-----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, CHjCtLacTSUBjpJ6iq8BmddBcAtGs38F29ItbxSXxIVO6prMzhlZyFaPihfzGbvI 0FOFIeOA9tQ6xH+ScysZpQ== 0000905870-95-000024.txt : 19951119 0000905870-95-000024.hdr.sgml : 19951119 ACCESSION NUMBER: 0000905870-95-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTORS TITLE CO CENTRAL INDEX KEY: 0000720858 STANDARD INDUSTRIAL CLASSIFICATION: TITLE INSURANCE [6361] IRS NUMBER: 561110199 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11774 FILM NUMBER: 95591996 BUSINESS ADDRESS: STREET 1: 121 N COLUMBIA ST STREET 2: P O DRAWER 2687 CITY: CHAPEL HILL STATE: NC ZIP: 27514 BUSINESS PHONE: 9199682200 MAIL ADDRESS: STREET 1: 121 NORTH COLUMBIA STREET CITY: CHAPEL HILL STATE: NC ZIP: 27514 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: September 30, 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: 0-11774 INVESTORS TITLE COMPANY (Exact name of registrant as specified in its charter) North Carolina 56-1110199 (State of Incorporation) (I.R.S. Employer Identification Number) 121 North Columbia Street, Chapel Hill, North Carolina 27514 (Address of Principal Executive Offices) (Zip Code) (919) 968-2200 ( Registrant's Telephone Number Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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 Shares outstanding of each of the issuer's classes of common stock as of September 30, 1995: Common Stock, no par value 2,800,973 Class Shares Outstanding 1 INVESTORS TITLE COMPANY AND SUBSIDIARIES Index PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . .3 Consolidated Statements of Income: Nine Months and Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . .4 Consolidated Statements of Cash Flows: Nine Months Ended September 30, 1995 and 1994 . . . .5 Notes to Condensed Consolidated Financial Statements . .6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 7 PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 9 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 1995 and December 31, 1994 (Unaudited) 9/30/95 12/31/94 Assets Cash and Cash Equivalents $ 2,602,658 $ 2,590,071 Investments: Held to maturity: Certificates of deposit 399,203 539,203 Bonds - at amortized cost 11,602,486 10,283,644 Available for sale - at market: Bonds, treasury note and redeemable preferred stocks 2,456,285 2,839,813 Common and nonredeemable preferred stocks 3,817,101 2,699,422 Total investments 18,275,075 16,362,082 Receivables: Premiums, net 1,582,897 1,057,228 Accrued interest and dividends 279,742 309,689 Recoveries of claims previously paid 377,356 375,061 Refundable income taxes 62,246 Other 39,377 43,982 Total receivables 2,279,372 1,848,206 Prepaid Expenses and Other Assets 679,036 370,890 Property Acquired in Settlement of Claims 250,500 170,600 Property-At Cost: Land 782,582 782,582 Buildings 1,291,776 1,228,375 Furniture and equipment 1,605,298 1,536,745 Automobiles 135,024 118,162 Total 3,814,680 3,665,864 Less accumulated depreciation 987,137 765,653 Property, net 2,827,543 2,900,211 Total Assets $ 26,914,184 $ 24,242,060 Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued liabilities $ 578,721 $ 663,124 Accrued vacation 336,735 336,735 Commissions and reinsurance payables 45,070 52,848 Premium taxes payable 27,608 28,766 Note payable 500,000 Income taxes payable: Current 57,883 Deferred 919,978 470,725 Total liabilities 1,965,995 2,052,198 Reserve for Possible Claims 3,794,850 3,635,850 Stockholders' Equity: Common stock-No par value (shares authorized, 6,000,000; 2,855,744 and 2,855,744 shares issued and 2,800,973 1,149,411 1,263,318 and 2,812,062 shares outstanding, 1995 and 1994, respectively) Retained earnings 19,257,524 17,151,557 Net unrealized gain on investments(net of deferred taxes: 1995: $385,709; 1994: $72,876) 746,404 139,137 Total stockholders' equity 21,153,339 18,554,012 Total Liabilities and Stockholders' Equity $ 26,914,184 $ 24,242,060
