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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, 2001
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.)
250 East Wisconsin Avenue, Suite 2000, Milwaukee, Wisconsin 53202
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (414) 277-4400
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. [ ]
AGGREGATE MARKET VALUE OF VOTING STOCK HELD
BY NON-AFFILIATES OF THE REGISTRANT:
As of March 15, 2002, approximately 1.6 million 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 of $14.08 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 $22.3 million.
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, 2001 Part II
Portions of Proxy Statement for 2002
Annual Meeting of Shareholders Part III
PART I
ITEM 1. BUSINESS.
--------
General
The Ziegler Companies, Inc. (the "Company") is a financial services holding
company which owns operating subsidiary companies in three segments -- capital
markets, investment services and corporate segments. 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 financial service businesses. The Company's principal executive
offices are located at 250 East Wisconsin Avenue, Milwaukee, Wisconsin 53202 and
its telephone number is (414) 277-4400. Previously the Company's executive
offices were at 215 N. Main Street, West Bend, Wisconsin 53095.
CAPITAL MARKETS SEGMENT
Capital Markets underwrites fixed income securities, primarily for senior
living and healthcare providers, religious institutions, and private schools.
Capital Markets services also include financial advisory services, merger and
acquisition services, sales on an agency basis of complex financial products
incorporating risk management strategies, sales and trading of fixed income
securities and preferred stock, and Federal Housing Administration ("FHA")
mortgage loan origination, often in conjunction with investment banking
services. Capital Markets activities are conducted through our B.C. Ziegler and
Company ("BCZ") subsidiary, except that Ziegler Financing Corporation ("ZFC")
conducts FHA mortgage loan origination activities. These services are provided
primarily to institutions, corporations and municipalities.
INVESTMENT SERVICES SEGMENT
The Investment Services Group consisted of three operating groups: asset
management, wealth management and portfolio consulting. Effective August 31,
2001, the Company exited the portfolio consulting business with the disposition
of PMC International, Inc. ("PMC") located in Denver, Colorado. The Company
still offers portfolio consulting services through the broker distribution
network of its wealth management operation using third party providers. Asset
management provides investment advisory services to Company-sponsored mutual
funds and private account asset management services for institutional and
individual clients. Wealth management provides a wide range of financial
products and financial planning services to retail clients through its broker
distribution network, including equity and fixed-income securities, proprietary
and non-affiliated mutual funds, annuities and other insurance products. Wealth
management is the primary retail distribution channel for religious institution
and private school bonds and other taxable and tax-exempt bonds underwritten by
the Company. Sales credits associated with underwritten offerings are reported
in the Investment Services Group when sold through the Company's retail
distribution channels. Portfolio consulting provided fee-based "wrap account"
services as an intermediary, serving independent financial advisors, investment
consultants, and other financial services organizations. Asset management
activities are conducted through BCZ and were conducted through Ziegler Asset
Management, Inc. ("ZAMI") prior to 2001. ZAMI was merged into BCZ on January 1,
2001. Wealth management activities are conducted through BCZ. Through August
2001 portfolio consulting activities were provided by the Company through PMC.
As a result of the disposition of PMC, the Company owns common stock and notes
from The EnvestNet Group, Inc., the purchaser of PMC.
CORPORATE SEGMENT
The Corporate Group consists primarily of the investment and debt
management activities of the Parent and the unallocated corporate administrative
activities included in BCZ. Certain corporate administrative costs are
allocated to the Capital Markets and the Investment Services Groups using
methodologies which consider the size of the operation, the extent of
administrative services provided, the number of personnel, the area occupied and
other related factors. Corporate Group investment activity includes the
operations of Ziegler Healthcare Fund I, LP ("ZHF"), a small business investment
company ("SBIC") that is in the business of originating loans and lending to
qualified small businesses, primarily for-profit assisted living providers;
Ziegler Healthcare Capital, LLC ("ZHC"), the management company of ZHF; and ZHP
I, LLC ("ZHP"), the general partner of ZHF. The Company has an 11% ownership
share in ZHF and wholly owns ZHP and ZHC. The Company also owns 67% of Ziegler
Equity Funding I, LLC ("ZEF") a private equity fund whose purpose is to provide
funding for the pre-finance development needs of developmental stage continuing
care retirement communities. Corporate also includes the Company's share of the
operations of ZEF. Each of the companies is consolidated into the Company's
financial statements.
