-----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, Ijwxfx2CYq3UqqnjZgnA1vjDP6Ccb1UhOsuYiX9dOysK0O65/LnmMkAljvFoBVVG JIOlXQo/La8Jbq/o4fGLIw== 0000950144-96-005199.txt : 19960813 0000950144-96-005199.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950144-96-005199 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCM CORP CENTRAL INDEX KEY: 0000275710 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] 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: 96608798 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 6-30-96 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 June 30, 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 June 30, 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 -- June 30, 1996 and December 31, 1995 Consolidated Statements of Income -- Six and Three Months Ended June 30, 1996 and 1995 Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1996 and 1995 Notes to Consolidated Financial Statements -- June 30, 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)
June 30 December 31 1996 1995 -------- -------- ASSETS Invested Assets: Securities available-for-sale, at fair value: Fixed maturities (amortized cost: 1996 - $21,378; 1995 - $31,477) $ 21,139 $ 31,942 Fixed maturities held-to-maturity, at amortized cost (fair value: 1996 - $13,762; 1995 - $16,429) 13,828 16,230 Short-term investments 23,619 14,848 -------- -------- 58,586 63,020 Cash 541 1,637 Accrued investment income 805 840 Premiums receivable 10,384 9,935 Reinsurance balances recoverable on: Paid losses and settlement expenses 5,268 3,461 Reserves for losses and settlement expenses 35,327 36,155 Unearned premiums 4,021 4,943 Deferred policy acquisition costs 3,738 3,343 Equipment, at cost less accumulated depreciation (1996 - $1,565; 1995 - $1,437) 1,036 1,105 Other assets 1,767 2,129 -------- -------- TOTAL ASSETS $121,473 $126,568 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and settlement expenses $61,373 $66,152 Unearned premiums 17,476 17,234 Other policyholder funds 6,726 7,247 Amounts payable to reinsurers 510 2,202 Accrued expenses 11,676 10,493 -------- -------- TOTAL LIABILITIES 97,761 103,328 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 (239) 465 Retained Earnings 17,799 16,623 -------- -------- TOTAL SHAREHOLDERS' EQUITY 23,712 23,240 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $121,473 $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)
Six Months Ended Three Months Ended June 30 June 30 ---------------------- --------------------- 1996 1995 1996 1995 ---------------------- --------------------- REVENUES Premiums earned $ 36,863 $ 33,427 $18,459 $16,791 Premiums ceded (11,243) (12,059) (5,597) (6,013) ---------------------- --------------------- Net premiums earned 25,620 21,368 12,862 10,778 Investment income, less investment expenses: $236 and $243 for the six months ended June 30, 1996 and 1995, and $119 and $118 for the three months ended June 30, 1996 and 1995 1,607 1,787 717 891 Other income 167 79 106 44 ---------------------- --------------------- TOTAL REVENUES 27,394 23,234 13,685 11,713 LOSSES AND EXPENSES Losses and settlement expenses 25,629 19,927 15,303 9,540 Losses and settlement expenses ceded (9,010) (5,804) (6,958) (2,357) ---------------------- --------------------- Net losses and settlement expenses 16,619 14,123 8,345 7,183 Underwriting, acquisition and administrative expenses 9,506 7,977 4,742 3,990 ---------------------- --------------------- TOTAL LOSSES AND EXPENSES 26,125 22,100 13,087 11,173 ---------------------- --------------------- NET INCOME $ 1,269 $ 1,134 $ 598 $ 540 ====================== ===================== PER SHARE DATA: Income per share $ 0.27 $ 0.24 $ 0.13 $ 0.12 ====================== ===================== Dividends per share declared by McM $ 0.02 $ 0.00 $ 0.02 $ 0.00 ====================== =====================
5 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) MCM CORPORATION AND SUBSIDIARIES (Thousands of dollars)
Six Months Ended June 30 ------------------ 1996 1995 ------- ------- OPERATING ACTIVITIES Net income $1,269 $1,134 Adjustments to reconcile net income to net cash used by operating activities: Policy liabilities (5,058) (9,713) Premiums receivable (449) (1,313) Accrued investment income 35 157 Net receivable from reinsurers (1,749) 1,945 Amortization of deferred policy acquisition costs 4,334 3,355 Policy acquisition costs deferred (4,729) (3,306) Other 1,868 3,631 ------- ------- CASH USED BY OPERATING ACTIVITIES (4,479) (4,110) INVESTING ACTIVITIES Securities available-for-sale: Maturities 4,730 739 Securities held-to-maturity: Purchases 0 (2,984) Maturities 7,755 120 Purchases of property and equipment (238) (91) (Increase) decrease in short-term investments (8,771) 5,482 ------- ------- CASH PROVIDED BY INVESTING ACTIVITIES 3,476 3,266 FINANCING ACTIVITIES Cash dividends paid (93) 0 ------- ------- DECREASE IN CASH ($1,096) ($844) ======= =======
