-----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, UC4WbZ9SmuXNR4u/NbrdnHSpQXcKfHYFZBGXiPpIykXo+U/5vGD6T2JbejPigsVD iFXOzocdWWv1Qs9EXoQuRw== 0000798085-96-000004.txt : 19960809 0000798085-96-000004.hdr.sgml : 19960809 ACCESSION NUMBER: 0000798085-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: US FACILITIES CORP CENTRAL INDEX KEY: 0000798085 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 330097221 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15196 FILM NUMBER: 96605397 BUSINESS ADDRESS: STREET 1: 650 TOWN CENTER DR STE 1600 CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7145491600 MAIL ADDRESS: STREET 1: 650 TOWN CENTER DRIVE STREET 2: STE 1600 CITY: COSTA MESA STATE: CA ZIP: 92626-1925 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 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: 0-15196 US FACILITIES CORPORATION --------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 33-0097221 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 650 Town Center Drive, Suite 1600, Costa Mesa, CA 92626 ------------------------------------------------------- (Address of principal executive offices) (Zip code) (714) 549-1600 -------------- (Registrant's telephone number, including area code) Not applicable --------------- (Former name, former address and former fiscal year, if changed since last report.) 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 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 Number of shares outstanding of each class of the Registrant's Common Stock as of July 31, 1996: Common Stock, par value $.01 per share: 5,878,848 Common Stock Purchase Rights: 5,878,848 INDEX Part I FINANCIAL INFORMATION Item 1. FINANCIAL INFORMATION Condensed Consolidated Financial Statements: Balance Sheets as of June 30, 1996 and December 31, 1995...............................................3 Income Statements for the Quarters and Six Months Ended June 30, 1996 and 1995..........................................4 Statements of Cash Flows for the Six Months Ended June 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 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................12 Item 6. EXHIBITS and REPORTS ON FORM 8-K............................14 SIGNATURES................................................................16 2 PART I FINANCIAL INFORMATION Item 1 FINANCIAL INFORMATION Condensed Consolidated Financial Statements: US FACILITIES CORPORATION Condensed Consolidated Balance Sheets (000 omitted) ASSETS
June 30, 1996 December 31,1995 ------------- ---------------- Investments, at market (amortized cost $172,332 at June 30,1996, $159,333 at December 31,1995) $ 177,616 $ 170,258 Cash and invested cash 11,020 8,165 Restricted cash and short term investments 22,033 24,036 Accrued investment income 2,585 2,414 Receivables: Reinsurance losses and reserves 20,538 18,597 Premiums 14,283 14,065 Prepaid reinsurance premiums 5,917 5,117 Deferred policy acquisition costs 3,132 2,830 Other assets 6,312 4,390 ------------ ----------- Total assets $ 263,436 $ 249,872 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Insurance liabilities: Amounts due insurance companies $ 25,216 $ 25,712 Losses and loss adjustment expenses 86,877 78,894 Unearned premiums 20,798 17,705 Note payable 35,000 35,000 Accounts payable and accrued expenses 3,508 4,500 ------------ ---------- Total liabilities 171,399 161,811 STOCKHOLDERS' EQUITY 92,037 88,061 ------------ ---------- Total liabilities and stockholders' equity $ 263,436 $ 249,872 ============ ==========
See accompanying notes to condensed consolidated financial statements. 3 US FACILITIES CORPORATION Condensed Consolidated Income Statements (000 omitted, except per share data)
Quarter Ended Six Months Ended June 30 June 30 --------------------- ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Premiums earned $ 29,707 $ 30,641 $ 58,859 $ 57,336 Commissions and fees 6,305 6,828 12,894 13,248 Net investment income 2,526 2,411 4,968 4,575 Realized investment gains (9) 52 726 232 --------- --------- --------- --------- Total revenues 38,529 39,932 77,447 75,391 --------- --------- --------- --------- Operating Expenses: Losses and loss adjustment expenses incurred 20,852 20,459 41,694 38,099 Policy acquisition expenses 8,818 9,485 17,692 18,245 General and administrative expenses 3,379 3,871 6,924 7,961 Other -- 547 -- 1,242 Interest 699 547 1,379 1,089 --------- --------- --------- -------- Total operating expenses 33,748 34,909 67,689 66,636 ------ ------ ------ ------ Income before income taxes 4,781 5,023 9,758 8,755 Income tax expense 1,196 1,174 2,365 1,984 ------- ------- ------- ------- Net income $ 3,585 $ 3,849 $ 7,393 $ 6,771 ========= ========= ========= ========= Net income per common and common equivalent share $ 0.60 $ 0.67 $ 1.24 $ 1.19 ========= ========== ========= ========== Weighted average number of common and common equivalent shares outstanding during period 5,972 5,774 5,971 5,675 ===== ===== ===== =====
