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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----------- to -----------
Commission file number: 0-6237
THE ZIEGLER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1148883
--------- ----------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
215 North Main Street, West Bend, Wisconsin 53095
-------------------------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (262) 334-5521
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
-----------------------------
(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 -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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]
AGGREGATE MARKET VALUE OF VOTING STOCK HELD
BY NON-AFFILIATES OF THE REGISTRANT:
As of March 16, 2000, 2,428,680 shares of Common Stock were outstanding
and the aggregate market value of registrant's voting and nonvoting common
equity (based on the average of the bid and ask price $20.00) on that date
excluding shares reported as beneficially owned by directors and executive
officers (which exclusion does not constitute an admission as to affiliate
status) was approximately $31,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into Which Portions of
Document Document Are Incorporated
-------- ----------------------------------------
Portions of Annual Report to
Shareholders for the calendar
year ended December 31, 1999 Part II
Portions of Proxy Statement for 2000
Annual Meeting of Shareholders Part III
PART I
ITEM 1. BUSINESS.
General
The Ziegler Companies, Inc. (the "Company") is a holding company
which owns nine operating subsidiary companies. A list of the Company's
subsidiaries is filed as Exhibit 21.1 to this Form 10-K. All of the
companies are engaged in financially oriented businesses. The Company's
principal executive offices are located at 215 North Main Street, West Bend,
Wisconsin 53095 and its telephone number is (262) 334-5521. In 1999, the
Company sold substantially all the assets and liabilities of Ziegler Thrift
Trading, Inc. (a discount brokerage firm) and sold the capital stock of WRR
Environmental Services Co., Inc. and its subsidiary (engaged in the business
of recycling, reclaiming, and disposing of industrial chemicals and solvents,
blending chemicals, and providing pollution abatement services). Otherwise,
there was no material change in the scope of the business during 1999.
The Company's financial services activities are conducted primarily
through three operating segments. These operating segments are investment
banking/capital markets, investment services/consulting and other.
The investment banking/capital markets operating segment consists
of the Company's health care and senior living finance groups, church and
school finance group, and equity and fixed-income institutional sales and
trading groups. This segment provides services primarily to institutional
customers. These services include the underwriting and marketing of tax-
exempt and taxable debt securities for the health care industry and non-
profit senior living facilities. Services to these markets also include
financial advisory services, merger and acquisition services, sales on an
agency basis of complex financial products incorporating risk management
strategies, and Federal Housing Administration ("FHA") loan origination in
conjunction with investment banking activities. This segment also includes
sales and trading in both the primary and secondary markets for our
underwritten bonds as well as other taxable and tax-exempt debt securities
and preferred stocks. The church and school finance group provides
underwriting services to churches and private schools. This operating
segment also provides limited preferred stock and equity market-making and
research activities. These activities are conducted through B.C. Ziegler and
Company ("BCZ"), except that Ziegler Financing Corporation ("ZFC") conducts
FHA loan activities.
The investment services/consulting operating segment consists of
the Company's full-service brokerage group; investment management,
consulting, and performance reporting groups; and the insurance sales group.
The full-service brokerage group provides a broad range of financial products
and brokerage services primarily to retail customers through BCZ. Equity and
fixed income investment management, administration, performance reporting and
consulting services are provided through BCZ and Ziegler Asset Management,
Inc. ("ZAMI"), each of which is a registered investment adviser. PMC
International, Inc. ("PMC"), not an investment manager itself, provides
administrative products and services to facilitate the selection and/or
monitoring of unaffiliated investment managers or mutual funds. PMC's
customers are primarily financial planners and advisers. This operating
segment also provides traditional insurance products. The full-service
brokerage group is the primary retail distribution channel for church and
private school bonds and other taxable and tax-exempt underwritten products.
Sales credits associated with underwritten offerings are reported in this
operating segment when sold through the Company's retail distribution
channels. The investment services/consulting segment provides services to
both retail and institutional clients.
Other operating activities are primarily the investment and debt
management activities of the Company and the corporate administrative
activities included in BCZ. Corporate administrative costs are allocated
using various methodologies which consider the size of the operation and the
extent of administrative services provided. Also included in this segment are
First Church Financing Corporation ("FCFC"), Ziegler Collateralized Securities,
Inc. ("ZCSI"), the church mortgage servicing element of Ziegler Financing
Corporation ("ZFC"), and Ziegler Capital Corporation ("ZCC"), all of which have
reduced or eliminated operations since 1997.
