<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K/A
(Amendment No. 1)
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF THE REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 1, 1998
THE KROLL-O'GARA COMPANY
(Exact name of registrant as specified in its charter)
Ohio 000-21629 31-1470817
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation) file number) Identification No.)
9113 LeSaint Drive
Fairfield, Ohio 45014
(513) 874-2112
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Items 1, 3, 4, 5, 6, 8 and 9 are not applicable and are omitted from this
Current Report. The information required by Items 2 and 7(c) has been previously
filed. This amended report is filed to provide the financial information
required by Items 7(a) and 7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) PRO FORMA FINANCIAL INFORMATION OF THE KROLL-O'GARA COMPANY
Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1998.............................................................3
Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1997...................................................4
Pro Forma Consolidated Statement of Operations for the Six
Months Ended June 30, 1998................................................5
(b) FINANCIAL STATEMENTS OF KIZOREK, INC.
Report of Independent Public Accountants......................................6
Balance Sheet as of October 31, 1997..........................................7
Statements of Income and Retained Earnings for the year ended
October 31, 1997.....................................................8
Statement of Cash Flows for the year ended October 31, 1997...................9
Notes to Financial Statements................................................10
</TABLE>
The Pro Forma Condensed Consolidated Balance Sheet of The Kroll-O'Gara
Company (the "Company") as of December 31, 1997, reflects the financial position
of the Company after giving effect to the acquisition discussed in Item 2. The
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997, assumes that the acquisition occurred on January 1, 1997, and is based on
the operations of the Company for the year then ended.
The Unaudited Pro Forma Condensed Consolidated Financial Statements
have been prepared by the Company based upon assumptions it deems proper. The
Unaudited Pro Forma Condensed Consolidated Financial Statements presented herein
are not necessarily indicative of the future consolidated financial position or
future consolidated results of operations of the Company. The statements are
also not indicative of the consolidated financial position or consolidated
results of operations of the Company that would have actually occurred had the
transaction been in effect as of the date or for the periods presented. It
should be noted that for periods subsequent to June 30, 1998 the Company's
consolidated financial statements will reflect the acquisition.
The Unaudited Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with the historical consolidated Financial
Statements and related notes of the Company contained in its annual report on
Form 10-K for the year ended December 31, 1997.
The allocation of purchase price was based on estimates and may be
revised at a later date pending the completion of certain appraisals and other
analyses.
1
<PAGE>
In connection with the acquisition of Kizorek, assets were acquired and
liabilities were assumed as follows (dollars in thousands):
<TABLE>
<CAPTION>
Kizorek
-----------
<S> <C>
Fair value of assets acquired including:
Cash $192
Accounts receivable 1,743
Unbilled revenue 269
Other current assets 448
Property, plant and equipment 955
Intangibles 700
Goodwill 8,076
-----------
$12,383
Less: Cash paid for net assets (800)
Fair value of debt issued -
Fair value of stock issued (8,228)
-----------
$3,355
-----------
-----------
Liabilties assumed including:
Liabilties assumed and acquisition costs $3,155
Debt 200
-----------
$3,355
-----------
-----------
</TABLE>
2
<PAGE>
THE KROLL-O'GARA COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 1998
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Historical Kizorek (1) Adjustments Pro Forma
------------ ----------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 40,318 $ 294 $ (800) (5) $ 39,812
Accounts receivable 41,267 1,843 - 43,110
Costs and estimated earnings in excess of -
billings on uncompleted contracts 19,802 - - 19,802
Inventories 20,153 - - 20,153
Other current assets 12,832 903 - 13,735
-------- ------ ------ --------
Total current assets 134,372 3,040 (800) 136,612
Property, plant, and equipment, net 16,471 957 - 17,428
Databases, net 8,467 - - 8,467
Cost in excess of assets acquired, net 28,515 - 7,567 (2)(3)(7) 36,082
Other assets 5,293 34 700 (6) 6,027
-------- ------ ------ --------
42,275 34 8,267 50,576
-------- ------ ------ --------
Total assets $ 193,118 $ 4,031 $ 7,467 $ 204,616
-------- ------ ------ --------
-------- ------ ------ --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,104 $ 782 $ 545 (3) $ 28,431
Accrued liabilities 13,128 334 450 (8) 13,912
Other current liabilities 6,336 9 190 (7) 6,535
-------- ------ ------ --------
Total current liabilities 46,568 1,125 1,185 48,878
Other long-term liabilities 1,861 - 900 (8) 2,761
Deferred income taxes 2,153 - 60 (7) 2,213
Long-term debt, net of current portion 39,319 - - 39,319
-------- ------ ------ --------
Total liabilities 89,901 1,125 2,145 93,171
Shareholders' equity 103,217 2,906 5,322 (4)(8) 111,445
-------- ------ ------ --------
Total liabilities and shareholders' equity $193,118 $4,031 $7,467 $204,616
-------- ------ ------ --------
-------- ------ ------ --------
</TABLE>
(1) KIZOREK HISTORICAL BALANCE SHEET AS OF APRIL 30, 1998
(2) TO RECORD $6,772 IN GOODWILL RESULTING FROM THE ACQUISITION OF KIZOREK.
