge-offs Period -------------- -------------- -------------- -------------- ------------- <S> <C> <C> <C> <C> <C> YEAR ENDED JANUARY 2, 2000: Allowance for doubtful accounts $401 $1,474 $ -- $(376) $1,499 YEAR ENDED JANUARY 3, 1999: Allowance for doubtful accounts $ -- $ 401 $ -- $ -- $ 401 YEAR ENDED DECEMBER 28, 1997: Allowance for doubtful accounts $ -- $ -- $ -- $ -- $ -- </TABLE> PAGE 26 of 27
27 EXHIBIT INDEX Exhibit Number Description ------- ----------- 3.1 Amended and Restated Articles of Incorporation of the Company dated May 16, 1994. 3.2 Bylaws of the Company. 4.1 Amended and Restated Credit Agreement, dated December 18, 1997, by and among Wackenhut Corrections Corporation, NationsBank, National Association, ScotiaBanc, Inc. and the Lenders Party thereto from time to time. 4.2 Amended and Restated Participation Agreement, dated June 19, 1997, among Wackenhut Corrections Corporation, First security Bank, National Association, the Various Bank and other Lending Institutions which are Partners thereto from time to time, ScotiaBanc Inc., and NationsBank, National Association. 4.3 Amended and Restated Lease Agreement, dated as of June 19, 1997, between First Security Bank, National Association and Wackenhut Correction Corporation. 4.4 Guaranty and Suretyship Agreement, dated December 18, 1997, by and among the Guarantors parties thereto and NationsBank, National Association. 4.5 Third Amended and Restated Trust Agreement, dated as of June 19, 1997, among, NationsBank, National Association, and other financial institutions parties thereto and First Security Bank, National Association. 4.6 Amended and Restated Credit Agreement, dated December 3, 1999, by and among Wackenhut Corrections Corporation, Bank of America, N.A., ScotiaBanc, Inc. and the Lenders Party thereto from time to time. 10.1 Wackenhut Corrections Corporation Stock Option Plan. 10.2 Wackenhut Corrections Corporation 1994 Stock Option Plan. 10.3 Form of Indemnification Agreement between the Company and its Officers and Directors. 10.4 Wackenhut Corrections Corporation Senior Officer Retirement Plan. 10.5 Wackenhut Corrections Corporation Director Deferral Plan. 10.6 Wackenhut Corrections Corporation Senior Officer Incentive Plan. 10.7 Services Agreement dated as of January 3, 1994 between the Company and TWC (incorporated by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1, as amended, Registration Number 33-79264). 10.8 Services Agreement effective as of January 1, 1996 between the Company and TWC. 10.9 Lease Agreement effective as of January 3, 1994 between the Company and TWC (incorporated by reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1, as amended, Registration Number 33-79264) 10.10 Revolving Credit Facility Agreement dated December 12, 1994 between the Company and Barnett Bank of South Florida, N.A. (incorporated by reference to Exhibit 10.106 of the Company's Annual Report on Form 10-K for the Fiscal Year ended January 1, 1995). 10.11 Form of Master Agreement to Lease between CPT Operating Partnership L.P. and Wackenhut Corrections Corporation; Form of Lease Agreement between CPT Operating Partnership L.P. and Wackenhut Corrections Corporation; Form Right to Purchase Agreement between Wackenhut Corrections Corporation and CPT Operating Partnership L.P.; and, Form of Option agreement between Wackenhut Corrections Corporation and CPT Operating Partnership L.P. 10.12 Wackenhut Corrections Corporation 1999 Stock Option Plan. 13.0 Annual Report to shareholders for the year ended January 3, 1999, beginning with page 25 (to be deemed filed only to the extent required by the instructions to exhibits for reports on this Form 10-K). 21.1 Subsidiaries of the Company. 23.1 Consent of Independent Certified Public Accounts. 24.1 Powers of Attorney (included as part of the signature page hereto). 27.1 Financial Data Schedule (For SEC use only). PAGE 27 of 27