Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10854
THE ZIEGLER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1148883
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 334-5521
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ( X ) No ( )
The number of shares outstanding of the registrant's Common Stock, par
value $1.00 per share, at March 31, 1996 was 2,431,782 shares.
<PAGE>
PART I
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
Revenues:
Investment banking and commission income $ 6,294,020 $ 5,411,055
Interest and dividends 1,165,721 1,068,886
Lease income 2,263,649 2,500,161
Gross profit on chemical products 818,735 615,511
Insurance agency 304,646 290,409
Other 1,604,455 1,444,512
Total revenues 12,451,226 11,330,534
Expenses:
Employee compensation and benefits 5,429,338 4,752,317
Commissions and clearing fees 206,828 168,637
Communications 690,501 642,202
Occupancy and equipment 2,190,823 2,228,610
Promotional 500,454 486,137
Professional and regulatory 195,557 238,103
Interest 1,381,693 1,404,604
Other operating expenses 1,636,270 1,406,843
Total expenses 12,231,464 11,327,453
Income before income taxes 219,762 3,081
Provision for (benefit from) income taxes 37,800 (16,400)
Net income $ 181,962 $ 19,481
Earnings per share $ .08 $ .01
Dividends per share $ .13 $ .13
Average number of shares outstanding 2,392,185 2,394,416
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash $ 3,806,452 $ 4,231,808
Short-term investments 15,220,021 12,430,129
Bonds due and called as of April 1, 1996
and January 1, 1996, respectively 3,134,263 3,472,297
Total cash and cash equivalents 22,160,736 20,134,234
Securities inventory 8,682,063 28,151,740
Accounts receivable -- securities sales 5,327,871 3,434,916
Accounts receivable -- other 3,653,536 4,612,320
Investment in and receivables from
affiliates 2,757,360 2,638,456
Investment in leases 49,045,859 51,090,834
Notes receivable 28,059,676 26,564,818
Land, buildings and equipment, at cost,
net of reserves for depreciation of
$14,657,832 and $14,425,733,
respectively 7,128,486 7,090,543
Other assets 14,435,977 12,127,533
Total assets $141,251,564 $155,845,394
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable $ 17,450,704 $ 18,394,420
Payable to customers 2,226,901 2,567,092
Payable to broker-dealers 819,247 409,425
Accounts payable 4,531,261 3,910,191
Dividends payable 316,132 1,167,207
Accrued income taxes 735,709 1,138,008
Deferred income taxes 5,472,406 5,358,583
Notes payable to banks 16,026,154 24,559,972
Bonds payable 35,865,621 37,403,990
Other liabilities and deferred items 5,650,531 8,694,508
Total liabilities 89,094,666 103,603,396
Commitments
Stockholders' equity
Common stock, $1 par, authorized
7,500,000 shares, issued 3,544,030 3,544,030 3,544,030
Additional paid-in capital 5,968,537 5,968,737
Retained earnings 60,525,573 60,659,742
Treasury stock, at cost, 1,112,248
and 1,112,348, respectively (17,228,153) (17,229,903)
Unearned compensation (653,089) (700,608)
Total stockholders' equity 52,156,898 52,241,998
Total liabilities and
stockholders' equity $141,251,564 $155,845,394
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these balance sheets.
