8-K 1 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 - May 23, 1995 ANUHCO, INC. State of Incorporation - Delaware Commission File No. - 0-12321 IRS Employer Identification No. - 46-0278762 9393 West 110th Street, Suite 100 Overland Park, Kansas 66210 Telephone Number - (913)-451-2800 Item 5. OTHER EVENTS On May 23, 1995, Anuhco, Inc ("Anuhco") announced the execution of definitive agreements for the acquisition of all of the issued and outstanding stock of Agency Premium Resource, Inc. and Subsidiary ("APR"). The purchase price, together with payments for services to be rendered by the sellers after closing, will be approximately $11.5 million. This transaction, subject to the satisfaction of certain conditions, is scheduled for closing on or about May 31, 1995 and will be accounted for as a purchase. Anuhco will utilize a portion of its available cash to consummate the purchase. Anuhco will be assuming certain guarantees of the APR financing arrangements. Such guarantees would have exceeded $20 million at December 31, 1994. The terms of the acquisition and the purchase price resulted from negotiations between Anuhco and the APR shareholders, Seafield Capital Corporation (Seafield) and APR's Chief Executive Officer, C. Ted McCarter. APR offers premium financing and related services through approved insurance agencies, primarily throughout the midwestern United States. Its wholly owned subsidiary, Agency Services, Inc., provides motor vehicle report services throughout the same geographic area. Anuhco intends for APR to continue its operation as an autonomous finance company. Existing management will continue, including all officers, with C. Ted McCarter to continue as Chief Executive Officer of APR under a five year employment agreement. This acquisition would provide Anuhco a base, from which to grow a financial services operation. Expansion of the financial services operation is expected to include continued growth of APR and possibly the acquisition of units which would compliment the operation of APR. In management's opinion, the acquisition of APR will not have a dilutive effect on consolidated earnings. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (1)
Page (a) Financial Statements of Agency Premium Resource, Inc. and Subsidiary (business acquired) Unaudited Consolidated Balance Sheets as of December 31, 1994 4 Unaudited Consolidated Statements of Earnings for the years ended December 31, 1994 and 1993 5 Unaudited Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1993 6 Unaudited Notes to Consolidated Financial Statements 7 (b) Condensed Pro Forma Financial Information Condensed Pro Forma Balance Sheet at December 31, 1994 13 Condensed Pro Forma Statement of Earnings for the year ended December 31, 1994 14 Notes to Pro Forma Financial Statements 15 (c) Exhibits - Filed herewith 99(a) May 23, 1995 News Release announcing execution of definitive documents related to the acquisi- tion of Agency Premium Resource, Inc. and 16 Subsidiary. 99(b) Unaudited Selected Financial Information Re: Agency Premium Resource, Inc. 17
(1) The following financial information and/or documents were not available at the date of this filing and therefore will be supplied as required by the SEC, not later than 60 days from the date the report on Form 8-K is due to be filed: - Audited financial statements of acquired company for the year ended December 31, 1994. - Interim condensed financial statements of the acquired company as of March 31, 1995. - Proforma condensed financial statements for the interim period as of March 31, 1995. - Acquisition agreements. AGENCY PREMIUM RESOURCE, INC. AND SUBSIDIARY Consolidated Balance Sheets December 31, 1994 and 1993 "Unaudited"
Assets 1994 1993 Current assets: Accounts receivable, net of allowance for uncollectible accounts of $210,970 and $285,814 and unearned interest of $177,363 and $114,310 in 1994 and 1993 and sold receivables of $23,000,000 and $19,000,000 in 1994 and 1993 (note 2) $8,088,077 $5,737,732 Short term investments 1,002,245 2,261,399 Prepaid expenses and other 55,312 41,092 Deferred income tax assets (note 5) 89,260 99,448 Total current assets 9,234,894 8,139,671 Furniture and equipment, net of accumulated depreciation of $184,467 in 1994 and $151,500 in 1993 59,501 59,143 Capital lease, net of accumulated amortiza- tion of $5,592 (note 6) 22,366 - - Deferred transaction costs, net of accumu- lated amortization of $145,226 in 1994 and $41,156 in 1993 (note 2) 108,782 144,048 Deferred income tax asset (note 5) - - 29,400 $9,425,543 $8,372,262 Liabilities and Stockholders' Equity Current liabilities: Bank overdrafts $ 445,125 $ 381,489 Accounts and premiums payable 664,001 399,139 Current income taxes-payable to parent 149,740 85,251 Accrued expenses and other 318,215 213,456 Capital lease - current (note 6) 5,620 - - Total current liabilities 1,582,701 1,079,335 Capital lease - noncurrent (note 6) 16,062 - - Deferred income tax liability (note 5) 3,611 - - Stockholders' equity: Common stock, $1 stated value, 30,000 shares authorized; 1,500 shares issued and outstanding 1,500 1,500 Paid-in capital 8,280,341 8,280,341 Accumulated deficit (458,672) (988,914) Total stockholders' equity 7,823,169 7,292,927 $9,425,543 $8,372,262
