-----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, i2jk0htsKG18zUUyXGA5JXvNueLA1x5+9OZreC3FTgPjK2Xp4iJ8bW1nYyWEE8BK 1SSbK6Rs8w9FqVKC4pwAHQ== 0000950144-94-001996.txt : 19941117 0000950144-94-001996.hdr.sgml : 19941117 ACCESSION NUMBER: 0000950144-94-001996 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTY CORP CENTRAL INDEX KEY: 0000059229 STANDARD INDUSTRIAL CLASSIFICATION: 6311 IRS NUMBER: 570507055 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05846 FILM NUMBER: 94559575 BUSINESS ADDRESS: STREET 1: P O BOX 789 STREET 2: WADE HAMPTON BLVD CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032688283 MAIL ADDRESS: STREET 1: P.O. BOX 789 STREET 2: WADE HAMPTON BLVD CITY: GREENVILLE STATE: SC ZIP: 29602 10-Q 1 THE LIBERTY CORPORATION FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) [XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 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 1-5846 THE LIBERTY CORPORATION - - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) South Carolina 57-0507055 ---------------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
Post Office Box 789, Wade Hampton Boulevard, Greenville, S. C. 29602 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (803) 268-8436 --------------------------- NOT APPLICABLE ------------------------------------------------------------------------------ (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 such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of the latest practicable date. Number of Shares Outstanding Title of each class as of September 30, 1994 - - ---------------------------------- ---------------------------- Common Stock 19,815,600
Page 1 of 14 sequentially numbered pages. The Exhibit Index is on Page 12. 2 PART I, ITEM 1 THE LIBERTY CORPORATION AND SUBSIDIARIES CONSOLIDATED AND CONDENSED BALANCE SHEETS (In thousands) (Unaudited)
September 30, December 31, ASSETS 1994 1993 ------------ ----------- Investments: Fixed Maturity Securities: Available for Sale, at market, cost of $920,086 at 9/30/94 $ 863,242 $ --- Held to Maturity, at cost, market of $324,813 at 9/30/94 and $921,169 at 12/31/93 304,882 857,673 Nonredeemable Preferred Stocks, at market, cost of $41,983 at 9/30/94 and $44,359 at 12/31/93 41,277 48,123 Common Stocks, primarily at market, cost of $33,352 at 9/30/94 and $16,156 at 12/31/93 37,628 20,268 Mortgage Loans 212,545 165,784 Investment Properties 135,721 84,530 Loans to Policyholders 95,737 86,942 Other Long-Term Investments 32,741 82,826 Short-Term Investments 2,370 13,355 ----------- ----------- Total Investments 1,726,143 1,359,501 ----------- ----------- Cash 94,914 29,487 Accrued Investment Income 18,156 12,736 Receivables 48,256 46,648 Receivable from Reinsurers 254,478 245,210 Deferred Acquisition Costs 364,989 288,635 Buildings and Equipment 65,783 63,499 Intangibles Related to Television Operations 47,305 48,418 Goodwill Related to Insurance Acquisitions 38,058 27,683 Other Assets 67,511 65,216 ----------- ----------- 999,450 827,532 ----------- ----------- Total Assets $ 2,725,593 $ 2,187,033 =========== =========== LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Liabilities Policy Liabilities $ 1,756,036 $ 1,389,176 Notes, Mortgages and Other Debt 256,648 149,489 Accrued Income Taxes 8,600 12,054 Deferred Income Taxes 111,823 110,004 Accounts Payable and Accrued Expenses 87,004 61,932 Other Liabilities 26,267 30,533 ----------- ----------- Total Liabilities 2,246,378 1,753,188 ----------- ----------- Redeemable Preferred Stock 1994-A Series, $35.00 redemption value, 668,207 shares issued and outstanding 23,387 --- 1994-B Series, $37.50 redemption value, 598,101 shares issued and outstanding 22,429 --- Shareholders' Equity Common Stock 152,284 143,939 Unearned Stock Compensation (5,646) (4,475) Unrealized Investment Gains (Losses) (30,566) 5,177 Cumulative Foreign Currency Translation Adjustment (861) (1,529) Retained Earnings 318,188 290,733 ----------- ----------- Total Shareholders' Equity 433,399 433,845 ----------- ----------- Total Liabilities, Redeemable Preferred Stock and Shareholders' Equity $ 2,725,593 $ 2,187,033 =========== ===========
