-----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, EpPoYRT6hGVhHqMnS6O8Al8GcHrFp0kSZ3n2r8O09HN1PESjhCETSQUUlwfF0Hds YCNcwiDLkzY9pvIfZxO90g== 0000914039-96-000141.txt : 19960514 0000914039-96-000141.hdr.sgml : 19960514 ACCESSION NUMBER: 0000914039-96-000141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACMAT CORP CENTRAL INDEX KEY: 0000002062 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 060682460 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06234 FILM NUMBER: 96561473 BUSINESS ADDRESS: STREET 1: 233 MAIN ST STREET 2: P O BOX 2350 CITY: NEW BRITAIN STATE: CT ZIP: 06050-2350 BUSINESS PHONE: 2032299000 MAIL ADDRESS: STREET 1: 233 MAIN STREET STREET 2: P O BOX 2350 CITY: NEW BRITAIN STATE: CT ZIP: 06050-2350 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] 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 0-6234 ACMAT CORPORATION Connecticut 06-0682460 (State of Incorporation) (I.R.S. Employer Identification No.) 233 Main Street, New Britain, Connecticut 06050-2350 (Address of principal executive offices) Registrants's telephone number including area code: (860) 229-9000 NONE (Former name, former address and former fiscal year, if changed since last report) 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 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.
Shares outstanding Title of Class at April 30, 1996 - -------------- ------------------ Common Stock 634,340 Class A Stock 2,232,585
2 TABLE OF CONTENTS Part I FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Earnings 4 Consolidates Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II OTHER INFORMATION Item 3. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 2 3 Part I Financial Information Item I Financial Statements ACMAT CORPORATION AND SUBSIDIARIES Financial Statements Consolidated Balance Sheets
March 31, December 31, Assets 1996 1995 - ------ --------- ------------ Investments: Fixed maturities-available for sale, at market (Cost of $123,618,913 in 1996 and $121,612,706 in 1995) $123,993,476 122,387,491 Equity securities, at market value (Cost $5,262 in 1996 and $20,000 in 1995) 5,262 20,000 Limited partnership investment, at market value (Cost $1,108,995 in 1996 and $1,120,354 in 1995) 1,806,762 1,641,763 Short-term investments, at cost which approximates market 11,058,431 8,359,047 ------------ ----------- Total investments 136,863,931 132,408,301 Cash and cash equivalents 3,417,271 5,120,375 Accrued interest receivable 2,215,558 2,230,988 Reinsurance recoverable 3,942,899 3,872,099 Receivables, net 10,379,749 9,022,434 Federal income tax recoverable - 233,572 Prepaid expenses 250,120 178,965 Deferred income taxes 1,986,794 1,971,148 Property & equipment, net 13,883,156 13,987,256 Deferred policy acquisition costs 3,623,280 3,459,308 Other assets 3,672,053 3,869,028 Intangibles, net 3,967,101 4,048,764 ------------ ----------- $184,201,912 180,402,238 ============ =========== Liabilities & Stockholders' Equity Notes payable to banks $ 16,200,000 7,500,000 Accounts payable 2,098,339 2,189,645 Reserves for losses and loss adjustment expenses 45,928,421 45,235,311 Unearned premiums 14,873,786 14,302,613 Cash collateral held 17,054,794 17,767,955 Accrued liabilities 1,947,312 1,861,815 Income taxes 154,892 - Long-term debt 39,140,204 40,127,590 ------------ ----------- Total liabilities 137,397,748 128,984,929 Minority interests 14,118,797 13,830,050 Stockholders' Equity: Common Stock (No Par Value; 3,500,000 shares Authorized; 634,340 and 642,464 Shares Issued and Outstanding) 634,340 642,464 Class A Stock (No Par Value; 10,000,000 Shares Authorized; 2,232,585 and 2,665,836 shares Issued and Outstanding) 2,232,585 2,665,836 Additional paid-in capital - 1,921,100 Retained earnings 29,188,725 31,601,383 Net unrealized loss on securities 629,717 756,476 ------------ ----------- Total stockholders' equity 32,685,367 37,587,259 ------------ ----------- $184,201,912 180,402,238 ============ ===========
See Notes to Consolidated Financial Statements. 3 4 ACMAT CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings Three Months Ended March 31, 1996 and 1995
1996 1995 ----------- --------- Earned premiums $ 4,644,032 5,702,614 Contract revenues 1,986,682 2,720,521 Investment income, net 1,649,027 1,376,886 Net realized capital losses (7,788) (120) Other income 187,020 165,934 ----------- --------- 8,458,973 9,965,835 ----------- --------- Cost of contract revenues 1,906,875 2,529,468 Losses and loss adjustment expenses 1,393,210 1,710,784 Amortization of policy acquisition costs 674,256 1,088,831 Selling, general and administrative expenses 1,319,921 1,366,390 Interest expense 1,232,383 1,210,835 ----------- --------- 6,526,645 7,906,308 ----------- --------- Earnings before income taxes and minority interests 1,932,328 2,059,527 Income taxes Federal 447,460 481,985 State 35,000 40,000 ----------- --------- 482,460 521,985 ----------- --------- Earnings before minority interests 1,449,868 1,537,542 Minority interests (309,754) (334,117) ----------- --------- Net earnings $ 1,140,114 1,203,425 =========== ========= Net earnings per share and share equivalent .34 .30 Net earnings per share - assuming full dilution .28 - Weighted average shares outstanding 3,400,691 3,965,165