See accompanying notes to consolidated financial statements. AGENCY PREMIUM RESOURCE, INC. AND SUBSIDIARY Consolidated Statements of Earnings Years ended December 31, 1994 and 1993 "Unaudited"
1994 1993 Revenues: Interest income $1,252,487 $1,664,049 Service revenue 1,854,780 1,235,122 Other revenue 582,852 549,318 Total revenues 3,690,119 3,448,489 Expenses: Salaries and benefits (note 7) 931,311 794,969 Service expense 940,143 614,762 Commissions expense 250,125 206,055 Occupancy 42,161 44,993 Depreciation and amortization 142,678 73,982 Other operating expense 429,570 495,383 Total operating expenses 2,735,988 2,230,144 Bad debt expense 119,622 220,400 Interest expense (notes 3 and 4) 9,587 430,087 Other expenses 14,174 7,238 Total expenses 2,879,371 2,887,869 Earnings before income tax expense 810,748 560,620 Income tax expense (note 5) 280,506 194,220 Net earnings $ 530,242 $ 366,400
See accompanying notes to consolidated financial statements. AGENCY PREMIUM RESOURCE, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Years ended December 31, 1994 and 1993 "Unaudited"
1994 1993 Cash flows from operating activities: Net earnings $ 530,242 $ 366,400 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 142,678 73,982 Bad debt expense 119,622 220,400 Changes in assets and liabilities: Income taxes 107,688 (4,993) Prepaid expenses (14,220) (14,901) Accounts and premiums payable 264,862 118,577 Accrued expenses and other 104,759 29,133 Net cash provided by operating activities 1,255,631 788,598 Cash flows from investing activities: Sale (purchase) short-term investments 1,259,154 (2,261,399) Securitization of accounts receivable 4,000,000 19,000,000 Capitalization of transaction costs 68,804) (185,204) Additions to accounts receivable (6,469,967) (6,840,815) Additions to furniture and equipment (33,556) (19,729) Proceeds from sale of furniture and equipment 182 - - Net cash provided (used) by investing activities (1,312,991) 9,692,853 Cash flows from financing activities: Repayment of note payable to bank,net - - (8,340,000) Repayment of subordinated notes payable to related parties, net - - (2,000,000) Payments on capital lease obligation (6,276) - - Increase(decrease) in bank overdrafts 63,636 (141,451) Net cash provided (used) by financing activities 57,360 (10,481,451) Net increase in cash - - - - Cash at beginning of year - - - - Cash at end of year $ - - $ - - Supplemental disclosure: Cash paid for interest $ 9,587 $ 478,963 Cash paid to parent and states for income taxes $ 172,818 $ 198,554
See accompanying notes to consolidated financial statements. AGENCY PREMIUM RESOURCE, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements December 31, 1994 and 1993 "Unaudited" (1) Summary of Significant Accounting Policies (a) Organization Agency Premium Resource, Inc., (the Company) a subsidiary of Seafield Capital Corporation (Seafield), was formed on January 1, 1989. The Company offers premium financing and related services through approved insurance agencies. Agency Services, Inc., a wholly- owned subsidiary, provides motor vehicle report services. (b) Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis in conformity with generally accepted accounting principles. All significant intercompany transactions have been eliminated in consolidation. (c) Furniture and Equipment Furniture and equipment are stated at cost. Depreciation of furniture and equipment is provided over the estimated useful lives of assets (two to ten years) using the straight-line method. (d) Income Taxes The provision for income taxes is based on income recognized for financial statement purposes and includes the effects of temporary differences between such income and that recognized for tax purposes. (2) Securitization of Receivables In July, 1993, the Company entered into an extendable two- year agreement whereby it can sell undivided interests in a designated pool of accounts receivable on an ongoing basis. The maximum allowable amount of receivables to be sold was increased by amendment in August 1994 from $22,000,000 to $30,000,000, subject to voluntary reduction by the seller to a minimum of $12,000.00. As collections reduce accounts receivable in the pool, the purchaser permits the Company to apply such collections to additional purchases up to the maximum. The Company