<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
<TABLE>
<S> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996)
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER: 0-07477
</TABLE>
THE ENSTAR GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
GEORGIA 63-0590560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
172 COMMERCE STREET - 3RD FLOOR
MONTGOMERY, ALABAMA 36104
(Address of principal executive offices)
(334) 834-5483
(Telephone number, including area code, of agent for service)
---------------------
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 [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12,13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
The number of shares of Registrant's Common Stock, $.01 par value per
share, outstanding at October 29, 1997 was 4,478,680.
================================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE ENSTAR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 214 $ 4,749
Restricted cash............................................. 355 346
Certificates of deposit..................................... 3,708 1,238
Other....................................................... 25 55
Investment in First Union................................... 66,796 63,153
Property and equipment, net................................. 40 31
--------- ---------
Total assets...................................... $ 71,138 $ 69,572
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities Not Subject to Compromise:
Note payable.............................................. $ -- $ 18,100
Reserve for litigation settlements........................ 1,843 1,861
Accounts payable and accrued liabilities.................. 435 881
Liabilities Subject to Compromise:
Class 10A claims.......................................... -- 203
Accrued interest on all classes........................... -- 39
Other..................................................... 355 346
--------- ---------
Total liabilities................................. 2,633 21,430
--------- ---------
Shareholders' equity:
Common stock ($.01 par value; 55,000,000 shares
authorized, 4,514,306 and 100 shares issued at
September 30, 1997 and December 31, 1996,
respectively).......................................... 45 --
Additional paid-in capital................................ 167,890 167,935
Unrealized gain on investment in First Union.............. 36,022 23,949
Accumulated deficit....................................... (135,089) (143,742)
Treasury stock, at cost (30,000 shares at September 30,
1997).................................................. (363) --
--------- ---------
Total shareholders' equity........................ 68,505 48,142
--------- ---------
Total liabilities and shareholders' equity........ $ 71,138 $ 69,572
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE> 3
THE ENSTAR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -----------------------
1997 1996 1997 1996
---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Investment income.............................. $ 10,201 $ 495 $ 11,255 $ 1,372
Litigation income (expense), net............... 2 (320) (33) (69)
General and administrative expenses............ (304) (1,465) (1,167) (1,879)
Reorganization items, net...................... -- 114 (484) 417
Interest expense............................... (66) (234) (717) (543)
---------- ----------- ---------- ----------
Income (loss) before income taxes.............. 9,833 (1,410) 8,854 (702)
Income tax expense............................. (200) -- (200) --
---------- ----------- ---------- ----------
Net income (loss).............................. $ 9,633 $ (1,410) $ 8,654 $ (702)
========== =========== ========== ==========
Net income (loss) per common share............. $ 2.14 $(14,100.00) $ 2.82 $(7,020.00)
========== =========== ========== ==========
Weighted average shares outstanding............ 4,500,085 100 3,063,414 100
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 4
THE ENSTAR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
-------- -------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 8,654 $ (702)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation........................................... 8 8
Litigation income...................................... -- (1,004)
Gain on sale of First Union common stock............... (9,711) --
Changes in assets and liabilities:
Change in restricted cash.............................. (9) (2,325)
Accounts payable and accrued liabilities............... (464) 1,986
Liabilities subject to compromise...................... (233) 771
Other.................................................. 29 777
-------- -------
Net cash used in operating activities:............ (1,726) (489)
-------- -------
Cash flows from investing activities:
Proceeds from sale of First Union common stock............ 18,141 --
Reinvestment of First Union dividends..................... -- (868)
Purchases of certificates of deposit...................... (8,122) (9,228)
Maturities of certificates of deposit..................... 5,652 10,825
Purchase of property and equipment........................ (17) (1)
-------- -------
Net cash provided by investing activities:........ 15,654 728
-------- -------
Cash flows from financing activities:
Repayment of note payable................................. (18,100) --
Purchase of treasury stock................................ (363) --
-------- -------
Net cash used in financing activities:............ (18,463) --
-------- -------
Increase (decrease) in cash and cash equivalents............ (4,535) 239
Cash and cash equivalents at the beginning of the period.... 4,749 1,814
-------- -------
Cash and cash equivalents at the end of the period.......... $ 214 $ 2,053
======== =======
Supplemental disclosures of cash flow information:
Interest paid............................................... $ 750 $ --
======== =======
Income tax refund........................................... $ (36) $ (502)
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 5
THE ENSTAR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: GENERAL
The consolidated financial statements of The Enstar Group, Inc. (the
"Company") are unaudited and, in the opinion of management, include all
adjustments consisting solely of normal recurring adjustments necessary to
fairly state the Company's financial condition and results of operations for the
interim period. The results of operations for the quarter and nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the full year. These statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1996
included in the Company's Form 10 as filed with the Securities and Exchange
Commission on March 27, 1997 under the Securities Exchange Act of 1934, as
amended.