DISPOSITIONS
On August 31, 2001, the Company exchanged its 100% interest in PMC for a
minority interest in The EnvestNet Group, Inc. ("EnvestNet"). The Company
received common stock of EnvestNet valued at $9.5 million. EnvestNet also
assumed $8 million in debt owed to the Company. EnvestNet paid $3.5 million of
the debt at closing. At December 31, 2001, EnvestNet owed the remaining $4.5
million to the Company due over the next two years. A before tax gain of $1.4
million was recorded on the sale of PMC during 2001. An additional gain
approximating $5.6 million has been deferred. The deferred gain will be
recognized as the debt is collected and the value of the EnvestNet common stock
is realized. The EnvestNet common stock received in the sale is recorded at the
cost of $9.5 million. In conjunction with the receipt of EnvestNet stock, the
Company became party to an EnvestNet shareholders' agreement. The shareholders'
agreement restricts the Company's ability to sell its interest in EnvestNet.
The Company owns less than 20% of the common stock of EnvestNet at December 31,
2001, and does not exert significant influence over EnvestNet.
The financial results of PMC which includes all revenues and expenses prior
to the disposition are included as part of the Investment Services Segment. The
gain on sale of PMC is reported in the Corporate Segment. PMC provided fee-
based "wrap account" services as an intermediary to independent financial
advisors, investment consultants, and other financial services organizations.
BUSINESS FACTORS
The Company's businesses are sensitive to economic factors. During periods
of lower interest rates, the use of debt is more attractive to issuers and
generally results in an increase in fixed income underwriting activity. Part of
the increase generally comes from the refinancing of higher interest rate debt
outstanding by issuing debt with a lower interest rate. Even though this
relationship between underwriting and interest rates exists, many other factors
can affect the timing and frequency of debt underwritings. Among those factors
are the perception of the general direction of interest rates, investor
liquidity and desire for fixed income investments, issuer perceptions of the
need for new construction, and regulatory and legal factors associated with the
process. The Company enjoyed an increase in underwriting activity in 2001 over
2000 as interest rates declined and other factors were favorable. The prospects
for future debt underwriting activity will likely be tied to the level of
interest rates as well as other factors.
Another factor that impacts the Company's results is market valuation in
the equity markets. Asset management and, to a lesser extent, wealth management
rely on fees which are based on the value of assets under management. Assets
under management will vary as the result of sales and redemptions, but are also
significantly impacted by changes in securities market values. The declines in
the overall equity markets since the beginning of 2000 adversely affected the
fee income the Company received on assets under management. We also hold
investments, such as EnvestNet common stock and notes, which could decline in
value and affect our results.
Wealth management relies on the brokerage activity of retail investors.
Transaction volume of securities and other financial product sales affects the
volume of revenues, primarily commissions. The experience of wealth management
in 2001 included lower transaction activity in equity-based investments, mostly
attributable to uncertainty in the direction of the economy and the financial
markets, but increased transaction volumes in fixed income securities, primarily
those underwritten by the Company. The uncertainty in the direction of the
economy and the financial markets was further impacted by the terrorist attacks
of September 11, 2001.
In addition to the foregoing, the Company faces a number of other risks
that may adversely affect its business, financial condition and results of
operations. For example, if any of the variety of instruments and strategies
the Company utilizes to hedge or otherwise manage its exposure to various types
of risk are not effective, the Company may incur losses. The Company's hedging
strategies and other risk management techniques may not be fully effective in
mitigating risk exposure in all market environments or against all types of
risk.