had securitized receivables of $23,000,000 at December 31, 1994 and $19,000,000 at December 31, 1993. The net cash proceeds are reported as an investing activity in the accompanying consolidated statement of cash flows. The securitized receivables are reflected as sold in the accompanying consolidated balance sheet. The proceeds from the initial sale of receivable interests were used to retire bank debt and subordinated debts to the shareholders and the Company's Chief Executive Officer. The Company did not record a gain or loss on the sales as the costs of receivables sold approximated the proceeds. Receivables of $2,760,000 and $2,280,000 at December 31, 1994 and 1993, respectively, are subordinated to undivided interests sold in the event of defaults or delinquencies with respect to the underlying receivables. A default reserve, which serves as collateral, is required for the greater of 12% of the accounts receivable sold, or an amount set forth by a formula based on preceding months' default ratios. The Company capitalized costs of approximately $69,000 in 1994 and $185,000 in 1993 related to the asset securitization. These costs are being amortized over a two- year period, with amortization expense of approximately $104,000 in 1994 and $41,000 in 1993. The Company continues to service the securitized receivables for which it receives a servicing fee. Included in the service revenue was $822,503 and $543,170 of servicing fees at December 31, 1994 and 1993, respectively. (3) Note Payable to Bank The Company had a $9,000,000 bank line of credit through July 22, 1993 to provide funding for premiums financed. In July, 1993, the Company retired this debt with cash provided from the securitization of receivables described in note 2. (4) Related Party Transactions In October 1991, Seafield, the majority shareholder, advanced $2,000,000 to the Company. This advance was subordinate to the bank debt and carried an interest rate of 5.5%. In January 1993, the majority shareholder advanced an additional $3,000,000 to the Company through an amendment to the original agreement. The Company also borrowed $700,000 from its Chief Executive Officer in the form of a thirty-day renewable note payable. In July 1993, the Company retired these debts with cash provided from the securitization of receivables described in note 2. The Company had an open line of credit with its majority shareholder in the amount of $5,000,000. During 1994, there were draws made on this line of credit by the Company and all were repaid prior to year-end. During 1993, there were no draws on this line of credit. Interest expense on related party transactions was $8,026 and $167,641 for 1994 and 1993, respectively. The Chief Executive Officer purchased approximately $192,000 in receivables from the Company in 1993 at their unpaid balance. In June 1994, the Company received a settlement from an insurance company and a portion of the settlement funds were used to repurchase the $192,000 in receivables from the Chief Executive Officer. (5) Income Taxes Income tax expense (benefit) consists of the following:
1994 1993 Current Deferred Total Current Deferred Total Federal $231,902 $47,724 $279,626 $195,755 $(3,814) $191,941 State 5,405 (4,525) 880 2,592 (313) 2,279 $237,307 $43,199 $280,506 $198,347 $(4,127) $194,220
Income tax expense approximates the amounts computed by applying the U. S. federal income tax rate of 34% to earnings before income taxes. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1994 and 1993 are presented below:
1994 1993 Deferred tax assets: Accounts receivable, due to the allow- ance for uncollectible accounts $81,963 $116,984 Accrued expenses 6,462 28,646 Furniture and equipment, due to differences in depreciation for book and tax purposes - - (11,584) Other 835 9,310 State net operating loss carryforwards 6,881 50,016 Total gross deferred tax assets 96,141 193,372 Less valuation allowance 6,881 64,524 $89,260 $128,848 Deferred tax liabilities: Furniture and equipment, due to differences in depreciation for book and tax purposes $ 3,345 $ - - Other 266 - - $ 3,611 $ - -
The valuation allowance for deferred tax assets as of January 1, 1993 was $104,081. The decrease in the total valuation allowance for the years ended December 31, 1994 and 1993 was $57,643 and $39,557, respectively. The decrease each year in the valuation allowance is primarily attributed to the utilization of state net operating loss carryforwards. At December 31, 1994, the Company has net operating loss carryforwards for state income tax purposes of $116,411 which are available to offset future state taxable income, if any, through 2005. (6) Commitments Total rent expense was $50,904 and $52,766 in 1994 and 1993, respectively. The Company is obligated under certain noncancelable rental agreements which terminate through July 1996. The minimum future payments under these agreements are as follows:
