<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the fiscal year ended December 31, 1994.
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from N/A to N/A.
Commission file number 1-10242.
KEMPER CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 36-6169781
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification Number)
ONE KEMPER DRIVE 60049
LONG GROVE, ILLINOIS -----
-------------------- (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (708) 320-4700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------------------- -----------------------------------------
Common Stock ($5 par value) New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
Title of class
--------------
Series A Cumulative Convertible Preferred Stock
<PAGE> 2
KEMPER CORPORATION (THE "COMPANY")
FORM 10-K/A
AMENDMENT NO. 1 (THIS "FORM 10-K/A")
TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
(THE "1994 FORM 10-K")
The Company hereby amends Item 14(a)(1) "Financial Statements" in PART
IV at page 73 of the 1994 Form 10-K by (i) including therein, pursuant to Rule
3-09 of Regulation S-X, the consolidated financial statements of KLMLP, L.P.
(the "MLP") for the years ended December 31, 1994 and 1993, which financial
statements are included on the following pages of this Form 10-K/A, and (ii)
adding to Item 14(a)(1) the following sentence as a new second sentence
introducing the inclusion of the aforesaid financial statements: "In addition
to the Company's consolidated financial statements filed as part of this Annual
Report on Form 10-K, the following consolidated financial statements of the MLP
are filed herewith:".
The Company hereby also amends the Index to Exhibits included at page 85
of the 1994 Form 10-K by including therein, as a new exhibit (no. 23.1) the
consent of KPMG Peat Marwick LLP, the MLP's (and the Company's) independent
auditors, which consent is included as exhibit no. 23.1 to this Form 10-K/A.
<PAGE> 3
KLMLP, L.P. AND SUBSIDIARIES
Consolidated Financial Statements
Years ended December 31, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE> 4
Independent Auditors' Report
The Board of Directors
Kemper Real Estate Management Company:
We have audited the accompanying consolidated balance sheets of KLMLP, L.P. and
subsidiaries (the Company) as of December 31, 1994 and 1993, and the related
consolidated statements of operations, owners' deficit and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management and Kemper Real Estate Management
Company. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of KLMLP, L.P. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in note 12 to the financial statements, Kemper Corporation has
entered into a definitive agreement to be acquired. If the proposed
acquisition is consummated, the continued operations of the Company will depend
upon the intent of the new owners and the outcome of negotiations between the
Company's partners to dissolve the Company. The ultimate outcome of these
matters and the effect on the Company's consolidated financial statements are
not presently determinable. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
KPMG Peat Marwick LLP
May 19, 1995
<PAGE> 5
KLMLP, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
Assets 1994 1993
------ ---- ----
<S> <C> <C>
Cash and cash equivalents $ 33,606 26,934
Receivables:
Notes receivable, net 26,665 31,664
Accounts receivable 8,327 6,613
Allowance for doubtful receivables (3,222) (4,015)
Receivable from Bedford, net -- 38,640
Due from affiliates 2,428 --
---------- ---------
34,198 72,902
---------- ---------
Real estate:
Properties held for sale and investment, net 364,822 468,756
Operating properties, net 461,245 665,998
---------- ---------
826,067 1,134,754
---------- ---------
Other assets 30,845 33,721
Minority interest 10,914 12,894
---------- ---------
$ 935,630 1,281,205
========== =========
Liabilities and Owners' Deficit
-------------------------------
Accounts payable $ 7,801 8,327
Due to affiliates -- 895
Accrued liabilities:
Interest 110,737 116,756
Development costs 22,041 19,614
Property taxes 3,176 555
Payroll -- 19
Other 6,410 6,179
---------- ---------
142,364 143,123
---------- ---------
Notes and mortgages payable 1,532,458 1,724,664
Deferred income and security deposits 8,556 10,034
---------- ---------
Total liabilities 1,691,179 1,887,043
---------- ---------
Owners' deficit:
Partners' capital (deficit) (252,786) (252,766)
Accumulated deficit (502,763) (353,072)
---------- ---------
Total owners' deficit (755,549) (605,838)
---------- ---------
$ 935,630 1,281,205
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
KLMLP, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1994 and 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Real estate operations:
Sales $ 317,666 171,383
Cost of sales (295,103) (163,609)
Closing costs (10,523) (4,500)
--------- -------
Real estate margin 12,040 3,274
--------- -------
Business operations:
Revenues 86,087 83,370
Cost of operations (31,753) (29,228)
--------- -------
Business operations margin 54,334 54,142
--------- -------
Other income:
Interest 2,575 29,622
Recognition (deferral) of income (2,354) 6,316
Other business operations 2,121 1,646
Other 1,346 --
--------- -------
Total other income 3,688 37,584
--------- -------
Other costs and expenses:
Interest, net of amounts capitalized (101,166) (145,574)
Property taxes, real estate held for sale
and investment (10,615) (7,075)
General and administrative (21,797) (21,310)
Depreciation and amortization (27,043) (27,565)
Minority interest in losses of subsidiaries (1,358) 30,025
Write-off of receivable from Bedford (811) (220,049)
Reversal (provision) for losses:
Receivable from Bedford -- 63,654
Real estate lower of cost or market (111,027) (121,891)
Notes receivable and other (677) (2,960)
Other -- (575)
------- --------
Total other costs and expenses (274,494) (453,320)
--------- --------
Loss before income taxes and extraordinary item (204,432) (358,320)
Income tax benefit (27) 26
--------- --------
Loss before extraordinary item (204,459) (358,294)
Extraordinary item--gain on extinguishment of debt from
foreclosure by related party 52,958 5,222
Extraordinary item--gain on extinguishment of third party debt 1,794 --
--------- --------
Net loss $(149,707) (353,072)
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
KLMLP, L.P. AND SUBSIDIARIES
Consolidated Statements of Owners' Deficit
