SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934For the fiscal year ended December 31, 1999
[ ] 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 0-22342
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TRIAD GUARANTY INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1838519
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 SOUTH STRATFORD ROAD, SUITE 500
WINSTON-SALEM, NORTH CAROLINA 27104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 723-1282
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g)of the Act:
Title of each class
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Common Stock, par value $.01 per share
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. / /
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 2, 2000, computed by reference to the last reported price
at which the stock was sold on such date, was $134,504,077.
The number of shares of the registrant's common stock, par value $.01 per share,
outstanding as of March 2, 2000 was 13,313,194.
Portions of the following documents Part of this Form 10-K into
are incorporated by reference into which the document is
this Form 10-K: incorporated by reference:
TRIAD GUARANTY INC. PART III
PROXY STATEMENT FOR 2000 ANNUAL MEETING
OF STOCKHOLDERS
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K.
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(a) The following documents are filed as a part of this Report:
2. FINANCIAL STATEMENT SCHEDULES
(a) Triad Guaranty Inc. 401(k) Profit-Sharing Plan Financial
Statements
The Financial Statement of Triad Guaranty Inc. 401(k)Profit
Sharing Plan, together with the report thereon of Ernst & Young
LLP, consisting of:
Report of Independent Auditors
Statements of Net Assets Available for Benefits (Modified Cash
Basis)
Statement of Changes in Net Asset Available for Benefits
(Modified Cash Basis)
Notes to Financial Statements
Schedule of Assets Held for Investment Purposes at end of Year
(Modified Cash Basis)
3. EXHIBITS
23.2 Consent of Ernst & Young LLP
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereto duly authorized on the 23th day of
June 2000.
TRIAD GUARANTY INC.
By:/s/Michael R. Oswalt
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Michael R. Oswalt
Senior Vice President and Controller
Principal Accounting Officer
Financial STATEMENTS AND SUPPLEMENTAL SCHEDULE
(MODIFIED CASH BASIS)
TRIAD GUARANTY INC. 401(K) PROFIT-SHARING PLAN
DECEMBER 31, 1999 AND 1998 AND YEAR ENDED DECEMBER 31, 1999
WITH REPORT OF INDEPENDENT AUDITORS1999
Triad Guaranty Inc.
401(k) Profit-Sharing Plan
Financial Statements and Supplemental Schedule
(Modified Cash Basis)
December 31, 1999 and 1998 and year ended December 31, 1999
Contents
Report of Independent Auditors.................................................1
Financial Statements
Statements of Net Assets Available for Benefits (Modified Cash Basis)..........2
Statement of Changes in Net Assets Available for Benefits
(Modified Cash Basis).......................................................3
Notes to Financial Statements .................................................4
Supplemental Schedule
Schedule of Assets Held for Investment Purposes at End of Year
(Modified Cash Basis).......................................................9
REPORT OF INDEPENDENT AUDITORS
Plan Administrator of the Triad Guaranty Inc.
401(k) Profit-Sharing Plan
We have audited the accompanying statements of net assets available for benefits
(modified cash basis) of the Triad Guaranty Inc. 401(k) Profit-Sharing Plan as
of December 31, 1999 and 1998, and the related statement of changes in net
assets available for benefits (modified cash basis) for the year ended December
31, 1999. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 2, these financial statements and the supplemental schedule
were prepared on a modified cash basis of accounting, which is a comprehensive
basis of accounting other than accounting principles generally accepted in the
United States.
In our opinion, the financial statements referred to above present fairly, in
all material respects, information regarding the Plan's net assets available for
benefits (modified cash basis) as of December 31, 1999 and 1998, and changes
therein (modified cash basis) for the year ended December 31, 1999, on the basis
of accounting described in Note 2.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule (modified
cash basis) of assets held for investment purposes at end of year as of December
31, 1999 is presented for purposes of additional analysis and is not a required
part of the financial statements but is supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The supplemental
schedule is the responsibility of the Plan's management. The supplemental
schedule (modified cash basis) has been subjected to the auditing procedures
applied in our audits of the financial statements and, in our opinion, is fairly
stated in all material respects in relation to the financial statements taken as
a whole.
ERNST & YOUNG LLP
May 26, 2000
Triad Guaranty Inc.
401(k) Profit-Sharing Plan
Statements of Net Assets Available for Benefits
(Modified Cash Basis)
December 31
1999 1998
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Assets
Investments, at fair value $ 4,546,891 $ 3,461,285
Cash and cash equivalents 25,853 560
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Net assets available for benefits $ 4,572,744 $ 3,461,845
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See notes to financial statements.
2
Triad Guaranty Inc.
401(k) Profit-Sharing Plan
Statement of Changes in Net Assets Available for Benefits
(Modified Cash Basis)
Year ended December 31, 1999
Additions:
Investment income:
Net appreciation in
fair value of investments $ 203,675
Interest and dividends 125,702
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329,377
Contributions:
Participants 718,692
Employer 294,996
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1,013,688
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Total additions 1,343,065
Deductions:
Benefits paid to participants 232,166
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Net increase 1,110,899
Net assets available for benefits:
Beginning of year 3,461,845
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End of year $ 4,572,744
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See notes to financial statements.
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TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
(MODIFIED CASH BASIS)
DECEMBER 31, 1999
1. DESCRIPTION OF PLAN
The following description of the Triad Guaranty Inc. 401(k) Profit-Sharing Plan
(the "Plan") provides only general information. Participants should refer to the
Plan agreement for a more complete description of the Plan's provisions.