Year Amount 1995 $50,234 1996 23,347
In January 1994, the Company entered into a noncancelable capital lease payable in thirty monthly installments of $580 and a final payment of $12,722. Amortization expense related to the capitalized asset was $5,592 in 1994. (7) Retirement Plans The Company is a member of the Seafield Capital Corporation 401(k) Savings Plan and Trust (401(k) Plan) and the Seafield Capital Corporation Money Purchase Pension Plan (Pension Plan), both of which are defined contribution plans. All full-time employees who have worked 500 hours within the first six months of employment are eligible to participate in the Plans. Participants in the 401(k) Plan may contribute 2% to 10% of annual compensation. The Company contributes for each participant an amount equal to 50% of the participant's contribution up to 10% of annual compensation. A participant is immediately fully vested with respect to the participant's contributions and the Company contributions vest over five years. Participant contributions are invested by the Trustees of the Plan at the direction of the participants in one or more of six investment funds, one of which is a Seafield Stock Fund. The matching contributions made by the Company were $19,439 and $16,990 in 1994 and 1993, respectively. Under the Pension Plan, the Company contributes 7% of each eligible participant's annual compensation up to the social security wage base plus 12.7% for any excess up to the salary limits of $150,000 for 1994 and $235,840 for 1993. Participants become 100% vested after five years of service, normal retirement at age sixty-five or in the event of disability or death while employed by the Company. Provisions for contributions to the Pension Plan by the Company were $50,251 and $37,755 in 1994 and 1993, respectively. Implementation of Financial Accounting Standards Board Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", did not have an impact on the Company's financial condition or results of operations. ANUHCO, INC. AND AGENCY PREMIUM RESOURCE, INC. Description of Condensed Pro Forma Financial Statements On May 23, 1995, Anuhco, Inc. ("Anuhco") announced the execution of definitive agreements for the acquisition of all of the issued and outstanding stock of Agency Premium Resource, Inc. and Subsidiary, a Kansas corporation ("APR"). The purchase price, together with payment for services to be rendered by the sellers after closing, will be approximately $11.5 million. This transaction, subject to the satisfaction of certain conditions, is scheduled for closing on or about May 31, 1995 and will be accounted for as a purchase. The entities involved in the pro forma financial statements are Anuhco, the Registrant, and APR. Anuhco's and APR's normal fiscal year is a calendar year ending December 31. The pro forma balance sheet was prepared using the historical balance sheets of Anuhco and APR as of the calendar year of 1994. Anuhco previously reported such information on Form 10-K. The fiscal year pro forma income statement was prepared using the historical income statement of Anuhco and APR for the year ended December 31, 1994, Anuhco's historical information having been previously reported on Form 10-K. ANUHCO, INC. AND AGENCY PREMIUM RESOURCE, INC. Condensed Pro Forma Balance Sheet as of December 31, 1994 (in thousands)
Historical Pro Forma Pro Forma Anuhco APR Combined Adjustments Combined Current Assets - Cash & investments $38,258 $1,002 $39,260 $(11,500)(1)$27,760 Finance receivables - 8,008 8,008 - 8,008 Other receivables 8,675 - 8,675 - 8,675 AFS net assets 21,095 - 21,095 - 21,095 Other 983 144 1,127 - 1,127 Total Current 69,011 9,234 78,245 (11,500) 66,745 Property/Equipment 14,417 82 14,499 - 14,499 Intangibles - - - 3,677(1) 3,677 Other Assets 1,344 109 1,453 - 1,453 Total Assets $84,772 $9,425 $94,197 $ (7,823) $86,374 Current Liabilities $ 7,353 $1,583 $ 8,936 $ - $ 8,936 Other Liabilities - 19 19 - 19 Total Liabilities 7,353 1,602 8,955 - 8,955 Shareholders Equity 77,419 7,823 85,242 (7,823)(1) 77,419 Total Liability & Shareholder's Equity $84,772 $9,425 $94,197 $ (7,823) $86,374
This pro forma balance sheet should be read in conjunction with the related Description and Notes to Condensed Pro Forma Financial Statements and the Registrant's financial statements contained in its Form 10-Q and Form 10-K filings with the Commission. ANUHCO, INC. AND AGENCY PREMIUM RESOURCE, INC. Condensed Pro Forma Statement of Income For the year ended December 31, 1994 (in thousands, except per share amounts)
