-----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, BU6YO4lkhu5g4Txz2rDILZcFJ9N5mjuOqn1PPFCXIade8ujHLQdv++ea2mb/2+Tz plBebevVRThVUFTj6EF5Ew== 0000905870-00-000016.txt : 20000515 0000905870-00-000016.hdr.sgml : 20000515 ACCESSION NUMBER: 0000905870-00-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: SEC FILE NUMBER: 000-11774 FILM NUMBER: 629401 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 FIRST QUARTER 10-Q 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: March 31, 2000 ------------------- 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) 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 March 31, 2000: Common Stock, no par value 2,597,764 - ------------------------------ -------------------------------------- Class Shares Outstanding 1 INVESTORS TITLE COMPANY AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999.....3 Consolidated Statements of Income: Three Months Ended March 31, 2000 and March 31, 1999....................4 Consolidated Statements of Cash Flows: Three Months Ended March 31, 2000 and March 31, 1999....................5 Notes to Consolidated Financial Statements.................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................7 Item 3. Quantitative and Qualitative Disclosures About Market Risk...........10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.....................................10 SIGNATURES....................................................................11 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2000 and December 31, 1999 (Unaudited)
March 31, 2000 December 31, 1999 --------------- ----------------- Assets Cash and cash equivalents $ 6,637,676 $ 7,554,297 Investments in securities: Fixed maturities: Held-to-maturity, at amortized cost 4,550,666 4,565,871 Available-for-sale, at fair value 26,019,938 25,931,918 Equity securities, at fair value 5,002,307 5,012,259 ------------------ ----------------- Total investments 35,572,911 35,510,048 Premiums receivable (less allowance for doubtful accounts: 2000 and 1999: $775,000) 2,864,924 3,292,001 Accrued interest and dividends 521,585 521,624 Prepaid expenses and other assets 1,024,208 930,981 Property acquired in settlement of claims 191,617 191,617 Property, net 5,764,675 5,836,466 Prepaid federal income taxes 1,071,899 705,437 Deferred income tax asset, net - 614,093 ------------------ ----------------- Total Assets $ 53,649,495 $ 55,156,564 ================== ================= Liabilities and Stockholders' Equity Liabilities: Reserves for claims (Note 2) $ 15,964,665 $ 15,864,665 Accounts payable and accrued liabilities 907,284 1,560,936 Commissions and reinsurance payables 191,502 208,605 Premium taxes payable 5,012 20,618 Deferred income taxes, net 31,819 - ------------------ ----------------- Total liabilities 17,100,282 17,654,824 ------------------ ----------------- Stockholders' Equity: Common stock-no par value (shares authorized 6,000,000; 2,855,744 and 2,855,744 shares issued; and 2,597,764 and 2,736,961 shares outstanding 2000 and 1999, respectively) 1 1 Retained earnings 35,012,149 36,311,613 Accumulated other comprehensive income (net unrealized gain on investments) (net of deferred taxes: 2000: $792,379; 1999: $613,667) (Note 3) 1,537,063 1,190,126 ------------------ ----------------- Total stockholders' equity 36,549,213 37,501,740 ------------------ -------------------- Total Liabilities and Stockholders' Equity $ 53,649,495 $ 55,156,564 ================== ================= See notes to consolidated financial statements. 3 Investors Title Company and Subsidiaries Consolidated Statements of Income March 31, 2000 and 1999 (Unaudited)
