-----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, NWAhZUYgx9IfzGZ5YokG6nApDDExbPupLVmMKrHLwxGfffbDSOsnN1ntglyxUqpQ sV1oB6HhNxrL0GyTsFE8Qg== 0000950144-96-002534.txt : 19960517 0000950144-96-002534.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950144-96-002534 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCM CORP CENTRAL INDEX KEY: 0000275710 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [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: 96566439 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 3-31-96 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, 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: 0-8678 ------ 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, 1996, 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, 1996 and December 31, 1995 Consolidated Statements of Income -- Three Months Ended March 31, 1996 and 1995 Consolidated Statements of Cash Flows -- Three Months Ended March 31, 1996 and 1995 Notes to Consolidated Financial Statements -- March 31, 1996 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 1996 1995 ------------ ------------ Invested Assets: Securities available-for-sale, at fair value: Fixed maturities (amortized cost: 1996 - $28,938; 1995 - $31,477) $ 28,843 $ 31,942 Fixed maturities held-to-maturity, at amortized cost (fair value: 1996 - $14,291; 1995 - $16,429) 14,196 16,230 Short-term investments 18,936 14,848 ---------- --------- 61,975 63,020 Cash 1,819 1,637 Accrued investment income 1,053 840 Premiums receivable 9,744 9,935 Paid losses and settlement expenses 4,282 3,461 Reserves for losses and settlement expenses 34,339 36,155 Unearned premiums 4,395 4,943 Deferred policy acquisition costs 3,534 3,343 Equipment, at cost less accumulated depreciation (1996 - $1,499; 1995 - $1,437) 1,032 1,105 Other assets 1,927 2,129 ---------- ---------- TOTAL ASSETS $ 124,100 $ 126,568 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and settlement expenses $ 62,381 $ 66,152 Unearned premiums 17,083 17,234 Other policyholder funds 6,944 7,247 Amounts payable to reinsurers 2,111 2,202 Accrued expenses 12,230 10,493 ---------- ---------- TOTAL LIABILITIES 100,749 103,328 Shareholders' equity: Common Stock, par value $1 per share - authorized 1996 and 1995 - 10,000,000 shares; issued and outstanding: 1996 and 1995 - 4,675,038 shares 4,675 4,675 Additional paid-in capital 1,477 1,477 Unrealized (loss)/gain on securities available-for-sale (95) 465 Retained Earnings 17,294 16,623 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 23,351 23,240 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 124,100 $ 126,568 ========== ==========
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, --------------------- 1996 1995 --------------------- REVENUES Premiums earned $ 18,404 $ 16,636 Premiums ceded (5,646) (6,046) -------- -------- Net premiums earned 12,758 10,590 Investment income, less investment expenses: $117 and $125 for the three months ended March 31, 1996 and 1995 890 896 Other income 61 35 -------- -------- TOTAL REVENUES 13,709 11,521 LOSSES AND EXPENSES Losses and settlement expenses 10,326 10,387 Losses and settlement expenses ceded (2,052) (3,447) -------- -------- Net losses and settlement expenses 8,274 6,940 Underwriting, acquisition and administrative expenses 4,764 3,987 -------- -------- TOTAL LOSSES AND EXPENSES 13,038 10,927 -------- -------- NET INCOME $ 671 $ 594 ======== ======== PER SHARE DATA: Income per share $ 0.14 $ 0.13 ======== ======== 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, ----------------------- 1996 1995 ----------------------- OPERATING ACTIVITIES Net income $ 671 $ 594 Adjustments to reconcile net income to net cash used by operating activities: Policy liabilities (4,225) (6,109) Premiums receivable 191 (429) Accrued investment income (213) (716) Net receivable from reinsurers 1,452 (124) Amortization of deferred policy acquisition costs 2,362 1,705 Policy acquisition costs deferred (2,553) (1,401) Other 2,072 5,878 -------- -------- CASH USED BY OPERATING ACTIVITIES (243) (602) INVESTING ACTIVITIES Securities available-for-sale: Maturities 4,592 165 Securities held-to-maturity: Maturities 0 110 Purchases of property and equipment (79) (3) (Increase)/decrease in short-term investments (4,088) 3,457 -------- ------- CASH PROVIDED BY INVESTING ACTIVITIES 425 3,729 -------- ------- INCREASE IN CASH $ 182 $ 3,127 ======= =======