(3) TO RECORD $545 IN COSTS ASSOCIATED WITH THE ACQUISITION OF KIZOREK.
(4) TO REFLECT 352,381 SHARES OF STOCK ISSUED IN CONNECTION WITH THE
ACQUISITION, LESS KIZOREK HISTORICAL EQUITY.
(5) TO REFLECT $800 CASH PAID TO THE FORMER SHAREHOLDER OF KIZOREK IN
CONNECTION WITH THE ACQUISITION.
(6) TO REFLECT A VALUE OF $600 FOR CUSTOMER LISTS AND $100 FOR PRIVATE
INVESTIGATION LICENSES IDENTIFIED IN CONJUNCTION WITH THE ACQUISITION.
(7) TO RECORD CURRENT AND LONG-TERM DEFERRED TAX LIABILITY RESULTING FROM THE
DIFFERENCES IN PRELIMINARY BOOK AND TAX BASIS OF ASSETS ACQUIRED.
(8) TO RECORD ACCRUED COMPENSATION UNDER THE KIZOREK DEFERRED COMPENSATION PLAN
ASSOCIATED WITH THE ACCELERATED VESTING OF BENEFITS RESULTING FROM A CHANGE
IN CONTROL OF THE COMPANY ($1,350 AT 5 1/8%)
3
<PAGE>
THE KROLL-O'GARA COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
(unaudited)
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
Historical Kizorek (1) Adjustments (8) Pro Forma
----------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 190,413 $ 14,476 $ - $ 204,889
Cost of sales 131,644 8,113 - 139,757
--------- -------- ------ ---------
Gross profit 58,769 6,363 - 65,132
OPERATING EXPENSES
Selling and marketing 14,371 1,332 - 15,703
General and administrative 27,538 3,779 47 (6) 31,364
Merger related costs 7,205 - - 7,205
Amortization of costs in excess of
assets aquired 684 - 293 (2)(3) 977
--------- -------- ------ ---------
Operating income 8,971 1,252 (340) 9,883
OTHER INCOME (EXPENSE):
Interest expense (4,806) (20) (69) (7) (4,895)
Other, net (393) - - (393)
--------- -------- ------ ---------
Income before minority interest, provision for income taxes,
extraordinary item, and cumulative effect of change in
accounting principle 3,772 1,232 (409) 4,595
Minority interest (156) - - (156)
--------- -------- ------ ---------
Income before provision for income taxes,
extraordinary item, and cumulative
effect of change in accounting principle 3,616 1,232 (409) 4,439
Provision for income taxes 2,352 - 329 (4)(5) 2,681
--------- -------- ------ ---------
Income from continuing operations $ 1,264 $ 1,232 $ (738) $ 1,758
--------- -------- ------ ---------
--------- -------- ------ ---------
Basic earnings per share from continuing operations $ 0.10 $ 0.13
--------- ---------
--------- ---------
Basic weighted average shares outstanding 13,061 13,413
--------- ---------
--------- ---------
Diluted earnings per share from continuing operations $ 0.09 $ 0.12
--------- ---------
--------- ---------
Diluted weighted average shares outstanding 13,721 14,073
--------- ---------
--------- ---------
</TABLE>
(1) TO INCLUDE HISTORICAL RESULTS OF OPERATIONS FOR KIZOREK FOR THE YEAR ENDED
OCTOBER 31, 1997. KIZOREK'S OPERATING COSTS HAVE BEEN ALLOCATED INTO
CATEGORIES CONSISTENT WITH THE COMPANY'S STATEMENT OF OPERATIONS
PRESENTATION POLICIES
(2) TO RECORD AMORTIZATION ON GOODWILL RESULTING FROM THE ACQUISITION OF
KIZOREK (GROSS COST $6,772 OVER 25 YEARS).
