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 September 30, 1997
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 September 30, 1997 was 2,444,773 shares.
<PAGE>
PART I
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,September 30,
1997 1996
<S> <C> <C>
Revenues:
Investment banking and commission
income $10,331,634 $ 8,121,935
Investment management and
advisory fees 1,870,087 693,095
Interest and dividends 1,165,748 1,091,211
Gross profit on chemical products 838,336 1,302,880
Insurance agency 258,074 272,369
Other 1,044,404 882,025
Total revenues 15,508,283 12,363,515
Expenses:
Employee compensation and benefits 8,696,396 6,135,866
Commissions and clearing fees 685,810 261,259
Communications 732,207 693,996
Occupancy and equipment 1,261,475 1,155,763
Promotional 661,650 593,133
Professional and regulatory 267,498 159,767
Interest 674,472 718,524
Provision for losses 2,500,000 -
Other operating expenses 1,609,842 1,446,777
Total expenses 17,089,350 11,165,085
Income (loss) from continuing
operations before income taxes (1,581,067) 1,198,430
Provision for (benefit from)
income taxes (641,700) 424,800
Net income (loss) from
continuing operations $ (939,367) $ 773,630
Discontinued operations:
Income from operating of dis-
continued leasing subsidiary (net
of income taxes of $202,000) - 338,897
Net income (loss) $ (939,367) $ 1,112,527
Net income (loss) per share of
common stock:
Continuing operations $(.39) $ .32
Discontinued operations - .14
$(.39) $ .46
Dividends per share $ .13 $ .13
Average number of shares outstanding 2,430,935 2,401,080
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,September 30,
1997 1996
<S> <C> <C>
Revenues:
Investment banking and commission
income $26,573,731 $21,232,183
Investment management and
advisory fees 3,409,436 2,069,572
Interest and dividends 3,702,637 3,091,079
Gross profit on chemical products 2,544,465 3,032,692
Insurance agency 878,256 787,048
Other 2,710,993 2,722,942
Total revenues 39,819,518 32,935,516
Expenses:
Employee compensation and benefits 21,334,475 16,800,112
Commissions and clearing fees 1,250,984 722,851
Communications 2,070,040 1,977,934
Occupancy and equipment 3,678,894 3,369,529
Promotional 1,723,116 1,567,037
Professional and regulatory 807,451 460,898
Interest 2,406,536 2,223,824
Provision for losses 3,900,000 -
Other operating expenses 4,489,842 4,010,298
Total expenses 41,661,338 31,132,483
Income (loss) from continuing
operations before income taxes (1,841,820) 1,803,033
Provision for (benefit from)
income taxes (752,300) 579,000
Net income (loss) from
continuing operations (1,089,520) 1,224,033
Discontinued operations:
Income from operations of dis-
continued leasing subsidiary
(less applicable income taxes
of $273,000) - 405,553
Net income (loss) $(1,089,520) $ 1,629,586
Net income (loss per share of
common stock:
Continuing operations $(.45) $ .39
Discontinued operations - .17
$(.45) $ .68
Dividends per share $ .39 $ .51
Average number of shares outstanding 2,422,056 2,397,439
</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>
September 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash $ 5,810,678 $ 6,012,977
Short-term investments 27,814,670 26,240,446
Bonds due and called as of October 1,
1997 and January 1, 1997, respectively 2,681,698 10,843,295
Total cash and cash equivalents 36,307,046 43,096,718
Securities inventory 15,648,816 34,920,458
Accounts receivable -- securities sales 4,741,932 8,434,547
Accounts receivable -- other 6,358,803 4,709,368
Investment in and receivables from
affiliates 1,540,515 2,775,607
Investment in leases 5,383,234 7,507,948
Notes receivable 14,878,876 23,204,541
Land, buildings and equipment, at cost,
net of accumulated depreciation of
$15,702,180 and $14,973,709, respectively 8,314,434 7,165,857
Deferred tax benefit 1,229,997 1,106,198
Other assets 9,612,250 8,235,257
Total assets $104,015,903 $141,156,499
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable $ 9,545,771 $ 13,245,639
Payable to customers 7,105,381 6,478,455
Payable to broker-dealers 178,116 370,791
Accounts payable 3,908,361 2,629,014
Dividends payable 317,821 1,049,740
Accrued income taxes - 6,361,958
Notes payable to banks 1,144,287 22,469,310
Bonds payable 20,901,221 25,011,498
Other liabilities and deferred items 8,598,622 9,320,894
Total liabilities 51,699,580 86,937,299
Commitments
Stockholders' equity
Common stock, $1.00 par,
authorized 7,500,000 shares,
issued 3,544,030 shares 3,544,030 3,544,030
Additional paid-in capital 6,071,171 5,962,229
Retained earnings 60,257,847 62,305,397
Treasury stock, at cost, 1,099,257
and 1,102,773 shares, respectively (17,142,566) (17,062,908)
Unearned compensation (414,159) (529,548)
Total stockholders' equity 52,316,323 54,219,200
Total liabilities and
stockholders' equity $104,015,903 $141,156,499
</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 Nine Months Ended
September 30, September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,089,520) $ 1,629,586
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,114,421 1,139,530
Provision for losses 4,005,250 165,356
Gain on sale of equipment (928) (60,161)
Unrealized loss (gain) on
securities inventory (53,198) 133,897
Compensation related to
restricted stock grants 115,389 128,974
Deferred income taxes (94,999) 236,000
Undistributed (earnings of) net dividends
received from unconsolidated affiliate 1,181,965 (38,899)
Changes in operating assets and liabilities:
Decrease/(Increase) in -
Securities inventory 19,362,779 12,610,809
Accounts receivable -- security sales 3,692,615 (1,730,315)
Accounts receivable -- other (366,454) (88,057)
Other operating assets 299,365 3,034,062