NOTE 2: INVESTMENT IN FIRST UNION
In July 1997, the Company sold 186,300 shares of common stock of First
Union Corporation for net proceeds of $18.1 million which were used to repay
indebtedness owed to First Union National Bank of Georgia. The First Union
indebtedness was incurred by the Company in October 1996 in order to make final
distributions to creditors under the Company's bankruptcy plan. Following the
sale, the Company held 667,123 shares of common stock of First Union
Corporation. On June 17, 1997 First Union Corporation declared a 2-for-1 stock
split payable July 31, 1997 for shareholders of record on July 1, 1997 changing
the Company's holdings to 1,334,246 shares at September 30, 1997.
NOTE 3: DISTRIBUTION OF NEW COMMON STOCK
On March 27, 1997, the Company distributed a portion of its new common
stock to its former shareholders of record as of June 1, 1992. The Company's old
common stock was cancelled in 1992 pursuant to its bankruptcy plan of
reorganization. The Company has paid off all creditors from its bankruptcy case,
and in accordance with the terms of its bankruptcy plan, the Company issued new
common stock to qualified former shareholders. Shareholders received one new
share for every ten shares of old cancelled stock and cash in lieu of any
fractional shares.
With respect to the distribution of the Company's new common stock,
4,514,306 shares were issued at September 30, 1997, leaving approximately
235,000 shares remaining available for subsequent distribution.
NOTE 4: TREASURY STOCK
In July 1997, the Company announced a stock repurchase program under which
the Company could repurchase up to $5 million of its common stock in the open
market at prices per share deemed favorable from time to time by the Company. In
conjunction with the stock repurchase program the Company executed a new $5
million revolving credit note with First Union National Bank of Georgia. The
note matures on July 30, 1998 and bears interest, at the Company's option, at
either a fixed rate equal to the Adjusted Eurodollar Rate, as defined, plus .6%,
or at a variable rate equal to Prime. The note is secured by shares of common
stock of First Union Corporation as defined in a stock pledge agreement. It is
anticipated the Company will repay such indebtedness from proceeds of sales of
common stock of First Union Corporation.
As of September 30, 1997, the Company had repurchased 30,000 shares of its
common stock for approximately $363,000. No funds had been drawn on the
revolving credit note with First Union National Bank of Georgia.
NOTE 5: LITIGATION CONTINGENCIES
In February 1993, the Company obtained a $15 million judgement against
Richard Grassgreen, one of the Company's former officers, who subsequently filed
for bankruptcy. In connection with the settlement of
4
<PAGE> 6
THE ENSTAR GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company's claims against the Grassgreen bankruptcy estate (the "Estate") and
others, the Company agreed to pay certain taxes of the Estate in the event the
Estate did not have sufficient funds. The IRS has appealed a determination by
the bankruptcy court that the IRS cannot seek payment of the taxes from the
Estate. The Company has accrued a liability of approximately $1,800,000 for the
potential tax and interest.
On February 11, 1997, fifteen former shareholders of the Company filed a
lawsuit against the Company. The complaint, which deals with actions occurring
prior to the Company's filing for bankruptcy in 1991, alleges that the Company
along with its then principal officers and others defrauded the plaintiffs in
violation of the Alabama Securities Act and other Alabama statutory provisions.
The plaintiffs seek compensatory damages in the amount of their alleged losses
of approximately $2 million and unspecified punitive damages. The Company filed
a motion to dismiss and/or for summary judgement on March 17, 1997. The motion
filed by the Company contends that the claims asserted are barred by the
applicable statutes of limitations. In the event the plaintiffs' claims are not
dismissed pursuant to the Company's motion, the Company intends to contest the
plaintiffs' claims vigorously.
NOTE 6: NEWLY ISSUED ACCOUNTING STANDARD
In February 1997, SFAS No. 128, "Earnings Per Share," was issued and is
effective for both interim and annual periods ending after December 15, 1997.