See Notes to Consolidated and Condensed Financial Statements. 2 3 THE LIBERTY CORPORATION AND SUBSIDIARIES CONSOLIDATED AND CONDENSED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------- ------------------------ 1994 1993 1994 1993 -------- -------- -------- --------- REVENUES Insurance Premiums & Policy Charges $ 83,498 $ 63,241 $231,511 $187,153 Broadcasting Revenues 23,154 21,031 70,082 63,887 Net Investment Income 34,999 26,876 97,677 81,925 Service Contract Revenues 1,336 1,975 4,297 6,599 Realized Investment Gains (1,425) 2,626 740 12,717 -------- -------- -------- -------- Total Revenues 141,562 115,749 404,307 352,281 -------- -------- -------- -------- EXPENSES Policyholder Benefits 60,347 40,666 166,335 121,238 Commissions 12,500 11,034 36,168 33,160 General Insurance Expenses 15,679 16,105 44,868 47,339 Amortization of Deferred Acquisition Costs 10,129 9,414 31,376 28,062 Broadcasting Expenses 17,138 15,893 50,819 47,634 Interest Expense 3,232 2,794 7,792 8,451 Other Expenses 2,906 2,274 8,840 7,185 -------- -------- -------- -------- Total Expenses 121,931 98,180 346,198 293,069 -------- -------- -------- -------- Income Before Income Taxes & Cumulative Effect of Accounting Changes 19,631 17,569 58,109 59,212 Provision for Income Taxes 6,729 9,491 20,034 23,839 -------- -------- -------- -------- Income Before Cumulative Effect of Accounting Changes 12,902 8,078 38,075 35,373 Cumulative Effect of Accounting Changes --- --- --- (11,940) -------- -------- -------- -------- NET INCOME $ 12,902 $ 8,078 $ 38,075 $ 23,433 ======== ======== ======== ======== EARNINGS PER SHARE: (Exhibit 11) $ .62 $ .41 $ 1.85 $ 1.20 ======== ======== ======== ======== Dividends Per Common Share $ .155 $ .14 $ .465 $ .42 ======== ======== ======== ========
See Notes to Consolidated and Condensed Financial Statements. 3 4 THE LIBERTY CORPORATION AND SUBSIDIARIES CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended September 30, --------------------------- 1994 1993 ---------- ---------- OPERATING ACTIVITIES Net income $ 38,075 $ 23,433 Adjustments to reconcile net income to net cash provided (used) in operating activities: Increase in policy liabilities 37,849 28,401 Increase (decrease) in accounts payable and accrued liabilities 24,398 524 (Increase) decrease in receivables (1,217) 1,374 Amortization of policy acquisition costs 29,705 28,062 Policy acquisition costs deferred (45,530) (44,843) Realized investment (gains) losses (740) (12,717) Gain on sale of operating assets (2,083) --- Depreciation and amortization 11,630 10,875 Amortization of bond premium and discount (3,425) (3,215) Provision for deferred income taxes 4,958 6,399 All other operating activities, net (15,395) 10,230 ---------- ---------- NET CASH PROVIDED IN OPERATING ACTIVITIES 78,225 48,523 ---------- ---------- INVESTING ACTIVITIES Investment securities sold - available for sale 143,969 39,774 Investment securities matured or redeemed by issuer- available for sale 49,989 --- Investment securities matured or redeemed by issuer- held to maturity 58,540 140,562 Cost of investment securities acquired - available for sale (284,833) ---- Cost of investment securities acquired - held to maturity ---- (243,462) Mortgage loans made (32,548) (16,532) Mortgage loan repayments 16,450 15,876 Purchase of investment properties, buildings and equipment (76,090) (24,729) Sale of investment properties, buildings and equipment 24,409 23,859 Purchases of short-term investments (370,497) (267,280) Sales of short-term investments 381,679 288,430 Net cash paid on purchases of insurance companies (48,742) ---- All other investment activities, net (3,175) (7,456) ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (140,849) (50,958) ---------- ---------- FINANCING ACTIVITIES Proceeds from borrowings 1,841,806 1,757,635 Principal payments on debt (1,739,736) (1,771,383) Dividends paid (10,619) (8,108) Stock issued for employee benefit and compensation programs 2,602 6,277 Common stock offering ---- 8,543 Return of policyholders' account balances (22,186) (19,680) Receipts credited to policyholders' account balances 56,186 48,093 ---------- ---------- NET CASH PROVIDED IN FINANCING ACTIVITIES 128,053 21,377 ---------- ---------- INCREASE IN CASH 65,429 18,942 Cash at beginning of year 29,485 32,180 ---------- ---------- CASH AT END OF PERIOD $ 94,914 $ 51,122 ========== ==========