Years ended December 31, 1994 and 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
Partners' Accu- Total
capital mulated owners'
(deficit) deficit deficit
--------- ------- -------
<S> <C> <C> <C>
Contribution of investments in subsidiaries $ (252,766) -- (252,766)
Net loss -- (353,072) (353,072)
---------- --------- --------
Balances, December 31, 1993 (252,766) (353,072) (605,838)
Net loss -- (149,707) (149,707)
Assumption of Bedford's equity -- 16 16
Other (20) -- (20)
---------- --------- --------
Balances, December 31, 1994 $ (252,786) (502,763) (755,549)
========== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
KLMLP, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1994 and 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (149,707) (353,072)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Cost of sales 234,140 163,609
Development costs on real estate held for sale (69,740) (56,649)
Assessment debt assumed on sales (6,531) (4,979)
Minority interest in losses of subsidiaries 1,358 (30,025)
Notes taken back on sales (5,096) (1,588)
Notes receivable (980) (198)
Collection of notes receivable 5,710 15,211
Amortization of discount on notes receivable (192) (239)
Accrued interest, net of amount capitalized 50,714 58,263
Loss from property sales 2,926 --
Depreciation and amortization 27,043 27,565
Provisions for possible losses 111,704 124,851
Gain on extinguishment of debt from foreclosure by
related party (52,958) --
Gain on extinguishment of third party debt (1,794) (5,222)
Forgiveness of Bedford debt obligation (2,200) --
Reversal of provision for receivable from Bedford -- (63,654)
Write-off of receivable from Bedford 811 220,049
Changes in operating assets and liabilities:
Accounts receivable (1,944) 320
Closing costs and impounds -- (9,853)
Other assets (4,062) (5,947)
Accounts payable and accrued liabilities (1,604) 1,266
Deferred income and security deposits 1,159 (10,420)
------- ------
Net cash provided by operating activities 138,757 69,288
------- ------
Cash flows from investing activities:
Due from affiliates 3,587 (1,392)
Net proceeds from property sales 11,277 --
Accrued interest on receivable from Bedford -- (22,824)
Paydowns of receivable from Bedford 11,992 1,706
Investment in partnerships 1,460 --
Acquisition of real estate -- (4,259)
Development costs on operating properties and properties held
for investment (10,460) (24,533)
------- -------
Net cash provided by (used in) investing activities 17,856 (51,302)
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
KLMLP, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended December 31, 1994 and 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from financing activities:
Revolving credit borrowings $ 2,000 19,950
Revolving credit payments (42,865) (53,151)
Kemper and Lumbermens borrowings 90,640 339,114
Kemper and Lumbermens payments (159,130) (417,895)
CBA Mortgage Corp. borrowings -- 187,150
Prudential borrowings -- 64,000
Other mortgage and debt borrowings 24,483 11,525
Mortgage and other debt payments (65,069) (150,320)
--------- --------
Net cash provided by (used in) financing activities (149,941) 373
--------- --------
Net increase in cash and cash equivalents 6,672 18,359
Cash and cash equivalents, beginning of year 26,934 8,575
--------- --------
Cash and cash equivalents, end of year $ 33,606 26,934
========= ========
Supplemental disclosure of noncash investing and financing
activities:
Foreclosures on real estate held as collateral for notes receivable $ (5,975) (17,052)
========= ========
Notes receivable foreclosed $ 5,975 17,052
========= ========
Assessment bonds issued on real estate held for sale $ -- (24,402)
========= ========
Assessment bonds issued on operating properties and properties
held for investment $ -- (1,246)
========= ========
Acquisition of property and ownership interest from Bedford
and affiliated entities $ (78,032) 20,931
========= ========
Assumption of debt related to acquisition of property and
ownership interests from Bedford and affiliated entities $ 82,574 (27,397)
========= ========
Accrued interest added to principal $ 33,022 61,204
========= ========
Extinguishment of debt from foreclosure by lender $ 121,304 --
========= ========
Deed in lieu of foreclosure on real estate by lender $ 34,302 17,717
========= ========
CBA Mortgage Corp. debt assumed on sales $ 45,400 --
========= ========
Assessment debt assumed on sales $ 183 --
========= ========
Tenant security deposits and other liabilities assumed on sales $ 902 --
========= ========
Mortgage and other costs assumed on sales $ 275 --
========= ========
Supplemental disclosure of cash flow information:
Interest expense paid in cash, net of amounts capitalized $ 52,812 83,759
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1994 and 1993
(Thousands of Dollars)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
Kemper Corporation subsidiaries (Kemper) and Lumbermens Mutual
Casualty Company subsidiaries (Lumbermens) owned interests in
various joint ventures (the Joint Ventures) and Kemper/Lumbermens
Properties, Inc. (KLPI). On July 15, 1993, Kemper and Lumbermens
formed KLMLP, L.P., a limited partnership (KLMLP or the Company),
by transferring to KLMLP their ownership interests in the Joint
Ventures and KLPI, except for a minor ownership percentage
retained in order to prevent tax termination of the partnerships.
At December 31, 1993, KLMLP owned 50% of KLPI and interests ranging
from 20% to 49.9% in the Joint Ventures. Peter B. Bedford and
affiliates (Bedford) also owned 50% of KLPI and interest ranging
from 25% to 50% in the Joint Ventures. As further explained in
Note 4, on January 27, 1994, Bedford transferred ownership
interests in the Joint Ventures, KLPI and certain wholly owned
entities to KLMLP under the terms of a Settlement and Discharge
Agreement. Fidelity Life Association (FLA) holds a minority
interest in several Joint Ventures. At December 31, 1994 and 1993
and during the years then ended, KLPI and the Joint Ventures were
controlled by KLMLP and are therefore reported as consolidated
subsidiaries.
For purposes of these consolidated financial statements, the
formation of KLMLP and the contribution of the ownership interests
is considered to have been effective January 1, 1993. The
consolidated financial statements include the operations of KLPI
and the Joint Ventures for the years ended December 31, 1994 and
1993.
