<PAGE>
Form 10-Q/A
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, 1998
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, 1998 was 2,428,454 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,
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Investment banking and
commission income $14,513,176 $10,574,392
Investment management fees 2,358,919 791,956
Interest and dividends 2,272,073 1,292,738
Gross profit on chemical products 888,388 899,970
Insurance agency 244,269 223,688
Other 964,380 809,334
----------- -----------
Total revenues 21,241,205 14,592,078
Expenses:
Employee compensation and
benefits 11,478,848 6,861,496
Commissions and clearing fees 1,528,876 277,093
Communications 1,004,287 659,818
Occupancy and equipment 1,442,429 1,244,031
Promotional 994,462 530,433
Professional and regulatory 504,818 234,230
Interest 1,804,722 914,725
Other operating expenses 1,747,726 1,440,857
----------- -----------
Total expenses 20,506,168 12,162,683
----------- -----------
Income before income taxes 735,037 2,429,395
Provision for income taxes 269,200 961,400
----------- -----------
Net income $ 465,837 $ 1,467,995
=========== ===========
Net income per share of common stock:
Basic earnings per share $.20 $.61
Diluted earnings per share .19 .60
Dividends per share $.13 $.13
Average number of shares outstanding:
Basic 2,372,579 2,392,721
Diluted 2,439,188 2,435,465
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
2
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED OPERATING STATEMENTS
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------
June 30, June 30,
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Investment banking and commission
income $23,505,396 $16,242,097
Investment management fees 4,611,595 1,539,349
Interest and dividends 4,175,907 2,536,889
Gross profit on chemical products 1,642,177 1,706,129
Insurance agency 685,424 620,182
Other 1,814,804 1,666,589
----------- -----------
Total revenues 36,435,303 24,311,235
Expenses:
Employee compensation and
benefits 20,588,323 12,638,079
Commissions and clearing fees 2,594,393 565,174
Communications 2,023,091 1,337,833
Occupancy and equipment 2,886,642 2,417,419
Promotional 1,843,361 1,061,466
Professional and regulatory 900,163 539,953
Interest 3,297,238 1,732,064
Provision for losses - 1,400,000
Other operating expenses 3,363,102 2,879,999
----------- -----------
Total expenses 37,496,313 24,571,987
----------- -----------
Loss before income taxes (1,061,010) (260,752)
Benefit from income taxes (377,600) (110,600)
----------- -----------
Net loss $ (683,410) $ (150,152)
=========== ===========
Net loss per share of common stock:
Basic and diluted loss
per share $(.29) $(.06)
Dividends per share $ .26 $ .26
Average number of shares outstanding:
Basic 2,371,964 2,390,549
Diluted 2,439,937 2,427,243
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
3
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash $ 4,963,752 $ 5,769,914
Short-term investments 20,231,103 22,849,551
Bonds due and called as of July 1, 1998
and January 1, 1998, respectively 5,209,820 6,805,665
------------ ------------
Total cash and cash equivalents 30,404,675 35,425,130
Securities inventory 101,325,916 69,255,507
Securities purchased under agreements to
resell 13,223,750 8,240,000
Accounts receivable -- securities sales 2,828,202 7,272,672
Accounts receivable -- other 6,698,625 6,660,650
Investment in and receivables from
affiliates 1,597,604 1,550,082
Investment in leases - 4,475,935
Notes receivable 8,545,513 14,513,323
Land, buildings and equipment, at cost,
net of accumulated depreciation of
$16,749,802 and $15,949,666,
respectively 11,206,353 8,879,613
Deferred income tax benefit 2,879,146 2,327,646
Other assets 8,646,810 8,876,549
------------ ------------
Total assets $187,356,594 $167,477,107
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable $ 16,298,130 $ 15,033,913
Securities sold under agreements to
repurchase 38,174,000 7,324,000
Payable to customers 4,851,110 4,668,771
Payable to broker-dealers and clearing
organizations 34,264,161 680,980
Accounts payable 1,449,045 6,098,180
Dividends payable - 1,042,222
Accrued income taxes payable - 329,982
Securities sold, not yet purchased 14,124,628 7,989,062
Notes payable to banks 8,393,892 41,833,196
Bonds payable 8,179,797 18,281,775
Other liabilities and deferred items 10,257,805 11,900,370
------------ ------------
Total liabilities 135,992,568 115,182,451
------------ ------------
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 6,059,436 6,068,647
Retained earnings 59,659,596 60,658,881
Treasury stock, at cost, 1,115,576
and 1,120,257, respectively (17,484,209) (17,600,754)
Unearned compensation (414,827) (376,148)
------------ ------------
Total stockholders' equity 51,364,026 52,294,656
------------ ------------
Total liabilities and stockholders' equity $187,356,594 $167,477,107
============ ============
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these balance sheets.
