THE ZIEGLER COMPANIES, INC.
1995 ANNUAL REPORT
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Table of Contents
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Financial Highlights 3
Letter to Shareholders 4-7
Overview of The Ziegler Companies, Inc. 8-13
Summary of Operations 15-16
Officers and Directors 49-52
Investor Information 54-55
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Financial Highlights
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For the Year Ended
December 31,
1995 1994
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Total Revenues $55,209,000 $48,474,000
Income Before Income Taxes 6,337,000 3,122,000
Net Income 4,044,000 2,005,000
Per share
Net Income $1.69 $ .84
Dividends Declared $ .87 $ .72
Average Common Shares Outstanding 2,391,968 2,388,586
Number of Common Shareholders 537 590
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Corporate Creed
We believe in the American free enterprise system. We shall consistently
treat our customers, employees, shareholders and community with honesty,
dignity, fairness and respect. We will conduct our business with the highest
ethical standards.
<PAGE>
Letter to Shareholders
Dear Shareholders:
1995 was a better year for The Ziegler Companies, Inc.
We entered 1995 on the heels of very difficult 1994 fixed income
markets. The year started slowly, but finished very strongly with the fourth
quarter being the most profitable. While we made progress in 1995, there is
still much to be accomplished in providing a more satisfactory return to you,
the shareholders, on your capital invested in our Company.
In 1995, earnings per share were $1.69 versus 84 cents in 1994. Net
income grew to $4,044,000 from $2,005,000 in 1994. Total revenues grew 17%,
to a record $55,209,000. Book value per share rose to $21.48 from $20.68 at
year-end 1994.
1995 marked the 44th consecutive year that cash dividends have been paid
on your Company's common shares. Cash dividends declared in 1995 were 87
cents per share compared to 72 cents per share in 1994. Included in the 87
cents per share was an extra dividend of 35 cents per share declared in the
fourth quarter of 1995. Dividend policy is reviewed by your directors on a
quarterly basis. The historically large year-end extra dividends should not
create expectations by shareholders for the same in the future. However, as
stated in previous shareholder letters, a higher payout of earnings will be
considered an alternative until an adequate return on shareholders' equity is
achieved. We will continually assess the operational needs, as well as
investment opportunities, in determining how to allocate excess capital.
Buyback of outstanding shares is just such an opportunity when shares are
available at the right price. In 1995, additional shares were repurchased at
a substantial discount to book value, pursuant to an existing buyback
authority. With the dramatic changes taking place in our core financial
service businesses, it is more probable today than it has been in the past,
that capital will be utilized for investment opportunities.
The securities industry was blessed by astonishingly strong capital
markets in 1995. The Dow Jones Industrial Average cracked the 5000 barrier
and the Standard & Poor's 500 Index (with dividends) advanced 37.6% in 1995.
The equity markets drew much of their strength from the bond market, where
yields declined almost as much as they had increased in 1994. By year-end,
the yield on the long U.S. Treasury bond dropped through 6%. Despite
legislative proposals for a flat tax, the municipal market rallied strongly as
well. New issuance of long-term municipal bonds in 1995 was $156 billion,
down from $165 billion in 1994. However, December of 1995 was the fifth
straight month in which issuance volume exceeded 1994 levels.
B.C. Ziegler and Company (BCZCO), your largest subsidiary company,
capitalized on the strong markets and posted improved operating results.
Contributing to BCZCO's performance were the following:
-- Ziegler Securities Division (ZSD) substantially increased revenues
and profitability.
- The Healthcare Finance Group increased its ranking and
market share as a nationally recognized investment banker to
the healthcare industry.
- The Senior Living Finance Group had a great year by
recapturing its number one industry underwriting ranking,
capturing twice the market share of its nearest competitor
and generating an increased and substantial profit
contribution to ZSD.
- Diversification of ZSD's revenue base was achieved through
the establishment of the Special Products Group, which on an
agency basis provides advice and guidance for clients using
derivatives. Further diversification took the form of a
joint venture to provide a turnkey medical office building
program.
-- The General Corporate Finance Division profitability was down
slightly from 1994, while church and school underwriting volume
was up slightly for the year.
-- Our new Preferred Stock Division, which began operations in
December of 1994, was profitable and a meaningful contributor to
earnings in every month of 1995. The legislative proposal to
reduce the dividend received deduction is currently restricting
liquidity in this market.
-- The Retail Division went through a year of transition in 1995:
Revenues and profits were down from 1994. From May through early
September, all of our investment brokers became "full-service"
brokers as we implemented solicited equity transactions for all of
our investment brokers and clients. We believe we accomplished
this with a strong focus on adding value to our clients'
portfolios with high quality independent research and efficient
execution. By year-end, we had installed personal computers in
most of our sales offices.
-- Sales and support activities relating to Principal Preservation
Portfolios (PPP), our family of mutual funds, showed improved
profitability from 1994. PPP ended the year with total assets of
$320,000,000. In general, the investment performance of the nine
portfolios was solid and bodes well for sales in 1996.
-- BCZCO's independent insurance agency's profitability dropped in
1995. While new business was up substantially, a soft market
caused the loss of existing business. Further, performance-based
commissions were down and Ziegler Financial Agency, in its first
full year of operations, was a slight drag on earnings.
Ziegler Thrift Trading, Inc. (ZTT) contributed record profits in 1995 as
the result of:
-- Record retail ticket volume was propelled by the robust equity
markets.
-- A new office which was opened in St. Paul, Minnesota.
-- An acquisition of a discount brokerage business in Naperville,
Illinois in September.
Ziegler Leasing Corporation (ZLC) profits declined in 1995, primarily as
a result of a decline in booked leases, as well as a softening of residual
values in certain equipment categories. ZLC continues to show restraint when
bidding new business in the face of market conditions that don't allow us an
adequate return on capital. At mid-year we bought out our minority partners
at Ziegler Medical Equipment Group. The loss narrowed in this business from
1994. The biggest challenge facing ZLC is to distinguish itself as a value-
added service provider with potential customers in an intensively competitive
environment.
With another year of excellent performance numbers in both its equity
and fixed income managed accounts, Ziegler Asset Management, Inc. (ZAMI) saw
assets under management grow to $587,000,000. However, profitability was well
below plan as the result of the subsidization of new products and services.
We brought in new leadership in January 1996 to focus the strengths of ZAMI.
WRR Environmental Services Co., Inc. (WRR), posted record profits in
1995. These earnings came primarily as the result of the diversification
efforts of the last few years, whereby management entered related businesses
that haven't been subject to the classic margin pressure an industry
experiences when it matures. The hazardous waste processing industry has not
been a growth industry the last few years and is mature. WRR's remediation
services are an example of a new service that contributed meaningfully in
1995.
In March of 1996, Vernon C. Van Vooren will retire as Senior Vice
President-Treasurer after 32 years of service. Vern always went out of his
way to befriend new employees and make them feel at home, no matter at what
level in the company they were employed. Vern built and ran our commercial
paper department which was vital to our success. He will always be remembered
by his clients for immediate and quality service, by his fellow managers as
the "conservative conscience" of BCZCO, and by everyone for his high ethical
standards.
At the April 1995 annual meeting, Peter R. Kellogg was elected to your
Board of Directors. Peter is the CEO and Senior Partner of Spear Leeds &
Kellogg, the largest specialist firm making markets in listed stocks on the
New York Stock Exchange and American Stock Exchange. He brings as counsel to
our organization broad and successful experiences in the financial services
and broker/dealer industry.
In 1996, William R. Holmquist will retire from the Board of Directors.
Bill has served as a Director for 20 years and was active in management for 32
years, retiring as the Senior Vice President of Marketing in 1989. During
Bill's lengthy leadership as the head of our retail division, he gained the
respect, loyalty and friendship of all those with whom he came in contact. He
was respected by all for his fairness and sharp mind, and saw to it everyone
had fun. As a director, he balanced well his loyalty to shareholders and
support for management. We extend our most sincere appreciation for the many
contributions Bill made over 38 years of service to the Ziegler organization.
On the legislative front, Congress overrode President Clinton's veto to
pass the Private Securities Litigation Reform Act of 1995. This is a very
significant and welcome piece of legislation which should sharply curtail
frivolous securities litigation. Once again, the reports of the death of the
Glass-Steagal Act were premature. Our hopes of having a relatively level
playing field with the banks were again thwarted by the special interests of
banks, securities firms and the insurance industry. As of this writing,
Congress and the President are still debating a budget. I find the threats of
a U.S. government default on its obligations to be irresponsible. The
absolute integrity of the full faith and credit of the U.S. government's
securities is essential to the capital markets, in not only this country, but
the world. The implications of a default are incomprehensible.
As we look ahead, the need for change to respond to the marketplace is a
part of any business, and is certainly inherent in the securities industry and
our business. Profound change is reshaping our businesses. These changes
bring stress to an organization - along with opportunities. We have a young
and energetic management team that has embraced these changes and is driven to
succeed. In doing so, they have and will carry the same values and high
ethical standards for which your Company has always stood.
1995 was a year of improvement for your Company. 1996 holds many
opportunities and challenges. Our collective goal of building shareholder
value has never been clearer. Delivering on that goal is the work of all of
our valued employees. On their behalf, I thank you, this corporation's
owners, for the confidence you continue to demonstrate by investing your
capital in The Ziegler Companies, Inc.
Sincerely,
/s/ Peter D. Ziegler
Peter D. Ziegler
President & CEO
<PAGE>
THE ZIEGLER COMPANIES, INC.
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Business Activity
B. C. ZIEGLER AND COMPANY
Ziegler Securities Division Strategic consulting, merger and
Healthcare Finance acquisition, and investment banking
services to hospitals, physician
organizations, healthcare systems,
medical office developers
Senior Living Finance Strategic consulting and investment
banking services to non-profit
senior living providers
Special Products Advisor/consultant to healthcare
providers on asset and liability
management techniques
General Corporate Finance Debt financing to churches and
independent schools nationwide for
construction, land/facilities
purchase, refinancing of debt or
construction loans
Retail Division Full-service retail distribution of
investment securities and services
through 24 retail offices serving
investors nationwide
Sponsor of Niche family of mutual funds,
Principal Preservation Portfolios distributed through investment
brokers, banks and financial
planners
Preferred Stock Division Institutional sales and trading of
nonconvertible preferred stock to
client base of major domestic
institutional investors and
broker/dealers
Independent Insurance Agency Independent agency providing
complete insurance programs for
individuals, families and
businesses, primarily in
southeastern Wisconsin
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THE ZIEGLER COMPANIES, INC.
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Competitive Advantages
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B. C. ZIEGLER AND COMPANY
Ziegler Securities Division Largest specialty investment
Healthcare Finance banking firm serving exclusively
healthcare clients nationwide
Unique product applications and
financing solutions
Senior Living Finance Designated investment banker to
American Association of Homes &
Services for the Aging
Largest data and research base for
non-profit senior living facilities
Special Products Strong economic value added to new
and existing financings
General Corporate Finance Largest underwriter nationally
selling taxable securities for
churches/schools
Retail Division Reputation for stability and
integrity in industry
High level of individual client
service
Proprietary products and
distribution capability for firm's
investment banking services
Unique, personalized investment
broker support
Sponsor of Provides individualized service to
Principal Preservation Portfolios brokers in Midwest
In-house transfer agent, custodian
and fund accounting services
Preferred Stock Division Strong market position in a niche
market
Highly experienced staff; low
overhead for operations
Independent Insurance Agency Diverse insurance company
representation, with a
distinguishing value-added service
approach
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THE ZIEGLER COMPANIES, INC.
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Highlights
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B. C. ZIEGLER AND COMPANY
Ziegler Securities Division Ranked fifth nationally in senior-
Healthcare Finance managed tax-exempt healthcare
bonds; highest ranking off Wall
Street
Provided consulting and advisory
services to the largest not-for-
profit sale transaction ever
completed
Senior Living Finance Ranked first among underwriters of
tax-exempt bonds for senior living
facilities
22% market share
Senior managed 38 financings, with
par value $443 million
Special Products Completed more than 35 transactions
in 1995 related to bond issues
exceeding $1 billion
General Corporate Finance Solely managed 23 issues in 1995,
with par value of $67 million
Retail Division Expansion of products and services
in 1995; added high quality,
independent equity investing
services
Initiated an investment broker
recruitment and training program;
expanded number of producing
brokers
Improved technology in branch
investment offices
Sponsor of Asset base in excess of $320
Principal Preservation Portfolios million
Double tax-free fund for Wisconsin
investors
Preferred Stock Division One of the largest domestic trading
operations dedicated exclusively to
preferred stock
Trading strategy of primarily risk-
free trading
Independent Insurance Agency Increased agency volume 50% in
financial benefits area
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THE ZIEGLER COMPANIES, INC.
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Business Activity
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ZIEGLER LEASING CORPORATION Equipment financing for healthcare
providers, commercial and
industrial clients nationwide
Refurbishing and remarketing of
pre-owned medical equipment through
Ziegler Medical Equipment Group,
Inc.
ZIEGLER THRIFT TRADING, INC. Provides quick, efficient order
execution and clearing for all
types of securities at discounted
commission rates
Cashless stock option financing
ZIEGLER ASSET MANAGEMENT, INC. Investment adviser to individual
retail and institutional
portfolios: clients include high
net worth individuals; corporate,
governmental, charitable and non-
profit organizations; mutual funds
Qualified retirement plans for
corporate accounts
WRR ENVIRONMENTAL SERVICES CO., INC. Waste management, chemical
processing, laboratory services,
waste transportation services,
emergency response; site
remediation and restoration
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THE ZIEGLER COMPANIES, INC.