For The Three Months Ended March 31 ---------------------------------------------- 2000 1999 ---- ---- Revenues: Underwriting income: Premiums written $ 8,443,307 $ 10,771,628 Less-premiums for reinsurance ceded 73,169 77,391 ----------------- ---------------- Net premiums written 8,370,138 10,694,237 Investment income-interest and dividends 591,791 470,127 Net realized gain on sales of investments 62,867 191,405 Other 301,437 160,547 ----------------- ---------------- Total 9,326,233 11,516,316 ----------------- ---------------- Operating Expenses: Commissions to agents 3,377,871 3,991,288 Provision for claims (Note 2) 1,244,804 1,580,868 Salaries and employee benefits 2,488,329 2,542,752 Office occupancy and operations 908,464 888,333 Business development 262,556 274,910 Taxes, other than payroll and income 53,461 42,408 Premium and retaliatory taxes 211,624 261,910 Professional fees 171,691 166,158 Other 28,226 47,869 ----------------- ---------------- Total 8,747,026 9,796,496 ----------------- ---------------- Income Before Income Taxes 579,207 1,719,820 ----------------- ---------------- Provision For Income Taxes 57,600 543,502 ----------------- ---------------- Net Income $ 521,607 $ 1,176,318 ================= ================ Basic Earnings per Common Share $ 0.20 $ 0.42 ================= ================ Weighted Average Shares Outstanding-Basic 2,643,241 2,805,423 ================= ================ Diluted Earnings per Common Share $ 0.20 $ 0.42 ================= ================ Weighted Average Shares Outstanding-Diluted 2,646,215 2,821,888 ================= ================ Dividends Paid $ 85,672 $ 85,672 ================= ================ Dividends per Share $ 0.03 $ 0.03 ================= ================
See notes to consolidated financial statements. 4 Investors Title Company and Subsidiaries Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2000 and 1999 (Unaudited)
2000 1999 -------------- ----------------- Operating Activities: Net income $ 521,607 $ 1,176,318 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 185,185 100,966 Amortization, net 3,177 12,642 Net (gain) loss on disposals of property (1,073) 1,791 Net realized gain on sales of investments (62,867) (191,405) Provision (benefit) for deferred income taxes 467,200 (134,825) Provision for claims 1,244,804 1,580,868 Payments of claims, net of recoveries (1,144,804) (755,868) Changes in assets and liabilities: (Increase) decrease in receivables and other assets (32,573) 494,225 Decrease in accounts payable and accrued liabilities (552,408) (96,856) Increase (decrease) in commissions and reinsurance payables (17,103) 69,169 Decrease in premium taxes payable (15,606) (186,583) Increase in current income taxes payable - 246,640 -------------- ----------------- Net cash provided by operating activities 595,539 2,317,082 -------------- ----------------- Investing Activities: Purchases of available-for-sale securities (1,005,900) (100,000) Proceeds from sales of available-for-sale securities 1,513,376 793,519 Proceeds from sales of held-to-maturity securities 15,000 307,500 Purchases of property (127,637) (620,742) Proceeds from sales of property 15,316 4,850 -------------- ----------------- Net cash provided by investing activities 410,155 385,127 -------------- ----------------- Financing Activities: Repurchases of common stock (1,844,223) (640,763) Exercise of options 7,580 133,455 Dividends paid (85,672) (85,672) -------------- ----------------- Net cash used in investing activities (1,922,315) (592,980) -------------- ----------------- Net Increase (Decrease) in Cash and Cash Equivalents (916,621) 2,109,229 Cash and Cash Equivalents, Beginning of Year 7,554,297 8,141,354 -------------- ----------------- Cash and Cash Equivalents, End of Period $ 6,637,676 $ 10,250,583 ============== ================= Supplemental Disclosures: Cash Paid During the Year for: Income Taxes $ 4,298 $ 430,487 ============== ================= Noncash Financing Activities: Accrued bonuses totaling $101,244 and $131,136 were paid for the three months ended March 31, 2000 and 1999, respectively, by issuance of the Company's common stock.