See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS McM Corporation and Subsidiaries June 30, 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 No provision for income taxes has been recognized by the Company 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 six months ended June 30, 1996, show net income of $1,269,000 or $.27 per share, up 12% from net income of $1,134,000 or $.24 per share for the first six months of 1995. Consolidated gross revenues for the first six months of 1996 increased 18% to $27,630,000 compared to $23,477,000 for the same period in 1995. Shareholders' equity at June 30, 1996, totalled $23,712,000 or $5.07 per share compared to $23,240,000 or $4.97 per share at December 31, 1995. Consolidated assets totalled $121,473,000 at June 30, 1996, compared to $126,568,000 at December 31, 1995. Total net premium revenues were $25,620,000 for the first six months of 1996 compared to $21,368,000 for the same period in 1995, an increase of approximately 20%. This increase in net premiums is primarily the result of planned growth in commercial automobile and private passenger automobile premium writings. In addition, net premium revenues increased by approximately $700,000 as a result of a change in the Company's quota share reinsurance program. Overall, premium writings are in line with management's expectations of controlled growth in these lines of business. Continued improvement in underwriting results for the Company's ongoing lines of business is reflected in the decrease of the overall claims loss and settlement expense ratio. This ratio decreased over one percentage point from 66.1% at June 30, 1995, to 64.9% at June 30, 1996. Overall, loss reserves of prior accident years experienced unfavorable development of approximately $311,000 during the first six months of 1996. Most of this development relates to the Company's discontinued workers compensation programs. The ratio of underwriting, acquisition, and administrative expenses to net earned premiums has also shown improvement as management continues its focus on expense control, increased productivity and more efficient operations. This ratio was 37.1% at June 30, 1996, compared to 37.3% at June 30, 1995. 8 Liquidity and Capital Resources Consolidated gross investment income totalled $1,843,000 for the first six months of 1996, compared to $2,030,000 for the same period in 1995. This decline in investment income is primarily the result of lower investment yields on short-term investments during 1996 and a reduction in invested assets from $64.2 million at June 30, 1995, to $58.6 million at June 30, 1996. The decrease in invested balances is primarily attributed to the continued settlement of claims related to discontinued lines of business, and the acceleration of claims settlement relating to ongoing lines of business. Overall, loss reserves decreased by $4.8 million during the first six months of 1996. In addition, the Company experienced unrealized losses of $704,000 during the first six months of 1996 on securities available-for-sale, compared to unrealized gains of $488,000 for the first six months of 1995. Cash used by operating activities totalled $4.5 million for the first six months of 1996 compared to $4.1 million during the same period in 1995. The cash used by operating activities for the period reflects an overall decrease in liabilities of $5.6 million. Cash and short-term investments held by the Company at June 30, 1996, were approximately $24.1 million compared to $16.5 million at December 31, 1995. On May 23, 1996, upon careful consideration of the Company's earnings, capital requirements, financial condition and other relevant factors, the Board of Directors declared a dividend of $.02 per share payable on June 17, 1996, to shareholders of record on June 3, 1996. The Board will continue to analyze such factors when determining whether to declare additional 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 Chief Executive Officer and Chairman Emeritus August 12, 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 SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 21,139 13,828 13,762 0 0 0 58,586 541 44,616 3,738 121,473 61,373 17,476 0 6,726 0 0 0 4,675 19,037 121,473 25,620 1,607 0 167 16,619 0 9,506 1,269 0 1,269 0 0 0 1,269 0.27 0.27 29,997 16,207 413 8,478 12,093 26,045 413
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