-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WEZLD8eB0Audmr6+9fExbSgnRL3AKoUL6bd0U1eVwN+ibTHF28tEjqAi3i8fokLh BOZBMSwM3EhSeHwiU1WPIg== 0000950124-95-003104.txt : 19951002 0000950124-95-003104.hdr.sgml : 19951002 ACCESSION NUMBER: 0000950124-95-003104 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950824 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950928 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEMPER FINANCIAL COMPANIES INC CENTRAL INDEX KEY: 0000799367 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 363451068 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15253 FILM NUMBER: 95577113 BUSINESS ADDRESS: STREET 1: ONE KEMPER DRIVE CITY: LONG GROVE STATE: IL ZIP: 60049 BUSINESS PHONE: 7083204700 8-K 1 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549-1004 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 24, 1995 KEMPER FINANCIAL COMPANIES, INC. (Exact name of registrant as specified in its charter) Delaware 0-15253 36-3451068 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification Number) incorporation or organization) One Kemper Drive 60049 Long Grove, Illinois (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (708) 320-4700 2 Kemper Financial Companies, Inc. FORM 8-K Page ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS....................... 3 ITEM 5. OTHER EVENTS............................................... 5 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.......................... 6 SIGNATURES......................................................... 14 - 2 - 3 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS DIVESTITURE OF SECURITIES BROKERAGE SEGMENT On September 13, 1995, Kemper Corporation ("Kemper") and Kemper Financial Companies, Inc. ("KFC" or the "Company") completed the divestiture of their securities brokerage segment. These discontinued operations consist of EVEREN Securities Holdings, Inc., formerly Kemper Securities Holdings, Inc. ("ESHI"), and its subsidiaries. In connection with the divestiture, ESHI became wholly owned by EVEREN Capital Corporation, a newly formed Delaware corporation ("EVEREN"), and EVEREN became an independent employee owned company with publicly traded preferred stock. Completion of the divestiture satisfied an important condition to Kemper's previously announced proposed merger transaction. See "Merger Transaction Update" in Item 5 below of this Current Report on Form 8-K. As part of the divestiture, Kemper distributed 1,202,805 shares of Series A Exchangeable Preferred Stock of EVEREN, having a liquidation preference of $25 per share (an aggregate liquidation preference of $30.1 million) and a dividend rate of 13.5% per annum (the "Exchangeable Preferred Stock"), to holders of shares of common stock of Kemper ("Kemper Common Stock") and to holders of certain Kemper Common Stock options and phantom stock units as a taxable distribution (the "Kemper Distribution"). On the same day as the Kemper Distribution, KFC sold 10,437,781 shares of common stock, par value $.01 per share, of EVEREN (the "EVEREN Common Stock"), representing all of the shares of EVEREN Common Stock then held by KFC, to the EVEREN Capital Corporation 401(k) and Employee Stock Ownership Trust which is part of the EVEREN Capital Corporation 401(k) and Employee Stock Ownership Plan (the "KSOP"), for an aggregate purchase price of $71.4 million in cash, of which $46.4 million was paid on September 13, 1995 and $25.0 million is to be paid not later than January 2, 1996 (the "KSOP Purchase," and together with the Kemper Distribution, the "Transfers"). Immediately prior to the Transfers, (i) Kemper and KFC contributed to ESHI and its subsidiaries intercompany indebtedness of approximately $81.8 million owed by ESHI and its subsidiaries to Kemper, KFC and their subsidiaries, (ii) a KFC subsidiary purchased certain illiquid securities from ESHI for approximately $15.6 million, (iii) Kemper assumed in their entirety (and KFC agreed to indemnify Kemper with respect thereto) all of EVEREN's obligations with respect to certain specified outstanding litigation matters (including the Melridge securities litigation matter described in Item 3, Legal Proceedings, of the Company's 1994 Annual Report on Form 10-K), (iv) KFC transferred to EVEREN all of the outstanding shares of common stock of ESHI in exchange for 10,437,681 shares of EVEREN Common Stock and 1,202,805 shares of Exchangeable Preferred Stock, and (v) Kemper purchased from KFC, at a price of approximately $30.1 million, all of the outstanding shares of Exchangeable Preferred Stock then held by KFC in repayment of intercompany indebtedness owed by KFC to Kemper (collectively, the "Preliminary Transactions"). Kemper and EVEREN, and certain of their respective subsidiaries, entered into certain agreements setting forth the various actions agreed to be - 3 - 4 taken by such parties to effectuate the Transfers and the Preliminary Transactions and also to provide for, among other things, (i) the orderly separation of EVEREN