-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VBGd+EcSmPAAB4WeHUQsX9xFtnoQOqTs4NsQj34CWtWt4htGdXU/ZGlxMkRRVWvQ 05WinrNa0Vv85kVIgi7IjQ== 0000950144-95-001394.txt : 19950530 0000950144-95-001394.hdr.sgml : 19950530 ACCESSION NUMBER: 0000950144-95-001394 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCM CORP CENTRAL INDEX KEY: 0000275710 STANDARD INDUSTRIAL CLASSIFICATION: 6311 IRS NUMBER: 561171691 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08678 FILM NUMBER: 95539544 BUSINESS ADDRESS: STREET 1: 702 OBERLIN RD STREET 2: BOX 12317 CITY: RALEIGH STATE: NC ZIP: 27605 BUSINESS PHONE: 9198331600 MAIL ADDRESS: STREET 1: 702 OBERLIN ROAD STREET 2: P O BOX 12317 CITY: RALEIGH STATE: NC ZIP: 27605 10-Q 1 MCM CORPORATION 10-Q 3-31-95 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 ------------------ 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: 0-8678 ----------------- McM Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) North Carolina 56-1171691 - - - - - - ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation of organization) Box 12317, 702 Oberlin Road, Raleigh, North Carolina 27605 - - - - - - ------------------------------------------------------ --------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (919) 833-1600 --------------- 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At March 31, 1995, 4,675,038 shares of Common Stock of the registrant were outstanding. 2 INDEX McM CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION (Unaudited) Item 1. Financial Statements Consolidated Balance Sheets -- March 31, 1995 and December 31, 1994 Consolidated Statements of Income -- Three Months Ended March 31, 1995 and 1994 Consolidated Statements of Cash Flows -- Three Months Ended March 31, 1995 and 1994 Notes to Consolidated Financial Statements -- March 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Default Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 3 CONSOLIDATED BALANCE SHEETS (UNAUDITED) McM CORPORATION AND SUBSIDIARIES (Thousands of dollars)
March 31, December 31, ASSETS 1995 1994 --------- ------------ Invested Assets: Securities available-for-sale, at fair value: Fixed maturities (cost: 1995 - $10,135; 1994 - $10,291) $ 10,256 $ 10,133 Fixed maturities held-to-maturity, at amortized cost (fair value: 1995 - $38,269; 1994 - $37,370) 39,189 39,352 Short-term investments 14,221 17,678 -------- -------- 63,666 67,163 Cash 4,624 1,497 Accrued investment income 1,732 1,016 Premiums receivable 9,221 8,792 Reinsurance balances recoverable on: Paid losses and settlement expenses 6,128 6,134 Reserves for losses and settlement expenses 39,231 42,471 Unearned premiums 4,579 3,482 Deferred policy acquisition costs 2,931 3,235 Equipment, at cost less accumulated depreciation (1995 - $1,233; 1994 - $1,166) 1,124 1,187 Other assets 2,192 2,688 -------- -------- TOTAL ASSETS $135,428 $137,665 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Reserves for losses and settlement expenses $75,038 $80,886 Unearned premiums 14,397 14,811 Other policyholder funds 7,550 7,397 Amounts payable to reinsurers 832 3,105 Accrued expenses 16,331 11,059 -------- -------- TOTAL LIABILITIES 114,148 117,258 Shareholders' equity: Common Stock, par value $1 per share-authorized 5,000,000 shares, issued and outstanding: 1995 and 1994 - 4,675,038 4,675 4,675 Additional paid-in capital 1,477 1,477 Unrealized appreciation (depreciation) on securities available-for-sale 121 (158) Retained earnings 15,007 14,413 -------- -------- TOTAL SHAREHOLDERS' EQUITY 21,280 20,407 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $135,428 $137,665 ======== ========
See notes to consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) McM CORPORATION AND SUBSIDIARIES (Thousands of dollars, except per share data)
Three Months Ended March 31, ------------------- 1995 1994 ------------------- REVENUES Premiums earned $16,636 $16,937 Premiums ceded (6,046) (6,602) ------------------- Net premiums earned 10,590 10,335 Investment income, less investment expenses: $125 and $92 for the three months ended March 31, 1995 and 1994 896 914 Other income 35 206 ------------------- TOTAL REVENUES 11,521 11,455 LOSSES AND EXPENSES Losses and settlement expenses 10,387 12,545 Losses and settlement expenses ceded (3,447) (5,708) ------------------- Net losses and settlement expenses 6,940 6,837 Underwriting, acquisition and administrative expenses 3,987 4,204 ------------------- TOTAL LOSSES AND EXPENSES 10,927 11,041 ------------------- NET INCOME $ 594 $ 414 =================== PER SHARE DATA: Income per share $ 0.13 $ 0.09 =================== Dividends per share declared by McM $ 0.00 $ 0.00 ===================