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Competitive Advantages
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ZIEGLER LEASING CORPORATION Specialization in healthcare
provides clients with valuable
assistance in financing structures
ZIEGLER THRIFT TRADING, INC. Self-clearing for superior service
Specialized services: Free dividend
reinvestment, free check-writing
money market funds, mutual funds,
electronic payments and
disbursements, free quotes, 24-hour
order taking
ZIEGLER ASSET MANAGEMENT, INC. Highly experienced investment
management team
Experienced in serving clients in
healthcare and senior living
industries
Proprietary investment products
Long-term record developing short-
term cash management services
WRR ENVIRONMENTAL SERVICES CO., INC. Provides full range of value-added
services to meet all environmental
needs of clients
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THE ZIEGLER COMPANIES, INC.
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Highlights
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ZIEGLER LEASING CORPORATION Financed more than $300 million of
equipment since 1971
Expanded sales force to
aggressively market directly to
healthcare market
ZIEGLER THRIFT TRADING, INC. Record earnings in 1995
More than 50% of new accounts from
referrals
In 1995, acquired two offices in
Illinois, opened an office in St.
Paul, Minnesota
Investment consultant services
available
ZIEGLER ASSET MANAGEMENT, INC. Strong asset growth since
established in 1991
Manages in excess of $575 million
Extensive healthcare/senior living
client base
Excellent equity and fixed-income
performance
WRR ENVIRONMENTAL SERVICES CO., INC. 150% growth in revenue over past
five years
Record profits in 1995
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Consolidated Financial Statements
Table of Contents
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Consolidated Balance Sheets 17
Consolidated Statements of Income 18
Consolidated Statements of Cash Flows 19-20
Consolidated Statements of Stockholders' Equity 21
Notes to Consolidated Financial Statements 22-37
Report of Independent Public Accountants 38
Management's Discussion and Analysis 39-46
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<PAGE>
1995 Summary of Operations
A holding company with eight principal subsidiaries, The Ziegler Companies,
Inc. ("ZCO") provides a wide range of financial services for businesses,
institutions and individuals. B. C. Ziegler and Company ("BCZCO"), Ziegler
Leasing Corporation ("ZLC"), Ziegler Financing Corporation ("ZFC"), Ziegler
Thrift Trading, Inc. ("ZTT"), Ziegler Asset Management, Inc. ("ZAMI"), Ziegler
Collateralized Securities, Inc. ("ZCSI"), and First Church Financing
Corporation ("FCFC") are financial services companies; WRR Environmental
Services Co., Inc. ("WRR") recycles, reclaims and disposes of industrial
chemicals and solvents and provides pollution abatement services.
Operational results for ZCO and its subsidiaries are as follows:
B. C. Ziegler and Company, including Ziegler Securities: BCZCO is one of the
nation's leading investment banking firms specializing in underwriting and
marketing tax-exempt and taxable debt securities for hospitals, clinics,
medical office developers and other healthcare related entities and churches.
In addition, BCZCO is the nation's leading underwriter for senior living
facilities. Ziegler Securities, headquartered in Chicago, is a major
operating division of BCZCO and is responsible for all healthcare, senior
living and municipal finance activities of BCZCO.
In addition to traditional underwriting services offered to its clients,
Ziegler Securities also provides financial advisory and consulting services to
healthcare clients through the Ziegler Healthcare Affiliates division. Other
financial services offered through Ziegler Securities include asset and
liability management, special products for capital restructurings and interest
rate management strategies.
During 1995, Ziegler Securities managed 14 new issues of tax-exempt and
taxable healthcare debt securities totaling $452,755,000. During 1995,
Ziegler Securities also managed 38 issues for long-term care retirement
facilities totaling $442,790,000.
The corporate finance group of BCZCO, which performs underwriting in
connection with offerings of taxable bonds for non-profit institutions,
brought 23 bond issues to market in 1995 on behalf of churches, private
schools and other non-profit institutions. The offerings had a total
principal amount of $67,408,000.
BCZCO provides retail investment brokerage services through 24 offices
nationwide. In 1995, solicited equity investing services were instituted at
all retail investment offices, a service supported by high quality independent
research.
BCZCO serves as principal underwriter, and provides certain other functions,
for Principal Preservation Portfolios, Inc., an open-end investment company.
This family of mutual funds had total assets of approximately $320,000,000 at
December 31, 1995, as compared with total assets of approximately $250,000,000
at December 31, 1994.
BCZCO has owned and operated a general independent insurance agency since its
founding in 1902 with offices located in West Bend and Milwaukee, Wisconsin.
The agency maintains direct agency contracts with 26 insurance companies.
Diversified coverages including, but not limited to, life, health, property,
casualty and fidelity insurance are available for personal and business
insurance customer needs. Ziegler Financial Agency, a general agency,
distributes financial insurance-based products through BCZCO and an existing
network of Wisconsin-based independent insurance agencies.
In 1995, total BCZCO revenues were $32,039,000, compared to $25,787,000 in
1994, a 24% increase. Total expenses were $29,592,000 in 1995, compared to
$25,899,000 in 1994, a 14% increase. The resulting net income was $1,555,000
in 1995, compared to $3,000 in 1994.
Ziegler Leasing Corporation: ZLC leases diagnostic, laboratory and operating
equipment to hospitals, clinics and other healthcare providers, and leases a
variety of commercial equipment to financial institutions, insurance companies
and manufacturing concerns. ZLC provides other financing alternatives,
including non-recourse notes and purchase money security notes in addition to
its leasing alternatives. ZLC also refurbishes and remarkets pre-owned
medical equipment through its wholly-owned subsidiary, Ziegler Medical
Equipment Group, Inc. ZLC's total revenues were $10,498,000 in 1995, compared
to $10,842,000 in 1994. Net income was $716,000 in 1995 compared to $764,000
in 1994. Seventy-nine leases or notes involving equipment costing $18,891,000
were activated in 1995.
Ziegler Thrift Trading, Inc.: Headquartered in Minneapolis, this subsidiary
is Minnesota's oldest discount brokerage firm. ZTT has three branch offices
in St. Paul, two of which are located in lobbies of a major financial
institution. In the third quarter of 1995, ZTT acquired two branch offices in
the western Chicago suburbs of Naperville and Westchester. Investors use ZTT
to trade stocks, bonds and options with a commission savings of up to 70% of
commissions charged by full commission firms. ZTT provides a wide range of
services to its customers, including a dividend reinvestment program, free
safekeeping, cashless stock option services, and investment consulting. Net
income was $677,000 in 1995 compared to $382,000 in 1994.
Ziegler Asset Management, Inc.: ZAMI is the investment adviser or money
manager entity in the Ziegler family of companies. Entering the industry in
mid-1991, ZAMI has shown rapid growth, from $48,000,000 in assets under
management in 1991 to $587,000,000 in assets under management at the end of
1995. Growth continues in two primary areas: equity and balanced portfolios,
using a quality growth strategy for individuals, foundations, endowments and
401(k) plans; and fixed-income management provided by the fixed-income
management team, primarily for the benefit of healthcare and municipal
clients. ZAMI is becoming a steady and profitable company, following its
early period of rapid growth.
WRR Environmental Services Co., Inc.: ZCO's only non-financial related
business operates a recycling and chemical waste treatment facility in Eau
Claire, Wisconsin. At WRR, waste chemicals and spent solvents are converted
into recycled products which may again be used by industrial concerns. In
addition to hazardous waste management, WRR also offers parts washer service
through its AIS Division, emergency response spill cleanup service, laboratory
services, and off-site remediation cleanup services. Net income increased
from $529,000 in 1994 to $918,000 in 1995.
Ziegler Financing Corporation: The subsidiary's policy of limited interim
lending activities continued in 1995. Total revenues were $327,000 in 1995,
compared to $364,000 in 1994.
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Consolidated Balance Sheets
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As of December 31,
1995 1994
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ASSETS
Cash $ 4,231,808 $ 5,185,343
Short-term investments 12,430,129 19,027,837
Bonds due and called as of January 1, 1996
and 1995, respectively 3,472,297 1,285,301
Total cash and cash equivalents 20,134,234 25,498,481
Securities inventory 28,151,740 22,803,084
Accounts receivable -
Securities sales 3,434,916 5,253,705
Other 4,612,320 3,293,159
Investment in and receivables from affiliates 2,638,456 2,578,926
Investment in leases 51,090,834 56,062,738
Notes receivable 26,564,818 21,029,012
Land, buildings and equipment, at cost, net
of accumulated depreciation of $14,425,733
and $13,519,851, respectively 7,090,543 6,813,086
Other assets 12,127,533 9,108,016
Total assets $155,845,394 $152,440,207
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable $ 18,394,420 $ 19,728,501
Payable to customers 2,567,092 5,876,231
Payable to broker-dealers 409,425 1,217,984
Accounts payable 3,910,191 2,738,966
Dividends payable 1,167,207 804,026
Accrued income taxes payable 1,138,008 -
Deferred income taxes 5,358,583 5,322,679
Notes payable to banks 24,559,972 26,900,354
Bonds payable 37,403,990 31,605,241
Other liabilities and deferred items 8,694,508 7,866,203
Total liabilities 103,603,396 102,060,185
Commitments
Stockholders' equity -
Common stock, $1 par, 7,500,000 shares
authorized, 3,544,030 shares issued 3,544,030 3,544,030
Additional paid-in capital 5,968,737 6,030,565
Retained earnings 60,659,742 58,734,576
Treasury stock, at cost, 1,112,348 and
1,107,587 shares, respectively (17,229,903) (17,196,800)
Unearned compensation (700,608) (732,349)
Total stockholders' equity 52,241,998 50,380,022
Total liabilities and stockholders'
equity $155,845,394 $152,440,207
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
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<TABLE>
Consolidated Statements of Income
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For the Years Ended
December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Investment banking and commission
income $ 30,642,641 $ 23,702,142 $ 29,819,544
Interest and dividends 4,327,412 4,210,107 2,228,984
Lease income 9,656,436 10,253,033 10,390,587
Gross profit on chemical products
(28%, 29% and 28% of net sales,
respectively) 3,762,466 3,086,816 2,660,305
Insurance agency 951,085 985,320 830,075
Other 5,869,128 4,844,073 4,411,760
55,209,168 47,081,491 50,341,255
Expenses:
Employee compensation and benefits 22,329,471 18,651,203 19,532,839
Commissions and clearing fees 820,472 728,472 775,743
Communications 2,660,151 2,510,738 2,461,531
Occupancy and equipment 8,773,624 8,573,225 7,974,217
Promotional 2,115,780 2,234,606 2,274,578
Professional and regulatory 901,396 1,121,473 953,826
Interest 5,568,541 5,261,397 4,419,711
Other operating expenses 5,703,212 4,878,021 4,524,586
48,872,647 43,959,135 42,917,031
Income before income taxes 6,336,521 3,122,356 7,424,224
Provision for income taxes 2,292,200 1,117,300 2,893,200
Net income $ 4,044,321 $ 2,005,056 $ 4,531,024
Net income per share of common stock $1.69 $ .84 $1.90
Weighted average number of common
shares outstanding 2,391,968 2,388,586 2,382,957
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended
December 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,044,321 $ 2,005,056 $ 4,531,024
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 6,349,924 6,647,086 6,078,718
Provision for losses 367,609 269,550 164,696
Loss (gain) on sale of equipment 31,419 (18,397) (62,641)
Gain on sale of leased equipment (665,196) (841,819) (869,990)
Unrealized loss (gain) on
securities inventory (437,351) 206,643 152,000
Compensation expense related to
restricted stock grants 200,728 115,964 -
Deferred income taxes 35,904 444,056 498,333
Change in assets and liabilities:
Decrease (Increase) in -
Accounts receivable -
security sales 1,818,789 1,886,096 (1,422,693)
Accounts receivable - other (1,697,059) (840,451) (1,619,156)
Securities inventory (4,911,305) (5,129,866) (2,447,151)
Other assets (1,568,021) 2,385,153 (2,222,277)
Increase (Decrease) in -
Payable to customers and
broker-dealers (4,117,698) 4,178,849 66,079
Accounts payable net of
leased equipment purchases 588,037 383,695 1,232,337
Income taxes payable 1,138,008 (807,436) 276,756
Other liabilities 766,623 5,287,303 3,337,206
Net cash provided by
operating activities 1,944,732 16,171,482 7,693,241
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from -
Decrease in investment in
affiliates - 505,000 -
Proceeds received on sale of
equipment 32,553 21,376 90,328
Principal payments received under
leases 15,770,970 14,591,072 14,064,246
Proceeds from sale of leased
equipment 4,574,626 4,009,902 3,999,554
Payments received on notes
receivable 13,743,482 7,541,691 10,147,894
Payments for -
Investment in and loans to
affiliates - (890,379) (25,025)
Purchase of assets to be leased (8,716,323) (15,510,850) (16,730,744)
Issuance of new notes receivable (28,634,614) (21,015,487) (25,667,177)
Capital expenditures (898,787) (1,977,440) (2,873,316)
Acquisition of business assets (1,868,058) - -
Net cash used in
investing activities (5,996,151) (12,725,115) (16,994,240)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from -
Issuance of short-term notes
payable 94,452,000 103,861,000 92,974,000
Issuance of notes payable to
banks 2,023,057 851,910 610,014
Issuance of nonrecourse debt 1,340,458 4,421,988 515,941
Exercise of employee stock
options 110,557 64,093 100,169
Issuance of bonds payable 11,074,080 9,152,760 11,426,000
Other - 30,000 -
Payments for -
Principal payments of
short-term notes payable (95,778,000) (103,363,000) (91,348,000)
Principal payments of notes
payable to banks (4,485,439) (3,552,142) (1,421,185)
Principal payments of
nonrecourse debt (2,292,092) (1,342,958) (1,666,847)
Repayments of bonds payable (5,627,000) (4,982,000) (1,929,000)
Purchase of treasury stock (374,475) (3,400) (20,000)
Cash dividends paid (1,755,974) (2,570,237) (2,308,566)
Net cash provided by
(used in) financing
activities (1,312,828) 2,568,014 6,932,526
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (5,364,247) 6,014,381 (2,368,473)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 25,498,481 19,484,100 21,852,573
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 20,134,234 $ 25,498,481 $ 19,484,100
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the year $ 5,423,442 $ 5,040,525 $ 4,417,000
Income taxes paid during the year $ 975,268 $ 1,410,439 $ 2,097,000
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING ACTIVITIES:
Conversion of notes receivable
to leased equipment $ 9,222,523 $ 8,202,635 $ 4,916,710
Granting of restricted stock
from treasury stock $ 168,987 $ 848,313 $ -
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
For the Years Ended Additional Unearned
December 31, 1995, Common Paid-In Retained Treasury Compensa-
1994 and 1993 Stock Capital Earnings Stock tion Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 $3,544,030 $5,866,663 $56,502,210 $(18,022,073) $ - $47,890,830
Net income - - 4,531,024 - - 4,531,024
Dividends declared
($1.07 per share) - - (2,550,168) - - (2,550,168)
Proceeds from exercise
of stock options - 15,727 - 84,442 - 100,169
Cost of treasury stock
purchased
(1,200 shares) - - - (20,000) - (20,000)
BALANCE, December 31, 1993 3,544,030 5,882,390 58,483,066 (17,957,631) - 49,951,855
Net income - - 2,005,056 - - 2,005,056
Dividends declared
($.72 per share) - - (1,753,546) - - (1,753,546)
Proceeds from exercise
of stock options - (6,335) - 70,428 - 64,093
Cost of treasury stock
purchased (200 shares) - - - (3,400) - (3,400)
Restricted stock grants - 154,510 - 693,803 (848,313) -
Amortization of unearned
compensation - - - - 115,964 115,964
BALANCE, December 31, 1994 3,544,030 6,030,565 58,734,576 (17,196,800) (732,349) 50,380,022
Net income - - 4,044,321 - - 4,044,321
Dividends declared
($.87 per share) - - (2,119,155) - - (2,119,155)
Proceeds from exercise
of stock options - (32,613) - 143,170 - 110,557
Cost of treasury stock
purchased (24,241 shares) - - - (374,475) - (374,475)
Restricted stock grants - (29,215) - 198,202 (168,987) -
Amortization of unearned
compensation - - - - 200,728 200,728
BALANCE, December 31, 1995 $3,544,030 $5,968,737 $60,659,742 $(17,229,903) $(700,608) $52,241,998
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies -
Principles of consolidation -
The consolidated financial statements of The Ziegler Companies, Inc. and
subsidiaries (the "Company") include the accounts of The Ziegler
Companies, Inc. and its wholly-owned subsidiaries, B. C. Ziegler and
Company ("BCZ"), Ziegler Thrift Trading, Inc. ("ZTT"), Ziegler Financing
Corporation ("ZFC"), Ziegler Leasing Corporation ("ZLC"), Ziegler Asset
Management, Inc. ("ZAMI"), Ziegler Collateralized Securities, Inc.