ProForma Historical Adjust ProForma Anuhco APR Combined ments Combined Operating Revenue $95,772 $3,690 $99,462 $ - $99,462 Operating Expenses Salaries, wages & employee benefits 51,732 931 52,663 - 52,663 Operating supplies & expenses 10,869 1,781 12,650 - 12,650 Operating taxes & licenses 2,597 - 2,597 - 2,597 Insurance & claims 2,209 - 2,209 - 2,209 Depreciation & amortization 2,315 143 2,458 350(1) 2,808 Purchased transpor- tation & rents 20,829 - 20,829 - 20,829 Total operating expenses 90,551 2,855 93,406 - 93,756 Operating Income 5,221 835 6,056 (350) 5,706 Nonoperating Income (Expense) 274 (25) 249 - 249 Income Before Income Taxes 5,495 810 6,305 (350) 5,955 Income Tax Provision - 280 280 (80)(1) 200 Net Income $ 5,495 $ 530 $ 6,025 $(270) $ 5,755 Average Common Shares Outstanding 7,545 7,545 Net Income Per Share $0.73 $0.76
This pro forma statement of income should be read in conjunction with the related Description and Notes to Condensed Pro Forma Financial Statements and the Registrant's financial statements contained in its Form 10-Q and Form 10-K filings with the Commission. ANUHCO, INC. AND AGENCY PREMIUM RESOURCE, INC. Notes to Pro Forma Financial Statements (dollars in thousands) 1. These Notes to Pro Forma Financial Statements are not intended to disclose all data of significance relative to the historical financial statements of the entities. The Notes and the related Pro Forma Financial Statements should be read in conjunction with the historical interim and annual financial statements of Anuhco, Inc. ("Anuhco") filed with the Commission on Forms 10-Q and 10-K. Anuhco knows of no material non-reoccuring credits or charges from the acquisition of Agency Premium Resource, Inc. ("APR") from Seafield Capital Corporation ("Seafield") that will be included in Anuhco's statement of income subsequent to May 31, 1995 (the proposed date of acquisition). 2. Pro Forma balance sheet adjustments. See Description of Condensed Pro Forma Financial Statements for a description of the historical balance sheets used to prepare the Condensed Pro Forma Balance Sheet. The following descriptions correspond to the numbering of the adjustments set forth on the Condensed Pro Forma Balance Sheet. (1) To record acquisition as follows: Anuhco cash payment to APR shareholders $11,500 Shareholders' equity acquired 7,823 Intangibles acquired, including goodwill $ 3,677 3. Pro Forma income statement adjustments. See Description of Condensed Pro Forma Financial Statements for a description of the historical income statements used to prepare the Condensed Pro Forma Income Statements. The following descriptions correspond to the numbering of the adjustments and eliminations set forth on the Condensed Pro Forma Income Statements. (1) Amortization of intangibles, including goodwill, arising in acquisition (see note 2) $ 350 (2) Income tax benefit of Pro Forma net adjustments to income before income taxes $ (80) Exhibit 99(a) ANUHCO, INC. 9393 West 110th Street Suite 100 Overland Park, Kansas 66210 913-451-2800 FAX 913-451-2800 NEWS RELEASE.......NEWS RELEASE......NEWS RELEASE......NEWS RELEASE Page 1 of 1 Contact: Timothy P. O'Neil OVERLAND PARK, KANSAS, May 23, 1995 - Anuhco, Inc. ("Anuhco") announced the signing of definitive agreements to acquire one hundred percent of the outstanding stock of Agency Premium Resource, Inc. ("APR"), a subsidiary of Seafield Capital Corporation of Kansas City, Missouri. APR, headquartered in Overland Park, Kansas, is a financial services company providing short-term collateralized installment loans to fund the payment of premiums by insureds for the purchase of commercial insurance. APR had over $30 million of such loans outstanding at December 31, 1994. Acquisition of APR will initiate Anuhco's entry into financial services and result in a current commitment by Anuhco of over $30 million to that industry. Anuhco, a holding company based in Overland Park, Kansas, now owns Crouse Cartage Company, a regional motor carrier headquartered in Carroll, Iowa, and its Common Stock is traded on the American Stock Exchange under the trading symbol "ANU". The acquisition is subject to the satisfaction of certain conditions and is expected to be consummated by the end of May, 1995. # # # # Exhibit 99(b) AGENCY PREMIUM RESOURCE, INC. Unaudited Selected Financial Information (in thousands)
1994 1993 1992 Accounts Receivable-Financed $23,000 $19,000 $10,340 -Equity 8,088 5,738 7,777 $31,088 $24,738 $18,117 Total Assets $ 9,426 $ 8,372 $ 8,011 Shareholder Equity $ 7,823 $ 7,293 $ 6,927 Total Premiums Financed $74,807 $61,507 $39,837 Revenue $ 3,690 $ 3,448 $ 2,354 Earnings before income tax $ 811 $ 561 $ 276 Return on equity before tax 10.4% 7.7% 4.0%
SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. ANUHCO, INC. /s/ Timothy P. O'Neil By: Timothy P. O'Neil, Senior Vice President & Chief Financial Officer Date: May 23, 1995