4
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------
June 30, June 30,
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (683,410) $ (150,152)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 840,355 745,890
Provision for losses - 1,400,000
Unrealized loss on securities inventory 97,517 44,748
Compensation expense related to restricted
stock grants 168,353 77,379
Deferred income taxes (551,500) (140,000)
Net dividend received from unconsolidated
affiliates - 307,465
Loss on bond retirement 94,268 -
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable --
securities sales 4,444,470 2,161,299
Accounts receivable -- other (92,087) (725,142)
Securities inventory (26,032,360) 15,141,247
Securities purchased under agreements
to resell (4,983,750) -
Other assets 11,295 603,054
Increase (Decrease) in -
Payable to customers and
broker-dealers 33,765,520 5,918,037
Accounts payable (4,649,135) (2,110,249)
Income taxes payable (329,982) (6,074,024)
Securities sold under agreements to
repurchase 30,850,000 -
Other liabilities (1,553,631) (4,200,859)
------------ -----------
Net cash provided by operating activities 31,395,923 12,998,693
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of equipment 17,125 217,215
Principal payments received under
leases 760,074 1,259,309
Sale of leased equipment 909,608 -
Sale of investment in affiliate - 787,000
Payments received on notes receivable 3,508,670 4,522,991
Sale of leases and notes 5,832,190 -
Payments for:
Issuance of new notes receivable (561,146) -
Capital expenditures (3,051,102) (1,131,885)
------------ -----------
Net cash provided by investing activities $ 7,415,419 $ 5,654,630
============ ===========
</TABLE>
5
<PAGE>
THE ZIEGLER COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
-------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
----------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Issuance of short-term notes
payable $ 41,336,000 $ 40,728,000
Exercise of employee stock options 82,469 127,340
Payments for:
Principal payments of short-term notes
payable (40,052,000) (40,766,000)
Repayments of bonds payable (3,961,000) (3,110,000)
Purchase of treasury stock (182,167) (32,175)
Cash dividends paid (1,358,097) (1,367,624)
Retirement of bonds outstanding (6,257,698) -
Net repayments under bank credit facilities (33,439,304) (19,841,978)
------------ ------------
Net cash used in financing activities (43,831,797) (24,262,437)
------------ ------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (5,020,455) (5,609,114)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 35,425,130 43,096,718
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 30,404,675 $ 37,487,604
============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid during the period $ 2,298,000 $ 1,814,000
Income taxes paid during
the period $ 646,000 $ 6,105,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Granting of restricted stock from
treasury stock $ 207,000 $ -
</TABLE>
The accompanying notes to consolidated condensed financial statements
are an integral part of these statements.
6
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
June 30, 1998
-------------
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 audited 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.
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, requires the reporting of other comprehensive income.
Other comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are included in comprehensive
income but excluded from net income. There are no items of other comprehensive
income, therefore comprehensive income equals net income.
In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS
133"), Accounting for Derivative Instruments and Hedging Activities, was issued.
The Statement establishes accounting and reporting standards for derivative
instruments. SFAS 133 is effective for fiscal years beginning after June 15,
1999. Management has not yet quantified the impacts of adopting SFAS 133 on the
financial statements and has not determined the timing of or method of adoption
of SFAS 133. Although management expects the amount to be immaterial, the
Statement could increase volatility in earnings and other comprehensive income.
Note B -- Commitments and Contingent Liabilities
- ------ --------------------------------------
In the normal course of business, B. C. Ziegler and Company (BCZ) and GS/2/
Securities, Inc. (GS/2/) enter into firm underwriting commitments for the
purchase of debt and equity issues. BCZ purchases debt issues at a specified
price. To manage the related credit and market risk exposure, BCZ attempts to
presell the debt issues to customers. BCZ had approximately $27,840,000 of firm
underwriting commitments outstanding at June 30, 1998. GS/2/ had no firm
underwriting commitments outstanding at June 30, 1998.
As of June 30, 1998, 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 of contaminants in ground water under and adjacent to the plant
site in Eau Claire, Wisconsin.
7
<PAGE>
WRR has disposed of wastes at other recycling sites which are on or 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, 1998, 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 1997 in response to an assessment
by a steering committee of PRPs at the site. WRR believes that the payment is
sufficient to cover its proportionate share of 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
approximately $7,000,000 based on current management estimates. Based on the
identification of other PRPs and the present interim allocation schedule, WRR
would be responsible for costs of approximately $420,000. WRR was notified by
the EPA that WRR is a PRP at a third site to which WRR delivered materials from
1982 to 1985. In addition, a group of major PRPs at the site have cross-
complained against WRR and other PRPs, requesting contributions for the cleanup
costs. The case is pending in a federal district court. WRR's review of the
EPA's remediation investigation and feasibility study, and other materials
prepared by the EPA on account of this site, indicates that WRR has valid
defenses to this cross complaint by the major PRP group at the site, or any
action by the 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.
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
$593,000 at June 30, 1998 and covers the costs related to the specific sites
identified above and other ongoing environmental matters. 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
- ------ ------------------------------
On January 15, 1998, the Company issued an aggregate of 10,617 shares of
restricted common stock of the Company to certain key employees under the 1993
Plan. Each employee's ownership of shares is subject to full or partial
forfeiture in accordance with a vesting schedule in the event that the
employee's employment with the Company terminates for any reason before January
15, 2001. All shares remain nonvested at June 30, 1998. The market value of the
restricted stock, when issued, was $19.50 per share. The total value at issuance
is being amortized and recorded as compensation expense over the period of
vesting. The shares may not be transferred by the recipients until vested.
