SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 17, 1997
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I.C.H. CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-7697 43-6069928
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
9404 Genesee Avenue, LaJolla, CA 92037
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 587-8533
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Item 5. Other Events.
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On February 7, 1997, the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division Bankruptcy Court entered an order
confirming the I.C.H. Corporation First Amended Joint Plan of
Reorganization (the "Joint Plan") under Chapter 11 of the United States
Bankruptcy Code. The effective date of the Joint Plan occurred on
February 19, 1997 (the "Effective Date"). As of the Effective Date, the
I.C.H. Corporation had no significant business operations. Set forth
below is the audited opening balance sheet of I.C.H. Corporation as of
the Effective Date.
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ICH CORPORATION
CONSOLIDATED BALANCE SHEET
WITH REPORT OF INDEPENDENT ACCOUNTANTS
as of February 19, 1997
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Coopers & Lybrand
Report of Independent Accountants
To the Board of Directors
ICH Corporation:
We have audited the accompanying consolidated balance sheet of ICH Corporation
(the "Company," the entity which emerged from Chapter 11 bankruptcy) as of
February 19, 1997. This consolidated balance sheet is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated balance sheet is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures accompanying the consolidated
balance sheet. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
consolidated balance sheet presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of ICH Corporation as
of February 19, 1997, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P
Dallas, Texas
April 17, 1997
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ICH CORPORATION
CONSOLIDATED BALANCE SHEET
as of February 19, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 500,000
Other assets 200,000
Account receivable 2,790,203
Subsidiary held for sale 5,000,000
Real estate held for sale 3,700,000
Total assets $12,190,203
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, $1,000,000
authorized, none issued and outstanding $ --
Common stock, $0.01 par value, 9,000,000
authorized (see Note 7) --
Paid-in capital 12,190,203
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Total stockholders' equity $12,190,203
The accompanying notes are an integral part of the
consolidated balance sheet.
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ICH CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET
1. Organization
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ICH Corporation, referred to as Reorganized ICH Corporation (the
"Company"), is the successor to ICH Corporation (the "Predecessor
Company"). On October 10, 1995, the Predecessor Company and three of its
wholly-owned subsidiaries filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Bankruptcy Code (the "Code")
in the United States Bankruptcy Court for the Northern District of Texas,
Dallas Division (the "Bankruptcy Court"). The Predecessor Company continued
to operate and manage its assets and business as a debtor in possession as
authorized by Chapter 11 of the Code. The Predecessor Company sold seven of
eight insurance subsidiaries and also sold all of the business of Bankers
Multiple Line Insurance Company ("BML"), its remaining insurance
subsidiary, through an assumption reinsurance agreement. The Company's
Joint Plan of Reorganization (the "Reorganization Plan") was confirmed
on February 7, 1997 by the Bankruptcy Court and became effective on
February 19, 1997 (the "Reorganization Date"). As of the Reorganization
Date, the Company had no significant business operations.
Lone Star Liquidating Trust (the "Trust") was created on the Reorganization
Date as a vehicle to liquidate and distribute assets owned by the
Predecessor Company to the claimants. The Reorganization resulted in the
complete satisfaction, discharge and release of all claims against and
interests in the Company. The Company retained certain designated assets
and emerged from Chapter 11 owned by its existing preferred and common
stockholders. Existing shares of the Predecessor Company's preferred and
common stock were canceled, and the Company issued new common stock. See
Note 7.
Assets retained by the Trust and postpetition and other liabilities are not
reflected in this consolidated balance sheet as the Company does not have
legal title to the assets nor any obligations to satisfy the liabilities.
2. Consolidation:
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The consolidated balance sheet includes the accounts of the Company and
both of its wholly-owned subsidiaries SWL Holding Corporation ("SWL
Holding") and Care Financial Corporation ("Care") which owns 100% of BML.
