SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 1997
LOGANSPORT FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-25910 35-1945736
(Commission File Number) (IRS Employer Identification No.)
723 East Broadway
Logansport, Indiana 46947
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 722-3855
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Item 4. Changes in Registrant's Certifying Accountant.
On August 12, 1997, the Board of Directors of Logansport Financial Corp.
(the "Company") selected the accounting firm of Grant Thornton LLP to examine
the consolidated financial statements of the Company for the fiscal year ending
December 31, 1997. Geo. S. Olive & Co. LLC, which has acted as the independent
public accountant for the Company since 1993 and audited its consolidated
financial statements for 1995 and 1996, has been notified of the Company's
decision.
The audit reports issued by Geo. S. Olive & Co. LLC with respect to the
Company's consolidated financial statements for 1995 and 1996 did not contain an
adverse opinion or disclaimer of opinion, and were not qualified as to
uncertainty, audit scope or accounting principles. During 1995 and 1996 (and any
subsequent interim period), there have been no disagreements between the Company
and Geo. S. Olive & Co. LLC on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Geo. S. Olive & Co. LLC,
would have caused it to make a reference to the subject matter of the
disagreement in connection with its audit report. Moreover, none of the events
listed in Item 304(a)(1)(v) of Regulation S-K occurred during 1995 or 1996 or
any subsequent interim period.
In 1996, the Company consulted Grant Thornton LLP for financial accounting
and tax advice regarding a tax-free return of capital which was paid in 1996.
Grant Thornton LLP provided a letter to the Company stating its views with
respect to accounting for the exercise price of stock options following such
return of capital distribution. A copy of their written views are attached
hereto as Exhibit A. Geo. S. Olive & Co. LLC was consulted during its completion
of the 1996 audit of the consolidated financial statements in 1997 for
concurrence with Grant Thornton LLP on their written views attached as Exhibit
A, and Geo. S. Olive & Co. LLC concurred.
Pursuant to Item 304 of Regulation S-K, the Company has provided a copy of
this Current Report on Form 8-K to Geo. S. Olive & Co. LLC for review. Attached
hereto as Exhibit (16) is a letter from Geo. S. Olive & Co. LLC addressed to the
Securities and Exchange Commission indicating that it agrees with the statements
made by the Company herein.
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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 hereunto duly authorized.
LOGANSPORT FINANCIAL CORP.
By:/s/Thomas G. Williams
----------------------------------
Thomas G. Williams, President
and Chief Executive Officer
Date: August 12, 1997
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Exhibit A
August 19, 1997
Mr. Thomas G. Williams, President
Logansport Financial Corp.
723 East Broadway
Logansport, Indiana 46947-3159
Dear Mr. Williams:
Pursuant to your request, we are pleased to provide our opinion as to
the amount of compensation expense, if any, that would result from a proposed
reduction of the exercise price of Logansport Financial Corp.'s (the
"Corporation") stock options to give effect to the Corporation's tax-free return
of capital. It is understood that such opinion is specifically limited to the
applicable accounting principles underlying the transaction. Our engagement has
been conducted in accordance with standards established by the American
Institute of Certified Public Accounts. A summary of the information and
assumptions provided to us is as follows:
1. On September 10, 1996, the Corporation declared a $3.00 return
of capital dividend payable on December 10, 1996 to
shareholders of record November 25, 1996.
2. The ex-dividend date for the declared dividend was November
21, 1996 with the market price of the Corporation's common
shares closing at a price of $12.00.
3. On the day preceding the November 21, 1996 ex-dividend date,
the market price of the Corporation's common shares closed at
a price of $14.25.
4. The Board believes that, in the event of special nonrecurring
dividend, the Stock Option Plan provides for a reduction of
the fixed option exercise price from $12.50 to $10.53, as well
as an increase in the number of shares granted under option in
order to insure equivalent economic consequences to option
holders following the special $3.00 return of capital
dividend. The vesting provisions and option period of the
original option grant will not change.