Discontinued operations -
Noncash charges and working capital changes - 344,446
Increase/(Decrease) in -
Payable to customers and broker-dealers 434,251 1,304,148
Accounts payable 1,147,755 (2,052,911)
Income taxes payable (7,348,280) (1,082,012)
Other operating liabilities (3,320,283) (1,518,934)
Net cash provided by
operating activities 19,080,128 14,155,519
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Sale of equipment - 60,510
Principal payments received under leases 1,850,432 2,528,603
Sale of leased equipment 223,991 751,323
Payments received on notes receivable 6,123,185 37,384,329
Cash acquired in purchase of GS2 through issuance
of treasury stock 600,196 -
Payments for:
Purchase of assets to be leased - (2,887,884)
Issuance of notes receivable - (39,231,173)
Capital expenditures (1,958,960) (1,027,180)
Net cash provided by (used in)
investing activities 6,838,844 (2,421,472)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Issuance of short-term notes payable 55,312,000 64,017,000
Exercise of employee stock options 127,339 68,022
Issuance of bonds payable - 4,875,000
Payments of:
Principal on short-term notes payable (58,998,000) (67,519,000)
Repayment of bonds payable (4,112,000) (6,208,000)
Purchase of treasury stock (1,473,010) -
Dividends (1,689,950) (1,799,875)
Net repayments under bank credit facilities (21,875,023) (9,050,085)
Net cash used in financing
activities (32,708,644) (15,616,938)
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,789,672) (3,882,891)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 43,096,718 18,028,477
CASH AND CASH EQUIVALENTS AT END OF PERIOD $36,307,046 $14,145,586
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the period $ 2,539,000 $ 2,371,000
Income taxes paid during the period $ 6,721,000 $ 1,229,000
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING ACTIVITIES:
Treasury stock issued for
acquisition of GS2 $ 1,375,000 $ -
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1997
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. Certain prior year amounts
have been reclassified to conform with current year presentation.
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 attempts to presell the issues to customers. BCZ
had approximately $895,000 in commitments outstanding at September 30,
1997.
As of September 30, 1997, Ziegler Financing Corporation (ZFC) had no
financial commitments to unrelated entities for construction or other
loans.
WRR Environmental Services Co., Inc. (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 in Eau Claire,
Wisconsin.
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 September 30, 1997, WRR had
been identified as a potentially responsible party ("PRP") in connection
with three sites. For the first site, a payment of $138,000 was made in
the third quarter of 1997 as a settlement of WRR's liability on that
particular site. WRR believes that the payment is sufficient to cover the
current estimated costs to clean up the first site. Release of WRR by the
Environmental Protection Agency ("EPA") will occur only after site work is
completed and no further costs have been determined. 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.
Payments of $42,000 have been made on the second site and are expected to
continue over the next five years. A specific reserve of $460,000 exists
to cover WRR's share of the clean-up costs of this second site. WRR has
not received sufficient information to revise the original estimates for
cleaning up the second site. WRR was notified by the 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 specific reserve has
been established on account of 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 PRPs when viewed as a group. No potential
insurance recoveries have been accrued in the financial statements. The
reserve for accrued loss contingencies totaled $559,000 at September 30,
1997 and covers the costs related to the specific sites identified above
and other ongoing environmental matters in accordance with the American
Institute of Certified Public Accountants Statement of Position 96-1,
"Environmental Remediation Liabilities" ("SOP 96-l"). SOP 96-1 provides
authoritative guidance on the accrual of environmental remediation
liabilities. It is possible that WRR's estimates of its liability related
to the clean-up of these sites may change materially in the future.
Note C -- Stock-Based Compensation Plans
The Ziegler Company, Inc. 1989 Employees' Stock Purchase Plan (the
"1989 Plan") was established for substantially all full-time employees. On
April 30, 1997, a total of 76,940 unexercised options expired under the
1989 Plan. On June 1, 1997, the Board of Directors granted additional
options to purchase 130,030 shares under the 1989 Plan. As of September
30, 1997, unexercised options for 128,290 shares were outstanding. Only
114,795 additional shares are authorized for issuance under the 1989 Plan.
Shares will be issued on a first come, first served basis until all
authorized shares are issued. Subject to the above limitation, all
outstanding options are currently exercisable through May 31, 1999, at 85%
of the market value on the date of exercise. Options for a total of 2,410
shares were exercised in 1997 at a price of $15.94 per share. Under the
1989 Plan, no options are currently available for future granting as a
result of the limitation described above. Options granted under the 1989
Plan that expire, terminate, or are cancelled are again available for the
granting of future options subject to the above limitation. Options for a
total of 5,860 shares were forfeited during the period.