The Company and its wholly-owned subsidiaries currently have no ongoing
business operations
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ICH CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
3. Significant Accounting Policies:
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Cash and Cash Equivalents
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The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Use of Estimates
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The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
Fresh-Start Reporting
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As holders of existing voting shares immediately before filing and
confirmation of the Reorganization Plan received less than 50% of the
voting shares of the emerging entity and as reorganization value was
estimated to be less than postpetition liabilities and allowed claims, the
Company adopted "fresh-start" reporting in accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7.
Accordingly, assets have been restated to reflect reorganization value,
which approximates fair value at the Reorganization Date.
In determining the applicability of fresh-start reporting, the
reorganization value of the Company was determined based on the
reorganization value of the Predecessor Company prior to the confirmation
of the Reorganization Plan. As the Company currently has no operations,
management did not anticipate future earnings in determining reorganization
value. Accordingly, reorganization value equals management's estimates of
the fair value of assets prior to the confirmation of the Reorganization
Plan.
As a result of adjusting the assets to fair value with the adoption of
fresh-start reporting, the Company increased the carrying value of real
estate held for sale by $961,000.
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ICH CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
4. Account Receivable:
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Account receivable represents a receivable from the Trust in accordance
with the Reorganization Plan. The Company was to receive $2,500,000 in
cash, plus proceeds of $500,000 from the settlement of a claim with a
former affiliate, for a total of $3,000,000. This receivable balance
includes the total of $3,000,000, less approximately $200,000 in costs
related to the pending acquisition (see Note 10). The Company received the
balance in full within two days of the reorganization in accordance with
the Reorganization Plan.
5. Subsidiary Held for Sale:
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BML is a property and casualty insurer domiciled in the state of Illinois
and licensed in all fifty states. As of February 19. 1997, BML has ceded
100% of its insurance operations and holds debt securities to maintain its
insurance licenses, as well as limited partnership investments, real estate
and affiliated common stock. Per the Reorganization Plan, the Trust has
legal title to net tangible assets of BML which, as of February 19, 1997,
included total assets and total liabilities (unaudited) of approximately
$34,400,000 and $1,700,000, respectively, recorded in accordance with
statutory accounting principles.
Under the terms of the Reorganization Plan, the Company has the option
through May 22, 1997 to transfer to the Trust all of the outstanding
capital stock of BML in return for a payment of $5,000,000 from the Trust.
The Company plans to sell BML, effectively for the value of its insurance
licenses, prior to May 22, 1997 or exercise its option to the Trust for
$5,000,000.
6. Real Estate:
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Real estate consists of Perry Park, a property located in Owen County,
Kentucky consisting of 2,397 acres, including an 18 hole golf course, club
house, restaurant, approximately 227 salable lots (232 have been sold and
developed), three lakes, additional platted but undeveloped lots, and
vacant acreage. As of March 6, 1997, the appraised value of the Perry Park
property established a value ranging from $3,700,000 to $4,300,000.
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ICH CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
7. Equity:
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On the Reorganization Date, all of the outstanding equity securities
("Predecessor common stock" and "Predecessor preferred stock") of the
Predecessor Company were canceled. The Company's Restated Certificate of
Incorporation authorizes the issuance of 9,000,000 shares of common stock
("the Company's common stock") and l,000,000 shares of preferred stock.
Holders of the Predecessor stocks have a two-year period in which to
exchange the canceled shares for the Company's common stock. Holders of
Predecessor stock will receive 0.0269 shares of the Company's common stock
for each share of Predecessor common stock and 0.2 shares of the Company's
common stock for each share of Predecessor preferred stock.
For a period 40 days from the Reorganization Date, holders of Predecessor
preferred stock could elect to receive a single cash payment of $0.36 per
share, to a maximum of $234, in lieu of receiving the Company's common
stock. For that same 40 day period, holders of Predecessor common stock
could elect to receive a single cash payment of $0.05 per share, to a
maximum of $250, in lieu of receiving the Company's common stock.
Holders of less than 101 shares of Predecessor common stock and 14 shares
of Predecessor preferred stock (collectively, the "nominal shareholders")
are excluded from the conversion into the Company's common stock and from
any cash payments.