and its subsidiaries from Kemper and the Company, (ii) the indemnification of EVEREN by KFC for the first $20.0 million of employer contributions (other than 401(k) contributions) to the KSOP, (iii) the provision by EVEREN and Kemper and the Company of certain support services to each other for a period of time following the Transfers, (iv) the limited use by EVEREN of the "Kemper" name for transitional purposes only, (v) indemnities from EVEREN to Kemper and its subsidiaries with respect to all liabilities arising out of the operation of the business of EVEREN not specifically assumed by Kemper or a subsidiary of the Company, (vi) indemnities from Kemper to EVEREN with respect to all liabilities arising out of the operation of the business of Kemper and its subsidiaries (other than that of EVEREN and its subsidiaries), and (vii) the allocation and management of certain tax matters. Certain agreements entered into by Kemper and the Company and their subsidiaries in connection with the Transfers and the Preliminary Transactions are filed as exhibits to this Current Report on Form 8-K and are incorporated herein by reference. ESHI and subsidiaries have been reported as discontinued operations in the Company's periodic reports since the first quarter of 1995. See the pro forma financial statements included in Item 7 below in this Form 8-K. - 4 - 5 ITEM 5. OTHER EVENTS A. KFS ACQUISITION OF DREMAN ASSETS On August 24, 1995, the Company's principal asset management subsidiary, Kemper Financial Services, Inc. ("KFS"), announced the completion of the acquisition of substantially all of the assets of Dreman Value Management, L.P. ("Dreman"), including assignment of the Dreman-managed mutual funds' advisory contracts. The acquisition required an initial cash payment of approximately $18 million and calls for contingent cash payments in future periods. The four Dreman mutual funds account for approximately $60 million of assets under management and, following the acquisition, were renamed as follows: the Kemper-Dreman High Return Fund, the Kemper-Dreman Small Cap Value Fund, the Kemper-Dreman Contrarian Fund, and the Kemper-Dreman Fixed Income Fund. Dreman also had approximately $1.5 billion of institutional assets under management which, subject to advisory client approvals, would be managed by a KFS subsidiary. The acquisition broadened KFS' retail and institutional product offerings to include the value style of equity investing and complement KFS' growth style. B. MERGER TRANSACTION UPDATE On September 6, 1995, Kemper announced a $0.30 per share adjustment in the merger consideration to be received by its common stockholders in the previously announced proposed merger transaction with an investor group comprised of Zurich Insurance Company and Insurance Partners. Kemper and the investor group agreed to the adjustment, to $49.80 per share from $49.50 per share, because of increased benefits to the investor group from modifications announced in late August with respect to the plan to divest the securities brokerage segment. Completion of the merger transaction is subject to certain conditions, including certain approvals by state insurance regulators and the common stockholders of Kemper. On September 26, 1995, the investor group filed with the Illinois Department of Insurance a Form A seeking approval of the change of control of Kemper's life insurance subsidiaries. At special meetings held September 19, 1995, the shareholders of investment companies with assets managed by KFS and its subsidiaries (the "Kemper Funds") representing more than 90 percent of the Kemper Funds' net assets approved new investment advisory contracts with KFS and its asset management subsidiaries, as required to satisfy one of the conditions to the merger agreement. The investor group has informed Kemper that it currently expects that the transaction will close in early January 1996. In connection with this transaction, KFS will be sold to Zurich Insurance Company for approximately $932 million. - 5 - 6 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of business acquired - not applicable. (b) Pro forma financial information. The following unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 1995 and the year ended December 31, 1994 present the Company's results of operations as adjusted to give effect to the divestiture of ESHI and its subsidiaries as if it occurred on January 1, 1994. The accompanying unaudited pro forma consolidated balance sheet as of June 30, 1995 presents the Company's financial position as if the divestiture occurred on June 30, 1995. The Company's historical financial statements reflected ESHI and its subsidiaries as discontinued operations since the first quarter of 1995 and as the Company's securities brokerage segment in and for 1994. The pro forma financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto previously filed as part of the Company's most recent annual and quarterly reports on Forms 10-K and 10-Q. The pro forma information below is