-----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, CM2jjlfqj36KcqbPJtu8Qpgvmqq81roaL0rSblAJ06+y6yaLRPI+CV9Yh8IRq+Y2 bE7T0F3GllIXmmz4HcSQTg== 0000905870-96-000025.txt : 19961111 0000905870-96-000025.hdr.sgml : 19961111 ACCESSION NUMBER: 0000905870-96-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961108 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: 96657049 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, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-11774 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 September 30, 1996: Common Stock, no par value 2,765,291 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, 1996 and December 31, 1995. . . . . . . . . . . . . . . . . . . . . . .3 Consolidated Statements of Income: Three Months and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Consolidated Statements of Cash Flows: Nine Months Ended September 30, 1996 and 1995. . . . . . . . .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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 1996 and December 31, 1995 (Unaudited) 9/30/96 12/31/95 Assets Cash and Cash Equivalents $ 3,577,290 $ 2,527,008 Investments: Held-to-maturity: Certificates of deposit 194,334 399,203 Bonds - at amortized cost 5,530,220 4,748,276 Available-for-sale - at market: Bonds and redeemable preferred stocks 11,239,947 10,310,737 Common and nonredeemable preferred stocks 5,275,938 4,284,423 Total investments 22,240,439 19,742,639 Receivables: Premiums, net 2,058,987 1,703,395 Accrued interest and dividends 314,235 299,159 Recoveries of claims previously paid 257,123 426,056 Refundable income taxes 22,203 - Other 14,542 34,159 Total receivables 2,667,090 2,462,769 Prepaid Expenses and Other Assets 394,273 378,191 Property Acquired in Settlement of Claims 165,500 250,500 Property-At Cost: Land 782,582 782,582 Office buildings and improvements 1,293,726 1,293,726 Furniture, fixtures and equipment 1,825,950 1,694,657 Automobiles 169,423 151,374 Total 4,071,681 3,922,339 Less accumulated depreciation 1,270,074 1,059,170 Property, net 2,801,607 2,863,169 Total Assets $ 31,846,199 $ 28,224,276 Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued liabilities $ 925,710 $ 997,823 Commissions and reinsurance payables 44,115 38,601 Premium taxes payable 91,194 35,840 Income taxes payable: Current - 119,500 Deferred 1,181,582 986,633 Total liabilities 2,242,601 2,178,397 Reserve for Claims 4,786,065 3,836,065 Stockholders' Equity: Common stock-No par value (shares authorized 6,000,000; 2,855,744 and 2,855,744 shares issued and 2,765,291 and 2,790,633 shares outstanding 1996 and 1995, respectively) 746,424 1,038,414 Retained earnings 22,772,704 20,173,755 Net unrealized gain on investments (net of deferred taxes: 1996: $669,069; 1995: $514,130) 1,298,405 997,645 Total stockholders' equity 24,817,533 22,209,814 Total Liabilities and Stockholders' Equity $ 31,846,199 $ 28,224,276
3 Investors Title Company and Subsidiaries Consolidated Statements of Income September 30, 1996 and 1995 (Unaudited) For The Three For The Nine Months Ended Months Ended September 30 September 30 1996 1995 1996 1995 Revenues: Underwriting income: Premiums written $ 5,604,538 $ 4,443,282 $ 15,563,118 $ 11,338,032 Less-premiums for reinsurance ceded 30,295 21,788 72,584 51,241 Net premiums written 5,574,243 4,421,494 15,490,534 11,286,791 Investment income-interest and dividends 329,113 298,430 938,190 879,599 Rental income 13,167 8,313 32,292 18,077 Gain (loss) on disposals of investments and property, net 37,288 (9,915) 57,802 36,623 Other 70,741 41,769 181,612 165,759 Total 6,024,552 4,760,091 16,700,430 12,386,849 Operating Expenses: Salaries 1,055,299 849,763 2,836,457 2,565,017 Commissions to agents 1,535,595 959,760 3,984,649 2,492,222 Provision for claims 714,513 508,537 2,226,658 1,095,110 Employee benefits and payroll taxes 296,899 389,515 1,027,280 939,834 Office occupancy and operations 555,629 469,257 1,542,986 1,337,653 Business development 136,261 136,234 432,452 381,893 Taxes, other than payroll and income 183,454 106,522 442,534 297,833 Professional fees 42,595 42,074 113,766 179,062 Interest expense - - - 10,638 Other 26,443 10,431 217,692 73,113 Total 4,546,688 3,472,093 12,824,474 9,372,375 Income Before Income Taxes 1,477,864 1,287,998 3,875,956 3,014,474 Provision For Income Taxes: Current 335,473 357,873 1,037,095 600,743 Deferred 70,041 16,394 40,010 136,420 Total 405,514 374,267 1,077,105 737,163 Net Income $ 1,072,350 $ 913,731 $ 2,798,851 $ 2,277,311 Net Income Per Share* $ 0.39 $ 0.32 $ 1.01 $ 0.81 Dividends Paid $ 71,394 $ 57,114 $ 199,902 $ 171,344 Dividends Per Share $ 0.025 $ 0.02 $ 0.07 $ 0.06