The operations and gain from the sale of Ziegler Thrift Trading,
Inc. ("ZTT") are excluded from the operating segments. Although not a
separate segment and, therefore, not a discontinued operation under generally
accepted accounting principles, financial results are separately identified
in the operating segment information for comparability purposes. WRR
Environmental Services, Inc., which was the hazardous waste management
subsidiary of the Company, was sold on December 30, 1999, and is considered a
discontinued operation and not a part of the operating segment financial
information presented.
The Company's operating results are sensitive to various factors.
During the last half of 1999, the general level of interest rates increased.
The increased rates had an impact on the Company's underwriting activities.
The refinancing of bonds became uneconomical for issuers and caused the
cancellation of those bond issues. This was true in the municipal as well as
the church and school bond underwriting markets.
The rise in interest rates combined with the increases in the
equity markets has caused investors to turn from fixed income investment
vehicles to equity investment vehicles. This flow of funds has caused a
higher level of liquidations in tax-exempt bond mutual funds, which has
reduced the ability of these mutual funds to purchase new issue municipal
securities. Retail investors have also shown a diminished interest in fixed
income securities given the increases in the equity markets and the
uncertainty as to the future level of interest rates.
The Company has been the recipient of increased assets under
management in the equity mutual funds that it manages, primarily the PSE Tech
100 Index Portfolio, as a result of the factors noted above. Revenue from
management fees increase correspondingly. This increase in the value of
assets under management would be slowed or reversed to some extent by a
correction in the equity or fixed income markets.
The rise in interest rates also increases the cost of financing
inventory. Since much of the Company's inventory is in the form of fixed
rate debt instruments, the cost of financing may increase without a
corresponding increase in interest income. Further, the inventory being held
will lose value as the result of general interest rate increases and may have
to be sold at or below cost. The Company marks its inventory to market to
reflect these circumstances.
Results of Operations - 1999 Compared to 1998
The following table summarizes the changes in revenue and net
income (loss) before taxes of each segment of the Company:
Year Ended December 31, Increase/
(Dollars in Thousands) 1999 1998 (Decrease)
---- ---- ---------
Revenues:
Investment Banking/Capital Markets $30,380 $32,883 $(2,503)
Investment Services/Consulting 51,402 28,238 23,164
Other 4,073 6,064 (1,991)
------- ------- -------
$85,855 $67,185 $18,670
ZTT 10,827 5,075 5,752
------- ------- -------
Total $96,682 $72,260 $24,422
------- ------- -------
------- ------- -------
Income (Loss) Before Taxes:
Investment Banking/Capital Markets $ 1,816 $(1,727) $ 3,543
Investment Services/Consulting (6,480) (5,223) (1,257)
Other 1,101 1,247 (146)
------- ------- -------
$(3,563) $(5,703) $ 2,140
ZTT 6,692 553 6,139
------- ------- -------
Total $ 3,129 $(5,150) $ 8,279
------- ------- -------
------- ------- -------
Investment Banking/Capital Markets
This segment's revenues decreased $2,503,000 or 8% due to a
decrease in underwriting and related revenue and interest income partially
offset by increases in trading profits and other income. Municipal
underwriting and fee revenues decreased approximately $2,350,000 and
corporate underwriting and fee revenues decreased approximately $650,000.
The Company completed 59 municipal underwriting transactions selling $1.6
billion of debt securities as senior or sole manager in 1999 compared to 66
underwriting transactions totaling $1.6 billion of debt securities in 1998.
Competition has caused a narrowing of margins in the municipal underwriting
market, a trend which has continued throughout the 1990s. Interest income
decreased $1,500,000 primarily as the result of a significant reduction in
the taxable bond trading operation and a reduction in related securities
inventory. Trading income increased $1,400,000. In 1998, this segment
incurred losses of $1,250,000 on taxable trading inventory. Other income
increased approximately $600,000 as the result of increased mortgage
origination activity. Other items of revenue, including church and school
underwriting revenues, did not change significantly between years. The
church and school underwriting group underwrote 22 transactions totaling $76
million in 1999 compared to 22 transactions totaling $80 million in 1998.