("ZCSI"), WRR Environmental Services Co., Inc. ("WRR") and First Church
Financing Corporation ("FCFC"). All significant intercompany balances
and transactions have been eliminated in consolidation.
The Company, through its financial services subsidiaries, provides a
wide range of financial services for businesses, institutions and
individuals. WRR recycles, reclaims and disposes of industrial
chemicals and solvents and provides pollution abatement services.
The Company has a 50% interest in Ziegler Mortgage Securities, Inc. II
("ZMSI II"), an unconsolidated entity accounted for by the equity
method.
The Company acquired a 33% interest in Heartland Capital Company, LLC
("HCC"), a start-up company organized to provide construction loans to
low income housing developments. HCC did not have a significant impact
on the consolidated financial statements in 1995 or 1994. HCC is an
unconsolidated entity accounted for by the equity method.
Securities -
Security transactions are recorded on a settlement date basis which is
not materially different from a trade date basis. Investment banking
revenue is recorded net of directly related expenses.
Short-term investments consist of commercial paper, variable rate demand
notes, money market investments, equities and U.S. Government and U.S.
Government agency securities purchased under agreements to resell.
Securities purchased under agreements to resell, and securities sold
under agreements to repurchase, are treated as financing transactions
and are carried at the amounts at which the securities will be
subsequently resold or repurchased as specified in the respective
agreements. Other short-term investments are carried at approximate
market. The reported value of the securities inventory is carried at
approximate market.
At December 31, 1995, there were unrealized gains totaling approximately
$388,000 on short-term investments and securities inventory. At
December 31, 1994, the market value of the short-term investments and
the securities inventory was not materially different from cost.
Lease contracts -
ZLC leases various types of equipment to hospitals and other
organizations. The terms of these contracts generally range from one to
seven years. Depending on the lease terms, they are classified as
operating, financing or leveraged leases in accordance with Statement of
Financial Accounting Standards No. 13. Generally, third parties finance
approximately 75% to 90% of the leveraged leases in the form of
long-term debt that provides no recourse against ZLC and is secured by a
first lien on the property.
Initial direct costs -
Initial direct costs are those costs incurred by the Company that are
directly associated with negotiating and consummating completed leasing
transactions. For operating and financing leases, the Company defers
and amortizes initial direct costs over the lease term as an adjustment
to the yield. The unamortized initial direct costs are reported as part
of the investment in leases on the balance sheets.
Depreciation -
Depreciation is computed on buildings and equipment on a straight-line
basis. The buildings are depreciated over 20 to 40 years and equipment
over 3 to 10 years. Equipment under operating leases is depreciated
over the terms of the respective leases.
Income taxes-
The provision for income taxes is the estimated amount of income taxes
payable, both currently and in the future, on consolidated pretax
earnings for the year at current Federal and state tax rates. Deferred
income taxes have been provided for those transactions, primarily
investment in lease transactions, which are accounted for in different
periods for financial reporting purposes than for income tax purposes.
Net Income Per Share of Common Stock -
Net income per share of common stock is calculated based on the weighted
average number of common shares outstanding, including restricted common
stock, using the treasury stock method.
Cash Equivalents -
Cash equivalents are defined as short-term investments maturing within
three months of the date of purchase.
Use of Estimates -
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 dates of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Accounting Changes -
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". The Company is required to adopt this
Statement no later than its 1996 fiscal year.
In October 1995, SFAS No. 123, "Accounting for Stock Based
Compensation", was issued and also requires adoption by the Company no
later than its 1996 fiscal year. The standard requires expanded
disclosures, and permits, but does not require, changes in the
accounting for stock based compensation.
The implementation of SFAS No. 121 and SFAS No. 123 is not expected to
have a material impact on the financial statements.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan", and SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures",
(collectively "SFAS 114"). SFAS 114 requires that certain impaired
loans and leases be measured based on the present value of expected
future cash flows discounted at the loans' or leases' effective interest
rates. As a result of these new standards, no additional allowance for
losses was required as of January 1, 1995. At December 31, 1995, the
Company had no material impaired loans or leases requiring evaluation
under SFAS 114.
Reclassification-
Certain prior year amounts have been reclassified to conform with
current year presentation.
(2) Securities Inventory -
Securities inventory at December 31, 1995 and 1994, consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Municipal bond issues $20,351,886 $11,344,996
Corporate bond issues 2,230,918 189,345
Institutional bond issues 2,589,739 4,826,932
U.S. Government securities - 4,157,527
Preferred stock 1,263,826 519,001
Other 1,715,371 1,765,283
$28,151,740 $22,803,084
</TABLE>
Municipal bond issues consist primarily of revenue bonds issued by state
and local governmental authorities related to healthcare facilities.
Corporate bond issues consist primarily of bonds issued by for-profit
corporations. Institutional bond issues consist primarily of bonds
issued by not-for-profit hospitals, geriatric care facilities and
churches.
Included in municipal bond issues at December 31, 1995, are
approximately $12,580,000 of bonds from one issuer in Texas. These
bonds were substantially sold subsequent to year-end.
(3) Investment in Leases -
Approximately 76% of the Company's investment in leases is concentrated
in the healthcare industry. Investment in leases consisted of the
following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Financing leases -
Lease contracts receivable $37,214,062 $38,632,162
Estimated residual value 3,669,562 4,104,599
Deferred initial direct costs 512,114 634,902
Less -
Unearned income (6,357,433) (6,620,784)
Allowance for losses (476,126) (587,132)
Investment in financing leases 34,562,179 36,163,747
Leveraged leases -
Lease contracts receivable (net of
principal and interest on the
nonrecourse debt) 766,072 1,073,586
Estimated residual value 2,099,954 1,970,941
Less -
Unearned income (485,624) (566,042)
Investment in leveraged leases 2,380,402 2,478,485
Operating leases -
Equipment on rental, at cost 25,468,242 28,383,149
Less accumulated depreciation (11,458,824) (11,164,178)
Deferred initial direct costs 138,835 201,535
Investment in operating leases 14,148,253 17,420,506
Total investment in leases $51,090,834 $56,062,738
</TABLE>
Deferred income taxes arising from leveraged leases were $2,073,745 and
$1,804,727 as of December 31, 1995 and 1994, respectively, resulting in
a net investment in leveraged leases of $306,657 and $673,758,
respectively.
The following is a summary of scheduled payments to be received on
financing, leveraged, and noncancellable operating lease contracts:
<TABLE>
<CAPTION>
Financing Leveraged Operating
<C> <C> <C> <C>
1996 $13,676,503 $ 270,623 $ 4,903,147
1997 10,313,867 196,843 3,173,497
1998 7,182,383 291,932 2,014,828
1999 4,181,704 6,674 1,045,378
2000 1,679,568 - 363,125
Thereafter 180,037 - -
$37,214,062 $ 766,072 $11,499,975
</TABLE>
(4) Investment in ZMSI II -
Condensed financial information of ZMSI II as of December 31, 1995 and
1994, and for the three year period ended December 31, 1995 is as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Mortgage Certificates, net of
unamortized discount of $3,425,237
and $3,453,038, respectively $116,345,952 $113,401,638
Deferred bond issuance costs 3,378,116 3,409,878
Cash and cash equivalents, primarily
held by trustee 4,632,392 4,736,534
Accrued interest receivable 855,783 844,075
Total assets $125,212,243 $122,392,125
Mortgage Certificate-Backed Bonds payable $119,908,000 $117,018,000
Accrued interest payable 3,716,958 3,613,928
Due to BCZ 67,285 240,197
Total liabilities 123,692,243 120,872,125
Stockholders' equity ($1,510,000 held by
the Company) 1,520,000 1,520,000
Total liabilities and
stockholders' equity $125,212,243 $122,392,125
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income, primarily interest $10,623,778 $11,144,634 $17,010,650
Expenses -
Interest expense 9,764,637 9,654,473 14,443,586
Amortization of bond issuance
costs 359,513 1,111,631 2,138,311
Management fee earned by BCZ 349,925 158,801 179,930
General and administrative
expense 149,703 219,729 248,823
Total expenses 10,623,778 11,144,634 17,010,650
Net income $ - $ - $ -
</TABLE>
The Mortgage Certificate-Backed Bonds are collateralized by the Mortgage
Certificates, which consist of Government National Mortgage Association
certificates and Federal National Mortgage Association certificates.
(5) Ziegler Collateralized Securities, Inc. -
ZCSI was organized to facilitate the financing of equipment purchases
and leases by securitizing such purchases and leases for offerings to
the public. Summarized financial information of ZCSI as of December 31,
1995 and 1994 and for the years ended December 31, 1995, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Investment in leases $ 8,818,566 $10,509,676
Notes receivable 6,865,720 3,487,364
Other assets 2,614,081 1,815,606
Total assets $18,298,367 $15,812,646
Bonds payable $15,070,000 $12,522,000
Other liabilities, primarily a
subordinated note to Company 3,218,367 3,280,646
Total liabilities 18,288,367 15,802,646
Stockholder's equity 10,000 10,000
Total liabilities and
stockholder's equity $18,298,367 $15,812,646
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Lease income $ 877,242 $ 993,566 $ 908,886
Other income, primarily interest 519,381 248,845 24,452
Total income 1,396,623 1,242,411 933,338
Interest expense 988,358 763,019 539,650
Management fees to ZLC 61,423 153,024 147,095
Other expenses 346,842 326,368 246,593
Total expenses 1,396,623 1,242,411 933,338
Net income $ - $ - $ -
</TABLE>
In accordance with a written agreement with ZLC, which provides
management and administrative services to ZCSI, management fees paid to
ZLC were limited to the amount which prevented ZCSI from incurring a
loss.
