-----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, VUnT6cOwmPj5aTiOlcuHO/+F17yL6JmxDdjl9h04Ov3mwum7Dd1EhGmBy6KHXM/X le/24Or87q4RXlyJ22jkgw== 0000905870-98-000008.txt : 19980511 0000905870-98-000008.hdr.sgml : 19980511 ACCESSION NUMBER: 0000905870-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980508 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: SEC FILE NUMBER: 000-11774 FILM NUMBER: 98613406 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, 1998 ------------------- 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, 1998: Common Stock, no par value 2,805,173 - -------------------------------------------------------------------- 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, 1998 and December 31, 1997....3 Consolidated Statements of Income: Three Months Ended March 31, 1998 and 1997 ............................4 Consolidated Statements of Cash Flows: Three Months Ended March 31, 1998 and 1997 ............................5 Notes to Condensed Consolidated Financial Statements .....................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................8 PART II. OTHER INFORMATION...................................................10 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, 1998 and December 31, 1997 (Unaudited)
3/31/98 12/31/97 ------- -------- Assets Cash and Cash Equivalents $ 3,652,670 $ 2,823,177 Investments in securities: Held-to-maturity: Certificates of deposit 131,725 130,985 Bonds, at amortized cost 5,163,585 4,710,481 Available-for-sale, at fair value: Bonds 20,229,252 19,752,550 Common and nonredeemable preferred stocks 6,648,115 6,530,394 ----------------- ----------------- Total investments 32,172,677 31,124,410 ----------------- ----------------- Premiums ( less allowance for doubtful accounts: 1998: $425,000; 1997: $350,000) 3,852,776 3,372,751 Accrued interest and dividends 444,889 429,064 Prepaid expenses and other assets 449,033 462,801 Property acquired in settlement of claims 265,725 280,725 Property, net 2,856,537 2,800,079 ----------------- ----------------- Total Assets $ 43,694,307 $ 41,293,007 ================= ================= Liabilities and Stockholders' Equity Liabilities: Reserves for claims (Note 2) $ 8,498,765 $ 7,622,140 Accounts payable and accrued liabilities 816,272 1,069,372 Commissions and reinsurance payables 89,210 96,241 Premium taxes payable 131,618 153,857 Current income taxes payable 528,263 25,081 Deferred income taxes, net 1,230,461 1,197,408 ----------------- ----------------- Total liabilities 11,294,589 10,164,099 ----------------- ----------------- Stockholders' Equity: Common stock-no par value (shares authorized 6,000,000; 2,855,744 and 2,855,744 shares issued; and 2,805,173 and 2,800,240 shares outstanding 1998 and 1997, respectively) 979,002 879,612 Retained earnings 28,915,637 27,933,688 Net unrealized gain on investments (accumulated other comprehensive income - Note 3) (net of deferred taxes: 1998: $1,291,067; 1997: $1,193,461) 2,505,079 2,315,608 ----------------- ----------------- Total stockholders' equity 32,399,718 31,128,908 ----------------- ----------------- Total Liabilities and Stockholders' Equity $ 43,694,307 $ 41,293,007 ================= =================
See notes to consolidated financial statements. 3 Investors Title Company and Subsidiaries Consolidated Statements of Income March 31, 1998 and 1997 (Unaudited)
For The Three Months Ended March 31 ----------------------------------- 1998 1997 ---- ---- Revenues: Underwriting income: Premiums written $ 9,516,951 $ 5,487,630 Less-premiums for reinsurance ceded 75,103 68,842 ------------- ------------- Net premiums written 9,441,848 5,418,788 Investment income-interest and dividends 420,286 398,113 Net realized gain on sales of investments 70,175 107,081 Other 150,011 121,529 ------------- ------------- Total 10,082,320 6,045,511 ------------- ------------- Operating Expenses: Commissions to agents 3,531,840 1,672,088 Provision for claims (Note 2) 1,564,370 814,821 Salaries 1,226,059 991,476 Employee benefits and payroll taxes 811,034 463,472 Office occupancy and operations 659,734 546,940 Business development 307,775 145,947 Taxes, other than payroll and income 242,440 172,844 Professional fees 89,136 35,136 Other 123,814 21,863 ------------- ------------- Total 8,556,202 4,864,587 ------------- ------------- Income Before Income Taxes 1,526,118 1,180,924 ------------- ------------- Provision For Income Taxes 458,497 319,870 ------------- ------------- Net Income $ 1,067,621 $ 861,054 ============= ============= Basic Earnings per Common Share $ 0.38 $ 0.31 ============= ============= Weighted Average Shares Outstanding-Basic 2,803,028 2,768,947 ============= ============= Diluted Earnings per Common Share $ 0.38 $ 0.31 ============= ============= Weighted Average Shares Outstanding-Diluted 2,846,113 2,816,123 ============= ============= Dividends Paid $ 85,672 $ 85,672 ============= ============= Dividends per Share $ 0.03 $ 0.03 ============= =============