5. Management is of the belief that no compensation expense would
result from the foregoing reduction in exercise price and
increase in the number of options.
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The authoritative accounting literature applicable to the foregoing
scenario is set forth in Accounting Principles Board Opinion No. 25 and Emerging
Issues Task Force (the "EITF") No. 90- 9. The discussion therein focuses upon
the fact that stock option grants typically contain antidilution provisions that
explain how the exercise price and number of shares will be adjusted if the
employer declares a stock dividend or a stock split. The exercise price is
reduced, and the number of shares under option is increased to offset the
dilution created by the stock dividend or stock split. These changes are made to
keep the option holder in the same economic position as before the stock
dividend or stock split. In practice, such changes as a result of a stock
dividend or stock split do not create a new measurement date for determining
compensation expense.
In addition, at the time of an equity restructuring transaction such as
a special, large, and nonrecurring dividend, some employers change the terms of
outstanding fixed stock option grants in a manner similar to the changes made
for stock dividends or stock splits. These changes may include a reduction of
the exercise price, or a reduction of the exercise and an increase in the number
of shares under option.
Under such circumstances, the EITF reached a consensus that a change to
outstanding fixed stock option grants made to restore the option holder's
economic position as a result of a special large nonrecurring dividend does not
result in a new measurement date and therefore will not result in additional
compensation expense if all of the following criteria are met:
1. The aggregate intrinsic value (difference between market value
per share and exercise price) of the options immediately after
the special dividend is not greater than the aggregate
intrinsic value of the options immediately before the special
dividend;
2. The ratio of the exercise price per option to the market value
per share is not reduced; and
3. The vesting provisions and option period of the original grant
remain the same.
The economic equivalence of the Corporation's option holders
post-dividend in the instant case is illustrated using the following
assumptions:
1. Option holder has 1,000 shares granted at an original exercise
price of $12.50 with a pre-dividend market value of $14.25.
2. Post-dividend option holder exchanges the 1,000 original
options or 1,190 stock options with an exercise price of
$10.53. Such exchange gives effect to the fact that the
post-dividend market value of the Corporation's common stock
is $12.00.
Based on the application of the authoritative literature to the above,
the option holder is in an equivalent economic position post-dividend.
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Aggregate intrinsic value prior to return of capital
$1.75 x 1,000 shares = $1,750
------
Aggregate intrinsic value subsequent to return of
capital dividend
$1.47 x 1,190 shares = $ 1,749
-------
Ratio of exercise price per option to market value per
share prior to return of capital dividend
$12.50/$14.25 = 87.7%
-----
Ratio of exercise price per option to market value per
share, post return of capital dividend
$10.53/$12.00 = 87.7%
-----
As a result, given a market price of $12.00, it is our opinion that no
compensation expense would be recognized in the above illustration as a result
of the proposed reduction in the stock option price, coupled with an increase in
the number of shares under option.
The ultimate responsibility for the decision on the appropriate
application of generally accepted accounting principles for an actual
transaction rests with the preparers of financial statements. Our judgment on
the appropriate application of generally accepted accounting principles for the
described specific transaction is based solely on the information and
assumptions provided to us as described above; should these facts and
circumstances differ, our conclusion may change.
This letter is intended solely for use by Logansport Financial Corp. and
should not be used for any other purpose.
Very truly yours,
/s/Grant Thornton LLP
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Exhibit (16)
Letter re change in certifying accountant
Securities and Exchange Commission
Washington, DC 20549
We were previously the independent accountants for Logansport Financial Corp.
(the "Registrant"), and on January 23, 1997 we reported on the consolidated
financial statements of the Registrant as of and for the two years ended
December 31, 1996. On August 12, 1997, we were dismissed as independent
accountants of the Registrant.
We have read the Registrant's statements included under Item 4 of its Form 8-K
dated August 12, 1997 and we agree with such statements.
/s/ Geo. S. Olive & Co. LLC
GEO. S. OLIVE & CO. LLC
Indianapolis, Indiana
August 18, 1997
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