An analysis of each outstanding bond series as of December 31, 1995 and
for the year then ended is as follows:
<TABLE>
<CAPTION>
Collateral Lease/ Bond Other Excess
Bonds Value Note Interest Related of
Series # Outstanding at Cost Income Expense Expenses Income
<C> <C> <C> <C> <C> <C> <C>
1 $ 217,000 $ 340,813 $ 83,350 $ 47,815 $ 11,386 $24,149
2 $ 902,000 $1,036,372 $119,825 $ 87,609 $ 22,617 $ 9,599
3 $ 850,000 $ 960,364 $155,304 $ 86,325 $ 39,793 $29,186
4 $1,701,000 $1,909,933 $226,030 $126,775 $ 39,563 $59,692
5 $4,200,000 $5,452,573 $473,958 $329,000 $123,220 $21,738
6 $7,200,000 $8,145,934 $171,851 $132,016 $ 32,622 $ 7,213
</TABLE>
(6) Short-Term Notes Payable, Lines of Credit,
Notes Payable to Banks and Bonds Payable -
The Company finances the operations of certain subsidiaries by issuing
commercial paper (short-term notes payable). During 1995, 1994 and
1993, it had average outstanding balances of approximately $19,882,000,
$20,856,000 and $18,889,000, respectively. Maximum borrowings based on
month-end outstanding balances for those same years were approximately
$21,590,000, $21,707,000 and $19,434,000, respectively. During 1995,
1994 and 1993, the weighted average interest rates incurred were 6.8%,
4.8%, and 3.8%, respectively, based on month-end outstanding balances.
The average discount rates on short-term notes payable outstanding as of
December 31, 1995 and 1994, were 6.75% and 4.83%, respectively.
The Company had lines of credit as of December 31, 1995 and 1994,
totaling $26,000,000. In accordance with normal banking practice, these
lines may be withdrawn at the discretion of the lenders. In connection
with certain of these bank lines, the Company is required to maintain,
as compensating balances, average collected funds, which at December 31,
1995 and 1994, approximated $380,000. There are no legal restrictions
on the withdrawal of these funds. Interest expense incurred in
connection with borrowings against its lines of credit was not material
in 1995, 1994 or 1993. One of the bank lines for $3,000,000 is shared
with the family of mutual funds sponsored by BCZ. All borrowings under
this line of credit by the funds are guaranteed by BCZ. The family of
mutual funds had no borrowings outstanding at December 31, 1995, and
$75,000 outstanding at December 31, 1994.
BCZ periodically obtains short-term borrowings for specific
underwritings under broker loan facilities at the market rate of
interest to broker- dealers, payable on demand and fully collateralized
by the securities held in inventory. Such amounts are generally
outstanding for periods of less than two weeks and total interest
expense in connection with such borrowings was not material in 1995,
1994 or 1993.
BCZ serves as the remarketing agent on certain variable-rate municipal
bonds that can be tendered back to the respective issuers, generally
upon seven days advance notice, by the holders. To assist it in
carrying out its remarketing duties, BCZ has obtained $75,000,000 of
borrowing capacity to allow it to finance the purchase of tendered bonds
it elects to purchase into its own inventory. These loan facilities are
restricted to financing only variable-rate, municipal bonds and each
financing must be approved by the lenders, in advance. The financings
are done at the lenders' prime rates, are payable on demand and are
fully collateralized by the variable-rate, municipal bonds. Such
amounts are generally outstanding for periods of less than two weeks and
total interest expense in connection with such borrowings was not
material in either 1995 or 1994. There were no such borrowings
outstanding at December 31, 1995 or 1994.
Notes payable to banks consisted of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Unsecured promissory note, 10.02%
interest, principal due May, 1996 $ 6,000,000 $ 8,000,000
Unsecured term note, 8.0% interest,
principal due - $1,000,000 in
December, 1996 with any remaining
due in December, 1997 4,000,000 5,000,000
Secured note, prime plus .5% - 40,503
Secured promissory note; bearing
interest at 8%; interest-only
payments due monthly; principal
payable in six equal monthly
payments of $116,624 commencing
May, 1996; collateralized by
inventory 699,746 -
Secured promissory note; bearing
interest at 8%; due in monthly
principal and interest installments
of approximately $2,900 through
September, 2002 with a final
payment of approximately $286,000
due October, 2002; collateralized
by land and buildings 348,205 -
Borrowings under unsecured lines
of credit 11,402,000 11,280,000
Other - nonrecourse notes,
collateralized by leased equipment,
interest ranging from 7.00%-10.55%,
payable in monthly installments
through November, 1997 2,110,021 2,579,851
$24,559,972 $26,900,354
</TABLE>
Among other restrictions of the debt agreements, ZLC is required to
maintain tangible net worth, as defined, of $10,600,000. At December
31, 1995, tangible net worth was $11,237,000.
Bonds payable at December 31, 1995 and 1994, consisted of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
First Church Financing Corporation
Mortgage-Backed Bonds:
Series 1 - due March, 2008;
interest at 8.25% $ 3,479,000 $ 4,158,000
Series 2 - due August, 2009;
interest at 8.75% 4,195,000 4,456,000
Series 3 - due December, 2010;
interest at 8.00% 4,223,000 -
Waste Research and Reclamation Co.,
Inc., Small Business Pollution
Control Revenue Bonds, due in
monthly principal and interest
installments of approximately
$6,000, through December 1, 2004,
bearing interest at 7.5% 436,990 469,241
Ziegler Collateralized Securities,
Inc., Collateralized Bonds;
collateralized by equipment leases
and other financing agreements;
guaranteed by The Ziegler Companies,
Inc.:
Series 1 - due serially through
June, 1996; interest
ranging from 6.00% to 7.75% 217,000 900,000
Series 2 - due serially through
July, 1997; interest
ranging from 5.00% to 7.00% 902,000 2,400,000
Series 3 - due serially through
June, 1998; interest
ranging from 5.00% to 6.75% 850,000 1,770,000
Series 4 - due serially through
December, 1998; interest
ranging from 4.75% to 6.5% 1,701,000 2,452,000
Series 5 - due serially through
October, 2001; interest
ranging from 6.25% to 7.75% 4,200,000 5,000,000
Series 6 - due serially through
March, 2001; interest
ranging from 6.00% to 7.00% 7,200,000 -
Ziegler Leasing Corporation Five-Year
Extendable/Redeemable Notes, Series
1991, 8.75% interest, unsecured;
principal redeemable by holders
December, 1996 and December, 2001;
principal redeemable by ZLC after
November, 1993, any remaining due
in December, 2006 10,000,000 10,000,000
$37,403,990 $31,605,241
</TABLE>
Annual amounts due on notes payable to banks and bonds payable for the
next five years are:
<TABLE>
<S> <C>
1996 $33,795,603
1997 5,449,402
1998 6,564,603
1999 2,462,945
2000 1,097,857
Thereafter 12,593,552
$61,963,962
</TABLE>
(7) Related Party Transactions -
BCZ sponsors the Principal Preservation Portfolios, Inc. family of
mutual funds. Certain BCZ officers and directors also serve as officers
or directors of the funds. BCZ performs investment advisory services,
transfer agency services, depository services and administrative
services for the funds. ZAMI also provides investment advisory services
to the funds. Fees for services earned from the funds approximated
$2,253,000, $2,009,000 and $2,073,000 in 1995, 1994 and 1993,
respectively.
BCZ serves as Manager of ZMSI II pursuant to a written agreement. BCZ
also advances funds to ZMSI II and owns $1,500,000 of $9 non-cumulative,
non-voting preferred stock in ZMSI II. See Note 4 for the ZMSI II
intercompany balances with The Ziegler Companies, Inc. and BCZ for the
years ended December 31, 1995 and 1994.
(8) Retirement Plans -
The Company has contributory profit sharing plans for substantially all
full-time employees. BCZ and ZTT have plans which provide for a
guaranteed company match equal to 50% of employee contributions and a
discretionary annual company contribution up to 6% of defined
compensation for each year. The annual company contributions are at the
discretion of the boards of directors. WRR has a plan that provides a
company match equal to 100% of employee contributions up to a maximum
match of 1.43% of defined compensation. WRR also provides a company
contribution equal to 3.88% of defined compensation. Retirement plan
expense of the Company and subsidiaries was $1,159,000, $820,000 and
$1,065,000 in 1995, 1994 and 1993, respectively.
(9) Provision for Income Taxes -
The provision for income taxes for the years ended December 31, 1995,
1994 and 1993, consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current Federal $1,632,800 $ 535,400 $1,920,100
Current state 623,500 137,800 474,800
Deferred provision 35,900 444,100 498,300
Total $2,292,200 $1,117,300 $2,893,200
</TABLE>
The following are reconciliations of the statutory Federal income tax
rates for 1995, 1994 and 1993 to the effective income tax rates:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory Federal income tax rate 34.0% 34.0% 34.0%
State taxes on income, net of related
Federal income tax benefit 5.0% 4.5% 4.8%
Federal tax-exempt interest income (2.4%) (5.0%) (1.5%)
Other, net (.4%) 2.3% 1.6%
Effective income tax rate 36.2% 35.8% 38.9%
</TABLE>
The tax effects of temporary differences that give rise to significant
elements of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Allowance for uncollectible accounts $ (807,277) $ (794,142)
Alternative minimum tax carryforward - (754,595)
Other (878,932) (865,392)
Total deferred tax assets (1,686,209) (2,414,129)
Deferred tax liabilities:
Fixed assets (primarily due to
depreciation) 84,748 105,944
Investment in leases 6,691,515 7,239,691
Other 268,529 391,173
Total deferred tax liabilities 7,044,792 7,736,808
Net deferred tax liabilities $5,358,583 $5,322,679
</TABLE>
(10) Other Assets -
In 1993, the Company entered into a loan for $4,610,000 with an
organization which was experiencing difficulties making required debt
service payments on an outstanding bond issue underwritten by BCZ. The
loan is due on demand, is interest free and requires weekly principal
payments totaling $7,000. The loan proceeds were used to redeem the
organization's outstanding bond issue in full. The amount due the
Company at December 31, 1995 was approximately $3,827,000.
The bonds were, and the loan is, secured by first mortgages on the
underlying real estate. The bonds and the loan are recorded at cost,
net of an allowance for possible losses, totaling approximately
$2,991,000 and $3,578,000 at December 31, 1995 and 1994, respectively.
While it had no obligation to do so, the Company elected to repurchase
the bonds and make the loan to maintain its business reputation and the
confidence of the purchasers of securities BCZ underwrites.
(11) Preferred Stock -
The Company is authorized to issue 500,000 shares of preferred stock, $1
par value, which is undesignated as to series.
(12) Stock Option Plans -
In 1993, the Company established the 1993 Employees' Stock Incentive
Plan (the "1993 Plan") for certain officers and key employees. On
December 29, 1993, the Board of Directors granted options to purchase
54,500 shares of Company stock under this Plan. The options are
exercisable through December 28, 2003 at a price of $16.625 per share.
Options forfeited totaled 2,000 in 1995; none were forfeited in 1994 or
1993. No options were exercised during 1995, 1994 or 1993. A total of
200,000 shares are issuable under the Plan. Options granted under the
1993 Plan that expire, terminate or are cancelled are again available
for the granting of future options.
On January 26, 1994, the Company issued an aggregate of 49,000 shares of
restricted common stock of the Company to certain key employees pursuant
to the 1993 Plan. Each employee's ownership of shares is subject to
full or partial forfeiture in accordance with a vesting schedule in the
event that the employee's employment with the Company terminates for any
reason before January 26, 2003. The market value of the restricted
stock, when issued, was $17.3125 per share. The total value at issuance
is being amortized and recorded as compensation over the period of
vesting. The shares are considered as outstanding, but may not be
transferred by the recipients until vested.
On January 27, 1995, the Company issued an aggregate of 11,313 shares of
restricted common stock of the Company to certain key employees pursuant
to the 1993 Plan. Each employee's ownership of shares is subject to
full or partial forfeiture in accordance with a vesting schedule in the
event that the employee's employment with the Company terminates for any
reason before January 27, 2000. In 1995, 401 of these shares were
forfeited. The market value of the restricted stock, when issued, was
$14.9375 per share. The total value at issuance is being amortized and
recorded as compensation over the period of vesting. The shares are
considered as outstanding, but may not be transferred by the recipients
until vested.
The 1989 Employees' Stock Purchase Plan (the "1989 Plan") was
established for substantially all full-time employees. On May 1, 1993,
the Board of Directors granted options to purchase 80,960 shares under
the 1989 Plan. The May 1, 1993 options still outstanding expired on
April 30, 1995. On May 1, 1995, the Board of Directors granted options
to purchase 104,200 shares.
Activity relating to the common stock options under the 1989 Plan was:
<TABLE>
<CAPTION>
1995 1994
(Number of Shares)
<S> <C> <C>
Options outstanding, beginning of year 71,387 77,882
Options exercised (7,467) (3,535)
Options forfeited (7,270) (2,960)
Options expired (63,835) -
Additional options granted 104,200 -
Options outstanding, end of year 97,015 71,387
</TABLE>
All outstanding options are currently exercisable through April 30,
1997, at 85% of the market value on the date of exercise. Shares were
exercised at prices averaging $13.38 per share during 1995. Under the
1989 Plan, 24,065 shares are available for future granting at 85% of the
market value on the date of exercise. Options granted under the 1989
Plan that expire, terminate or are cancelled are again available for the
granting of future options.