The Company established the 1993 Employees' Stock Incentive Plan (the
"1993 Plan") for certain officers and key employees. Stock options, stock
appreciation rights and restricted stock may be granted under the 1993
Plan. As of September 30, 1997, unexercised options for 38,500 shares were
outstanding under the 1993 Plan. The options are exercisable through
December 28, 2003 at a price of $16.625 per share. Options for a total of
4,000 shares were exercised during 1997. Options for a total of 6,000
shares were forfeited during the period.
The Company established a nonstatutory stock option plan (the "GS2
Plan") for certain officers and other key employees of GS2 Securities, Inc.
(GS2) pursuant to the acquisition of that subsidiary. A total of 10,000
stock options may be granted under the GS2 Plan. As of September 30, 1997,
no options have been granted. The exercise of the options is subject to
performance requirements, a vesting schedule, and continued employment.
The Company granted 50,000 nonstatutory stock options to a key
employee of GS2 pursuant to the acquisition of that subsidiary. The
exercise of the options is subject to performance requirements, a vesting
schedule, and continued employment. Options will be granted in accordance
with a specified schedule of earnings targets to be achieved by GS2 during
the three year period ended June 30, 2000, and will vest over the following
two years. Once vested, the stock options are exercisable through June 30,
2007 at a price of $19 per share.
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 employee stock option plans in the computation of
earnings per share under Accounting Principles Board Opinion 15, Earnings
per Share, is not significant. In March 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards, No.
128, Earnings per Share, superseding Opinion 15. The Company is required
to adopt the new rules for periods ending after December 15, 1997. If
adopted for the nine month periods ending September 30, 1997 and 1996, the
earnings per share as presented in the Consolidated Condensed Income
Statements would not change and would be the same for both basic and
diluted earnings per share, as defined by the newly issued statement.
Note E -- Net Capital Requirements and Customer Reserve Accounts
As registered broker-dealers, BCZ, Ziegler Thrift Trading, Inc. (ZTT)
and GS2 Securities, Inc. (GS2) 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 September 30, 1997, is as
follows:
<TABLE>
<CAPTION>
BCZ ZTT GS2
<S> <C> <C> <C>
Aggregate indebtedness $ 6,288,000 $2,636,000 $ 762,000
Net capital $16,384,000 $1,977,000 $1,213,000
Ratio of aggregate
indebtedness to
net capital .38 to 1 1.33 to 1 .63 to 1
Required net capital $ 480,000 $ 250,000 $ 100,000
</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 September 30, 1997, there was approximately $8,184,000 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
September 30,September 30,
1997 1996
<S> <C> <C>
Income, primarily interest $2,266,395 $2,518,449
Expenses -
Interest 1,956,503 2,265,653
Amortization of bond
issuance costs 136,074 128,249
Management fees 143,808 66,989
Other 30,010 57,558
Total expenses 2,266,395 2,518,449
Net income $ - $ -
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,September 30,
1997 1996
<S> <C> <C>
Income, primarily interest $ 6,658,493 $ 7,924,788
Expenses -
Interest 5,991,020 7,030,427
Amortization of bond
issuance costs 287,229 558,216
Management fees 287,891 194,294
Other 92,353 141,851
Total expenses 6,658,493 7,924,788
Net income $ - $ -
</TABLE>
Note G -- Securities Inventory
Securities inventory consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Municipal bond issues $12,527,451 $18,619,321
Corporate bond issues 94,723 358,571
Institutional bond issues 988,372 13,357,676
Preferred stock 770,963 1,768,185
Other securities 1,267,307 816,705
$15,648,816 $34,920,458
</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 $809,000 in short-term borrowings outstanding at September 30, 1997.
Such short-term borrowings are generally repaid within 30 days. Such
amounts are treated as financing 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 September 30, 1997
and December 31, 1996 and income statements for the nine month periods
ended September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Balance Sheets as of:
September 30,December 31,
1997 1996
<S> <C> <C>
Investment in leases $ 5,383,234 $ 7,507,948
Notes receivable 4,802,902 7,046,152
Other assets 3,198,158 2,773,088
Total assets $13,384,294 $17,327,188
Bonds payable $10,716,000 $14,302,000
Other liabilities 2,658,294 3,015,188
Total liabilities 13,374,294 17,317,188
Stockholder's equity 10,000 10,000
Total liabilities and
stockholder's equity $13,384,294 $17,327,188
</TABLE>
<TABLE>
<CAPTION>
Income Statements for the
Nine Months Ended
September 30, September 30,
1997 1996
<S> <C> <C>
Lease income $ 471,744 $ 642,351
Other, primarily interest
income 457,809 561,533
Total income 929,553 1,203,884
Interest expense 754,219 888,575
Management fee (subsidy) (17,049) 15,259
Other expenses 192,383 300,050
Total expenses 929,553 1,203,884
Net income $ - $ -
</TABLE>
At the end of February 1997, the written agreement with Ziegler
Leasing Corporation (ZLC) to provide management and administrative services
to ZCSI terminated. In March 1997, a written agreement with ZCO was
undertaken to provide management and administrative services to ZCSI.