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 181,962 $ 19,481
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 1,541,044 1,645,564
Provision for losses 113,185 34,700
(Gain) Loss on sale of equipment (10) 38,331
Gain on sale of leased equipment (155,080) (91,216)
Unrealized (gain) loss on securities
inventory 303,458 (12,932)
Compensation related to restricted
stock grants 47,519 44,489
Undistributed earnings of
unconsolidated affiliate (68,000) (46,292)
Changes in operating assets and
liabilities:
Decrease (Increase) in -
Securities inventory 19,166,219 13,589,525
Accounts receivable --
securities sales (1,892,955) 931,431
Accounts receivable -- other 544,981 (56,923)
Other operating assets (2,505,955) (2,033,274)
Increase (Decrease) in -
Payable to customers and
broker-dealers 69,631 (3,162,689)
Accounts payable net of payments
for purchases of assets
to be leased 1,096,801 427,238
Income taxes payable (402,299) 138,896
Deferred income taxes 113,823 (230,395)
Notes payable to banks (8,270,000) (11,280,000)
Other operating liabilities (3,078,693) (2,953,294)
Net cash provided by (used in)
operating activities 6,805,631 (2,997,360)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of equipment 10 8,805
Principal payments received under
leases 3,831,131 3,954,396
Sale of leased equipment 507,685 576,733
Payments received on notes receivable 5,076,595 6,150,719
Decrease in advances to affiliates - 158,646
Payments for:
Purchase of assets to be leased (303,319) (2,700,162)
Issuance of notes receivable (9,015,012) (6,568,771)
Capital expenditures (321,115) (233,677)
Net cash provided by (used in)
investing activities (224,025) 1,346,689
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Issuance of short-term notes payable 22,047,000 26,207,000
Exercise of employee stock options 1,550 43,108
Payments of:
Principal on short-term notes payable (22,986,000) (26,340,000)
Principal on notes payable to banks (338,220) (398,477)
Principal on nonrecourse debt (573,227) (538,905)
Repayment of bonds payable (1,539,000) (1,272,000)
Dividends (1,167,207) (804,026)
Net cash used in financing
activities (4,555,104) (3,103,300)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,026,502 (4,753,971)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 20,134,234 25,498,481
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 22,160,736 $ 20,744,510
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period $ 1,628,000 $ 1,308,000
Income taxes paid during the period $ 535,000 $ 23,000
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES:
Conversion of notes receivable to
investment in leases at the
initiation of a lease $ 2,490,423 $ 2,664,670
Granting of restricted stock from
treasury stock $ - $ 168,988
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
Note A -- Basis of Presentation
The consolidated condensed financial statements included herein have
been prepared by The Ziegler Companies, Inc. (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Management believes, however, that these condensed
financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the periods
presented. All such adjustments are of a normal recurring nature. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
Note B -- Commitments and Contingent Liabilities
In the normal course of business, B. C. Ziegler and Company (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 presells the issues to customers. BCZ had
approximately $6,250,000 in commitments outstanding at March 31, 1996.
As of March 31, 1996, Ziegler Leasing Corporation (ZLC) had outstanding
written agreements to provide equipment lease financing for approximately
$4,431,000. 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.
As of March 31, 1996, Ziegler Financing Corporation (ZFC) had no
financial commitments to unrelated entities for construction or other
loans.
WRR is subject to a consent order of the Wisconsin Department of Natural
Resources for further testing and surface water control, and to remedial
action under the federal Research Conservation and Recovery Act ("RCRA"),
of contaminants in ground water directly underneath and adjacent to 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 March 31, 1996, 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 PRPs 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 $601,000 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 on account of this third site.
WRR is jointly and severally liable on two of the previously mentioned
sites. To the extent that WRR is found liable for contributing to the
pollution at the third site, its liability will be joint and several.
Management for the Company 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 have been accrued in the financial statements. The reserve for
accrued loss contingencies totaled $729,000 at March 31, 1996.
Note C -- Stock Option Plans
The Ziegler Company, Inc. 1989 Employees' Stock Purchase Plan (the "1989
Plan") was established for substantially all full-time employees. As of
March 31, 1996, unexercised options for 94,255 shares were outstanding.
All outstanding options are currently exercisable through April 30, 1997,
at 85% of the market value on the date of exercise. Options for a total of
100 shares were exercised at prices averaging $15.50 per share during 1996.
Under the 1989 Plan, 26,725 options 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. Options for a total of 2,660 shares were
forfeited during the period.
Note D -- Earnings Per Share
Earnings per share calculations were computed based on the weighted
average number of common shares outstanding including restricted common
stock using the treasury stock method. The dilutive effect of shares
issuable under the various employee stock option plans in the computation
of earnings per share is not significant.