Liquidity is essential to the Company's businesses. The Company's
liquidity could be impaired by an inability to access the long-term or short-
term debt markets, an inability to access the repurchase and securities lending
markets, or an inability to sell assets. This situation may arise due to
circumstances that the Company may be unable to control, such as a general
market disruption, perceptions about the Company's creditworthiness or an
operational problem that affects third parties or the Company. Further, the
Company's ability to sell assets may be impaired if other market participants
are seeking to sell similar assets at the same time.
Substantial legal liability or a significant regulatory action against the
Company could have a material adverse financial impact or cause significant
reputational harm to the Company's businesses, which in turn could seriously
harm the Company's business prospects. The Company faces significant legal
risks in its businesses and the volume and amount of damages claimed in
litigation against financial intermediaries are increasing. In addition, the
Company would expect legal claims by customers and clients to increase in a
market downturn.
The Company, as a participant in the financial services industry, is
subject to extensive regulation. It faces the risk of significant intervention
by regulatory authorities. Among other things, the Company could be fined or
prohibited from engaging in some of its business activities. New laws or
regulations or changes in enforcement of existing laws or regulations applicable
to the Company's clients may also adversely affect its businesses.
Results of Operations - 2001 Compared to 2000
- ---------------------------------------------
The following table summarizes the changes in revenues and income (loss)
before taxes of continuing operations of the Company.
Year Ended
December 31, Increase/
2001 2000 (Decrease)
---- ---- ----------
Revenues:
Capital Markets $28,898 $24,269 $ 4,629
Investment Services
Asset Management 8,405 8,913 (508)
Wealth Management 21,384 24,262 (2,878)
Portfolio Consulting 16,231 23,494 (7,263)
------- ------- --------
46,020 56,669 (10,649)
Corporate 5,761 2,870 2,891
------- ------- --------
$80,679 $83,808 $ (3,129)
------- ------- --------
------- ------- --------
Income (loss) before taxes:
--------------------------
Capital Markets $ 4,070 $(1,458) $ 5,528
Investment Services
Asset Management (616) 525 (1,141)
Wealth Management (2,496) (1,422) (1,074)
Portfolio Consulting (1,389) (2,553) 1,164
------- ------- --------
(4,501) (3,450) (1,051)
Corporate 2,632 (2,869) 5,501
------- ------- --------
$2,201 $(7,777) $ 9,978
------- ------- --------
------- ------- --------
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 and service
marks which identify the "brands" of the Company and its affiliated mutual fund
family. None of the businesses is seasonal, although commission income will
fluctuate depending upon the financial condition of the US 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, 2002 approximately 317 persons were employed full time and
24 persons were employed part time by the Company and its subsidiaries.
Executive Officers of the Company
Information regarding the officers of the Company as of March 1, 2002,
which is not part of the Company's Proxy Statement for the 2002 Annual Meeting
is as follows:
Name Age Position
- ---- --- --------
John J. Mulherin 50 President and Chief Executive Officer
of the Company
Gary P. Engle 49 Senior Vice President, Chief
Financial Officer and Chief
Administrative Officer of the Company
S. Charles O'Meara 51 Senior Vice President, Secretary and
General Counsel of the Company
Jeffrey C. Vredenbregt 48 Vice President, Controller and
Treasurer of the Company
Officers of Subsidiaries Deemed Executive Officers of the Company
Name Age Position
- ---- --- --------
Donald A. Carlson, Jr. 55 Senior Managing Director - Capital
Markets Group
Thomas R. Paprocki 47 Chief Operating Officer - Capital
Markets Group
Darrell P. Frank 43 Senior Managing Director - Services
and Technology Group
Brian K. Andrew 39 Chief Investment Officer - Asset
Management Group
Frank W. Siegel 49 Senior Managing Director - Wealth
Management Group
Robert J. Tuszynski 42 Senior Vice President and Managing
Director - Asset Management Group
The term of office of each officer is one year or until his successor is
elected and qualified and officers are appointed by the board of directors.