Management fees paid to ZCO/ZLC were limited to the amount which prevented
ZCSI from incurring a loss. Since inception ZCO has guaranteed the payment
of principal and interest on bonds issued by ZCSI.
An analysis of each outstanding bond series as of September 30, 1997
and for the nine 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
<S><C> <C> <C> <C> <C> <C>
3 19,000 53,802 6,967 3,101 2,229 1,637
4 556,000 624,100 42,848 33,345 7,545 1,958
5 2,312,000 3,053,747 193,235 134,993 35,510 22,732
6 3,739,000 4,270,084 338,269 225,228 44,164 68,877
7 4,090,000 4,787,933 315,197 220,353 52,676 42,168
</TABLE>
Note J -- Litigation
B. C. Ziegler and Company (BCZ), a broker-dealer subsidiary of the
Company, has been made a party to a class action lawsuit involving the
underwriting of two bond issues in May of 1989 which totaled $11,680,000
(the "Bonds"). The bonds were issued to construct a retirement facility.
In 1992, there was a default on the Bonds, which resulted in a significant
loss of principal and interest by the bondholders. Admitting no liability
with respect to the matters alleged in the lawsuit, management reached a
settlement with the class of plaintiffs as the best means to manage the
uncertainty and expense of protracted litigation, and to limit the
diversion of management time. The settlement was in the amount of
$1,400,000 and was judicially approved. The settlement amount was included
as an expense in the first quarter results for 1997.
Note K -- Notes Receivable
Included in Notes Receivable are approximately $2.5 million of loans
receivable, a portion of which management believes may not be collectible
based on information discovered subsequent to June 30, 1997. In
recognition of that information, management recognized a $2.25 million
charge in the third quarter of 1997 to write down the receivables to
estimated net realizable value.
Note L -- Acquisition of Subsidiary
On July 2, 1997, the Company acquired Glaisner, Schilffarth, Grande &
Schnoll, Ltd., a Milwaukee-based financial services holding company,
together with its broker-dealer subsidiary, GS2 Securities, Inc. Total
consideration, payable in Company stock, was $1,375,000 at closing. In
addition, the selling principals of the merged entity can earn a future
contingent payment of 72,368 additional shares of Company common stock.
The purchase agreement also provides for contingent cash payments, based on
the financial performance of GS2 Securities, Inc. during the three years
following the purchase. The acquisition expands the securities-related
services of the Company, including among others institutional brokerage,
research, investment banking services and investment advisor selection and
monitoring for high net worth individuals and institutions. The
acquisition will be accounted for under the purchase method of accounting,
and the consolidated financial statements will include the results of
operations from the date of acquisition. Following the merger of Glaisner,
Schilffarth, Grande & Schnoll, Ltd. into the Company, GS2 Securities, Inc.
survives as a new broker/dealer subsidiary of the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended
September 30, 1997 versus September 30, 1996
The "Company", consisting of The Ziegler Companies, Inc. and its
subsidiaries, is a financial services company whose principal activities
include investment banking, primarily the underwriting and marketing of
debt securities for the healthcare industry, nonprofit senior living
providers and for churches and private schools, full-service and reduced-
commission brokerage services, investment management and advisory services,
financial advisory services, proprietary trading of municipal and
government securities, and Federal Housing Administration loan origination
in conjunction with investment banking activities. The nonfinancial
services of the Company are pollution abatement, chemical processing, and
the recycling, reclaiming and disposing of chemical wastes. The Company
has discontinued its operations in the area of equipment leasing services
to the healthcare industry and commercial/industrial customers as the
result of the sale of its leasing subsidiary, Ziegler Leasing Corporation,
in December 1996.
All references to 1997 and 1996 in this section of the results of
operations refer to the three months ended September 30, unless otherwise
noted. Total revenues of the Company were $15,508,000 in 1997 compared to
revenues from continuing operations of $12,364,000 in 1996, an increase of
$3,145,000 or 25%. Total expenses in 1997 were $17,089,000 compared to
expenses of continuing operations of $11,165,000 in 1996, an increase of
$5,924,000 or 53%. There was a benefit from income taxes of $642,000 in
1997 compared to a provision for income taxes of continuing operations of
$425,000 in 1996 using a federal statutory tax rate of 34% in both periods.
In 1997 there was a net loss from continuing operations of $939,000
compared to net income of $774,000 in 1996, a decrease of $1,713,000. Net
income from discontinued operations, net of applicable income taxes, was
$339,000 in 1996. The loss per share from continuing operations in 1997
was $.39 compared to earnings per share of $.32 from continuing operations
and $.14 from discontinued operations in 1996. The changes in revenues,
operating expenses, and net income from continuing operations were
primarily a reflection of factors related to investment banking, broker-
dealer and parent company activities, as well as activities 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. The impact of discontinued
operations is limited to 1996 when substantially all of such operations
were sold.