Note E -- Net Capital Requirements and Customer Reserve Accounts
As registered broker-dealers, BCZ and Ziegler Thrift Trading, Inc. (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 March 31, 1996, is as follows:
<TABLE>
<CAPTION>
BCZ ZTT
<S> <C> <C>
Aggregate indebtedness $ 2,472,000 $3,489,000
Net capital $16,651,000 $1,200,000
Ratio of aggregate indebtedness
to net capital .15 to 1 2.91 to 1
Required net capital $ 595,000 $ 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 other qualified securities. As
of March 31, 1996, there was approximately $4,936,000 in the customer
reserve accounts.
Note F -- Investment in Ziegler Mortgage Securities, Inc. II
The Company has a 50% interest in Ziegler Mortgage Securities,
Inc. II (ZMSI II), an unconsolidated entity accounted for by the equity
method. Condensed income statement information is as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
Income, primarily interest $2,720,630 $2,694,422
Expenses -
Interest 2,406,375 2,419,843
Amortization of bond
issuance costs 208,946 153,898
Management fees 63,972 81,633
Other 4,337 39,048
Total expenses 2,720,630 2,694,422
Net income $ - $ -
</TABLE>
Note G -- Securities Inventory
Securities inventory consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Municipal bond issues $4,217,240 $20,351,886
Corporate bond issues 182,895 2,230,918
Institutional bond issues 371,709 2,589,739
Preferred stock 1,749,875 1,263,826
Other securities 2,160,344 1,715,371
$8,682,063 $28,151,740
</TABLE>
Note H -- Notes Payable to Banks
The Company has various unsecured and secured borrowing facilities in
place to obtain short-term funds. Short-term borrowings are used for
general corporate purposes as well as to fund specific underwriting
purchases or purchases of other large blocks of securities. The Company
had $1,223,000 in short-term borrowings outstanding at March 31, 1996.
Such short-term borrowings are generally repaid within 30 days. Such
amounts are treated as operating items in the Statement of Cash Flows.
Note I -- Ziegler Collateralized Securities, Inc.
Ziegler Collateralized Securities, Inc. (ZCSI), a wholly-owned
subsidiary of the Company, was organized to facilitate the financing of
equipment purchases and leases by securitizing such purchases and leases
for offerings to the public.
Summarized balance sheet information of ZCSI as of March 31, 1996 and
December 31, 1995 and income statements for the three month periods ended
March 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Balance Sheets as of:
March 31, December 31,
1996 1995
<S> <C> <C>
Investment in leases $ 7,867,567 $ 8,818,566
Notes receivable 6,389,816 6,865,720
Other assets 3,654,985 2,614,081
Total assets $17,912,368 $18,298,367
Bonds payable $14,738,000 $15,070,000
Other liabilities 3,164,368 3,218,367
Total liabilities 17,902,368 18,288,367
Stockholder's equity 10,000 10,000
Total liabilities and
stockholder's equity $17,912,368 $18,298,367
</TABLE>
<TABLE>
<CAPTION>
Income Statements for the
Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
Lease income $ 210,642 $ 247,613
Interest income 173,529 114,148
Total income 384,171 361,761
Interest expense 285,425 242,134
Management fees 5,793 31,858
Other expenses 92,953 87,769
Total expenses 384,171 361,761
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 March 31, 1996 and for
the three month period then ended indicates the income from each series
exceeds the interest expense on the corresponding bonds and the other
expenses directly related to each specific series.