See Notes to Consolidated Financial Statements. 4 5 ACMAT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Class A Net stock stock Additional unrealized par par paid-in Retained gains Total value value capital earnings (losses) stockholders' ------ ------- ---------- -------- on securities equity ------------- ------------- Balance as of December 31, 1994 $652,920 $3,313,067 $ 9,358,948 $26,251,103 $(1,571,103) $38,004,935 Acquisition and Retirement of 1,106 Shares of Common Stock (1,106) -- (15,484) -- -- (16,590) Acquisition and Retirement of 88,500 Shares of Class A Stock -- (88,500) (747,750) -- -- (836,250) Net Unrealized Appreciation of Debt and Equity Securities -- -- -- -- 1,209,872 1,209,872 Net Earnings -- -- -- 1,203,425 -- 1,203,425 -------- ---------- ----------- ----------- ----------- ----------- Balance as of March 31, 1995 $651,814 $3,224,567 $ 8,595,714 $27,454,528 $ (361,231) $39,565,392 ======== ========== =========== =========== =========== =========== Balance as of December 31, 1995 $642,464 $2,665,836 $ 1,921,100 $31,601,383 $ 756,476 $37,587,259 Acquisition and Retirement of 8,124 Shares of Common Stock (8,124) -- (63,925) (63,000) -- (135,049) Acquisition and Retirement of 483,250 Shares of Class A Stock -- (483,250) (2,307,166) (3,489,772) -- (6,280,188) Issuance of 49,999 Shares of -- 49,999 449,991 -- -- 499,990 Class A Stock Net Unrealized Losses on Debt -- -- -- -- (126,759) (126,759) and Equity Securities Net Earnings -- -- -- 1,140,114 -- 1,140,114 -------- ---------- ----------- ----------- ----------- ----------- Balance as of March 31, 1996 $634,340 $2,232,585 $ -- $29,188,725 $ 629,717 $32,685,367 ======== ========== =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. 5 6 ACMAT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Three Months Ended March 31, 1996 and 1995
1996 1995 ------------ --------- Cash flows from operating activities: Net earnings $ 1,140,114 1,203,425 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 504,163 591,295 Minority interests 309,754 334,117 Net realized capital losses 7,788 120 Changes in: Accrued interest receivable 15,430 (247,089) Reinsurance recoverable (70,800) 612,577 Receivables, net (1,357,315) 1,082,359 Deferred policy acquisition costs (163,972) 137,139 Prepaid expenses and other assets 107,613 (363,780) Accounts payable and accrued liabilities (5,809) (262,657) Cash collateral held (713,161) 5,882,729 Reserves for losses and loss adjustment expenses 693,110 849,223 Income taxes, net 448,930 280,056 Unearned premiums 571,173 (807,566) ------------ --------- Net cash provided by operating activities 1,487,018 9,291,948 ------------ --------- Cash flows from investing activities: Proceeds from investments sold or matured: Fixed maturities-sold 1,305,893 130,802 Fixed maturities-matured 10,636,500 17,848,750 Equity securities -- -- Purchases of: Fixed maturities (14,194,921) (24,090,180) Equity securities (5,262) -- Limited Partnership Investment adjustment 11,360 -- Short-term investments, net (2,699,384) (3,403,800) Capital expenditures (41,675) (54,120) ------------ --------- Net cash used for investing activities (4,987,489) (9,568,548) ------------ --------- Cash flows from financing activities: Borrowings under lines of credit 8,700,000 -- Repayments on long-term debt (487,396) (852,055) Payments for acquisition & retirement of stock (6,415,237) (852,840) ------------ --------- Net cash provided by (used for) financing activities 1,797,367 (1,704,895) ------------ --------- Net decrease in cash and cash equivalents (1,703,104) (1,981,495) Cash and cash equivalents at beginning of period 5,120,375 5,471,148 ------------ --------- Cash and cash equivalents at end of period $ 3,417,271 3,489,653 ============ =========