Minority interests in deficits of corporate subsidiaries are
charged against the majority interest. Minority interest in
deficits of partnership Joint Ventures are recorded to the extent
they are considered recoverable. The minority interest included in
the consolidated balance sheet relates to the ownership interests
held by FLA, Kemper and Lumbermens, and other third-party
investors.
All dollar amounts in these notes are in thousands unless the
context indicates otherwise.
(Continued)
<PAGE> 11
2
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(b) Principles of Consolidation
The accompanying consolidated financial statements of KLMLP include the
accounts of KLPI and its wholly owned subsidiaries as follows:
KRDC, Inc. and Subsidiaries (KRDC):
OakAmCo, Inc.
Kacor Trust Deed
First Kaiser Center Partners (50% owned by KRDC and 50% owned by
Kacor Trust Deed)
Rancho and Industrial Properties Brokerage, Inc.
Hawaii Kai Development Company and Subsidiary (HKDC)
Mesa Homes and Subsidiary
Pacific Homes, Inc.
Ardenwood Financial Corporation
Camelot Financial Corporation
Margarita Village Retirement Community, Inc.
Palomar Triad, Inc.
One Corporate Centre, Inc.
Two Corporate Centre, Inc.
Crow Canyon, Inc.
Crow Canyon Properties I (49% owned by Crow Canyon, Inc.)
Crow Canyon Properties II (5% owned by Crow Canyon Properties I)
Sutter Street, Inc.
Pine/Battery Properties, Inc.
Rancho Regional Shopping Center, Inc.
Kacor Gateway, Inc.
Seattle Gateway, Inc.
Kaiser Gateway Associates (wholly owned by Kacor Gateway, Inc. and
Seattle Gateway, Inc.)
Time D.C., Inc.
Rancho California, Inc.
(Continued)
<PAGE> 12
3
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
The consolidated financial statements also include the accounts of the
Joint Ventures and wholly owned entities which are as follows:
<TABLE>
<S> <C> <C>
Bedford Properties #2* Rowland 101 Properties Crow Canyon Properties II
Benicia Properties* West Gude I Properties Tempe Tech Properties II
Cody Street Properties* Park Len D Properties Lafayette Terrace Properties
Contra Costa Diablo Industrial Denver Properties Brightseat Road Properties
Properties* Hohokam Properties Harbor Bay Shopping Center
Crow Canyon Properties Inter-State Properties Kailua Associates, Inc.
Depot Industrial Properties* Dry Creek Properties Canyon Park Properties
Diablo Properties Tustin Business Park Park Len C Properties
Concord North Properties Omni Properties Oklahoma City Properties
47th Avenue Industrial Tobin East Properties Stanley Building
Properties Bedford Spectrum 3 Properties Union I Properties
Hayward BART Properties Arbor Hills Trinity Court Properties
Holly Farm Properties* Riverside Apartments Tulsa Properties
Parkpoint Properties Stockton Properties Willow Pass Properties
Hesperian Boulevard Properties* Cranbury Properties Pringle Building
Lafayette Office Properties Delta Wetlands Properties Mason II Properties
Lafayette BART Properties Jamboree Plaza Properties Mason XIX Properties
Lafayette Rental Properties Keene Ranch Properties Park Royale
Mason Industrial Park Microdry Properties Trinity V Properties
Memory Gardens, Inc. Moreno Valley Properties Ridgeview Properties
Napa Industrial Properties Pearl Plantation Properties Lafayette Hills, Inc.
Park Len Properties Red Hill Properties Montgomery Gallery
Portland Airport Industrial Redmond BA Properties Tourelle Corporation
Properties* Scott Road Properties Wellesley Court
Southridge Properties Seagate Properties Parkstreet Properties
Rincon Industrial Properties* Bedford Spectrum Properties Concord Aviation
Stone Road Properties Woodview Properties Rancho California
Walnut Creek Properties* Brannan Street Properties
West Gude Properties Columbia Pointe II
Pozas Properties Contra Costa Diablo Industrial
Sierra Trinity Properties Properties II*
Richard Avenue Properties Concord North Properties II
Mason Industrial Park II
</TABLE>
*FLA ownership ranges from 16.67% to 30.00%.
All significant intercompany balances and transactions have been eliminated in
consolidation.
(Continued)
<PAGE> 13
4
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(c) Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with
initial maturities of three months or less. As of December 31,
1994 and 1993, cash and cash equivalents totaling $16,687 and
$15,113, respectively, are restricted under CBA Mortgage Corp. debt
agreements.
(d) Notes Receivable
Notes receivable are discounted to yield interest rates comparable
to market rates at the time the receivable originates. Discounts
are amortized over the life of the receivable using the effective
interest method.
(e) Real Estate
Properties held for sale and investment are stated at cost,
including capitalized interest and real estate taxes, but not in
excess of management's estimate of net realizable value. Net
realizable value is the estimated selling price less costs to
complete development and sell in the ordinary course of business.
The lower of cost or market reserve is reviewed annually and
adjusted accordingly. Real estate costs are allocated to
individual parcels within a project and charged to cost of sales on
a basis approximating the relative market value method.
Operating properties are stated at cost less accumulated
depreciation and, if appropriate, provision for value impairment.
Depreciation is computed principally by the straight-line method
over an estimated useful life of 35 years for buildings. Tenant
improvements are depreciated over the term of the lease.
Expenditures for repairs and maintenance are charged to cost of
operations when incurred. A provision for value impairment is
provided if estimated undiscounted future operating cash flow over
a long-term holding period plus estimated undiscounted disposition
value is less than current book value. When management receives
approval to list operating properties for sale, a lower of cost or
market reserve is recorded, if necessary, based upon the estimated
net realizable value.
Sales of real estate are recorded at the close of escrow. When
sales do not meet the requirements for recognition of income,
profit is deferred until the requirements are met.
(f) Rental Income
For financial statement purposes, rental income is recognized on a
straight-line basis over the term of the lease.
