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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
NO. 1
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
___ Act of 1934 (Fee required )
For the fiscal year ended December 31, 1996.
___ 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 0-19239
LAW COMPANIES GROUP, INC
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(Exact name of registrant as specified in its charter)
Georgia 58-0537111
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporated or organization)
114 Townpark Drive, Kennesaw, GA 30144
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 770-396-8000
Securities registered pursuant to Section 12(b) of
the Act: None
Securities pursuant to section 12(g) of the Act:
Common Stock, par value $1.00 per share
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(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Paragraph 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 1, 1997.
Common Stock, $1 par value - $20,815,403
The number of shares outstanding of the Registrant's class of common stock as of
March 1, 1997.
Common Stock, $1 par value - 1,894,797
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The Annual Report on Form 10-K of Law Companies Group, Inc. which was filed with
the Securities and Exchange Commission on March 25, 1997 is hereby amended to
reflect the information required as of March 31, 1997 and to add the signature
of Ernst & Young LLP to their Report of Independent Auditors dated March 14,
1997.
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
There is no regular market for the Company's common stock (the "Common Stock").
As mandated by the Company's Third Restated Articles of Incorporation, as
amended (the "Articles"), the Common Stock's fair market value is determined by
independent appraisals conducted throughout the year. The appraised fair market
value per share was determined to be $12.61 and $16.91 at December 31, 1996, and
1995, respectively. As of March 1, 1997, the fair market value per share was $
12.61.
As of March 1, 1997, there were 1,894,797 shares of Common Stock outstanding
directly and beneficially owned by 1,712 shareholders.
In addition, as of March 1, 1997, stock options to acquire 315,000 shares of the
Company's Common Stock were outstanding pursuant to the 1990 Stock Option Plan,
176,400 of which are currently exercisable.
No dividends have been paid for each of the years ended December 31, 1996 and
1995.
The Company's current amended and restated credit facilities (the "1997
Facilities") prohibit the payment of cash dividends through the term of the
credit facilities. (See Management's Discussion and Analysis of Financial
Condition and Result of Operations - Dividends).
STOCK REPURCHASES
The Company's Common Stock is not listed on a national securities exchange or
traded in any organized over-the-counter market.
Since 1994, the Company conducted workforce reductions in order to reduce labor
related expenses to make them consistent with the Company's level of business
and to improve its overall operating performance. In the course of these
efforts, over 220 employees left the Company, with severance and related costs
aggregating approximately $0.8 million in 1995, and $0.4 million in 1996. The
Company is entitled under its Articles to redeem shares of shareholders whose
employment with the Company has ended, through either paying cash or issuing
notes. The Company has historically repurchased all shares of Common Stock from
employees exiting the Company through the issuance of such notes or cash
payments; however, the 1995 credit facilities (the "1995 Facilities") and the
1996 credit facilities limited the Company from continuing the repurchases.
Notwithstanding the significant number of departures, and the restrictions on
share repurchases contained in the credit facilities, the Company continued to
deem it appropriate to redeem or repurchase all of the shares of exiting
employees in 1995 in order to continue to meet a required 95% employee ownership
threshold required by certain Internal Revenue Service Regulations. Thus,
subject to the condition subsequent of lender approval, the Company (i)
exercised its right to redeem or repurchase all of the shares held by employee
shareholders who exited the Company in 1995 and (ii) commenced negotiations with
its lenders regarding the terms and conditions under which the Company could
redeem or repurchase the shares without violating any covenants in its credit
facilities. As a result of these efforts, the Company obtained approval from
its lenders to make cash payments and to issue interest bearing notes in amounts
aggregating approximately $3.9 million for employees who terminated in 1995. As
of December 31, 1996, the Company's aggregate obligations to former employees of
the Company arising from the repurchase or redemption of their shares was
approximately $13.1 million. All notes issued to employees who left the Company
in 1995 specify that the notes are subordinated to the Company's senior credit
facilities. There can be no assurance that the Company will have either
sufficient cash flow or permission of its senior lenders to pay any principal on
such notes when due. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
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In 1996, the Company elected to report taxable income for tax reporting purposes
on an accrual basis rather than a cash basis, effective for the year beginning
January 1, 1995. The conversion to accrual basis taxable income recognition
eliminated the need for the Company to maintain at least 95% employee ownership
of its capital stock since this requirement arose from an Internal Revenue
Service Regulation for cash basis revenue recognition (governing engineering and
other professional companies). In 1996, the Company's Board of Directors
repealed the Bylaws provision requiring 95% employee ownership. The Articles
continue to give the Company the right, but not the obligation, to redeem shares
of Common Stock of employees exiting the Company, but the Company has not
exercised that right since the beginning of 1996. There can be no assurance
that the Company will, under the terms of its existing credit facilities, be
able to repurchase shares from employees exiting the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Law Companies Group, Inc.
We have audited the accompanying consolidated balance sheets of Law Companies
Group, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also include the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Law Companies
Group, Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 14, 1997
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
LAW COMPANIES GROUP, INC.
Date: April 8, 1997 By: /s/ Bruce C. Coles
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Bruce C. Coles
Chairman of the Board of Directors
and Chief Executive Officer
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