See accompanying notes to condensed consolidated financial statements. 4 US FACILITIES CORPORATION Condensed Consolidated Statements of Cash Flows (000 omitted)
Six Months Ended June 30, ------------------------- 1996 1995 ---- ---- Cash provided by operating activities $ 15,432 $ 4,252 -------- -------- Cash flows from investing activities: Purchases of fixed maturity investments (18,642) (72,386) Purchases of equity securities (1,571) (1,924) Proceeds from sales of investment securities 13,923 54,568 Net sales (purchases) of short term investments (5,622) 20,011 Purchases of property and equipment (972) (124) ------- --------- Cash (used in) provided by investing activities (12,884) 145 -------- --------- Cash flows from financing activities: Dividends paid (702) (551) Exercise of stock options 1,009 1,304 -------- --------- Cash provided by financing activities 307 753 -------- --------- Net increase in cash and invested cash 2,855 5,150 Cash and invested cash at beginning of period 8,165 4,502 -------- --------- Cash and invested cash at end of period $ 11,020 $ 9,652 ======== ========== Supplemental disclosure of cash flow information: Interest paid $ 662 $ 1,078 ========= ======== Income taxes paid, net $ 2,242 $ 1,780 ========= ========
See accompanying notes to condensed consolidated financial statements. 5 US FACILITIES CORPORATION Notes to Condensed Consolidated Financial Statements 1. General The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the six months ended June 30,1996 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31,1995 included in the US Facilities Corporation (the "Company") 1995 Annual Report to Stockholders. 2. Note Payable Effective March 29, 1996, the Company renegotiated its bank Credit Agreement to extend the commencement of required principal reductions and maturity by one year, and reduce the applicable interest margin from 2% to 1.75% over LIBOR. Mandatory principal reductions now commence in March 1997, and the Note matures December 31, 2002. At June 30, 1996, the Company was in compliance with all covenants of the Credit Agreement. 3. Other Other expenses include $547,000 incurred in the second quarter of 1995 resulting from the closure of the Registrant's bill review operations effective May 31, 1995. Results for the 1995 six month period also include an expense of $695,000 pertaining to the resignation of the Registrant's former Chief Executive Officer. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's consolidated revenues increased 3% to $77,447,000 for the first six months of 1996 from $75,391,000 for the 1995 period and decreased 4% to $38,529,000 for the 1996 second quarter ended June 30, 1996 from $39,932,000 in the 1995 second quarter. Revenue changes in the 1996 periods as compared to the 1995 periods arise from increases in premiums earned from the property/casualty business segment and an increase in net investment income, resulting from higher levels of invested assets, offset by the effect of competitive pressures in the medical lines segment. The increase in realized gains in the 1996 six month period primarily resulted from two transactions during the 1996 first quarter. Consolidated net income for the first six months of 1996 increased 9% to $7,393,000 from $6,771,000 in the 1995 six month period and declined 7% to $3,585,000 for the second quarter of 1996 from $3,849,000 in the second quarter of 1995. Changes in net income for the 1996 periods as compared to the 1995 periods primarily resulted from the changes in revenues noted above and a 13% decrease in consolidated general and administrative (G&A) expenses, as the Company continued to manage both productivity and expenses in relation to revenues. G&A expenses reported by business segment include revisions to allocation percentages of common corporate overhead between the periods presented. Results for the 1995 six month period include a first quarter pre-tax charge of $695,000 pertaining to the resignation of the Company's former Chief Executive Officer, as well as the effect in the second quarter of a pre-tax charge of $547,000 resulting from the closure of its medical bill review operation. Income tax expense as a percentage of pre-tax income fluctuates depending on the proportion of tax-exempt investment income to total pre-tax income. The statutory combined ratio of the Company's insurance operations increased in the 1996 first half to 101.6 from 98.4 in the 1995 first half. BUSINESS SEGMENTS The Company conducts business primarily in two business segments which are classified as: (a) MEDICAL LINES, which includes all commission and fee-based revenues of the Company and premiums earned from reinsurance of 50% of the medical stop-loss and provider excess business generated by the Company's 7 wholly owned subsidiary, USBenefits