See Notes to Consolidated and Condensed Financial Statements. 4 5 THE LIBERTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS September 30, 1994 (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated and condensed financial statements of The Liberty Corporation and Subsidiaries have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The information included is not necessarily indicative of the annual results that may be expected for the year ended December 31, 1994, but it does reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. 2. FINANCIAL ACCOUNTING STANDARDS STATEMENT NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES As a result of adopting FAS 115 on January 1, 1994, the opening balance of shareholders' equity was increased by $11.4 million related to unrealized gains, net of adjustments to deferred acquisition costs and deferred taxes, on the fixed income securities classified as available-for-sale previously carried at amortized cost or cost. There was no effect on net income as a result of the adoption of FAS 115. During the nine month period following adoption, net unrealized losses of $47.1 million were reported, resulting in a net decrease in shareholders equity of $35.7 million for the period. Of this amount, $44.2 million resulted directly from the implementation of FAS 115. This resulted in an unrealized loss balance of $30.6 million at September 30, 1994. This significant decrease reflects the impact of rising interest rates as well as the addition of the new 1994 acquisitions which provided approximately $9.7 million of net unrealized losses. On a consolidated basis, the Company initially classified approximately 66% of its bond portfolio as available-for-sale and 34% as held-to-maturity; and classified 100% of its redeemable preferred stocks as available for sale. In accordance with FAS 115, the Company did not restate prior period financial statements to reflect this change in accounting principle. For additional information on FAS 115, see the Company's 1994 First Quarter Form 10-Q. 3. REDEEMABLE PREFERRED STOCK On February 24, 1994, the Company issued 598,656 shares of Series 1994-B Voting Cumulative Preferred Stock having a total redemption value of $22,449,600 or $37.50 per share in connection with the acquisition of American Funeral Assurance Company. Additionally, on April 1, 1994, the Company issued 668,207 shares of Series 1994-A Voting Cumulative Preferred Stock having a total redemption value of $23,387,245 or $35.00 per share in connection with the acquisition of State National Capital Corporation. Both the Company and the holders of the Preferred Stock 1994-A Series and 1994-B Series have the right to redeem any or all of the shares from time to time at any time beginning five years and one month after the date of issue in exchange for cash or shares of the Company's common stock. Each share of preferred stock is convertible, at the option of the shareholder, at any time into one share of the Company's common stock. For additional information see the Company's 1994 First Quarter Form 10-Q. 5 6 4. ACQUISITIONS (In 000's, except for per share data) North American National Corporation, American Funeral Assurance Company and State National Capital Corporation were acquired by the Company on February 23, February 24, and April 1, respectively. The following unaudited combined results of operations for the nine months ended September 30, 1994 and 1993 give effect to these acquisitions as though they had occurred at the beginning of each period. None of these acquisitions were individually material for financial reporting purposes and accordingly the following pro forma financial data reflects the effect of these acquisitions in the aggregate. Pro forma results are not necessarily indicative of the results that actually would have occurred had the Company owned these acquisitions during these periods or which will be obtained in the future.
