-----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, TJZZAeKkjkOKkwrW3AzYS+2kbWtlqZsenkNro2PsGU4ZWNzaYN1voFpWUflaQDIt pHoZwMXHY4kzNxBGPhVgrQ== 0000914039-97-000176.txt : 19970515 0000914039-97-000176.hdr.sgml : 19970515 ACCESSION NUMBER: 0000914039-97-000176 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACMAT CORP CENTRAL INDEX KEY: 0000002062 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] 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: 97604054 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 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, 1997 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) Registrant'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, 1997 - -------------- ----------------- Common Stock 598,357 Class A Stock 2,817,491
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 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 Consolidated Balance Sheets
March 31, December 31, 1997 1996 ---- ---- Assets Investments: Fixed maturities-available for sale, at market (Cost of $131,545,352 in 1997 and $93,397,819 in 1996) $130,987,612 93,511,048 Equity securities, at market value (Cost $5,262 in 1997 and 1996) 10,573 10,573 Limited partnership investment, at market value (Cost $1,148,298 in 1997 and $1,086,630 in 1996) 1,333,300 1,439,174 Short-term investments, at cost which approximates market 9,120,147 46,969,137 ------------ ----------- Total investments 141,451,632 141,929,932 Cash and cash equivalents 2,500,718 2,187,227 Accrued interest receivable 2,063,169 1,567,761 Reinsurance recoverable 3,565,425 3,841,001 Receivables, net 8,831,981 8,381,590 Prepaid expenses 268,032 206,562 Deferred income taxes 2,472,103 2,285,883 Property & equipment, net 13,434,939 13,553,114 Deferred policy acquisition costs 2,609,017 2,905,875 Other assets 3,185,985 3,951,946 Intangibles, net 3,467,012 3,548,675 ------------ ----------- $183,850,013 184,359,566 ============ =========== Liabilities & Stockholders' Equity Notes payable to banks $ 10,000,000 13,200,000 Accounts payable 1,594,990 1,873,611 Reserves for losses and loss adjustment expenses 47,720,350 47,960,084 Unearned premiums 11,182,424 12,341,642 Cash collateral held 21,533,798 21,830,566 Accrued liabilities 1,676,777 1,404,821 Income taxes 607,124 239,019 Long-term debt 51,397,806 35,807,419 ------------ ----------- Total liabilities 145,713,269 134,657,162 Stockholders' Equity: Common Stock (No Par Value; 3,500,000 Shares Authorized; 598,357 and 600,257 Shares Issued and Outstanding) 598,357 600,257 Class A Stock (No Par Value; 10,000,000 Shares Authorized; 2,817,792 and 3,488,860 Shares Issued and Outstanding) 2,817,792 3,488,860 Additional paid-in capital -- 8,407,877 Retained earnings 35,100,900 36,894,494 Net unrealized gain (loss) on securities (380,305) 310,916 ------------ ----------- Total stockholders' equity 38,136,744 49,702,404 ------------ ----------- $183,850,013 184,359,566 ============ ===========
See Notes to Consolidated Financial Statements. 3 4 ACMAT CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings Three Months Ended March 31, 1997 and 1996
1997 1996 ---- ---- Earned premiums $4,477,238 4,644,032 Contract revenues 1,773,134 1,986,682 Investment income, net 1,797,770 1,649,027 Net realized capital gains (losses) 35,556 (7,788) Other income 180,111 187,020 ---------- ---------- 8,263,809 8,458,973 ---------- ---------- Cost of contract revenues 1,660,662 1,906,875 Losses and loss adjustment expenses 1,343,171 1,393,210 Amortization of policy acquisition costs 863,054 674,256 Selling, general and administrative expenses 1,461,013 1,319,921 Interest expense 1,320,284 1,232,383 ---------- ---------- 6,648,184 6,526,645 ---------- ---------- Earnings before income taxes and minority interest 1,615,625 1,932,328 Income taxes Federal 446,399 447,460 State 20,000 35,000 ---------- ---------- 466,399 482,460 ---------- ---------- Earnings before minority interest 1,149,226 1,449,868 Minority interest -- (309,754) ---------- ---------- Net earnings $1,149,226 $1,140,114 ========== ========== Net earnings per share and share equivalent .30 .34 Net earnings per share - assuming full dilution .27 .28 Weighted average shares outstanding 3,875,529 3,400,691
See Notes to Consolidated Financial Statements. 4 5 ACMAT CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity
Class A Additional Common stock stock par paid-in Retained par value value capital earnings --------- ----- ------- -------- Balance as of December 31, 1995 $ 642,464 $ 2,665,836 $ 1,921,100 $31,601,383 Acquisition and Retirement of 8,124 Shares of Common Stock (8,124) -- (63,925) (63,000) Acquisition and Retirement of 483,250 Shares of Class A Stock -- (483,250) (2,307,166) (3,489,772) Issuance of 49,999 Shares of Class A Stock -- 49,999 449,991 -- Net Unrealized Losses on Debt and Equity Securities -- -- -- -- Net Earnings -- -- -- 1,140,114 ---------- ----------- ------------ ----------- Balance as of March 31, 1996 $ 634,340 $ 2,232,585 $ -- $29,188,725 ========== =========== ============ =========== Balance as of December 31, 1996 $ 600,257 $ 3,488,860 $ 8,407,877 $36,894,494 Acquisition and Retirement of Shares of Common Stock (1,900) -- (37,396) -- Acquisition and Retirement of Shares of Class A Stock -- (1,129,568) (12,462,981) (2,942,820) Issuance of 450,000 Shares of Class A Stock -- 450,000 4,050,000 -- Issuance of 8,500 Shares of Class A Stock pursuant to stock options -- 8,500 42,500 -- Net Unrealized Appreciation of Debt and Equity Securities -- -- -- -- Net Earnings -- -- -- 1,149,226 ---------- ----------- ------------ ----------- Balance as of March 31, 1997 $ 598,357 2,817,792 -- 35,100,900 ========== =========== ============ ===========
Net unrealized Total gains(losses) stockholders' on securities equity ------------- ------ Balance as of December 31, 1995 $ 756,476 $37,587,259 Acquisition and Retirement of 8,124 Shares of Common Stock -- (135,049) Acquisition and Retirement of 483,250 Shares of Class A Stock -- (6,280,188) Issuance of 49,999 Shares of Class A Stock -- 499,990 Net Unrealized Losses on Debt and Equity Securities (126,759) (126,759) Net Earnings -- 1,140,114 ------------ ----------- Balance as of March 31, 1996 $ 629,717 $32,685,367 ============ =========== Balance as of December 31, 1996 $ 310,916 $49,702,404 Acquisition and Retirement of Shares of Common Stock -- (39,296) Acquisition and Retirement of Shares of Class A Stock (16,535,369) Issuance of 450,000 Shares of Class A Stock -- 4,500,000 Issuance of 8,500 Shares of Class A Stock pursuant to stock options -- 51,000 Net Unrealized Appreciation of Debt and Equity Securities (691,221) (691,221) Net Earnings -- 1,149,226 ------------ ----------- Balance as of March 31, 1997 (380,305) 38,136,744 ============ ===========
See Notes to Consolidated Financial Statements. 5 6 ACMAT CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Three Months Ended March 31, 1997 and 1996
1997 1996 ---- ---- Cash flows from operating activities: Net earnings $ 1,149,226 1,140,114 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 388,177 504,163 Minority interests -- 309,754 Net realized capital losses (gains) (35,556) 7,788 Changes in: Accrued interest receivable (495,408) 15,430 Reinsurance recoverable 275,576 (70,800) Receivables, net (450,391) (1,357,315) Deferred policy acquisition costs 296,858 (163,972) Prepaid expenses and other assets 686,284 107,613 Accounts payable and accrued liabilities (6,665) (5,809) Cash collateral held (296,768) (713,161) Reserves for losses and loss adjustment expenses (239,734) 693,110 Income taxes, net 329,178 448,930 Unearned premiums (1,159,218) 571,173 ------------ ----------- Net cash provided by operating activities 441,559 1,487,018 ------------ ----------- Cash flows from investing activities: Proceeds from investments sold or matured: Fixed maturities-sold 6,233,293 1,305,893 Fixed maturities-matured 6,800,000 10,636,500 Short-term investments 80,604,928 21,375,007 Purchases of: Fixed maturities (51,301,008) (14,194,921) Equity securities -- (5,262) Limited Partnership Investment adjustment (61,668) 11,360 Short-term investments (42,755,938) (24,074,391) Capital expenditures (14,399) (41,675) ------------ ----------- Net cash used for investing activities (494,792) (4,987,489) ------------ ----------- Cash flows from financing activities: Borrowings under lines of credit 2,000,000 8,700,000 Repayments under lines of credit (5,200,000) -- Borrowings on long-term debt 8,500,000 -- Repayments on long-term debt (409,611) (487,396) Payments for acquisition & retirement of stock (4,523,665) (6,415,237) ------------ ----------- Net cash provided by financing activities 366,724 1,797,367 ------------ ----------- Net increase (decrease) in cash and cash equivalents 313,491 (1,703,104) Cash and cash equivalents at beginning of period 2,187,227 5,120,375 ------------ ----------- Cash and cash equivalents at end of period $ 2,500,718 3,417,271 ============ ===========
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, 1996. (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 3,875,529 and 3,400,691 for 1997 and 1996, 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 1997 and 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. (3) Supplemental Cash Flow Information Income taxes paid during the three months ended March 31, 1997 and 1996 was $137,221 and $33,530, respectively, and interest paid for the three months ended March 31, 1997 and 1996 was $568,712 and $680,501, respectively. On February 5, 1997 and March 29, 1996, the Company issued 450,000 and 49,999 shares of Class A Stock, respectively, 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) Stock Transaction On February 5, 1997, ACMAT Corporation purchased 1,099,996 shares of its