Investment Banking and Broker-Dealer Activities
B. C. Ziegler and Company (BCZCO), the investment banking and full
service broker-dealer subsidiary of the Company, had total revenues of
$9,425,000 in 1997 compared to $8,264,000 in 1996, an increase of
$1,161,000 or 14%. The increase was primarily due to increases in broker-
dealer commission income of $728,000 and underwriting revenues of $512,000.
Total BCZCO expenses were $9,408,000 in 1997 compared to $8,135,000 in
1996, an increase of $1,273,000 or 16%. The increase was primarily due to
increased employee compensation and benefits of $1,259,000 associated with
both a higher volume of revenues and the timing of expense recognition with
respect to compensation accruals. BCZCO net income was $30,000 in 1997
compared to $130,000 in 1996.
Ziegler Thrift Trading, Inc. (ZTT), the reduced commission brokerage
service of the Company, had total revenues of $1,344,000 in 1997 compared
to $1,112,000 in 1996, an increase of $232,000 or 21%. Commission income
was $1,180,000 in 1997 compared to $1,009,000 in 1996, an increase of
$171,000 or 17%. The increase was primarily due to an increase in trading
volume of 12% and an increase in the average commission per trade. Total
expenses of ZTT were $1,019,000 in 1997 compared to $924,000 in 1996, an
increase of $95,000 or 10%. The increase in expenses was spread
approximately proportionally over all categories of expense and related to
the increase in volume as well as various marketing and customer service
activities. Net income for ZTT was $202,000 in 1997 compared to $116,000
in 1996.
GS2 Securities, Inc. (GS2), an equity investment banking, research
and management broker-dealer, had total revenues of $2,075,000 since its
purchase by the Company on July 2, 1997. Its primary sources of revenue
were investment advisory fees of $1,025,000 and commission income of
$635,000. Other sources of revenue include trading, investment banking and
fee income. Total expenses of GS2 were $1,952,000. The largest categories
of expenses were for employee compensation and benefits of $1,255,000 and
brokerage commission and clearing fees of $401,000. Net income for GS2 was
$64,000 in 1997.
Ziegler Asset Management, Inc. (ZAMI), a money management services
subsidiary of the Company, had total revenues of $906,000 in 1997 compared
to $747,000 in 1996, an increase of $159,000 or 21%. The increase in
revenues was primarily due to an increase in assets under management.
Total expenses of ZAMI were $740,000 in 1997 compared to $619,000 in 1996,
an increase of $121,000 or 20%. The increase in expenses was primarily due
to an increase in employee compensation and benefits. Net income for ZAMI
was $92,000 in 1997 compared to $71,000 in 1996.
Other Services and Activities
WRR Environmental Services Co., Inc. (WRR) is in the business of
providing pollution abatement services, chemical processing and recycling,
reclaiming, and disposing of chemical wastes. WRR is also engaged in the
sale, installation and servicing of truck equipment through a wholly-owned
subsidiary, WRR Northwest Enterprises, Inc. (NWE). Total gross revenues
were $3,072,000 in 1997 compared to $3,897,000 in 1996, a decrease of
$825,000 or 21%. Total gross margin for WRR was $838,000 in 1997 compared
to $1,303,000 in 1996. The gross margin percentage in 1997 was 27%
compared to 33% in 1996. A decrease in remediation, field and emergency
response services which are higher margin activities was the primary reason
for the decline in revenues and gross margin. Total expenses of WRR were
$643,000 in 1997 compared to $684,000 in 1996, a decrease of $41,000 or 6%.
Net income for WRR in 1997 was $141,000 compared to $396,000 in 1996.
Ziegler Financing Corporation (ZFC) is engaged in originating loans
for the Federal Housing Administration (FHA), and miscellaneous other
lending activities. Total revenues of ZFC were $25,000 in 1997 compared to
$146,000 in 1996. Revenue in 1997 consisted primarily of interest income
whereas 1996 revenues included mortgage origination fees of $105,000.
Total expenses of ZFC were $59,000 in 1997 compared to $85,000 in 1996.
The higher expenses in 1996 were related to the initiation of the FHA
mortgage origination business activity. ZFC had a net loss of $20,000 in
1997 compared to net income of $38,000 in 1996.
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 $250,000
in 1997 compared to $264,000 in 1996. FCFC had expenses of $233,000 in
1997 compared to $246,000 in 1996. No new bond series were issued during
the year 1996 or the first nine months of 1997. The reduction in income,
which was primarily interest, was due to the amortization of principal as
loan payments are made. The principal payments on the loans are used to
redeem outstanding bonds which reduces interest expense, the primary
component of FCFC expenses. Net income was $11,000 in 1997 compared to
$10,000 in 1996.
Ziegler Collateralized Securities, Inc. (ZCSI) facilitated 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 formerly purchased the leases and notes
from Ziegler Leasing Corporation (ZLC) which also acted as manager and
lease servicer because ZCSI has no employees. ZCSI no longer makes such
purchases since the sale of ZLC by the Company and is now allowing all
leases and notes to run to maturity. The Ziegler Companies, Inc. (ZCO) now
acts as manager and lease servicer. ZCSI had revenues of $277,000 in 1997
compared to $419,000 in 1996. ZCSI revenues consist almost entirely of
lease income and note interest income. The reduction of the underlying
principal upon which the income is received is the reason for the decline
in revenues. Expenses equaled revenues since management and servicing fees
are limited to an amount that would prevent ZCSI from incurring a loss.
