SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 1997
GORAN CAPITAL INC.
(Exact name of registrant as specified in its charter)
Canada 000-24366 Not Applicable
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or organization) File Number) Identification No.)
181 University Avenue, Suite 1101 - Box 11, Toronto, Ontario, Canada M5H 3M7
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (416) 594-1155 (Canada)
(317) 259-6300 (USA)
(Former name or former address, if changed since last report) Not Applicable
ITEM 5. OTHER EVENTS
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF GORAN CAPITAL, INC.
The following unaudited pro forma consolidated statements of operations of
the Registrant for the year ended December 31, 1996 and the year ended December
31, 1995 present results for the Registrant as if the acquisition of Superior
Insurance Company and the initial public offering of Symons International Group,
Inc. had occurred as of January 1, 1996 and January 1, 1995, respectively. The
pro forma adjustments are based on available information and certain assumptions
that the Registrant currently believes are reasonable in the circumstances. The
unaudited pro forma consolidated financial statements have been derived from and
should be read in conjunction with (i) the historical Consolidated Financial
Statements and Notes of the Registrant for the year ended December 31, 1995 and
as of and for the unaudited three months ended March 31, 1996 and (ii) the
historical Consolidated Financial Statements and Notes of Superior for the years
ended December 31, 1996 and 1995. The pro forma adjustments and pro forma
consolidated amounts are provided for informational purposes only.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the results of operations or financial position
that would have occurred had the transactions described above been consummated
on the dates assumed; nor is the pro forma information intended to be indicative
of the Company's future results of operations or financial position.
Goran Capital Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1996
GORAN CAPITAL INC . GORAN SUPERIOR ADJUSTMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT
OF OPERATIONS GORAN CAP. INCLUDE MINORITY INT. CONSOL. ELM MINORITY EXCLUDE
FOR THE PERIOD ENDED CONSOLID. SUPERIOR IN EARN. OF OF SUPERIOR INT. IN PGIC FLORIDA &
DECEMBER 31, 1996 GAAP-FINAL APRIL 30/96 SUPERIOR DEBTMIN. INT. AUTO ONLY OTHER BUS.
- -------------------- ---------- ----------- -------- ------------- --------- ----------
Gross premiums written $ 307,634,000 $ 43,993,000 $--- $--- $--- $ 0
=========== ========== ========== ======== ======== =======
Net premiums written 220,432,000 43,618,000 0
=========== ========== ========== ======== ======== =======
Net premiums earned 214,346,000 39,387,000 0 0
Net investment income 16,406,000 4,698,000 0 0
Net realized investment
gains/(losses) 0 0 0 0
Other income/(expenses) 0 0 0 280,000 0
----------- --------- ---------- -------- -------- -------
Total revenue 230,752,000 44,085,000 0 0 280,000 0
Claims incurred 151,384,000 26,715,000 0 0
Other underwriting expenses 0 0 0 0 0 0
Operating expenses 0 0 0 200,813 0 0
General & admin. expenses 50,352,000 11,445,000 0 (174,000) 0 0
Interest expense 4,961,000 0 1,330,000 0 0
----------- --------- ---------- -------- -------- -------
Total expenses 206,697,000 38,160,000 0 1,356,813 0 0
----------- --------- ---------- -------- -------- -------
Income before taxes & minority 24,055,000 5,925,000 0 (1,356,813) 280,000 0
interest
Provision for income taxes
Current 8,054,000 1,952,000 0 (462,673) 95,480 0
Deferred 73,000 0 0 0 0 0
----------- --------- ---------- -------- -------- -------
Provision for income taxes 8,127,000 1,952,000 0 (462,673) 95,480 0
----------- --------- ---------- -------- -------- -------
Income before minority interest 15,928,000 3,973,000 0 (894,140) 184,520 0
Minority interest (2,801,000) 0 (1,907,040) 429,187 (313,432)
----------- --------- ---------- -------- -------- -------
Discontinued operations 13,127,000 3,973,000 (1,907,040) (464,953) (128,912) 0
---------- --------- ---------- -------- -------- -
Net income for the period 13,127,000 3,973,000 (1,907,040) (484,953) (128,912) 0
========== ========= ========== ======== ======== =======
ADJUST. TOTAL PRE-OFFERING OFFERING POST-OFFERING