3 Investors Title Company and Subsidiaries Consolidated Statements of Income September 30, 1995 and 1994 (Unaudited) For The Three For The Nine Months Ended Months Ended September 30 September 30 1995 1994 1995 1994 Revenues: Underwriting income: Premiums written $ 4,443,282 $ 3,825,492 $11,338,032 $11,850,308 Less-premiums for reinsurance ceded 21,788 13,463 51,241 37,688 Underwriting income 4,421,494 3,812,029 11,286,791 11,812,620 Investment income-interest and dividends 298,430 292,730 879,599 789,436 Rental income 8,313 5,143 18,077 14,457 Gain (loss) on disposals of investments and property, net (9,915) 28,742 36,623 30,834 Other 41,769 53,586 165,759 116,876 Total 4,760,091 4,192,230 12,386,849 12,764,223 Operating Expenses: Salaries 849,763 843,958 2,565,017 2,618,472 Commissions to agents 959,760 836,425 2,492,222 2,369,760 Provision for possible claims 508,537 515,967 1,095,110 1,354,648 Employee benefits and payroll taxes 389,515 209,523 939,834 880,163 Office occupancy and operations 469,257 470,915 1,337,653 1,430,759 Business development 136,234 123,822 381,893 360,553 Taxes, other than payroll and income 106,522 97,817 297,833 298,864 Professional fees 42,074 24,402 179,062 84,395 Interest expense 9,469 10,638 40,742 Other 10,431 25,229 73,113 63,470 Total 3,472,093 3,157,527 9,372,375 9,501,826 Income Before Income Taxes 1,287,998 1,034,703 3,014,474 3,262,397 Provision For Income Taxes: Current 357,873 216,258 600,743 893,158 Deferred 16,394 79,542 136,420 65,083 Total 374,267 295,800 737,163 958,241 Net Income $ 913,731 $ 738,903 $ 2,277,311 $ 2,304,156 Net Income Per Share* $ 0.32 $ 0.27 $ 0.81 $ 0.82 Dividends Paid $ 57,114 $ 57,182 $ 171,344 $ 171,568 Dividends Per Share $ 0.02 $ 0.02 $ 0.06 $ 0.06 * Net income per share is computed based on the weighted average number of common and dilutive common equivalent shares outstanding(1995, 2,807,068 and 1994, 2,810,645 shares, respectively.) Common equivalent shares consist solely of stock options.
4 Investors Title Company and Subsidiaries Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 1995 and 1994 (Unaudited) 1995 1994 Operating Activities: Net income $2,277,311 $2,304,156 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 225,071 242,776 Amortization, net of accretion 46,063 40,687 Loss on disposals of property 5,601 7,721 Gain on sales of investments (42,223) (38,554) Provision for deferred income taxes 136,420 65,083 Provision for possible claims 1,095,110 1,354,648 Payments of claims, net of recoveries (936,110) (1,066,798) (Increase) decrease in receivables (493,412) 453,368 (Increase) decrease in prepaid expenses and other assets (308,146) 112,549 Increase in assets acquired in settlement of claims (79,900) (25,000) Decrease in accounts payable and accrued liabilities (84,403) (293,493) Decrease in commissions and reinsurance payables (7,778) (73,545) Decrease in premium taxes payable (1,158) (12,583) Increase in income taxes payable - current 120,129 510,182 Net cash provided by operating activities 1,952,575 3,581,197 Investing Activities: Purchases of investments held to maturity (2,129,088) (2,274,602) Purchases of investments available for sale (743,094) (436,483) Proceeds from sales of investments held to maturity 1,040,200 1,062,903 Proceeds from sales of investments available for sale 835,249 394,441 Purchases of property (161,161) (290,729) Proceeds from sales of property 3,157 6,876 Net cash used in investing activities (1,154,737) (1,537,594) Financing Activities: Dividends paid (171,344) (171,568) Repurchases of common stock (113,907) (397,677) Repayment of notes payable (500,000) (1,000,000) Net cash used in financing activities (785,251) (1,569,245) Net Increase in Cash and Cash Equivalents 12,587 474,358 Cash and Cash Equivalents, Beginning of Year 2,590,071 1,701,786 Cash and Cash Equivalents, End of Period $2,602,658 $2,176,144 Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest $ 14,476 $ 40,742 Income Taxes $ 486,602 $ 568,000