Total expenses of this segment decreased $6,046,000 to $28,564,000
in 1999. Employee compensation and benefits decreased by $3,850,000 as a
result of the significant reduction in the taxable bond trading operation at
the end of 1998. Interest expense also decreased $2,175,000 primarily
related to the reduction in the taxable trading operation and related
inventory carrying costs. Other categories of expenses did not change
significantly.
Total income before taxes for this segment increased $3,543,000
from a loss in 1998 of $1,727,000 to income in 1999 of $1,816,000. The
savings associated with the reduction in trading operations was partially
offset by the decrease in underwriting and related fee income.
Investment Services/Consulting
This segment had increased revenues of $23,164,000 primarily as the
result of the addition of PMC as a subsidiary in December 1998. This
segment's revenues increased by $18,900,000 as the result of PMC's inclusion
for a full year. Most of the increased revenues related to PMC are derived
from investment management and advisory fees. Investment management and
advisory fees of other segment operations increased approximately $1,200,000
as the result of increased assets under management. ZAMI and BCZ assets
under management increased to $1.8 billion at the end of 1999 compared to
$1.3 billion at the end of 1998. Of these totals, the assets under
management related to Principal Preservation Portfolios increased to $1.05
billion in 1999 compared to $602 million in 1998, most significantly in the
equity portfolios. PMC provided administrative and performance reporting
services on behalf of accounts holding a total of $4.9 billion of assets at
the end of 1999, compared to $2.4 billion at the end of 1998. Revenue from
full service brokerage operations increased $4,644,000 primarily on higher
sales volumes.
The expenses of this segment increased $24,628,000 to $57,882,000
in 1999. The primary reason for the increase was the addition of PMC to this
segment as discussed above. Expenses increased $19,405,000 related to PMC
operations in 1999. The most significant PMC increases were in fees paid to
investment managers of $9,400,000 and employee compensation and benefits of
$4,517,000. This operating segment also had an increase of $2,363,000 in
goodwill amortization primarily as the result of the write-off of GS2
goodwill. Compensation and benefits also increased in this segment,
exclusive of PMC increases, by $1,715,000 due to increased commissions and
asset management fees as respective sales of financial products and assets
under management have increased as discussed above.
The total loss for this segment before any tax benefits increased
$1,257,000 to a loss of $6,480,000. The loss of $6,480,000 in 1999 includes
approximately $5,415,000 of allocated corporate administrative costs compared
to $5,200,000 of such costs in 1998. Before allocation of corporate
administrative costs, the loss in this segment for 1999 was $1,065,000. The
write-off of goodwill of $2,255,000 associated with the former GS2 investment
advisory operations was the primary reason for the loss before administrative
cost allocations. Before the write-off of goodwill, the former GS2 investment
advisory operations were approximately breakeven for 1999. PMC was also not
profitable in 1999 although it was cash flow positive. PMC lost $566,000
during 1999, which included goodwill amortization on its purchase of
$707,000. Full service brokerage, asset management and insurance sales
operations were profitable prior to administrative cost allocations.
Other
This segment's revenues decreased $1,991,000 in 1999 to $4,073,000.
The revenue of this segment is primarily related to interest income. The
largest component of interest income is related to the collateralized
mortgage obligations ("CMOs") owned by the Company. The CMO principal
balances have declined between years as the result of scheduled payments and
prepayments of principal. These principal payments have also caused interest
income to decline. Interest income related to the other entities in this
operating segment has also declined as the operations and related investments
or notes have decreased, through amortization or sale, as planned.
This segment's expenses declined $1,845,000 primarily due to
declines in interest expense on the repurchase agreements associated with the
CMOs, in interest expense associated with outstanding bonds, and elimination
of operational expenses of ZCC, a company that was discontinued in 1998.
Customers and Raw Materials
None of the Company's businesses is subject to governmental
renegotiation of profits; none is dependent on a single customer or a few
customers or dependent on a single supplier of raw materials or a few
suppliers of raw materials. In no case are patents, trademarks, licenses or
franchises important other than securities, brokerage and investment advisory
licenses under federal and state laws and regulations of self regulatory
organizations. None of the businesses is seasonal, although commission
income will fluctuate depending upon the financial condition of the U.S.
securities markets. None of the businesses engages in significant operations
outside the United States.
Environmental Matters
Compliance with Federal, state and local laws and regulations that
have been enacted or adopted relating to the protection of the environment
has had no material effect upon the capital expenditures, earnings and
competitive position of the Company and its financial services subsidiaries.