Consolidated Statements of Comprehensive Income March 31, 1998 and 1997 (Unaudited) Net Income $ 1,067,621 $ 861,054 ------------- ------------- Other comprehensive income, net of tax: Net unrealized gain (loss) on investments arising during the period 189,471 (380,976) ------------- ------------- Comprehensive Income (Note 3) $ 1,257,092 $ 480,078 ============= =============
See notes to consolidated financial statements. 4 Investors Title Company and Subsidiaries Consolidated Statements of Cash Flows For the Three Months Ended March 31, 1998 and 1997 (Unaudited)
1998 1997 --------- --------- Operating Activities: Net income $ 1,067,621 $ 861,054 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 79,184 80,106 Net (accretion) amortization (2,294) 1,176 Provision for losses on premiums receivable 75,000 - Net loss on disposals of property 83 956 Net realized gain on sales of investments (70,175) (107,081) Benefit for deferred income taxes (64,553) (37,527) Provision for claims 1,564,370 814,821 Payments of claims, net of recoveries (687,745) (464,821) Changes in assets and liabilities: Increase in receivables and other assets (542,082) (69,769) Decrease in accounts payable and accrued liabilities (253,100) (429,646) Increase (decrease) in commissions and reinsurance payables (7,031) 28,252 Decrease in premium taxes payable (22,239) (111,552) Increase in current income taxes payable 503,182 208,410 ----------------- --------------- Net cash provided by operating activities 1,640,221 774,379 ----------------- --------------- Investing Activities: Purchases of available-for-sale securities (996,730) (1,326,176) Purchases of held-to-maturity securities (584,035) - Proceeds from sales of available-for-sale securities 762,044 1,305,447 Proceeds from sales of held-to-maturity securities 130,000 285,000 Purchases of property (135,725) (80,615) Proceeds from sales of property - 45 ----------------- --------------- Net cash provided by (used in) investing activities (824,446) 183,701 ----------------- --------------- Financing Activities: Distributions (repurchases) of common stock 99,390 (16,355) Dividends paid (85,672) (85,672) ----------------- --------------- Net cash provided by (used in) financing activities 13,718 (102,027) ----------------- --------------- Net Increase in Cash and Cash Equivalents 829,493 856,053 Cash and Cash Equivalents, Beginning of Year 2,823,177 4,244,570 ----------------- --------------- Cash and Cash Equivalents, End of Period $ 3,652,670 $ 5,100,623 ================= =============== Supplemental Disclosures: Cash Paid During the Year for: Interest $ 6,000 $ - ================= =============== Income Taxes $ 20,062 $ 148,987 ================= ===============
See notes to consolidated financial statements. 5 INVESTORS TITLE COMPANY AND SUBSIDIARIES ---------------- Notes to Condensed Consolidated Financial Statements ---------------------------------------------------- March 31, 1998 -------------- (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, 1997 for a description of accounting policies. Note 2 - Reserves for Claims - ---------------------------- Transactions in the reserves for claims for the three months ended March 31, 1998 were as follows: Balance, beginning of year $7,622,140 Provision, charged to operations 1,564,370 Recoveries 222,652 Payments of claims (910,397) ------------ Balance, March 31, 1998 $8,498,765 ============ In management's opinion, the reserves are adequate to cover claim losses which might result from pending and possible claims. 6 Note 3 - Comprehensive Income - ----------------------------- In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). The Company adopted SFAS 130 as of January 1, 1998. Adoption of SFAS 130 has not had a financial impact on the Company. This statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. Reclassification of financial statements for earlier periods provided for comparative purposes is required. Accumulated other comprehensive income is summarized as follows: Net Unrealized Gain (Loss) on Investments ----------------- Three months Three months ended ended March 31, 1998 March 31, 1997 ------------------------ ------------------------ Beginning balance $ 2,315,608 $ 1,519,861 Current period change 189,471 (380,976) ------------------------ ------------------------ Ending balance $ 2,505,079 $ 1,138,885 ======================== ======================== 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations ------------- The 1997 Form 10-K and the 1997 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, 1998, premiums written increased 74% to $9,441,848, investment income increased 6% to $420,286, revenues