See Notes to Consolidated Financial Statements. 6 7 ACMAT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Financial Statements The consolidated financial statements include the accounts of ACMAT Corporation ("ACMAT" or the "Company") and its subsidiaries. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles and are unaudited. The interim financial information contained in this report has been prepared from the books and records of the Company and its subsidiaries and reflects, in the opinion of the management of the Company, all adjustments (consisting of normal and recurring accruals) necessary to fairly present results of operations for the periods indicated. All significant intercompany accounts and transactions have been eliminated in consolidation. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. (2) Earnings Per Share and Share Equivalent The earnings per share and share equivalent were computed by dividing net earnings by the weighted average number of Common and Class A shares outstanding of 3,400,691 and 3,965,165 for 1996 and 1995, respectively, and includes the common stock equivalency of outstanding options, if dilutive. The number of shares was also increased by the number of shares issuable on the exercise of options when the market price of the stock exceeded the exercise price of the option. This increase in the number of shares was reduced by the number of shares which are assumed to have been purchased with the proceeds from the exercise of the option; these purchases were assumed to have been made at the average price of the common stock during that part of the period when the market price of the common stock exceeded the exercise price of the option. Earnings per share - assuming full dilution was determined on the assumptions that the convertible notes for 1996 were converted and the options were exercised at the beginning of the period. As to the debentures, net earnings were adjusted for the interest expense, net of its tax effect. As to the options, outstanding shares were increased as described above, except that purchases were assumed to have been made at the period-end price of the shares as it was higher than the average price during the period. Earnings per share - assuming full dilution was not presented for 1995 because the effect was not material. (3) Supplemental Cash Flow Information Income taxes paid during the three months ended March 31, 1996 and 1995 was $33,530 and $241,928, respectively, and interest paid for the three months ended March 31, 1996 and 1995 was $680,501 and $736,236, respectively. On March 29, 1996, the Company issued 49,999 shares of Class A Stock at $10 per share pursuant to the conversion options of the Convertible Senior Notes to AIG Life Insurance Company and American International Life Assurance Company of New York. The issuance of stock pursuant to the conversion option of the Convertible Senior notes is a non-cash transaction that is not reflected in the Consolidated Statement of Cash Flows. (4) Application of New Accounting Standards Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (FAS 121). This statement establishes accounting standards for the impairment of long-lived assets and certain identifiable intangibles to be disposed of. This statement requires a write down to fair value when long-lived assets to be held and used are impaired. The adoption of this statement did not have any effect on results of operations, financial condition or liquidity as no adjustments were required. Also, effective January 1, 1996 the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123). This statement addresses alternative accounting treatments for stock-based compensation, such as stock options and restricted stock. FAS 123 permits disclosing in the financial statement 7 8 footnotes the pro forma impact to net income as if the value of stock-based compensation awards had been expensed. The value of awards are measured at the grant date based upon estimated fair value, using option pricing models. The Company has selected the alternative method which provides for pro forma disclosure in the footnotes to the year-end financial statements only. 8 9 ACMAT CORPORATION AND SUBSIDIARIES Item 2: Management's Discussion and Analysis of Financial Conditions and Results of Operations RESULTS OF OPERATIONS: Overview Net earnings were $1,140,114 for the three months ended March 31, 1996 compared to $1,203,425 for the same period a year ago. The decrease in net earnings for the quarter ended March 31, 1996 reflects a decrease in earned premiums and contract revenues partially offset by an increase in interest income. Earned Premiums Earned premiums for the three months ended March 31, 1996 decreased to $4,644,032 compared to $5,702,614 for the same period in 1995. The decrease in earned premiums is a result of some insurance policies issued with policy durations in excess of twelve months. Net written premiums were $5,165,081 for the three months ended March 31, 1996 compared to $5,102,114 for the three months ended March 31, 1995. Variances in net written premiums have historically occurred due to the fluctuations in size, number and timing of bonds and policies bound by the Company. Contract Revenues Contract revenues were $1,986,682 for the three-month period ended March 31, 1996 compared to $2,720,521 for the same