This Statement simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion 15, "Earnings Per Share," ("APB 15") by
replacing the presentation of primary EPS with basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed similarly to fully
diluted EPS under APB 15. The Company intends to adopt this Statement in the
fourth quarter of 1997. Application of this statement in each of the three and
nine months ended September 30, 1997 and 1996 would have no impact on the EPS
calculation.
NOTE 7: SUBSEQUENT EVENTS
During October 1997, the Company sold 155,000 call options for its First
Union Corporation common stock. The options contain a call price of $55 per
share with expiration dates of January 17, 1998 to April 18, 1998. The Company
received approximately $199,000 in proceeds from the sales.
During October 1997, the Company repurchased 5,626 shares of its common
stock for approximately $67,000. See Note 4.
5
<PAGE> 7
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Shareholders of
The Enstar Group, Inc.
Montgomery, Alabama
We have reviewed the accompanying consolidated balance sheet of The Enstar
Group, Inc. and subsidiary as of September 30, 1997 and the related consolidated
statements of operations and cash flows for the three-month and nine-month
periods ended September 30, 1997 and 1996. These financial statements are the
responsibility of The Enstar Group, Inc. and subsidiary's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Enstar Group, Inc. and
subsidiary as of December 31, 1996 and the related consolidated statements of
operations, shareholder's equity, and cash flows for the year then ended (not
presented herein); and in our report dated January 3, 1997 (January 20, 1997 as
to Note 12 and March 19, 1997 as to Note 5), we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 1996 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
October 29, 1997
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The Company's assets, aggregating approximately $71.1 million at September
30, 1997, consisted primarily of 1,334,246 shares of the common stock of First
Union Corporation (the "First Union Common Stock") (with a market value of $66.8
million), cash, cash equivalents and certificates of deposit. The Company's
holdings in First Union Common Stock reflect a 2-for-1 stock split which was
paid on July 31, 1997. Based on the average daily trading volume of shares of
First Union Common Stock, the Company believes that its investment in First
Union is readily marketable.
In July 1997, the Company sold 186,300 shares (before the 2-for-1 split) of
First Union Common Stock for net proceeds of $18.1 million which were used to
repay the Company's indebtedness owed to First Union National Bank of Georgia.
The First Union indebtedness was incurred by the Company in October 1996 for the
purpose of repaying certain of the Company's liabilities subject to compromise.
During October 1997, the Company sold 155,000 call options for its First
Union Corporation common stock. The options contain a call price of $55 per
share with expiration dates of January 17, 1998 to April 18, 1998. The Company
received approximately $199,000 in proceeds from the sales.
The Company is seeking to acquire one or more operating businesses. Until
such time as the Company uses its assets for an acquisition, the Company's only
liquidity needs are to fund operating expenses.
Financial Condition
The Company had total assets of $71.1 million at September 30, 1997
compared to $69.6 million at December 31, 1996. The change in total assets was
due to an increase in market value of the Company's First Union Common Stock of
approximately $21.7 million less $18.1 million which represents the value of the
186,300 shares sold in July 1997. In addition, cash and cash equivalents and
certificates of deposit decreased approximately $2.1 million.
The Company's total liabilities at September 30, 1997 were $2.6 million
compared to $21.4 million at December 31, 1996. The decrease in liabilities is
primarily due to the repayment of $18.1 million of indebtedness, repaying
certain liabilities subject to compromise and a reduction of accounts payable
and accrued liabilities.
Approximately $45,000 was reclassified from Additional paid-in capital to
Common stock to reflect the distribution of 4,514,306 shares of its $.01 par
value common stock through September 30, 1997.
In July 1997, the Company announced a stock repurchase program under which
the Company could repurchase up to $5 million of its common stock in the open
market at prices per share deemed favorable from time to time by the Company. As
of September 30, 1997, the Company had repurchased 30,000 shares of its common
stock for approximately $363,000. During October 1997, the Company repurchased
5,626 shares of its common stock for approximately $67,000.
Results of Operations
Investment income increased by $9,706,000 and $9,883,000 in the third
quarter and first nine months of 1997, respectively, over the same periods in
1996. These increases resulted from the gain on the sale of 186,300 shares of
First Union Common Stock and a reclassification of interest income in the second
and third quarters of 1997. Through March 1997 interest income was classified as
a reorganization item. After the distribution of its new common stock, the
Company completed its reorganization and accordingly, interest income subsequent
to March 1997 is included in investment income.