(Continued)
<PAGE> 14
5
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, Continued
(g) Deferred Costs
Deferred loan costs are amortized over the term of the related
indebtedness using a method which approximates the effective
interest method.
Lease commissions paid to obtain tenants for the properties are
deferred and amortized over the term of the respective leases.
(h) Income Taxes
KLMLP is a limited partnership, and the Joint Ventures are
generally organized as partnerships. Any taxable income or loss
of the partnerships is included in tax returns of the partners.
KLPI files consolidated Federal and state income tax returns.
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(i) Reclassifications
Certain reclassifications not affecting net loss have been made to
the 1993 consolidated financial statements in order to conform to
the 1994 presentation.
(Continued)
<PAGE> 15
6
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Real Estate
Real estate is summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Properties held for sale and investment $ 547,284 641,587
Lower of cost or market reserve (182,462) (172,831)
-------- ----------
Properties held for sale and investment, net 364,822 468,756
-------- ----------
Operating properties 635,552 803,810
Accumulated depreciation (114,970) (135,920)
Lower of cost or market reserve (59,337) (1,892)
------- ---------
Operating properties, net 461,245 665,998
------- ---------
$ 826,067 1,134,754
======= =========
</TABLE>
Interest incurred for the years ended December 31, 1994 and 1993 of
$114,985 and $144,783, respectively, was reduced by capitalized interest of
$13,819 and $13,016, respectively.
Operating properties include industrial buildings, shopping centers, office
buildings and apartments. Depreciation expense for the years ended December 31,
1994 and 1993 was $21,480 and $23,654, respectively.
The Company recorded the following provision for lower of cost or market
during the years ended December 31, 1994 and 1993 based upon the difference
between cost and estimated net realizable value of properties held for sale and
investment and operating properties listed for sale:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Properties held for sale and investment $ 40,865 119,012
Operating properties 70,162 2,879
------ -------
$ 111,027 121,891
======= =======
</TABLE>
In April 1993, a lender, Connecticut Mutual Life Insurance Company,
foreclosed on property in the Lafayette Office Properties resulting in the
recognition of a gain of $3,913.
In December 1993, the Company negotiated a foreclosure on the Diablo Plate
Building with the lender, FLA, and recognized a gain of $1,059.
In May 1993, the Company negotiated a foreclosure on the Keene Ranch
Properties with the lender, Keene Ranch Company. The foreclosures resulted in
no gain or loss as the property was written down to market value.
(Continued)
<PAGE> 16
7
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Real Estate, Continued
During 1993, KLPI sold a shopping center in Hawaii to the Bishop Estate
for approximately $39,000. KLPI recognized a gross profit on the sale
of $4,500. KLPI recognized deferred profit of $6,654 on contracts
receivable related to the shopping center which were sold to the Bishop
Estate in 1992.
In June 1994, the Company negotiated a foreclosure on the Lafayette Bart
Properties and the Canyon Park Properties with the lender, Kemper
Investors Life Insurance Company (Kemper Investors), and recognized a
gain of $17,161 and $1,146, respectively, recorded as an extraordinary
item.
Also in June 1994, the Company negotiated a foreclosure on the Keene
Ranch Properties with the lenders, Kemper Investors and KFC Portfolio
Corporation, and recognized a gain of $8,831, recorded as an
extraordinary item.
In December 1994, the Company negotiated a foreclosure on the Walnut
Creek Properties with the lenders, Kemper Investors, Federal Kemper Life
Assurance Company and Kemper/Benicia Limited Partnership, and recognized
a gain of $4,758, recorded as an extraordinary item.
In 1994, Kemper Investors accepted a deed-in-lieu of foreclosure on the
note payable secured by the Sutter Street property with outstanding
principal and interest of $31,322, resulting in a gain of $15,193,
recorded as an extraordinary item.
In May 1994, the Company entered into a real estate joint venture,
Lafayette Terrace Properties (LTP), with an outside partner. The
Company contributed the assets of Lafayette Rental Properties to the new
joint venture. The Company had negotiated a debt restructuring with the
lender to reduce the loan balance by $1,794. The loan was then assumed
by LTP.
In October 1993, KLPI negotiated a settlement on a note in foreclosure
on the Temeku property. Margarita Village Retirement Community, Inc.
(MVRC) received title to the property and the first deed of trust to
Ardenwood Financial Company remained in place. The second mortgage
holder, Primerit Bank, was granted a profit participation in exchange
for allowing the foreclosure. A Mello-Roos District (the District) has
a tax lien to provide for payment of $27,460 in bonds it sold. The
District invested the proceeds from the sale of the bonds with Executive
Life Insurance. Executive Life Insurance was taken over by the
California State Department of Insurance prior to any work being
performed on the property. On December 21, 1994, MVRC filed Chapter 11
bankruptcy in an effort to have the Mello-Roos lien removed from the
property so that the property could be sold. In February 1995, the
Court of Appeals in the Executive Life Insurance case handed down a
decision which resulted in the District's claim on Executive Life assets
being downgraded from class 5 to class 6 status, which means that there
is now a low probability that KLPI or the District will recover any
proceeds from Executive Life. KLPI will continue to negotiate a
settlement with the bondholders and file a plan of reorganization for
MVRC with the bankruptcy court.
(Continued)
<PAGE> 17
8
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Real Estate, Continued
In 1994, KLPI obtained title to properties through foreclosure of
various notes receivable. Title to the Winchester 635 property, obtained
through foreclosure, was taken subject to $2,065 in past due property
taxes and bonded assessment liens. KLPI is in the process of appeal on
the taxes and liens and currently plans to market the property subject
to these taxes and liens.
In December 1994, KLPI did not pay the semi-annual property tax
installment on 556 acres on the Winchester Hills property in Temecula.
The past due property taxes and assessments are $378 and $355,
respectively. The assessment bond payments were not made in an effort
to accelerate the settlement negotiations aimed at achieving a reduction
in the overall assessments against the property and settle various other
district issues.