The effect of outstanding stock options on net income per share is not
material.
(13) Net Capital Requirements and Customer Reserve Accounts -
As registered broker-dealers, BCZ and ZTT are subject to the
requirements of Rule 15c3-1 (the "net capital rule") under the
Securities Exchange Act of 1934. The basic concept of the rule is
liquidity, requiring a broker-dealer to have sufficient liquid assets at
all times to cover current indebtedness. Specifically, the rule
prohibits a broker-dealer from permitting "aggregate indebtedness" to
exceed 15 times "net capital" (15 to 1) as those terms are defined.
Approximate net capital data as of December 31, 1995, is as follows:
<TABLE>
<CAPTION>
BCZ ZTT
<S> <C> <C>
Aggregate indebtedness $15,809,000 $1,419,000
Net capital $14,541,000 $1,093,000
Ratio of aggregate indebtedness
to net capital 1.09 to 1 1.30 to 1
Required net capital $ 1,054,000 $ 250,000
</TABLE>
In accordance with Securities and Exchange Commission Rule 15c3-3, BCZ
and ZTT maintain separate bank accounts for the exclusive benefit of
customers. The amounts maintained in these accounts are determined by
periodic computations required under the rule, which allows the
companies to maintain the computed amounts in cash or qualified
securities. As of December 31, 1995 and 1994, there were approximately
$4,936,900 and $5,924,200, respectively, in the customer reserve
accounts.
(14) Segment Information -
Information about the Company's operations by major industry segment is
as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Income
Before Total Depreciation
Revenues Taxes Assets Expense
<S> <C> <C> <C> <C>
Broker-dealer $37,679,955 $3,625,194 $ 53,681,199 $ 684,541
Lease financing 11,677,920 1,066,380 68,625,343 4,538,560
Real estate financing 197,488 122,420 4,280,944 -
Corporate and other 5,653,805 1,522,527 29,257,908 415,309
Consolidated $55,209,168 $6,336,521 $155,845,394 $5,638,410
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1994
Income
(Loss)
Before Total Depreciation
Revenues Taxes Assets Expense
<S> <C> <C> <C> <C>
Broker-dealer $30,324,225 $ 686,114 $ 56,636,013 $ 675,699
Lease financing 11,872,082 1,205,679 67,983,998 4,813,728
Real estate financing 328,164 (69,471) 5,044,727 -
Corporate and other 4,557,020 1,300,034 22,775,469 350,206
Consolidated $47,081,491 $3,122,356 $152,440,207 $5,839,633
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
Income
Before Total Depreciation
Revenues Taxes Assets Expense
<S> <C> <C> <C> <C>
Broker-dealer $35,237,620 $5,484,248 $ 47,195,182 $ 567,912
Lease financing 11,606,242 1,750,558 66,498,130 4,497,858
Real estate financing 350,957 64,509 7,923,869 -
Corporate and other 3,146,436 124,909 20,005,874 319,287
Consolidated $50,341,255 $7,424,224 $141,623,055 $5,385,057
</TABLE>
The industry segments above are each a separate company or group of
companies; therefore, all expenses and assets can be directly identified
with segment revenues. Intercompany revenues consist of interest income
earned by the Company on loans to subsidiaries and dividends from
subsidiaries. Substantially all other revenues are derived from
transactions with unaffiliated parties in the United States.
(15) Commitments and Contingent Liabilities -
In the normal course of business, BCZ enters into firm underwriting
commitments for the purchase of debt issues. These commitments require
BCZ to purchase debt issues at a specified price. To manage the
off-balance sheet credit and market risk exposure related to these
commitments, BCZ pre-sells the issues to its customers. BCZ had no such
commitments outstanding at December 31, 1995 or 1994.
As of December 31, 1995, ZLC had outstanding written agreements to
provide equipment lease financing for $5,214,174. To manage the
off-balance sheet credit and interest rate risk exposure related to
those commitments, ZLC retains the right to adjust or cancel the
commitments if adverse interest rate or credit conditions arise.
The Company leases office space under noncancellable lease agreements
which allow for annual adjustments to the minimum lease payments to
reflect increases in actual operating costs. BCZ leases computer
equipment under noncancellable agreements. WRR leases vehicles under
noncancellable lease agreements which allow for adjustments to the
minimum lease payments to reflect excess mileage above the agreed
mileage allowance. Minimum lease payments for office space, computer
equipment and vehicles, which extend through 2003, are:
<TABLE>
<C> <S>
1996 $1,567,000
1997 1,261,000
1998 647,000
1999 575,000
2000 507,000
2001 and after 1,006,000
</TABLE>
Rental expense for 1995, 1994 and 1993 was $2,293,000, $1,912,000 and
$1,853,000, respectively.
WRR is subject to a consent order of the Wisconsin Department of Natural
Resources for further testing and surface water control, and to remedial
1action under the federal Research, Conservation and Recovery Act
("RCRA"), of contaminants in ground water directly underneath the plant
site.
WRR has disposed of wastes at other recycling sites which may be added
to the National Priority List, and may be required to share in the cost
of the clean-up of these sites. As of December 31, 1995, WRR had been
identified as a potentially responsible party ("PRP") in connection with
three sites. For the first site, a reserve of $128,000 was established
based on WRR's review of documents, its knowledge of the site and its
experience with the clean-up of similar sites. No engineering studies
have yet been done to arrive at a more reliable cost estimate. Payments
on this site are expected to occur over the next five years. The
estimated cost of cleaning up a second site is between $10,000,000 and
$30,000,000 based on preliminary estimates from various consulting
firms. Based on the identification of other PRP's and the present
interim allocation schedule, WRR would be responsible for costs ranging
from $500,000 to $1,800,000. In accordance with Financial Accounting
Standards Board Interpretation No. 14, Reasonable Estimation of the
Amount of a Loss, WRR established a reserve of $589,000 to cover its
share of the clean-up costs of this second site. Payments on this site
are expected to occur over the next five years. In June 1994, WRR was
notified by the United States Environmental Protection Agency ("EPA")
that WRR is a PRP at a third site to which WRR delivered materials from
1982 to 1985. WRR's review of the remediation investigation and
feasibility study, and other materials prepared by EPA on account of
this site, indicates that WRR has valid defenses to any action by EPA to
collect remediation costs. The EPA's estimate of WRR's proportionate
share of anticipated remediation costs at this third site approximates
$200,000. No reserve has been established for this third site.
While WRR is jointly and severally liable on all three sites, management
is not aware of circumstances which could lead to non-performance by the
other PRP's when viewed as a group. No potential insurance recovery or
reimbursements from WRR's liability insurance carriers has been accrued
in the financial statements. The reserve for accrued loss contingencies
totaled $716,914 and $633,124 at December 31, 1995 and 1994,
respectively. It is reasonably possible that WRR's estimates of its
liability related to the clean-up of these sites may change materially
in the near term.
(16) Fair Value of Financial Instruments -
Financial Accounting Standard No. 107, "Disclosure about Fair Value of
Financial Instruments" requires that the Company disclose the fair value
of financial instruments for both assets and liabilities for which it is
practicable to estimate that value. Where readily available, quoted
market prices were utilized by the Company. If quoted market prices
were not available, fair values were based on estimates using present
value or other valuation techniques. These techniques were
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. The calculated fair value
estimates, therefore, cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. Statement No. 107 excludes
certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The book values, estimated fair values and the methods and assumptions
used to estimate the fair value of the financial instruments of the
Company are reflected below as of December 31, 1995.
Cash and cash equivalents -
The carrying values of cash and cash equivalents approximate the fair
values for those amounts.
Securities inventory -
The carrying value of securities inventory approximates the fair value
based on quoted market prices. See Note 1 for additional information.
Notes receivable -
The carrying value of notes receivable approximates the fair value based
on a discounted cash flow analysis. The discount rates were based on
the Company's current loan rates. For purposes of this Standard No.
107, the loan disclosed in Note 10 is also considered a note receivable.
Short-term notes payable -
The carrying value of short-term notes payable approximates the fair
value which was determined based on current market rates offered on
notes with similar terms and maturities.
Notes payable to banks -
The carrying value of notes payable to banks approximates the fair value
which was determined based on current market rates offered on notes with
similar terms and maturities.
Bonds payable -
The carrying value of bonds payable approximates the fair value which
was determined based on current market rates offered on bonds with
similar terms and maturities.
<PAGE>
Report of Independent Public Accountants
To the Stockholders and the Board of Directors of
The Ziegler Companies, Inc.:
We have audited the accompanying consolidated balance sheets of THE ZIEGLER
COMPANIES, INC. (a Wisconsin corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. 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 audits.
We conducted our audits 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 audits provide 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 The Ziegler Companies, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 2, 1996.
<PAGE>
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Results of Operations (Comparison of Years 1995, 1994 and 1993)
The predominant activity of The Ziegler Companies, Inc., (the "Company" or
"ZCO") has been and continues to be investment banking, primarily the
underwriting and marketing of debt securities for the healthcare industry and
for churches and private schools. The Company is also involved in other
financial service activities, specifically equipment leasing services to the
healthcare industry and commercial/industrial customers, securitization of
leases for offerings to the public, full-commission and reduced-commission
brokerage services, investment management and advisory services, and interim
lending to investment banking clients. The nonfinancial services of the
Company are pollution abatement, as well as the recycling, reclaiming and
disposing of chemical wastes.
Total revenues of the Company in 1995 were $55,209,000 compared to $47,081,000
in 1994, an increase of $8,128,000 or 17%. The revenues for 1994 reflected a
decrease of $3,260,000 or 6% over revenues of $50,341,000 in 1993. Expenses
of the Company in 1995 were $48,873,000 compared to $43,959,000 in 1994, an
increase of $4,914,000 or 11%. The expenses in 1994 reflected an increase of
$1,042,000 or 2% over expenses of $42,917,000 in 1993. The provisions for
income taxes were $2,292,000, $1,117,000, and $2,893,000 in 1995, 1994, and
1993, respectively. The statutory federal income tax rates applicable to the
Company were 34% in each of the three years. Net income of the Company in
1995 was $4,044,000 compared to $2,005,000 in 1994, an increase of $2,039,000
or 102%. The net income for 1994 reflected a decrease of $2,526,000 or 56%
from net income of $4,531,000 in 1993. Earnings per share were $1.69, $.84,
and $1.90 in 1995, 1994, and 1993, respectively. Weighted average shares
outstanding did not change significantly during the three-year period. The
changes in revenues, operating expenses and net income were primarily a
reflection of factors related to investment banking, broker-dealer and lease
financing activities, as well as changes in the Company's nonfinancial
services company, WRR Environmental Services Co., Inc. These factors, as well
as the impact of other factors, are explained more fully in the information
that follows.
Investment Banking and Broker-Dealer Activities
B. C. Ziegler and Company ("BCZCO"), the investment banking and broker-dealer
subsidiary of the Company, had total revenues of $32,039,000 in 1995 compared
to $25,787,000 in 1994, an increase of $6,252,000 or 24%. Revenues from tax-
exempt underwriting in 1995 increased approximately 30% over 1994 levels. The
increase in revenues from tax-exempt underwriting was offset by a reduction in
taxable underwriting revenues. In total, underwriting revenues increased
$4,058,000 in 1995. Commission income from non-underwritten securities,
primarily mutual funds, decreased $91,000. Trading profits increased
$900,000, primarily due to the fact that the preferred stock trading
department, established in December 1994, had completed its first full year of
business. Offsetting the aforementioned increases were decreases in interest
income of $220,000 due to lower interest rates. Fee-generated revenues
increased $384,000 primarily due to increased volumes and an increase in
investment advisory and management fees.
Total expenses of BCZCO were $29,592,000 in 1995 compared to $25,899,000 in
1994, an increase of $3,693,000 or 14%. Employee compensation and benefits
increased $3,183,000 as the result of an increase in incentive and commission-
based payments, as well as expenses associated with an increase in personnel.
Data processing expenses increased $229,000 because of increased sales
activity and because of equipment and software enhancements. All other
expenses remained approximately the same as last year or increased modestly in
line with inflation and increased sales activities. Net income for BCZCO was
$1,555,000 in 1995 compared to $3,000 in 1994, an increase of $1,552,000.
BCZCO had total revenues of $25,787,000 in 1994 compared to $30,352,000 in
1993, a decrease of $4,565,000 or 15%. Tax-exempt underwriting revenues in
1994 decreased to 63% of 1993 levels in response to an industry-wide downturn
in underwriting volume caused by sharply increased interest rates and the
threat of national healthcare reform. Taxable underwriting volumes also
decreased, primarily the result of higher interest rates and fewer refinancing
opportunities. In total, underwriting revenues decreased $6,327,000 in 1994.
Commission income from non-underwritten product, primarily mutual funds,
decreased $1,085,000. Trading profits increased $1,728,000 as suitable
products were obtained for sale to customers to replace the shortfall in
underwritten products. Further offsetting the aforementioned decreases were
increases in interest income of $693,000 due to favorable interest arbitrage
opportunities, an increase in insurance agency revenues of $155,000, and an
increase in fee revenues of $270,000.
