-----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, JSa6qM68czItIJpV5L/W9YiTWdYlJOIs5wXtC4VL9v1Axo7iltzBDvD544jDGDl0 C89ozsGkF8n8vXo1auE7uA== 0000892569-99-002218.txt : 19990816 0000892569-99-002218.hdr.sgml : 19990816 ACCESSION NUMBER: 0000892569-99-002218 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN NATIONAL FINANCIAL INC CENTRAL INDEX KEY: 0001068843 STANDARD INDUSTRIAL CLASSIFICATION: TITLE INSURANCE [6361] IRS NUMBER: 330731548 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24961 FILM NUMBER: 99688428 BUSINESS ADDRESS: STREET 1: 17911 VON KARMAN AVENUE SUITE 240 CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 9496224700 MAIL ADDRESS: STREET 1: 17911 VON KARMAN AVENUE SUITE 240 CITY: IRVINE STATE: CA ZIP: 92614 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1999 Commission File Number 0-24961 AMERICAN NATIONAL FINANCIAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 33-0731548 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 17911 Von Karman Avenue, Suite 240, Irvine, California 92614 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (949) 622-4700 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common stock, no par value, 7,150,000 shares as of August 12, 1999 Exhibit Index appears on page 11 of 12 sequentially numbered pages. 2 FORM 10-Q QUARTERLY REPORT Quarter Ended June 30, 1999 TABLE OF CONTENTS -----------------
Page Number ----------- Part I: FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements A. Condensed Consolidated Balance Sheets as of 3 June 30, 1999 and December 31, 1998 B. Condensed Consolidated Statements of Earnings 4 for the three-month and six-month periods ended June 30, 1999 and 1998 C. Condensed Consolidated Statements of Comprehensive 5 Earnings for the three-month and six-month periods ended June 30, 1999 and 1998 D. Condensed Consolidated Statements of Cash Flows 6 for the six-month periods ended June 30, 1999 and 1998 E. Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition 8 and Results of Operations Item 3. Quantitative and Qualitative Market Risk Disclosures 10 Part II: OTHER INFORMATION Items 1, 2, 3 and 5 of Part II have been omitted because they are not applicable with respect to the current reporting period. Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11
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 thereunto duly authorized. AMERICAN NATIONAL FINANCIAL, INC. --------------------------------- (Registrant) By: /s/ Carl A. Strunk Date: August 12, 1999 ------------------------------------------- Carl A. Strunk Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 2 3 Part I: FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1999 1998 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents............................................................. $19,018,697 $10,344,987 Short-term investments, at cost, which approximates fair market value................. 154,000 150,000 Other long term investments, at fair market value..................................... 2,843,101 -- Accounts receivable, net of allowance for doubtful accounts of $1,233,121 in 1999 and $1,895,684 in 1998........................................ 7,454,987 8,575,808 Notes receivables, net................................................................ 116,725 -- Deferred income taxes................................................................. 3,051,873 2,395,298 Prepaid expenses and other current assets............................................. 1,092,456 2,796,888 ----------- ----------- Total current assets............................................................... 33,731,839 24,262,981 Property and equipment, net............................................................. 7,730,520 4,010,187 Title plants............................................................................ 2,377,223 2,252,023 Deposits with Insurance Commissioner.................................................... 140,000 112,500 Intangibles, net of accumulated amortization of $720,321 in 1999 and $609,103 in 1998 ..................................................................... 8,268,508 6,738,350 ----------- ----------- Total assets....................................................................... $52,248,090 $37,376,041 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and other accrued expenses, including $58,883 to affiliates in 1999 and $126,630 in 1998.......................................... $ 5,161,652 $ 6,354,355 Customer advances..................................................................... 2,359,702 2,190,364 Current portion of long-term debt..................................................... 53,184 442,500 Current portion of obligations under capital leases with affiliates................... 64,568 741,561 Current portion of obligations under capital leases with non-affiliates............... 170,681 115,643 Reserve for claim losses.............................................................. 4,153,277 -- Income taxes payable.................................................................. 