See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS McM Corporation and Subsidiaries March 31, 1996 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, 1995. 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 MANAGEMENT'S DISCUSSION AND ANALYSIS McM Corporation and Subsidiaries Review of Operations Unaudited results for the three months ended March 31, 1996, show net income of $671,000 or $.14 per share, up 13% from net income of $594,000 or $.13 per share for the first three months of 1995. Consolidated gross revenues for the first three months of 1996 were $13,826,000 compared to $11,646,000 for the same period in 1995. Shareholders' equity at March 31, 1996, totalled $23,351,000 or $4.99 per share compared to $23,240,000 or $4.97 per share at December 31, 1995. Consolidated assets totalled $124,100,000 at March 31, 1996, compared to $126,568,000 at December 31, 1995. Total net premium revenues were $12,758,000 for the first quarter of 1996 compared to $10,590,000 for the first quarter of 1995, an increase of approximately 20.5%. This increase in net premiums reflects growth in commercial automobile and private passenger automobile premium writings and is in line with management's expectations of controlled growth in these lines of business. The overall claims loss and settlement expense ratio for the first three months of 1996 decreased to 64.9% compared to 65.5% for the same period in 1995. This decline in the overall loss ratio is attributed to improvement in ongoing lines of business. Overall, development of prior years' loss reserves was not significant during the first quarter of 1996. Losses incurred relating to prior accident years totalled approximately $340,000, most of which related to the Company's discontinued workers compensation programs. Management's continuing focus on expense control, increased productivity, sustained growth in premium writings and more efficient operations continues to be reflected in the ratio of underwriting, acquisition, and administrative expenses to net earned premiums. This ratio declined one-half of a percentage point to 37.3% for the first quarter of 1996 compared to 37.8% for the same period in 1995. 8 Liquidity and Capital Resources Consolidated gross investment income totalled $1,007,000 for the first three months of 1996, compared to $1,021,000 for the same period in 1995. This decline in investment income is primarily the result of lower investment yields on short-term investments during the first quarter of 1996 and a small reduction in invested assets. Invested assets totalled $62.0 million at March 31, 1996, compared to $63.0 million at December 31, 1995, and $63.7 million at March 31, 1995. As previously disclosed, the decline in invested asset balances experienced by the Company during 1993 and 1994 slowed significantly in 1995. The decline resulted from planned reductions in net written premiums and the settlement of claims related to discontinued property and casualty insurance programs. The decrease in invested balances for the first quarter of 1996 is attributed to the change in the unrealized gain/loss on fixed maturity securities available-for-sale and continued settlement of claims related to discontinued property and casualty insurance programs. The Company experienced unrealized losses of $560,000 during the first quarter of 1996 on securities available-for-sale and overall loss reserves decreased by $3.8 million during this period. Cash used by operating activities was $243,000 for the first three months of 1996 as compared to $602,000 during the same period last year. The cash used by operating activities reflects an overall decrease in liabilities of $2.6 million for the first quarter of 1996. Cash and short-term investments held by the Company at March 31, 1996, were approximately $20.8 million as compared to $16.5 million at December 31, 1995. The Board of Directors did not declare a dividend to shareholders during the first three months of 1996. 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. 9 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. Items 2 - 6. Nothing to report. 10 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) /s/ George E. King ---------------------------- George E. King President and Chief Executive Officer May 13, 1996 /s/ Kevin J. Hamm ---------------------------- Kevin J. Hamm Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF McM CORPORATION FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 28,843 14,196 14,291 0 0 0 61,975 1,819 48,365 4,395 124,100 62,381 17,083 0 6,944 0 0 0 4,675 18,676 124,100 12,758 890 0 61 8,274 0 4,764 671 0 671 0 0 0 671 0.14 0.14 29,997 7,895 379 3,008 7,221 28,042 (131)
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