period in 1995. During the past several years, the Company has focused on fewer more profitable projects. Construction revenue is difficult to predict and depends greatly on the successful securement of contracts bid. However, since the backlog at March 31, 1996 was lower than the backlog a year ago, the Company expects contract revenues to be lower in 1996. Investment Income, Net Net investment income increased to $1,649,027 for the three-month period ended March 31, 1996 compared to $1,376,886 for the same period in 1995, representing effective yields of 4.75% and 4.27%, respectively. The increase in investment income in 1996 over 1995 was due substantially to higher yields on the portfolio as the result of higher interest rates obtained on reinvested assets as well as an increase in the total invested assets. Invested assets, including cash, were $140,281,205 and $137,528,676 at March 31, 1996 and December 31, 1995, respectively. The increase in invested assets is attributable to the net cash flow generated by written premiums and the reinvestment of investment income offset by the repayment of debt and the repurchase of stock. Net Realized Capital Losses Realized capital losses from the sale of investments in the three-month period ended March 31, 1996 were $7,788 compared to realized capital losses of $120 for the same period in 1995. Costs of Contract Revenues Costs of contract revenues decreased to $1,906,875 for the three-month period ended March 31, 1996 compared to $2,529,468 for the same period in 1995. The decrease in costs of contract revenues reflects the decrease in contract revenues. Costs of contract revenues vary from period to period as a function of contract revenues (See Contract Revenues). The Company's construction backlog was approximately $3,400,000 at March 31, 1996 compared to $7,700,000 a year ago. Losses and Loss Adjustment Expenses Losses and loss adjustment expenses were $1,393,210 for the three-month period ended March 31, 1996 compared to $1,710,784 for the same period in 1995. The decrease in losses and loss adjustment expenses are attributable to the decrease in earned premiums from 1996 to 9 10 1995 without any fluctuations in the loss ratios. Losses and loss adjustment expense reserves represent management's estimate of the ultimate costs of unpaid losses incurred for these periods relative to premiums earned. Amortization of policy acquisition costs Amortization of policy acquisition costs was $674,256 for the three-month period ended March 31, 1996 as compared to $1,088,831 for the same period in 1995. The decrease in amortization of policy acquisition costs is primarily attributable to the decrease in premiums earned. Policy acquisition costs, primarily commissions, are deferred and amortized over the policy or bond term. Selling, General and Administrative Expenses Selling, general and administrative expenses were $1,319,921 for the three-month period ended March 31, 1996 compared to $1,366,390 for the same period in 1995. The decrease in the selling, general and administrative expenses during 1996 is due primarily to a decrease in salary expense. Interest Expense Interest expense increased to $1,232,383 for the three-month period ended March 31, 1996 compared to $1,210,835 for the same period in 1995. The increase in interest expense in 1996 is due primarily to the increase in short-term borrowings offset in part by the repayment of long-term debt. Income Taxes Income tax expense was $482,460 for the three-month period ended March 31, 1996 compared to $521,985 for the same period in 1995, representing effective Federal tax rates of 23.2% and 23.4%, respectively. The Federal effective tax rate fluctuates according to the mix of tax exempt and taxable securities held by the Company. RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES: Reserves for losses and loss adjustment expenses are established with respect to both reported and incurred but not reported claims for insured risks. The amount of loss reserves for reported claims is primarily based upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and the policy provisions relating to the type of claim. As part of the reserving process, historical data is reviewed and consideration is given to the anticipated impact of various factors such as legal developments and economic conditions, including the effects of inflation. Reserves are monitored and evaluated periodically using current information on reported claims. Management believes that the reserves for losses and loss adjustment expenses at March 31, 1996 are adequate to cover the unpaid portion of the ultimate net cost of losses and loss adjustment expenses, including losses incurred but not reported. Reserves for losses and loss adjustment expenses are estimates at