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 June 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 June 30, 1997 was 2,447,067 shares.
<PAGE>
PART I
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
Revenues:
Investment banking and
commission income $10,574,392 $ 6,816,228
Investment management fees 791,956 697,785
Interest and dividends 1,292,738 1,000,703
Gross profit on chemical products 899,970 911,077
Insurance agency 223,688 210,032
Other 809,334 939,906
Total revenues 14,592,078 10,575,731
Expenses:
Employee compensation and
benefits 6,861,496 5,466,988
Commissions and clearing fees 277,093 254,765
Communications 659,818 635,024
Occupancy and equipment 1,244,031 1,113,777
Promotional 530,433 546,800
Professional and regulatory 234,230 129,001
Interest 914,725 755,599
Other operating expenses 1,440,857 1,076,214
Total expenses 12,162,683 9,978,168
Income from continuing operations
before income taxes 2,429,395 597,563
Provision for income taxes 961,400 196,400
Net income from continuing
operations 1,467,995 401,163
Discontinued operations:
Loss from operations of dis-
continued leasing subsidiary
(net of income tax benefit
of $9,000) - (66,066)
Net income $ 1,467,995 $ 335,097
Net income per share of common
stock:
Continuing operations $ .61 $ .17
Discontinued operations - (.03)
$ .61 $ .14
Dividends per share $ .13 $ .13
Average number of shares outstanding 2,420,779 2,399,054
</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 Six Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
Revenues:
Investment banking and commission
income $16,242,097 $13,110,247
Investment management fees 1,539,349 1,376,477
Interest and dividends 2,536,889 1,999,868
Gross profit on chemical products 1,706,129 1,729,812
Insurance agency 620,182 514,679
Other 1,666,589 1,840,918
Total revenues 24,311,235 20,572,001
Expenses:
Employee compensation and
benefits 12,638,079 10,664,246
Commissions and clearing fees 565,174 461,593
Communications 1,337,833 1,283,938
Occupancy and equipment 2,417,419 2,213,766
Promotional 1,061,466 973,904
Professional and regulatory 539,953 301,131
Interest 1,732,064 1,505,300
Provision for litigation
settlement 1,400,000 -
Other operating expenses 2,879,999 2,563,520
Total expenses 24,571,987 19,967,398
Income (loss) from continuing
operations before income taxes (260,752) 604,603
Provision for (benefit from)
income taxes (110,600) 154,200
Net income (loss) from
continuing operations (150,152) 450,403
Discontinued operations:
Income from operations of dis-
continued leasing subsidiary
(less applicable income taxes
of $71,000) - 66,656
Net income (loss) $ (150,152) $ 517,059
Net income (loss) per share of
common stock:
Continuing operations $(.06) $ .19
Discontinued operations - .03
$(.06) $ .22
Dividends per share $ .26 $ .26
Average number of shares outstanding 2,417,617 2,395,619
</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>
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash $ 9,386,088 $ 6,012,977
Short-term investments 22,741,017 26,240,446
Bonds due and called as of July 1,1997
and January 1, 1997, respectively 5,360,499 10,843,295
Total cash and cash equivalents 37,487,604 43,096,718
Securities inventory 19,734,464 34,920,458
Accounts receivable -- securities sales 6,273,248 8,434,547
Accounts receivable -- other 5,135,077 4,709,368
Investment in and receivables from
affiliates 1,697,777 2,775,607
Investment in leases 5,995,213 7,507,948
Notes receivable 18,705,388 23,204,541
Land, buildings and equipment, at cost,
net of accumulated depreciation of
$15,376,589 and $14,766,286,
respectively 7,677,622 7,165,857
Deferred income tax benefit 1,246,197 1,106,198
Other assets 7,575,736 8,235,257
Total assets $111,528,326 $141,156,499
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable $ 13,170,229 $ 13,245,639
Payable to customers 12,127,122 6,478,455
Payable to broker-dealers 640,161 370,791
Accounts payable 518,765 2,629,014
Dividends payable 322,327 1,049,740
Accrued income taxes - 6,361,958
Notes payable to banks 2,627,332 22,469,310
Bonds payable 21,902,647 25,011,498
Other liabilities and deferred items 6,618,361 9,320,894
Total liabilities 57,926,944 86,937,299