(3) Notes Receivable
The notes receivable bear interest at rates ranging from 5% to 12%. The
notes are due principally in quarterly installments over periods of not
more than ten years. Deeds of trust are generally held as collateral
for the notes. The notes are subject to advance collections upon the
sale of real estate that is pledged as security. Substantially all of
the notes receivable are pledged to Wells Fargo and Bank of America
under the revolving credit agreement, as well as to Kemper and
Lumbermens. Principal on the notes receivable is summarized by annual
maturities as follows:
<TABLE>
<S> <C>
1995 $ 7,586
1996 2,282
1997 7,605
1998 1,393
1999 1,952
Thereafter 5,911
Less unearned discount (64)
----------
$ 26,665
==========
</TABLE>
In 1994 and 1993, KLPI obtained title to various properties through the
foreclosure process on several obligors. Upon foreclosure, the related
notes receivable of $5,975 and $14,200, net of an offset to the
allowance for doubtful receivables of $293 and $2,700, respectively,
were recorded as real estate at the lower of the carrying value of the
notes receivable or the fair market value of the collateral.
As of December 31, 1994, KLPI also has one note receivable of $5,263
which is in the process of foreclosure. KLPI believes that this note
will be brought current or that there is adequate collateral value in
the property to fully recover the carrying value.
(Continued)
<PAGE> 18
9
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Receivable from Bedford
The receivable from Bedford was documented under the terms of the Loan
and Security Agreement among FKLA Realty Corporation (FKLA), the Lenders
and Bedford dated September 13, 1991 and amended and restated as of July
31, 1992 (the FKLA Loan). FKLA was the agent for the Lenders; various
corporations and partnerships between Bedford and Kemper and Lumbermens,
including the Joint Ventures and KLPI, were the lenders; and Bedford was
the borrower. The FKLA Loan was secured by the pledge of certain assets
owned by Bedford in addition to the pledge of his interest in the Joint
Ventures and his 50% ownership of the stock of KLPI (collectively, the
FKLA Collateral).
The FKLA Loan required minimum mandatory payments of $45 million in
1993. Bedford's failure to make the 1993 payments on the FKLA Loan
constituted an event of default. Bedford and Kemper and Lumbermens
entered into a Forbearance Agreement dated September 13, 1993 whereby
the Lenders agreed to forbear from exercising rights and remedies
available to them as a result of Bedford's failure to make scheduled
payments until early in 1994. Bedford agreed to assume $153 million of
unsecured debt directly from the Lenders, resolve certain title and
third-party ownership interests and amend promissory note terms. The
receivables from Bedford held by substantially all of the Joint Ventures
were distributed to the Company. The receivable from Bedford held by
KLPI was retained by KLPI.
A Settlement and Discharge Agreement was executed on January 27, 1994.
Under the terms of this Agreement, the Lenders agreed to the discharge
of Bedford's indebtedness under the FKLA Loan in exchange for the
transfer to the Lenders of all of Bedford's interests in the FKLA
Collateral. The Lenders also agreed to cancel the unsecured debt
assumed by Bedford. A mutual General Release Agreement was executed
among Bedford, Kemper and Lumbermens and their respective affiliates.
The 1993 activity of the FKLA Loan to Bedford is summarized as follows:
<TABLE>
<S> <C>
Beginning balance $ 173,883
Accrued interest 24,380
Paydowns (1,706)
Additional loan costs 832
Other (2,354)
------------
Subtotal 195,035
Reversal of provision for loan loss 63,654
Write-off of loan balance (220,049)
------------
Ending balance $ 38,640
============
</TABLE>
The receivable from Bedford was reversed in 1994 and the FKLA Collateral
was recorded on the books and records of KLMLP and the Joint Ventures.
The receivable from Bedford held by KLPI was reclassified to a
receivable included in the amount due from affiliates to record its
claim on the assets now held by KLMLP and the Joint Ventures. In 1994,
KLMLP recorded a bad debt write-off of $811 related to the estimated
fair value of the FKLA Collateral acquired.
(Continued)
<PAGE> 19
10
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes and Mortgages Payable
Notes and mortgages payable consist of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Bank debt with Wells Fargo Bank, Nippon Credit Bank Ltd., and
Bank of America:
Revolving credit line with Wells Fargo Bank, secured by
KRDC, Inc. real estate and notes receivable, interest at prime plus
.5% with fixed rate options, monthly interest only payments,
principal due April 15, 1996. $ 46,825 87,691
Revolving credit line with Nippon Credit Bank Ltd., secured by Mesa
Homes real estate, interest at prime or LIBOR plus 1.35% with fixed
rate options, monthly interest only payments. Maximum
commitment of $15,000 as of December 31, 1994, matures February
1995, eligible for up to three six-month extensions. 2,438 --
Unsecured note payable to Bank of America, interest at 8.875%,
mandatory quarterly payments of $473 through maturity, due 1996. 2,725 4,668
Kemper and Lumbermens debt:
Secured by real estate and notes receivable, interest at 10% per
annum, compounded semi-annually and added to principal, due as
certain notes are collected and upon sale of certain real
estate with maturity in 2001. 117,828 116,107
Unsecured subordinated debentures at 10%, accrual of interest
through maturity; principal and accrued interest due 1996 and 1997. 91,000 91,000
Secured by real estate, interest ranging from 6.75% to 10% per
annum, with various payment terms and maturity dates through 2004. 624,416 730,537
Unsecured, interest ranging from 5.17% to 12.18% with various
payment terms and maturity dates through 2004. 287,768 260,386
--------- ---------
Subtotal-Kemper and Lumbermens debt 1,121,012 1,198,030
--------- ---------
Balance carried forward 1,173,000 1,290,389
--------- ---------
</TABLE>
(Continued)
<PAGE> 20
11
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes and Mortgages Payable, Continued
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance brought forward $1,173,000 1,290,389
KRDC, Inc. stock acquisition debt to KACC:
Unsecured debt, due monthly as certain installment notes are
collected and upon sales of certain Hawaii real estate, discounted at
12%. 671 2,593
Unsecured debt based upon residual interest agreement, annual
payments equal to four percent of certain sales, discounted at 14%. 15,928 17,211
Mortgages payable and other debt:
CBA Mortgage Corp. loans, secured by first deed of trust on real
estate, non-recourse, cross collateralized and cross defaulted,