* Net income per share is computed based on the weighted average number of common shares outstanding (1996, 2,774,409 and 1995, 2,807,068 shares, respectively.) The effect of stock options is not material to the computation of earnings per share. 4 Investors Title Company and Subsidiaries Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 1996 and 1995 (Unaudited) 1996 1995 Operating Activities: Net income $2,798,851 $2,277,311 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 239,261 225,071 Amortization, net of accretion 9,287 46,063 (Gain) loss on disposals of property (10,991) 5,601 Gain on sales of investments (46,810) (42,223) Provision for deferred income taxes 40,010 136,420 Provision for possible claims 2,226,658 1,095,110 Payments of claims, net of recoveries (1,276,658) (936,110) Increase in receivables (204,321) (493,412) Increase in prepaid expenses and other assets (16,082) (308,146) (Increase) decrease in assets acquired in settlement of claims 85,000 (79,900) Decrease in accounts payable and accrued liabilities (72,113) (84,403) Increase (decrease) in commissions and reinsurance payables 5,514 (7,778) Increase (decrease) in premium taxes payable 55,354 (1,158) Increase (decrease) in income taxes payable - current (119,500) 120,129 Net cash provided by operating activities 3,713,460 1,952,575 Investing Activities: Purchases of investments held-to-maturity (997,220) (2,129,088) Purchases of investments available-for-sale (2,833,523) (743,094) Proceeds from sales of investments held-to-maturity 862,019 1,040,200 Proceeds from sales of investments available-for-sale 964,146 835,249 Purchases of property (251,062) (161,161) Proceeds from sales of property 84,354 3,157 Net cash used in investing activities (2,171,286) (1,154,737) Financing Activities: Dividends paid (199,902) (171,344) Repurchases of common stock, net (291,990) (113,907) Repayment of notes payable - (500,000) Net cash used in financing activities (491,892) (785,251) Net Increase in Cash and Cash Equivalents 1,050,282 12,587 Cash and Cash Equivalents, Beginning of Year 2,527,008 2,590,071 Cash and Cash Equivalents, End of Period $3,577,290 $2,602,658 Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest - $14,476 Income Taxes $1,329,196 $486,602
5 INVESTORS TITLE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 1996 (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, 1995 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 $30,456 and $72,584, respectively for the nine months ended September 30, 1996, and $27,565 and $51,241, respectively for the nine months ended September 30, 1995. Note 3 - Reserve for Claims Transactions in the reserve for claims for the nine months ended September 30, 1996 were as follows: Balance, beginning of year $3,836,065 Provision, charged to operations 2,226,658 Recoveries 238,420 Payments of claims (1,515,078) Balance, September 30, 1996 $4,786,065 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 $292,604 and $294,377, respectively for the nine months ended September 30, 1996 and 1995. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The 1995 Form 10-K and the 1995 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, 1996, premiums written increased 26% to $5,604,538, investment income increased 16% to $329,113, revenues increased 27% to $6,024,552, net income increased 17% to $1,072,350 and net income per share increased 22% to $.39 all compared to the same quarter in 1995. For the nine months ended September 30, 1996, premiums written increased 37% to $15,563,118, investment income increased 14% to $938,190, revenues increased 35% to $16,700,430, net income increased 23% to $2,798,851 and net income per share increased 25% to $1.01 all compared to the same period in 1995. Growth in sales has resulted from a combination of continued marketing efforts and a generally healthy real estate market, despite an approximately one point rise in mortgage rates since January. The volume of business continued to increase in the third quarter of 1996 