- -----------------------------------------------------------------------------------------------------------------------------
UNION FED. ADJUSTMENTS GORAN CAPITAL SIG INC. GORAN CAPITAL
AND IGF SPIN TOTAL PRO-FORMA PUBLIC PRO-FORMA
DEBT PRE-OFFERING OFFERING POST-OFFERING
---------- ----------- ------------- -------- -------------
Gross premiums written $--- $ 0 $ 351,627,000 $--- $ 351,627,000
======== ========== ========== ======= ==========
Net premiums written 0 264,050,000 264,050,000
======== ========== ========== ======= ==========
Net premiums earned 0 253,733,000 253,733,000
Net investment income 0 21,104,000 21,104,000
Net realized investment
gains/(losses) 0 0
Other income/(expenses) 280,000 280,000 (280,000) 0
-------- ---------- ---------- ------- ----------
Total revenue 280,000 275,117,000 (280,000) 274,837,000
Claims incurred 178,099,000 178,099,000
Other underwriting expenses 0
Operating expenses 0 200,813 200,813 0 200,813
General & admin. expenses 0 (174,000) 61,623,000 0 61,623,000
Interest expense 324,583 1,654,583 6,615,583 (852,031) 5,763,552
-------- ---------- ---------- ------- ----------
Total expenses 324,583 1,681,397 246,538,397 (852,031) 245,686,365
-------- ---------- ---------- ------- ----------
Income before taxes & minority (324,583) (1,401,397 28,578,603 572,031 29,150,635
interest
Provision for income taxes
Current (110,683) (477,876) 9,528,124 195,063 9,723,186
Deferred 0 73,000 73,000
-------- ---------- ---------- ------- ----------
Provision for income taxes (110,683) (477,876) 9,601,124 195,063 9,796,186
-------- ---------- ---------- ------- ----------
Income before minority interest (213,900) (923,520) 18,977,480 378,969 19,354,448
Minority interest (1,791,284) (4,592,284) (180,945) (4,773,229)
-------- ---------- ---------- ------- ----------
Discontinued operations (213,900) (2,714,805) 14,385,195 196,024 14,581,219
-------- ---------- ---------- ------- ----------
0 0 0 0
Net income for the period (213,900) (2,714,805) 14,385,195 196,024 14,581,219
======== ========== ========== ======= ==========
Goran Capital Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1995
GORAN CAPITAL INC . GORAN SUPERIOR ADJUSTMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT
OF OPERATIONS GORAN CAP. MINORITY INT. CONSOL. ELM MINORITY EXCLUDE
FOR THE PERIOD ENDED CONSOLID. INCLUDE IN EARN. OF OF SUPERIOR INT. IN PGIC FLORIDA &
DECEMBER 31, 1995 GAAP-FINAL SUPERIOR SUPERIOR DEBTMIN. INT. AUTO ONLY OTHER BUS.
- -------------------- ---------- ----------- -------- ------------- --------- ----------
Gross premiums written $ 151,717,000 $ 94,756,000 $--- $--- $--- $ 0
=========== ========== ========== ======== ======== =======
Net premiums written 86,360,000 94,070,000 0
=========== ========== ========== ======== ======== =======
Net premiums earned 76,102,000 97,614,000 0 0
Net Investment and
other income 5,872,000 13,218,000 0 280,000 0
Net realized invest
gains/(losses) 0 0 0 0
Other income/(expenses) 0 0 0
----------- --------- ---------- -------- -------- -------
Total revenue 81,974,000 110,832,000 0 0 280,000 0
Losses & loss adj. exp. 54,193,000 72,343,000 0 0
Policy acq'n & general &
admin. expenses 16,352,000 32,705,000 0 602,000 0 0
Other expenses 0 0 0 (521,000)
Interest expense 1,761,000 0 3,989,000 0 0
----------- --------- ---------- --------- -------- -------
Total expenses 72,306,000 105,048,000 0 4,070,000 0 0
----------- --------- ---------- --------- -------- -------
Income before taxes & minority 9,668,000 5,784,000 0 (4,070,000) 280,000 0
interest
Provision for income taxes
Current 2,352,000 925,000 0 (1,347,170) 92,680 0
Deferred 145,000 724,000 0
----------- --------- ---------- -------- -------- -------
Provision for income taxes 2,497,000 1,649,000 0 (1,347,170) 92,680 0
----------- --------- ---------- -------- -------- -------
Income before minority interest 7,171,000 4,135,000 0 (2,722,830) 187,320 0
Minority interest 0 0 (1,984,800) 1,306,958 545,841
----------- --------- ---------- -------- -------- -------
Net income for the period 7,171,000 4,135,000 (1,984,800) (1,415,872) 793,161 0
========== ========= ========== ======== ======== =======
ADJUST. TOTAL PRE-OFFERING OFFERING POST-OFFERING
- -----------------------------------------------------------------------------------------------------------------------------