any given point in time of what the Company may have to pay ultimately on incurred losses, including related settlement costs, based on facts and circumstances then known. The Company also reviews its claim reporting patterns, loss experience, risk factors and current trends and considers their effect in the determination of estimates of incurred but not reported reserves. Ultimate losses and loss adjustment expenses are affected by many factors which are difficult to predict, such as claim severity and frequency, inflation levels and unexpected and unfavorable judicial rulings. Reserves for surety claims also consider the amount of collateral held as well as the financial strength of the principal and its indemnitors. The Company's insurance subsidiaries' loss ratios under generally accepted accounting principles ("GAAP") was 30.0% for the three-month periods ended March 31, 1996 and 1995. These loss ratios are below industry averages and are believed to be the result of conservative underwriting. There can be no assurance that such loss ratios can continue. The Company's insurance subsidiaries' expense ratios under GAAP were 44.5% and 41.0% for the three-month period ended March 31, 1996 and 1995, respectively. The Company's insurance subsidiaries' combined ratios under GAAP were 74.5% and 71.0% for the three-month period ended March 31, 1996 and 1995, respectively. 10 11 LIQUIDITY AND CAPITAL RESOURCES: The Company generates sufficient funds from its operations and maintains a relatively high degree of liquidity in its investment portfolio. The primary source of funds to meet the demands of claim settlements and operating expenses are premium collections, investment earnings and maturing investments. As of March 31, 1996, the Company had no material commitments for capital expenditures and, in the opinion of management of the Company, the Company currently has adequate sources of liquidity to fund its operations over the next 12 months. ACMAT, exclusive of its subsidiaries, has incurred negative cash flows from operating activities primarily because of interest expense related to notes payable and long-term debt incurred to acquire and capitalize its insurance subsidiaries. ACMAT has also incurred negative working capital as a result of holding short-term debt related to its operations. ACMAT's principal sources of funds are dividends from its wholly-owned subsidiaries, intercompany and short-term borrowings, insurance underwriting fees from its subsidiaries, construction contracting operations and rental income. Management believes that these sources of funds are adequate to service its indebtedness and its construction contracting operations without regard to any dividends from ACMAT's insurance holding company subsidiaries, United Coasts and ACSTAR Holdings. ACMAT has recently utilized short-term borrowings to repurchase its stock. On a long-term basis, ACMAT could rely, if necessary, on dividends from its insurance holding company subsidiaries to improve its working capital. The Company realized cash flow from operations of $1,487,018 for the three-month period ended March 31, 1996 compared to $9,291,948 for the same period in 1995. Net cash flows provided by operations in 1996 were derived principally from premium collections offset in part by cash collateral returned. Purchases of investments are made based upon excess cash available after the payment of losses and loss adjustment expenses and other operating and non-operating expenses. The Company's short term investment strategy coincides with the relatively short maturity of its liabilities which are comprised primarily of reserves for losses covered by claims-made insurance policies, reserves related to surety bonds and collateral held for surety obligations. Net cash used for investing activities in the first quarter of 1996 amounted to $4,987,489 compared to net cash used for investing activities of $9,568,548 for the same period in 1995. The terms of the Company's note agreements contain limitations on payment of cash dividends, re-acquisition of shares, borrowings and investments and require maintenance of specified ratios and minimum net worth levels, including cross default provisions. The Company is prohibited from paying any dividend prior to July 1, 1997. The payment of future cash dividends and the re-acquisition of shares are restricted each to amounts of an Available Fund. The Available Fund is a cumulative fund which is increased each year by 20% of the Consolidated Net Earnings (as defined). The Company is in compliance with all covenants at March 31, 1996, except for the limitation on the reacquisition of shares which exceeded the Available Fund at March 31, 1996. The Company does not consider this a significant event of default and has received