(3) TO AMORTIZE CAPITALIZED ACQUISITION COSTS ASSOCIATED WITH KIZOREK ($545
OVER 25 YEARS).
(4) TO RECOGNIZE THE BENEFIT FOR INCOME TAXES ON PRO FORMA ADJUSTMENTS AT AN
EFFECTIVE RATE OF 40%.
(5) TO RECOGNIZE PROVISION FOR INCOME TAXES AT AN EFFECTIVE RATE OF 40% IN
ASSOCIATION WITH THE HISTORICAL RESULTS OF KIZOREK, WHICH HAD PREVIOUSLY
BEEN TREATED AS AN S CORPORATION FOR TAX PURPOSES.
(6) TO RECORD AMORTIZATION OF CUSTOMER LISTS AND DETECTIVE LISENCES IDENTIFIED
IN CONJUNCTION WITH THE ACQUISITION (GROSS COST $700 OVER 15 YEARS)
(7) TO RECORD INTEREST EXPENSE UNDER THE KIZOREK DEFERRED COMPENSATION PLAN.
($1,350 AT 5 1/8%)
(8) PRO FORMA ADJUSTMENTS EXCLUDE THE IMPACT OF COMPENSATION EXPENSE FOR A
NON-RECURRING CHARGE UNDER THE KIZOREK DEFERRED COMPENSATION PLAN
ASSOCIATED WITH THE ACCELERATED VESTING OF BENEFITS RESULTING FROM A CHANGE
IN CONTROL OF THE COMPANY.
4
<PAGE>
THE KROLL-O'GARA COMPANY
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1998
(unaudited)
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
Historical Kizorek (1) Adjustments(8) Pro Forma
---------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 111,816 $ 6,385 $ - $ 118,201
Cost of sales 75,632 3,911 - 79,543
--------- ------- ------ ---------
Gross profit 36,184 2,474 - 38,658
OPERATING EXPENSES
Selling and marketing 7,734 618 - 8,352
General and administrative 15,019 1,793 23 (6) 16,835
Amortization of costs in excess of
assets aquired 624 - 146 (2)(3) 770
--------- ------- ------ ---------
Operating income 12,807 63 (169) 12,701
OTHER INCOME (EXPENSE):
Interest expense (2,369) - (35) (7) (2,404)
Other, net 9 - - 9
--------- ------- ------ ---------
Income before provision for income taxes 10,447 63 (204) 10,306
Provision for income taxes 4,140 - (57) (4)(5) 4,083
--------- ------- ------ ---------
Net income $ 6,307 $ 63 $ (147) $ 6,223
--------- ------- ------ ---------
--------- ------- ------ ---------
Basic earnings per share $ 0.43 $ 0.42
--------- ---------
--------- ---------
Basic weighted average shares outstanding 14,632 14,984
--------- ---------
--------- ---------
Diluted earnings per share $ 0.42 $ 0.40
--------- ---------
--------- ---------
Diluted weighted average shares outstanding 15,015 15,367
--------- ---------
--------- ---------
</TABLE>
(1) TO INCLUDE HISTORICAL RESULTS OF OPERATIONS FOR KIZOREK FOR THE YEAR ENDED
OCTOBER 31, 1997. KIZOREK'S OPERATING COSTS HAVE BEEN ALLOCATED INTO
CATEGORIES CONSISTENT WITH THE COMPANY'S STATEMENT OF OPERATIONS
PRESENTATION POLICIES
(2) TO RECORD AMORTIZATION ON GOODWILL RESULTING FROM THE ACQUISITION OF
KIZOREK (GROSS COST $6,772 OVER 25 YEARS).
(3) TO AMORTIZE CAPITALIZED ACQUISITION COSTS ASSOCIATED WITH KIZOREK ($545
OVER 25 YEARS).
(4) TO RECOGNIZE THE BENEFIT FOR INCOME TAXES ON PRO FORMA ADJUSTMENTS AT AN
EFFECTIVE RATE OF 40%.
(5) TO RECOGNIZE PROVISION FOR INCOME TAXES AT AN EFFECTIVE RATE OF 40% IN
ASSOCIATION WITH THE HISTORICAL RESULTS OF KIZOREK, WHICH HAD PREVIOUSLY
BEEN TREATED AS AN S CORPORATION FOR TAX PURPOSES.
(6) TO RECORD AMORTIZATION OF CUSTOMER LISTS AND DETECTIVE LISENCES IDENTIFIED
IN CONJUNCTION WITH THE ACQUISITION (GROSS COST $700 OVER 15 YEARS)
(7) TO RECORD INTEREST EXPENSE UNDER THE KIZOREK DEFERRED COMPENSATION PLAN.