Nine Months Ended September 30, --------------------------- 1994 1993 -------- -------- Revenues $423,371 $437,791 ======== ======== Net Income Before Cumulative Effect of Accounting Changes $ 38,921 $ 34,405 ======== ======== Net Income $ 38,921 $ 22,465 ======== ======== Earnings Per Share: Net Income Before Cumulative Effect of Accounting Changes $ 1.86 $ 1.64 ======== ======== Net Income $ 1.86 $ 1.03 ======== ========
5. COMMITMENTS AND CONTINGENCIES At September 30, 1994, the Company had made commitments as shown below:
(In 000's) Buildings and equipment $ 7,438 Mortgage loans and bonds 17,720 ------- $25,158 =======
The Company is contingently liable for reinsurance ceded ($4.8 billion at September 30, 1994) should any reinsurer be unable to meet the obligations assumed. 6 7 6. SUPPLEMENTAL INFORMATION ON INSURANCE OPERATIONS
Three Months Ended Nine Months Ended September 30, September 30, ---------------- -------------- 1994 1993 1994 1993 ---- ------ ---- ------ (In millions) Increase in net insurance in force $ 309 $ (141) $ 1,233 $ 99 ====== ======= ======= ======= Net insurance in force $16,667 $15,670 ======= =======
7 8 PART I, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Unaudited) Operations Consolidated third quarter net income of $12.9 million increased 60% or $4.8 million from 1993's third quarter (see table below). The increase in net income was due to: (1) a $2.0 million increase in income before taxes; and (2) a $2.8 million decrease in income taxes, primarily related to the $3.8 million charge taken during the third quarter of 1993 resulting from changing the Company's federal income tax rate from 34% to 35%. Of that total, approximately $3.6 million was related to taxes on periods prior to the third quarter of 1993. The increase in income before taxes was a function of increased earnings of $0.9 million from the Insurance Group, increased earnings of $0.8 million from Broadcasting Operations coupled with a decreased loss of $0.3 million in the Parent Company. Year-to-date net income before the cumulative effect of accounting changes increased $2.7 million from last year primarily due to the decline in income taxes previously mentioned, a decrease in realized gains of $6.8 million, and earnings contributions from the acquisitions of $3.7 million.
Third Quarter Year-to-Date -------------------------- -------------------------- 1994 1993 1994 1993 -------- -------- -------- -------- (000's) (000's) Income Before Income Taxes and the Cumulative Effect of Accounting Changes 19,631 17,569 58,109 59,212 Income Taxes 6,729 9,491 20,034 23,839 -------- -------- -------- -------- Income Before the Cumulative Effect of Accounting Changes $ 12,902 $ 8,078 $ 38,075 $ 35,373 Cumulative Effect of Accounting Changes --- --- --- (11,940) -------- -------- -------- -------- Net Income $ 12,902 $ 8,078 $ 38,075 $ 23,433 ======== ======== ======== ========
The $0.9 million (4%) increase in the Insurance Group's third quarter income before taxes was primarily a function of a pretax earnings contribution from the 1994 acquisitions of $5.6 million, offset by lower realized investment gains. The pre-need business provided a pretax earnings increase of $2.1 million -- approximately $2.4 million came from the acquisitions of North American National Corporation and American Funeral Assurance Company which closed in late February, with Pierce National Life Insurance Company experiencing a decrease of $0.3 million due to higher claims and foreign currency translation. State National Corporation, a home service company acquired on April 1, 1994, provided a pretax earnings contribution of $0.7 million. Additionally, the Insurance Group's earnings benefitted from improving lapse experience in the home service business and an overall improvement from the mortgage protection business, offset by alower average yield on it's investment portfolio. The decline in the Insurance Group's year-to-date pretax earnings reflects primarily lower realized investment gains of $5.6 million offset by the earnings contributions from the acquisitions. The $0.8 million (26%) increase in pretax earnings from broadcasting operations was largely due to a substantial increase in political revenues coupled with strong national revenue growth. Year-to-date pre-tax earnings, up $3.0 million (27%), reflect stronger local revenues as well as higher political revenues. 