as the number of policies and commitments issued rose to 36,149, an increase of 17% compared to 30,964 in the same period in 1995. However, by the end of the third quarter, the pace of sales had begun to decline. Policies and commitments issued for the nine months ended September 30, 1996 were 105,391 compared to 79,286 in 1995. Premiums from direct operations increased 27%, while premiums from agency operations increased 58% for the nine months ended September 30, 1996 compared to the same period in 1995. Operating expenses increased 31% and 37% for the three and nine months ended September 30, 1996, respectively, when compared to the same periods in 1995. Salaries increased due to additional staffing needed to process the rise in premium volume. Office occupancy and operations and premium taxes rose primarily due to the increase in premium volume. The increase in commissions is the result of the Company's expansion into new markets primarily through establishing new agency relationships. The year-to-date provision for possible claims increased as a result of the increase in premiums written coupled with a 36% increase in claims payments compared to the same period in 1995. The increase in claim payments was largely the result of the occurrence of a few larger than average claims. The reserve for claims has increased $950,000 in 1996 compared to year-end based on management's assessment of the reserve. The provision for current income taxes increased in 1996 compared to 1995 primarily due to a 1995 current income tax benefit resulting from loss carrybacks, an increase in the reserve for claims in 1996 which is not currently tax deductible, and an increase 7 in income in 1996. The increase in the provision for current income taxes was partially offset by a decline in the provision for deferred income taxes. Deferred income taxes decreased primarily as a result of the increase in the reserve for claims which is not deductible from taxable income. Liquidity and Capital Resources: Net cash provided by operating activities for the nine months ended September 30, 1996, amounted to $3,713,459 compared to $1,952,575 for the same nine month period during 1995. This increase is attributable to the increase in net income and a number of other factors, including a smaller increase in prepaid expenses and receivables in 1996, a decrease in assets acquired in settlement of claims in 1996, and a higher provision for possible claims in 1996 net of payments (which is added back to net income to reconcile net income to net cash), partially offset by a smaller provision for deferred income taxes and a decrease in current income taxes payable in 1996. The Board of Directors has approved the repurchase by the Company of shares of the Company's common stock from time to time at prevailing market prices for the purpose of issuances of stock in connection with stock options and stock bonuses. For the nine months ended September 30, 1996, the Company repurchased 34,936 shares at an average purchase price of $11.19 per share. The Board has authorized management to repurchase up to an additional 9,732 shares. 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 (27) Financial Data Schedule (b) Reports on Form 8-K There were no reports filed on Form 8-K for this quarter. 8 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 8, 1996 9 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-31-1996 DEC-31-1996 DEC-31-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996 MAR-31-1996 JUN-30-1996 SEP-30-1996 11,122,024 10,247,774 11,239,947 4,773,802 5,385,784 5,579,075 0* 0* 0* 3,923,286 4,908,399 5,275,938 0 0 0 0 0 0 19,943,423 20,675,968 22,240,439 3,111,968 3,029,399 3,577,290 0 0 0 0 0 0 29,028,800 30,141,064 31,846,199 4,186,065 4,486,065 4,786,065 0 0 0 30,682 36,063 44,115 0 0 0 0 0 0 0 0 0 0 0 0 910,970 783,200 746,424 21,882,473 22,853,262 24,071,109 29,028,800 30,141,064 31,846,199 4,434,799 9,916,291 15,490,534 294,791 609,077 938,190 (40,052) 8,604 46,810 69,710 141,906 224,896 681,333 1,512,145 2,226,658 0 0 0 3,031,212 6,765,641 10,597,816 1,046,703 2,398,092 3,875,956 298,984 671,591 1,077,105 747,719 1,726,501 2,798,851 0 0 0 0 0 0 0 0 0 747,719 1,726,501 2,798,851 .27 .62 1.01 .27 .62 1.01 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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