Note D -- Net Capital Requirements and Customer Reserve Accounts
- ------ ------------------------------------------------------
As registered broker-dealers, BCZ, Ziegler Thrift Trading, Inc. (ZTT) and
GS/2/ Securities, Inc. (GS/2/) 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, 1998, is as follows:
8
<PAGE>
<TABLE>
<CAPTION>
BCZ ZTT GS/2/
----------- ---------- ----------
<S> <C> <C> <C>
Aggregate indebtedness $50,990,000 $ 653,000 $1,500,000
Net capital $ 8,498,000 $1,873,000 $ 466,000
Ratio of aggregate
indebtedness to
net capital 6.00 to 1 .35 to 1 3.21 to 1
Required net capital $ 3,399,000 $ 250,000 $ 100,000
</TABLE>
As a registered broker-dealer that carries customer accounts, BCZ is
subject to Securities and Exchange Commission Rule 15c3-3. BCZ must maintain a
separate bank account for the exclusive benefit of customers. The amount
maintained in this account is determined by periodic computations required under
the rule, which allows the company to maintain the computed amounts in cash or
other qualified securities. As of June 30, 1998, there was approximately
$3,504,000 in the customer reserve account.
In April, 1998, ZTT entered into an agreement to clear all transactions
through a clearing broker-dealer on a fully disclosed basis. ZTT no longer
carries customer accounts and is no longer subject to Rule 15c3-3 and,
accordingly, no longer is required to make deposits to a customer reserve
account. In May, 1998, BCZ entered into a similar agreement. However, as of June
30, 1998, BCZ still maintained some customer accounts and accordingly was still
required to maintain deposits in a customer reserve account. BCZ is in the
process of transferring all remaining customer accounts to a clearing broker.
Note E -- 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,
1998 1997
-------- ----------
<S> <C> <C>
Revenues -
Interest $960,192 $2,142,821
Gain on sale/redemption of
mortgage certificates 25,441 85,042
-------- ----------
Total revenues 985,633 2,227,863
-------- ----------
Expenses -
Interest 878,025 2,021,195
Amortization of bond issuance costs 40,635 109,394
Management fees 43,270 59,177
Other 23,703 38,097
-------- ----------
Total expenses 985,633 2,227,863
-------- ----------
Net income $ -- $ --
======== ==========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
June 30, June 30,
1998 1997
---------- ----------
<S> <C> <C>
Revenues -
Interest $2,255,947 $4,288,011
Gain on Sale/Redemption of
Mortgage Certificates 1,054,747 104,087
---------- ----------
Total Revenues 3,310,694 4,392,098
---------- ----------
Expenses -
Interest 2,087,179 4,034,517
Amortization of bond issuance costs 1,071,202 151,155
Management fees 24,091 144,083
Other 128,222 62,343
---------- ----------
Total expenses 3,310,694 4,392,098
---------- ----------
Net income $ -- $ --
========== ==========
</TABLE>
BCZ purchased approximately $39,579,000 of mortgage certificates from ZMSI
II in February, 1998. ZMSI used the proceeds from the sale to call $39,570,000
of bonds which were outstanding.
Note F -- Securities Inventory
- ------ --------------------
Securities inventory consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Municipal bond issues $ 32,046,534 $54,481,670
Collateralized mortgage obligations 5,232,793 9,300,821
Corporate bond issues 14,318,311 1,742,008
U.S. government and agency securities 42,095,469 --
Institutional bond issues 2,676,588 2,165,128
Preferred stock 3,542,919 401,766
Other securities 1,413,302 1,164,114
------------ -----------
$101,325,916 $69,255,507
============ ===========
</TABLE>
U.S. government agency securities totalling $36,990,000 were purchased by BCZ
from ZMSI II and remained in inventory at June 30, 1998. Because of the nature
of the underlying mortgage obligations, the true market value is difficult to
determine, but management believes the market values approximate par value.
Coincident with purchasing these securities, BCZ entered into a repurchase
agreement under which BCZ is able to benefit from the spread between current
short-term interest rates and the yields on the associated U.S. government
agency securities. In July 1998, BCZ sold the U.S. government agency securities
to the parent at cost which approximated par value and also transferred the
respective repurchase agreement to the parent.
10
<PAGE>
Note G -- Securities Sold, Not Yet Purchased
- ------ ----------------------------------
Marketable securities sold, not yet purchased, consist of trading
securities at market value as follows:
June 30, December 31,
1998 1997
---- ----
U.S. government and agency securities $14,124,628 $ 7,989,062
Note H -- Payable to Broker-Dealers and Clearing Organizations
- ------ ----------------------------------------------------
As of May, 1998 BCZ clears its proprietary and customer transactions
through another broker-dealer on a fully disclosed basis. The relationship with
the clearing broker results in amounts payable for transaction processing and
inventory purchases offset by fees earned and commissions and profits or losses
on securities transactions. The amount payable to the clearing broker of
approximately $34,264,000 at June 30, 1998 relates primarily to the financing of
inventory and is collateralized by securities owned by BCZ.
Note I -- 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 $8,065,000 in short-term
borrowings outstanding at June 30, 1998.