($1,350 AT 5 1/8%)
(8) PRO FORMA ADJUSTMENTS EXCLUDE THE IMPACT OF COMPENSATION EXPENSE FOR A
NON-RECURRING CHARGE UNDER THE KIZOREK DEFERRED COMPENSATION PLAN
ASSOCIATED WITH THE ACCELERATED VESTING OF BENEFITS RESULTING FROM A CHANGE
IN CONTROL OF THE COMPANY.
5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Kizorek, Inc.
Naperville, Illinois
We have audited the accompanying balance sheet of Kizorek, Inc. as of October
31, 1997 and the related statements of income and retained earnings and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kizorek, Inc. as of October 31,
1997 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
December 10, 1997, except for Note 8,
as to which the date is August 31, 1998
6
<PAGE>
KIZOREK, INC.
BALANCE SHEET
October 31, 1997
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<TABLE>
<S> <C>
ASSETS
Current assets
Cash $ 558,315
Accounts receivable (less allowance for doubtful
accounts of $65,000) 2,405,538
Employee loans 97,069
Prepaid vehicle lease costs 175,473
Other prepaid expenses 111,458
-----------
Total current assets 3,347,853
Property and equipment
Photo equipment 1,033,364
Office and computer equipment 2,121,218
Vehicles 229,329
Leasehold improvements 76,962
-----------
3,460,873
Accumulated depreciation 2,291,904
-----------
1,168,969
Other assets
S corporation tax deposit 30,153
Security deposits 36,734
-----------
66,887
-----------
$ 4,583,709
-----------
-----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current maturities of long-term debt (Note 3) $ 19,204
Accounts payable 677,779
Accrued payroll 161,107
Accrued other expenses 120,388
-----------
Total current liabilities 978,478
Long-term debt (Note 3) 25,669
Stockholder's equity
Common stock, no par value;
authorized 100 shares, issued and
outstanding 10 shares 1,000
Retained earnings 3,578,562
-----------
3,579,562
-----------
$ 4,583,709
-----------
-----------
</TABLE>
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7
See accompanying notes to financial statements.
<PAGE>
KIZOREK, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year ended October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUE $ 14,476,272
Operating expenses
Payroll, payroll taxes, and fringe benefits 7,205,295
Vehicle operating and leasing 1,718,389
Travel 1,004,521
Occupancy 340,129
Depreciation 478,540
Outside services 221,149
Insurance 488,275
Advertising and promotion 245,531
Telephone 443,902
Office and computer related expenses 521,926
Other 556,566
------------
13,224,223
------------
INCOME FROM OPERATIONS 1,252,049
Interest expense 19,816
NET INCOME 1,232,233
Retained earnings at beginning of year 2,730,052
Dividends to stockholder (383,723)
------------
RETAINED EARNINGS AT END OF YEAR $ 3,578,562
------------
------------
</TABLE>
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8
See accompanying notes to financial statements.
<PAGE>
KIZOREK, INC.
STATEMENT OF CASH FLOWS
Year ended October 31, 1997
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<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,232,233
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 478,540
Gain on disposal of equipment (1,103)
Change in assets and liabilities
Accounts receivable (360,027)
Other current assets (79,983)
Other assets 18,851
Accounts payable 145,260
Other current liabilities 4,959
------------
Net cash provided by operating activities 1,438,730
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 36,103
Additions to property and equipment (296,230)
------------
Net cash used in investing activities (260,127)
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on line of credit (450,000)
Repayment of long-term debt (18,938)
Dividends to stockholder (383,723)
------------
Net cash used in financing activities (852,661)
------------
Net change in cash 325,942
Cash at beginning of year 232,373
------------
CASH AT END OF YEAR $ 558,315
------------
------------
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 20,132
Supplemental schedule of noncash investing activity
Equipment acquired through a
capital lease $ 59,108
</TABLE>
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9
See accompanying notes to financial statements.
