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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
Entire Document
 
<PAGE>   116
 
                 HANOVER CAPITAL PARTNERS LTD. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 AND
          FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
 
will not have a material impact on its operations. The Company will adopt this
statement effective January 1, 1997.
 
     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share. This statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to entities with publicly held common stock or potential common
stock. This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, Earnings per Share, and makes them
comparable to international EPS standards. This statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. The Company has analyzed the impact of adopting this
statement and determined that it will not have a material impact on its EPS
calculation.
 
3.  PAYROLL TAX SETTLEMENT
 
     In 1994, the Internal Revenue Service ("IRS") began an examination of the
Company's payroll tax withholding practices with respect to independent
contractors who provided services to HCP's due diligence business.
 
     Pursuant to the IRS Classification Settlement Program ("CSP"), HCP received
an offer to settle all disputed payroll taxes relating to the IRS examination of
HCP's payroll withholding practices with respect to independent contractors.
Management of HCP intends to agree to the terms of the CSP which require HCP to
pay the United States Government $122,400 in full discharge of any federal
employment tax liability and to further treat the workers as employees (rather
than independent contractors) on a prospective basis.
 
     At December 31, 1995, HCP had recorded an accrual of $400,000 for payroll
withholding tax for independent contractors in the accompanying consolidated
balance sheet. HCP recorded a reversal of reserve of $277,600 for the payroll
tax matter in the accompanying consolidated statement of operations for the year
ended December 31, 1996 to adjust the previously established reserve to the
expected settlement amount.
 
     Subsequent to December 31, 1996, HCP received a revised settlement offer
from the IRS and will agree to pay the United States Government $100,000 rather
than $122,400. Accordingly, HCP recorded an additional reversal of reserve of
$22,400 for the payroll tax matter in the accompanying consolidated statement of
operations for the six months ended June 30, 1997.
 
4.  CONCENTRATION RISK
 
     For the six month periods ended June 30, 1997 and 1996 and for the years
ended December 31, 1996, 1995 and 1994 the Company received revenues from
certain customers which exceeded 10% of total revenues as follows:
 

<TABLE>
<CAPTION>
  SIX MONTHS
     ENDED
    JUNE 30           YEAR ENDED DECEMBER 31
- ---------------     --------------------------
1997       1996     1996       1995       1994
- ----       ----     ----       ----       ----
(UNAUDITED)
<S>        <C>      <C>        <C>        <C>
 40%        53%      46%        32%        44%
 11%       --        26%        16%        12%
</TABLE>

 
5.  MORTGAGE SERVICING
 
     The Company, through its wholly-owned subsidiary HCMC, services multifamily
mortgage loans on behalf of others. Loan servicing consists of the collection of
monthly mortgage payments on behalf of investors, reporting information to those
investors on a monthly basis and maintaining custodial escrow
 
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