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 5,956,540 5,962,229
Retained earnings 61,515,035 62,305,397
Treasury stock, at cost, 1,096,963
and 1,102,773, respectively (16,962,054) (17,062,908)
Unearned compensation (452,169) (529,548)
Total stockholders' equity 53,601,382 54,219,200
Total liabilities and stockholders'
equity $111,528,326 $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 Six Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (150,152) $ 517,059
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 745,890 753,403
Provision for losses 71,500 82,606
Litigation settlement provision 1,400,000 -
Gain on sale of equipment (928) (15,161)
Unrealized loss on securities inventory 44,748 248,467
Compensation related to restricted
stock grants 77,379 86,888
Deferred income taxes (140,000) (95,000)
Undistributed (earnings of) net
dividends received from
unconsolidated affiliate 307,465 (12,038)
Changes in operating assets and
liabilities:
Decrease (Increase) in -
Securities inventory 15,141,247 11,867,599
Accounts receivable --
securities sales 2,161,299 (3,446,068)
Accounts receivable -- other (725,142) 196,657
Other operating assets 531,554 (1,905,154)
Discontinued operations -
Noncash charges and working capital
changes - 383,344
Increase (Decrease) in -
Payable to customers and
broker-dealers 5,918,037 855,912
Accounts payable (2,110,249) (2,375,818)
Income taxes payable (6,074,024) (643,170)
Other operating liabilities (4,199,931) (3,114,698)
Net cash provided by operating
activities 12,998,693 3,384,828
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Principal payments received under
leases 1,259,309 1,713,093
Sale of equipment 217,215 766,835
Payments received on notes
receivable 4,522,991 24,060,327
Liquidation of unconsolidated affiliate 787,000 -
Payments for:
Purchase of assets to be leased - (2,903,265)
Issuance of notes receivable - (25,674,163)
Capital expenditures (1,131,885) (660,252)
Net cash provided by (used in)
investing activities 5,654,630 (2,697,425)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Issuance of short-term notes
payable 40,728,000 43,998,000
Exercise of employee stock options 127,340 58,041
Issuance of bonds payable - 4,875,000
Payments of:
Principal on short-term notes
payable (40,766,000) (47,133,000)
Repayment of bonds payable (3,110,000) (4,499,000)
Purchase of treasury stock (32,175) -
Dividends (1,367,624) (1,483,338)
Net repayments under bank credit
facilities (19,841,978) 396,680
Net cash used in financing
activities (24,262,437) (3,787,617)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (5,609,114) (3,100,214)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 43,096,718 18,028,477
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 37,487,604 $ 14,928,263
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the period $ 1,814,000 $ 1,671,000
Income taxes paid during
the period $ 6,105,000 $ 556,000
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 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 $6,312,000 in commitments outstanding at June 30, 1997.
BCZ also had $845,000 of commitments related to loan participation
agreements.
As of June 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 June 30, 1997, WRR has been
identified as a potentially responsible party ("PRP") in connection with
three sites. For the first site, a specific 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 the first 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. A specific reserve of $460,000 exists to cover its
share of the clean-up costs of this second site. Payments of $42,000 have
been made on the second site and are expected to continue over the next
five years. 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 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 $692,000 at June 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 reasonably 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 June 30,
1997, unexercised options for 129,740 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 2,700 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 June 30, 1997, unexercised options for 38,500 shares were
outstanding. 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.