Total expenses of BCZCO were $25,899,000 in 1994 compared to $26,076,000 in
1993, a decrease of $177,000 or 1%. Employee compensation and benefits
decreased $964,000 as the result of a decrease in incentive and commission-
based payments which was partially offset by the expense associated with an
increase in investment sales brokers and a 4% general wage increase. Interest
expense increased $340,000 due to the interest rate arbitrage activities that
also increased revenues. All other expenses remained approximately the same
as last year or increased modestly in line with inflation and expenses
associated with additional product sales efforts. Net income for BCZCO was
$3,000 in 1994 compared to $2,659,000 in 1993, a decrease of $2,656,000.
Ziegler Thrift Trading, Inc. ("ZTT"), the reduced-commission brokerage service
of the Company, had total revenues of $4,434,000 in 1995 compared to
$3,474,000 in 1994, an increase of $960,000 or 28%. Commission income, the
primary source of revenues, increased $775,000 or 24% as the result of an 18%
increase in trading volume compared to 1994 coupled with a 5% increase in the
average commission earned per trade. Approximately $134,000 of 1995
commission income came from the operations of a discount brokerage operation
in Illinois which was purchased by ZTT in September 1995. The purchase price
was approximately $507,000. The assets acquired included all customer
accounts serviced by two sales offices in Illinois. A $132,000 increase in
fees earned on ZTT's stock option financing program and increases in other fee
generating services also contributed to the increased revenues in 1995. Total
expenses of ZTT were $3,341,000 in 1995 compared to $2,850,000 in 1994, an
increase of $491,000 or 17%. Most of the increase was from increases in
volume-based commission expense, employee compensation and benefits, the
acquisition mentioned above and increased interest expense incurred on the
stock option financing program. Net income for ZTT was $677,000 in 1995
compared to $382,000 in 1994, an increase of $295,000 or 77%.
ZTT had total revenues of $3,474,000 in 1994 compared to $4,027,000 in 1993, a
decrease of $553,000 or 14%. Commission income, the primary source of
revenues, declined $539,000 or 14% as the result of a 14% decrease in trading
volume compared to 1993. Other components of revenue did not change
significantly. Total expenses of ZTT were $2,850,000 in 1994 compared to
$3,073,000 in 1993, a decrease of $223,000 or 7%. Most of the decrease was
from decreases in volume-based commission and clearing fee expense and
employee compensation and benefits. Net income for ZTT was $382,000 in 1994
compared to $554,000 in 1993, a decrease of $172,000 or 31%.
Ziegler Asset Management, Inc. ("ZAMI"), the money management services
subsidiary of the Company, had total revenues of $1,479,000 in 1995 compared
to $1,383,000 in 1994, an increase of $96,000 or 7%. An increase in assets
under management to $587,000,000 is the reason for the increased revenues.
Total expenses of ZAMI were $1,393,000 in 1995 compared to $1,209,000 in 1994,
an increase of $184,000 or 15%. The primary reasons for the increase in
expenses are the increase of $347,000 associated primarily with the adding of
a new office devoted to fixed-income management services in mid-1994, and
$155,000 of expenses associated with the reimbursement of management fees.
Offsetting these increases is a reduction in fees paid to sub-advisors
approximating $252,000 and a reduction in other salaries and wages. Net
income for ZAMI was $48,000 in 1995 compared to $97,000 in 1994, a decrease of
$49,000 or 51%.
ZAMI had total revenues of $1,383,000 in 1994 compared to $1,204,000 in 1993,
an increase of $179,000 or 15%. An increase in assets under management to
$523,000,000 is the reason for the increased revenues. Total expenses of ZAMI
were $1,209,000 in 1994 compared to $949,000 in 1993, an increase of $260,000
or 27%. The primary reasons for the increase in expenses are the increase of
$127,000 associated primarily with the added personnel expenses of a new
office devoted to fixed-income management services and $84,000 of expenses
associated with the reimbursement of management fees. All other expenses did
not change significantly. Net income for ZAMI was $97,000 in 1994 compared to
$156,000 in 1993, a decrease of $59,000 or 38%.
Lease Financing Activities
Ziegler Leasing Corporation ("ZLC") is the primary lease financing subsidiary
of the Company. ZLC leases equipment and provides other financing primarily
to the healthcare industry as well as to commercial and industrial customers.
ZLC had total revenues of $10,498,000 in 1995 compared to $10,842,000 in 1994,
a decrease of $344,000 or 3%. The primary components of revenue are equipment
leasing and financing, and gains on the sale of leased equipment sold at the
termination of the leases. Equipment leasing income was $8,793,000 in 1995
compared to $9,259,000 in 1994, a decrease of $466,000 or 5%. The recognition
of leasing income is affected by the different methods of accounting for the
different types of leases and the timing of lease activations and
terminations. Lease activations in 1995 were approximately $18,000,000 or 20%
of total equipment on lease as of the beginning of the year. This was less
than the total of terminations and sales to Ziegler Collateralized Securities,
Inc., a related company, which caused the investment in leased equipment on
hand at December 31, 1995 to be approximately $3,281,000 less than the
investment in leased equipment on hand at December 31, 1994. This decrease is
the primary reason for the 5% decrease in lease income compared to 1994.
Gains on the sale of leased equipment were $665,000 in 1995 compared to
$842,000 in 1994, a decrease of $177,000 or 21%, primarily reflecting a 17%
drop in the volume of equipment terminated. Interest income was $685,000 in
1995 compared to $470,000 in 1994, an increase of $215,000 or 46%. The
increase is primarily due to an increase in the levels of notes receivables
outstanding during 1995. Fee income decreased $56,000 between years from
$229,000 in 1994 to $173,000 in 1995. Of the total fees, $127,000 in 1995 and
$212,000 in 1994 were received from Ziegler Collateralized Securities, Inc.
Total expenses of ZLC were $9,467,000 in 1995 compared to $9,666,000 in 1994,
a decrease of $199,000 or 2%. The largest component of expenses is
depreciation expense on operating lease equipment. The expense was $4,543,000
in 1995 compared to $4,817,000 in 1994, a decrease of $274,000 or 6% and is
attributable to the lower level of operating equipment on lease during 1995.
Another large component of expense is interest expense which was similar
between years at $2,890,000 in 1995 compared to $2,866,000 in 1994. Interest
expense reflects the financing of the assets associated with leases and, on a
smaller scale, notes. The steady interest expense is due to the decrease in
the average overall portfolio of leases, offset by an increase in the average
notes outstanding during the year. Other changes in expenses were not
significant. Net income for ZLC was $716,000 in 1995 compared to $764,000 in
1994, a decrease of $48,000 or 6%. Investments in leases and notes at
December 31, 1995, were $42,272,000 and $8,275,000, respectively.
ZLC had total revenues of $10,842,000 in 1994 compared to $10,863,000 in 1993,
a decrease of $21,000. The primary components of revenue are from equipment
leasing and financing, and from gains on the sale of leased equipment sold at
the termination of the leases. Equipment leasing income was $9,259,000 in
1994 compared to $9,482,000 in 1993, a decrease of $223,000 or 2%. The
recognition of leasing income is affected by the different methods of
accounting for the different types of leases and the timing of lease
activations and terminations. Lease activations in 1994 were $23,000,000 or
26% of total equipment on lease as of the beginning of the year. Although
activations exceeded the total of terminations and sales to Ziegler
Collateralized Securities, Inc., a related company, the average equipment on
lease in 1994 decreased 4% as compared to 1993. The decrease in average
equipment on lease is due to the timing of activations and terminations and is
the primary reason for the 2% decrease in lease income compared to 1993.
Total equipment on lease actually increased 4% during the year despite the
lower average of equipment on lease noted above, with the largest net increase
occurring in the fourth quarter.
Gains on the sale of leased equipment were $842,000 in 1994 compared to
$870,000 in 1993, a decrease of $28,000 or 3%, reflecting similar
circumstances involving volume of equipment terminated and market conditions
in both years. Interest income was $470,000 in 1994 compared to $258,000 in
1993, an increase of $212,000 or 82%. The increase is due to an increase in
the levels of notes and an increase in the rate of return on short-term
investments. Fee income remained comparable between years at $229,000 in 1994
compared to $240,000 in 1993. Of the total fees, $212,000 in 1994 and
$190,000 in 1993 were received from Ziegler Collateralized Securities, Inc.
Total expenses of ZLC were $9,666,000 in 1994 compared to $9,113,000 in 1993,
an increase of $553,000 or 6%. The largest component of expenses is
depreciation expense on operating lease equipment. The expense was $4,817,000
in 1994 compared to $4,498,000 in 1993, an increase of $319,000 or 7%, and is
attributable to the higher average level of operating equipment on lease
during 1994. Another large component of expense is interest expense which was
$2,866,000 in 1994 compared to $2,979,000 in 1993, a decrease of $113,000 or
4%. Interest expense reflects the financing of the assets associated with
leases and, on a smaller scale, notes. The decrease in interest expense is
due to the decrease in the average overall portfolio of leases, partially
offset by an increase in interest rates and an increase in the average notes
outstanding during the year. Other changes in expenses were not significant.
Net income for ZLC was $764,000 in 1994 compared to $1,076,000 in 1993, a
decrease of $312,000 or 29%. Investments in leases and notes at December 31,
1994 were $45,553,000 and $1,778,000, respectively.
Ziegler Collateralized Securities, Inc. ("ZCSI") facilitates the financing of
equipment leases and sales by securitizing equipment leases or notes
supporting equipment leases or sales, and offering the resulting securities to
the public. ZCSI purchases the leases and notes from ZLC, which also acts as
manager and lease servicer since ZCSI has no employees. ZCSI had six series
of bonds outstanding totaling $15,070,000 as of December 31, 1995, one of
which was issued in September of 1995 for $7,200,000. ZCSI had revenues of
$1,397,000 in 1995 compared to $1,242,000 in 1994, an increase of $155,000 or
12%. ZCSI revenues consist almost entirely of leasing income and note
interest income. The increase in revenues is due to the net purchase of
leases and notes for bond issues in 1994 and 1995. Expenses of ZCSI consist
primarily of interest expense, amortized bond issue costs, management and
servicing fees, and initial direct cost expense. Management and servicing
fees are paid to ZLC and are limited to an amount that would prevent ZCSI from
incurring a loss. Such fees earned in 1995 were $127,000 compared to $212,000
in 1994. Expenses equaled revenues in both 1995 and 1994. Investment in
leases and notes were $8,815,000 and $6,866,000, respectively, as of December
31, 1995.
Total ZCSI revenues of $1,242,000 in 1994 increased $309,000 or 33% over
revenues of $933,000 in 1993. Income from the leases and notes purchased in
1993 and 1994 was the reason for the increased revenues in 1994. Expenses of
ZCSI equaled revenues in both 1994 and 1993. Management fees paid to ZLC were
$212,000 in 1994 compared to $190,000 in 1993. Investment in leases and notes
as of December 31, 1994 were $10,510,000 and $3,487,000, respectively.
Other Services and Activities
Ziegler Financing Corporation ("ZFC") provides construction financing and
interim lending primarily to investment banking clients. Total revenues were
$327,000 in 1995 compared to $364,000 in 1994, a decrease of $37,000 or 10%.
Revenues consist primarily of interest income on loans and short-term
investments. A fluctuating level of loans associated with the demand for
interim lending is the reason behind the revenue differences between years.
In recent years, ZFC has accumulated loans for church construction projects
and sold them to First Church Financing Corporation ("FCFC"), a related
company. A portfolio of loans was sold to FCFC in both 1995 and 1994. Total
expenses of ZFC were $204,000 in 1995 compared to $433,000 in 1994, a decrease
of $229,000 or 53%. The decrease in expenses is due to a $186,000 swing in
ZFC's provision for losses and decreasing interest on borrowed funds. A
$100,000 provision for losses was recorded in 1994, relating to an investment
in two residual ownership interests totaling $170,000, the values of which
have been impaired. In 1995, approximately $86,000 of a previously
established provision for losses was transferred out of expenses when the
corresponding loan was sold to the Company at book value. There was net
income of $74,000 in 1995 compared to a net loss of $42,000 in 1994, an
increase of $116,000.
Total ZFC revenues were $364,000 in 1994 compared to $375,000 in 1993, a
decrease of $11,000 or 3%. Revenues consist primarily of interest income on
loans and short-term investments. A portfolio of loans was sold to FCFC in
both 1994 and 1993. Total expenses of ZFC were $433,000 in 1994 compared to
$311,000 in 1993, an increase of $122,000 or 39%. The increase in expenses is
due to a provision for losses of $100,000 and increasing interest rates on
borrowed funds. The $100,000 provision for losses is related to an investment
in two residual ownership interests totaling $170,000, the values of which
have been impaired. There was a net loss of $42,000 in 1994 compared to net
income of $40,000 in 1993, a decrease of $82,000.
First Church Financing Corporation ("FCFC") is organized for the purpose of
issuing mortgage-backed bonds collateralized by first mortgages on church
buildings and properties. FCFC has three series of bonds outstanding. The
second series totaled $4,456,000 and was issued during the third quarter of
1994. The third series totaled $4,223,000 and was issued on December 22,
1995. Total revenues of FCFC were $852,000 in 1995 compared to $611,000 in
1994, an increase of $241,000. This increase is directly related to the
interest received on the church loans that are associated with the bond issues
and are purchased by FCFC at the time of issue of the bonds. Total expenses
of FCFC were $799,000 in 1995 compared to $578,000 in 1994, an increase of
$221,000. Expenses reflect primarily interest on the bonds outstanding and
the increase is a reflection of the amount of bonds outstanding during all or
part of each of the years. Included among the expenses is a servicing fee
paid to ZFC as servicer of the church loans of $29,000 in 1995 and $21,000 in
1994. Net income for FCFC was $32,000 in 1995 compared to $20,000 in 1994.
Total revenues of FCFC were $611,000 in 1994 compared to $347,000 in 1993, an
increase of $264,000. This increase is directly related to the interest
received on the church loans that are associated with the bond issues and are
purchased by FCFC at the time of issue of the bonds. Total expenses of FCFC
were $578,000 in 1994 compared to $324,000 in 1993, an increase of $254,000.