a waiver from the note holders. The Company maintains two short-term unsecured bank credit line totalling $17.5 million to fund interim cash requirements. There was $16,200,000 outstanding under these lines of credit as of March 31, 1996. During the three-month period ended March 31, 1996, the Company purchased, in the open market and privately negotiated transactions, 8,124 shares of its Common Stock at an average price of $16.62. The Company also repurchased, in the open market and privately negotiated transactions, 483,250 shares of its Class A Stock at an average price of $13.00 per share. The Company's principal source of cash for repayment of long-term debt is borrowings from its two insurance holding companies. Under applicable insurance regulations, ACMAT's insurance subsidiaries are restricted as to the amount of dividends they may pay to their 11 12 respective holding companies, without the prior approval of their domestic state insurance department. The amount of dividends ACMAT's insurance subsidiaries may pay are limited to approximately $6,600,000 in 1996. REGULATORY ENVIRONMENT The National Association of Insurance Commissioners has recently adopted a risk-based capital formula for property and casualty companies which will be used by insurance regulators in assessing the capital adequacy of insurance companies. The risk-based capital formula, effective December 31, 1995, is a regulatory tool designed to identify weakly capitalized companies. The formula determines a required amount of capital based on the risks that the insurer assumes. Various regulatory actions are then prescribed if a company's ratio falls below the minimum required ratio. These actions range from requiring the insurer to submit a comprehensive plan to the insurance commissioner in the event its statutory surplus falls below its Company Action Level which is 200% of it Authorized Control Level, as calculated under the formula, to placing the insurer under regulatory control if its statutory surplus falls below 70% of its Authorized Control Level. The ratio for each of the Company's insurance subsidiaries as of December 31, 1995 was significantly above the level which might require regulatory action. 12 13 Part II - Other Information Item 3 - Legal Proceedings ACMAT and the directors of United Coasts, Henry W. Nozko, Sr., Henry W. Nozko, Jr. and John C. Creasy are defendants in an action brought by a shareholder of United Coasts seeking to enjoin a 1993 exchange offer by ACMAT for shares of United Coasts held by unaffiliated persons. ACMAT subsequently withdrew the exchange offer but the plaintiff continues to seek, among other things, (a) a determination that the action is a proper class action, (b) a mandatory injunction requiring the registration of United Coasts common stock under the Securities Exchange Act of 1934, (c) unspecified damages and (d) attorneys' fees and costs. On May 2, 1996, ACMAT entered into a Stipulation of Settlement with counsel to shareholders of United Coasts which will allow for a proposed merger of United Coasts into ACMAT. Under the terms of the merger, the United Coasts' shareholders would receive one share of ACMAT Class A Stock for each one and one-half shares of United Coasts shares, adjusted to reflect any counsel fees payable to the shareholders' counsel. The merger is subject to several conditions, including shareholder and court approval. The Company has, together with many other defendants, been named as a defendant in approximately 140 actions brought in Connecticut state courts by injured individuals or their representatives based on product liability claims relating to materials containing asbestos. No specific claims for monetary damages are asserted in these actions. Although it is early in the litigation process, the Company does not believe that its exposure in connection with these cases is significant. Item 6 - Exhibits and Reports on Form 8-K a. Exhibits - None -27. Financial Data Schedule b. Report on Form 8-K - None 13 14 SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACMAT CORPORATION Date: May 13, 1996 /S/ Henry W. Nozko, Sr. --------------------------------------------- Henry W. Nozko, Sr., President and Chairman Date: May 13, 1996 /S/ Henry W. Nozko, Jr. --------------------------------------------- Henry W. Nozko, Jr., Executive Vice President Chief Operating Officer, and Treasurer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 3-MOS DEC-31-1995 MAR-31-1996 3,417,271 136,863,931 10,634,304 (254,825) 0 157,069,528 17,575,198 3,692,042 184,201,912 98,257,504 39,140,204 0 0 2,866,925 29,818,442 184,201,912 6,630,714 8,458,973 3,974,341 3,974,341 1,319,921 0 1,232,383 1,932,328 482,460 1,449,868 0 0 0 1,140,114 .34 .28
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