prepayment restrictions through November 1, 1998 and prepayment
limitations thereafter, loan reserves of $16,687, (note 1(c))
interest only payable monthly in arrears at 7.96%, interest rate to
be reset on January 1, 1999, principal due December 1, 2003. 141,750 187,150
Prudential Insurance Co., secured by first deeds of trust on
real estate, monthly principal and interest payments of $377,
interest at 6.31%, due June 1998. 62,343 63,464
Secured by real estate, interest ranging from 4.11% to 14% with
various payment terms and maturity dates through December 2007. 88,178 103,064
Unsecured, interest at 5% per annum, annual principal and
interest payments, due 2003. 191 210
Assessment district debt, interest ranging from 5.5% to 10%,
with various maturity dates. 50,397 60,583
---------- ---------
$1,532,458 1,724,664
========== =========
</TABLE>
The minimum scheduled annual maturities of notes and mortgages payable at
December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995 $ 280,564
1996 286,974
1997 127,985
1998 63,211
1999 17,418
Thereafter 756,306
----------
Total $1,532,458
==========
</TABLE>
(Continued)
<PAGE> 21
12
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes and Mortgages Payable, Continued
KLMLP, the Joint Ventures and KLPI have secured and unsecured loans with
Kemper, Lumbermens and FLA. In many cases the results of operations and
sales of property will be insufficient to provide for full repayment of
these loans. Any secured loan that is not repaid in full upon sale,
foreclosure or refinancing shall remain in existence as an unsecured
loan until repaid or forgiven. As these notes mature, they are rolled
over with past due interest added to principal. The Company continues
to record interest expense on these loans until there is modification of
the debt instrument even if the lender has placed the loan in
non-accrual status, reserve status or incurred a write-down on their
books.
Effective January 1, 1994, Kemper, Lumbermens and FLA modified certain
notes and accrued interest totaling $402,099 to bear contingent interest
only, whereby no interest is accrued by the Company on these notes.
Approximately $36,132 of interest on these notes was not accrued or
expensed during the year ended December 31, 1994. The Company will be
obligated to the lenders for interest on the original terms of these
notes to the extent that proceeds from the sale of the underlying
properties would result in cash remaining after repayment of existing
principal. It is currently estimated that no cash will be available
beyond the existing principal.
Related party interest on Kemper and Lumbermens debt for the years ended
December 31, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Interest incurred $ 80,344 131,571
Interest paid 20,240 63,830
Accrued interest at December 31 109,662 113,933
</TABLE>
The CBA Mortgage Corp. loans are cross-collateralized and
cross-defaulted among properties secured by the loan, including KR Palm
Plaza, which is owned by Kemper and FLA and is not included in these
consolidated financial statements. KR Palm Plaza has a CBA Mortgage
Corp. loan of $28,300 and no Kemper debt. The CBA Mortgage Corp. loans
also restrict the sale or transfer of the properties unless additional
cash reserves are provided as required under the release provisions of
the deeds of trust.
The revolving credit line of KRDC, Inc. with Wells Fargo Bank contains
covenants which limit indebtedness and dividends, and require the
maintenance of minimum net worth and cash balances. KLPI has obtained a
waiver of the net worth covenants and has complied with the other loan
covenants. The Wells Fargo Bank Loan is supported by a buy-sell
agreement whereby certain Kemper entities are obligated to purchase 50%
of the loan under certain circumstances.
(Continued)
<PAGE> 22
13
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes and Mortgages Payable, Continued
The Joint Ventures are not in compliance with certain loan covenants on
approximately $51,732 of mortgages payable and other debt at
December 31, 1994, which could result in the repayment of the related
debt being accelerated. These covenants relate primarily to providing
audited financial statements and certain other documentation or
notification. The Joint Ventures have consistently provided internally
prepared financial information and other documentation to the lenders
when requested. The Joint Ventures have not been in compliance with
these covenants for several years, and to date, the lenders have not
enforced their rights under the loan agreements related to these
violations.
(6) Taxes on Income
The provision for income taxes for the years ended December 31, 1994 and
1993 consists of current state income tax expense (benefit) of $27 and
$(26), respectively.
The significant components of deferred income tax benefit (expense)
for the years ended December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax benefit (expense) $ (11,769) 32,675
Decrease (increase) in beginning of the year balance
of the valuation allowance for deferred tax assets 11,769 (32,675)
------- -------
$ -- --
======= =======
</TABLE>
The difference between the statutory Federal income tax rate and the
effective rate for KLPI provided in the consolidated statement of
operations is due to state taxes and limitations on recognition of tax
benefits from net operating losses.
KLPI's net operating loss carryforwards for Federal income tax purposes
expire as follows:
<TABLE>
<S> <C>
2005 $ 12,403
2006 34,118
2007 8,311
2008 151,024
2009 47,201
-----------
Total $ 253,057
===========
</TABLE>
(Continued)
<PAGE> 23
14
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Taxes on Income, Continued
The types of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities include
net operating loss carryforwards, provisions for possible losses,
depreciation, accrued expenses and capitalization of interest and
general and administrative costs. The components of the net deferred tax
asset at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets $ 81,070 97,877
Less valuation allowance (73,544) (85,313)
-------- -------
Net deferred tax assets 7,526 12,564
Deferred tax liabilities (7,526) (12,564)
-------- -------
Net deferred tax asset $ -- --
======== =======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1994
and 1993 was $85,313 and $52,638, respectively. The net change in the
valuation allowance for the year ended December 31, 1994 was a decrease
of $11,769. The decrease in the balance of deferred tax assets was
offset by a decrease in the valuation allowance. The net change in the
valuation allowance for the year ended December 31, 1993 was an increase
of $32,675. The increase in the balance of deferred tax assets was
offset by the increase in the valuation allowance.