Based on the number of outstanding shares of Predecessor common and
preferred stock on the Reorganization Date, after considering the nominal
shareholders, approximately 2,881,000 shares of the Company's common stock
could be issued. Upon conversion, the par value of the issued common stock
will be transferred from paid-in capital to common stock. As a result of
the cash payment option and the likelihood that some Predecessor
shareholders may not exercise their conversion option during the two-year
period, management has not determined the ultimate number of shares of
common stock which will be issued upon conversion
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ICH CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
As of February 19, 1997, the Company declared a dividend of one right (the
"Rights") for each share of the Company's common stock. Each Right
represents the right to purchase one one-thousandth of a share of Series A
Junior Participating Preferred Stock (the "Junior preferred stock"). The
Rights have an exercise price of $10.07 per right and are exercisable until
February 19, 1999. One thousand shares of the Company's authorized
preferred stock have been reserved for issuance upon the exercise of the
Rights. The Junior preferred stock has voting rights equal to l,000 votes
per share and is entitled to receive dividends, on a cumulative basis,
payable in cash, equal to 1,000 times the aggregate per share amount of all
cash dividends or all noncash dividends or other distributions declared on
the Company's common stock. Upon liquidation, the Junior preferred stock is
entitled to receive an aggregate amount per share equal to 1,000 times the
aggregate amount to be distributed per share to the holders of shares of
common stock plus any accrued and unpaid dividends.
8. Stock Options:
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The Company has two stock option plans, the Employee Stock Option Plan (the
"ESP") and the Director Stock Option Plan (the "DSP", collectively the
"Option plans"). The ESP provides for the grant of incentive stock options
and nonqualifying options to eligible officers and employees. The DSP
authorizes annual grants of 5,000 options to eligible directors subject to
an individual maximum of 40,000 options and an aggregate maximum of 280,000
options. The DSP also authorizes grants to individuals who have provided
special services to the Company and special grants to eligible
participants, at the discretion of the Option Committee of the Board of
Directors. Options granted under the Option plans expire ten years from the
date of grant. The Company has reserved 1,000,000 shares and 400,000 shares
of the Company's common stock for the ESP and the DSP, respectively.
Effective February 19, 1997, the Company granted 221,000 options under the
ESP, including 176,000 to an officer and director of the Company as part of
his two-year employment agreement, and 35,000 options under the DSP. The
options were granted at the estimated fair value of the stock on February
19, 1997 with an exercise price of $2.17 per share.
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ICH CORPORATION
NOTES TO CONSOLIDATED BALANCE SHEET, Continued
9. Income Taxes:
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Differences exist between the Company's carrying amounts of assets for
financial reporting purposes and the amounts used for tax purposes. The
Company's tax basis in the BML stock significantly exceeds its carrying
value for financial reporting purposes; however, as any tax loss generated
on the sale of BML stock could be limited pursuant to the Internal Revenue
Code and Treasury regulations thereunder, no deferred tax asset has been
recorded for the difference.
The Company's tax basis in real estate held for sale is approximately
$8,000,000, resulting in a deferred tax asset of $1,460,000 using a 34%
federal rate. The Company recorded a full valuation allowance against this
deferred tax asset due to the uncertainty surrounding its realizability as
of February 19, 1997.
10. Pending Acquisition:
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Effective February 7, 1997, the Company entered into an agreement to
purchase all of the outstanding capital stock of Sybra, Inc. ("Sybra"), a
Michigan Corporation. Sybra operates a chain of fast food restaurants (150
at September 28, 1996) clustered in four regions, primarily Texas,
Michigan, Pennsylvania and Florida, as a franchisee of Arby's, Inc. The
purchase price is approximately $40,000,000, and the expected closing date
of the acquisition is before April 30, 1997. As a condition to the
agreement, the Company must obtain formal commitment letters for the
financing of at least $31,000,000 to fund the acquisition.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to the signed on its behalf by the
undersigned hereunto duly authorized.
I.C.H. CORPORATION
By: s/ James R. Arabia
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Name: James R. Arabia
Title: President
Date: May 21, 1997