Expenses reflect primarily interest on the bonds outstanding and the increase
is a reflection of the amount of bonds outstanding during all or part of each
of the years. Included among the expenses are servicing fees paid to ZFC of
$21,000 in 1994 and $12,000 in 1993. Net income for FCFC was $20,000 in 1994
compared to $14,000 in 1993.
WRR Environmental Services Co., Inc. ("WRR") is in the business of providing
pollution abatement services and recycling, reclaiming, and disposing of
chemical wastes. In addition, effective October 1995, a wholly-owned
subsidiary of WRR purchased the land, buildings, equipment, and certain
inventories of a company located adjacent to WRR which is primarily engaged in
the sale, installation and servicing of truck equipment. Total gross revenues
were $13,502,000 in 1995 compared to $10,648,000 in 1994, an increase of
$2,854,000 or 27%. WRR has increased revenue due primarily to $799,000 of
sales generated by the acquired business, an increase of $1,391,000 in
revenues from waste remediation services, and an increase of $695,000 in
revenues generated by waste disposal services. The 1995 sales mix resulted in
a gross margin percentage of 28% in 1995 compared to 29% in 1994. Total
dollars of gross margin were $3,762,000 in 1995 compared to $3,087,000 in
1994, an increase of $675,000 or 22%. Total expenses of WRR other than cost
of sales were $2,346,000 in 1995 compared to $2,218,000 in 1994, an increase
of $128,000 or 6%. The increase in expenses is due to personnel and
promotional costs associated with the increased marketing and sales
activities, increased transportation costs associated with higher levels of
business activity, and increased expenses associated with tax compliance and
insurance audits. Net income for WRR was $918,000 in 1995 compared to
$529,000 in 1994, an increase of $389,000 or 74%.
Total WRR gross revenues were $10,648,000 in 1994 compared to $9,450,000 in
1993, an increase of $1,198,000 or 13%. WRR increased revenue through
aggressive marketing and sales of new services, specifically waste remediation
services. Included in gross revenues was a project with a customer completed
during 1994 that amounted to approximately 21% of gross revenues. The gross
margin percentage was 29% in 1994 compared to 28% in 1993. Total dollars of
gross margin were $3,087,000 in 1994 compared to $2,660,000 in 1993, an
increase of $427,000 or 16%. Total expenses of WRR other than cost of sales
were $2,218,000 in 1994 compared to $2,208,000 in 1993, an increase of
$10,000. The increase in expenses is due to personnel and promotional costs
associated with the increased marketing and sales activities, and increased
expenses associated with tax compliance and insurance audits offset by a
$531,000 reduction in contingency loss provisions. Net income for WRR was
$529,000 in 1994 compared to $234,000 in 1993, an increase of $295,000 or
126%.
The Ziegler Companies, Inc. is the parent company of the subsidiaries and also
engages in limited investing activities. Total revenues of the Company were
$991,000 in 1995 compared to $859,000 in 1994, an increase of $132,000.
Revenues totaling $225,000 from an equity investment in a company that
provides construction loans to low-income housing developments, combined with
trading gains on company investments, were the primary causes of the increased
revenues. Offsetting these increases was a $192,000 decrease in interest
income related to a credit facility established by the Company for a
corporation that generates automobile loans for retail customers. The balance
outstanding on this credit facility at December 31, 1995, was $3,828,000. ZCO
expenses were $930,000 in 1995 compared to $452,000 in 1994, an increase of
$478,000 or 106%. A $120,000 increase in interest expense to support a higher
level of funds advanced during the year, combined with the transfer to the
Company of $336,000 of provision for losses associated with the purchase, at
book value, of a loan from ZFC, were the primary reasons for the increase.
Net income for the Company was $33,000 in 1995 compared to $263,000 in 1994.
Total revenues of the Company were $859,000 in 1994 compared to $107,000 in
1993, an increase of $752,000. An increase in interest income related to a
credit facility established by the Company for a corporation that generates
automobile loans for retail customers is the primary reason for the increase.
The balance outstanding on this credit facility at December 31, 1994 was
$5,025,000. A loss of $200,000 recorded in 1993 on an abandoned new business
venture also had an impact on the comparison of revenues between 1994 and
1993. ZCO expenses were $452,000 in 1994 compared to $383,000 in 1993, an
increase of $69,000 or 18% An increase in interest expense to support a
higher level of funds advanced under the aforementioned credit facility is the
primary reason for the increase. Expenses incurred in 1993 associated with
the establishment of the credit facility did not recur in 1994 and also had an
impact on the comparison of expense between years. Net income for the Company
was $263,000 compared to a net loss of $191,000 in 1993.
Liquidity and Capital Resources
The Company's primary activities involve investment banking, retail and
institutional securities brokerage, equipment leasing and other financial
services. Capital expenditures for assets other than leased equipment were
relatively insignificant during the year ended December 31, 1995. Land,
buildings and equipment, net of related depreciation and amortization, was
4.6% of total Company assets and investment in leases was 32.8% of total
Company assets.
The Company, specifically its financial subsidiaries, has a continuing
requirement for cash to finance its activities. A primary source of cash has
been and continues to be the issuance of short-term notes of the Company.
These notes vary in maturities up to 270 days. In 1995, a total of
$94,452,000 of notes was issued and $95,778,000 was repaid. In 1994, a total
of $103,861,000 of notes was issued and $103,363,000 was repaid. In 1993, a
total of $92,974,000 of notes was issued and $91,348,000 was repaid. The
total balance of short-term notes outstanding, without regard to interest
discounts, was $18,553,000 as of December 31, 1995, compared to $19,879,000 as
of December 31, 1994, and $20,442,000 as of December 31, 1993. This source of
additional cash was used primarily to finance leasing and lending activity and
remains an important source of cash for the Company.
ZLC also uses intermediate term, fixed-rate bank borrowings and five-year
extendable/redeemable, fixed-rate bonds issued to the public. The bank
borrowings are structured to mature in a pattern approximating the lease
agreements they support. Total indebtedness to the banks under these
borrowings was $10,000,000 at the end of 1995, $13,000,000 at the end of 1994,
and $15,000,000 at the end of 1993. The $10,000,000 five-year
extendable/redeemable bonds previously issued by ZLC mature December 1, 2006.
The holders of the extendable/redeemable bonds have the option of tendering
the bonds for repayment in whole or in part on December 1, 1996, and December
1, 2001. ZLC was also involved in nonrecourse debt issuance and repayments in
conjunction with leveraged leasing activities.
In 1993, ZFC entered into a loan for $4,610,000 with an organization which was
experiencing difficulties making required debt service payments on an
outstanding bond issue underwritten by BCZCO. The loan is due on demand, is
interest free and requires weekly principal payments totaling $7,000. The
loan proceeds were used to redeem the organization's outstanding bond issue in
full. This loan was transferred to ZCO at book value in 1995. The amount due
ZCO at December 31, 1995 is approximately $3,827,000. The loan is secured by
a first mortgage on the underlying real estate. The loan is recorded at cost,
net of allowances for possible losses previously provided, totaling
approximately $2,991,000 at December 31, 1995, and is included in Other Assets
on the balance sheets.
ZCSI issues bonds to the public as a source of cash. During 1995, ZCSI issued
$7,200,000 of bonds to the public and redeemed $4,335,000 of bonds which
matured, and $317,000 of bonds which were called. During 1994, ZCSI issued
$5,000,000 of bonds to the public, and redeemed $4,354,000 of bonds which
matured, and $264,000 of bonds which were called. During 1993, ZCSI issued
$6,840,000 of bonds and redeemed $1,800,000 of bonds which matured. Total
bonds outstanding at December 31, 1995, 1994, and 1993 were $15,070,000,
$12,522,000, and $12,140,000, respectively. The bonds are due serially from
January 1996 to October 2001. The bonds were used to finance the purchase of
lease obligations and lease financing notes and will mature in a pattern
approximating the maturities of the lease obligations and lease financing
notes that serve as collateral.
FCFC issues bonds to the public as a source of cash. Mandatory redemption on
the bonds is made from principal payments received on the mortgage loans which
serve as collateral for the bonds. Principal payments on the mortgage loans
are received in regular installments over 15-year amortization schedules
through 2010. During 1995, FCFC issued $4,223,000 of bonds to the public and
redeemed $940,000 of bonds which were called. During 1994, FCFC issued
$4,456,000 of bonds to the public and redeemed $329,000 of bonds which were
called. During 1993, FCFC issued $4,586,000 of bonds to the public and
redeemed $99,000 of bonds which were called. Total bonds outstanding at
December 31, 1995, 1994 and 1993, were $11,897,000, $8,614,000, and
$4,487,000, respectively.
WRR has bonds outstanding at a face value of $450,000. The bonds mature
serially each December through the year 2004. The bonds were issued in 1980
to finance continuing operations.
BCZCO finances most activities from its own resources and also relies upon
unsecured lines of credit available through banking relationships, if
necessary. Any utilization of these lines of credit is generally repaid in
less than 30 days. BCZCO also has broker loan and other collateralized
arrangements available through banking relationships.
The Company's cash and cash equivalent position allows a certain flexibility
in its financial activities. In order to maximize income, available cash is
invested in short-term investments such as commercial paper, money market
funds and reverse repurchase agreements at very short maturities in accordance
with the Company's liquidity requirements.
<PAGE>
<TABLE>
Five-Year Summary of Financial Data
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operating
Revenues $ 55,209,168 $ 47,081,491 $ 50,341,255 $ 48,306,068 $ 41,342,278
Net Income
from
Continuing
Operations $ 4,044,321 $ 2,005,056 $ 4,531,024 $ 5,086,534 $ 3,811,858
Net Income
from
Continuing
Operations
Per
Common
Share $1.69 $ .82 $1.90 $2.01 $1.45
Cash Divi-
dends
Declared
Per Share
of Common
Stock $ .87 $ .72 $1.07 $ .97 $ .87
Total
Assets $155,845,394 $152,440,207 $141,623,055 $124,822,939 $117,182,297
Long-Term
Obliga-
tions $ 38,358,173 $ 38,331,881 $ 37,490,196 $ 33,588,703 $ 32,916,233
Short-Term
Notes
Payable $ 18,394,420 $ 19,728,501 $ 19,322,467 $ 17,708,751 $ 11,688,766
End of Year
Share-
holders'
Equity $ 52,241,998 $ 50,380,022 $ 49,951,855 $ 47,890,830 $ 49,121,674
Book Value
Per Share $21.48 $20.68 $20.96 $20.14 $18.65
</TABLE>
<PAGE>
<TABLE>
Quarterly Consolidated Results of Operations for 1995 and 1994
<CAPTION>
1995 Quarter Ended March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Revenues $11,331,000 $12,971,000 $12,564,000 $18,343,000
Expenses 11,328,000 11,753,000 11,370,000 14,421,000
Net Income 19,000 772,000 776,000 2,477,000
Net Income Per Share $ .01 $ .32 $ .32 $1.04
</TABLE>
<TABLE>
<CAPTION>
1994 Quarter Ended March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Revenues $11,133,000 $12,835,000 $12,187,000 $10,926,000