(7) Leases
The Company owns retail, office and industrial space which it leases
under noncancelable operating leases. The leases generally provide for
specified minimum rents, percentage rents, and other charges to cover
operating expenses such as maintenance, property taxes and insurance.
Future minimum rents under these leases as of December 31, 1994 are as
follows:
<TABLE>
<S> <C>
1995 $ 45,766
1996 37,604
1997 27,105
1998 17,207
1999 11,252
Thereafter 31,598
--------
Total $170,532
========
</TABLE>
(Continued)
<PAGE> 24
15
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Commitments and Contingencies
The Company has commitments and contingent liabilities which have been
incurred in the ordinary course of business, including obligations to
complete on-site construction and to satisfy customer warranty claims,
generally for a period of one year after sale. In certain cases, the
Company is obligated under performance bonds and letters of credit to
complete installation of improvements and construction. The Company is
also involved in legal actions and other claims. Provisions have been
made for estimated losses and, in the opinion of counsel and management,
additional liabilities are not probable or would not be material to the
Company's financial position or results of operations.
Inherent in the real estate business is the possibility that there may
exist environmental conditions as a result of current and past
operations which might be in violation of various Federal and State laws
related to the protection of the environment. Management believes that
costs relating to such conditions, if any, will not have a material
effect on the consolidated financial statements.
(9) Fair Value of Financial Instruments
Statement of Financial Accounting Standard No. 107, DISCLOSURE ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure about the fair
value of all financial assets and liabilities for which it is
practicable to estimate. There is no quoted market value for any of the
Company's financial instruments.
Cash equivalents, accounts receivable, accounts payable and accrued
liabilities are carried at amounts which reasonably approximate their
fair values.
The majority of notes receivable and notes payable are at adjustable
rates or fixed rates of interest that approximate market rates; thus,
the carrying amount of such receivables and payables approximates fair
value. Certain notes payable to Kemper, Lumbermens and FLA do not bear
interest or bear interest at rates that differ from market. An estimate
of the fair value of these notes and the Residual Interest Agreement
with Kaiser Aluminum Chemical Corporation, which is included in notes
payable, is not practicable. An estimate of the fair value of Kemper
and Lumbermens debt is not practicable due to the uncertainty of
repayment.
(10) Related Party Transactions
Related party transactions with Kemper and/or Lumbermens affiliated
companies not otherwise disclosed in the notes to the consolidated
financial statements are as follows:
- Kemper Real Estate Management Company (KREMCO), under the terms of a
management agreement, manages the operations of the Company and other
affiliates. KREMCO is reimbursed for costs by payment of direct
costs incurred for a specific property, a property management fee and
a pro rata share of general overhead expenses allocated to all
properties under management based upon relative net realizable
value. Overhead allocation reimbursements and property management
fees paid to KREMCO for the years ended December 31, 1994 an 1993
were $14,227 and $16,280, respectively.
(Continued)
<PAGE> 25
16
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Related Party Transactions, Continued
- During the year ended December 31, 1994, the Company reimbursed
KREMCO for lease brokerage fees of $387 and sale brokerage fees of
$2,696.
- During the year ended December 31, 1994, KLPI paid KREMCO
development fees, which are capitalized, of $608.
- KREMCO and affiliates rent office space from the Company. The
rental income for the years ended December 31, 1994 and 1993
was $384 and $794, respectively.
- KLPI paid KR Palm Plaza, a limited partnership, a net operating
income guarantee of $822 in 1994. The guarantee expires on
September 30, 1995.
- Notes receivable includes $2,117 due from Kemper at December 31,
1994 related to the acquisition of Crow Canyon Properties from
affiliates.
- Kemper and Lumbermens made secured loans of $16,663 and $57,706
during the years ended December 31, 1994 and 1993, respectively, on
a property owned by Hawaii Kai Development Company and advanced such
funds to KRDC, Inc. and other affiliates through the common cash
management account.
- During 1994, the Joint Ventures recognized an extraordinary gain of
$5,368 for debt forgiveness due to affiliates.
Related party transactions with Bedford are as follows:
- The Company paid BCI, Inc., an affiliate of Bedford, to perform
building construction and land development for the year ended
December 31, 1993 of $3,790.
- During 1993, Bedford Properties Holdings, Ltd. (BPHL) earned a sale
commission of $1,160 on the Bishop Estate sales contract, which is
included in paydowns on the FKLA Loan. KLPI paid BPHL $257 in 1993
under the terms of a brokerage and consulting agreement related to
HKDC which expired February, 1994.
- BPHL and affiliates rented office space from properties owned by
KLPI. The rental income for the year ended December 31, 1993 was
$423.
- In 1994, the Company acquired ownership of Butterfield Financial
Corporation (Butterfield) under the Settlement Agreement with
Bedford. Butterfield issued $17,946 in letters of credit that
are outstanding at December 31, 1994 as security for improvements of
property owned by KLPI. The assets and liabilities of Butterfield
have been transferred to affiliates. Ardenwood Financial Corporation
and Camelot Financial Corporation have guaranteed the outstanding
letters of credit. In addition, Kemper has provided a $5,000
guarantee to Butterfield in support of the letters of credit.
(Continued)
<PAGE> 26
17
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Related Party Transactions, Continued
The following are other related party transactions:
- Under the terms of a cash management agreement, cash accounts
related to the Company and other affiliates of the Company,
excluding KRDC, Inc., are held in separate cash management accounts
under the name of the Company. A segregated cash management account
continues to be maintained by KRDC, Inc. as required under the Wells
Fargo Loan.
