-----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, OR/jckuV+QR4OeDGI6LwT7RSHw4+US5XblisttMQTgCsBH+U1/EUGPd5ejmEmF08 F+elJ/eX92h3bK+wbJPJBQ== 0000950144-96-008124.txt : 19961118 0000950144-96-008124.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950144-96-008124 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96663109 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 9-30-96 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 September 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 September 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 -- September 30, 1996 and December 31, 1995 Consolidated Statements of Income -- Nine and Three Months Ended September 30, 1996 and 1995 Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 1996 and 1995 Notes to Consolidated Financial Statements -- September 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)
September 30 December 31 ASSETS 1996 1995 ------------ ----------- Invested Assets: Securities available-for-sale, at fair value: Fixed maturities (amortized cost: 1996 - $27,956; 1995 - $31,477) $ 27,719 $ 31,942 Fixed maturities held-to-maturity, at amortized cost (fair value: 1996 - $13,908; 1995 - $16,429) 13,980 16,230 Short-term investments 18,072 14,848 -------- -------- 59,771 63,020 Cash 1,148 1,637 Accrued investment income 659 840 Premiums receivable 10,583 9,935 Reinsurance balances recoverable on: Paid losses and settlement expenses 2,686 3,461 Reserves for losses and settlement expenses 33,510 36,155 Unearned premiums 4,080 4,943 Deferred policy acquisition costs 4,063 3,343 Equipment, at cost less accumulated depreciation (1996 - $1,628; 1995 - $1,437) 1,069 1,105 Other assets 2,106 2,129 -------- -------- TOTAL ASSETS $119,675 $126,568 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Reserves for losses and settlement expenses $ 57,492 $ 66,152 Unearned premiums 18,266 17,234 Other policyholder funds 6,774 7,247 Amounts payable to reinsurers 4,522 5,008 Accrued expenses 8,579 7,687 -------- -------- TOTAL LIABILITIES 95,633 103,328 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 (237) 465 Retained Earnings 18,127 16,623 -------- -------- TOTAL SHAREHOLDERS' EQUITY 24,042 23,240 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $119,675 $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)
Nine Months Ended Three Months Ended September 30 September 30 --------------------- --------------------- 1996 1995 1996 1995 --------------------- --------------------- REVENUES Premiums earned $ 54,961 $ 51,331 $ 18,098 $ 17,904 Premiums ceded (16,458) (18,048) (5,215) (5,989) -------- -------- -------- -------- Net premiums earned 38,503 33,283 12,883 11,915 Investment income, less investment expenses: $344 and $361 for the nine months ended September 30, 1996 and 1995, and $108 and $121 for the three months ended September 30, 1996 and 1995 2,371 2,644 764 857 Other income 248 133 81 54 -------- -------- -------- -------- TOTAL REVENUES 41,122 36,060 13,728 12,826 LOSSES AND EXPENSES Losses and settlement expenses 37,097 34,534 11,468 14,607 Losses and settlement expenses ceded (11,733) (12,562) (2,723) (6,758) -------- -------- -------- -------- Net losses and settlement expenses 25,364 21,972 8,745 7,849 Underwriting, acquisition and administrative expenses 14,066 12,102 4,560 4,125 -------- -------- -------- -------- TOTAL LOSSES AND EXPENSES 39,430 34,074 13,305 11,974 -------- -------- -------- -------- NET INCOME $ 1,692 $ 1,986 $ 423 $ 852 ======== ======== ======== ======== PER SHARE DATA: Income per share $ 0.36 $ 0.42 $ 0.09 $ 0.18 ======== ======== ======== ======== Dividends per share declared by McM $ 0.04 $ 0.00 $ 0.02 $ 0.00 ======== ======== ======== ========
See notes to consolidated financial statements 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) MCM CORPORATION AND SUBSIDIARIES (Thousands of dollars)
Nine Months Ended September 30, --------------------- 1996 1995 ---- ---- OPERATING ACTIVITIES Net income $ 1,692 $ 1,986 Adjustments to reconcile net income to net cash used by operating activities: Policy liabilities (8,101) (9,228) Premiums receivable (648) (3,789) Accrued investment income 181 (117) Net receivable from reinsurers 3,797 (1,054) Amortization of deferred policy acquisition costs 7,292 4,995 Policy acquisition costs deferred (8,012) (5,490) Other 1,379 4,580 -------- ------- CASH USED BY OPERATING ACTIVITIES (2,420) (8,117) INVESTING ACTIVITIES Securities available-for-sale: Purchases (9,881) 0 Maturities 6,965 1,177 Securities held-to-maturity: Purchases (1,961) (2,984) Maturities 10,603 120 Purchases of property and equipment (383) (211) (Increase) decrease in short-term investments (3,224) 9,828 -------- ------- CASH PROVIDED BY INVESTING ACTIVITIES 2,119 7,930 FINANCING ACTIVITIES Cash dividends paid (188) 0 -------- ------- DECREASE IN CASH $ (489) $ (187) ======== =======
See notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS McM Corporation and Subsidiaries September 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 NOTE E -- RECLASSIFICATIONS A reclassification of certain balance sheet accounts was made for the current and prior periods. The reclassification was made for the purpose of enhanced presentation and has no impact on shareholder's equity or net income. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS McM Corporation and Subsidiaries Review of Operations Unaudited results for the nine months ended September 30, 1996, show net income of $1,692,000 or $.36 per share, compared to net income of $1,986,000 or $.42 per share for the first nine months of 1995. Consolidated gross revenues for the first nine months of 1996 increased 14% to $41,466,000 compared to $36,421,000 for the same period in 1995. Shareholders' equity at September 30, 1996, totalled $24,042,000 or $5.14 per share compared to $23,240,000 or $4.97 per share at December 31, 1995. Consolidated assets totalled $119,675,000 at September 30, 1996, compared to $126,568,000 at December 31, 1995. Total net premium revenues were $38,503,000 for the first nine months of 1996 compared to $33,283,000 for the same period in 1995, an increase of approximately 16%. This increase in net premiums is primarily the result of growth in private passenger automobile premium writings and a reduction in the Company's quota share reinsurance program. Underwriting results for the first nine months of 1996 are consistent with those for the same period of 1995. The overall claims loss and settlement expense ratio for the current period was 65.9% compared to 66.0% for the first nine months of 1995. The ratio of underwriting, acquisition and administrative expenses to net earned premium was 36.5% for the nine months ended September 30, 1996, compared to 36.3% for the same period in 1995. Underwriting results for the Company's ongoing lines of business continued to show improvement in the first nine months of 1996. The claims loss and settlement expense ratio for these lines showed a decrease of 2.5 percentage points to 64.4% at September 30, 1996, from 66.9% at September 30, 1995. There was no significant loss development on reserves of prior accident years related to ongoing lines of business during the current period. The Company did experience unfavorable loss development totalling $575,000 for the first nine months of 1996 on reserves of prior accident years related to workers compensation and other discontinued insurance coverages compared to favorable development of $618,000 during the same period in 1995. 9 Liquidity and Capital Resources Consolidated gross investment income totalled $2,715,000 for the first nine months of 1996, compared to $3,005,000 for the same period in 1995. This decline in investment income is primarily the result of lower investment yields and a reduction in average invested asset balances during 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 $8.7 million during the first nine months of 1996. In addition, the Company experienced unrealized losses of $702,000 during the first nine months of 1996 on securities available-for-sale, compared to unrealized gains of $517,000 for the first nine months of 1995. Cash used by operating activities totalled $2.4 million for the first nine months of 1996 compared to $8.1 million during the same period in 1995. This improvement is attributed to the overall increase in net premium writings, the Company's main source of cash, experienced in 1995 and 1996. Additionally, planned increases in premium writings during 1995 resulted in an increase in premiums receivable balances at September 30, 1995, whereas 1996 production levels show only a moderate increase. Cash and short-term investments held by the Company at September 30, 1996, were approximately $19.2 million compared to $16.5 million at December 31, 1995. The Board of Directors declared quarterly dividends of $.02 per share on May 23, 1996, and August 29, 1996, for payment on June 17, 1996, and September 27, 1996, respectively. The payments were made to shareholders of record on June 17 and September 9, 1996. 10 McM CORPORATION AND SUBSIDIARIES PART II Item 1. Legal Proceedings. 1) Reference is hereby made to Note D of the Consolidated Financial Statements provided in Part I, Item 1 of this Form 10-Q. Items 2 - 5. Nothing to report. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 27 Financial Data Schedule (for SEC use only). b) Reports on Form 8-K None 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) /s/ GEORGE E. KING ------------------------- George E. King Chief Executive Officer and Chairman Emeritus August 14, 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 NINE MONTHS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 27,719 13,980 13,908 0 0 0 59,771 1,148 40,276 4,063 119,675 57,492 18,266 0 6,774 0 0 0 4,675 19,367 119,675 38,503 2,371 0 248 25,364 0 14,066 1,692 0 1,692 0 0 0 1,692 0.36 0.36 29,997 24,642 722 14,825 16,556 23,982 722
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