Employees
As of March 1, 2000, approximately 454 persons were employed full
time and 81 persons were employed part time by the Company and its
subsidiaries.
Executive Officers of the Company
Information regarding the executive officers of the Company during
1999, which is not part of the Company's Proxy Statement for the 2000 Annual
Meeting is as follows:
Name Age Position
- ---- --- --------
P. D. Ziegler 50 Chairman (President and Chief Executive
Officer until February 2000)
J.J. Mulherin 48 President and Chief Executive Officer (since
February 2000)
G.P. Engle 48 Senior Vice President-Chief Financial
Officer
D. A. Carlson, Jr. 53 Senior Managing Director, B.C. Ziegler and
Company
R. J. Glaisner 58 Senior Managing Director, B.C. Ziegler and
Company
G. G. Maclay, Jr. 52 President and Chief Executive Officer of
ZAMI
S. C. O'Meara 50 Senior Vice President, Secretary and General
Counsel
J. C. Vredenbregt 46 Vice President-Controller, Treasurer
The term of office of each officer is one year or until his
successor is elected and qualified. There is no arrangement or understanding
between any officer and any other person pursuant to which he was elected as
an officer.
Mr. Peter D. Ziegler was elected President of the Company and BCZ
on April 21, 1986, and became Chief Executive Officer of both companies on
January 1, 1990, and Chairman in April 1997. He resigned his President and
Chief Executive Officer position in February 2000. He is presently a director
of West Bend Mutual Insurance Company, West Bend, Wisconsin and Trustmark
Insurance Company, Lake Forest, Illinois. Mr. Ziegler is a first cousin of
Mr. B. C. Ziegler III, a director of the Company.
Mr. John J. Mulherin became President and CEO in February 2000. Prior
to February 2000, Mr. Mulherin was chief administrative officer at Villanova
Capital from June 1999 to February 2000, the asset management group of
Nationwide Insurance. Prior to Nationwide, Mr. Mulherin served as president
of National Financial Correspondent Services Company, Boston, a clearing
subsidiary of Fidelity Investments, and previous to that served as chief
operating officer of Fidelity Investments Institutional Services Company, a
mutual fund distribution and services organization.
Mr. Richard J. Glaisner served as a Senior Managing Director,
Ziegler Investment Group of B.C. Ziegler and Company. During 1999, he was a
director of Principal Preservation Portfolios, Inc. and the Company. Mr.
Glaisner resigned in January 2000.
Mr. Donald A. Carlson, Jr. is a Senior Managing Director of the
Health Care and Senior Living Investment Banking Group of B.C. Ziegler and
Company, a subsidiary of the Company. Mr. Carlson is a director of the
Company.
Mr. Geoffrey G. Maclay, Jr. began employment with the Company on
January 22, 1996. He served as President and Chief Executive Officer of
ZAMI. Mr. Maclay was previously employed as a specialist in lending,
marketing, planning and investments at Firstar Investment Services from 1978
through 1995, and was self-employed in the financial/strategic consulting
business from February 1995 to January 1996. Mr. Maclay resigned in January
2000.
Mr. Gary Engle began employment with the Company on April 20, 1999
and serves as Senior Vice President and Chief Financial Officer of the
Company. Mr. Engle was previously employed as Chief Financial Officer of
Firstar Investment Research and Management Company from 1996 to 1999 and was
employed by Robert W. Baird & Co., Incorporated from 1978 to 1996.
Mr. S. Charles O'Meara began employment with the Company and BCZ as
Senior Vice President and General Counsel on January 15, 1993 and also serves
as Secretary of the Company.
Mr. Jeffrey C. Vredenbregt began employment May 18, 1987 and serves
as Vice President, Treasurer and Controller.
Statement Regarding Forward Looking Disclosure
Except for the historical information contained in this Annual
Report on Form 10-K, certain matters discussed herein, including (without
limitation) under Part I, Item 1, "Business -- Environmental Matters," Item
3, "Legal Proceedings" and under Part II, Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," contain
forward looking statements that involve risks and uncertainties, including
(without limitation) the effect of economic and market conditions, such as
demand for investment advisory, banking and brokerage services in the markets
served by the Company, pricing of services, successful management of
financial and legal risks which necessarily accompany various segments of the
Company's business, interest rates, retention of key employees, profitable
operations of the institutional trading desks, Year 2000 issues and
competition in the financial services industry. The forward looking
statements and statements based on the Company's beliefs contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" represent the Company's attempt to measure activity in, and to
analyze the many factors affecting, the markets for its products. There can
be no assurance that: (i) the Company has correctly measured or identified
all of the factors affecting these markets or the extent of their likely
impact; (ii) the publicly available information with respect to these factors
on which the Company's analysis is based is complete or accurate; or (iii)
the Company's analysis is correct.