See notes to consolidated financial statements. 5 INVESTORS TITLE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2000 (Unaudited) Note 1 - Basis of Presentation - ------------------------------ The consolidated financial statements include Investors Title Company and its subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United States of America. 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, 1999 for a description of accounting policies. Note 2 - Reserves for Claims - ---------------------------- Transactions in the reserves for claims for the three months ended March 31, 2000 were as follows: Balance, beginning of year $ 15,864,665 Provision, charged to operations 1,244,804 Recoveries 166,775 Payments of claims (1,311,579) ----------- Balance, March 31, 2000 $ 15,964,665 ============ In management's opinion, the reserves are adequate to cover claim losses which might result from pending and possible claims. Note 3 - Comprehensive Income - ------------------------------ Total comprehensive income for the three months ended March 31, 2000 and 1999 was $868,544 and $1,008,571, respectively. Other comprehensive income is comprised solely of unrealized gains or losses on the Company's available-for-sale securities. Note 4 - Earnings Per Common Share - ----------------------------------- Employee stock options are considered outstanding for the diluted earnings per common share calculation and are computed using the treasury stock method. The total increase in the weighted average shares outstanding related to these equivalent shares was 2,974 and 16,465 for the three months ended March 31, 2000 and 1999, respectively. Options to purchase 72,210 and 50,416 shares of common stock were outstanding for the three months ended March 31, 2000 and 1999, respectively, but were not included in the computation of diluted EPS because the options' exercise prices were greater than the average market price of the common shares. 6 Subsequent to March 31, 2000 the Company repurchased 11,975 common shares at a price of $11.38 per share under a stock repurchase program. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------------- The 1999 Form 10-K and the 1999 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 March 31, 2000, net premiums written decreased 22% to $8,370,138, investment income increased 26% to $591,791, revenues decreased 19% to $9,326,233 and net income decreased 56% to $521,607 all compared with the same quarter in 1999. Net income per basic and diluted common share both decreased 52% to $.20 as compared with the year ago period. Despite efforts by the Federal Reserve to brake the economy, the pace of sales in the residential real estate market remained relatively strong in the first quarter. The decrease in our premiums written resulted primarily from the lack of significant mortgage refinancing, which was prevalent in the prior year quarter. According to the Mortgage Bankers Association of America, the monthly average 30-year fixed mortgage interest rates increased to 8.26% for the three months ended March 31, 2000 compared with 6.88% for the three months ended March 31, 1999. The volume of business decreased in the first quarter of 2000 as the number of policies and commitments issued declined to 47,228, a decrease of 31% compared with 68,191 in the same period in 1999. Branch net premiums written as a percentage of total net premiums written were 43% and 48% for the three months ended March 31, 2000 and 1999, respectively. Net premiums written from branch operations decreased 30% and increased 12% for the three months ended March 31, 2000 and 1999, respectively, as compared with the same periods in the prior year. Agency net premiums written as a percentage of total net premiums written were 57% and 52% for the three months ended March 31, 2000 and 1999, respectively. Agency net premiums decreased 14% and increased 14% for the three months ended March 31, 2000 and 1999, respectively, as compared with the same periods in the prior year. Shown below is a schedule of title premiums written for the three months ended March 31, 2000 and 1999 in all states where the Company's two insurance subsidiaries, Investors Title Insurance Company and Northeast Investors Title Insurance Company, currently underwrite insurance: 2000 1999 ---- ---- Georgia 68,917 159,712 Indiana 112,184 35,803 Kentucky - 93 7 Maryland 139,672 103,760 Michigan 1,452,644 1,779,066 Minnesota 141,783 412,657 Mississippi 5,541 5,430 Nebraska 316,913 138,680 New York 72,621 144,443 North Carolina 3,576,796 5,128,234 Pennsylvania 131,750 - South Carolina 770,103 930,487 Tennessee 244,553 102,322 Virginia 1,132,474 1,593,505 West Virginia 262,846 224,975 Wisconsin 3,942 - --------- ---------- Direct Premiums 8,432,739 10,759,167 Reinsurance, net (62,601) (64,930) --------- ---------- Net Premiums $ 8,370,138 $ 10,694,237 ============ ============ Total operating expenses decreased 11% for the three-month period ended March 31, 2000 compared with the same period in 1999. This decrease was due in part to the decrease in premiums written. Certain operating expenses increased due to continued ongoing investments in technology and costs associated with entering and supporting new markets. The provision for claims as a percentage of net premiums written was 15% for the three months ended March 31, 2000 and 1999. The provision for income taxes was 10% of income before income taxes for the three months ended March 31, 2000 versus 31.6% for the same period in 1999. The decrease in the tax provision was primarily due to a higher mix of tax-exempt investment income to total income before taxes in 2000 compared with 1999. Liquidity and Capital Resources: - -------------------------------- Net cash provided by operating activities for the three months ended