- KRDC sold $8,353 and $7,166 of property to Mesa Homes for the
years ended December 31, 1994 and 1993, respectively.
- In 1993, KRDC, Inc. sold 169 residential lots to Rancho California,
Inc. for $5,070. Rancho California, Inc. entered into a Fee Incentive
Management Agreement with Fieldstone, a southern California
homebuilder. Rancho California, Inc. closed 75 home sales in 1994.
Profit on these sales is deferred until the ultimate fee to
Fieldstone is determined with the sale of all 169 units, anticipated
to be in 1996.
- Notes receivable include $607 at December 31, 1994 from employees
of an affiliate.
Due from (to) affiliates consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Due from Kemper and Lumbermens (acquisition of
stock of Palomar Triad, Inc.) $ 2,834 2,834
Due to Bedford (acquisition of stock of Kacor Gateway,
Seattle Gateway and Rancho Regional Shopping Center, Inc.) -- (2,200)
Due to affiliates for cash advances (406) (1,529)
--------- ------
$ 2,428 (895)
========= ======
</TABLE>
(11) Liquidity
The Company does not expect to generate sufficient cash from operations
to cover all required expenditures. To the extent necessary, the
Company anticipates obtaining additional advances of funds from Kemper
and Lumbermens, extending the maturity date of the notes payable,
selling existing properties or a combination of the above to provide the
required cash.
(Continued)
<PAGE> 27
18
KLMLP, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Subsequent Events
The owners of the properties which serve as collateral for the mortgage
loans provided on December 22, 1993 by CBA Mortgage Corp. (The JV
Mortgaged Properties) have entered into a non-binding letter of intent
to sell a 49% joint venture interest in the partnerships which own the
properties to an affiliate of CBA Mortgage Corp. The acquiring party
will also have the right to purchase the remaining 51% partnership
interest until the reset date for the CBA Mortgage Corp. loans. If the
above transaction is executed with the provisions included in the letter
of intent, the impact upon the consolidated financial statements would
be a transfer of cash and cash equivalents to Kemper of approximately
$19 million, a write-down of operating properties and deferred costs of
approximately $23 million and a forgiveness of Kemper affiliates debt
and accrued interest of approximately $97 million, resulting in a net
decrease in accumulated deficit of approximately $55 million.
In May 1995, Kemper entered into a definitive merger agreement to be
acquired by an investor group led by Zurich Insurance Company. In
connection with the proposed acquisition, a significant portion of the
Company's real estate portfolio may be sold. While the amounts realized
from such sales will depend upon the nature and timing of the sales,
management believes that the ultimate net sales proceeds of the
properties may be less than the carrying values of the properties. If
Kemper so elects, these sales would be conditioned on the closing, or
the satisfaction of conditions to closing, of the sale of Kemper to the
investor group. It is not practicable at present to quantify the amount
of losses which may be incurred as a result of these sales.
Accordingly, the consolidated financial statements do not include any
additional adjustments or provisions for possible losses relating to
properties which were not previously expected to be sold. Further, if
the proposed acquisition is consummated, the continued operations of the
Company will depend upon the intent of the new owners.
In connection with the above described merger agreement, Kemper and
Lumbermens have entered into an agreement which, among other things,
could result in the dissolution of the Company on or about the date of
the sale of Kemper to the investor group. The dissolution is contingent
upon the closing of the sale of Kemper. The consolidated financial
statements do not include any adjustments relating to the distribution
of assets and liabilities or the impact of possible forgiveness of debt.
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, Kemper Corporation has duly caused this Amendment No. 1 to Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on the 28th day of September 1995.
KEMPER CORPORATION
By: /s/ DAVID B. MATHIS*
---------------------------
David B. Mathis
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Amendment No. 1 to Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 has been signed below by the following persons on behalf of
Kemper Corporation in the capacities indicated on the 28th day of September
1995.
Signature Capacities
- --------- ----------
/s/ DAVID B. MATHIS* Chairman of the Board, Chief Executive Officer
- ------------------- and Director
David B. Mathis
/s/ STEPHEN B. TIMBERS* President, Chief Operating Officer
- ---------------------- and Director
Stephen B. Timbers
/s/ JOHN H. FITZPATRICK Executive Vice President, Chief Financial
- ----------------------- Officer and Director
John H. Fitzpatrick
/s/ JOSEPH R. SITAR* Senior Vice President
- ------------------- and Chief Accounting Officer
Joseph R. Sitar
<PAGE> 29
Signature Capacities
--------- ----------
/s/ JOHN T. CHAIN JR.* Director
----------------------
John T. Chain Jr.
/s/ J. REED COLEMAN* Director
----------------------
J. Reed Coleman
/s/ RAYMOND F. FARLEY* Director
----------------------
Raymond F. Farley
/s/ PETER B. HAMILTON* Director
----------------------
Peter B. Hamilton
/s/ RICHARD D. NORDMAN* Director
-----------------------
Richard D. Nordman
/s/ KENNETH A. RANDALL* Director
-----------------------
Kenneth A. Randall
/s/ DANIEL R. TOLL* Director
----------------------
Daniel R. Toll
*By /s/ JOHN H. FITZPATRICK, pursuant to a power of attorney.
-----------------------
John H. Fitzpatrick
<PAGE> 30
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23.1 Consent of KPMG Peat Marwick LLP
<PAGE> 1
EXHIBIT NO. 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Kemper Corporation:
We consent to incorporation by reference in the Registration Statements
No. 33-50736 on Form S-8 and No. 2-71680 on Form S-3 of Kemper Corporation of
our report dated May 19, 1995, relating to the consolidated balance sheet of
KLMLP, L.P. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, owners' deficit and cash flows for the
years then ended, which report appears in the Form 10-K/A Amendment No. 1 to
the December 31, 1994 Annual Report on Form 10-K of Kemper Corporation.
KPMG PEAT MARWICK LLP
Chicago, Illinois
September 28, 1995
