The Kroll-O'Gara Company Announces a Definitive Agreement to Sell Its Security Products and Services Group to Armor Holdings, Inc. and Reports 2000 Results
NEW YORK--April 23, 2001--The Kroll-O'Gara Company ("the Company") today announced a definitive agreement to sell its Security Products and Services Group (the "O'Gara Group") to Armor Holdings, Inc. ("Armor") . The proposed transaction will allow the Company to focus on its profitable Investigation and Intelligence Services Group (the "Kroll Group"). The Company also announced its financial results for 2000.
Sale of the Security Products and Services Group
The Company has entered into a definitive agreement to sell the O'Gara Group to Armor for an aggregate purchase price of up to $56.5 million, consisting of $39.5 million in cash, $15.0 million in registered shares of Armor common stock, and up to $2.0 million in deferred consideration, which is subject to certain performance goals, and the assumption of certain indebtedness. The agreement with Armor is subject to a limited number of conditions, primarily, among other things, approval by certain regulatory bodies and third parties.
"Through this proposed transaction, we not only have clarified our mission, but also have concluded a challenging time for our company" said Jules Kroll, Chairman. "The divestiture of the O'Gara Group will enable us to concentrate on building the Kroll Group business and operate our company without distraction. Our remaining Kroll Group businesses grew and were profitable in 2000, and are expected to perform profitably in 2001."
The O'Gara Group consists primarily of the armored vehicle manufacturing and sales business and the operations of International Training, Inc., which offers driver and other security training programs. The Company will not sell its kidnap and ransom and risk information services businesses to Armor, and will continue to operate them as part of the Kroll Group.
The proposed transaction is expected to close late in the second quarter or in the third quarter of 2001. The Boards of Directors of both companies have approved the transaction and shareholder approval will not be required. The Company will use the proceeds from the sale to reduce outstanding indebtedness and increase working capital.
Due to tightening in credit markets, the Company believes that the sale of the O'Gara Group to Armor provides greater certainty and better serves the interests of shareholders than the Company's previously announced plan to separate itself into two, publicly traded companies.
Other Operating Performance Enhancing Actions
In addition to the proposed sale of the O'Gara Group to Armor, the Company also announced that it has discontinued its Voice and Data Communications Group operations. The 2000 loss from the operations and the planned disposal of this business totaled $8.2 million, or $0.37 per diluted share. Additionally, in October 2000, Securify, the Company subsidiary that comprises its Information Security Group, completed a private placement offering of preferred stock, whereby 73% voting control was transferred to private equity holders. The Company has no further obligation to fund the operations of Securify.
"These actions will further increase our focus and establish a solid foundation for the future growth of the Kroll Group," said Mr. Kroll.
2000 Year-End and Fourth Quarter Results
The Company also today announced that net sales for the year ended December 31, 2000, were $310.6 million, a 2% increase from $305.2 million in 1999. Net sales for the Kroll Group were $195.6 million for 2000, an 11% increase from $176.8 million in 1999. Net sales for the O'Gara Group were $111.0 million in 2000, a 10% decrease from $124.0 million in 1999. The Company reported a net loss of $33.9 million in 2000, or $1.52 per diluted share, compared with a net loss of $1.9 million, or $0.09 per diluted share, in 1999. The Company's net loss for 2000 includes substantial one-time items, including certain merger and restructuring expenses, failed merger and separation costs, and losses associated with discontinued operations. Excluding these items, the Company's net loss for 2000 was $18.0 million, or $0.81 per diluted share. The Kroll Group had operating income of $12.7 million for 2000.
For the fourth quarter of 2000, the Company's net sales were $72.9 million, a 6% decrease from $77.2 million in the fourth quarter of 1999. Net sales for the Kroll Group were $44.7 million for the fourth quarter of 2000, a 3% decrease from $46.1 million in the fourth quarter of 1999. Net sales for the O'Gara Group were $27.9 million in the fourth quarter of 2000, a 7% decrease from $30.0 million in the fourth quarter of 1999. The Company reported a net loss of $22.1 million, or $0.99 per diluted share, for the fourth quarter of 2000, compared with a net loss of $8.4 million, or $0.38 per diluted share, in the fourth quarter of 1999. The net loss for the fourth quarter of 2000 includes substantial one-time items, such as certain merger and restructuring expenses, failed merger and separation costs, and losses associated with discontinued operations. Excluding these items, the Company's net loss for the fourth quarter of 2000 was $13.6 million, or $0.61 per diluted share.