Expenses 10,988,000 11,049,000 11,130,000 10,792,000
Net Income 95,000 1,071,000 665,000 174,000
Net Income Per Share $ .04 $ .44 $ .27 $ .09
</TABLE>
<PAGE>
Directors and Executive Officers
DIRECTORS
J. C. Frueh
President, Aegis Group, Inc., Pittsburgh, Pennsylvania; Acquisition and
Management of Manufacturing and Distribution Companies
J. R. Green
Partner, Green, Manning & Bunch, Denver, Colorado; Merchant Banking Firm
W. R. Holmquist
Retired Senior Vice President of the Company
P. R. Kellogg
Chief Executive Officer and Senior Partner, Spear, Leeds & Kellogg; Specialist
Firm on the New York Stock Exchange
P. D. J. Kenny
Director of University Facilities - Mercer University, Macon, Georgia
F. J. Wenzel
Advisor to the President, Marshfield Clinic, Marshfield, Wisconsin; Executive
Vice President/Chief Executive Officer, Medical Group Management Association,
Englewood, Colorado
B. C. Ziegler III
President, Ziegler/Limbach, Inc., West Bend, Wisconsin; Business Development,
Management and Consulting
P. D. Ziegler
President and Chief Executive Officer
R. D. Ziegler
Chairman of the Board
B. C. Ziegler
Director Emeritus
EXECUTIVE OFFICERS
R. D. Ziegler
Chairman of the Board
P. D. Ziegler
President and Chief Executive Officer
S. C. O'Meara
Senior Vice President and General Counsel
L. R. Van Horn
Senior Vice President - Finance
V. C. Van Vooren
Senior Vice President, Treasurer and Assistant Secretary
J. R. Schmidt
Corporate Secretary
J. C. Vredenbregt
Assistant Treasurer and Controller
OFFICERS AND
SUBSIDIARIES
B. C. Ziegler
and Company
R. D. Ziegler
Chairman
P. D. Ziegler
President and Chief
Executive Officer
S. C. O'Meara
Senior Vice President
and General Counsel
D. A. Carlson, Jr.
Senior Vice President
M. P. Doyle
Senior Vice President-
Retail Operations
N. L. Fuerbringer
Senior Vice President-
Administration
E. H. Rudnicki
Senior Vice President
R. N. Spears
Senior Vice President
L. R. Van Horn
Senior Vice President-
Finance
V. C. Van Vooren
Senior Vice President
and Treasurer
J. C. Wagner
Senior Vice President-
Retail Sales
J. R. Wyatt
Senior Vice President
G. Aman
Vice President -
Insurance
M. A. Baumgartner
Vice President
J. L. Brendemuehl
Vice President -
Mutual Funds/UITs
J. M. Bushman
Vice President -
Recruiting and
Training Coordinator
M. S. Donahoe
Vice President
J. H. Downer
Vice President-
MIS Director
D. P. Frank
Vice President -
Director of Strategic
Planning and Change
S. K. Hittman
Vice President-
Personnel
R. J. Johnson
Vice President-
Compliance
D. J. Meizen
Vice President
L. C. Rosenheimer
Vice President - Bond
Sales Control
T. S. Ross
Vice President
D. A. Schlosser
Vice President
C. G. Stevens
Vice President -
Marketing Director
R. J. Tuszynski
Vice President -
Director of Mutual
Funds
J. C. Vredenbregt
Vice President,
Assistant Treasurer
and Controller
B. J. Bronson
Assistant Vice
President
H. C. Delcore
Assistant Vice
President
J. Ferrara, Jr.
Assistant Vice
President - Mutual
Funds
D. J. Hauser
Assistant Vice
President
S. A. Hron
Assistant Vice
President
B. A. Rahlf
Assistant Vice
President
S. D. Rolfs
Assistant Vice
President
R. C. Strzok
Assistant Vice
President -
Administration
J. R. Schmidt
Corporate Secretary
K. A. Lochen
Assistant Secretary
Vice Presidents-Sales:
S. C. Bass
D. S. Bast
W. L. Bruss
R. T. Bunn
R. A. Conn
J. O. Conwell
T. J. Doyle
R. W. Eggebrecht
A. G. Frey
S. A. Isaacson
G. R. Knutson
J. A. Kramer
S. S. Kurer
W. G. Morse
J. V. Noordyk
P. D. O'Brien
R. D. Ping
R. R. Poggenburg
T. P. Sancomb
D. J. Schoenwetter
C. D. Schrader
M. W. Severson
S. D. Steinke
W. R. Uebele
M. B. Walsh
G. M. Wilson
Assistant Vice
Presidents-Sales:
J. F. Cape
F. H. Ellenberger
W. T. Epping
T. J. Fitzgerald
W. F. Gould
N. E. Harris
J. D. Klanderman
P. J. Krause
W. J. Langley
L. D. Martin
D. L. Peterson
R. J. Ratterman
M. B. Seiser
R. R. Sims
A. A. Struebing
T. M. Turner
P. D. Voss
Ziegler Securities
Division
P. D. Ziegler
Chairman
D. A. Carlson, Jr.
President, Chief
Executive Officer and
Treasurer
J. M. Annett
Senior Vice President
and National Director
of Long-Term Care
Finance
J. B. Sterns
Senior Vice President
and National Director
of Healthcare Finance
M. A. Baumgartner
Senior Vice President
M. P. McDaniel
Senior Vice President
D. M. Rognerud
Senior Vice President
J. R. Wyatt
Senior Vice President
D. M. Kolzow
Vice President -
Operations
<PAGE>
S. D. Smith
Vice President and
Co-Manager of Special
Products Group
T. J. Sheehan
Vice President and
Co-Manager of Special
Products Group
T. L. Brod
Vice President
D. J. Hermann
Vice President
T. S. Howard
Vice President
M. J. Kane
Vice President
J. LeBuhn
Vice President
R. K. Price
Vice President
R. J. Scanlon
Vice President
E. K. Eng
Assistant Vice
President
J. M. Garza
Assistant Vice
President -
Information Systems
and Services
V. C. Van Vooren
Assistant Treasurer
Ziegler Financing
Corporation
E. H. Rudnicki
President
S. C. O'Meara
Senior Vice President
and General Counsel
J. M. Annett
Vice President
P. O. Faragasso
Vice President
R. K. Price
Vice President
L. R. Van Horn
Vice President and
Treasurer
J. R. Wyatt
Vice President
P. D. Ziegler
Vice President
V. C. Van Vooren
Secretary
J. C. Vredenbregt
Assistant Treasurer
Ziegler Leasing
Corporation
M. E. Sedlmeier
President and Chief
Executive Officer
S. C. O'Meara
Senior Vice President
and General Counsel
L. E. Johnson
Vice President -
Marketing
R. F. Jones
Vice President - Sales
T. A. Norman
Vice President -
Asset Management
P. D. Ziegler
Vice President
D. M. Pieper
Assistant Vice
President - Operations
J. R. Schmidt
Corporate Secretary
V. C. Van Vooren
Assistant Secretary
L. R. Van Horn
Treasurer
J. C. Vredenbregt
Assistant Treasurer
K. A. Kalnins
Controller
Ziegler Medical
Equipment Group, Inc.
T. A. Norman
President
M. E. Sedlmeier
Executive Vice
President
L. E. Johnson
Vice President -
Marketing
J. R. Schmidt
Corporate Secretary
K. A. Kalnins
Controller and
Treasurer
Ziegler Thrift
Trading, Inc.
R. D. Ziegler
Chairman
V. C. Van Vooren
President and Chief
Executive Officer
R. L. Kangrga
Vice President and
Assistant Secretary
M. W. Stefano
Vice President and
Treasurer
L. R. Van Horn
Vice President
J. R. Schmidt
Corporate Secretary
J. C. Vredenbregt
Assistant Treasurer
WRR Environmental
Services Co., Inc.
J. L. Hager
President and Chief
Executive Officer
J. D. Bisek
Vice President - Sales
and Marketing
J. Y. Lee
Vice President -
Quality Control
B. I. Heath
Vice President - Plant
Operations
First Church Financing
Corporation
E. H. Rudnicki
President
L. R. Van Horn
Secretary and
Treasurer
J. R. Schmidt
Assistant Secretary
Ziegler Asset
Management, Inc.
R. D. Ziegler
Chairman
G. G. Maclay, Jr.
President and Chief
Executive Officer
P. D. Ziegler
Senior Vice President
M. J. Dion
Vice President -
Portfolio Manager and
Chief Investment
Officer
R. F. Patek
Vice President -
Portfolio Manager
D. R. Wyatt
Vice President -
Retirement Plan
Services
D. L. Lauterbach
Vice President
R. J. Tuszynski
Vice President
J. R. Schmidt
Corporate Secretary
L. R. Van Horn
Treasurer
Ziegler Collateralized
Securities, Inc.
L. R. Van Horn
President
P. D. Ziegler
Vice President
J. R. Schmidt
Corporate Secretary
M. E. Sedlmeier
Treasurer
DIVISION AND SUBSIDIARY OFFICES
B. C. Ziegler and Company
Corporate Headquarters
215 North Main Street
West Bend, Wisconsin 53095-3348
(414) 334-5521
Investment Offices
Denver, Colorado
Fort Myers, Florida
Orlando, Florida
Arlington Heights, Illinois
Rockford, Illinois
Springfield, Illinois
Indianapolis, Indiana
West Des Moines, Iowa
Minneapolis, Minnesota
St. Louis, Missouri
Portland, Oregon
Appleton, Wisconsin
Fond du Lac, Wisconsin
Fort Atkinson, Wisconsin
Green Bay, Wisconsin
Kenosha, Wisconsin
LaCrosse, Wisconsin
Madison, Wisconsin
Milwaukee, Wisconsin
Mequon, Wisconsin
Sheboygan, Wisconsin
Wausau, Wisconsin
West Bend, Wisconsin
Preferred Stock Division
1001 West Glen Oaks Lane, Suite 101
Mequon, Wisconsin 53092-3365
(414) 241-7200
Ziegler Securities Division
Division Headquarters
One South Wacker Drive
Suite 3080
Chicago, Illinois 60606-4617
(312) 263-0110
Division Offices
Walnut Creek, California
St. Petersburg, Florida
Indianapolis, Indiana
Washington, D.C.
West Bend, Wisconsin
Ziegler Healthcare Affiliates
One South Wacker Drive
Suite 3080
Chicago, Illinois 60606-4617
(312) 263-0110
Ziegler Leasing Corporation
Corporate Headquarters
215 North Main Street
West Bend, Wisconsin 53095-3348
(414) 334-5521
Regional Offices
Roseville, California
Parker, Colorado
Roswell, Georgia
Ziegler Medical Equipment
Group, Inc.
9305 H Court
Omaha, Nebraska 68127-1247
(402) 593-0333
Ziegler Thrift Trading, Inc.
Corporate Headquarters
733 Marquette Avenue
Suite 106
Minneapolis, Minnesota 55402-2340
(612) 333-4206
Investment Offices
Minneapolis, Minnesota
St. Paul, Minnesota
Naperville, Illinois
Westchester, Illinois
Ziegler Investment Services
670 McKnight Road, North
Eastern Heights Bank Building
St. Paul, Minnesota 55119-4140
(612) 736-7974
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095-3348
(414) 334-5521
Fixed Income Division
100 East Wisconsin Avenue
Suite 1850
Milwaukee, Wisconsin 53202-4107
(414) 271-0464
WRR Environmental Services Co., Inc.
5200 State Road 93
Eau Claire, WI 54701-9808
(715) 834-9624
WRR Northwest Enterprises, Inc.
5100 State Road 93
Eau Claire, Wisconsin 54701-9808
(715) 834-8426
<PAGE>
Investor Information
Corporate Offices
215 North Main Street
West Bend, Wisconsin 53095-3348
Annual Meeting
The annual meeting of shareholders will be held at 10:00 a.m., April 15, 1996
at the West Bend Inn, 2520 West Washington Street, West Bend, Wisconsin.
Copies of the Form 10-K covering the fiscal year 1995 are available upon
request. Form 10-K is the Company's annual report filed with the Securities
and Exchange Commission, Washington, D.C. Shareholders wishing to receive a
copy, please write to:
The Ziegler Companies, Inc.
Attention: Janine R. Schmidt
215 North Main Street
West Bend, Wisconsin 53095-3348
Market
The Ziegler Companies, Inc. common stock trades on the American Stock
Exchange. The range of bid and asked quotations during 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
1995 Bid Asked 1994 Bid Asked
<S> <C> <C> <S> <C> <C>
1st Quarter High 15-1/4 15-1/2 1st Quarter High 19 19-1/8
Low 14-3/4 15 Low 16-1/4 16-5/8
2nd Quarter High 15 15-3/4 2nd Quarter High 18 18-3/8
Low 14-5/8 15 Low 16-1/8 16-3/8
3rd Quarter High 16-3/8 16-5/8 3rd Quarter High 17 17-3/8
Low 14-5/8 15 Low 16-1/8 16-1/2
4th Quarter High 16-7/8 17-1/8 4th Quarter High 17-1/4 17-5/8
Low 16-1/8 16-1/2 Low 14-7/8 15-1/8
</TABLE>
Cash Dividends
Cash Dividends during 1995 and 1994 were paid as follows:
<TABLE>
<CAPTION>
Per Share 1995 1994
<C> <C> <C>
January $ .13 $ .13
Extra cash dividend .20 .55
April .13 .13
July .13 .13
October .13 .13
Total $ .72 $1.07
</TABLE>
Holders of record on January 8, 1996, were paid a regular cash dividend of 13
cents per share plus an extra cash dividend of 35 cents per share on January
19, 1996.
Transfer Agent and Registrar
Firstar Trust Company
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Compensation Committee
John R. Green, Chairman
William R. Holmquist
Frederick J. Wenzel
Audit Committee
John C. Frueh, Chairman
Peter R. Kellogg
Patrick D. J. Kenny
Bernard C. Ziegler III
AMEX Symbol
ZCO
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ZIEGLER
COMPANIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,231,808
<RECEIVABLES> 8,047,236
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 108,445,848<F2>
<PP&E> 7,090,543
<TOTAL-ASSETS> 155,845,394
<SHORT-TERM> 29,796,420<F3>
<PAYABLES> 8,053,915<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 50,561,962<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 48,697,968
<TOTAL-LIABILITY-AND-EQUITY> 155,845,394
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 4,327,412
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 30,642,641<F6>
<FEE-REVENUE> 5,869,128
<INTEREST-EXPENSE> 5,568,541
<COMPENSATION> 22,329,471
<INCOME-PRETAX> 6,336,521
<INCOME-PRE-EXTRAORDINARY> 6,336,521
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,044,321
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
<FN>
<F1>Short-term investments include some securities purchased under resale
agreements.
<F2>Financial instruments include securities inventory, investment in leases,
notes receivable, and investment in and receivables from affiliates.
<F3>Includes short-term notes payable and unsecured notes payable to banks under
line of credit arrangements.
<F4>Includes payable to customers, payable to broker-dealers, accounts payable, and
dividends payable.
<F5>Includes bonds payable and notes payable to banks other than line of credit
borrowings.
<F6>Revenue from investment banking activities includes revenue from trading
activities and commissions.
</FN>
</TABLE>