8 9 The decrease in the parent company's before-tax loss was a result of lower interest expense and strong real estate land and lot sales. The 22% increase in consolidated revenues for the quarter was due to the 1994 insurance acquisitions which contributed $29 million. Without the acquisitions, consolidated revenues were down slightly primarily due to the sale of the medicare business in late 1993 offset by higher broadcasting revenues. The 32% growth in third quarter insurance premiums was due to additional premiums of $21.1 million from the Pre-need Group with the new acquisitions -- American Funeral and North American -- contributing an increase of $19 million and Pierce National contributing an incremental $2.2 million. The home service acquisition -- State National -- provided additional premiums of $1.7 million. In Liberty Life premiums were down $2.6 million primarily due the sale of its medicare supplement business in December of 1993. The medicare business produced $3.1 million of premiums in the third quarter of 1993. Year-to-date premiums were up 24% reflecting the impact of $47.4 million of additional premiums from the acquisitions. Excluding the acquisitions, premiums were down 2% due to the sale of medicare and lower mortgage protection premiums. The 30% increase in net investment income for the quarter was also primarily due to the acquisitions. The acquisitions contributed $6.1 million to net investment income. Year-to-date net investment income was up 19%, but relatively flat compared to last year (excluding the acquisitions), as the overall yield on the portfolio dropped, reflecting lower fixed income rates. Realized investment gains were down significantly from last year for both the quarter and year-to-date. Contributing factors to a significantly greater amount of investment gains last year include: (1) a high level of repayments on bonds and preferred stock due to early calls and redemptions, (2) planned sales of shopping centers in the parent company's real estate operation, and (3) gains taken on common stocks due to market prospects and timing. Broadcasting revenues for the quarter, up 10%, benefitted primarily from a $.8 million increase in political revenues as well as continued strong national revenue growth which produced a $.9 million increase, in addition to first time cable related revenues of $.6 million. Local revenues, however, were up only 1% largely reflecting the trade-off in advertising time for political advertising. The cable operation currently generates revenues from two sources: (1) third party sales of advertising time on cable by Cosmos sales representatives; and (2) advertising insertion, which allows Cosmos stations' advertisements to be inserted into other markets for advertising on cable. Year-to-date revenues, up 9%, reflect the impact of national and political revenues. The 48% increase in policy benefits was primarily due to the new acquisitions; excluding the new acquisitions, policy benefits were up 6%. Year-to-date policy benefits increased 37% reflecting the impact of acquisitions as well as unfavorable claims experience, primarily in the first half of the year in home service and mortgage protection. Commissions for the Insurance Group increased 13% for the third quarter; without the new acquisitions, commissions were down 4% reflecting a lower premium base as well as improvement in home service commissions due to changes in agent compensation. Year-to-date commissions were up 9%, but were down 7% excluding the acquisitions. 9 10 General expenses for the Insurance Group were down 3% compared to last year's third quarter due largely to lower expenses in Liberty Life reflecting cost reduction efforts. The two new pre-need acquisitions added approximately $2.5 million to general expenses and the new home service acquisition added $.3 million. Year-to-date general insurance expenses were down 5% despite $6.1 million of additional general expenses attributed to the acquisitions. The 7% increase in amortization of deferred acquisition costs was also a function of the new acquisitions; excluding these acquisitions, amortization of deferred acquisition costs decreased 11% due to an overall improvement in home service and mortgage protection lapses. Year-to-date amortization of deferred acquisition costs was up 12%; without the acquisitions, amortization of deferred acquisition costs was up 2% reflecting an improving trend in home service lapses in the third quarter compared to the first and second quarters. Broadcasting expenses were up 8% for the quarter due to the additional expenses associated with its start-up venture with cable operators. Without the cable operation expenses, expenses were up 3% for the quarter. Year-to-date broadcasting expenses were up 7%. Investments As of September 30, 1994, approximately 61% of the Company's $1.7 billion consolidated invested assets were in bonds with an overall average credit rating of AA. Less than 5% of the bond portfolio was rated below investment grade. Approximately 55% of the Company's $1.1 billion bond portfolio at September 30, 1994 was comprised of mortgage-backed securities compared to 60% at December 31, 1993. Certain mortgage-backed securities are subject to significant prepayment risk due to the fact that in periods of declining interest rates mortgages may be repaid more rapidly than scheduled as borrowers refinance higher rate mortgages to take advantage of the lower current rates. As a result, holders of mortgage-backed securities may receive large prepayments on their investments which cannot be reinvested at interest rates comparable to the rates on the prepaid mortgages. In periods of increasing interest rates, prepayments may decrease resulting in lower amounts of funds being available to reinvest at the higher interest rates. Mortgage-backed pass-through securities and "sequential" CMO's, which comprised 18% of the