provided for informational purposes only and is not necessarily indicative of what the actual financial position or results of operations of the Company would have been had the transactions actually occurred on the dates indicated, nor does it purport to indicate the future financial position or results of operations of the Company. Results of operations for the six months ended June 30, 1995 may not be indicative of results of operations to be expected for a full year. The pro forma adjustments are based upon available information and assumptions believed to be reasonable in the circumstances. There can be no assurance that such information and assumptions will not change from those reflected in the pro forma financial statements and notes thereto. - 6 - 7 KEMPER FINANCIAL COMPANIES, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 (in thousands, except share data) (unaudited)
Pro Forma Historical Adjustments Pro Forma ASSETS Investments: Fixed maturities available for sale, at fair value (cost 1995, $3,583,537; 1994, $3,711,839) $3,614,993 15,859 (1) $3,630,852 Short-term investments 191,800 191,800 Joint venture mortgage loans 413,197 413,197 Third-party mortgage loans 302,407 302,407 Other real estate-related investments 236,157 236,157 Policy loans 281,691 281,691 Other invested assets 45,045 45,045 ----------------------------------------- Total investments 5,085,290 15,859 5,101,149 Cash 283,177 46,400 (2) 267,318 (46,400)(3) (15,859)(1) Other accounts and notes receivable 457,021 25,000 (4) 491,021 9,000 (5) Reinsurance recoverable 550,607 550,607 Deferred insurance acquisition costs 286,956 286,956 Deferred investment product sales costs 154,466 154,466 Fixed assets, at cost less accumulated depreciation 39,505 39,505 Other assets 13,088 13,088 Net assets of discontinued operations 132,686 (102,616)(6) 0 (30,070)(6)(7) Assets of separate accounts 1,641,106 1,641,106 ----------------------------------------- Total assets $8,643,902 (98,686) $8,545,216 ========================================= LIABILITIES Future policy benefits $4,645,628 $4,645,628 Other accounts payable and liabilites 901,049 (4,083)(8) 896,966 Notes payable 1,112,096 (30,070)(7) 1,035,626 (46,400)(3) Convertible debentures 26,676 26,676 Liabilites of separate accounts 1,641,106 1,641,106 ----------------------------------------- Total liabilites 8,326,555 (80,553) 8,246,002 ----------------------------------------- Commitments and contingent liabilites STOCKHOLDERS' EQUITY Class A common stock-$.10 par value authorized 135,000,000 shares; outstanding 1995 and 1994, 43,268,038 shares 4,327 4,327 Additional paid-in capital 442,828 442,828 Unrealized loss on foregn currency translations (21,938) (21,938) Unrealized gain on investments 13,308 13,308 Retained deficit (121,178) (18,133)(9) (139,311) ----------------------------------------- Total stockholders' equity 317,347 (18,133) 299,214 ----------------------------------------- Total liabilities and stockholders' equity $8,643,902 (98,686) $8,545,216 =========================================
- 7 - 8 Notes to Pro Forma Consolidated Balance Sheet as of June 30, 1995 (1) Purchase of illiquid securities from ESHI. (2) Receipt of cash proceeds on date of divestiture. (3) Use of cash proceeds (see Note 2 above) to repay certain borrowings from Kemper. (4) Receivable for the remainder of the purchase price payable by the KSOP no later than January 2, 1996. (5) Federal income tax benefit recorded in the third quarter of 1995 due to modifications to original plan of divestiture. (6) Elimination of net assets of the discontinued securities brokerage operations. (7) Use by KFC of EVEREN Preferred Stock to repay certain borrowings from Kemper. (8) Adjustment of intercompany payables and receivables. (9) Reflects additional (third-quarter 1995) loss on divestiture, net of tax. - 8 - 9 KEMPER FINANCIAL COMPANIES, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (in thousands, except per share data) (unaudited)
Pro Forma Historical Adjustments Pro Forma REVENUE Investment management and other fees $164,139 $164,139 Commissions 26,160 26,160 Investment income 186,648 186,648 Securities gain, net 1,130 1,130 Realized investment loss (23,225) (23,225) Other income 24,133 24,133 -------------------------------------- Total revenue 378,985 0 378,985 -------------------------------------- EXPENSES Operating expenses 131,286 131,286 Benefits and interest credited to policyholders 123,197 123,197 Commissions 40,523 40,523 Deferral of mutual fund and insurance acquisition costs (34,839) (34,839) Amortization of mutual fund and insurance acquisition costs 48,566 48,566 Interest expense 50,843 (3,427)(1) 47,416 -------------------------------------- Total expenses 359,576 (3,427) 356,149 -------------------------------------- Earnings from continuing operations before tax 19,409 3,427 22,836 Income tax expense 22,681 1,199 (2) 23,880 -------------------------------------- Gain (loss) from continuing operations (3,272) 2,228 (1,044) Gain (loss) from discontinued operations, net of tax (2,712) 2,712 (3) -- Gain (loss) on divestiture of discontinued operations, net of tax (66,536) 66,536 (4) -- -------------------------------------- Net income (loss) ($72,520) 71,476 ($1,044) ====================================== Gain (loss) per share from continuing operations ($0.08) $0.06 ($0.02) Gain (loss) per share from discontinued operations (1.60) 1.60 -- -------------------------------------- Net income (loss) per share ($1.68) 1.66 ($0.02) ======================================