1,208,910 3,750,029 Due to affiliate...................................................................... 1,825,781 1,892,910 ----------- ----------- Total current liabilities.......................................................... 14,997,755 15,487,362 Long term debt.......................................................................... 2,017,952 -- Obligations under capital leases with affiliates........................................ 636,493 669,435 Obligations under capital leases with non-affiliates.................................... 1,250,571 1,321,070 ----------- ----------- Total liabilities.................................................................. 18,902,771 17,477,867 Shareholders' equity: Preferred stock, no par value; authorized 5,000,000 shares; issued and outstanding, none..................................................... -- -- Common stock, no par value; authorized, 50,000,000 shares; issued and outstanding, 7,150,000 in 1999 and 4,917,096 in 1998.................. -- -- Additional paid in capital......................................................... 21,745,777 12,324,264 Retained earnings.................................................................. 11,586,716 7,573,910 ----------- ----------- 33,332,493 19,898,174 Accumulated comprehensive earnings................................................. 12,826 -- Total shareholders' equity......................................................... 33,345,319 19,898,174 ----------- ----------- Total liabilities and shareholders' equity......................................... $52,248,090 $37,376,041 =========== ===========
See accompanying notes to condensed consolidated financial statements 3 4 AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended Six months ended June 30, June 30, --------------------------- --------------------------- 1999 1998 1999 1998 ------------ ------------ ----------- ------------ (Unaudited) (Unaudited) Revenues: Net title service revenue -- related party ............. $ 14,541,703 $ 13,377,163 $ 28,819,023 $ 24,121,338 Escrow fees ............................................ 7,190,009 6,186,316 13,848,981 10,716,185 Other service charges .................................. 3,635,468 4,168,457 7,110,607 7,138,011 ------------ ------------ ------------ ------------ Total revenues ..................................... 25,367,180 23,731,936 49,778,611 41,975,534 ------------ ------------ ------------ ------------ Expenses: Personnel costs ........................................ 14,563,258 12,274,301 28,391,950 22,522,387 Other operating expenses includes $888,620 and $970,974 with affiliate for the three-month period ended June 30, 1999 and 1998, respectively, and $2,046,824 and $1,682,230 with affiliate for the six-month period ended June 30, 1999 and 1998, respectively ......................................... 4,641,160 4,277,274 8,820,383 7,774,630 Title plant rent and maintenance ....................... 1,600,073 1,526,530 3,181,858 3,015,889 ------------ ------------ ------------ ------------ Total expenses ..................................... 20,804,491 18,078,105 40,394,191 33,312,906 ------------ ------------ ------------ ------------ Earnings before income taxes and minority interest in net earnings of consolidated subsidiary ............ 4,562,689 5,653,831 9,384,420 8,662,628 Provision for income taxes ................................. 1,916,330 2,347,847 3,941,622 3,532,039 ------------ ------------ ------------ ------------ Earnings before minority interest in net earnings of consolidated subsidiary ............................... 2,646,359 3,305,984 5,442,798 5,130,589 Minority interest in net earnings of consolidated subsidiary -- (1,352,085) -- (2,044,546) ------------ ------------ ------------ ------------ Net earnings ............................................... $ 2,646,359 $ 1,953,899 $ 5,442,798 $ 3,086,043 ============ ============ ============ ============ Basic net earnings ......................................... $ 2,646,359 $ 1,953,899 $ 5,442,798 $ 3,086,043 ============ ============ ============ ============ Basic earnings per share ................................... $ 0.37 $ 0.68 $ 0.82 $ 1.06 ============ ============ ============ ============ Weighted average shares outstanding, basic basis ........... 7,150,000 2,900,767 6,606,271 2,917,754 ============ ============ ============ ============ Diluted net earnings ....................................... $ 2,646,359 $ 1,953,899 $ 5,442,798 $ 3,086,043 ============ ============ ============ ============ Diluted earnings per share ................................. $ 0.37 $ 0.62 $ 0.82 $ .97 ============ ============ ============ ============ Weighted average shares outstanding, diluted basis ......... 7,150,000 3,178,046 6,672,144 3,183,380 ============ ============ ============ ============ Cash dividends per share ................................... $ 0.10 $ -- $ 0.20 $ -- ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements 4 5 AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (In thousands)