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 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 six month periods ending June 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 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 June 30, 1997, is as follows:
<TABLE>
<CAPTION>
BCZ ZTT
<S> <C> <C>
Aggregate indebtedness $13,515,000 $4,489,000
Net capital $13,013,000 $2,105,000
Ratio of aggregate
indebtedness to
net capital 1.04 to 1 2.13 to 1
Required net capital $ 901,000 $ 299,000
</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 June 30, 1997, there was approximately $6,984,000 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
June 30, June 30,
1997 1996
<S> <C> <C>
Income, primarily interest $2,227,863 $2,685,709
Expenses -
Interest 2,021,195 2,358,400
Amortization of bond
issuance costs 109,394 221,019
Management fees 59,177 63,333
Other 38,097 42,957
Total expenses 2,227,863 2,685,709
Net income $ - $ -
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
Income, primarily interest $4,392,098 $5,406,339
Expenses -
Interest 4,034,517 4,764,775
Amortization of bond
issuance costs 151,155 429,965
Management fees 144,083 127,305
Other 62,343 84,294
Total expenses 4,392,098 5,406,339
Net income $ - $ -
</TABLE>
Note G -- Securities Inventory
Securities inventory consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Municipal bond issues $12,954,653 $18,619,321
Corporate bond issues 816,284 358,571
Institutional bond issues 4,571,390 13,357,676
Preferred stock 674,436 1,768,185
Other securities 717,700 816,705
$19,734,463 $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 $1,790,000 in short-term borrowings outstanding at June 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 June 30, 1997 and
December 31, 1996 and income statements for the six month periods ended
June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Balance Sheets as of:
June 30, December 31,
1997 1996
<S> <C> <C>
Investment in leases $ 5,995,212 $ 7,507,948
Notes receivable 5,810,387 7,046,152
Other assets 2,548,700 2,773,088
Total assets $14,354,299 $17,327,188
Bonds payable $11,525,000 $14,302,000
Other liabilities 2,819,299 3,015,188
Total liabilities 14,344,299 17,317,188
Stockholder's equity 10,000 10,000
Total liabilities and
stockholder's equity $14,354,299 $17,327,188
</TABLE>
<TABLE>
<CAPTION>
Income Statements for the
Six Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
Lease income $ 327,054 $ 428,100
Interest income 325,147 357,276
Total income 652,201 785,376
Interest expense 528,975 572,742
Management fee (subsidy) (6,759) 9,485
Other expenses 129,985 203,149
Total expenses 652,201 785,376
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.
An analysis of each outstanding bond series as of June 30, 1997 and
for the six 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>
2 $ 100,000 $ 123,314 $ 5,437 $ 3,500 $ 1,069 $ 868
3 19,000 144,623 5,008 2,781 1,882 345
4 556,000 959,665 33,410 24,480 5,958 2,972
5 2,312,000 3,861,267 135,890 93,595 25,552 16,743
6 4,448,000 5,133,293 230,502 155,090 30,180 45,232
7 4,090,000 5,868,840 220,323 152,969 38,728 28,626
</TABLE>
Note J -- Litigation
B. C. Ziegler and Company (BCZ), a broker-dealer subsidiary of the
Company, has been made a party to a 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 has reached a
provisional settlement as the best means to manage the uncertainty and
expense of protracted litigation, and to limit the diversion of management
time. The settlement is in the amount of $1,400,000, and is conditioned
upon judicial certification of a class of bondholders as plaintiffs, and
judicial approval of the settlement. In June the court approved a motion
to certify the class and to approve the settlement. BCZ is awaiting the
approval of the final form of release, and entry by the court of the
appropriate order. 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 $2.9 million of loans
receivable, a portion of which management believes may not be collectible
based on the cash flows and other credit information discovered subsequent
to June 30, 1997. Management is in the course of investigating and
evaluating these receivables and cannot yet estimate the amount of any loss
that can be expected to properly state the receivables at 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
June 30, 1997 versus June 30, 1996
The "Company", consisting of The Ziegler Companies, Inc. and its
subsidiaries, is a financial services company whose predominant activity is
investment banking, primarily the underwriting and marketing of debt
securities for the healthcare industry, nonprofit senior living providers
and for churches and private schools. The Company's other financial
service activities include full-service and reduced-commission brokerage
services, investment management and advisory services, 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.
Total revenues of the Company were $14,592,000 in 1997 compared to
revenues from continuing operations of $10,576,000 in 1996, an increase of
$4,016,000 or 40%. Total expenses in 1997 were $12,163,000 compared to
expenses of continuing operations of $9,978,000 in 1996, an increase of
$2,185,000 or 22%. There was a provision for income taxes of $961,000 in
1997 compared to a provision for income taxes of continuing operations of
$196,000 in 1996 using a federal statutory tax rate of 34% in both periods.