The Company had litigation income of $2,000 and litigation expense of
$33,000 for the third quarter and first nine months of 1997, respectively, as
opposed to litigation expense of $320,000 and $69,000 for the same periods in
1996. The primary reason for the difference between the third quarters of each
year was the incurrence of a disputed claim in 1996.
7
<PAGE> 9
General and administrative expenses decreased $1,161,000 and $712,000 in
the third quarter and first nine months of 1997, respectively, over the same
periods in 1996. The decreases in 1997 were primarily due to the accrual of a
one time bonus for certain directors and employees of $1.2 million in September
1996. The substantial decrease was partially offset by an increase in
professional fees incurred in connection with the preparation of the Company's
registration statement and complying with other reporting and legal requirements
of a publicly traded company.
Reorganization items consist of interest income less expenses directly
related to the reorganization of the Company. The Company completed its
reorganization in March 1997 and therefore incurred no reorganization items in
the second and third quarters of 1997. Net reorganization expense for the nine
months ended September 30, 1997 was $484,000 compared to net reorganization
income of $417,000 for the same period in 1996. The increase in net expenses for
1997 was a result of expenses incurred in connection with the distribution of
the Company's new common stock.
Interest expense was $66,000 and $717,000 in the three and nine months
ended September 30, 1997, respectively, compared to $234,000 and $543,000 for
the same periods in 1996. Interest expense for 1997 was comprised of $597,000
relating to the $18.1 million loan (repaid in July 1997, see Liquidity and
Capital Resources) and $120,000 relating to the reserve for litigation
settlements and liabilities subject to compromise. Interest expense for 1996 was
related to liabilities subject to compromise and the reserve for litigation
settlements.
Income tax expense of $200,000 was recorded for the three and nine month
periods ending September 30, 1997 due to the alternative minimum tax which
limits the utilization of net operating loss carryforwards. The additional
income tax expense that would have been recordable for the three and nine months
ended September 30, 1997 and the income tax benefit that would have been
recordable for the three and nine months ended September 30, 1996 were fully
offset by changes in the valuation allowance for deferred tax assets during the
respective periods.
8
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Since May 31, 1991, the Company has been involved in extensive litigation
relating to its bankruptcy case. The history of the Company's bankruptcy case
has been previously described by the Company in the Registration Statement on
Form 10, filed by the Company on March 27, 1997 (the "Form 10"). The Company's
bankruptcy case was closed by final decree dated July 17, 1997. Except as
described below, the Company is not aware of any pending litigation matters that
could have a material adverse effect on the Company.
In connection with the settlement of the Company's claims against the
bankruptcy estate of Richard Grassgreen, a former chairman and chief executive
officer of the Company, and others, and the confirmed plan of reorganization in
Mr. Grassgreen's bankruptcy case (the "Grassgreen Bankruptcy Estate
Settlement"), the United States Internal Revenue Service (the "IRS") has
asserted a liability of the Company for taxes allegedly owed by the Grassgreen
bankruptcy estate. In 1996, the IRS appealed a determination by the United
States Bankruptcy Court for the Middle District of Florida that the IRS cannot
seek payment of the taxes. The alleged tax liability, for calendar year 1994, is
for sums paid to the Company in connection with the settlement of the Grassgreen
Bankruptcy Estate Settlement by third parties to resolve the Company's claims
against those parties. In United States of America v. Richard J. Grassgreen and
The Enstar Group, Inc., Case No. 96-1099-CIV-J-10 (U.S.D.C. M.D. Fla.), the IRS
claims that it should be entitled to assess additional taxes in the approximate
amount of $1.6 million against the Grassgreen bankruptcy estate for 1994 and
that the IRS should be able to seek payment of those taxes from the Company by
virtue of the Company's agreement to pay certain taxes of the Grassgreen
bankruptcy estate. Although the Company has accrued a liability for the
potential tax, the Company intends to contest vigorously that any taxes are owed
by the Grassgreen bankruptcy estate. In the event a court determines that
additional taxes are owed, the Company will vigorously contest that it has any
obligation to pay such taxes.
On February 11, 1997, fifteen former shareholders of the Company filed a
lawsuit against the Company in the Circuit Court of Montgomery County, Alabama
styled Peter N. Zachary, et al. v. The Enstar Group, Inc., Case No.