March 31, 2000, amounted to $595,539 compared with $2,317,082 for the same three-month period during 1999. This decrease is primarily the result of a decrease in net income, a decrease in the provision for claims (net of payments), an increase in receivables and a decrease in accounts payable. On December 9, 1996, the Board of Directors approved the repurchase by the Company of 150,000 shares of the Company's common stock from time to time at prevailing market prices. The purpose of the repurchases is to avoid dilution to existing shareholders as a result of issuances of stock in connection with stock options and stock bonuses. Pursuant to this approval, the Company has repurchased all 150,000 shares at an average price of $19.37 per share as of March 31, 2000 including 6,211 shares purchased at an average purchase price of $17.58 during the quarter ended March 31, 2000. 8 On May 11, 1999, the Board of Directors also approved the repurchase of an additional 200,000 shares of the Company's common stock. Pursuant to this approval, the Company has repurchased 140,059 shares in the quarter ended March 31, 2000 at an average price of $12.42 per share. On May 9, 2000, the Board of Directors approved the repurchase of an additional 500,000 shares of the Company's common stock. As of May 10, 2000, no shares have been repurchased. Management believes that funds generated from operations (primarily underwriting and investment income) will enable the Company to adequately meet its operating needs and is unaware of any trend likely to result in adverse liquidity changes. 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. Other Matters - ------------- Year 2000 Issues - ---------------- The Company's Year 2000 Project Committee (the Committee") is comprised of department heads and high-level managers representing each of the Company's departments. Under the leadership of the Vice President of Information Systems, the Committee worked through the Year 2000 transition to ensure that all aspects of the Company's business and operations continued normally. As of May 10, 2000, the Company has not experienced business interruptions from Year 2000 issues, either internally or with its third party business partners and vendors. Business operations continued uninterrupted through the December 31, 1999 to January 1, 2000 transition, as well as the Leap Year transition (from February 29, 2000 through March 1, 2000). The Company's efforts to complete its regular technology refresh project helped to mitigate the possibility of Year 2000 interruptions. The planned technology refresh kept costs directly associated to Year 2000 to approximately $20,000. At this time, the Company does not expect to incur additional costs directly related to its Year 2000 initiative. Although the Company believes it has completed all phases of its Year 2000 initiative in sufficient time to identify and remedy any non-compliant programs and systems, future failures experienced by third party vendors could negatively impact the Company's operations. 9 Safe Harbor Statement - --------------------- Except for the historical information presented the matters disclosed in the foregoing discussion and analysis and other parts of this report include forward- looking statements. These statements represent the Company's current judgment on the future and are subject to risks and uncertainties that could cause actual results to differ materially. Such factors include, without limitation: (i) that the demand for title insurance will vary with factors beyond the control of the Company such as changes in mortgage interest rates, availability of mortgage funds, level of real estate activity, cost of real estate, consumer confidence, supply and demand for real estate, inflation and general economic conditions; (ii) that losses from claims may be greater than anticipated such that reserves for possible claims are inadequate; (iii) that unanticipated adverse changes in securities markets could result in material losses on investments made by the Company; and (iv) the dependence of the Company on key management personnel the loss of whom could have a material adverse effect on the Company's business. The Company's discussion of Year 2000 issues under the heading "Other Matters" contains forward-looking statements that are subject to risks and uncertainties that could cause the actual results to differ from those projected. These include the risks associated with unforeseen technological issues associated with the Company's own Year 2000 compliance efforts and the compliance efforts of third parties on whose systems the Company relies. Other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission. Item. 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- The Company's market risk exposure has not changed materially from the exposure as disclosed in the Company's 1999 Annual Report on Form 10-K. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- (27) Financial Data Schedule included herewith. (b) Reports on Form 8-K ------------------- There were no reports filed on Form 8-K for this quarter. 10 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/ James A. Fine, Jr. ---------------------- James A. Fine, Jr. President By: /s/ Elizabeth P. Bryan ---------------------- Elizabeth P. Bryan Vice President (Principal Accounting Officer) Dated: May 12, 2000 11 EX-27 2 FIRST QUARTER 2000 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
7 *Not disclosed on a quarterly basis. 3-MOS DEC-31-2000 MAR-31-2000 26,019,938 4,471,811 0* 5,002,307 0 0 35,572,911 6,637,676 0 0 53,649,495 15,964,665 0 191,502 0 0 0 0 1 36,549,212 53,649,495 8,370,138 591,791 62,867 301,437 1,244,804 0 7,502,222 579,207 57,600 521,607 0 0 0 521,607 .20 .20 0 0 0 0 0 0 0
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