5 INVESTORS TITLE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 1995 (Unaudited) Note 1 - Basis of Presentation The consolidated financial statements include Investors Title Company and its subsidiaries, and have been prepared in conformity with generally accepted accounting principles. In the opinion of management all necessary adjustments have been reflected for a fair presentation of the financial position, results of operations and cash flows in the accompanying unaudited consolidated financial statements. All such adjustments are of a normal recurring nature. Reference should be made to the "Notes to Consolidated Financial Statements" of the Registrant's Annual Report to Shareholders for the year ended December 31, 1994 for a description of accounting policies. Note 2 - Reinsurance The Company assumes and cedes reinsurance with other insurance companies in the normal course of business. Premiums assumed and ceded were $27,565 and $51,241, respectively for the nine months ended September 30, 1995, and $42,125 and $37,688, respectively for the nine months ended September 30, 1994. Note 3 - Reserve for Possible Claims Transactions in the reserve for possible claims for the nine months ended September 30, 1995 were as follows: Balance, beginning of year $3,635,850 Provision, charged to operations 1,095,110 Recoveries 88,035 Payments of claims (1,024,145) Balance, September 30, 1995 $3,794,850 In management's opinion, the reserve is adequate to cover claim losses which might result from pending and possible claims. Note 4 - Leases Rent expense totaled $294,377 and $231,242, respectively for the nine months ended September 30, 1995 and 1994. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The 1994 Form 10-K and the 1994 Annual Report should be read in conjunction with the following discussion since they contain important information for evaluating the Company's operating results and financial condition. Results of Operations: For the quarter ended September 30, 1995, premiums written increased 16% to $4,443,282, investment income increased 2% to $298,430, revenues increased 14% to $4,760,091, net income increased 24% to $913,731 and net income per share increased 19% to $.32 all compared to the same quarter in 1994. For the nine months ended September 30, 1995, premiums written decreased 4% to $11,338,032, investment income increased 11% to $879,599, revenues decreased 3% to $12,386,849, net income decreased 1% to $2,277,311 and net income per share decreased 1% to $.81 all compared to the same period in 1994. Sales growth in the third quarter 1995 resulted from a combination of concentrated marketing efforts and continued strength in the real estate market. Additionally, the Company achieved significant gains in operating efficiency as a 10% increase in operating expenses supported the 14% increase in revenues. In September 1995, volume in the Company's branch offices increased over 40% compared to the same period last year. This increase in demand was met on a timely basis without incremental increases in direct costs. The Company's ability to efficiently process this higher volume in its branches reflects the Company's automation and internal reorganization efforts over the past three years. The 10% increase in operating expenses for the three months ended September 30, 1995 compared to the same period in 1994 primarily resulted from an increase in commissions and employee benefits. The increase in commissions is the result of the Company's expansion into new markets primarily through establishing new agency relationships rather than branch offices. Employee benefits rose due to an increase in accrued bonuses. Operating expenses for the nine months ended September 30, 1995 decreased 1% compared to the same period in 1994 primarily due to a reduction in salaries, the provision for possible claims, and office occupancy and operations expenses, offset by an increase in commissions, employee benefits and payroll taxes, and professional fees. The provision for possible claims was lower in 1995 compared to 1994 due to improved claims experience. A scheduled regulatory audit and related costs contributed to the increase in professional fees. The