CV-97-257-Gr. The complaint, which deals with actions occurring prior to the
Company's filing for bankruptcy in 1991, alleges that the Company along with its
then principal officers and others defrauded the plaintiffs in violation of the
Alabama Securities Act and other Alabama statutory provisions. The plaintiffs
seek compensatory damages in the amount of their alleged losses of approximately
$2 million and unspecified punitive damages. The complaint is virtually
identical to a complaint brought by these plaintiffs against the Company's
former chairman, former president and others in December, 1991, during the
pendency of the Company's bankruptcy case and prior to the confirmation of the
reorganization plan. The plaintiffs allege that the bankruptcy court issued an
order on January 15, 1997, allowing them to litigate their claims against the
Company. The bankruptcy court's order actually held that the plaintiffs could
not bring a late claim against the Company in its bankruptcy case and then went
on to state that because of facts relating to these particular plaintiffs, they
were not bound by the provisions of the reorganization plan and their claims
were not subject to discharge under the bankruptcy code. The Company filed a
motion to dismiss and/or for summary judgement on March 17, 1997. The motion
filed by the Company contends that the claims asserted are barred by the
applicable statutes of limitations. In the event the plaintiffs' claims are not
dismissed pursuant to the Company's motion, the Company intends to contest the
plaintiffs' claims vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
REFERENCE
NO. DESCRIPTION OF EXHIBIT
- --------- ----------------------
<C> <C> <S>
27.1 -- Financial Data Schedule (For SEC use only)
99.1 -- Deferred Compensation and Stock Plan for Non-Employee
Directors
</TABLE>
9
<PAGE> 11
(b) Reports on Form 8-K
(i) A report on Form 8-K dated July 3, 1997 announcing the sale of First
Union Stock to retire debt and announcing the adoption of a stock repurchase
program.
10
<PAGE> 12
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 ENSTAR GROUP, INC.
By: /s/ CHERYL D. DAVIS
------------------------------------
Cheryl D. Davis
Chief Financial Officer, Vice
President
of Corporate Taxes, Secretary
(Authorized Officer)
(Principal Financial Officer)
Date: October 30, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED FINANCIAL STATEMENTS CONTAINED IN ITS REPORT ON FORM 10-Q
FOR THE PERIOD ENDING SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 569<FN>
<SECURITIES> 70,504
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 70,998
<PP&E> 95
<DEPRECIATION> 55
<TOTAL-ASSETS> 71,138
<CURRENT-LIABILITIES> 435
<BONDS> 0
0
0
<COMMON> 45
<OTHER-SE> 68,460
<TOTAL-LIABILITY-AND-EQUITY> 71,138
<SALES> 0
<TOTAL-REVENUES> 11,255
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 717
<INCOME-PRETAX> 8,854
<INCOME-TAX> 200
<INCOME-CONTINUING> 8,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,654
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 2.82
<FN>
INCLUDES CASH EQUIVALENTS
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
THE ENSTAR GROUP, INC.
DEFERRED COMPENSATION AND STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
--------------------------------------------
ARTICLE 1
PURPOSE
The purposes of The Enstar Group, Inc. Deferred Compensation and Stock
Plan For Non-Employee Directors (the "Plan") are to enable the Company to
attract and retain qualified persons to serve as Non-Employee Directors, to
solidify the common interests of its Non-Employee Directors and shareholders by
enhancing the equity interest of Non-Employee Directors in the Company, and to
encourage the highest level of Non-Employee Director performance by providing
such Non-Employee Directors with a proprietary interest in the Company's
performance and progress by permitting Non-Employee Directors to receive all or
a portion of their Retainer and Meeting Fees in Common Stock and to defer all or
a portion of their Retainer and Meeting Fees in Stock Units.
ARTICLE 2
EFFECTIVE DATE
The Plan shall be effective as of September 30, 1997.
ARTICLE 3
DEFINITIONS
Whenever used in the Plan, the following terms shall have the
respective meanings set forth below:
3.1 "Account" means, with respect to each Participant, the Participant's
separate individual bookkeeping account established and maintained by
the Company for the exclusive purpose of accounting for the
Participant's Stock Units hereunder.
3.2 "Beneficiary" means, with respect to each Participant, the recipient or
recipients designated by the Participant who are, upon the
Participant's death, entitled in accordance with the Plan's terms to
receive the benefits to be paid with respect to the Participant.