- 9 - 10 Notes to Pro Forma Consolidated Statement of Operations for the six months ended June 30, 1995 (1) Reduction of interest expense due to KFC's use of proceeds from sale of ESHI to repay $76.5 million of borrowings from Kemper. (2) Federal income tax increase due to reduction of interest payable to Kemper. (See note (1) above.) (3) Elimination of income from discontinued securities brokerage operations. (4) Elimination of the loss on divestiture recorded by KFC in the first half of 1995. (KFC recorded in the third quarter of 1995 an additional loss on divestiture of approximately $18.1 million.) - 10 - 11 KEMPER FINANCIAL COMPANIES, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994 (in thousands, except per share data) (unaudited)
Pro Forma Historical Adjustments Pro Forma REVENUE Investment management and other fees $381,215 (23,011)(1) $358,204 Commissions 408,430 (343,533)(1) 64,897 Investment income 405,374 (67,594)(1) 337,780 Securities gain (loss), net 17,016 (17,602)(1) (586) Realized investment loss (84,058) (84,058) Other income 96,474 (45,230)(1) 51,244 ------------------------------------- Total revenue 1,224,451 (496,970) 727,481 ------------------------------------- EXPENSES Operating expenses 786,198 (494,713)(2) 291,485 Benefits and interest credited to policyholders 248,494 248,494 Commissions 68,991 23,579 (2) 92,570 Deferral of mutual fund and insurance acquisition costs (68,641) (68,641) Amortization of mutual fund and insurance acquisition costs 78,132 78,132 Interest expense 119,856 (38,610)(2) 75,706 (5,540)(3) ------------------------------------- Total expenses 1,233,030 (515,284) 717,746 ------------------------------------- Earnings (loss) from continuing operations before tax (8,579) 18,314 9,735 Income tax expense (benefit) (11,743) 10,537 (4) 733 1,939 (5) ------------------------------------- Net income $3,164 5,838 $9,002 ===================================== Net income per share $0.07 0.14 $0.21 =====================================
- 11 - 12 Notes to Pro Forma Consolidated Statement of Operations for the year ended December 31, 1994 (1) Elimination of the discontinued operations' revenue from the historical consolidated statement of operations for the year ended December 31, 1994, when such operations were classified as the Company's securities brokerage segment. (2) Elimination of the discontinued operations' expense. (See note (1) above.) (3) Reduction of interest expense payable by KFC to Kemper due to KFC's repayment of $76.5 million of its borrowings from proceeds of the sale of EVEREN common stock to the KSOP. (4) Federal income tax adjustment due to elimination of securities brokerage revenue and expenses. (5) Federal income tax adjustment due to reduction of interest expense payable to Kemper. - 12 - 13 (c) Exhibits Exhibit No. ----------- 10 Transactions Agreement, dated as of September 13, 1995, between EVEREN Capital Corporation ("EVEREN"), Kemper Financial Companies, Inc. ("KFC") and Kemper.* 99.1 Interim Services Agreement, dated as of September 13, 1995, between EVEREN and Kemper.* 99.2 Stock Purchase Agreement, dated as of September 13, 1995, between EVEREN and KFC.* 99.3 Stock Purchase Agreement, dated as of September 13, 1995, between the Trustee of the EVEREN Capital Corporation 401(k) and Employee Stock Ownership Trust and KFC.* 99.4 Securities Purchase Agreement, dated as of September 13, 1995, between EVEREN Securities Holdings, Inc. ("ESHI") and KFC.* 99.5 Assumption Agreement, dated as of September 13, 1995, between Kemper and EVEREN Securities, Inc. ("ESI").* 99.6 Names Agreement, dated as of September 13, 1995, among EVEREN, ESHI, ESI, EVEREN Clearing Corp. and Kemper.* 99.7 Tax Sharing Agreement, dated as of September 13, 1995, between EVEREN and Kemper.* 99.8 Employee Benefits Agreement, dated as of September 13, 1995, among Kemper, Kemper Financial Services, Inc., INVEST Financial Corporation and EVEREN.* *The nine asterisked exhibits above are incorporated herein by reference to exhibits nos. 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.12, 10.13 and 10.14, respectively, to the Current Report on Form 8-K filed September 27, 1995 by EVEREN Capital Corporation (file no. 1-13864). - 13 - 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KEMPER FINANCIAL COMPANIES, INC. By: /s/JOHN H. FITZPATRICK ---------------------- John H. Fitzpatrick Executive Vice President and Chief Financial Officer September 28, 1995 - 14 - -----END PRIVACY-ENHANCED MESSAGE-----