UNION FED. ADJUSTMENTS GORAN CAPITAL SIG INC. GORAN CAPITAL
AND IGF SPIN TOTAL PRO-FORMA PUBLIC PRO-FORMA
DEBT PRE-OFFERING OFFERING POST-OFFERING
---------- ----------- ------------- -------- -------------
Gross premiums written $--- $ 0 $ 246,473,000 $--- $ 246,473,000
======== ========== ========== ======= ==========
Net premiums written 0 180,430,000 180,430,000
======== ========== ========== ======= ==========
Net premiums earned 0 173,716,000 173,716,000
Net Investment and
other income 280,000 19,370,000 (280,000) 19,090,000
Net realized invest
gains/(losses) 0
Other income/(expenses) 0 0 0 0
-------- ---------- ---------- ------- ----------
Total revenue 280,000 193,086,000 (280,000) 192,806,000
Loses & loss adj. exp. 0 126,536,000 126,536,000
Policy acq'n & general
& admin. expenses 0 602,000 49,659,000 49,659,000
Other expenses (521,000) (521,000) (521,000)
Interest expense 974,000 4,963,000 6,724,000 (974,000) 5,750,000
-------- ---------- ---------- ------- ----------
Total expenses 974,000 5,044,000 182,398,000 (974,000) 181,424,000
-------- ---------- ---------- ------- ----------
Income before taxes & minority (974,000) (4,764,000) 10,688,000 694,000 11,382,000
interest
Provision for income taxes
Current (322,394) (1,576,884) 1,709,116 229,714 1,929,830
Deferred 869,000 869,000
-------- ---------- ---------- ------- ----------
Provision for income taxes (322,394) (1,576,884) 2,569,116 229,714 2,798,830
-------- ---------- ---------- ------- ----------
Income before minority interest (651,606) (3,187,116) 8,118,884 464,286 8,583,170
Minority interest 0 (132,001) (132,001) (222,857) (354,858)
-------- ---------- ---------- ------- ----------
Net income for the period (651,606) (3,319,117) 7,986,883 241,429 8,228,312
======== ========== ========== ======= ==========
GORAN CAPITAL INC.
Explanation of Superior Acquisition and SIG Inc. IPO adjustments
Pro-Forma - December 31, 1995 and 1996
December 31 December 31
1995 1996
COLUMN
1. Per - Goran Capital Inc.: Audited Financial Statements for the years ended
December 31, 1995 and 1996 (stated in US$)
2. Per-Superior Insurance Company: Unaudited Financial Statements for the
period from January 1, 1996 to April 30, 1996 and Audited Financial
Statements for the year ended December 31, 1995.
3. Record Minority Interest in Earnings of Superior - P/L only
------------------------------------------------------------
Jan 1/95 - Dec 31/95 Jan 1/96 - Apr 30/96
Net income 4,135,000 3,973,000
Minority Interest % 48% 48%
----------------------------------
Minority Interest 1,984,800 1,907,040
==================================
4. Record Acquisition of Superior & Elimination for Consolidation purposes
-----------------------------------------------------------------------
Capital Stock - Common 3,000,000
Contributed Surplus 37,025,000
Unrealized Gain on Equities 577,000
Retained Earnings 12,618,000
-----------
Superior Book Value 12/31/95 53,220,000
===========
Superior Book Value 12/31/95 53,220,000
Book Value Increment % 5%
-----------
Purchase Price 55,881,000
Transaction costs 140,000
Additional Consideration 360,000
-----------
Total Purchase Price 56,381,000
Less: Book Value (above) (53,220,000)
-----------
Goodwill on Acquisition 3,161,000
===========
Purchase Price (above) 56,381,000
Transaction Costs - Organization costs - GGS 1,220,000
Transaction Costs - Debt 1,392,000
-----------
Total Acquisition Cost 58,993,000
===========
Total Acquisition Costs 58,993,000
Less: Goldman Funding - Min. Int (21,200,000)
-----------
Bank Financing Required 37,793,000
===========
Actual Bank Financing 48,000,000 48,000,000
----------------------------
Interest expense at Annual Rate of 8.31% 3,988,800 1,330,000
LIBOR swap rate (to 11/15/96) 5.56%
LIBOR spread 2.75%
Total estimated effective rate 8.31%
Jan 1/95 - Dec 31/95 Jan 1/96 - Apr 30/96
Transaction Costs - Debt 1,392,000
---------
Amortized over 6 years 232,000 77,333
Transaction Costs -
Organizational costs 1,220,000
---------
Amortization over 5 years 244,000 81,333
Goodwill 3,161,000
---------
Amortization over 26 years 126,200 42,147
Elimination of Management
Fees to Fortis - per BKD (521,000) (174,000)
--------------------------------
4,070,000 1,356,813
Income Taxes @ 1995 -
33.1% & 1996 - 34.1% (1,347,170) (462,673)