3.3 "Board" means the Board of Directors of the Company.
3.4 "Committee" means any committee of the Board.
3.5 "Common Stock" means the common stock, par value $.01 per share, of the
Company.
<PAGE> 2
3.6 "Company" means The Enstar Group, Inc., a Georgia corporation, and any
successor thereto.
3.7 "Director" means an individual who is a member of the Board.
3.8 "Market Value" means the average of the high and low bid prices of the
Common Stock in the Over-the-Counter market on the date in question or,
if bids for the Common Stock shall not have been made on such date,
then the first day prior thereto on which bids were made in the
Over-the-Counter market for the Common Stock; provided, however, that
if the Common Stock is no longer traded in the Over-the-Counter market,
then Market Value shall mean the fair market value of the Common Stock
as determined in good faith by the Board.
3.9 "Non-Employee Director" means any person who serves on the Board and
who is not an officer or employee of the Company or any of its
subsidiaries.
3.10 "Participant" means any Non-Employee Director who has made an election
to receive all or a portion of such Non-Employee Director's Retainer
and Meeting Fees in shares of Common Stock and/or to defer payment of
all or a portion of such Retainer and Meeting Fees in Stock Units.
3.11 "Retainer and Meeting Fees" means the retainer and meeting fees payable
to Non-Employee Directors for service on the Board and attendance at
Board and Committee meetings, as such retainer and meetings fees shall
be established from time-to-time by the Board, but excluding any
reimbursement received by Non-Employee Directors for expenses incurred
in performance of service as a Director.
3.12 "Stock Unit" means a measure of value, expressed as a share of Common
Stock, credited to a Participant under this Plan who has elected
hereunder to receive all or a portion of such Participant's Retainer
and Meeting Fees in Common Stock and has elected hereunder to defer
receipt of such Common Stock in accordance with the provisions hereof.
No certificates shall be issued with respect to such Stock Units, but
the Company shall maintain an Account in the name of the Participant to
which the Stock Units shall relate.
3.13 "Termination" means retirement from the Board or termination of service
as a Director for any other reason.
ARTICLE 4
ELECTION TO RECEIVE COMMON STOCK FOR RETAINER AND
MEETING FEES AND TO DEFER
RETAINER AND MEETING FEES IN STOCK UNITS
4.1 ELECTION
On or before December 31 of any year, for calendar years subsequent to
1997, a Non-Employee Director may elect to: (a) receive all or a specified
portion of the Director's Retainer and
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Meeting Fees for the following fiscal year in shares of Common Stock; and (b)
defer payment with respect to such Retainer and Meeting Fees in Stock Units
which shall be payable only upon the Director's Termination. All such elections
shall be made upon the form of election prescribed by the Company for such
purpose and shall be effective upon receipt by the Company of such election form
duly executed by the Participant.
For the 1997 calendar year, a Non-Employee Director may choose to
receive shares of Common Stock under the Plan only with respect to Retainer and
Meeting Fees payable on or after September 30, 1997 and may elect to defer
payment with respect to Retainer and Meeting Fees payable for services rendered
on or after September 30, 1997, by filing an election to so participate on or
before September 30, 1997.
A Non-Employee Director elected to fill a vacancy on the Company's
Board and who was not a Director on the preceding December 31, or whose term of
office did not begin until after that date, may file an election to participate
in the Plan and commence deferral of receipt of Retainer and Meeting Fees
payable to such Director in the fiscal quarter immediately following the fiscal
quarter in which such Director joined the Board and filed such election.
4.2 REVOCATION OR MODIFICATION OF ELECTION
An effective election pursuant to Section 4.1 may not be revoked or
modified with respect to the Retainer and Meeting Fees payable for a calendar
year or portion of a calendar year for which such election is effective. An
effective election may be revoked or modified for any subsequent calendar year
by the filing of an election on or before December 31 of the preceding calendar
year for which such revocation or modification is to be effective. No such
revocation or modification shall affect the deferral of receipt of Retainer and
Meeting Fees previously deferred hereunder.
4.3 COMMON STOCK ELECTION
When a Participant elects pursuant to Section 4.1 to receive all or a
portion of the Participant's Retainer and Meeting Fees in shares of Common
Stock, the number of whole shares to be distributed to the Participant, with any
fractional shares to be paid in cash, as of the date the Retainer and Meeting
Fee would otherwise have been payable to the Participant, shall be equal to the
dollar amount of the Retainer and Meeting Fee which otherwise would have been
payable to the Participant divided by the Market Value on such date.