own Class A Stock from AIG Life Insurance Company (366,663 shares) and American International Life Assurance Company of New York, (733,333). The shares were purchased at an average price of $14.70 per share for a total purchase price of $16,174,942. The purchase price of $16,174,942 consisted of $4,174,942 in cash and promissory notes totaling $12,000,000. The promissory notes are with AIG Life Insurance Company and American International Life Assurance Company of New York and are payable over eight years with interest at prime rate (8-1/4%). The interest rate is equal to the prime rate, however, it shall not exceed 9-1/4% and it shall not be less than 7-1/4%. The purchase of stock with the $12,000,000 promissory notes is a non-cash transaction that is not reflected in the Consolidated Statement of Cash Flows. The 1,099,996 shares of Class A Stock were acquired throughout the past two years by AIG Life Insurance Company and American International Life Assurance Company of New York pursuant to the conversion options of the Convertible Senior Notes. 7 8 (5) Application of New Accounting Standards The Financial Accounting Standards Board has recently issued SFAS No. 128, "Earnings per Share." This statement simplifies the computation of earnings per share (EPS) by replacing the presentation of primary EPS with basic EPS. Under the new statement, dual presentation of basic and diluted EPS is required on the face of the income statement for entities with complex capital structures. A reconciliation of the numerator and denominator used in the basic EPS computation to the diluted EPS computation's numerator and denominator is also required. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The Company believes that the effect of the adoption of SFAS No. 128 will not be material to its disclosure of earnings per share. 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 $1,149,226 for the three months ended March 31, 1997 compared to $1,140,114 for the same period a year ago. The increase in net earnings for the quarter ended March 31, 1997 reflects the full consolidation of ACMAT's insurance company subsidiary offset in part by a decrease in earned premiums and contract revenues. Earned Premiums Earned premiums for the three months ended March 31, 1997 decreased to $4,477,238 compared to $4,644,032 for the same period in 1996. The decrease in earned premiums is a result of some insurance policies issued with policy duration's in excess of twelve months and as a result of declining net written premiums. Net written premiums were $3,741,360 for the three months ended March 31, 1997 compared to $5,165,081 for the three months ended March 31, 1996. 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 and due to competition. Contract Revenues Contract revenues were $1,773,134 for the three-month period ended March 31, 1997 compared to $1,986,682 for the same period in 1996. 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. The Company's construction backlog was approximately $7,000,000 at March 31, 1997 compared to $3,400,000 a year ago. Investment Income, Net Net investment income increased to $1,797,770 for the three-month period ended March 31, 1997 compared to $1,649,027 for the same period in 1996, representing effective yields of 4.99% and 4.75%, respectively. The increase in investment income in 1997 over 1996 was due substantially to higher yields on the portfolio as the result of higher interest rates obtained on reinvested assets. Invested assets, including cash, were $143,952,350 and $144,117,159 at March 31, 1997 and December 31, 1996, respectively. The decrease in invested assets is attributable to the net cash flow used to repay debt and repurchase stock offset by net cash flow generated from written premiums and the reinvestment of investment income. Net Realized Capital Losses Realized capital gains from the sale of investments in the three-month period ended March 31, 1997 were $35,556 compared to realized capital losses of $7,788 for the same period in 1996. Costs of Contract Revenues Costs of contract revenues decreased to $1,660,662 for the three-month period ended March 31, 1997 compared to $1,906,875 for the same period in 1996. 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). Losses and Loss Adjustment Expenses Losses and loss adjustment expenses were $1,343,171 for the three-month period ended March 31, 1997 compared to $1,393,210 for the same period in 1996. The decrease in losses and loss adjustment expenses are attributable to the decrease in earned premiums from 1997 to 1996 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. 