Mr. Kroll concluded, "We look forward to completing the sale of the O'Gara Group and focusing our resources on developing and growing the Kroll Group of businesses."
About the Company:
The Kroll-O'Gara Company is a leading global provider of a broad range of specialized products and services designed to supply solutions to a variety of security needs. Based in New York, NY and Fairfield, OH, Kroll-O'Gara employs more than 2,500 people in more than 59 offices and plants around the world. The company's Security Products and Services Group provides commercial and military armored vehicles, other armoring system, and advanced security and driver training programs. The company's Investigations and Intelligence Group, which grew out of Kroll Associate's traditional business investigations and intelligence practice, now offers a broad range of additional services. They include forensic accounting, business valuation and turnaround, asset tracing, financial due diligence, litigation support, monitoring, intellectual property protection, employee and vendor background screening, substance abuse testing, surveillance, crisis management, corporate security including security architecture and design, computer forensics and information security consulting. More information about Kroll-O'Gara can be found on the Web at www.kroll-ogara.com.
The statements in this release relating to Kroll-O'Gara's business plans are forward-looking statements within the meaning of the federal securities laws. Such statements are based upon management's estimates, assumptions and projections and are subject to substantial risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things: contract delays, reductions or cancellations; cost overruns with regard to fixed price contracts; adjustments associated with percentage-of-completion accounting; inability of sub-contracts to perform on schedule and meet demand; unexpected competitive pressures resulting in lower margins and volumes; higher than anticipated costs of financing the business; and changes in the general level of business activity. In addition, there can be no assurance that the agreement entered into with Armor Holdings will be completed. Completion of any transaction will be subject to a limited number of conditions, including, among others, certain contractual requirements and regulatory approvals.
The Kroll-O'Gara Company ----------------------------------------- Three Months Ended Twelve Months Ended (in thousands, except per share data) December 31, December 31, ------------------- ------------------- 1999 2000 1999 2000 ------- -------- ------ -------- NET SALES Investigations and Intelligence $ 46,136 $ 44,668 $176,837 $195,558 Security Products and Services 29,990 27,889 123,987 111,011 Information Security 1,123 293 4,345 4,033 --------- -------- -------- --------- 77,249 72,850 305,169 310,602 COST OF SALES Investigations and Intelligence 25,892 29,287 98,075 115,150 Security Products and Services 23,852 26,159 88,272 90,331 Information Security 402 403 2,045 4,437 -------- -------- -------- --------- 50,146 55,849 188,392 209,918 GROSS PROFIT Investigations and Intelligence 20,244 15,381 78,762 80,408 Security Products and Services 6,138 1,730 35,715 20,680 Information Security 721 (110) 2,300 (404) -------- -------- ------- -------- 27,103 17,001 116,777 100,684 Operating expenses 33,585 27,967 99,095 109,381 -------- -------- ------- -------- Operating income (loss) before restructuring and merger expenses (6,482) (10,966) 17,682 (8,697) Restructuring expenses - 4,364 685 Failed separation costs 947 - 4,194 Failed merger related expenses 1,562 (28) 1,562 2,491 Merger related expenses 532 (105) 4,069 357 -------- -------- ------- -------- Operating income (loss) (8,576) (11,780) 7,687 (16,424) OTHER INCOME (EXPENSE): Interest expense (1,730) (2,263) (4,747) (6,687) Interest income 97 161 410 349 Other, net (33) 1,131 (303) (293) -------- -------- ------ -------- Income (loss) before provision (benefit) for income taxes (10,242) (12,751) 3,047 (23,055) Provision (benefit) for income taxes (2,679) 1,677 2,429 2,651 -------- --------- -------- --------- Income (loss) from continuing operations (7,563) (14,428) 618 (25,706) Loss from operations of discontinued business, net (806) (2,630) (1,761) (3,200) Estimated net loss on disposal of discontinued business - (5,038) - (5,038) Cumulative effect of accounting change, net - - (778) - ------- -------- -------- --------- Net loss $(8,369) $(22,096) $ (1,921) $(33,944) Diluted earnings (loss) per share from cont ops before restruct and merger $ (0.28) $ (0.61) $ 0.33 $ (0.81) Diluted earnings (loss) per share from continuing operations $ (0.34) $ (0.65) $ 0.03 $ (1.15) ======== ======== ======= ========= Diluted earnings (loss) per share $ (0.38) $ (0.99) $ (0.09) $ (1.52) ======== ======== ======== ========= Diluted weighted average common shares outstanding 22,215 22,336 22,006 22,295 ======== ======== ======== =========