4.4 DEFERRED RETAINER ELECTION; STOCK UNITS
When a Participant elects pursuant to Section 4.1 to defer all or a
portion of the Participant's Retainer and Meeting Fees in Stock Units, the
number of whole and fractional Stock Units, computed to three decimal places, to
be credited to the Participant's Account, on the date the deferred Retainer and
Meeting Fee would otherwise have been payable to the Participant, shall be equal
to the dollar amount of the deferred Retainer and Meeting Fee which otherwise
would have been payable to the Participant divided by the Market Value on such
date.
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ARTICLE 5
DIVIDENDS AND ADJUSTMENTS
5.1 DIVIDENDS
To the extent the Company shall declare and pay any cash dividends on
the Common Stock, the Account of a Participant, with Stock Units held pursuant
to Article 4, shall be credited with an additional number of whole and
fractional Stock Units, computed to three decimal places, equal to the product
of the dividend per share then payable, multiplied by the number of Stock Units
then credited to such Account, divided by the Market Value on the dividend
payment date.
5.2 ADJUSTMENTS
The number of Stock Units credited to a Participant's Account pursuant
to Article 4 and the number of shares of Common Stock available for issuance
hereunder pursuant to Article 6 shall be appropriately adjusted for any change
in the Common Stock by reason of any merger, reclassification, consolidation,
recapitalization, stock dividend, stock split or any similar change affecting
the Common Stock.
ARTICLE 6
ISSUANCE OF COMMON STOCK
6.1 NUMBER OF SHARES
The maximum number of shares of Common Stock available for issuance
hereunder shall be 75,000 shares, subject to adjustment as set forth in Article
5.
6.2 SECURITIES COMPLIANCE; RESTRICTED SECURITIES
Any shares of Common Stock issued hereunder shall constitute
"restricted securities" under applicable securities laws and shall not be
transferable by the recipient thereof except pursuant to a registration
statement filed under the Securities Act of 1933, as amended, or in accordance
with an exemption from such registration requirements. Certificates evidencing
shares of Common Stock issued hereunder shall bear a legend reflecting such
transfer restrictions and such other matters as the Board shall deem necessary
and appropriate to ensure compliance with applicable securities laws.
ARTICLE 7
PAYMENT OF STOCK UNITS
7.1 MANNER OF PAYMENT UPON TERMINATION
All Stock Units held in a Participant's Account shall be paid to the
Participant as a lump sum distribution within 30 days after the Participant's
Termination. Payment with respect to Stock Units
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shall be effected through the issuance by the Company to the Participant of an
equivalent number of whole shares of Common Stock, with any fractional share
paid in cash.
7.2 MANNER OF PAYMENT UPON DEATH
If a Participant dies while Stock Units are held in the Participant's
Account, such Stock Units will be paid to the Beneficiary or the Participant's
estate, as the case may be, within 90 days from the date of the Participant's
death. Payment with respect to such Stock Units shall be effected through the
issuance by the Company to the Beneficiary or the Participant's estate, as the
case may be, of an equivalent number of whole shares of Common Stock, with any
fractional share paid in cash.
ARTICLE 8
BENEFICIARY DESIGNATION
Each Participant shall be entitled to designate a Beneficiary or
Beneficiaries (which may be an entity other than a natural person) who,
following the Participant's death, will be entitled to receive any payments to
be made under Section 7.2. At any time, and from time to time, any designation
may be changed or canceled by the Participant without the consent of any
Beneficiary. Any designation, change, or cancellation must be by written notice
filed with the Company and shall not be effective until received by the Company.
Payment shall be made in accordance with the last unrevoked written designation
of Beneficiary that has been signed by the Participant and delivered by the
Participant to the Company prior to the Participant's death. If the Participant
designates more than one Beneficiary, any payments under Section 7.2 to the
Beneficiaries shall be made in equal shares unless the Participant has
designated otherwise, in which case the payments shall be made in the
proportions designated by the Participant. If no Beneficiary has been named by
the Participant or if all Beneficiaries predecease the Participant, payment
shall be made to the Participant's estate.