ITEM 2. PROPERTIES.
----------
BCZ owns an office building located at 215 North Main Street in
West Bend, Wisconsin 53095 which serves as the home office for the Company
and all subsidiaries, except PMC (and its subsidiaries). This three-story
building has approximately 77,000 square feet of space. BCZ also owns two
other commercial buildings located in close proximity to its principal office
building.
BCZ Health Care and Senior Living Investment Banking Group
occupies leased premises at One South Wacker Drive, Suite 3080, Chicago,
Illinois 60606; 55 Brendon Way, Suite 500, Indianapolis, Indiana 46077;
1185 Avenue of the Americas, 32nd Floor, New York, New York 10036; 111
Second Avenue, N.E., Suite 915, St. Petersburg, Florida 33701; 200
California Street, Suite 400, San Francisco, California 94111-4341; and 8100
Professional Place, Suite 312, Landover, Maryland 20785.
BCZ and ZAMI lease commercial office space at 250 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202-4209.
PMC occupies leased premises at 555 17th Street, 14th Floor,
Denver, Colorado 80202.
All branch offices of BCZ are located in leased premises with
varying lease terms from one to five years.
BCZ owns approximately 40 acres of unimproved land in West Bend,
Wisconsin, which is held for future use as the potential site of the
Company's home office.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
The Company is involved in litigation from time to time as
incidental to its business. These legal matters are often in preliminary
stages, involve complex issues of law and fact and may proceed for protracted
periods of time. The amount of the eventual liability, if any, from these
proceedings cannot be determined with certainty; however, in the opinion of
the Company's management, based upon the information presently known, the
ultimate liability of the Company, if any, arising from the pending legal
proceedings, as well as from asserted legal claims and known potential legal
claims which are probable of assertion, taking into account established
accruals for estimated liabilities, should not be material to the financial
position of the Company but could be material to results of operations or
cash flows for a particular quarter or annual period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
No matters were submitted during the fourth quarter of the fiscal
year 1999 to a vote of security holders.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------
MATTERS.
-------
Page references to the Company's 1999 Annual Report in this Part II
refer to the hard copy print report, and not to pages on the SEC's electronic
file system, EDGAR.
The Company's Common Stock is traded under the symbol "ZCO" on the
American Stock Exchange. Information about the range of bid and asked
quotations for the Company's Common Stock on the American Stock Exchange for
each quarter during the Company's 1999 and 1998 fiscal years and information
about the cash dividends paid on the Company's Common Stock for each quarter
during 1999 and 1998 may be found on page 36 of the Company's 1999 Annual
Report to Shareholders incorporated herein by reference. On March 16, 2000,
the average of the bid and ask price of the Company's Common Stock was
$20.00. As of March 16, 2000, the Company had approximately 460 record
holders of its Common Stock.
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
Information about the Company's operating revenue, net income
(loss), earnings (loss) per share of common stock, cash dividends per share
declared, total assets, long-term obligations, short-term notes payable,
shareholders' equity and book value per share for the fiscal years 1995
through 1999 may be found on page 34 of the Company's 1999 Annual Report to
Shareholders incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
Information about the Company's analysis of financial conditions
and results of operations for the fiscal years 1999, 1998 and 1997 may be
found on pages 26 through 33 of the Company's 1999 Annual Report to
Shareholders incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
---------------------------------------------------------
Market risk to the Company arises from exposure to changes in
interest rates and other relevant market rate or price risk which impact an
instrument's financial value. The Company is exposed to market risk from
changes in interest rates through its trading and non-trading activities. To
strive to reduce such risks, the Company selectively uses hedging strategies
which, while not perfect, are designed to hedge market risk. All hedging
transactions are authorized and executed pursuant to existing policies and
procedures, which prohibit the use of such derivative instruments for trading
purposes.
Interest Rate Risk
The Company enters into interest rate agreements and purchases
futures contracts to minimize the effect of potential interest rate changes.