BCZ serves as the remarketing agent on certain variable-rate municipal
bonds that can be tendered back to the respective issuers, generally upon seven
days advance notice, by the holders. In its role as remarketing agent, BCZ may
purchase the tendered bonds into its own inventory. To assist in financing such
activity, BCZ obtained a $70,000,000 revolving credit facility and an
$83,000,000 uncommitted borrowing facility. Both facilities are primarily for
financing variable rate municipal bonds, although they may be used to finance
other inventory on a limited basis. The financings are done at the Federal funds
rate plus .85% and are fully collateralized. There were no amounts outstanding
under these facilities at June 30, 1998.
Note J -- 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. ZCSI has ceased any further securitization activity and no longer
intends to make offerings to the public.
11
<PAGE>
Summarized balance sheet information of ZCSI as of June 30, 1998 and
December 31, 1997 and income statements for the six month periods ended June 30,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Balance Sheets as of:
---------------------------
June 30, December 31,
1998 1997
----------- --------------
<S> <C> <C>
Investment in leases $ -- $ 4,475,934
Notes receivable 203,322 4,203,967
Other assets 594,170 2,454,051
-------- -----------
Total assets $797,492 $11,133,952
======== ===========
Bonds payable $ -- $ 8,829,000
Other liabilities 787,492 2,294,952
-------- -----------
Total liabilities 787,492 11,123,952
Stockholder's equity 10,000 10,000
-------- -----------
Total liabilities and
stockholder's equity $797,492 $11,133,952
======== ===========
Income Statements for the
Six Months Ended
----------------
June 30, June 30,
1998 1997
--------- ---------
Lease income $129,546 $327,054
Interest income 189,999 325,147
-------- ---------
Total income 319,545 652,201
-------- ---------
Interest expense 303,244 528,975
Management fee (subsidy) (69,879) (6,759)
Other expenses 86,180 129,985
-------- ---------
Total expenses 319,545 652,201
-------- ---------
Net income $ -- $ --
======== =========
</TABLE>
ZCO provides management and administrative services to ZCSI. Management
fees paid to ZCO are limited to the amount which prevents ZCSI from incurring a
loss.
During June, 1998 ZCSI sold substantially all leases and notes to a third
party. The total proceeds of the transaction were $5,832,000 which approximated
the book value of the assets sold. A total of approximately $6,258,000 was
deposited in escrow with the trustee to retire the outstanding bonds
collateralized by the leases and notes sold. The total amount deposited is
adequate to pay all principal and accrued interest on the bonds through maturity
or the first available call date which will occur on or before November 1, 1998.
The loss on the retirement of the ZCSI bonds was approximately $94,000 before
taxes.
12
<PAGE>
Note K -- Earnings per Share
- ------ ------------------
The following reconciles the numerators and denominators of the basic and
diluted EPS computations for net income (loss) for the following periods:
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
Net income $ 465,837 $1,467,995
========== ==========
Basic
- -----
Weighted average shares outstanding 2,372,579 2,392,721
========== ==========
Basic earnings per share $ .20 $ .61
========== ==========
Diluted
- -------
Weighted average shares outstanding-
Basic 2,372,579 2,392,721
Effect of dilutive securities:
Restricted stock 31,597 28,211
Employee stock purchase plan 14,632 9,482
Stock options 20,380 5,051
---------- ----------
Weighted average shares outstanding-
Diluted 2,439,188 2,435,465
========== ==========
Diluted earnings per share $ .19 $ .60
========== ==========
For the Six Months Ended
-------------------------
June 30, June 30,
1998 1997
-------- --------
Net loss $ (683,410) $ (150,152)
========== ==========
Basic
- -----
Weighted average shares outstanding 2,371,964 2,390,549
========== ==========
Basic loss per share $ (.29) $ (.06)
========== ==========
Diluted
- -------
Weighted average shares outstanding-
Basic 2,371,964 2,390,549
Effect of dilutive securities:
Restricted stock 30,085 27,196
Employee stock purchase plan 21,508 3,889
Stock options 16,380 5,609
--------- ---------
Weighted average shares outstanding-
Diluted 2,439,937 2,427,243
========= =========
Diluted loss per share $ (.29) $ (.06)
========== ==========
</TABLE>
Options to purchase 50,000 shares of common stock at $19 per share were
outstanding during the three and six month periods ended June 30, 1998, but were
not included in the computation of diluted EPS because the performance
13
<PAGE>
requirements for exercise of the options had not been met. The options,
which expire on June 30, 2007, were still outstanding at June 30, 1998.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations - Three Months Ended
June 30, 1998 versus June 30, 1997
The "Company", consisting of The Ziegler Companies, Inc. and its
subsidiaries, is a financial services company whose principal activities are
investment banking, retail/institutional sales and trading of securities, and
asset management services. The Company's investment banking services are the
underwriting and marketing of debt securities for the health care industry,
nonprofit senior living providers, and for churches and private schools, the
underwriting of equity securities as well as providing financial advisory
services. The Company also provides full-service and reduced-commission
brokerage services, investment management and advisory services, equity and
fixed income primary and secondary trading, sales of complex financial
instruments on an agency basis, and Federal Housing Administration loan
origination in conjunction with investment banking activities. The nonfinancial
services of the Company are pollution abatement, as well as the recycling,
reclaiming and disposing of chemical wastes.