Three months ended Six months ended June 30, June 30, ----------------------- ----------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) Net earnings $2,646,359 $1,953,899 $5,442,798 $3,086,043 ---------- ---------- ---------- ---------- Other comprehensive earnings: Unrealized gains on investments, net (1) 12,826 -- 12,826 -- ---------- ---------- ---------- ---------- Comprehensive earnings $2,659,185 $1,953,899 $5,455,624 $3,086,043 ========== ========== ========== ==========
- ------------------- (1) Net of income tax expense of $6,607 and $0, and $6,607 and $0 for the three-month and six-month periods ended June 30, 1999 and 1988 respectively. See accompanying notes to condensed consolidated financial statements 5 6 AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, ----------------------------- 1999 1998 ------------ ------------- (Unaudited) Cash flows from operating activities: Net earnings $ 5,442,798 $ 3,086,043 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 1,052,104 560,060 Minority interest in net earnings of consolidated subsidiary -- 2,044,546 Changes in: Accounts receivable, net 1,120,821 (1,904,319) Prepaid expenses and other assets 168,909 (173,605) Income taxes payable and deferred income taxes (3,184,868) 394,285 Accounts payable and other accrued expenses (1,907,695) 1,840,022 Due to affiliate (67,129) (1,213,749) Customer advances 169,338 436,194 ------------ ------------ Total cash provided by operating activities 2,794,278 5,069,477 ------------ ------------ Cash flow from investing activities: Advance to related party -- (1,531,169) Assets acquired, net of cash 1,204,323 -- Borrowings (repayment) of title plant (125,200) -- Purchase of property and equipment (4,991,219) (1,205,457) Additions to notes receivable (116,725) -- Purchase of investments (31,500) (1,982,398) ------------ ------------ Total cash used in investing activities (4,060,321) (4,719,024) Borrowings 2,080,000 -- Repayment of long term debt (442,500) -- Proceeds from stock options exercised 219,717 -- Proceeds from issuance of common stock 9,201,796 -- Proceeds from sale of real estate 330,000 -- Payments on long term debt (8,864) (1,100,002) Payments under capital lease obligations (725,396) (320,502) Dividends paid (715,000) -- ------------ ------------ Total cash provided by (used in) financing activities 9,939,753 (1,420,504) ------------ ------------ Increase (decrease) in cash and cash equivalents 8,673,710 (1,070,051) Cash and cash equivalents at the beginning of year 10,344,987 7,223,635 ------------ ------------ Cash and cash equivalents at end of period $ 19,018,697 $ 6,153,584 ============ ============ Supplemental disclosure of cash flow information: Cash paid during the year: Interest $ 88,705 $ 261,099 Income taxes $ 6,341,000 $ 1,520,105 Non-cash investing activities: Title plant acquired under capital lease $ 75,000 $ -- Non-cash financing activities: Dividends declared and unpaid $ 715,000 $ --
See accompanying notes to condensed consolidated financial statements 6 7 Notes to Condensed Consolidated Financial Statements Note A - Basis of Financial Statements - -------------------------------------- The financial information included in this report includes the accounts of American National Financial, Inc. and its subsidiaries (collectively, the "Company") and has been prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. This report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and the Prospectus dated February 12, 1999. Note B - State Banking Department - --------------------------------- One June 21, 1999 the Company submitted a response to The State Banking Department, State of Arizona ("State Banking Department") regarding their Report of Examination ("The Report") of Nations Title Insurance of Arizona, Inc. ("Nations") dated March 4, 1999 for the three-year period ending October 31, 1998. The report as agreed to by the Company indicates that the Company may not have been in compliance with certain State Banking Department regulations during the period. The Company has or will incorporate all comments and recommendations listed by the State Banking Department in the report covered by the report. The Company does not believe this will have a material impact upon the financial statements of the Company. Note C - Dividends - ------------------ On June 16 1999, the Company's Board of Directors declared a quarterly cash dividend of $.10 per share, payable on July 21, 1999, to stockholders of record on July 8, 1999. Note D - Santa Barbara Title Company Merger - ------------------------------------------- On April 30, 1999, the Department of Insurance, State of California, approved the merger of Santa Barbara Title Company, a wholly-owned subsidiary of American Title Company, into American Title Company. Note E - Acquisition - -------------------- On May 28, 1999, the Department of Insurance, State of New York, approved the acquisition of National Title Insurance of New York, a New York underwriter by American Title Company a subsidiary of American National Financial Inc. from Fidelity National Financial, Inc. National Title Insurance Company of New York is licensed to issue title insurance policies