-----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, LCHW4lHcz3Pa3dfqkVqh45SPKit9bXzy/3kC1atuONySQKIZ3QDo77pmyol0zJVH QSkWkNSPoz5FOUBLiJ3bmw== 0000074347-94-000001.txt : 19940601 0000074347-94-000001.hdr.sgml : 19940601 ACCESSION NUMBER: 0000074347-94-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RE CAPITAL CORP /DE/ CENTRAL INDEX KEY: 0000074347 STANDARD INDUSTRIAL CLASSIFICATION: 6331 IRS NUMBER: 133351768 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05429 FILM NUMBER: 94527113 BUSINESS ADDRESS: STREET 1: SIX STAMFORD FORUM STREET 2: P O BOX 10148 CITY: STAMFORD STATE: CT ZIP: 06904-2148 BUSINESS PHONE: 2039776100 MAIL ADDRESS: STREET 1: SIX STAMFORD FORUM STREET 2: P.O. BOX 10148 CITY: STAMFORD STATE: CT ZIP: 06904-2148 FORMER COMPANY: FORMER CONFORMED NAME: OLLA INDUSTRIES INC DATE OF NAME CHANGE: 19860806 10-Q 1 FORM 10-Q FOR THREE MONTHS ENDED 3/31/94 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, 1994 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: 1-5429 _________________________________ RE CAPITAL CORPORATION Delaware 13-3351768 (State of incorporation) (IRS employer identification no.) Two Stamford Plaza P.O. Box 10148 Stamford, Connecticut 06904 (Address of principal executive offices) Telephone Number: (203) 977-6100 ________________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods 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 At May 11, 1994, 7,046,125 shares of common stock, $.10 par value of the registrant were outstanding. 2 RE CAPITAL CORPORATION INDEX
PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets March 31, 1994 and December 31, 1993 3 Condensed Consolidated Statements of Income Three Months Ended March 31, 1994 and 1993 4 Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 1994 and 1993 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 ITEM 4. Submission of Matters to a Vote of Security Holders 10 ITEM 6. Exhibits and Reports on Form 8-K 10 Signatures 10 Exhibit 11.0 - Computation of Earnings Per Share 11
- 2 - 3 RE CAPITAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS) (UNAUDITED) MARCH 31, DECEMBER 31, 1994 1993 ASSETS Investments: Fixed maturities available for sale, at $324,775 $334,719 market value(amortized cost:1994-$319,372 and 1993-$318,868) Short-term 11,821 8,676 Total Investments 336,596 343,395 Cash 1,040 692 Accrued investment income 6,086 6,280 Premiums receivable 62,134 57,227 Reinsurance balances recoverable 12,140 12,557 Other assets 44,215 38,466 Total Assets $462,211 $458,617 LIABILITIES Claims and claim expenses $203,574 $200,638 Unearned premiums 53,016 46,487 Convertible debentures 69,000 69,000 Other liabilities 11,693 11,719 Total Liabilities 337,283 327,844 SHAREHOLDERS' EQUITY Preferred stock, $.10 par value, authorized: 1,000,000 shares, none issued Common stock, $.10 par value, authorized: 50,000,000 shares, issued: 9,536,159 shares 954 954 Additional paid-in capital 93,194 93,194 Unrealized appreciation on fixed maturities available for sale, net of tax 3,566 10,461 Retained earnings 56,863 55,890 Unearned compensation - restricted common stock (1,555) (1,632) Treasury stock, at cost; 2,490,284 shares (28,094) (28,094) Total Shareholders' Equity 124,928 130,773 Total Liabilities and Shareholders' Equity $462,211 $458,617
See notes to condensed consolidated financial statements. - 3 - 4 RE CAPITAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA) THREE MONTHS ENDED MARCH 31, 1994 1993 REVENUES Premiums earned $ 29,207 $ 28,732 Net investment income 5,197 4,383 Net realized investment gains 41 - Total 34,445 33,115 EXPENSES Claims and claim expenses 21,200 20,415 Amortization of deferred acquisition costs 8,039 7,939 Other operating expenses 2,549 2,177 Interest expense 949 353 Total 32,737 30,884 Income before Federal income taxes 1,708 2,231 Federal income tax expense 171 223 Net Income $ 1,537 $ 2,008 PER SHARE DATA PRIMARY EARNINGS PER SHARE: Weighted average shares outstanding 7,054 6,463 Primary earnings per share $ .22 $ .31 FULLY DILUTED EARNINGS PER SHARE: Weighted average shares outstanding 11,069 6,939 Fully diluted earnings per share $ .20 $ .31 Cash dividends declared per share $ .08 $ .07