GENERAL
The Plan is a salary deferral 401(k) defined contribution plan covering all
employees of Triad Guaranty Inc. and its subsidiaries (the "Company" or the
"Plan Sponsor") who have at least six months of service. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
The Plan became effective November 1, 1993.
CONTRIBUTIONS
Each year, participants may contribute up to 15% of their annual compensation,
as defined in the Plan. However, these elective deferral contributions may not
exceed the dollar limitation contained in Section 402(g). Participants may also
contribute amounts representing distributions from other qualified defined
benefit or defined contribution plans. In accordance with the Plan provisions,
the Company may match the participant's elective deferral contribution. The
discretionary percentage matched is determined by the Plan sponsor. Additional
amounts may be contributed at the option of the Plan sponsor.
FORFEITURES
Forfeitures of matching contributions of $4,810 and $10,606 for 1999 and 1998
were used to reduce employer contributions.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions
(elective deferral contribution) and allocations of (a) the Company's
contributions and (b) the Plan's earnings. Allocations are based on
participants' compensation and account balances. A portion of forfeited balances
of terminated participants' nonvested accounts are allocated to the active
participants' account balances as described above. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
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TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(MODIFIED CASH BASIS)
1. DESCRIPTION OF PLAN (CONTINUED)
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service. Participants
are 20% vested after 1 year, 40% vested after 2 years, 60% vested after 3 years,
80% vested after 4 years and 100% vested after 5 years of service.
PARTICIPANTS LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Loan terms range from 1-5 years or up to 15 years for the purchase of a primary
residence. The loans are secured by the balance in the participant's account and
bear interest at a rate commensurate with local prevailing rates as determined
quarterly by the plan administrator. Principal and interest is paid ratably
through monthly payroll deductions.
PAYMENT OF BENEFITS
On termination of service, a participant may receive a lump-sum payment equal to
the vested value of his or her account. Upon death, disability or retirement, a
participant may receive either a lump-sum payment equal to the vested value of
his or her account, or choose from several annuity options.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
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TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(MODIFIED CASH BASIS)
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the modified cash method
of accounting. Contributions are recorded when received and benefits are
recorded when paid.
INVESTMENT VALUATION
The Plan's investments are stated at fair value. The shares of the registered
investment companies are valued at quoted market prices which represent the net
asset values of shares held by the Plan at year-end. Marketable securities are
stated at fair value. The participant loans are valued at their outstanding
balances, which approximate their fair value.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
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TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(MODIFIED CASH BASIS)
3. INVESTMENTS
The Plan's investments are held by a bank administered trust fund. Investments
that represent 5 percent or more of the Plan's net assets as of December 31 are
as follows:
1999 1998
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Investments at fair value as determined
by quoted market price:
Oppenheimer Income & Growth Fund $ 513,227 $ 302,039
Oppenheimer Global Fund 271,581 154,976
Fidelity Growth & Income Fund 876,447 413,451
Triad Guaranty Inc. Stock Fund 2,761,782 2,543,255
During 1999, the Plan's investments (including investments bought and sold, as
well as held during the period) appreciated (depreciated) in value as follows:
Net
Appreciation
(Depreciation) in
Fair Value During
Year
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Oppenheimer Income & Growth Fund $ 18,362
Oppenheimer Global Fund 75,583
Fidelity Growth & Income Fund 15,584
Fidelity Bond Fund (3,137)
Triad Guaranty Inc. Stock Fund 97,283
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$ 203,675
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TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(MODIFIED CASH BASIS)
4. EXEMPT PARTY-IN-INTEREST TRANSACTIONS
All Plan investments are managed by the trustee, and, therefore, these
transactions qualify as party-in-interest. All fees for the investment manager
services were paid by the Plan sponsor.
Certain administrative functions are performed by officers or employees of the
Company. No such officer or employee receives compensation from the Plan. All
administrative expenses are paid directly by the Plan sponsor.
5. INCOME TAX STATUS
The Plan has received an opinion letter from the Internal Revenue Service dated
May 23, 1994, stating that the written form of the underlying prototype plan
document is qualified under Section 401(a) of the Internal Revenue Code (the
"Code"), and that any employer adopting this form of the Plan will be considered
to have a plan qualified under Section 401(a) of the Code. Therefore, the
related trust is exempt from taxation. Once qualified, the Plan is required to
operate in conformity with the Code to maintain its qualification. The Plan
Administrator believes the Plan is being operated in compliance with the
applicable requirements of the Code and, therefore, believes that the Plan is
qualified an the related trust is tax exempt.
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SUPPLEMENTAL SCHEDULE
TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
EIN: 56-1838519
PLAN NUMBER: 001
SCHEDULE H, LINE 4I
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
(MODIFIED CASH BASIS)
DECEMBER 31, 1999
(c)
Description of
Investment,
Including Maturity
Date, Rate of
(b) Interest, (e)
Identity of Issue, Borrower, Collateral, Par or Current
(a) Lessor or Similar Party Maturity Value Value
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Common Stock:
* Triad Guaranty Inc. 121,397 shares $ 2,761,782
Mutual Funds:
Fidelity Bond Fund 10,116 shares 98,727
Fidelity Growth and Income Fund 18,585 shares 876,447
Oppenheimer Income & Growth Fund 12,240 shares 513,227
Oppenheimer Global Fund 4,348 shares 271,581
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1,759,982
Participant loans 25,127
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$ 4,546,891
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* Indicates party in interest to the Plan
Note: Cost information has not been included because all investments are
participant directed.
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