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 1934 For the fiscal year ended December 31, 2001
[ ] 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 Identification No.)
incorporation or organization)
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 February 1, 2002, computed by reference to the last reported
price at which the stock was sold on such date, was $285,662,790.
The number of shares of the registrant's common stock, par value $.01 per share,
outstanding as of February 1, 2002, was 13,727,823.
Portions of the following documents Part of this Form 10-K into which
are incorporated by reference into the document is incorporated
this Form 10-K: by reference:
TRIAD GUARANTY INC.
Proxy Statement for 2002 Annual Meeting Part III
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 Statements 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 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 27th day of
June 2002.
TRIAD GUARANTY INC.
By:/s/Michael E. Crow
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Michael E. Crow
Vice President and Controller
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
(MODIFIED CASH BASIS)
TRIAD GUARANTY INC. 401(K) PROFIT-SHARING PLAN
DECEMBER 31, 2001 AND 2000 AND YEAR ENDED DECEMBER 31, 2001 WITH REPORT OF
INDEPENDENT AUDITORS
Triad Guaranty Inc.
401(k) Profit-Sharing Plan
Financial Statements and Supplemental Schedule
(Modified Cash Basis)
December 31, 2001 and 2000 and year ended December 31, 2001
Contents
Report of Independent Auditors................................................1
Financial Statements
Statements of Net Assets Available for Benefits (Modified Cash Basis).........3
Statement of Changes in Net Assets Available for Benefits
(Modified Cash Basis).......................................................4
Notes to Financial Statements (Modified Cash Basis)...........................5
Supplemental Schedule
Schedule of Assets (Held at End of Year) (Modified Cash Basis)...............11
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, 2001 and 2000, and the related statement of changes in net
assets available for benefits (modified cash basis) for the year ended December
31, 2001. 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, 2001 and 2000, and changes
therein (modified cash basis) for the year ended December 31, 2001, 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 at end of year) as of December 31, 2001 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. This 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 30, 2002
Greensboro, North Carolina
Triad Guaranty Inc.
401(k) Profit-Sharing Plan
Statements of Net Assets Available for Benefits
(Modified Cash Basis)
December 31
2001 2000
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Assets
Investments, at fair value $ 7,208,978 $ 6,064,571
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Net assets available for benefits $ 7,208,978 $ 6,064,571
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See notes to financial statements.
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Triad Guaranty Inc.
401(k) Profit-Sharing Plan
Statement of Changes in Net Assets Available for Benefits
(Modified Cash Basis)
Year ended December 31, 2001
Additions:
Investment income:
Net appreciation in fair value of investments $ 52,607
Interest and dividends 40,222
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92,829
Contributions:
Participants 895,550
Employer 373,772
Rollover 20,423
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1,289,745
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Total additions 1,382,574
Deductions:
Benefits paid to participants 238,167
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Net increase 1,144,407
Net assets available for benefits:
Beginning of year 6,064,571
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End of year $ 7,208,978
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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, 2001
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 three 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) of the Internal Revenue
Code. 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 $11,523 for 2001 were used to reduce
employer contributions.
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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)
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.
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 are 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.
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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)
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.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the modified cash method
of accounting, which is a comprehensive basis of accounting other than
accounting principles generally accepted in the United States. Under this basis,
investments are recorded at fair value, 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.
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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:
2001 2000
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Investments at fair value as determined
by quoted market price:
Triad Guaranty Inc. Common Stock $ 4,267,321 $ 3,944,089
Davis New York Venture Fund 885,721 888,512
Alger Capital Appreciation Portfolio 580,468 537,345
Federated International Equity Fund 361,506 462,282
Merrill Lynch Retirement Reserves 384,813 -
During 2001, 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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Triad Guaranty Inc. Common Stock $ 400,187
Mutual Funds (347,580)
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$ 52,607
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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, Merrill Lynch, and, therefore,
these transactions qualify as a 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 received an opinion letter from the Internal Revenue Service dated June
29, 1993, 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 and the related trust is tax exempt.
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SUPPLEMENTAL SCHEDULE
10
TRIAD GUARANTY INC.
401(K) PROFIT-SHARING PLAN
EIN: 56-1838519
PLAN NUMBER: 001
SCHEDULE H, LINE 4I
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
(MODIFIED CASH BASIS)
DECEMBER 31, 2001
(c)
Description
of Investment,
Including Maturity
Date, Rate of
(b) Interest, (e)
Identity of Issue, Borrower, Collateral, Par Current
(a) Lessor or Similar Party or Maturity Value Value
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* Triad Guaranty Inc. Common Stock 117,641 shares $ 4,267,321
Davis New York Venture Fund 34,821 shares 885,721
Dreyfus Founders Discovery Fund 2,431 shares 69,288
Alger Capital Appreciation Portfolio 64,069 shares 580,468
PIMCO Total Return Fund 33,432 shares 349,697
Federated International Equity Fund 24,004 shares 361,506
* Merrill Lynch Fundamental Growth Fund 2,087 shares 37,270
Van Kampen American Value Fund 119 shares 2,238
* Merrill Lynch Small Cap Value Fund 1,217 shares 29,320
PIMCO Innovation Fund 752 shares 16,999
PIMCO Mid-Cap Growth Fund 1,392 shares 26,700
* Merrill Lynch S&P 500 Index Fund 9,240 shares 130,097
AIM Balanced Fund 1,530 shares 39,700
* Merrill Lynch Retirement Reserves 384,813 shares 384,813
Loans Various maturities
with rates ranging
from 8.75% to 10.50% 27,840
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$ 7,208,978
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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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