book value of the Company's mortgage-backed securities at September 30, 1994 and 22% at December 31, 1993, are sensitive to prepayment and extension risk. The remaining 82% of the Company's mortgage-backed investment portfolio of September 30, 1994 consisted of planned amortization class ("PAC") instruments compared to approximately 78% at December 31, 1993. These investments are designed to amortize in a more predictable manner by shifting the primary risks of prepayment and extension to investors in other tranches of the CMO. Mortgage loans of $212.5 million comprised 12% of the consolidated investment portfolio at September 30, 1994. They are commercial mortgages with a loan to value ratio not exceeding 75% when made. These loans are concentrated in the southeast primarily in the states of North Carolina, South Carolina, Georgia, Florida, Virginia, Tennessee, and Louisiana. Investment real estate at September 30, 1994 of $135.6 million comprised 8% of the consolidated investment portfolio compared to 6% at December 31, 1993. Four key property types made up approximately 90% of the Company's real estate investment assets: residential land development, business parks, business property rentals and shopping centers. The majority of the Company's investment real estate is located in South Carolina, Florida, Georgia, and North Carolina. 10 11 Financial Position As a result of the first quarter acquisitions of North American and American Funeral and the second quarter acquisition of State National, the Company's consolidated assets increased approximately $430 million, of which approximately $307 million were in investments, and total liabilities increased approximately $337 million, of which approximately $307 million were related to policy liabilities. As a result of adopting FAS 115, "Accounting for Certain Investments in Debt and Equity Securities" on January 1, 1994, a significant portion of fixed maturity securities were classified as available-for-sale and accordingly carried on the balance sheet at fair value. Prior to the adoption of FAS 115, the fixed income securities were carried at either amortized cost or cost and therefore no unrealized gain or loss was reflected on the balance sheet. The 1993 balance sheet has not been restated for this change in accounting principle as prescribed by FAS 115. At September 30, 1994, fixed income securities reported as available-for-sale had a gross unrealized loss of $56.8 million. Held-to-maturity securities, however, had an unrealized gain of $19.9 million which was not reflected in the balance sheet since these securities continue to be carried at cost. Although the initial adoption of FAS 115 resulted in a net unrealized gain of $11.4 million on January 1, 1994, the decline in market value since that time resulted in a net decrease in shareholders' equity of $44.2 million for the period ended September 30, 1994. Thus, the net impact of FAS 115 on shareholders' equity has been a decline of $32.8 million. Capital, Financing and Liquidity The Company's net cash flow from operating activities was $78.2 million for the first nine months of 1994 compared to $48.5 million for the same period of 1993. The Company's net cash used in investing activities was $140.8 million, and cash flow provided from financing activities was $128.1 million. As a result of its activities, the Company generated a $65.4 million increase in cash compared to $18.9 million in the same period in 1993. The net cash used in investing activities was primarily related to net cash paid on the purchase of North American, American Funeral, State National, and certain real estate assets of SCANA Development Corporation. The net cash provided from financing activities was primarily from proceeds from borrowings net of principal payments on debt. The proceeds from borrowings were used to partially finance acquisitions and to repay an intercompany note. At September 30, 1994, borrowings against the Company's revolving credit facility and lines of credit amounted to $245.5 million, an increase from the $145.5 million outstanding at December 31, 1993. The increase was primarily a function of borrowings related to the insurance acquisitions -- North American of $51.9 million, American Funeral of $5.6 million and State National of $.9 million -- as well as a bulk real estate purchase of $42.8 million. The Company financed the $51.9 million purchase price of North American, which closed on February 23, 1994, entirely with proceeds borrowed under its revolving credit facility. Of the $28.1 million American Funeral purchase price, approximately $22.5 million was financed with a new class of redeemable, convertible preferred stock (1994-B Series) issued at the time of closing on February 24, 1994; and the remaining $5.6 million was financed from the Company's credit facility. The 1994-B Series preferred stock has a stated value of $37.50 per share and will pay an annual dividend of 5.6%. 