remaining operating expense declines were primarily due to the decrease in premium volume and the Company's cost control efforts. The provision for current income taxes declined in 1995 primarily due to loss carrybacks related to the 1992 loss. These carrybacks could not be utilized until 1995 7 as a result of recent tax legislation. The decline in the provision for current income taxes was partially offset by an increase in the provision for deferred income taxes. Deferred income taxes increased primarily as a result of an increase in the statutory unearned premium reserve which is deductible from taxable income but not expensed under generally accepted accounting principles. The total provision for income taxes for the third quarters of 1995 and 1994 remained at approximately 29% of income before income taxes. Liquidity and Capital Resources: Net cash provided by operating activities for the nine months ended September 30, 1995, amounted to $1,952,575 compared to $3,581,197 for the same nine month period during 1994. This decrease is attributable to a number of factors, including a decrease in receivables and prepaid expenses that contributed to net cash in the first half of 1994 but not in 1995, a smaller increase in current federal taxes payable in 1995, and a lower provision for possible claims in 1995 (which is added back to net income to reconcile net income to net cash), partially offset by a larger decrease in accounts payable and accrued liabilities in 1994. Cash flows from operations provided funds to repay the Company's $500,000 note payable in the first quarter of 1995. Investments increased primarily from funds retained in the business and increases in the market value of securities available for sale. The deferred income tax liability increased primarily due to an increase in the net unrealized gain on investments and the increase in the statutory unearned premium reserve described above. The Company continues to have plans to construct a five- story home office at 137 East Rosemary Street, Chapel Hill, the site of its former offices. However, no decision has been made as to when the Company will pursue construction of this facility. Management believes that funds generated from operations (primarily underwriting and investment income) will enable the Company to adequately meet its operating needs. In addition to operational liquidity, the Company maintains a high degree of liquidity within the investment portfolio in the form of short-term investments and other readily marketable securities. 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule (b) Reports on Form 8-K There were no reports filed on Form 8-K for this quarter. 9 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed in its behalf by the undersigned hereunto duly authorized. INVESTORS TITLE COMPANY (Registrant) By: /s/J. Allen Fine J. Allen Fine President, Chairman By: /s/Elizabeth P. Bryan Elizabeth P. Bryan Vice President (Principal Accounting Officer) Dated: November 14, 1995 10 EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
7 *Not disclosed on a quarterly basis. 3-MOS 6-MOS 9-MOS DEC-31-1995 DEC-31-1995 DEC-31-1995 JAN-01-1995 JAN-01-1995 JAN-01-1995 MAR-31-1995 JUN-30-1995 SEP-30-1995 2,500,451 2,557,644 2,456,285 10,557,522 10,775,433 11,642,510 *0 *0 *0 3,136,953 3,289,676 3,817,101 0 0 0 0 0 0 16,559,105 16,946,932 18,275,075 2,542,249 2,742,702 2,602,658 0 0 0 0 0 0 24,399,314 25,484,494 26,914,184 3,584,850 3,694,850 3,794,850 0 0 0 41,599 41,602 45,070 0 0 0 0 0 0 1,253,212 1,252,552 1,149,411 0 0 0 0 0 0 18,023,760 18,955,802 20,003,928 24,399,314 25,484,494 26,914,184 3,104,025 6,865,297 11,286,791 283,980 581,169 879,599 17,991 47,556 42,223 56,814 132,736 178,236 250,091 586,573 1,095,110 0 0 0 2,524,555 5,313,709 8,277,265 688,164 1,726,476 3,014,474 80,990 362,896 737,163 607,174 1,363,580 2,277,311 0 0 0 0 0 0 0 0 0 607,174 1,363,580 2,277,311 .22 .49 .81 .22 .49 .81 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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