in 35 states and the U.S. Virgin Islands. The $3.25 million dollar purchase price was paid in cash and the transaction was completed in June 1999. On April 1, 1999, the Company completed the purchase of a home office building located in Orange, California for $2,600,000. In connection with the purchase, the Company financed $2,080,000 in the form of a mortgage note payable to a financial institution that bears interest at the prime lending rate with principal payments in the amount of $4,432 payable monthly. The note matures on April 1, 2004. Note F - Investments - -------------------- Marketable securities are stated at market value as determined by the most recently traded price of each security at the balance sheet date. The Company invests primarily in high-grade marketable securities. All marketable securities are defined as available-for-sale securities under the provisions of Statement of Financial Accounting Standards No. ("SFAS") 115, "Accounting for Certain Investments in Debt and Equity Securities." Management determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such determination at each balance sheet date. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and unrealized gains and losses are included in earnings. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. 7 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Factors That May Affect Operating Results - ----------------------------------------- The statements contained in this report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. It is important to note that the Company's actual results could differ materially from those in such forward-looking statements. The reader should consult the risk factors listed from time to time and other information disclosed in the Company's reports on Forms 10-K and filings under the Securities Act of 1933, as amended. Results of Operations - --------------------- Total revenue for the second quarter of 1999 increased 6.9% to $25.4 million from $23.7 million for the second quarter of 1998. Total revenue for the six-month period ended June 30, 1999 increased 18.6% to $49.8 million from $42.0 million for the comparable 1998 period. The increases in total revenue for both the three-month and the six-month periods ended June 30, 1999 are primarily the result of continuing strength in the Company's core title operations. Open title orders lagged first quarter 1999 levels due to a decline in refinance activities. However, resale activities remained strong. Fee per file is higher for resale transactions than refinance. Additionally, the contribution of the Company's ancillary service subsidiaries was unchanged as the demand for these services are consistent with the trend in real estate activity. The increases in title premiums of $1.2 million, or 8.7%, and $4.7 million, or 19.5%, for the three-month and six-month periods ended June 30, 1999, respectively are consistent with the current real estate market environment. Title orders and requests for real estate related services have continued to react favorably to existing conditions. The average fee per file increased to $957 in 1999 from $856 in 1998. Escrow fees have followed the same trend as title premiums, as would be expected. Escrow fees increased $1.0 million and $3.1 million, or 16.2% and 29.2%, for the three-month and six-month periods ended June 30, 1999, respectively. The increase in escrow fees can also be attributed to current market conditions, and the Company's efforts to expand its presence in the southern California escrow market with the opening of five additional offices in the second quarter of 1999. Other fees and income trend closely with the level and mix of business, as well as the performance of certain of the Company's title-related subsidiaries. Other fees and income have decreased to $3.6 million compared to $4.2 million in the second quarter of 1998. This slight decrease for three months ending June 30, 1999 is a result of seasonal decline in ancillary business. For the six month period ended June 30, 1999 other fees and income was $7.1 million, and was comparable to the 1998 period. The Company's operating expenses consist primarily of personnel cost, other operating expenses and title plant maintenance expense. Title insurance premiums, escrow fees and the majority of other fees and revenue are recognized as income at the time the underlying transaction closes. As a result, revenue lags approximately 60-90 days behind expenses and therefore gross margins may fluctuate. Personnel costs include base salaries, bonuses and sales commissions paid to employees, and are the most significant operating expense incurred by the Company. These costs generally fluctuate with the level of orders opened and closed and with the mix of revenue. Personnel costs, as a percentage of total revenue, have increased to 57.4% for the three-month period ended June 30, 1999 compared to 51.7% for the corresponding period in 1998. Personnel costs as a percentage of total revenue for the six-month period ended June 30, 1999 have increased to 57.0% from 53.7% for the corresponding 