UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
_____________________
Date of Report: September 3, 1996
Alexander & Alexander Services Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-8282 52-0969822
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
organization)
1185 Avenue of the Americas
New York, New York 10036
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(Address of principal executive offices) (Zip Code)
(212) 444-4500
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(Registrant's telephone number, including area code:)
Not Applicable
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(Former name or former address,
if changed since last report.)
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Item 5. Other Events.
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In 1994, Alexander & Alexander Services Inc. (the "Company") received a Notice
of Proposed Adjustment from the Internal Revenue Service (the "IRS") proposing
an increase in taxable income for the 1991 year which, if sustained, would have
resulted in an additional tax liability, exclusive of interest and penalties,
estimated by the Company at $50 million. The proposed adjustment related to
intercompany transactions involving the stock of a U.K. subsidiary. The Company
disagreed with the proposed adjustment and requested technical advice from the
IRS National Office. On August 6, 1996, the Company received a technical advice
memorandum ("TAM"), issued by the IRS National Office, favorable to the Company
with respect to the issues raised by the proposed adjustment. In response to
the TAM, the IRS on August 27, 1996 withdrew the proposed adjustment in its
entirety. The IRS examination of the Company's 1990 and 1991 federal income tax
returns will come to a conclusion with the disposition of this issue.
The Company engaged in a similar series of intercompany transactions in 1993. If
the IRS were to adopt a position on the 1993 transactions similar to the
position it initially took on the 1991 transactions, the potential additional
1993 tax liability, exclusive of interest and penalties, would amount to
approximately $25 million. The Company has previously reported that the IRS
commenced its examination of the tax years 1992 through 1994 in July 1996.
Based upon the favorable TAM relating to the 1991 transactions, the Company does
not expect IRS examiners to take issue with the 1993 transactions. No provision
for any potential liabilities with respect to the 1991 and 1993 transactions had
been made in the consolidated financial statements.
Under the purchase agreement for the Series B Convertible Preferred Stock, the
Company had agreed to make certain payments to the purchaser pursuant to an
indemnification, limited to $10 million, to cover tax payments and reserves in
excess of recorded tax reserves as of March 31, 1994, including the tax matters
described above. However, in light of the IRS's withdrawal of the proposed
adjustment for the 1991 year, the purchaser has agreed to waive this
indemnification. Additionally, as a result of this waiver, the Company will
reclassify $10 million of the proceeds from the issuance of the Series B
Convertible Preferred Stock as stockholders' equity, which had previously been
classified outside of stockholders' equity because of the indemnification.
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SIGNATURE
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 hereunto duly authorized.
ALEXANDER & ALEXANDER SERVICES INC.
By: /s/ Albert A. Skwiertz, Jr.
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Albert A. Skwiertz, Jr.
Senior Vice President & General Counsel
Date: September 3, 1996
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