There is no arrangement or understanding between any officer and any other
person pursuant to which he was elected as an officer.
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 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.
----------
The Company and BCZ lease commercial office space at 250 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202-4209. BCZ also owns an office building
located at 215 North Main Street in West Bend, Wisconsin 53095 which serves as
an office for the Company and all subsidiaries. This three-story building has
approximately 65,000 square feet of space.
BCZ occupies leased premises at One South Wacker Drive, Suite 3080,
Chicago, Illinois 60606; 1185 Avenue of the Americas, 32nd Floor, New York, New
York 10036; 150 Second Avenue, N.E., Suite 1150, St. Petersburg, Florida
33701; 200 California Street, Suite 400, San Francisco, California 94111-4341;
and 8100 Professional Place, Suite 312, Landover, Maryland 20785. Other than
the above described office location in West Bend, Wisconsin, all branch offices
of BCZ's Wealth Management Group are located in leased premises with varying
lease terms from one to five years.
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 2001
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 2001 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 2001 and 2000 fiscal years and information about the cash
dividends paid on the Company's Common Stock for each quarter during 2001 and
2000 may be found on page 38 of the Company's 2001 Annual Report to Shareholders
incorporated herein by reference. On March 15, 2002, the average of the bid and
ask price of the Company's Common Stock was $14.08. As of March 15, 2002, the
Company had approximately 315 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 1997 through 2001 may be
found on page 36 of the Company's 2001 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 2001, 2000 and 1999 may be found on
pages 8 through 38 of the Company's 2001 Annual Report to Shareholders
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
---------------------------------------------------------
Risk is an inherent part of the Company's business activities. The
potential for changes in value of the Company's financial instruments is
referred to as "market risk." Market risk to the Company arises from changes in
interest rates, credit spreads and other relevant factors.
Interest Rate Risk
Interest rate risk, one component of market risk, arises from holding
interest sensitive financial instruments such as municipal, institutional, and
corporate bonds, and certain preferred equities. The Company manages its
exposure to interest rate risk in its securities inventory by monitoring its
inventory with respect to its total capitalization and regulatory net capital
requirements. The Company's securities inventories are marked to market and,
accordingly, represent current value with no unrecorded gains or losses in
value. While a significant portion of the Company's securities inventories may
have contractual maturities in excess of several years, the inventories, on
average, turn over frequently during the year. Accordingly, the turnover of
inventory mitigates the exposure to market risk.
The Company's other investments include government-agency backed
collateralized mortgage obligations ("CMOs") issued by the Government National
Mortgage Association and the Federal National Mortgage Association. These
investments have a fixed rate of interest and are subject to scheduled and early
prepayments. The Company finances the CMOs using a repurchase agreement. The
Company is exposed to the risk that the cost of financing, which is based on
short-term rates adjusted monthly, would exceed the interest received on the
CMOs, which is a fixed coupon extending to maturity. Management is of the
opinion that the spread between the rate of interest earned and paid is
sufficient to mitigate the risk of loss in net interest received versus paid.
Management continuously reviews these positions for an adequate spread in
interest rates.
Equity Price Risk
Equity price risk results from exposure to changes in the prices of equity
securities. The Company faces equity price risk with respect to the fees it
earns on the portfolio of assets it manages for clients. As of December 31,
2001, the Company manages a portfolio with an aggregate value of approximately
$2.1 billion in the form of separately managed and mutual fund accounts. Of the
total, $1 billion relates to equity securities portfolios. A general decline in
the equities market could adversely affect the amount of fee based revenues.
While this exposure is present, quantification remains difficult due to the
number of other variables affecting fee income. Interest rate changes can also
have an affect on fee income as it relates to the value of fixed income
securities portfolios.