<PAGE>
KIZOREK, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: Kizorek, Inc. (the Company) is an insurance claims
investigation agency based in Naperville, Illinois. The Company's primary
service is providing video surveillance to insurance companies investigating
disability claims primarily throughout the United States.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION: Kizorek, Inc. provides surveillance services for its
clients. Fees are generated and recognized for hours incurred based upon
established hourly rates. Accounts receivable include unbilled balances of
$192,000 for services provided prior to the end of the period but billed
subsequently.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation
is computed based on the estimated useful lives of the related assets using the
straight-line method for financial reporting and accelerated methods for income
tax purposes. For each classification of property and equipment, the depreciable
lives are as follows:
Photo equipment 6 years
Office and computer equipment 3 to 6 years
Vehicles 3 years
Leasehold improvements 5 years
INCOME TAXES: The Company, with the consent of its stockholder, elected to have
its income taxed as an S corporation which provides that, in lieu of corporate
income taxes, the stockholder is taxed on the Company's taxable income.
NOTE 2 - LINE OF CREDIT
The Company has a line of credit of $1,000,000 with Northern Trust Bank/DuPage.
The line of credit bears interest at the prime rate and is secured by all
business assets of the Company. The bank's commitment under the line of credit
expires on March 1, 1998. Restrictive covenants contained in the loan agreement
require the maintenance of certain financial ratios. At October 31, 1997, no
borrowings had been made against the line of credit.
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10
(Continued)
<PAGE>
KIZOREK, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
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NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following at October 31, 1997:
<TABLE>
<S> <C>
Lease payable, Naper Leasing Service, maturing January 2000 with interest at
12.8%, payable in monthly installments of $1,988, secured by equipment. $ 44,873
Less current maturities 19,204
------------
$ 25,669
------------
------------
</TABLE>
Future maturities are as follows:
<TABLE>
<CAPTION>
Year Ending
October 31,
-----------
<S> <C>
1998 19,204
1999 21,795
2000 3,874
</TABLE>
NOTE 4 - PROFIT SHARING PLAN
The Company maintains a defined contribution profit sharing plan for
substantially all employees which provides for contributions at the discretion
of the Board of Directors, voluntary employee 401(k) contributions, and matching
contributions by the Company up to specified limits. The matching contribution
for the year ended October 31, 1997 was $46,335. There was no discretionary
contribution for the year ended October 31, 1997.
NOTE 5 - LEASE COMMITMENTS
The Company conducts its operations from leased office facilities in Illinois,
South Carolina, Hawaii, California, and South Africa. The leases expire at
various dates through 1999.
The total office rental expense was $309,909 for the year ended October 31,
1997.
The Company leases vehicles under operating leases with two- or three-year lease
terms. Total expense amounted to $750,559 for the year ended October 31, 1997.
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11
(Continued)
<PAGE>
KIZOREK, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- -------------------------------------------------------------------------------
NOTE 5 - LEASE COMMITMENTS (Continued)
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
Year Ending
October 31, Amount
------------ ------
<S> <C>
1998 $ 788,614
1999 213,392
--------------
$ 1,002,006
--------------
--------------
</TABLE>
NOTE 6 - CONTINGENCY
The Company entered into an agreement with North American Benefits, Inc.,
whereby North American Benefits, Inc. provides certain administrative services
and North American Specialty Insurance Company provides stop loss coverage.
However, the Company is responsible for the funding of all claims up to $17,500
per individual per policy year and up to approximately $250,000 per year on the
group as a whole. A liability has been recorded for the estimate of claims
pending at the balance sheet date.
NOTE 7 - PENDING LITIGATION
The Company is a defendant in several lawsuits arising from the performance of
their regular business activities. These lawsuits are being defended by counsel
for the Company's insurance carrier. Damages being sought are covered by the
Company's existing insurance policies and are not expected to exceed existing
coverage limitations. These matters, when finally concluded and determined, will
not, in the opinion of management, have a material adverse effect on the results
of operations or financial position of the Company.
NOTE 8 - SUBSEQUENT EVENTS
Effective November 1, 1997, the Company established a deferred compensation plan
for key executives and employees. The total amount of benefits awarded under
this plan is $1,350,000, payable November 1, 2004 plus interest accrued from the
date of the award. If there is a change in control of the Company through
merger, consolidation, liquidation, dissolution, or sale of all or substantially
all of the Company's assets, payments become due in three installments plus
interest commencing on the December 1 following the date of the change in
control of the Company with the balance being due in two installments on
December 1 of each of the next two years.
On August 31, 1998, all of the outstanding shares of common stock of the Company
were exchanged for cash and shares of common stock of The Kroll-O'Gara Company
under the terms of a merger agreement.
- -------------------------------------------------------------------------------
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: OCTOBER 23, 1998 THE KROLL-O'GARA COMPANY
By /s/Nicholas P. Carpinello
--------------------------
Nicholas P. Carpinello
Controller and Treasurer
13