increased 67% to $10,082,320, net income increased 24% to $1,067,621 and net income per basic and diluted share increased 23% to $.38 all compared to the same quarter in 1997. Growth in sales has resulted from the Company's continuing efforts to increase market share in both existing and new operating territories and an extremely robust real estate market. Falling interest rates have spurred a surge in mortgage refinancing and a significant increase in real estate transactions. According to the Mortgage Bankers Association of America, the monthly average 30-year fixed mortgage interest rates declined to 7.04% for the three months ended March 31, 1998 compared with 7.79% for the three months ended March 31, 1997. The volume of business continued to increase in the first quarter of 1998 as the number of policies and commitments issued rose to 62,363, an increase of 79% compared with 34,857 in the same period in 1997. For the quarter ended March 31, 1998, premiums from branch operations increased 50% to $4,579,686 compared with $3,043,006 in the same quarter in 1997. Premiums from agency operations increased 105% to $4,862,162 for the three months ended March 31, 1998 compared with $2,375,782 for the same period in 1997. Shown below is a schedule of title premiums written for the three months ended March 31, 1998 and 1997 in all states where our two insurance subsidiaries, Investors Title Insurance Company and Northeast Investors Title Insurance Company, currently underwrite insurance: 1998 1997 --------------------- -------------------- Florida $ 8,224 $ 22,773 Georgia 141,944 192,909 Indiana 31,812 18,939 Kentucky 102 - Maryland 37,036 20,365 Michigan 2,076,358 668,290 Minnesota 225,206 - Mississippi 10,973 10,788 Nebraska 177,171 158,870 New York 101,765 99,355 North Carolina 4,574,551 2,966,363 Pennsylvania 250 - South Carolina 593,595 408,054 8 Shown below is a schedule of title premiums written for the three months ended March 31, 1998 and 1997 in all states (continued): 1998 1997 ------------------- --------------------- Tennessee 35,951 13,884 Virginia 1,474,921 884,793 ------------------- --------------------- Direct Premiums 9,489,859 5,465,383 Reinsurance, net (48,011) (46,595) ------------------- --------------------- Net Premiums $ 9,441,848 $ 5,418,788 =================== ===================== Operating expenses increased 76% for the three months ended March 31, 1998 compared with the same period in 1997. Salaries and employee benefits increased due to additional staffing needed to process the rise in premium volume. Office occupancy and operations, business development 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 continuing to grow agency relationships. The provision for claims as a percentage of net premiums written was 17% for the three months ended March 31, 1998 versus 15% for the same period in 1997. Income tax expense as a percentage of income before income taxes was 30% and 27% for the three months ended March 31, 1998 and 1997, respectively. The increase in 1998 was primarily the result of an increase in the deferred tax provision. Liquidity and Capital Resources: -------------------------------- Net cash provided by operating activities for the three months ended March 31, 1998, amounted to $1,640,221 compared with $774,379 for the same three month period during 1997. In addition to operational liquidity, the Company has no long-term debt. Nonoperating funds were primarily used to purchase investments. On December 9, 1996, the Board of Directors approved the repurchase by the Company of 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 23,106 shares at an average price of $17.38 per share as of April 17, 1998, including 972 shares purchased at an average purchase price of $23.73 during the quarter ended March 31, 1998. The Board has authorized management to repurchase up to an additional 126,894 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. 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) 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) the risk that losses from claims are greater than anticipated such that reserves for possible claims are inadequate; (iii) the risk 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 affect on the Company's business. 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. 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 8, 1998 11 EX-27 2 FIRST QUARTER 1998 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
7 *Not disclosed on a quarterly basis. 3-MOS DEC-31-1998 MAR-31-1998 20,229,252 5,163,585 0* 6,648,115 0 0 32,172,677 3,652,670 0 0 43,694,307 8,498,765 0 89,210 0 0 0 0 979,002 31,420,716 43,694,307 9,441,848 420,286 70,175 150,011 1,564,370 0 6,991,832 1,526,118 458,497 1,067,621 0 0 0 1,067,621 .38 .38 0 0 0 0 0 0 0
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