In addition to the CMOs noted above, other investments also include common
stock in the form of an investment in The EnvestNet Group, Inc. ("EnvestNet")
and partnership investments. These investments are subject to market risk in
the form of equity price, interest rate, credit and other performance-related
risks. The Company continuously reviews these investments.
The table below provides information about the Company's financial
instruments as of December 31, 2001 that are sensitive to market risk. 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 common stock and partnership interests, the table
presents the cost and fair values of the investments. The common stock and
partnership interests are not specified to result in cash flows during the next
five years, although the timing of cash flows is dependent upon many factors.
Trading accounts are shown in the caption "Securities Inventory" and non-trading
accounts are shown in all other captions.
Notional Fair
Amount Value
(Dollars in thousands) -------- -----
FORWARD DEBT SERVICE AGREEMENT $5,005 $170
- ------------------------------
Index: Municipal Market Data Services AAA/Aaa Scale plus a forward spread
FORWARD INTEREST RATE AGREEMENT $5,005 $(104)
- -------------------------------
Index: Municipal Market Data Services AAA/Aaa Scale plus a forward spread
(Hedge to above instrument)
II. TRADING AND NON-TRADING PORTFOLIO
Scheduled Maturity Dates
-----------------------------------------------------------
2002 2003 2004 2005 2006 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
(U.S. Dollars in Thousands)
ASSETS
- ------
SECURITIES INVENTORY - FIXED RATE
- ---------------------------------
Municipal bond issues $ 13 $ 10 $ 40 -- $6,570 $43,930 $50,563 $48,341
Weighted average interest rate 5.64% 2.70% 5.78% 5.50% 6.26%
Institutional Bonds 5 -- 5 -- -- 1,317 1,327 1,271
Weighted average interest rate 4.25% 6.00% 7.54%
Other -- -- -- -- 10 5,413 5,423 884
Weighted average interest rate 5.00% 8.35%
SECURITIES INVENTORY - VARIABLE RATE
- ------------------------------------
Municipal Variable rate demand notes -- -- -- -- -- 47,940 47,940 47,940
Weighted average interest rate 1.66%
NOTES RECEIVABLE 2,124 3,306 340 379 429 2,641 9,219 9,327
- ----------------
Weighted average interest rate 9.33% 11.69% 8.63% 8.57% 8.46% 11.17%
OTHER INVESTMENTS - CMOS(1) -- -- -- -- -- 38,152 38,152 38,125
- -------------------------------
Weighted average interest rate 7.89%
OTHER INVESTMENTS - COMMON STOCK -- -- -- -- -- 9,500 9,500 9,500
- --------------------------------
OTHER INVESTMENTS- PARTNERSHIP INTERESTS -- -- -- -- -- 525 525 525
- ----------------------------------------
LIABILITIES
- -----------
SHORT-TERM NOTES PAYABLE (2) $3,375 $ -- $ -- $ -- $ -- $ -- $ 3,375 $ 3,375
- --------------------------------
Weighted average interest rate 3.83%
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE(2) 37,870 -- -- -- -- -- 37,870 37,870
- --------------------------------
Weighted average interest rate 2.07%
BONDS PAYABLE - FIXED RATE(3) 1,700 -- -- -- -- 1,600 3,300 3,254
- ---------------------------------
Weighted average interest rate 8.3% 7.3%
(1) Assumes no prepayment
(2) The information shown above includes actual interest rates at December
31, 2001 and assumes no changes in interest rates in 2002 or
thereafter.
(3) Amounts in 2002 are based on the Company's early redemption of bonds.