1998 period. The Company is and continues to respond quickly to maintain personnel costs at levels consistent with revenues. The increase is a result of the Company's continued expansion of its business. The Company continues to monitor the prevailing market conditions and will adjust personnel costs in accordance with activity. Other operating expenses consist primarily of facilities expenses, escrow losses, provision for liquidated damages, courier services, computer services, professional services, general insurance, interest expense, trade and notes receivable allowances and depreciation. Certain fixed costs are incurred regardless of revenue levels, resulting in period over period fluctuations. Other operating expenses slightly increased as a percentage of total revenue at 18.3% in the second quarter of 1999 from 18.0% in the second quarter of 1998. As a percentage of total revenue, other operating expenses for the six-month period ended June 30, 1999 decreased to 17.7% from 18.5% for the same period on 1998. The Company previously implemented and remains committed to aggressive cost control programs that will help maintain operating expense levels consistent with revenue levels. 8 9 Title plant maintenance expenses slightly decreased as a percent of total revenue to 6.3% in the second quarter of 1999 from 6.4% in the second quarter of 1998. As a percentage of total revenue, title plant maintenance expenses for the six-month period ended June 30, 1999 decreased to 6.4% from 7.2% for the same period in 1998. This reduction as a percent of total revenue is the result from the recent negotiations regarding various contracts within several counties in California and Arizona. These agreements resulted in significant cost reductions to the Company. Income tax expense for the three-month periods ended June 30, 1999 and 1998, as a percentage of earnings before income taxes was 42.0% and 41.5%, respectively. Income tax expense for the six-month periods ended June 30, 1999 and 1998 was 42.0% and 40.8%, respectively. The fluctuations in income tax expense as a percentage of earnings before income taxes are attributable to the Company's estimate of ultimate income tax liability and the characteristics of net income, i.e., operating income versus investment income, taxable versus non-taxable. Liquidity and Capital Resources - ------------------------------- The Company's current cash requirements include debt service, debt relating to capital leases, personnel, operating expenses, taxes and dividends on its common stock. The Company believes that all anticipated cash requirements for current operations will be met from internally generated funds and existing cash resources. As a holding company, the Company receives cash from its subsidiaries in the form of reimbursement for operating and other administrative expenses. Positive cash flow from the insurance subsidiary is invested primarily in short-term investments. The insurance subsidiary is restricted by state regulations in their ability to pay dividends and make distributions. The Company's ancillary service subsidiaries collect revenue and pay operating expenses, however, they are not regulated by insurance regulatory or banking authorities. On April 1, 1999 the Company completed the purchase of a home office building located in Orange, California for $2,600,000. The Company financed $2,080,000 secured by a first trust deed. The terms of the note require monthly interest payments at prime interest rate and monthly principal payments of $4,432. The note matures on April 1, 2004. On May 28, 1999 the Department of Insurance, State of New York approved the acquisition of National Title Insurance Company of New York by the Company. The $3.25 million dollar transaction was paid in cash in June 1999. Year 2000 - --------- Information technology is an integral part of the Company's business. The Company also recognizes the critical nature of and the technological challenges associated with the Year 2000 issue. The Year 2000 issue ("Y2K") results from computer programs and computer hardware that utilize only two digits to identify a year in the date field, rather than four digits. If such programs or hardware are not modified or upgraded information systems could fail, lock up, or in general fail to perform according to normal expectations. The Company has implemented a program and committed both personnel and other resources to determine the extent of potential Y2K issues. Included within the scope of this program are systems used in title plants, title policy processing, escrow production, claims processing, real estate related services, financial management, human resources, payroll and infrastructure. In addition to a review of internal systems, the Company has initiated formal communications with third parties with which it does business in order to determine whether or not they are Y2K compliant and the extent to which the Company may be vulnerable to third parties' failure to become Y2K compliant. The Company is in the process of identifying Y2K compliant issues in its systems, equipment and