Interest expense was the largest component of total expenses and was
$225,000 in 1997 compared to $316,000 in 1996. All other expense changes
were not significant.
ZCO is the parent company of the subsidiaries and also engages in
limited investing and financing activities. Total revenues of ZCO were
$509,000 in 1997 compared to $219,000 in 1996. Revenues consist primarily
of interest income. The increase in revenues was primarily related to the
investment earnings on the proceeds of the sale of ZLC. Total expenses of
ZCO were $2,933,000 in 1997 compared to $179,000 in 1996. The net loss for
ZCO was $1,457,000 in 1997 compared to net income of $15,000 in 1996. A
provision for losses of $2,250,000 related to the collectibility of loans
recorded by ZCO was the primary reason for the increased expenses and
resulting loss in the current quarter. See the Liquidity and Capital
Resources section for additional information. Additional expenses
associated with the guarantee of leases for ZCSI and other matters caused
the balance of the expenses and loss in 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Nine Months Ended
September 30, 1997 and 1996
All references to 1997 and 1996 in this section of the Results of
Operations refer to the nine months ended September 30, unless otherwise
noted. Total revenues of the Company were $39,820,000 in 1997 compared to
revenues from continuing operations of $32,936,000 in 1996, an increase of
$6,884,000 or 21%. Total expenses in 1997 were $41,661,000 compared to
expenses of continuing operations of $31,132,000 in 1996, an increase of
$10,529,000 or 34%. There was a benefit from income taxes of $752,000 in
1997 compared to a provision for income taxes of continuing operations of
$579,000 in 1996 using a federal statutory tax rate of 34% in both periods.
In 1997 there was a net loss of $1,090,000 compared to net income from
continuing operations of $1,224,000 in 1996. Net income from discontinued
operations, net of applicable income taxes, was $406,000 in 1996. The loss
per share in 1997 was $.45 compared to earnings per share from continuing
operations of $.51 and from discontinued operations of $.17 in 1996. The
changes in revenues, operating expenses, and net income from continuing
operations were primarily a reflection of factors related to investment
banking, broker-dealer and parent company 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. The impact of
discontinued operations is limited to 1996 when substantially all of such
operations were sold.
Investment Banking and Broker-Dealer Activities
BCZCO had total revenues of $25,398,000 in 1997 compared to
$20,993,000 in 1996, an increase of $4,405,000 or 21%. The increase was
primarily due to an increase in broker-dealer commission income of $766,000
and underwriting revenues of $4,024,000. Interest income also increased
$272,000 primarily as the result of higher levels of inventory. These
increases were offset by decreases in trading profits and fee income.
Total BCZCO expenses were $27,476,000 in 1997 compared to $22,415,000 in
1996, an increase of $5,061,000 or 23%. Expenses for employee compensation
and benefits increased $2,875,000 due to a higher volume of revenues and
the timing of expense recognition with respect to incentive-based accruals.
A provision for losses was recorded for a litigation settlement of
$1,400,000 related to a defaulted bond issue underwritten by BCZCO in 1989.
Interest expense also increased $387,000 primarily due to increased
inventory related to variable rate demand note remarketing activity and the
related borrowing against credit facilities to finance the inventory.
Increases in occupancy and equipment costs and marketing expense associated
with an increased level of business activity also contributed to the
increased expenses. As a result, BCZ had a net loss of $1,229,000 in 1997
compared to a net loss of $760,000 in 1996.
ZTT had total revenues of $4,436,000 in 1997 compared to $4,074,000
in 1996, an increase of $362,000 or 9%. Commission income was $3,618,000
in 1997 compared to $3,499,000 in 1996, an increase of $119,000 or 3%. A
slight decrease in the number of trades was more than offset by an increase
in average commission per trade. An increase in stock option financing
activity for customers was the primary reason for the balance of the
increase in revenues. Total expenses of ZTT were $3,334,000 in 1997
compared to $3,064,000 in 1996, an increase of $270,000 or 9%. All
categories of expenses increased approximately proportionally and related
to various marketing and customer service activities. Net income for ZTT
was $683,000 in 1997 compared to $626,000 in 1996.
As described in the discussion of the three months results, GS2 was
purchased by the Company on July 2, 1997 and had a net income of $64,000 in
1997.
ZAMI had total revenues of $2,587,000 in 1997 compared to $2,117,000
in 1996, an increase of $470,000 or 22%. An increase in total assets under
management and a transfer of investment advisory business from BCZCO to
ZAMI were the primary reasons for the increase. Total expenses of ZAMI
were $2,180,000 in 1997 compared to $1,715,000 in 1996, an increase of
$465,000 or 27%. The increase in expenses was primarily due to an increase
in employee compensation and benefits. Net income for ZAMI was $226,000 in
1997 compared to $224,000 in 1996.