<TABLE>
<CAPTION>
Collateral Lease/ Bond Other Excess
Series Bonds Value Note Interest Related of
No. Outstanding at Cost Income Expense Expenses Income
<C> <C> <C> <C> <C> <C> <C>
1 $ 217,000 $ 244,429 $ 8,606 $ 4,204 $ 1,239 $ 3,163
2 $ 570,000 $ 642,932 $ 17,030 $ 9,784 $ 2,748 $ 4,498
3 $ 850,000 $ 955,021 $ 20,898 $ 13,331 $ 4,592 $ 2,975
4 $1,701,000 $1,906,357 $ 42,900 $ 25,292 $ 6,724 $10,884
5 $4,200,000 $5,439,320 $113,978 $ 72,875 $23,810 $17,293
6 $7,200,000 $8,111,776 $172,181 $116,484 $28,885 $26,812
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended
March 31, 1996 versus March 31, 1995
The predominant activity of The Ziegler Companies, Inc. and
subsidiaries (the "Company") is 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 full commission and
reduced commission brokerage services, equipment leasing services to the
healthcare industry and commercial/industrial customers, securitization of
leases for offerings to the public, 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 1996 were $12,451,00 compared to
$11,331,000 in 1995, an increase of $1,120,000 or 10%. Operating expenses
in 1996 were 12,231,000 compared to $11,327,000 in 1995, an increase of
$904,000 or 8%. There was a provision for income taxes in 1996 of $37,800
compared to a benefit from income taxes of $16,400 in 1995. Net income in
1996 was $182,000 compared to $19,000 in 1995. Earnings per share in 1996
was $.08 compared to $.01 in 1995. The changes in revenues, operating
expenses and net income for 1996 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, Broker-Dealer and Investment Advisory Activities
B. C. Ziegler and Company (BCZCO), the investment banking and primary
broker-dealer subsidiary of the Company, had total revenue of $6,269,000 in
1996 compared to $5,988,000 in 1995, an increase of $281,000 or 5%.
Revenues from securities activities in 1996 were $5,031,000 compared to
$4,578,000, an increase of $453,000 or 10%. Both first quarters had low
levels of municipal and corporate underwritings. Non-underwritten product
revenues increased $794,000 as BCZ increased its emphasis on such products,
primarily equities, mutual funds and annuities. As a result of this new
emphasis, secondary market trading profits were $522,000 lower in 1996.
Other income was lower by $164,000 primarily due to the transfer of some
investment advisory business from BCZ to Ziegler Asset Management, Inc., an
affiliated entity. Interest and dividend income was comparable between
years.
Total BCZCO expenses were $7,038,000 in 1996 compared to $6,568,000
in 1995, an increase of $470,000 or 7%. The increase was primarily due to
increased compensation and related benefits. All other expense categories
did not change significantly. BCZCO had a net loss in 1996 of $424,000
compared to a net loss of $340,000 in 1995.
Ziegler Thrift Trading, Inc. (ZTT), the reduced commission brokerage
service of the Company, had total revenues of $1,418,000 in 1996 and
$992,000 in 1995, and increase of $426,000 or 43%. Commission income was
$1,282,000 in 1996 compared to $886,000 in 1995, an increase of $396,000 or
45%. This increase was reflective of stronger retail markets in 1996 and
additional volume realized through an acquisition in 1995. Total expenses
of ZTT were $1,043,000 in 1996 compared to $772,000 in 1995, an increase of
$271,000 or 35%. This increase was primarily due to increased compensation
accruals and other expenses sensitive to the increased volumes in 1996.
Net income for ZTT was $232,000 in 1996 compared to $137,000 in 1995.
Ziegler Asset Management, Inc. (ZAMI), the money management services
subsidiary of the Company, had total revenues of $606,000 in 1996 compared
to $357,000 in 1995. An increase in total assets under management and a
transfer of some investment advisory business to ZAMI from BCZ accounts for
the revenue increase. Total expenses of ZAMI were $474,000 in 1996
compared to $356,000 in 1995, an increase of $118,000 or 33%.
Substantially all of the increase is due to the reimbursement of management
fees by ZAMI under expense reimbursement agreements with money market and
mutual funds whose assets ZAMI manages, and by increases in employee
compensation and benefits. Other changes in expense categories were not
significant. Net income for ZAMI was $74,000 in 1996 and breakeven in
1995.