11 12 On April 1, 1994, the Company closed its acquisition of State National for $27.5 million which was financed through a combination of cash of $.9 million, Liberty Common Stock of 113,611 shares valued at $3.2 million and a new class of redeemable, convertible preferred stock (1994-A Series) valued at $23.4 million. The stated value of the 1994-A Series preferred stock is $35.00 per share with an annual dividend of 6%. Both the 1994-A Series and 1994-B Series preferred stock will be convertible into shares of the Company's common stock on a share for share basis. Both the 1994-A and 1994-B Series of preferred stock may be redeemed at the option of either the holder of the stock or by the Company beginning five years and one month after the effective dates of the acquisitions. The 1994-A Series and 1994-B Series preferred stock was only issued to State National and American Funeral shareholders, respectively, in connection with the acquisitions of each company and no additional shares of these Series were made available to the public. On May 5, 1994, the Company closed the residential portion of the acquisition of certain real estate assets of SCANA Development Corporation for approximately $13 million. On May 27, 1994, the Company closed the remaining $29.8 million of the total $42.8 million cash purchase price, consisting of rental properties, industrial parks and undeveloped land. Financing of the acquisition was initially completed through the Company's credit facility. However, the Company plans to use internal funds to repay a substantial portion of the purchase price prior to year-end. Other Company commitments are shown in Note 5 contained in the accompanying financial statements. Additional detail as to commitments and financing is contained in the Notes to the Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. Further discussion of investments and valuation is contained in Notes 1 and 2 to the Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders. Accounting Developments Accounting developments are summarized in the Notes of the accompanying Financial Statements and are discussed in detail in the Management Discussion and Analysis in the Company's 1993 Annual Report to Shareholders and the Form 10-Q for the first quarter ended March 31, 1994. PART II, ITEM 6. Exhibit and Reports on Form 8-K (a) A list of the exhibits filed with this report is included in the Index to Exhibits filed herewith. (b) The filing of Form 8-K was not required during the third quarter of 1994. INDEX TO EXHIBITS EXHIBIT 11 Consolidated Earnings Per Share Computation EXHIBIT 27 Financial Data Schedule (Electronic Filing Only) 12 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE LIBERTY CORPORATION Date: November 11, 1994 - - ----------------------- (Registrant) /s/ H. Ray Eanes - - ----------------------- H. Ray Eanes Senior Vice President Finance & Treasurer /s/ John Smith - - ----------------------- John Smith Controller 13 EX-11 2 COMPUTATION OF EARNINGS 1 Exhibit 11 THE LIBERTY CORPORATION AND SUBSIDIARIES CONSOLIDATED EARNINGS PER SHARE COMPUTATION (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------------- --------------------------- 1994 1993 1994 1993 ----------- ----------- ----------- ----------- PRIMARY SHARES - - -------------- Common Shares Outstanding - End of Period 19,815,600 19,461,034 19,815,600 19,461,034 =========== =========== =========== =========== Weighted Average Common Shares 19,803,157 19,384,178 19,686,447 19,279,662 =========== =========== =========== =========== Common Stock Options Outstanding During Period (Weighted Average) 93,042 202,524 91,560 192,294 ----------- ----------- ----------- ----------- Total Primary Shares 19,896,199 19,586,702 19,778,007 19,471,956 =========== =========== =========== =========== Fully Diluted Shares - - -------------------- Weighted Average Common Shares 19,803,157 19,384,178 19,686,447 19,279,662 Common Stock Options Outstanding During 93,042 202,601 94,879 198,647 Period (Weighted Average) Weighted Average Redeemable Preferred Shares* 1,266,521 --- 924,282 --- --------- ----------- ---------- ---------- Total Fully Diluted Shares 21,162,720 19,586,779 20,705,608 19,478,309 ========== =========== ========== ========== NET INCOME - - ---------- Earnings $12,902,000 $ 8,078,000 $38,075,000 $23,433,000 =========== =========== =========== =========== Primary Earnings per Common Share $ .62 $ .41 $ 1.85 $ 1.20 (Earnings/Total Primary Shares) =========== =========== =========== =========== Fully Diluted Earnings per Common $ .61 $ .41 $ 1.84 $ 1.20 Share (Earnings/Total Fully Diluted =========== =========== =========== =========== Shares)
*The preferred stock 1994-A and 1994-B series is not considered a common stock equivalent for purposes of the primary earnings per share computation. 14 EX-27 3 FINANCILA DATA SCHEDULE
7 Exhibit 27 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE LIBERTY CORPORATION FOR THE PERIOD ENDED SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1994 JAN-01-1994 SEP-30-1994 863,242 304,882 324,813 37,628 212,545 135,721 1,726,143 94,914 254,478 364,989 2,725,593 1,706,915 0 22,140 26,981 256,648 152,284 45,816 0 281,115 2,725,593 231,511 97,677 740 74,379 166,335 31,376 81,036 58,109 20,034 38,075 0 0 0 38,075 1.85 1.84 0 0 0 0 0 0 0
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