This amendment is being filed to reflect the Company's determination that
$1,300,000 of cash received and recognized as revenue by its B.C. Ziegler and
Company subsidiary in the second quarter for certain hedging services actually
should have been taken into revenue over an extended period of time as future
contingencies are met.
All references to 1998 and 1997 in this section of the results of
operations refer to the three months ended June 30, unless otherwise noted.
Total revenues of the Company in 1998 were $21,241,000 compared to $14,592,000
in 1997, an increase of $6,649,000 or 46%. Expenses of the Company in 1998 were
$20,506,000 compared to $12,163,000 in 1997, an increase of $8,343,000 or 69%.
The provision for income taxes was $269,000 in 1998 and $961,000 in 1997. The
statutory federal income tax rate applicable to the Company was 34% in each of
the two periods. Net income of the Company in 1998 was $466,000 compared to
$1,468,000 in 1997, a decrease of $1,002,000 or 68%. The basic and diluted
earnings per share were $.20 and $.19 in 1998 as compared to $.61 and $.60 in
1997. The changes in revenues, operating expenses, and net income 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.
Investment Banking, Broker-Dealer and Asset Management Activities
- -----------------------------------------------------------------
B. C. Ziegler and Company ("BCZ"), the principal investment banking and
broker-dealer subsidiary of the Company, had total revenues of $14,114,000 in
1998 compared to $10,393,000 in 1997, an increase of $3,721,000 or 36%. The
increase was due to several factors. Underwriting revenues increased $1,365,000
or 21% to $7,927,000 primarily due to an increase in municipal bond
underwritings and related sales of complex financial instruments on an agency
basis. BCZ experienced a higher level of bond refunding underwritings as
municipalities took advantage of the
15
<PAGE>
lower interest rates to reduce their overall borrowing costs. Commission income
increased $700,000 or 40% to $2,444,000 due to a substantial increase in other
financial product sales, primarily mutual funds. Trading profits increased
$117,000 or 12% to $1,055,000 due to the addition of several new trading areas
to BCZ and a greater emphasis on secondary trading as a source of customer
service to institutional clients. Interest income also increased $1,288,000 or
267% to $1,729,000 due to substantially higher inventory levels. Insurance
agency and other revenues did not change significantly.
Total expenses of BCZ were $14,099,000 in 1998 compared to $8,961,000 in
1997, an increase of $5,138,000 or 57%. Employee compensation and benefits
increased $2,876,000 in 1998 to $8,729,000 primarily due to increases in
commission expense related to higher sales volumes, new hires for the secondary
sales and trading areas, and an increase in the accrual for incentive
compensation. Interest expense increased $1,096,000 to $1,418,000, primarily due
to higher inventories of variable rate demand notes, U.S. Government Agency
Securities, and secondary market issues and the related borrowing to finance
this inventory. The remaining expense increases were primarily a function of
expanding offices and activities. BCZ had net income of $37,000 in 1998 compared
to net income of $867,000 in 1997.
Ziegler Thrift Trading, Inc. ("ZTT"), the reduced-commission brokerage
service of the Company, had total revenues in 1998 of $1,324,000 compared to
$1,539,000 in 1997, a decrease of $215,000 or 14%. Commission income, the
primary source of revenues, decreased $143,000 to $1,103,000 in 1998, a 12%
decrease. Decreased trading volumes and a reduction in average commission per
trade are the reasons for the decreases. Total expenses of ZTT in 1998 were
$1,180,000 compared to $1,150,000 in 1997, an increase of $30,000 or 3%. The
resulting net income in 1998 was $90,000 compared to $240,000 in 1997, a
decrease of $150,000 or 62%.
GS/2/ Securities, Inc. ("GS/2/"), an equity investment banking, research,
asset management and broker-dealer business, had total revenues in 1998 of
$3,290,000. Its primary sources of revenue were investment advisory fees of
$1,316,000, commission income of $750,000 and investment banking fees of
$1,027,000. Total expenses of GS/2/ were $3,044,000. The largest expense
categories were employee compensation and benefits of $1,743,000 and brokerage
commission and clearing fees of $851,000. Net income for GS/2/ was $139,000 in
1998. GS/2/ was not a part of the Company in the second quarter of 1997.
Ziegler Asset Management, Inc. ("ZAMI"), the asset management services
subsidiary of the Company, had total revenues of $1,089,000 in 1998 compared to
$882,000 in 1997, an increase of $207,000 or 23%. This increase was primarily
due to increases in management fee income associated with increased assets under
management. Assets under management increased to approximately $1.2 billion at
June 30, 1998, from approximately $1 billion at June 30, 1997. Total expenses of
ZAMI were $818,000 in 1998 compared to $708,000 in 1997, an increase of $110,000
or 16%. Employee compensation and benefits increased $52,000 or 13% to $459,000.
Net income for ZAMI in 1998 was $162,000 compared to $98,000 in 1997, an
increase of $64,000 or 65%.
16
<PAGE>
Other Financial Services
- ------------------------
The Company's other financial services are primarily provided through
Ziegler Financing Corporation ("ZFC"), First Church Financing Corporation
("FCFC"), Ziegler Collateralized Securities, Inc. ("ZCSI"), Ziegler Capital
Company, LLC ("ZCC") and to a limited extent through The Ziegler Companies, Inc.