Lease Financing Activities
Ziegler Leasing Corporation (ZLC), the primary lease financing
subsidiary of the Company, had total revenues of $2,516,000 in 1996
compared to $2,562,000 in 1995. 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 $2,053,000 in 1996 compared to $2,253,000 in 1995, a decrease of
$200,000 or 9%. A lower level of equipment on lease for financing and
operating leases is the reason for the decline. Gain on the sale of leased
equipment was $155,000 in 1996 compared to $91,000 in 1995, an increase of
$64,000 or 70%. More favorable market conditions is the reason for the
increase in equipment gains. Total expenses of ZLC were $2,269,000 in 1996
compared to $2,353,000 in 1995. Depreciation expense on operating
equipment, the largest component of expense, was $1,076,000 in 1996 and
$1,204,000 in 1995. All other expenses did not vary significantly between
years. The resulting net income for ZLC was $155,000 in 1996 compared to
$128,000 in 1995, an increase of $27,000.
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 purchased the leases and notes from ZLC,
which also acts as manager and lease servicer since ZCSI has no employees.
ZCSI had revenues of $384,000 in 1996 compared to $362,000 in 1995. The
addition of a sixth series of bonds issued in the third quarter of 1995 and
the related leases and notes are the reasons for the increased revenues.
Expenses equaled revenues since management and servicing fees paid ZLC are
limited to an amount that would prevent ZCSI from incurring a loss. The
largest component of expense is interest expense. Interest expense was
$285,000 in 1996 compared to $242,000 in 1995, an increase of $43,000.
Management and servicing fees paid ZLC were $25,000 in 1996 compared to
$49,000 in 1995 reflecting a less favorable spread between bonds
outstanding and the collateral of leases and notes outstanding during 1996.
Other Services and Activities
Ziegler Financing Corporation (ZFC) provides construction financing
and interim lending primarily to investment banking clients. Total
revenues of ZFC were $45,000 in 1996 compared to $65,000 in 1995 and
reflect primarily interest income. Fluctuations in the loan portfolio and
yield on loans versus short-term investments are the reasons for the
difference between years. Total expenses were $26,000 in 1996 compared to
$99,000 in 1995 and reflect primarily interest expense. ZFC had a net
income of $11,000 in 1996 compared to a net loss of $21,000 in 1995. Net
income was negatively impacted in 1995 by an interest free loan made in
1993 to a church experiencing difficulties making required debt service
payments on a bond issue originally underwritten by BCZCO. This loan was
subsequently transferred to the Company.
First Church Financing Corporation (FCFC) is organized for the
purpose of issuing mortgage-backed bonds collateralized by first mortgages
on church buildings and properties. Total revenues of FCFC were $319,000
in 1996 compared to $234,000 in 1995. FCFC had expenses of $309,000 in
1996 compared to $223,000 in 1995. The addition of a third series of bonds
outstanding and its related collateral of church loans is the reason for
the increased revenues and expenses, both of which reflect primarily
interest. Net income for FCFC was $6,000 in 1996 compared to $7,000 in
1995.
WRR Environmental Services Co., Inc. (WRR) is in the business of
providing pollution abatement services and recycling, reclaiming, and
disposing of chemical wastes. Total gross revenues were $3,661,000 in 1996
compared to $2,521,000 in 1995, an increase of $1,140,000 or 45%.
Increased sales of specialized services, specifically remediation and spill
cleanups, along with modest increases in most other services accounted for
$607,000 of the increased sales. Approximately $524,000 of the sales
increase was from the sale, installation and servicing of truck equipment,
generated by WRR's wholly-owned subsidiary which became operational in
October, 1995. The gross margin percentage was 22% in 1996 compared to 24%
in 1995. This decrease is due primarily to a lower margin inherent in the
newly formed subsidiary's product mix. Total expenses of WRR were $639,000
in 1996 compared to $567,000 in 1995, an increase of $72,000 or 13%. The
increase in expenses is due to the newly formed subsidiary mentioned above.
Net income for WRR was $119,000 in 1996 compared to $34,000 in 1995.