The Company's accounting policies for these agreements are described in Note
1 of the Company's Notes to Consolidated Financial Statements and is
incorporated herein. For additional information on the Company's financial
instruments, see also Notes 21 and 22 to the Consolidated Financial
Statements.
The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates, including
interest rate forward agreements, securities inventory and debt obligations.
For securities inventory and debt obligations, the table presents principal
cash flows and related weighted average interest rates by expected maturity
dates. For interest rate forward agreements, the table presents notional
amounts and weighted average interest rates by expected (contractual)
maturity dates. Notional amounts are used to calculate the contractual
payments to be exchanged under the contracts. For futures contracts, the
table presents the notional amounts and the current market value. Fair value
is derived in accordance with the accounting policies described in Note 21 to
the Notes to the Consolidated Financial Statements. Trading accounts are
shown in the caption "Securities Inventory", "Securities purchased under
agreements to resell", "Securities sold under agreements to repurchase", and
"Futures contracts", and non-trading accounts are shown in all other
captions.
Notional Fair
Amount Value
---------------------------
FORWARD DEBT SERVICE AGREEMENT 5,005,000 (4,823)
- ------------------------------
Index: Municipal Market Data Services AAA/Aaaa Scale plus a forward spread
FORWARD INTEREST RATE AGREEMENT 5,005,000 30,599
- -------------------------------
Index: Municipal Market Data Services AAA/Aaaa Scale plus a forward spread
(Hedge to instrument listed above in Table I)
For additional information, See Note 22 to the Consolidated Financial
Statements.
Expected Maturity Dates
(In US dollars)
----------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
ASSETS
- ------
SECURITIES INVENTORY - FIXED RATE
- ----------------------------------
Municipal bond issues 114,000 50,000 95,000 322,000 322,000 72,035,623 72,938,623 69,951,148
Weighted average interest rate 5.59% 5.40% 5.22% 7.68% 5.51% 6.86%
Collateralized Mortgage obligations (1) 0 0 0 0 0 7,683,691 7,683,691 4,245,756
Weighted average interest rate 6.63%
Corporate Bond Issues
Weighted average interest rate 0 0 0 500,000 0 81,000 581,000 552,893
6.00% 7.06%
Institutional Bonds
Weighted average interest rate 5,000 7,000 0 0 13,000 2,524,000 2,549,000 2,417,674
6.75% 7.46% 7.88% 7.98%
Preferred Stock 0 0 0 0 0 3,328,352 3,328,352 3,328,352
Weighted average interest rate 5.09%
Other 18,000 0 0 0 15,000 566,641 599,641 595,354
Weighted average interest rate 0.00% 0.00% 10.17%
SECURITIES INVENTORY - VARIABLE RATE
- -------------------------------------
Municipal Variable rate demand notes 0 0 0 0 0 1,700,000 1,700,000 1,700,000
Weighted average interest rate 5.49%
SECURITIES PURCHASED UNDER AGREEMENT TO RESELL(2)
- ----------------------------------------------
Weighted average interest rate 4,365,000 4,365,000 4,365,000
5.25%
NOTES RECEIVABLE
- -----------------
Weighted average interest rate 4,548,038 4,548,038 4,548,038
9.23%
OTHER INVESTMENTS
- ------------------
Weighted average interest rate 26,931,474 26,931,474 26,931,474
8.87%
LIABILITIES
- -----------
SHORT-TERM NOTES PAYABLE (2)
- -------------------------
Weighted average interest rate 6,159,784 6,159,784 6,159,784
5.97%
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE(2)
- ----------------------------------------------
Weighted average interest rate 28,959,000 28,959,000 28,959,000
6.24%
SECURITIES SOLD NOT YET PURCHASED
- ----------------------------------
Weighted average interest rate 4,500,000 4,500,000 4,363,594
5.38%
BONDS PAYABLE - FIXED RATE(1)
- ---------------------------
Weighted average interest rate 4,223,000 4,223,000 4,223,000
8.29%
FUTURES CONTRACTS (SHORT)
- -------------------------
Contract Amount None
Market Value None
Price Range:
(1) Assumes no prepayment
(2) The information shown above includes actual interest rates at December 31, 1999 and assumes no changes in interest rates in
2000 or thereafter.
Equity Risk
In addition to interest rate risk, the Company faces market risk
associated with the fees it earns on its portfolio in the form of equity risk.