("ZCO"). ZFC provides construction financing and interim lending, primarily to
investment banking clients, and is also qualified to originate federally insured
mortgage loans for the Federal Housing Administration ("FHA"). FCFC was
organized for the purpose of issuing mortgage-backed bonds collateralized by
first mortgages on church buildings and properties. 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. ZCC was formed for the purpose of acquiring, owning,
financing and otherwise dealing with mortgages secured by senior living
facilities. Substantially all the assets of ZCSI were sold during the quarter
for no material gain or loss. The proceeds from the sale were used to pay the
company's outstanding bonds. For all practical purposes, ZCSI has ceased its
operating activities. ZCC ceased operating in May, 1998.
Other financial service revenues primarily consist of interest income and
lease income. Total revenues in 1998 of $811,000 decreased $266,000 or 25% from
revenues from the same operations of $1,077,000 in 1997. The decrease was
primarily due to a decrease in interest income and lease income. Decreasing
lease balances in ZCSI and securitized church loan balances in FCFC caused the
decreases in these businesses as this area of the business is being phased out.
Total expenses were $1,0411,000 in 1998 compared to $907,000 in 1997, an
increase of $134,000 or 15%. The increase in expenses was due to increased
activity and administrative expenses in the parent company as well as an
increase in interest expense. The net loss from other financial services was
$229,000 in 1998, compared to net income of $100,000 in 1997.
Nonfinancial Services
- ---------------------
WRR Environmental Services Co., Inc. ("WRR") is in the business of
providing pollution abatement services, blending virgin chemicals on a contract
basis for manufacturing firms, 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. Total gross revenues in 1998
were $3,567,000 compared to $3,073,000 in 1997, an increase of $494,000 or 16%.
The total gross margin for WRR and its subsidiary was $888,000 in 1998, compared
to $900,000 in 1997, a decrease of $12,000 or 1%. The gross margin percentage in
1998 was 25% compared to 29% in 1997. Total expenses of WRR in 1998 were
$634,000 compared to $671,000 in 1997, a decrease of $38,000 or 6%. The
resulting net income for WRR in 1998 was $176,000 compared to $164,000 in 1997,
an increase of $12,000 or 7%.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations - Six Months Ended
June 30, 1998 versus June 30, 1997
All references to 1998 and 1997 in this section of the results of
operations refer to the six months ended June 30, unless otherwise noted. Total
revenues of the Company in 1998 were $36,435,000 compared to $24,311,000 in
1997, an increase of $12,124,000 or 50%. Expenses of the Company in 1998 were
$37,496,000 compared to $24,572,000 in 1997, an increase of $12,924,000 or 53%.
The benefit from income taxes was $378,000 in 1998 as compared to a benefit from
income taxes of $111,000 in 1997. The statutory federal income tax rate
applicable to the Company was 34% in each of the two periods. Net loss of the
Company in 1998 was $683,000 compared to a net loss of $150,000 in 1997. The
basic and diluted loss per share were $.29 in 1998 compared to $.06 in 1997. 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 changes in the Company's nonfinancial
services company, WRR Environmental Services Co., Inc. These factors, as well as
the impact of other factors, are explained more fully in the information that
follows.
Investment Banking, Broker-Dealer and Asset Management Activities
- -----------------------------------------------------------------
B. C. Ziegler and Company ("BCZ"), the principal investment banking and
broker-dealer subsidiary of the Company, had total revenues of $22,893,000 in
1998 compared to $15,972,000 in 1997, an increase of $6,921,000 or 43%. The
increase was due to several factors. Underwriting revenues increased $1,988,000
or 24% to $10,348,000 primarily due to an increase in municipal bond
underwritings and related sales of complex financial instruments on an agency
basis. An increased volume of underwritings is the primary reason for the
increase. Many new issues were for bond refundings as municipalities took
advantage of the lower interest rate environment. Commission income increased
$1,681,000 or 50% to $5,033,000 due to a substantial increase in other financial
product sales, primarily mutual funds. Trading profits increased $888,000 or 47%
to $2,759,000 due to the addition of several new trading areas to BCZ and a
greater emphasis on secondary trading as a source of customer service to
institutional clients. Interest income also increased $2,057,000 or 229% to
$2,956,000 due to substantially higher inventory levels. Insurance agency and
other revenues did not change significantly.
Total expenses of BCZ were $25,558,000 in 1998 compared to $18,068,000 in
1997, an increase of $7,490,000 or 41%. Employee compensation and benefits
increased $5,013,000 in 1998 to $15,631,000 primarily due to increases in
commission expense related to higher sales volumes, new hires for the secondary
sales and trading areas, and an increase in the accrual for incentive
compensation. Interest expense increased $1,906,000 to $2,395,000, primarily due
to higher inventories of variable rate demand notes, U.S. government agency
securities, and other secondary market issues and the related borrowing to
finance this inventory. The remaining expense increases were primarily a
function of expanding offices and activities. BCZ had a net loss of $1,646,000
in 1998 compared to a net loss of $1,258,000 in 1997. The results in the prior
18
<PAGE>
year period included a $1,400,000 before tax settlement on a defaulted bond
issue underwritten by BCZ in 1989.