--------------------------------
Loss before Minority Interest 2,722,830 894,140
Minority Interest @ 48% (1,306,956) (429,187)
--------------------------------
Net Loss 1,415,872 464,953
================================
5. Record Minority Interest in Pafco General Insurance Company - Auto Business Only
--------------------------------------------------------------------------------
Operating Income/(Loss) (1,989,000) 709,792
effective SIG Inc tax rate 35.2% 34.0%
Less Taxes 700,128 (241,329)
-------------------------
After Tax Loss (1,288,872) 466,463
Minority Interest % 48% 48%
-------------------------
Minority Interest (635,754) 224,862 (a)
No investment income to be recorded
by PGIC on funds borrowed from Union Federal
Record investment income on IGF spin-off Debt
- ---------------------------------------------
Funds Provided 3,500,000 3,500,000
Investment return 8.00% 8.00%
-------------------------
Investment income 280,000 280,000
Income Taxes at 1995 - 33.1% & 1996 - 34.1% (92,650) (95,480)
-------------------------
After Tax Income 187,320 184,520
Minority Interest at 48% (89,914) (88,570) (b)
-------------------------
Net Income 97,406 95,950 (c)
=========================
Minority Interest Adjustments 545,841 (313,432) (a) + (b)
-------------------------
Total Net Income 733,161 (128,912) (a) + (c)
=========================
6. Exclusion of Florida and Other Business from Pafco General
----------------------------------------------------------
Florida net pre tax income 0 0
-------------------------
Other net pre tax loss 0 0
-------------------------
Net effect of Non auto - pre tax 0 0
effective SIG Inc tax rate 35.2% 34.0%
-------------------------
Income tax 0 0
-------------------------
Net income effect 0 0
-------------------------
Cession of Florida/Other Business to Granite Re
Cession of Outstanding Claims - 12/31/95 0
Cession of Unearned Premiums - 12/31/95 0
7 Record Union Federal Debt
-------------------------
Principal Amount Borrowed 7,500,000 7,500,000
Interest Rate 9.25% 9.25%
Interest Expense for Year 694,000 231,333
Record IGF Spin-Out Debt
- -------------------------
Principal Amount Borrowed 3,500,000 3,500,000
Interest Rate 8.00% 8.00%
Interest Expense for Year 280,000 93,250
Income Taxes at 1995 - 33.1% & 1996 - 34.1% (322,394) (110,683)
-------------------------
Net Loss for Year` 651,606 213,901
=========================
8 Adjustment Column Total
-----------------------
Sum of Column 2-7 Adjustment totals
9 Column 1 + 2 + 8 - Stated in US$
10 SIG Inc. Public Offering
------------------------
Gross Public Issue 43,125,000
Less: Issue Costs (5,156,000)
----------
Net Proceeds to Company 37,969,000
==========
Use of Proceeds
- ---------------
Repayment of Euro Debentures 11,085,000
Repay Union Federal Debt 7,500,000
Retained in SIG Inc. For acquisitions/expenses/capital 19,384,000
----------
37,969,000
==========
Elimination of Union Federal Interest
- -------------------------------------
Principal Amount Borrowed 7,500,000 7,500,000
Interest Rate 9.25% 9.25%
Interest reduction for Year 694,000 607,031
Elimination of IGF Spin-Out Debt Interest
- -----------------------------------------
Principal Amount Borrowed 3,500,000 3,500,000
Interest Rate 8.00% 8.00%
Interest Expense for Year/Quarter 280,000 245,000
Income Taxes at 1995 - 33.1% & 1996 - 34.1% (322,394) 290,543)
-------------------------
651,606 561,489
-------------------------
Net Income for Year
Elimination of Pafco General Interest Income on IGF Spin-Out
- ------------------------------------------------------------
Principal Amount (3,500,000) (3,500,000)
Interest Rate 8.00% 8.00%
Interest income reduction for Year (280,000) (280,000)
Income Taxes at 1995 - 33.1% & 1996 - 34.1% 92,680 95,480
-------------------------
Net Income for Year (187,320) (184,520)
=========================
Total Expense Reduction 694,000 572,031
Total Taxes (229,714) (195,063)
-------------------------
Total Income for year 464,286 376,969
=========================
Minority interest at 48% 222,857 180,945
-------------------------
Net Income for year 241,429 196,024
11 Column 9 + 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GORAN CAPITAL INC.
(Registrant)
April 22, 1997 By: /s/ Alan G. Symons
---------------------------------------
Alan G. Symons
President and Chief Executive Officer