Ziegler Asset Management, Inc. manages a portfolio of $1.8 billion of
separately managed and mutual fund accounts. Additionally, BCZ's and PMC's
retail accounts have nearly $5.7 billion of assets, a portion of which is
invested in managed products from which BCZ and PMC receive periodic fees.
Exposure exists to changes in equity values due to the fact that fee income is
primarily based on equity balances. While this exposure is present,
quantification remains difficult due to the number of the other variables
affecting fee income. Interest rate changes can also have an effect on fee
income for the above stated reasons.
In addition to the above market risks, material limitations exist in
determining the overall net market risk exposure of the Company. Computation of
prospective effects of hypothetical interest rate changes are based on many
assumptions, including levels of market interest rates, predicted prepayment
speeds, and projected decay rates of assets under management and retail customer
account balances. Therefore, the above outcomes should not be relied upon as
indicative of actual results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The Company's Consolidated Financial Statements containing
consolidated balance sheets for the years 1999 and 1998 may be found on
page 6 of the Company's 1999 Annual Report to Shareholders; consolidated
statements of operations for the years 1999, 1998 and 1997 may be found
on page 7 of the Company's 1999 Annual Report to Shareholders, consolidated
statements of cash flows for the years 1999, 1998 and 1997 may be found
on pages 9 and 10 of the Company's 1999 Annual Report to Shareholders;
consolidated statements of stockholders' equity for 1999, 1998 and 1997 may be
found on page 8 of the Company's 1999 Annual Report to Shareholders. The
consolidated notes to financial statements, together with the report of Arthur
Andersen LLP, may be found on pages 11 through 25 of the Company's 1999 Annual
Report to Shareholders. Such Consolidated Financial Statements and report of
Arthur Andersen LLP are incorporated herein by reference.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
----------------------------------------------------------------------
DISCLOSURE.
----------
There have been no reportable events during the fiscal years 1999 or
1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
-----------------------------------------------
Information about the Company's directors and those persons nominated
to become directors may be found on pages 3, 4, 5 and 6 of the Company's March
20, 2000 Proxy Statement incorporated herein by reference.
Information regarding the executive officers, which is not a part of
the Company's Proxy Statement, is set forth in Part I above.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
Information required under Item 11 about the compensation paid by the
Company to its Chief Executive Officer and other executive officers of the
Company may be found on pages 6, 7 and 8 of the Company's March 20, 2000 Proxy
Statement incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
Information concerning principal securities holders and securities
holdings of management may be found on pages 3 and 4 of the Company's March 20,
2000 Proxy Statement incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
There have been no transactions since the beginning of fiscal year
1999, or any currently proposed transactions, or series of similar transactions,
to which the Company or any of its subsidiaries was or is to be party in which
the amount exceeds $60,000 and in which any director, executive officer, any
nominee for election as a director, any security holder owning of record or
beneficially more than 5% of the Common Stock of the Company, or any member of
the immediate family of any of the foregoing persons had or will have a direct
material interest.
Information in response to this Item is incorporated herein by
reference to the information under the captions "Executive Compensation" and
"Compensation of Directors."
PART IV
ITEM 14(A). EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
1. Financial Statements
The following financial statements are incorporated herein by reference in
Part II at Item 8 above.
(i) Consolidated balance sheets - December 31, 1999 and 1998.
(ii) Consolidated statements of operations - years ended December
31, 1999, 1998 and 1997.
(iii) Consolidated statements of cash flows - years ended December
31, 1999, 1998 and 1997.
(iv) Consolidated statements of stockholders' equity - years ended
December 31, 1999, 1998 and 1997.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Public Accountants.
2. Supplementary Data and Financial Statement Schedule
The following financial statement schedule in response to this Item 14(a)
is submitted as a separate section of this report:
Report of Independent Public Accountants on
Supplemental Schedule.
Report of Independent Public Accountants on and Financial Statements of
Ziegler Mortgage Securities, Inc. II (Commission file number: 33-92454)
ITEM 14(B). REPORTS ON FORM 8-K
-------------------
The Company filed a Current Report on Form 8-K, dated December 30,
1999 on January 14, 2000 to report in Item 2 the disposition of WRR in December
1999 and in Item 7 the related financial statements and exhibits. The Current
Report included the following financial statements: pro forma consolidated
balance sheet at September 30, 1999; pro forma consolidated statement of
operations for the year ended December 31, 1998; pro forma consolidated
statement of operations for the nine months ended September 30, 1999; and
notes to pro forma consolidated financial statements.