Ziegler Thrift Trading, Inc. ("ZTT"), the reduced-commission brokerage
service of the Company, had total revenues in 1998 of $2,782,000 compared to
$3,092,000 in 1997, a decrease of $310,000 or 10%. Commission income, the
primary source of revenues, decreased $207,000 to $2,281,000 in 1998, an 8%
decrease. A 1% decrease in trading volume as well as a decrease in average
commissions per trade are the primary reasons for the decreases in revenue and
commissions. Total expenses of ZTT in 1998 were $2,397,000 compared to
$2,316,000 in 1997, an increase of $81,000 or 3%. The resulting net income in
1998 was $242,000 compared to $481,000 in 1997, a decrease of $239,000 or 50%.
GS/2/ Securities, Inc. ("GS/2/"), an equity investment banking, research,
asset management and broker-dealer business, had total revenues of $5,679,000
for the first six months. Its primary sources of revenue were investment
advisory fees of $2,588,000, commission income of $1,331,000 and investment
banking fees of $1,417,000. Total expenses of GS/2/ were $5,205,000. The largest
expense categories were employee compensation and benefits of $2,846,000 and
brokerage commission and clearing fees of $1,575,000. Net income for GS/2/ was
$264,000 in 1998. GS/2/ was not a part of the Company in the first six months of
1997.
Ziegler Asset Management, Inc. ("ZAMI"), the asset management services
subsidiary of the Company, had total revenues of $2,114,000 in 1998 compared to
$1,681,000 in 1997, an increase of $433,000 or 26%. This increase was primarily
due to increases in management fee income associated with increased assets under
management which reached $1.2 billion at June 30, 1998. Total expenses of ZAMI
were $1,584,000 in 1998 compared to $1,440,000 in 1997, an increase of $144,000
or 9%. Employee compensation and benefits increased $114,000 or 14% to $913,000.
Net income for ZAMI in 1998 was $317,000 compared to $134,000 in 1997, an
increase of $183,000 or 137%.
Other Financial Services
- ------------------------
Other financial service revenues primarily consist of interest income,
lease income and mortgage fees. Total revenues in 1998 of $1,853,000 decreased
$366,000 or 16% from revenues from the same operations of $2,219,000 in 1997.
The decrease was primarily due to a decrease in interest income and lease income
as the ZCSI and FCFC operations are phased out. Total expenses were $2,079,000
in 1998 compared to $1,824,000 in 1997, an increase of $255,000 or 14%. The
increase in expenses was due to increased activity and administrative expense in
the parent company, offset by a decrease in interest expense. The net loss from
other financial services was $226,000 in 1998, compared to net income of
$233,000 in 1997.
Nonfinancial Services
- ---------------------
WRR Environmental Services Co., Inc. ("WRR") is in the business of
providing pollution abatement services, blending virgin chemicals on a contract
basis for manufacturing firms, 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. Total gross revenues in 1998
were $6,594,000 compared to $5,893,000 in 1997, an increase of $701,000 or 12%.
The total gross margin
19
<PAGE>
for WRR and its subsidiary was $1,642,000 in 1998, compared to $1,706,000 in
1997, a decrease of $64,000 or 4%. The gross margin percentage in 1998 was 25%
compared to 29% in 1997. Total expenses of WRR in 1998 were $1,259,000 compared
to $1,344,000 in 1997, a decrease of $85,000 or 6%. The resulting net income for
WRR in 1998 was $268,000 compared to $260,000 in 1997.
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 for the first six months of 1998 were
$3,051,000. Land, buildings and equipment, net of related depreciation and
amortization, was 6% of total Company assets. In 1997 the Company began
modifying its computer systems and outsourcing various activities to address the
Year 2000 issue. Anticipated spending for these modifications will be expensed
as incurred and is not expected to have a significant impact on the Company's
ongoing results of operations. The Company expects to have its primary computer
systems Year 2000 compliant by the second quarter of 1999.
The Company has a continuing requirement for cash to finance its
activities. A significant 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 1998, a total of $41,336,000 of notes
were issued and $40,728,000 were repaid. The total balance of short-term notes
outstanding was $16,298,000 as of June 30, 1998, compared to $15,034,000 as of
December 31, 1997. This source of additional cash was used primarily to finance
lending activity and securities inventory.
ZCSI issued bonds to the public as a source of cash prior to 1997. During
the second quarter of 1998, substantially all the non-cash assets of ZCSI were
sold and the proceeds used to retire all the bonds outstanding. The bonds were
used to finance the purchase of lease obligations and lease financing notes. No
new bonds have been issued in 1997 or 1998, nor does the Company contemplate
issuing bonds from this subsidiary in the future.
FCFC issued 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. There are $7,861,000
of mortgage loans outstanding at June 30, 1998, which are included in Notes
Receivable in the balance sheet. Principal payments on the mortgage loans are
received in regular installments over a 15-year amortization schedule through
2010. Total bonds outstanding at June 30, 1998 were $7,812,000. No new bonds
were issued in the first six months of 1998.
BCZ, through its Ziegler Securities Division ("ZSD"), acts as remarketing
agent for approximately $1.4 billion of variable rate demand municipal
securities, most of which ZSD previously underwrote. The securities may be
tendered at the option of the holder, generally on seven days advance notice.
