-----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, B30vqXJ2NLfXQF87z6moJpZNWAHTA/nrt6l/SCJLb9N+v9ZguS9VYXBOfqN6VMPM tYtC3P3jh/SokdG4Uc6jBg== 0000905870-95-000006.txt : 19950518 0000905870-95-000006.hdr.sgml : 19950518 ACCESSION NUMBER: 0000905870-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTORS TITLE CO CENTRAL INDEX KEY: 0000720858 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95538702 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: March 31, 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) 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, 1995: Common Stock, no par value 2,813,120 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, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . .3 Consolidated Statements of Income: Three Months Ended March 31, 1995 and 1994 . . . . . . 4 Consolidated Statements of Cash Flows: Three Months Ended March 31, 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 . . . . . . . . . . . . . . . . . . . . . 8 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 8 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 1995 and December 31, 1994 (Unaudited) 3/31/95 12/31/94 Assets Cash and Cash Equivalents $ 2,542,249 $ 2,590,071 Investments: Held to maturity: Certificates of deposit 444,203 539,203 Bonds-at amortized cost 10,477,498 10,283,644 Available for sale - at market: Bonds, treasury note and redeemable preferred stocks 2,500,451 2,839,813 Common and nonredeemable preferred stocks 3,136,953 2,699,422 Total investments 16,559,105 16,362,082 Receivables: Premiums, net 931,494 1,057,228 Accrued interest and dividends 276,486 309,689 Recoveries of claims previously paid 490,269 375,061 Refundable income taxes 94,657 62,246 Other 104,270 43,982 Total receivables 1,897,176 1,848,206 Prepaid Expenses and Other Assets 370,807 370,890 Property Acquired in Settlement of Claims 150,600 170,600 Property-At Cost: Land 782,582 782,582 Buildings 1,240,375 1,228,375 Furniture and equipment 1,559,574 1,536,745 Automobiles 135,024 118,162 Total 3,717,555 3,665,864 Less accumulated depreciation (838,178) (765,653) Property, net 2,879,377 2,900,211 Total Assets $ 24,399,314 $ 24,242,060 Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued liabilities $ 422,053 $ 663,124 Accrued vacation 336,735 336,735 Commissions and reinsurance payables 41,599 52,848 Premium taxes payable 58,635 28,766 Note payable 500,000 Deferred income taxes payable 678,470 470,725 Total liabilities 1,537,492 2,052,198 Reserve for Possible Claims 3,584,850 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 2,813,120 and 1,253,212 1,263,318 2,812,062 shares outstanding, 1995 and 1994, respectively) shares outstanding) Retained earnings 17,701,617 17,151,557 Net unrealized gain on investment securities net of deferred taxes: 1995: $167,152; 1994: $72,876) 322,143 139,137 Total stockholders' equity 19,276,972 18,554,012 Total Liabilities and Stockholders' Equity $ 24,399,314 $ 24,242,060
3 Investors Title Company and Subsidiaries Consolidated Statements of Income March 31, 1995 and 1994 (Unaudited) For The Three Months Ended March 31 1995 1994 Revenues: Underwriting income: Premiums written $ 3,121,311 $ 3,888,377 Less-premiums for reinsurance ceded 17,286 11,930 Underwriting income 3,104,025 3,876,447 Investment income- interest and dividends 283,980 233,632 Rental income 4,323 4,661 Gain (loss) on disposals of investments and 18,697 (6,021) property, net Other 51,785 11,335 Total 3,462,810 4,120,054 Operating Expenses: Salaries 854,365 896,601 Commissions to agents 666,644 757,809 Provision for possible claims 250,091 488,482 Employee benefits and payroll taxes 277,906 418,216 Office occupancy and operations 421,985 442,004 Business development 113,357 108,605 Taxes, other than payroll and income 93,716 103,285 Professional fees 56,251 24,076 Interest expense 10,638 22,595 Other 29,693 33,873 Total 2,774,646 3,295,546 Income Before Income Taxes 688,164 824,508 Provision For Income Taxes: Current (32,480) 230,890 Deferred 113,470 (678) Total 80,990 230,212 Net Income $ 607,174 $ 594,296 Net Income Per Share* $ 0.22 $ 0.21 Dividends Paid $ 57,114 $ 57,114 Dividends Per Share $ 0.02 $ 0.02 * Net income per share is computed based on the weighted average number of common and dilutive common equivalent shares outstanding (1995, 2,815,152 and 1994, 2,855,744 shares, respectively.) Common equivalent shares consist solely of stock options.