9 10 Amortization of policy acquisition costs Amortization of policy acquisition costs was $863,054 for the three-month period ended March 31, 1997 as compared to $674,256 for the same period in 1996. The increase 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 $1,461,013 for the three-month period ended March 31, 1997 compared to $1,319,921 for the same period in 1996. The increase in the selling, general and administrative expenses during 1997 is due primarily to a increase in bad debt expense and salary expense. Interest Expense Interest expense increased to $1,320,284 for the three-month period ended March 31, 1997 compared to $1,232,383 for the same period in 1996. The increase in interest expense in 1997 is due primarily to the increase in long-term borrowings offset in part by the repayment of short-term debt. Income Taxes Income tax expense was $466,399 for the three-month period ended March 31, 1997 compared to $482,460 for the same period in 1996, representing effective Federal tax rates of 27.6% and 23.2%, 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, 1997 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") were 30.0% for the three-month periods ended March 31, 1997 and 1996. 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 46.0% and 44.5% for the three-month period ended March 31, 1997 and 1996, respectively. The Company's insurance subsidiaries' combined ratios under GAAP were 76.0% and 74.5% for the three-month period ended March 31, 1997 and 1996, respectively. LIQUIDITY AND CAPITAL RESOURCES: The Company internally generates sufficient funds for its operations and maintains a relatively high degree of liquidity in its investment portfolio. The primary sources of funds to meet the demands of claim settlements and operating expenses are premium collections, investment earnings and maturing investments. As of March 31, 1997, 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 year. 10 11 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 and to repurchase Company stock. 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. 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 subsidiaries to improve its working capital. The Company realized cash flow from operations of $441,559 for the three-month period ended March 31, 1997 compared to $1,487,018 for the same period in 1996. Substantially all of the Company's cash flow was used to repay long-term debt, repurchase stock and purchase investments. 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 1997 amounted to $494,792 compared to net cash used for investing activities of $4,987,489 for the same period in 1996. 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, 1997. The Company maintains a short-term unsecured bank credit line totaling $10.0 million to fund interim cash requirements. There was $10.0 million outstanding under this line of credit as of March 31, 1997. During the three-month period ended March 31, 1997, the Company purchased, in the open market and privately negotiated transactions, 1,900 shares of its Common Stock at an average price of $20.68. The Company also repurchased, in the open market and privately negotiated transactions, 1,121,068 shares of its Class A Stock at an average price of $14.64 per share. The Company's principal source of cash for repayment of long-term debt is from dividends from its two insurance companies. Under applicable insurance regulations, ACMAT's insurance subsidiaries are restricted as to the amount of dividends they may pay to their 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 $7,011,000 in 1997. REGULATORY ENVIRONMENT Risk-based capital requirements are used as early warning tools by the National Association of Insurance Commissioners and the states to identify companies that require further regulatory action. The ratio for each of the Company's insurance subsidiaries as of March 31, 1997 was significantly above the level which might require regulatory action. 11 12 Part II - Other Information Item 6 - Exhibits and Reports on Form 8-K a. Exhibits -27. Financial Data Schedule b. Report on Form 8-K -Report on Form 8-K dated February 13, 1997 On February 5, 1997, ACMAT Corporation purchased 1,099,996 shares of its own Class A Stock from AIG Life Insurance Company (366,663 shares) and American International Life Assurance Company of New York (733,333). The shares were purchased at an average price of $14.70 per share for a total purchase price of $16,174,942. 12 13 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, 1997 /s/ Henry W. Nozko, Sr. ----------------------- Henry W. Nozko, Sr., President and Chairman Date: May 13, 1997 /s/ Henry W. Nozko, Jr. ----------------------- Henry W. Nozko, Jr., Executive Vice President Chief Operating Officer, and Treasurer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 MAR-31-1997 2,500,718 141,451,632 9,154,387 (322,406) 0 158,680,957 17,575,332 4,140,393 183,850,013 94,315,463 51,397,806 0 0 3,416,149 34,720,595 183,850,013 6,250,372 8,263,809 3,866,887 3,866,887 1,461,013 0 1,320,284 1,615,625 466,399 1,149,226 0 0 0 1,149,226 .30 .27
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