See notes to condensed consolidated financial statements. - 4 - 5 RE CAPITAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (DOLLARS IN THOUSANDS) THREE MONTHS ENDED MARCH 31, 1994 1993 OPERATING ACTIVITIES Net Cash Provided by Operating Activities $ 5,084 $ 9,403 INVESTING ACTIVITIES Sales of fixed maturities 572 112 Maturities or calls of fixed maturities 1,000 1,705 Purchases of fixed maturities (2,609) (17,804) Net (purchases) sales of short-term investments (3,145) 6,520 Net additions to property and equipment (61) (34) Net Cash Used in Investing Activities (4,243) (9,501) FINANCING ACTIVITIES Cash dividends to shareholders (493) (379) Short-term debt borrowings, net - 150 Acquisition of treasury stock - (18) Exercise of common stock options - 30 Net Cash Used in Financing Activities (493) (217) Increase (Decrease) in Cash 348 (315) Cash at Beginning of Year 692 2,002 Cash at End of Period $ 1,040 $ 1,687
See notes to condensed consolidated financial statements. - 5 - 6 RE CAPITAL CORPORATION AND SUBSIDIARES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1994 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim condensed consolidated financial statements of Re Capital Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Certain balances in the 1993 financial statements have been reclassified to conform to the 1994 presentation. Operating results for any interim period are not necessarily indicative of results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report and Form 10-K for the year ended December 31, 1993. NOTE 2 - EARNINGS PER SHARE OF COMMON STOCK Primary earnings per share are based on the weighted average number of shares of common stock and common stock equivalents outstanding during the period, computed in accordance with the assumptions required by the treasury stock method. Fully diluted earnings per share assumes conversion of dilutive convertible debentures and the assumed exercise of all common stock equivalents. NOTE 3 - INCOME TAXES The Omnibus Budget Reconciliation Act of 1993, which was signed in August 1993, resulted in a graduated corporate tax rate increase from 34% to 35%, for companies with taxable income in excess of $10,000,000. The Company is not presently affected by this change, as its expected taxable income is below this threshold. The Company's effective federal income tax rate is less than the statutory tax rate due primarily to tax-exempt interest income. At March 31, 1994 and December 31, 1993, other assets include net deferred tax assets of $13,706,000 and $9,674,000, respectively. NOTE 4 - REINSURANCE All of the Company's premiums are assumed from other insurance companies. The Company also cedes reinsurance to other companies. Risks are reinsured (retroceded) with other companies to permit the recovery of a portion of the Company's losses. The Company remains liable regardless of whether the reinsuring companies meet their obligations under the reinsurance treaties. - 6 - 7 RE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1994 (CONTINUED) NOTE 4 - REINSURANCE (CONTINUED) The components of the Company's reinsurance balances recoverable at March 31, 1994 and December 31, 1993 are summarized as follows (in thousands):
MARCH 31, DECEMBER 31, 1994 1993 Ceded claims and claim expenses $ 8,703 $ 9,039 Prepaid reinsurance premiums 2,183 2,424 Reinsurance recoverable on paid losses 1,254 1,094 $12,140 $12,557
The effect of the Company's retrocessional program on premiums written, premiums earned and claims and claim expenses for the three months ended March 31, 1994 and 1993 are summarized as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 1994 1993 Ceded premiums written $ 1,725 $ 1,387 Ceded premiums earned $ 1,965 $ 1,376 Ceded claims and claim expenses $ 897 $ 771
NOTE 5 - DIVIDEND At its meeting held on March 22, 1994, the Board of Directors of the Company declared a quarterly dividend of $.08 per share payable on June 10, 1994 to shareholders of record on May 18, 1994. - 7 - 8 RE CAPITAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARCH 31, 1994 Management's discussion and analysis of financial condition compares certain financial results for the quarter ended March 31, 1994 with the quarter ended March 31, 1993. The Company is engaged primarily in the underwriting of domestic property and casualty reinsurance through its wholly-owned subsidiary, Re Capital Reinsurance Corporation ("Re Cap"). RESULTS OF OPERATIONS The Company's net income for the quarter ended March 31, 1994 was $1,537,000 versus $2,008,000 for the comparable 1993 period. Primary and fully diluted earnings per share for the three months ended March 31, 1994 were $.22 and $.20, respectively, as compared with $.31 on both a primary and fully diluted basis for the first quarter of 1993. After-tax net income for the first quarter of 1993 was reduced by $747,000, or $.11 per share on a primary basis ($.06 per share on a fully diluted basis), as a result of losses related to the Northridge earthquake. First