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 effect on
assets under management and retail customer account balances. Therefore,
the above information should not be relied upon as indicative of future
actual results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
The Company's Consolidated Financial Statements containing consolidated
statements of financial condition for the years 2001 and 2000 may be found
on page 8 of the Company's 2001 Annual Report to Shareholders; consolidated
statements of operations for the years 2001, 2000 and 1999 may be found on
page 9 of the Company's 2001 Annual Report to Shareholders, consolidated
statements of cash flows for the years 2001, 2000 and 1999 may be found on
pages 11 and 12 of the Company's 2001 Annual Report to Shareholders;
consolidated statements of stockholders' equity for 2001, 2000 and 1999 may
be found on page 10 of the Company's 2001 Annual Report to Shareholders.
The consolidated notes to financial statements, together with the report of
Arthur Andersen LLP, may be found on pages 13 through 25 of the Company's
2001 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.
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 3-6 of the Company's March 20, 2002 Proxy
Statement incorporated herein by reference.
On December 28, 1998, Brian Andrew consented to entry of an administrative
order by the Securities and Exchange Commission, based on certain actions he
took as an employee of an unaffiliated prior employer in the management of an
unaffiliated investment company between February 1993 and March 1994. Under the
terms of the order, Mr. Andrew paid a civil forfeiture and his activities as an
associated person of an investment advisor were subject to certain conditions
for one year.
Other 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 7-8 of the Company's March 20, 2002 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 2-4 of the Company's March 20, 2002 Proxy
Statement incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
Except as set forth below, there have been no transactions since the
beginning of fiscal year 2001, 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.
On April 13, 2001, Mr. John J. Mulherin, the Chief Executive Officer of the
Company, entered into a replacement promissory note with the Company which
evidences his indebtedness of $120,000 to the Company. Interest on the April
13, 2001 promissory note, due April 15, 2002, is accrued annually at the
variable short-term applicable federal rate and has been forgiven through April
15, 2002. The April 13, 2001 promissory note replaced in part a promissory note
dated December 29, 2000 which evidenced his indebtedness to the Company in the
principal amount of $67,906.67. Mr. Mulherin originally incurred this
indebtedness to pay taxes due on receipt of restricted common stock and the
rate has been extended until April 2003.
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 statements of financial condition - December 31,
2001 and 2000.
(ii) Consolidated statements of operations - years ended December
31, 2001, 2000 and 1999.
(iii) Consolidated statements of cash flows - years ended December
31, 2001, 2000 and 1999.
(iv) Consolidated statements of stockholders' equity - years ended
December 31, 2001, 2000 and 1999.
(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.
ITEM 14(B). REPORTS ON FORM 8-K
-------------------
None.
EXHIBITS
- --------
See Exhibit Index.
THE ZIEGLER COMPANIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
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,
2000 Expense (Note 1) (Note 2) 2001
---- ------- ------------ ------------ ----
Reserve for losses (Note 3) $2,682,636 $174,608 $(355,409) $(2,169,010) $332,825
---------- -------- --------- ----------- --------
---------- -------- --------- ----------- --------
Balance at Charged Charged to Balance at
December 31, to Other Accounts- Deductions- December 31,
1999 Expense (Note 1) (Note 2) 2000
---- ------- ------------ ------------ ----
Reserve for losses (Note 3) $2,605,596 $314,715 $(154,500) $(83,175) $2,682,636
---------- -------- --------- --------- ----------
---------- -------- --------- --------- ----------
Balance at Charged Charged to Balance at
December 31, to Other Accounts Deductions December 31,
1998 Expense (Note 1) (Note 2) 1999
---- ------- ------------ ------------ ----
Reserve for2losses9(Note 3) $2,548,259 $300,446 $(179,000) $(64,109) $2,605,596
---------- -------- --------- --------- ----------
---------- -------- --------- --------- ----------
(1) These amounts 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 22, 2002 By /s/John J. Mulherin
--------------------------------------------
John J. Mulherin
President, CEO and Director (Principal Executive Officer)
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 22, 2002 /s/ Donald A. Carlson, Jr.