See notes to consolidated financial statements 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) MCM CORPORATION AND SUBSIDIARIES (Thousands of dollars)
Three Months Ended March 31, ----------------------- 1995 1994 ------- ------- OPERATING ACTIVITIES Net income $ 594 $ 414 Adjustments to reconcile net income to net cash used by operating activities: Policy liabilities (6,109) (7,212) Premiums receivable (429) 978 Accrued investment income (716) (364) Net receivable from reinsurers (124) (2,558) Amortization of deferred policy acquisition costs 1,705 1,944 Policy acquisition costs deferred (1,401) (1,598) Other 5,878 59 ------- ------- CASH USED BY OPERATING ACTIVITIES (602) (8,337) INVESTING ACTIVITIES Securities available-for-sale: Purchases 0 (8,657) Maturities 165 1,524 Securities held-to-maturity: Purchases 0 (2,010) Maturities 110 3,000 Purchases of property and equipment (3) (23) Decrease in short-term investments 3,457 12,980 ------- ------- CASH PROVIDED BY INVESTING ACTIVITIES 3,729 6,814 ------- ------- INCREASE/(DECREASE) IN CASH $ 3,127 ($1,523) ======= =======
See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS McM Corporation and Subsidiaries March 31, 1995 Note A -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. The statements include all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results. For further information regarding the significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in McM's annual report on Form 10-K for the year ended December 31, 1994. NOTE B -- INCOME TAXES The income tax provision is based upon the estimated effective tax rate for the year. This rate varies from the normal federal income tax rate of thirty-four percent (34%) because of the utilization of tax return net operating loss carryforwards. NOTE C -- STOCK OPTION PLAN AND EARNINGS PER SHARE Earnings per common share are based on 4,675,038 shares of Common Stock issued and outstanding and exclude the effect of common stock equivalents. Stock options had no effect on the computation of earnings per share. NOTE D -- CONTINGENCIES Litigation: In the normal course of operations, certain subsidiaries of the Company have been named as parties to various pending and threatened litigation. While the outcome of some of these matters cannot be estimated with certainty, it is the opinion of management, after consultation with legal counsel, that the resolution of this litigation will not have a material adverse effect on the Company's consolidated financial position. 7 Proposition 103: On November 8, 1988, California voters passed Proposition 103. Proposition 103 is an initiative that calls for property and casualty insurers in California, including McM's subsidiary Wilshire Insurance Company, to roll back their rates by 20% for certain California policies issued for the twelve month period beginning November 8, 1988. Court decisions, including that of the United States Supreme Court, have confirmed the enforceability of Proposition 103, but at the same time have recognized the need for companies to earn a fair and reasonable return, thereby prohibiting confiscatory rollbacks. Although Wilshire has not received a rollback order at this time, California's current rollback worksheet calculation, before adjustments or corrections peculiar to Wilshire, produces a result of $6.1 million plus interest. Wilshire firmly believes that this worksheet calculation is based on incomplete and erroneous data. Furthermore, since the total earnings of Wilshire for the period in question were $4.5 million, management believes that the unadjusted calculations are clearly confiscatory and would prevent Wilshire from earning a fair and reasonable rate of return. Recently elected California Commissioner of Insurance, Charles Quackenbush, has announced his commitment to work together with companies to resolve all Proposition 103 rollback issues within the first six months of 1995. The Company is in direct contact with the California Department of Insurance, but, because of the preliminary stage of these discussions, the ultimate impact, if any, of Proposition 103 cannot be determined at this time. Inasmuch as management expects no material rollback liability for Wilshire, no amounts have been accrued in the financial statements of the Company relating to Proposition 103. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS McM Corporation and Subsidiaries Review of Operations Unaudited results for the three months ended March 31, 1995, show net income of $594,000 or $.13 per share compared to net income of $414,000 or $.09 per share for the same period in 1994. Consolidated gross revenues for the first quarter of 1995 were $11,646,000 compared to $11,547,000 for the first quarter of 1994. Shareholders' equity at March 31, 1995, totalled $21,280,000 or $4.55 per share compared to $20,407,000 or $4.37 per share at December 31, 1994. Consolidated assets totalled $135,428,000 at March 31, 1995, compared to $137,665,000 at December 31, 1994. Total net premium revenues were $10,590,000 for the first of 1995 compared to $10,335,000 for the same period in 1994, an increase of 2.5%. This increase in premium reflects the Company's plan of moderate growth in premium writings which began in the fourth quarter of 1994. The overall loss and settlement expense ratio for the first quarter of 1995 was relatively unchanged, falling approximately one-half of a percentage point from the same period in 1994. The loss overall loss ratios were 65.5% and 66.1% for the first quarters of 1995 and 1994, respectively. Favorable loss development on reserves of prior accident years, related primarily to the Company's assumed and discontinued business, contributed to this improvement. Overall underwriting results for the first quarter of 1995 continue to reflect the favorable trend established in 1994. Underwriting, acquisition and administrative expenses for the first three months of 1995 were approximately $200,000 less than for the same period last year. This decrease reflects management's continuing effort to enhance productivity and efficiency in its operations. Liquidity and Capital Resources Consolidated gross investment income totalled $1,021,000 for the first three months of 1995 as compared to $1,006,000 for the same period last year. The declining trend in investment earnings experienced throughout 1994 resulted from a reduction in invested assets and overall investment yields. The improvement in investment earnings for the for quarter of 1995 is attributed primarily to overall improvement in investment yields. Invested assets totalled $63,666,000 at March 31, 1995, compared to $67,163,000 at December 31, 1994. Claim liabilities decreased $5.8 million in the first quarter of 1995 and total liabilities decreased $3.1 million in the same period. 9 Consolidated cash used by operating activities was $603,000 for the first three months of 1995 as compared to $8,337,000 during the same period last year. The cash used by operating activities reflects an overall decrease in liabilities of $3.1 million for the first quarter of 1995. Cash and short-term investments held by the Company at March 31, 1995, were approximately $18,845,000 as compared to $19,175,000 at December 31, 1994. The Board of Directors did not declare a dividend to shareholders for the first quarter of 1995. The Board will carefully consider the Company's earnings, capital requirements, financial condition, and other relevant factors when determining whether to declare dividends in the future. 10 McM CORPORATION AND SUBSIDIARIES PART II Item 1. Legal Proceedings. 1) Reference is hereby made to the Note D of the Consolidated Financial Statements provided in Part I, Item 1 of this Form 10-Q. Exhibit 27 - Financial Data Schedule (for SEC use only) Items 2 - 6. Nothing to report. 11 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. McM Corporation ------------------------- (Registrant) George E. King ------------------------- George E. King President and Chief Executive Officer May 12, 1995 Kevin J. Hamm ------------------------- Kevin J. Hamm Vice President and Chief Financial Officer EX-27 2 FDS
7 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 10,256 39,189 38,269 0 0 0 63,666 4,624 49,938 2,931 135,428 75,038 14,397 0 7,550 0 4,675 0 0 16,605 135,428 10,590 896 0 35 6,940 0 3,987 594 0 594 0 0 0 594 0.13 0.13 38,415 5,465 (734) 2,224 7,324 35,807 (741)
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