quarter 1993 after-tax net income was reduced by $444,000, or $.07 per share, on both a primary and fully diluted basis as a result of the World Trade Center bombing. Net premiums written for the first quarter of 1994 increased 26.4% to $35,978,000 from $28,467,000 in the first quarter of 1993. Net premiums earned for the first quarter of 1994 and 1993 were $29,207,000 and $28,732,000, respectively. The increase in net premiums written, which is expected to translate into increased premiums earned in subsequent quarters, resulted from a combination of new business written and increased participations on existing business. The growth in premiums written was concentrated in the automobile liability and automobile physical damage lines of business. The statutory combined ratio for the first quarter of 1994 was 104.0% compared with 105.4% for the first quarter of 1993. The components of the combined ratios for both quarters are as follows:
QUARTER ENDED MARCH 31, 1994 1993 Loss ratio 72.6% 71.1% Underwriting expense ratio: Commission & Brokerage 25.9 27.8 Other operating expenses 5.5 6.5 Total expense ratio 31.4 34.3 Combined ratio 104.0% 105.4%
- 8 - 9 RE CAPITAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARCH 31, 1994 (CONTINUED) Losses resulting from the Northridge earthquake increased the Company's 1994 first quarter combined ratio by 3.9 points while the World Trade Center bombing added 2.3 points to the first quarter 1993 combined ratio. Net investment income, exclusive of net realized gains, increased 18.6% to $5,197,000 in the first quarter of 1994 from $4,383,000 recorded in the first quarter of 1993. This increase resulted primarily from an increase in invested assets as a result of the Company's convertible debenture offering which closed in July 1993. Exclusive of investment income allocable to the proceeds of this offering, the Company's net investment income for the quarter ended March 31, 1994 increased by 2.8% over the first quarter of 1993. The pre-tax yield on investments declined to 6.4% in the first quarter of 1994 from 6.9% in the first quarter of 1993. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations aggregated $5,084,000 for the quarter ended March 31, 1994 compared to $9,403,000 for the corresponding period of 1993. Cash flow in the first quarter of 1994 was reduced by the Company's initial interest payment on its convertible debentures of $1,940,000. The Company's shareholders' equity and Re Cap's statutory surplus at March 31, 1994 amounted to $124,928,000 and $156,685,000, compared with $130,773,000 and $155,530,000 at December 31, 1993. The Company's shareholders' equity per share decreased to $17.73 at March 31, 1994 from $18.56 at December 31, 1993. Effective December 31, 1993, the Company adopted Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In connection therewith, the Company recorded a $10,461,000 increase in shareholders' equity for the unrealized appreciation on its fixed income portfolio, net of tax. During the first quarter of 1994, this unrealized appreciation, net of tax, decreased by $6,895,000 or $.98 per share to $3,566,000. The Board of Directors of the Company declared a quarterly dividend of $.08 per share in the first quarter compared with $.07 per share in the first quarter of 1993. - 9 - 10 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibit 11.0 - Computation of Earnings Per Share. b. Reports on Form 8-K: None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURE TITLE DATE /s/ James E. Roberts President and Chief Executive May 11, 1994 James E. Roberts Officer and Director (Principal Executive Officer) /s/ R. Richard Mueller Vice President, Chief Financial May 11, 1994 R. Richard Mueller Officer and Treasurer (Principal Accounting and Financial Officer)
- 10 - 11 RE CAPITAL CORPORATION AND SUBSIDIARIES ITEM 6.a. - EXHIBIT 11.0 - COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 1994 1993 PRIMARY Average shares outstanding 6,923 6,329 Weighted average shares of common stock equivalents associated with stock options, net 131 134 Total 7,054 6,463 Net Income $ 1,537 $ 2,008 Per share amount $ .22 $ .31 FULLY DILUTED Average shares outstanding 6,923 6,329 Weighted average shares of common stock equivalents associated with stock options, net 131 134 Assumed conversion of convertible debentures and note 4,015 476 Total 11,069 6,939 Net Income $ 1,537 $ 2,008 Add convertible debenture and note interest, net of Federal income tax effect 626 132 Adjusted Net Income $ 2,163 $ 2,140 Per share amount $ .20 $ .31
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