The Ziegler Companies, Inc. (ZCI) is the parent company and also
engages in limited investing activities. Revenues for ZCI in 1996 were
$216,000 compared to $345,000 in 1995. Favorable equity trading activity
was the main reason for higher revenues in 1995. Interest income in 1996
of $148,000 is primarily due to the interest earnings on a credit facility
established by ZCI for a corporation which generates automobile loans to
individual customers and compares to $197,000 in 1995. Total expenses for
ZCI in 1996 were $163,000 compared to $165,000 in 1995. Net income for ZCI
in 1996 was $33,000 compared to $133,000 in 1995.
Liquidity and Capital Resources
The Company's primary activities involve investment banking,
equipment leasing and other financial services. Capital expenditures for
assets other than leased equipment were relatively insignificant. Land,
buildings and equipment, net of related depreciation and amortization, was
5% of total Company assets and investment in leases was 35% 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
the first three months of 1996, a total of $22,047,000 of notes were issued
and $22,986,000 were repaid. In the first three months of 1995, a total of
$26,207,000 of notes were issued and $26,340,000 were repaid. The total
balance of short-term notes outstanding, without regard to interest
discounts was $17,614,000 at March 31, 1996. 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 March 31, 1996 and $13,000,000 at March 31,
1995. The $10,000,000 of 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, 2002.
ZLC was also involved in nonrecourse debt issuance and repayments in
conjunction with leveraged leasing activities. As of March 31, 1996, there
was $1,847,000 of nonrecourse debt recorded by ZLC and $2,193,000 at
March 31, 1995.
Since 1993, the Company has had a loan 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. The amount due the Company at March 31, 1996 is
approximately $3,736,000. 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 $2,900,000
at March 31, 1996, and is included in Other Assets on the balance sheet.
ZCSI issues bonds to the public as a source of cash. No new bonds
were issued in the first three months of 1996. Total bonds outstanding
were $14,738,000 at March 31, 1996, and $11,872,000 at March 31, 1995. The
bonds are due serially from June, 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 a 15-year
amortization schedule through 2008. No new bonds were issued in the first
three months of 1996. Total bonds outstanding were $10,690,000 at March
31, 1996, and $7,992,000 at March 31, 1995.
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 financing continuing operations. WRR also has outstanding bank
borrowings incurred in a 1995 purchase of assets of a company engaged
primarily in the sale, installation and servicing of truck equipment. At
March 31, 1996, the bank borrowings total $1,047,000 and mature serially
through October, 2002.
BCZCO finances most activities from its own resources and also relies
upon unsecured and secured credit facilities available through banking
relationships, if necessary. Any utilization of these credit facilities is
generally repaid in less than 30 days. As of March 31, 1996, BCZCO had no
amounts outstanding under these facilities, however, ZCI, which shares the
unsecured credit facilities with BCZCO, had $1,223,000 outstanding under
these facilities at March 31, 1996. There were no amounts outstanding
under these facilities by BCZCO or ZCI at March 31, 1995.
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>
PART II
Items 1 through 5.
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE ZIEGLER COMPANIES, INC.
Dated: May 14, 1996 By /s/ Peter D. Ziegler
Peter D. Ziegler
President
Dated: May 14, 1996 By /s/ Lynn R. Van Horn
Lynn R. Van Horn
Senior Vice President -
Finance
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
27 Financial Data Schedule
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,806,452
<RECEIVABLES> 8,981,407
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 88,544,958<F2>
<PP&E> 7,128,486
<TOTAL-ASSETS> 155,845,394
<SHORT-TERM> 18,673,704<F3>
<PAYABLES> 7,893,541<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 50,668,775<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 48,612,868
<TOTAL-LIABILITY-AND-EQUITY> 141,251,564
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 1,165,721
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 6,294,020<F6>
<FEE-REVENUE> 1,604,455
<INTEREST-EXPENSE> 1,381,693
<COMPENSATION> 5,429,338
<INCOME-PRETAX> 219,762
<INCOME-PRE-EXTRAORDINARY> 219,762
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181,962
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<FN>
<F1>Short-term investments includes some securities purchased under resale
agreements.
<F2>Financial instruments includes 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 revenues from trading
activities and commission income.
</FN>
</TABLE>