4 INVESTORS TITLE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED) 1995 1994 Operating Activities: Net income $607,174 $594,296 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 72,525 47,283 Amortization, net of accretion 25,017 18,144 (Gain) loss on disposals of property (706) 1,415 (Gain) loss on sales of investments (17,991) 4,606 Provision (benefit) for deferred income taxes 113,470 (678) Provision for possible claims 250,091 488,482 Payments of claims, net of recoveries (301,091) (293,482) (Increase) decrease in receivables (48,970) 338,786 Decrease in prepaid expenses and other assets 83 3,599 Decrease in assets acquired in settlement of claims 20,000 Decrease in accounts payable and accrued liabilities (241,071) (415,635) Increase(decrease)in commissions and reinsurance payables (11,249) 18,386 Decrease in premium taxes payable 29,869 5,642 Decrease in income taxes payable- current 417,330 Net cash provided by operating activities 497,151 1,228,174 Investing Activities: Purchases of investments held to maturity (501,672) (445,490) Purchases of investments available for sale (332,084) (89,690) Proceeds from sales of investments held to maturity 553,980 152,500 Proceeds from sales of investments available for sale 353,008 91,689 Purchases of property (51,691) (116,518) Proceeds from sales of property 706 3,428 Net cash provided by (used in) investing activities 22,247 (404,081) Financing Activities: Dividends paid (57,114) (57,114) Repurchases of common stock (10,106) Repayment of notes payable (500,000) (1,000,000) Net cash used in financing activities (567,220) (1,057,114) Net Decrease in Cash and Cash Equivalents (47,822) (233,021) Cash and Cash Equivalents, Beginning of Year 2,590,071 1,701,786 Cash and Cash Equivalents, End of Period $2,542,249 $1,468,765 Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest $14,476 $29,812 Income Taxes $5,632 $1,556 See notes to consolidated financial statements.
5 INVESTORS TITLE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements March 31, 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 $9,171 and $17,286, respectively for the three months ended March 31, 1995, and $17,492 and $11,930, respectively for the three months ended March 31, 1994. Note 3 - Reserve for Possible Claims Transactions in the reserve for possible claims for the three months ended March 31, 1995 were as follows: Balance, beginning of year $3,635,850 Provision, charged to operations 250,091 Recoveries 23,783 Payments of claims (324,874) Balance, March 31, 1995 $3,584,850 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 $98,013 and $78,865, respectively for the three months ended March 31, 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 March 31, 1995, premiums written decreased 20% to $3,121,311, investment income increased 22% to $283,980, revenues decreased 16% to $3,462,810, net income increased 2% to $607,174 and net income per share increased 5% to $.22 all compared to the same quarter in 1994. Premium volume declined primarily due to the effects of higher mortgage interest rates on real estate sales and and a decline in refinancing activity in the first quarter of 1995 compared to the same period in 1994. Operating expenses for the three months ended March 31, 1995 decreased 16% primarily as a result of a decline in salaries, commissions, employee benefits and payroll taxes, as well as the provision for possible claims. The provision for possible claims was lower in the first quarter of 1995 as a result of a decision by management to reduce the Company's reserve for possible claims in view of continuing declines in claims payments. These remaining operating expense declines were primarily due to the decrease in premium volume. The provision for current income taxes in the first quarter of 1995 declined due to loss carrybacks related to the 1992 loss as well as a reduction in income. These carrybacks could not be utilized until 1995 as a result of recent tax legislation. The decline in the provision for current income taxes was partially offset by the provision for deferred income taxes, which increased primarily as a result of the reduction of the Company's reserve for possible claims. Liquidity and Capital Resources: Net cash provided by operating activities for the three months ended March 31, 1995, amounted to $497,151 compared to $1,228,174 for the same three month period during 1994. This decrease is primarily because decreases in receivables and in current federal taxes payable contributed to net cash in the first quarter of 1994 but not in 1995 and the provision for possible claims, which is added back to net income to reconcile net income to net cash, was lower in 1995 than in the first quarter of 1994. These changes were partially offset in the first quarter of 1995 by the higher provision for deferred income taxes and a smaller decrease in accounts payable and accrued liabilities. Cash flows from operations provided funds to repay the Company's $500,000 note payable in the first quarter of 1995. 7 Investments increased primarily from funds retained in the business. The net unrealized gain on investments increased due to increased due to 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 an increase in the statutory unearned premium reserve, which is deductible from taxable income. 