Other Services and Activities
Total gross revenues of WRR were $8,965,000 in 1997 compared to
$10,617,000 in 1996, a decrease of $1,652,000 or 16%. Total gross margin
for WRR was $2,544,000 in 1997 compared to $3,033,000 in 1996. The gross
margin percentage in 1997 was 28% compared to 29% in 1996. A decrease in
remediation, field and emergency response services was the primary reason
for the decline in revenues and gross margin. The declines were partially
offset by increased product sales, a higher margin activity. Total
expenses of WRR were $1,987,000 in 1997 compared to $1,955,000 in 1996, an
increase of $32,000 or 2%. Net income for WRR in 1997 was $405,000
compared to $723,000 in 1996.
Total revenues of ZFC were $96,000 in 1997 compared to $250,000 in
1996. Revenue in 1997 consisted primarily of interest income whereas 1996
revenues included mortgage origination fees of $105,000. A lower level of
lending activity also contributed to the decline in 1997 revenues. Total
expenses of ZFC were $177,000 in 1997 compared to $134,000 in 1996. The
addition of employees to ZFC and an outside office and the related expenses
were the primary reasons for the increase. ZFC had a net loss of $49,000
in 1997 compared to net income of $71,000 in 1996.
Total revenues of FCFC were $763,000 in 1997 compared to $852,000 in
1996. FCFC had expenses of $711,000 in 1997 compared to $804,000 in 1996.
No new bond series were issued during the year 1996 or the first nine
months of 1997. The reduction of income, which is primarily interest, was
due to the amortization of principal as loan payments are made. The
principal payments on the loans are used to redeem outstanding bonds which
reduces interest expense, the primary component of FCFC expenses. Net
income was $31,000 in 1997 compared to $29,000 in 1996.
ZCSI had revenues of $930,000 in 1997 compared to $1,204,000 in 1996.
ZCSI revenues consist almost entirely of lease income and note interest
income. The timing of bond issues and the reduction of the underlying
principal upon which the income is received was the reason for the decline
in revenues. Expenses equaled revenues since management and servicing fees
are limited to an amount that would prevent ZCSI from incurring a loss.
Interest expense is the largest component of total expenses and was
$754,000 in 1997 and $889,000 in 1996. All other expense changes were not
significant.
Total revenues of ZCO were $1,494,000 in 1997 compared to $760,000 in
1996. Revenues consist primarily of interest income. The increase in
revenues was primarily related to the investment earnings on the proceeds
of the sale of ZLC. Total expenses of ZCO were $3,508,000 in 1997 compared
to $257,000 in 1996. The net loss for ZCO was $1,216,000 in 1997 compared
to $316,000 in 1996. A provision for losses of $2,250,000 related to the
collectibility of loans recorded by ZCO was the primary reason for the
increased expense and resulting loss in the current quarter. See the
Liquidity and Capital Resources section for additional information.
Additional expenses associated with the guarantee of leases for ZCSI and
other matters caused the balance of the expenses and loss.
Liquidity and Capital Resources
The Company's primary activities involve investment banking, retail
and institutional securities brokerage, other financial services and
environmental services. Capital expenditures for assets are relatively
insignificant. Land, buildings and equipment, net of related depreciation
and amortization, was 8% of total Company assets at September 30, 1997.
The Company 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 maturity
up to 270 days. In the first nine months of 1997, a total of
$55,312,000 of notes were issued and $58,998,000 were repaid. In the
first nine months of 1996, a total of $64,017,000 of notes were issued and
$67,519,000 were repaid. The total face value of short-term notes
outstanding, without regard to interest discounts was $9,606,000 at
September 30, 1997.
ZCSI issued bonds to the public as a source of cash prior to 1997.
No new bonds have been issued in 1997 nor does the Company contemplate
issuing bonds from this subsidiary in the future. Total bonds outstanding
were $10,716,000 at September 30, 1997. The bonds are due serially from
October, 1997 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. The Company is currently in
negotiations to sell the ZCSI portfolio of lease obligations and lease
financing notes and intends to use the proceeds to refund or advance refund
the bonds outstanding.
FCFC issues bonds to the public as a source of cash prior to 1997.
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 2010. No new bonds were issued in
the first nine months of 1997. Total bonds outstanding were $9,779,000 at
September 30, 1997.
WRR has bonds outstanding with a face value of $415,000. 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
June 30, 1997, the bank borrowings total $335,000 and mature serially
through October, 2002. WRR also has a line of credit with a banking
relationship that is secured by accounts receivable and inventory. At
September 30, 1997, WRR had $500,000 outstanding under the line of credit.
BCZCO finances most activities from its own resources and also relies
upon unsecured and secured credit facilities available through banking
relationships and intercompany borrowings, 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. At September 30, 1997, BCZCO had no amounts
outstanding under the credit facilities or under the intercompany loan
facilities.
ZTT relies on unsecured lines of credit through a banking
relationship and intercompany borrowings to finance stock option financing
services provided to customers. Any utilization of those lines of credit
is generally repaid in less than seven days. At September 30, 1997 ZTT had
$309,000 outstanding under the line of credit. The financing arrangement
with the customer is secured by the stock upon which the options are
exercised.
