Financial highlights brighten year-end

Feb 1, 1997 12:00 PM, By TINA D'AVERSA-WILLIAMS

Tracking the strides of the flourishing integrated electronic security market Electronic security is a $10 to $11 billion industry and is growing at double-digit rates. Today, about 15 percent of homes and most commercial facilities have security systems. The residential number is expected to increase to more than 30 percent by the year 2000. The integrated electronic security market - access control with CCTV, alarms, electronic article surveillance and ID tags - represents a $4 billion industry nationally, growing about 16 to 20 percent per year. Research in 1996 shows the actual growth potential is much greater. When coupled with the $6 billion alarm industry, growing about 8 to 10 percent per year, electronic security systems is an attractive market for investors.

Electronic security market leaders that use access control and software as centerpieces of complete integrated security systems include ADT, Checkpoint, Pittway, Sensormatic, Monitor Dynamics, Northern Computers, Infographic Systems, Pinkerton and Simplex. These companies want to be total system solution providers.

To follow the industry's financial strides, Access Control and Security Systems Integration will track the publicly held and private companies leading the commercial integrated electronic security market. This information will be found on our Web site, Security Solutions Online http://www.securitysolutions.com), and in the pages of the magazine.

Each month we will feature financial highlights of several companies. * Pinkerton's (NYSE, PKT) reports net income up 50 percent in the third fiscal quarter of 1996. The company acquired ProNet Image and Audio Inc., a North Carolina-based regional electronic systems integration firm, as its 10th acquisition in 1996. Founded in 1992, ProNet installs and services a range of integrated systems including closed-circuit television, access control, video imaging, and audio and fiber-optic transmission. Alan H. Jelley, president of ProNet, will continue to lead the unit.

Pinkerton is one of the world's largest and best known suppliers of contract security and investigation services. Founded in 1850 by Allan Pinkerton, the company addresses asset protection needs by providing security services and technologies through 220 offices in the United States, Canada, Mexico, Europe and Asia.

* Pittway Corp. (NYSE, PRY), manufacturer of electronic burglar and fire alarm equipment, reflects the move toward integration. Several years ago, typical operating margins in Pittway's security business were 3 to 4 percent. Now, with an increasing percentage of sales in integrated fire and security systems, margins have doubled, and they continue to head higher. Pittway reports a 19 percent increase in third quarter 1996 sales to $285.7 million and a 39 percent increase in net income to $12.8 million ($0.61 per share), compared to results posted a year ago. Operating income increased 50 percent to $21.7 million. * Sensormatic Electronics Corp. (NYSE, SRM) is a leading supplier of electronic security systems to retail, commercial and industrial markets. The company's electronic article surveillance (EAS), closed-circuit television (CCTV) and exception monitoring systems are used by both soft goods and hard goods retailers to deter shoplifting and internal theft. The corporation reports earnings for the first quarter of fiscal 1997 of $2.1 million, or $0.03 per share, as compared to $16.9 million, or $0.23 per share, earned in the first quarter of fiscal 1996.

Revenues for the first quarter of fiscal 1997 were $246 million as compared with $267.2 million the same quarter a year ago, which included an approximately $28 million sale to a major retail customer. By the year 2000, Sensormatic will likely receive well over 50 percent of its operating earnings from its commercial/industrial business, of which its Software House subsidiary will be an important component.

The company is making progress in cost reduction, improving systems and repositioning for sustainable growth. A slate of new products will be introduced by fiscal year-end in the retail and commercial/industrial markets.

Nontraditional security companies * Western Resources (NYSE, WR) recently made a hostile $2.8 billion bid for home alarm provider ADT (NYSE, ADT), the largest provider of electronic security services in North America and the second largest in the U.K. ADT provides commercial and residential security systems to over 1 million customers, including 438 of the Fortune 500. ADT is also the second largest provider of vehicle auction services. Western Resources, a Topeka-based energy and security services company, is the largest shareowner of ADT with approximately 27 percent of outstanding shares. On Dec. 31, 1996, Westinghouse Electric Corp. (NYSE, WX) announced the completion of the divestiture of its residential security business, Westinghouse Security Systems, to Western Resources. The sale values Westinghouse Residential Security Systems at approximately $425 million. The Westinghouse acquisition positions Westar Security, a Western Resources subsidiary, as the third largest monitored security services provider in the United States.

Western Resources is a full-service, diversified energy company with total assets of more than $6 billion.

* Ameritech (NYSE, AIT) acquired National Guardian in the third quarter of 1996. The acquisition significantly expanded Ameritech's position in the fast-growing electronic security industry. National Guardian, a wholly-owned subsidiary of LEP Group PLC, provides service to more than 275,000 customers across the United States and Canada and had 1994 revenues of about $215 million.

Ameritech initially entered the industry in December 1994 with the purchase of SecurityLink of Oak Brook, Ill. Ameritech SecurityLink now serves more than 44,000 customers in Chicago and Peoria, Ill.; Cleveland and Columbus, Ohio; Indianapolis; Philadelphia; Trenton, N.J. and Washington. Ameritech serves more than 13 million customers with local phone, data and video services in Illinois, Indiana, Michigan, Ohio and Wisconsin. Also one of the world's leading wireless companies, Ameritech serves more than 1.5 million cellular and 700,000 paging customers and holds cellular interests in China, Norway and Poland. Nearly 1 million investors hold Ameritech shares.

* Johnson Controls Inc. (NYSE, JCI) manufactures Metasys, a fully integrated facility management system that blends the traditional functions of energy management, direct digital control, fire management, access control and lighting control into a single network. Metasys systems are built around a seamless architecture that provides flexibility to fit all building types and sizes. With headquarters in Milwaukee, Johnson Controls is a leading worldwide supplier of facility management and control systems, automotive seating, plastic packaging and automotive batteries. The Controls Group is a technological leader in the design, manufacture, installation, service and management of systems to control energy use, HVAC systems, lighting, security and fire management for non-residential and government buildings. Johnson Controls' Metasys FMS is certified for use in all AT&T SYSTIMAX SCS installations, a universal information access platform offering voice, data, video and building con h rough one network.

* JCI reports record sales of $10 billion for fiscal 1996, the 50th consecutive year of increases.

(All stock market and financial data is believed accurate at the time of this printing but is not warranted or guaranteed by Access Control and Security Systems Integration.)

Offering analysis and commentary on the security industry at large, our goal is to keep readers informed of the market growth and forward move-ment within the industry. The column is authored by Tina D'Aversa-Williams, publisher of Access Control and Security Systems Integration, whose background includes work in market research and analysis.

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