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. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits *(10)(i) 1988 Incentive Stock Option Plan, Filed as Exhibit 10, page 31, to Form 10-K dated December 31, 1989 *(10)(ii) 1993 Incentive Stock Option Plan, Filed as Exhibit 10, page 32, to Form 10-K dated December 31, 1993 *(10)(iii) 1993 Incentive Stock Option Plan - W. Morris Fine, filed as Exhibit 10, page 33, to Form 10-K dated December 31, 1993 *(10)(iv) Employment Agreement, dated February 9, 1984 with J. Allen Fine, President, filed as Exhibit 10, page 14, to Form 10-K dated December 31, 1985 *(10)(v) Form of Incentive Stock Option Agreement under 1933 Incentive Stock Option Plan, filed as Exhibit 10(v), page 29, to Form 10-K dated December 31, 1994 8 (10)(vi) Form of Amendment dated November 8, 1994 to Stock Option Agreement dated As of November 13, 1989 (10)(vii) Form of Stock Option Agreement dated November 13, 1989 (27) Financial Data Schedule *incorporated by reference to the report indicated (b) Reports on Form 8-K There were no reports filed on Form 8-K for this quarter. 9 SIGNATURE 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: April 28, 1995 10 EX-10.6 2 EXHIBIT 10 (VI) AMENDMENT TO STOCK OPTION AGREEMENT THIS AMENDMENT, dated as of November 8, 1994, to the Stock Option Agreement dated as of November 13, 1989 (the "Option Agreement") between Investors Title Company, a North Carolina corporation (the "Corporation"), and _____________, an employee of the Company (the "Employee"). W I T N E S S E T H: The Option Agreement shall be amended as follows: 1. By deleting in its entirety Article IV of the Option Agreement and inserting in lieu thereof the following: ARTICLE IV METHOD OF EXERCISE The option granted hereunder shall be exercised by written notice directed to the Corporation at its principal place of business. The purchase price of any shares purchased shall be paid in full in cash or by check payable to the order of the Corporation or by shares of Common Stock of the Corporation or by a combination of cash, check, or shares of Common Stock. If any portion of the purchase price is paid in shares of Common Stock, those shares shall be valued at their fair market value as of the day of delivery. Fair market value shall mean the closing sales price per share of the Corporation's Common Stock, as reported by the National Association of Securities Dealers Automated Quotation System, on the day preceding the day of delivery (or the most recent trading day preceding the day of delivery). 2. By deleting in its entirety Article VI of the Option Agreement and inserting in lieu thereof the following: ARTICLE VI RESTRICTION ON TRANSFER The Employee recognizes that the Option and the shares of Common Stock issuable upon its exercise have not been registered under the Securities Act of 1933 or under the securities laws of any state. The Employee acknowledges that under present federal securities regulations, he will be required to hold any shares purchased pursuant to exercise of the Option for a period of not less than two years following full payment for said shares and that thereafter the shares may be sold only in compliance with Rule 144 of the Securities and Exchange Commission. The Employee further acknowledges that, notwithstanding registration, if, at the time of exercise of the Option, he is deemed an "affiliate" of the Company as defined in said Rule 144, any shares purchased thereunder will nevertheless be subject to sale only in compliance with Rule 144 (but without any holding period), and that the Company shall take such action as it deems necessary or appropriate to assure such compliance, including placing restrictive legends on certificates evidencing such shares and delivering stop transfer instructions to the Company's transfer agent. 3. By inserting the following as a new Article VII of the Option Agreement: ARTICLE VII TAX CONSEQUENCES The Employee acknowledges that, upon any exercise of the Option, he will recognize ordinary income for income tax purposes (generally in an amount equal to the difference between the fair market value of the shares on the date of exercise and the option price paid therefor) and the Corporation will be entitled to a corresponding deduction. Consequently, the Employee agrees that he will pay, or make arrangements to pay, to the Corporation an amount equal to any income and other taxes that the Corporation is required to withhold as a result of his exercise of the Option. If for any reason such payment or arrangement to pay is not made, the Corporation shall be entitled to withhold, from other sums payable to the Employee, the amount of such income and other taxes. Except as amended hereby, the Option Agreement shall remain in full force and effect. IN WITNESS WHEREOF, this Amendment is executed by the Company and the Employee as of November 9, 1994. INVESTORS TITLE COMPANY By: ________________________ J. Allen Fine, President ________________________ _____________, Employee EX-10.7 3 EXHIBIT 10(vii) NORTH CAROLINA ORANGE COUNTY OPTION THIS OPTION, made and entered into this 13th day of November, 1989, by and between INVESTORS TITLE