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 money market
funds and reverse repurchase agreements at very short maturities in
accordance with the Company's liquidity requirements.
The Company received approximately $17,000,000 as the purchase price
in cash at the closing of the sale of Ziegler Leasing Corporation. The
proceeds were reduced by the federal tax payment related to the tax
liability associated with the sale of approximately $5,985,000. The net
proceeds of approximately $11,000,000 have been invested in short term
securities until such time as management determines the final use of these
proceeds. If suitable reinvestment opportunities are not identified within
a reasonable period of time, a special dividend, distribution or partial
buyback of the Company's common stock through open market purchases or a
tender offer may be effected.
During the third quarter the Company became aware of negative
information about the credit status of its portfolio of auto loans, and a
related working capital loan receivable, having an aggregate outstanding
balance of approximately $2.9 million as of June 30, 1997. The auto loans
were purchased in 1995 and 1996 under a warehouse financing arrangement the
Company had with the originator of the sub-prime automobile loans. The
intent of the financing was to warehouse the loans until the originator or
others could securitize the loans, and sell the securitized loan portfolio
to investors. The working capital loan represented a line of credit the
Company provided the originator to facilitate the sale of several pools of
auto loans. The Company has not funded any auto loans or loaned any money
under the line of credit since August, 1996, and began reducing its net
position in its warehouse of auto loan receivables at approximately that
time. As of September 30, 1997, the aggregate balance of the auto loan
warehouse and working capital loan receivable was approximately $2.5
million. The decrease in the loan balance since June 30, 1997 is due to
cash payments received on performing auto loans and the application of
various deposits from the originator against the loans receivable. During
the third quarter, the Company recognized a $2.25 million charge to write
down the remaining loan receivables to estimated net realizable value.
Actions have been taken to repossess the collateral on the delinquent auto
loans and pursue other legal remedies. Management does not expect that
additional write-offs related to these loan receivables will be incurred.
<PAGE>
PART II
Item 1. Legal Proceedings
On March 21, 1997, B. C. Ziegler and Company, a broker-
dealer subsidiary of the Company, was made party to a
lawsuit in the Circuit Court of Racine County, Wisconsin,
involving the underwriting of two bond issues. B. C.
Ziegler and Company settled its liability exposure in the
class action for $1,400,000 and the settlement has been
judicially approved. See Note J on page 12 of the financial
statements.
Items 2 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:
Registrant filed a Current Report on Form 8-K dated
September 22, 1997 announcing that it filed a suit against
First Fidelity Acceptance Corp. of Plano, Texas, and one of
its affiliates. Registrant also announced a write-off
related to its business dealings with those companies in the
amount of $1,350,000 after taxes.
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: November 14, 1997 By /s/ Peter D. Ziegler
Peter D. Ziegler
President
Dated: November 14, 1997 By /s/ Dennis A. Wallestad
Dennis A. Wallestad
Senior Vice President/CFO
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 the entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,361,585
<RECEIVABLES> 8,999,607
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 59,077,017<F2>
<PP&E> 7,167,749
<TOTAL-ASSETS> 109,528,124
<SHORT-TERM> 17,840,384<F3>
<PAYABLES> 5,659,242<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 26,657,751<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 52,864,806
<TOTAL-LIABILITY-AND-EQUITY> 109,528,124
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 3,091,079
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 21,232,183<F6>
<FEE-REVENUE> 4,792,514
<INTEREST-EXPENSE> 2,223,824
<COMPENSATION> 16,800,112
<INCOME-PRETAX> 1,803,033<F7>
<INCOME-PRE-EXTRAORDINARY> 1,224,033<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,224,033<F8>
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
<FN>
<F1>Short-term investments include some securities purchased under resale
agreements.
<F3>Includes short-term notes payable and unsecured notes payable to banks
under line of credit agreements.
<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 also includes revenue from
trading activities and commissions.
<F7>Includes only income from continuing operations.
<F8>Income from continuing and discontinued operations.
<F2>Financial instruments include securities inventory, investment in
leases, notes receivable, and investment in and receivables from
affiliates.
</FN>
</TABLE>
<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 the entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,810,678
<RECEIVABLES> 11,100,735
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 37,451,441<F2>
<PP&E> 8,314,434
<TOTAL-ASSETS> 104,015,903
<SHORT-TERM> 10,354,771<F3>
<PAYABLES> 11,509,679<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 21,236,508<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 48,772,293
<TOTAL-LIABILITY-AND-EQUITY> 104,015,903
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 3,702,637
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 26,573,731<F6>
<FEE-REVENUE> 6,120,429
<INTEREST-EXPENSE> 2,406,536
<COMPENSATION> 21,334,475
<INCOME-PRETAX> (1,841,820)<F7>
<INCOME-PRE-EXTRAORDINARY> (1,089,520)<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,089,520)<F8>
<EPS-PRIMARY> (.45)
<EPS-DILUTED> (.45)
<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 agreements.
<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 also includes revenue from
trading activities and commissions.
<F7>Includes only income from continuing operations.
<F8>Income from continuing and discontinued operations.
</FN>
</TABLE>