ARTICLE 9
TRANSFERABILITY RESTRICTIONS
The Plan shall not in any manner be liable for, or subject to, the
debts and liabilities of any Participant or Beneficiary. No payee may assign any
payment due such party under the Plan. No benefits at any time payable under the
Plan shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, attachment, garnishment, levy, execution, or other legal or
equitable process, or encumbrance of any kind.
ARTICLE 10
FUNDING POLICY
The Company's obligations under the Plan shall be totally unfunded so
that the Company is under merely a contractual duty to make payments when due
under the Plan. The promise to pay shall not be represented by notes and shall
not be secured in any way.
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ARTICLE 11
CHANGE IN CONTROL
Notwithstanding any provision of this Plan to the contrary, if a
"Change in Control" (as defined below) of the Company occurs, Stock Units held
in a Participant's Account will be paid in a lump sum distribution within
fifteen days after such Change in Control. Payment with respect to such Stock
Units shall be effected through the issuance by the Company to the Participant
of an equivalent number of whole shares of Common Stock, with any fractional
share paid in cash. In addition, the Company shall reimburse a Participant for
the legal fees and expenses incurred if the Participant is required to seek to
obtain or enforce any right to distribution. Notwithstanding any provisions of
this Plan to the contrary, the provisions of this Article 11 may not be amended
by an amendment effected within three years following a Change in Control.
A "Change in Control" of the Company shall be deemed to have occurred
upon: (a) the adoption of a plan of merger, consolidation or share exchange of
or by the Company with any other corporation as a result of which the holders of
the outstanding voting stock of the Company as a group would receive less than
fifty percent (50%) of the voting common stock of the surviving, resulting or
acquiring corporation; (b) the adoption of a plan of liquidation or the approval
of the dissolution of the Company; or (c) the sale or transfer of all or
substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur as a result of any event described in (a), (b) or (c) above, if
Directors who were a majority of the members of the Board prior to such event
and who continue to serve as Directors after such event determine in good faith
that the event shall not constitute a Change in Control.
ARTICLE 12
ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have
authority to interpret the Plan, and to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan, and all such
interpretations, rules and regulations shall be conclusive and binding on all
Participants. The Board may employ agents, attorneys, accountants, or other
persons and allocate or delegate to them powers, rights, and duties, all as the
Board may consider necessary or advisable to properly carry out the
administration of the Plan.
ARTICLE 13
AMENDMENT AND TERMINATION
Subject to the limitations on amendments set forth in Article 11, the
Company, by resolution duly adopted by the Board, shall have the right,
authority and power to alter, amend, modify, revoke, or terminate the Plan;
provided however, that no such alteration, amendment, modification, revocation
or termination of the Plan shall adversely affect the rights of any Participant
with respect
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to any Stock Units held in such Participant's Account, unless the Participant
shall consent thereto in writing.
ARTICLE 14
MISCELLANEOUS
14.1 NO RIGHT TO CONTINUE AS A DIRECTOR
Nothing in this Plan shall be construed as conferring upon a
Participant any right to continue as a member of the Board.
14.2 NO INTEREST AS A SHAREHOLDER
Stock Units do not give a Participant any rights whatsoever with
respect to shares of Common Stock until such time and to such extent that
payment of Stock Units is made in shares of Common Stock upon the Participant's
Termination.
14.3 NO RIGHT TO CORPORATE ASSETS
Nothing in this Plan shall be construed as giving the Participant, the
Participant's designated Beneficiaries or any other person any equity or
interest of any kind in the assets of the Company or any subsidiary or creating
a trust of any kind or a fiduciary relationship of any kind between the Company
or any subsidiary and any person. As to any claim for payments due under the
provisions of the Plan, a Participant, Beneficiary and any other persons having
a claim for payments shall be unsecured creditors of the Company.
14.4 NO LIMIT ON FURTHER CORPORATE ACTION
Nothing contained in the Plan shall be construed so as to prevent the
Company from taking any corporate action which is deemed by the Company to be
appropriate or in its best interest.
14.5 GOVERNING LAW
The Plan shall be construed and administered according to the laws of
the State of Georgia to the extent that those laws are not preempted by the laws
of the United States of America.
14.6 HEADINGS
The headings of articles, sections, subsections, paragraphs or other
parts of the Plan are for convenience of reference only and do not define,
limit, construe, or otherwise affect its contents.
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THE ENSTAR GROUP, INC.
By:
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Title:
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ATTEST:
By:
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Title:
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