In 1997 there was net income from continuing operations of $1,468,000
compared to $401,000 in 1996, an increase of $1,067,000. The net loss from
discontinued operations, net of applicable income taxes, was $66,000 in
1996. Earnings per share from continuing operations in 1997 were $.61
compared to $.17 from continuing operations and a loss of $.03 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 and broker-dealer
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. All references to
1997 and 1996 in this section of the results of operations refer to the
three months ended June 30, unless otherwise noted.
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
$10,393,000 in 1997 compared to $6,460,000 in 1996, an increase of
$3,933,000 or 61%. The increase is primarily due to an increase in
underwriting revenues and related fees of $4,100,000. Commissions from
nonunderwritten product sales, interest, insurance agency commissions and
fee income all increased but were offset by a decline in trading profits.
Total BCZCO expenses were $8,961,000 in 1997 compared to $7,241,000 in
1996, an increase of $1,720,000 or 24%. The increase is primarily due to
increased employee compensation and benefits of $1,237,000 associated with
the higher volume of revenues and the commission and incentive expense
associated with those revenues. Interest expense increased $264,000
primarily as the result of increased remarketing inventory levels and the
borrowing against credit facilities to finance the inventory. Other
expenses also increased modestly in 1997. BCZCO net income for 1997 was
$867,000 compared to a loss of $466,000 in 1996.
Ziegler Thrift Trading, Inc. (ZTT), the reduced commission brokerage
service of the Company, had total revenues of $1,539,000 in 1997 compared
to $1,545,000 in 1996, a decrease of $6,000 or less than 1%. Commission
income was $1,293,000 in 1997 compared to $1,324,000 in 1996, a decrease of
$31,000 or 2%. The minor decrease in commissions and total revenues is due
to a reduction in trading volume as compared to the prior year primarily
associated with market activity. Total expenses of ZTT were $1,150,000 in
1997 compared to $1,097,000 in 1996, an increase of $53,000 or 5%. There
were no significant increases in specific expenses in the two periods under
comparison. Net income for ZTT was $240,000 in 1997 compared to $278,000
in 1996, a decrease of $38,000 or 14%.
Ziegler Asset Management, Inc. (ZAMI), the money management services
subsidiary of the Company, had total revenues of $882,000 in 1997 compared
to $736,000 in 1996, an increase of $146,000 or 20%. The increase in
revenues is primarily due to an increase in assets under management. Total
expenses of ZAMI were $708,000 in 1997 compared to $595,000 in 1996, an
increase of $113,000 or 19%. The increase in expenses is primarily due to
an increase in employee compensation and benefits partially offset by a
reduction in subadvisory fees. Other changes in expense categories were
not significant. Net income for ZAMI was $98,000 in 1997 compared to
$79,000 in 1996, an increase of $19,000 or 24%.
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 $3,073,000 in 1997 compared to $3,059,000 in 1996, an increase of
$14,000 or less than 1%. A reduction in remediation services volume was
offset by an increase in product sales. All other services had comparable
revenues. Total gross margin for WRR was $900,000 in 1997 compared to
$911,000 in 1996. The gross margin percentage in 1997 was 29% compared to
30% in 1996. Total expenses of WRR were $671,000 in 1997 compared to
$632,000 in 1996, an increase of $39,000 or 6%. There were no significant
changes in the expenses between periods. Net income for WRR in 1997 was
$166,000 compared to $208,000 in 1996, a decrease of $42,000 or 20%.
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 $27,000 in 1997 compared to
$59,000 in 1996.
Revenue consists primarily of interest income. A low level of lending
activity and no mortgage origination activity in either 1997 or 1996 is the
reason for the decrease in revenues. Total expenses of ZFC were $55,000 in
1997 compared to $23,000 in 1996. The addition of employees to ZFC and an
outside office and the related expenses are the primary reasons for the
increase. ZFC had a net loss of $17,000 in 1997 compared to net income of
$22,000 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 $254,000
in 1997 compared to $269,000 in 1996. FCFC had expenses of $234,000 in
1997 compared to $248,000 in 1996. No new bond series were issued during
the year 1996 or the first six months of 1997. The reduction in income,
which is primarily interest, is due to the amortization of principal as
loan payments are made. The principal payments on the loans are then used
to redeem outstanding bonds which reduces interest expense, the primary
component of FCFC expenses. Net income was $12,000 in 1997 compared to
$13,000 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 since 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 $314,000 in 1997
compared to $401,000 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 is the largest component of total expenses and was
$249,000 in 1997 compared to $287,000 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
$482,000 in 1997 compared to $325,000 in 1996. Revenues consist primarily
of interest income. The increase in revenues is primarily related to the
investment earnings of the proceeds of the sale of ZLC. Total expenses of
ZCO were $305,000 in 1997 compared to an expense offset of $85,000 in 1996.