---------------------------------------------------------
Donald A. Carlson, Jr., Director
March 22, 2002 /s/ Gary P. Engle
---------------------------------------------------------
Gary P. Engle
Senior Vice President, Chief Financial Officer and Chief
Administrative Officer
(Principal Financial Officer)
March 22, 2002 /s/ John C. Frueh
---------------------------------------------------------
John C. Frueh, Director
March 22, 2002 /s/ Gerald J. Gagner
---------------------------------------------------------
Gerald J. Gagner, Director
March 22, 2002 /s/ John R. Green
---------------------------------------------------------
John R. Green, Director
March 22, 2002 /s/ Peter R. Kellogg
---------------------------------------------------------
Peter R. Kellogg, Director and Chairman
March 22, 2002 /s/ John J. Mulherin
---------------------------------------------------------
John J. Mulherin, President, Chief Executive Officer and
Director (Principal Executive Officer)
March 22, 2002 /s/ Jeffrey C. Vredenbregt
---------------------------------------------------------
Jeffrey C. Vredenbregt
Vice President, Treasurer and Controller
(Principal Accounting Officer)
March 22, 2002 /s/ Bernard C. Ziegler III
---------------------------------------------------------
Bernard C. Ziegler III, Director
THE ZIEGLER COMPANIES, INC.
Exhibit Index to Report on Form 10-K
for the fiscal year ended December 31, 2001
Exhibit Incorporated by Filed
No. Description Reference Herewith
- --- ----------- --------- --------
3.1 Articles of Incorporation Previously filed as Exhibit C
of the Company 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 Previously filed as
amended on February 18, 3(c) to the Form 10-K for year
1997. ended December 31, 1996.
3.4 Amendment to Bylaws, Previously filed as Exhibit 3.4
effective March 2000 to the Form 10-K for year ended
December 31, 1999.
3.5 Amendment to Bylaws, Previously filed as Exhibit 3.5
effective January 30, 2001 to Amendment No. 1 to Form 10-K
(reduces number of for year ended December 31,
directors) 2000.
4.1 Indentures and Guaranty Incorporated herein by
Agreement reference under Exhibit 10
below.
10 Material Contracts
10.1 1993 Employees' Stock Incorporated by reference from
Incentive Plan the March 8, 1993 Proxy
Statement.
10.2 1998 Stock Incentive Plan Incorporated by reference from
Appendix A to the March 31,
1998 Proxy Statement.
10.3 John Mulherin Employment Previously filed as Exhibit
Agreement and Offer Letter 10.4 to the Form 10-K for year
ended December 31, 2000.
10.4 Gary Engle Employment Previously filed as Exhibit
Agreement 10.5 to the Form 10-K for year
ended December 31, 2000.
10.5 Letter Agreement with M&I Previously filed as Exhibit
Marshall & Ilsley Bank 10.6 to the Form 10-K for year
dated September 14, 1999 ended December 31, 2000.
with Promissory Note
10.6 Promissory Note with M&I Previously filed as Exhibit
Marshall & Ilsley Bank 10.1 to the Form 10-Q for the
dated April 30, 2001 quarterly period ended
September 30, 2001.
10.7 John J. Mulherin Previously filed as Exhibit
Promissory Note, dated 10.7 to Amendment No. 1 to Form
December 29, 2000 10-K for year ended December
31, 2000.
10.8 Form of John J. Mulherin Previously filed as Exhibit
Promissory Note, dated 10.8 to Amendment No. 1 to Form
April 15, 2001 10-K for year ended December
31, 2000.
10.9 Form of Nonqualified X
Stock Option Agreement
10.10 The 1998 Stock Incentive X
Plan Amendment
11.1 Statement Re Computation Incorporated from 2001 Annual
of Per Share Earnings. Report to Shareholders, filed
as Exhibit 13.1.
13.1 2001 Annual Report to X
Shareholders.
21.1 List of Subsidiaries of X
the Company.
23.1 Consent of Independent X
Public Accountants.