COMPANY, a corporation duly organized and existing under the laws of the State of North Carolina, party of the first part, hereinafter referred to as "Corporation" and , party of the second part, hereinafter referred to as "Employee"; W I T N E S E T H: WHEREAS, Corporation has employed Employee and considers it desirable and in the best interest that Employee be given an inducement to acquire a proprietary interest in the Corporation and an added incentive to advance the interest of the Corporation in the form of options to purchase common shares of the Corporation. NOW, THEREFORE, subject to the terms and conditions hereinafter stated, Corporation does hereby give and grant unto Employee the right and option to purchase from Corporation its shares of common stock, subject to the following terms and conditions: ARTICLE I NUMBER OF SHARES Corporation hereby gives and grants Employee the right and option to purchase from Corporation an aggregate of shares of its common stock to be exercisable at the time and for the number of shares as follows: A. On or after November 13, 1989 to and including November 12, 1990 , shares. B. On or after November 13, 1990 to and including November 12, 1991 , shares. C. On or after November 13, 1991 to and including November 12, 1992 , shares. D. On or after November 13, 1992 to and including November 12, 1993 , shares. E. On or after November 13, 1993 to and including November 12, 1994 , shares. 1 If Employee does not purchase in the periods specified in Subparagraphs A-E, the full number of shares he is then entitled, he may purchase such shares in the subsequent period in addition to the shares which he would otherwise be entitled to purchase in such subsequent period; provided, however, this option shall in all events terminate November 12, 1994 , and any portion of this option remaining then unexercised shall be forfeited. ARTICLE II TERMINATION OF EMPLOYMENT The termination of Employee's continuous employment for any reason with Corporation shall not affect or reduce any option rights granted to him under Article I prior to the date of termination, provided, however, the right to purchase additional shares during subsequent periods after termination shall be forfeited. ARTICLE III PURCHASE PRICE The purchase price for each share of stock is per share, the fair value of such shares. ARTICLE IV METHOD OF EXERCISE The option granted hereunder shall be exercised by written notice directed to corporation at its principal place of business accompanied by check in payment of the option price for the number of shares specified and paid for and the Company shall make immediate delivery of such shares represented by the purchase paid. ARTICLE V TRANSFER ASSIGNMENT The rights under this option may not be transferred or assigned and may not be exercised by anyone other than Employee during his lifetime; provided, however, Employee may 2 designate a person who may exercise the option after his death or allow its exercise by a person so named in his Last Will and Testament. ARTICLE VI RESTRICTION ON TRANSFER Prior to delivery of the shares purchased under this option, the Corporation and Employee shall instruct the Corporation's transfer agent to the effect that no transfer of said shares shall be made unless a registration statement under the Securities Act of 1933, as amended, with respect to such shares is in effect or an exemption from the registration requirements of such act is in fact applicable to such shares and the Corporation shall impress upon the face of the Certificate or Certificates representing the shares exercised and upon all shares issued in exchange therefor the following legend: "No sale, offer to sell or transfer of the shares represented by this Certificate shall be made unless a registration statement under the Federal Securities Act of 1933, as amended, with respect to such shares is then in effect or an exemption from the registration requirements of such act is then in fact applicable to such shares." IN TESTIMONY WHEREOF, Corporation has caused this option to be signed in its corporate name by its President, attested by its Assistant Secretary, on the day and year first above written. INVESTORS TITLE COMPANY By: J. Allen Fine, President ATTEST Glenda H. Oxendine Assistant Secretary 3 NORTH CAROLINA ORANGE COUNTY I, Teresa Crisson Kelly Notary Public, certify that Glenda H. Oxendine, personally came before me this day and acknowledged that she is the Assistant Secretary of Investors Title Company, a corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its president, sealed with its corporate seal, and attested by herself as its Assistant secretary. Witness my hand and notarial seal this 14th day of November , 1989. Teresa Crisson Kelly Notary Public My Commission Expires 11/20/93 4 EX-27 4 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
7 *Not disclosed on a quarterly basis. 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 2,500,451 9,819,938 0* 3,136,953 0 0 16,559,105 2,542,249 0 0 24,399,314 3,584,850 0 41,599 0 0 1,253,212 0 0 18,023,760 24,399,314 3,104,025 283,980 17,991 56,814 250,091 0 2,524,555 688,164 80,990 607,174 0 0 0 607,174 .22 .22 0 0 0 0 0 0 0
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