The reversal of a $336,000 loss reserve in 1996 was the primary reason for
the difference between years. Other expense items did not change
significantly. The net income for ZCO was $104,000 in 1997 compared to
$269,000 in 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Six Months Ended
June 30, 1997 and 1996
Total revenues of the Company were $24,311,000 in 1997 compared to
revenues from continuing operations of $20,572,000 in 1996, an increase of
$3,739,000 or 18%. Total expenses in 1997 were $24,572,000 compared to
expenses of continuing operations of $19,967,000 in 1996, an increase of
$4,605,000 or 23%. There was a benefit from income taxes of $111,000 in
1997 compared to a provision for income taxes of continuing operations of
$154,000 in 1996 using a federal statutory tax rate of 34% in both periods.
In 1997 there was a net loss of $150,000 compared to net income from
continuing operations of $450,000 in 1996. The loss per share in 1997 was
$.06 compared to earnings per share from continuing operations of $.19 and
from discontinued operations of $.03 in 1996. The changes in revenues,
operating expenses, and net income or loss from continuing operations were
primarily a reflection of factors related to investment banking and broker-
dealer 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. All
references to 1997 and 1996 in this section of the Results of Operations
refer to the six months ended June 30, unless otherwise noted.
Investment Banking and Broker-Dealer Activities
BCZCO had total revenues of $15,972,000 in 1997 compared to
$12,729,000 in 1996, an increase of $3,243,000 or 25%. The increase is
primarily due to an increase in underwriting revenues of $3,512,000.
Commissions from nonunderwritten product sales, interest, and insurance
agency commissions all increased but were offset by a decline in trading
profits. Total BCZCO expenses were $18,068,000 in 1997 compared to
$14,279,000 in 1996, an increase of $3,789,000 or 27%. A primary reason
for the increase is a litigation settlement of $1,400,000 related to a
defaulted bond issue underwritten by BCZCO in 1989. Expenses for employee
compensation and benefits increased $1,616,000 due to the higher commission
and incentive expense associated with the higher volume of revenues.
Interest expense increased $365,000 primarily as the result of increased
remarketing inventory levels and the related borrowing against credit
facilities to finance the inventory. Other expenses increased modestly in
1997. BCZCO had a net loss for 1997 of $1,258,000 compared to a loss in
1996 of $890,000.
ZTT had total revenues of $3,092,000 in 1997 compared to $2,963,000
in 1996, an increase of $129,000 or 4%. Commission income was $2,591,000
in 1997 compared to $2,606,000 in 1996, a decrease of $15,000 or 1%. A
decrease in ticket volume partially offset by an increase in average
commission per trade is the reason for the decreased commissions. The
overall increase in revenues is primarily due to a higher volume of stock
option financing activity in 1997. Total expenses of ZTT were $2,316,000
in 1997 compared to $2,140,000 in 1996, an increase of $176,000 or 8%.
Increases in brokerage commissions and clearing fees and increases in
employee compensation and benefits are the primary reasons for the increase
in total expenses. Net income for ZTT was $481,000 in 1997 compared to
$510,000 in 1996.
ZAMI had total revenues of $1,681,000 in 1997 compared to $1,373,000
in 1996, an increase of $308,000 or 22%. The increase in revenues is due
to an increase in assets under management which is partially due to the
transfer of investment advisory business to ZAMI from BCZ early in 1996.
Total expenses of ZAMI were $1,440,000 in 1997 compared to $1,100,000 in
1996, an increase of $340,000 or 31%. The increase in expenses is
primarily due to an increase in employee compensation and benefits. Other
changes in expense categories were not significant. Net income for ZAMI
was $134,000 in 1997 compared to $153,000 in 1996, a decrease of $19,000 or
1%.