processes. The Company is making changes to such systems, updating or replacing such equipment, and modifying such processes to make them Y2K compliant. The Company has developed a four-phase program to become Y2K compliant. Phase I is, "Plan Preparation and Identification of the Problem." This is a continuing phase that will extend beyond the year 2000 itself. Phase II is, "Plan Execution and Remediation." Phase III is, "Testing." Phase IV is, "Maintaining Y2K Compliance." The Company was substantially Y2K compliant by July 1999. The status of the Y2K compliance program is monitored by senior management of the Company and by the Audit Committee of the Company's Board of Directors. The costs of the Y2K related efforts incurred to date have not been material, and the estimate of remaining costs to be incurred is not considered to be material. Due to the complexities of estimating the cost of modifying applications to become Y2K compliant and the difficulties in assessing third parties', including various local governments upon which the Company relies upon to provide title-related data, ability to become Y2K compliant, estimates may be subject to change. 9 10 Management of the Company believes that its electronic data processing and information systems will be substantially Y2K compliant; however, there can be no assurance that all of the Company's systems will be Y2K compliant, that the costs to be Y2K compliant will not exceed management's current expectations, or that the failure of such systems to be Y2K compliant will not have a material adverse effect on the Company's business. The Company believes that functions currently performed with the assistance of electronic data processing equipment could be performed manually or outsourced if certain systems were determined not to be Y2K compliant on or after January 1, 2000. The Company has substantially completed a contingency plan in the event that any systems are not Y2K compliant This entire section "Year 2000 Issues" is hereby designated a "Year 2000 Readiness Disclosure", as defined in the Year 2000 Information and Readiness Disclosure Act. Item 3. Quantitative and Qualitative Market Risk Disclosures The Company does not believe that there have been any material changes in market risks since year end. 10 11 Part II: OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. On June 16, 1999, the Company held its Annual Meeting of Shareholders pursuant to a Notice and Proxy Statement dated May 11, 1999. At the meeting, shareholders elected William P. Foley, II (6,178,445 for and 8,517 withheld), Michael C. Lowther (6,178,445 for and 8,517 withheld), Wayne D. Diaz (6,178,445 for and 8,517 withheld), Carl A. Strunk (6,178,445 for and 8,517 withheld), Barbara A. Ferguson (6,178,445 for and 8,517 withheld), Dennis R. Duffy (6,178,445 for and 8,517 withheld), Bruce Elieff (6,178,445 for and 8,517 withheld), Robert L. Majorino (6,178,445 for and 8,517 withheld) and Matthew K. Fong (6,178,445 for and 8,517 withheld) as Directors recommended by management and approved by a vote of 5,060,598 for, 43,600 against, with 4,617 abstaining and 1,330,258 not voted, the Company has adopted the 1999 Stock Option Plan ("1999 Plan") and approved by a vote of 5,075,264 for, 28,767 against, with 4,784 abstaining and 1,330,258 not voted, the adoption of the Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan"). Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit 11 -- Computation of Basic and Diluted Earnings Per Share Exhibit 27 -- Financial Data Schedule (b) Reports on Form 8-K: None. 11 12 EXHIBIT INDEX ------------- EXHIBIT NUMBER DESCRIPTION - -------------- ----------- Exhibit 11 Computation of Basic and Diluted Earnings Per Share Exhibit 27 Financial Data Schedule EX-11 2 COMPUTATION OF BASIC AND DILUTED EARNINGS 1 EXHIBIT 11 AMERICAN NATIONAL FINANCIAL, INC. AND SUBSIDIARIES COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE (In thousands, except per share data)
Three months ended Six months ended June 30, June 30, ------------------ ------------------ 1999 1998 1999 1998 ------ ------ ------ ------ Net earnings, basic basis $2,646 $1,954 $5,443 $3,086 ====== ====== ====== ====== Weighted average basic shares 7,150 2,901 6,606 2,918 ------ ------ ------ ------ Basic earnings per share $ .37 $ .68 $ .82 $ 1.06 ====== ====== ====== ====== Diluted net earning, basic basis 2,646 1,954 5,443 3,086 ====== ====== ====== ====== Weighted average shares outstanding during the period, basic basis 7,150 2,901 6,606 2,918 Effect of dilutive options -- 277 66 266 ------ ------ ------ ------ Weighted average shares outstanding during the period, diluted basis 7,150 3,178 6,672 3,184 ====== ====== ====== ====== Diluted earnings per share $ .37 $ .62 $ .82 $ .97 ====== ====== ====== ======
EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 19,018,697 2,843,101 8,804,833 1,233,121 0 33,731,839 10,396,114 2,665,594 52,248,090 14,997,755 0 0 0 0 21,745,777 52,248,090 49,778,611 49,778,611 0 40,394,191 0 0 0 9,384,420 3,941,622 5,442,798 0 0 0 5,442,798 .82 .82
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