In November 1999, the Company filed a Current Report on Form 8-K to
report the sale of substantially all the assets and liabilities of ZTT. The
current report included financial statements (similar to those listed above)
showing the effects of the sale.
THE ZIEGLER COMPANIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------------------------------------------------------------
COL.A COL.B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------------------
DESCRIPTION
Balance at Charged Charged to Balance at
December 31, to Other Accounts- Deductions- December 31,
1998 Expense (Note 1) (Note 2) 1999
---- ------- ------------ ------------ ----
Reserve for loan losses (Note 3) $2,548,259 $ 300,446 $(179,000) $(64,109) $2,605,596
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Balance at Balance at
December 31, December 31,
1997 1998
---- ----
Reserve for loan losses (Note 3) $2,838,507 $ 120,600 $(340,000) $(70,848) $2,548,259
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Balance at Balance at
December 31, December 31,
1996 1997
---- ----
Reserve for loan losses (Note 3) $ 338,072 $2,700,492 $(199,942) $ (115) $2,838,507
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1) The additions represent adjustments to prior charge-offs.
2) These deductions represent charge-offs for the purpose for which the
reserve was established.
3) The reserve is offset against the corresponding assets in the balance
sheet.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
THE ZIEGLER COMPANIES, INC.
March 28, 2000 By:/s/ Peter D. Ziegler
------------------------------------------
Peter D. Ziegler
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
March 30, 2000 /s/ Donald A. Carlson
---------------------------------------------
Donald A. Carlson, Director
March 28, 2000 /s/ Gary P. Engle
---------------------------------------------
Gary P. Engle
Senior Vice President and Chief Financial
Officer
(Principal Financial Officer)
March 28, 2000 /s/ John C. Frueh
---------------------------------------------
John C. Frueh, Director
March 28, 2000 /s/ John R. Green
---------------------------------------------
John R. Green, Director
March 28, 2000 /s/ Peter R. Kellogg
---------------------------------------------
Peter R. Kellogg, Director
March 28, 2000 /s/ John J. Mulherin
---------------------------------------------
John J. Mulherin, President and Chief
Executive Officer
(Principal Executive Officer)
March 28, 2000 /s/ Stephen A. Roell
---------------------------------------------
Stephen A. Roell, Director
March 28, 2000 /s/ Jeffrey C. Vredenbregt
---------------------------------------------
Jeffrey C. Vredenbregt
Vice President, Treasurer and Controller
(Principal Accounting Officer)
March 28, 2000 /s/ Frederick J. Wenzel
---------------------------------------------
Frederick J. Wenzel, Director
March 28, 2000 /s/ Bernard C. Ziegler III
---------------------------------------------
Bernard C. Ziegler III, Director
March 28, 2000 /s/ Peter D. Ziegler
---------------------------------------------
Peter D. Ziegler
Chairman
THE ZIEGLER COMPANIES, INC.
Exhibit Index to Report on Form 10-K
for the fiscal year ended December 31, 1999
Exhibit Filed
No. Description Herewith
- ------- ----------- --------
3.1 Articles of Incorporation of the Company, previously
filed as Exhibit C to the Company's Proxy Statement
dated March 8, 1993.
3.2 By-Laws of the Company, previously filed as Exhibit D to
the Company's Proxy Statement dated March 8, 1993 as
amended herein by Exhibit 3.1.
3.3 By-Laws of the Company, as amended on February 18, 1997
(changing number of directors from nine to eight; see
Article III, Section 3.02 of the By-Laws).
3.4 Amendment to Bylaws, effective March 2000 X
4.1 Indentures and Guaranty Agreement incorporated herein by
reference under item 10 below.
10 Material Contracts
10.10 1993 Employees' Stock Incentive Plan incorporated by
reference from the March 8, 1993 Proxy Statement.
10.11 1998 Stock Incentive Plan incorporated by reference from
the March 31, 1998 Proxy Statement.
10.12 Statement Re Computation of Per Share Earnings.
(incorporated from Annual Report).
13.1 1999 Annual Report to Shareholders. X
21.1 List of Subsidiaries of the Company. X
23.1 Consent of Independent Public Accountants. X
27 Financial Data Schedule X