Other Services and Activities
Total gross revenues of WRR were $5,893,000 in 1997 compared to
$6,720,000 in 1996, a decrease of $827,000 or 12%. The decrease is
primarily due to a reduced level of remediation services in 1997 partially
offset by increased product sales. Total gross margin for WRR was
$1,706,000 in 1997 compared to $1,730,000 in 1996. The gross margin
percentage in 1997 was 29% compared to 26% in 1996. The increase in the
gross margin percentage and the small reduction in total gross margin
dollars is due to the mix of product sales. An increase in higher margin
product sales and a decrease in remediation services, a lower margin
activity, is the reason for the gross margin relationships. Total expenses
of WRR were $1,344,000 in 1997 compared to $1,271,000 in 1996, an increase
of $73,000 or 6%. There were no significant changes in the expenses
between periods. Net income for WRR in 1997 was $264,000 compared to
$327,000 in 1996, a decrease of $63,000 or 19%.
Total revenues of ZFC were $70,000 in 1997 compared to $104,000 in
1996. Revenue consists primarily of interest income. A low level of
lending activity and no mortgage origination activity in either 1997 or
1996 is the reason for the decrease in revenues. Total expenses of ZFC
were $118,000 in 1997 compared to $49,000 in 1996. The addition of
employees to ZFC and an outside office and the related expenses are the
primary reasons for the increase. ZFC had a net loss of $29,000 in 1997
compared to net income of $33,000 in 1996.
Total revenues of FCFC were $513,000 in 1997 compared to $588,000 in
1996. FCFC had expenses of $479,000 in 1997 compared to $557,000 in 1996.
No new bond series were issued during the year 1996 or the first six months
of 1997. The reduction of income, which is primarily interest, is due to
the amortization of principal as loan payments are made. The principal
payments on the loans are then used to redeem outstanding bonds which
reduces interest expense, the primary component of FCFC expenses. Net
income was $21,000 in 1997 compared to $19,000 in 1996.
ZCSI had revenues of $652,000 in 1997 compared to $785,000 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 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 is the largest component of total expenses and was
$529,000 in 1997 and $573,000 in 1996. All other expense changes were not
significant.
Total revenues of ZCO were $984,000 in 1997 compared to $541,000 in
1996. Revenues consist primarily of interest income. The increase in
revenues is primarily related to the investment earnings of the proceeds of
the sale of ZLC. Total expenses of ZCO were $575,000 in 1997 compared to
$77,000 in 1996. The low expense level in 1996 is due to the reversal of
$336,000 of a previously established loss reserve. Interest expense
increased in 1997 due to an increased level of commercial paper
outstanding. Other expense items did not change significantly. The net
income for ZCO was $241,000 in 1997 compared to $302,000 in 1996.
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 7% of total Company assets at June 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
maturities up to 270 days. In the first six months of 1997, a total of
$40,728,000 of notes were issued and $40,766,000 were repaid. In the first
six months of 1996, a total of $43,998,000 of notes were issued and
$47,133,000 were repaid. The total face value of short-term notes
outstanding, without regard to interest discounts was $13,254,000 at June
30, 1997.
ZCSI issued bonds to the public as a source of cash. 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
$11,525,000 at June 30, 1997. The bonds are due serially from July, 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.
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 2010. No new bonds were issued in the first
six months of 1997. Total bonds outstanding were $9,972,000 at June 30,
1997.
WRR has bonds outstanding at 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 $337,000 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 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 June 30, 1997, BCZCO had no amounts
outstanding under the banking relationship credit facilities and had
$9,850,000 outstanding under the intercompany loan facilities. The amount
was borrowed to finance an inventory of variable rate demand notes to be
remarketed and inventory for retail investors.
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 are anticipated to be reinvested in
securities related activities and are currently segregated from other funds
until such time as the funds are used.
Subsequent to the end of the second 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.
Management for the Company is reviewing the status of these receivables,
but is currently unable to estimate the market value of the Company's
remaining auto loan portfolio and is unable to determine whether the
obligated party's ability to repay its working capital loan has been
impaired, and therefore cannot estimate at this time the amount of any loss
that can be expected respecting these receivables.