The obligation of the municipal borrower to pay for tendered securities is, in
substantially all cases, supported by a third party liquidity provider, such as
a commercial bank. In order to avoid utilizing the third party liquidity
provider, municipal borrowers contract with ZSD to remarket the tendered
securities. In order to permit ZSD,
20
<PAGE>
acting as remarketing agent, to purchase securities to be held in ZSD's
inventory pending successful remarketing to others, ZSD has arranged a
committed, secured line of credit for $70 million from a syndicate of banks,
together with substantial uncommitted lines. At June 30, 1998, BCZ had no
borrowings on the uncommitted lines. BCZ can also finance these variable rate
securities with its clearing organization.
BCZ finances activities from its own resources and from unsecured lines of
credit and repurchase agreements available through banking and brokerage
relationships, and from its clearing broker-dealer using inventory as collateral
as well as intercompany borrowings, if necessary. BCZ also has broker loan and
other collateralized arrangements available through banking relationships. At
June 30, 1998, amounts outstanding under the credit facilities were $7,575,000.
ZTT and GS/2/ rely on unsecured lines of credit through their banking
relationships and intercompany borrowings to finance their activities. Any
utilization of those lines of credit is generally repaid in less than seven
days. At June 30, 1998 ZTT and GS/2/ had no borrowings outstanding under their
respective lines of credit.
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 $11,000,000 in net proceeds after taxes
from the sale of Ziegler Leasing Corporation in 1996. The net proceeds have been
invested in short term securities. The Company has requested a Private Letter
Ruling from the Internal Revenue Service about the availability of tax-favored
treatment of a possible future distribution to shareholders of the proceeds.
Additionally, the Company continues to explore reinvestment opportunities as
well as a special dividend or partial buyback of the Company's common stock
through open market purchases or a tender offer.
In the opinion of management, the Company's capital resources and available
lines of credit are adequate for present and anticipated future operations.
21
<PAGE>
PART II
-------
Items 1 through 3. Not applicable
Item 4. Results of Votes of Security Holders
Registrant held an annual meeting on Monday, April 20, 1998 for which a
proxy statement was sent to shareholders of record at the close of
business on March 6, 1997. A brief description of the matters voted upon
is as follows:
1. To elect three directors for a term of three years, and a fourth
director to fill the remaining term of a retiring director.
2. To approve a new equity-based incentive compensation program for key
employees of the Company; and
3. To vote on a proposal to ratify the retention of Arthur Andersen LLP
as auditors for 1998.
A total of 2,425,183 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 vote for or against the nominees.
<TABLE>
<CAPTION>
Grant Withhold
--------- --------
<S> <C> <C>
P. D. Ziegler 1,944,547 11,111
F. J. Wenzel 1,951,924 3,734
P. R. Kellogg 1,952,124 3,534
D. A. Carlson, Jr. 1,952,397 3,261
</TABLE>
The following directors continued in office: S. A. Roell, B. C.
Ziegler III, J. C. Frueh, and J. R. Green.
2. Approval of incentive compensation program:
<TABLE>
<CAPTION>
Broker
For Against Abstain Nonvotes
--------- ------- ------- --------
<S> <C> <C> <C>
1,569,732 12,361 82,134 291,431
</TABLE>
3. Retention of Arthur Andersen LLP as auditors:
<TABLE>
<CAPTION>
For Against Abstain
--------- ------- -------
<S> <C> <C>
1,925,586 27,141 2,931
</TABLE>
Item 5. Not applicable.
22
<PAGE>
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
23
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ZIEGLER COMPANIES, INC.
Dated: March 4, 1999 By /s/ Peter D. Ziegler
-------------------------------
Peter D. Ziegler
President
Dated: March 4, 1999 By /s/ Jeffrey C. Vredenbregt
-------------------------------
Jeffrey C. Vredenbregt
Vice President
24
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
25
<TABLE> <S> <C>
<PAGE>
<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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,963,752
<RECEIVABLES> 9,526,827
<SECURITIES-RESALE> 13,223,750 <F1>
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 111,469,033 <F2>
<PP&E> 11,206,353
<TOTAL-ASSETS> 187,356,594
<SHORT-TERM> 24,363,130 <F3>
<PAYABLES> 44,474,155 <F4>
<REPOS-SOLD> 38,174,000
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 14,124,628
<LONG-TERM> 8,508,689 <F5>
0
0
<COMMON> 3,544,030
<OTHER-SE> 47,819,996
<TOTAL-LIABILITY-AND-EQUITY> 187,356,594
<TRADING-REVENUE> 0 <F6>
<INTEREST-DIVIDENDS> 4,175,907
<COMMISSIONS> 0 <F6>
<INVESTMENT-BANKING-REVENUES> 23,505,396
<FEE-REVENUE> 4,611,595
<INTEREST-EXPENSE> 3,297,238
<COMPENSATION> 20,588,323
<INCOME-PRETAX> (1,061,010)
<INCOME-PRE-EXTRAORDINARY> (683,410)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (683,410)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
<FN>
<F1> Short-term investments includes securities purchased under resale
agreements as a short-term investment vehicle.
<F2> Financial instruments includes securities inventory, 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.
</FN>
</TABLE>