<PAGE>
PART II
Item 1. Legal Proceedings
On March 21, 1997, B. C. Ziegler and Company, a broker-dealer
subsidiary of The Ziegler Companies, Inc., was made party to a
lawsuit involving the underwriting of two bond issues. The basis
of the lawsuit against B. C. Ziegler and Company is allegations
that it failed to discover inaccuracies in disclosure documents
delivered to potential investors. A provisional settlement has
been reached for $1,400,000 with attorneys who expect to
represent a class of former bondholders. The settlement is
conditioned upon the judicial certification of a class of
bondholders as plaintiffs, and judicial approval of the
settlement. The class action was filed in the Racine County
circuit Court in the State of Wisconsin. On June 6, 1997, the
court approved a motion to certify the class and to approve the
settlement. The Company is awaiting the approval of the final
form of release, and entry by the court of the appropriate order.
Items 2 and 3.
Not applicable
Item 4. Results of Votes of Security Holders
Registrant held an annual meeting on Monday, April 21, 1997 for
which a proxy statement was sent to shareholders of record at the
close of business on February 28, 1997. A brief description of
the matters voted upon is as follows:
1. To elect two directors for a term of three years.
2. To vote on a proposal to ratify the retention of Arthur
Andersen LLP as auditors for 1996.
A total of 2,445,257 shares were outstanding and eligible to
vote. The following votes were cast and the number of
abstentions and broker nonvotes are also listed.
1. Election of directors: Shareholders voted to grant or
withhold authority to a representative of the Registrant to
vote for or against the nominees, respectively.
<TABLE>
<CAPTION>
With- Broker
Granting holding Abstaining Nonvotes
<S> <C> <C> <C> <C>
J. C. Frueh 1,988,943 16,800 6,361 277,367
J. R. Green 2,004,643 1,100 6,361 277,367
</TABLE>
The following directors continued in office: P. D. Ziegler,
F. J. Wenzel, P. R. Kellogg, P. D. J. Kenny, S. A. Roell, and
B. C. Ziegler III.
2. Retention of Arthur Andersen LLP as auditors.
<TABLE>
<CAPTION>
Broker
For Against Abstaining Nonvotes
<S> <C> <C> <C> <C>
Arthur Andersen 1,983,363 20,711 8,030 277,367
</TABLE>
Item 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: August 13, 1997 By /s/ Peter D. Ziegler
Peter D. Ziegler
President
Dated: August 13, 1997 By /s/ Dennis A. Wallestad
Dennis A. Wallestad
Senior Vice President/CFO
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,386,088
<RECEIVABLES> 11,408,325
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 46,132,842<F2>
<PP&E> 7,677,622
<TOTAL-ASSETS> 111,528,326
<SHORT-TERM> 14,960,229<F3>
<PAYABLES> 13,608,375<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 22,739,979<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 50,057,352
<TOTAL-LIABILITY-AND-EQUITY> 111,528,326
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 2,536,889
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 16,242,097<F6>
<FEE-REVENUE> 3,205,938
<INTEREST-EXPENSE> 1,732,064
<COMPENSATION> 12,638,079
<INCOME-PRETAX> (260,752)<F7>
<INCOME-PRE-EXTRAORDINARY> (150,152)<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,152)<F8>
<EPS-PRIMARY> (.06)<F8>
<EPS-DILUTED> (.06)<F8>
<FN>
<F1>Short-term investments includes 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>
<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>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,472,755
<RECEIVABLES> 10,483,394
<SECURITIES-RESALE> 0<F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 60,363,251<F2>
<PP&E> 7,079,002
<TOTAL-ASSETS> 118,315,293
<SHORT-TERM> 27,270,431<F3>
<PAYABLES> 4,880,012<F4>
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 28,837,885<F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 48,727,288
<TOTAL-LIABILITY-AND-EQUITY> 118,315,293
<TRADING-REVENUE> 0<F6>
<INTEREST-DIVIDENDS> 1,999,868
<COMMISSIONS> 0<F6>
<INVESTMENT-BANKING-REVENUES> 13,110,247<F6>
<FEE-REVENUE> 3,217,395
<INTEREST-EXPENSE> 1,505,300
<COMPENSATION> 10,664,246
<INCOME-PRETAX> 604,603<F7>
<INCOME-PRE-EXTRAORDINARY> 450,403<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 517,059<F8>
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<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 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>