Insurance Services, Inc. ("USBenefits"). USBenefits acts primarily as the underwriting manager and marketing organization for medical stop-loss and provider excess coverages issued by The Continental Insurance Company, one of the CNA Insurance Companies, an unaffiliated party. Provider excess coverage is specifically designed to address the risk hospitals and physician groups are facing under capitated fee arrangements. USBenefits also provides other employee benefit related products. (b) PROPERTY/CASUALTY insurance and reinsurance underwriting is conducted by the Company's wholly owned subsidiaries, USF RE INSURANCE COMPANY ("USF RE") and USF Insurance Company ("USFIC"). USF RE assumes property/casualty reinsurance from unaffiliated insurance companies primarily through reinsurance intermediaries, and USFIC writes surplus lines insurance through independent excess and surplus lines brokers. The tables set forth below present pre-tax operating information by business segment and holding company operations (including realized gains) for the quarters and six month periods ended June 30, 1996 and 1995, respectively. MEDICAL LINES (000 omitted)
Quarter Ended Six Months Ended June 30 June 30 ------------------------------ ------------------------------ 1996 1995 %Change 1996 1995 %Change ---- ---- ------- ---- ---- ------- Revenues: Premiums earned $19,886 $21,366 (7)% $40,207 $40,938 (2)% Commissions and fees 6,305 6,828 (8)% 12,894 13,248 (3)% Investment income 848 876 (3)% 1,597 1,620 (1)% ------- ------- ------- ------- ------- ------ Total revenues 27,039 29,070 (7)% 54,698 55,806 (2)% ------- ------- ------- ------- ------- ------- Expenses: Losses and loss adjustment 13,557 13,855 (2)% 27,395 26,678 (3)% Policy acquisition 6,863 7,272 (6)% 13,719 13,694 -- General and administrative 2,312 2,816 (18)% 4,784 5,863 (8)% ------- ------- ------- ------- ------- ------- Total expenses 22,732 23,943 (5)% 45,898 46,235 (1)% ------- ------- ------- ------- ------- ------- Income before income taxes $ 4,307 $ 5,127 (16)% $ 8,800 $ 9,571 (8)% ======= ======= ======= ======= ======= =======
8 Throughout 1996, the Company has maintained its long-term focus on adherence to underwriting standards balanced against continued competitive pressures in the medical lines segment. These factors reduced medical lines production by 2% in the 1996 six month period and 7% in the 1996 second quarter as compared to the 1995 periods. In turn, loss and loss adjustment and policy acquisition expenses in 1996 as compared to 1995 reflect increases in the cost of healthcare which are not mitigated by corresponding increases in premium rates, as well as higher formula reserves and acquisition expenses incurred in connection with the provider excess line. PROPERTY/CASUALTY (000 omitted)
Quarter Ended Six Months Ended June 30 June 30 --------------------------------- ------------------------------- 1996 1995 % Change 1996 1995 % Change ---- ---- -------- ---- ---- -------- Revenues: Premiums earned $ 9,821 $ 9,275 6% $18,652 $16,398 14% Investment income 1,665 1,530 8% 3,339 2,937 14% ------- ------- --- ------ ------- --- Total revenues 11,486 10,805 6% 21,991 19,335 14% ------- --- --- ------ ------- --- Expenses: Losses and loss adjustment 7,295 6,604 10% 14,299 11,421 25% Policy acquisition 1,955 2,213 (12)% 3,973 4,551 (13)% General and administrative 872 714 22% 1,722 1,605 7% ------- ------- ---- ------ ------ --- Total expenses 10,122 9,531 6% 19,994 17,577 14% - -------------------------------------- ------- ------- ---- ------ ------ --- Income before income taxes $ 1,364 $ 1,274 7% $ 1,997 $ 1,758 14% ======= ======= ==== ======= ======= ===
The increases in premiums earned during the 1996 periods as compared to the 1995 periods primarily result from the continuing growth of property/casualty operations due to ongoing focused marketing efforts and expansion of its client base. Increases in losses and loss adjustment expenses in 1996 as compared to 1995 reflect the Company's continued growth of the casualty business which is reserved at a higher formula loss ratio than property lines, offset in part by the 1995 withdrawal from the plate glass business which generally had a lower loss ratio and higher acquisition expenses. The decrease in policy acquisition expenses in 1996 as compared to 1995 results from a shift in the mix of business and modification of retrocessional reinsurance arrangements. 9 HOLDING COMPANY (000 omitted)
Quarter Ended Six Months Ended June 30 June 30 ---------------------------- --------------------------- 1996 1995 % Change 1996 1995 %Change ------ ------- -------- ------ ------ ------- Revenues: Investment income $ 13 $ 5 160% $ 32 $ 18 78% Realized gains (9) 52 -- 726 232 213% ----- ------- ------ ------- ------- ---- Total revenues 4 57 -- 758 250 203% --- ------- ------ ------- ------- ---- Expenses: General and administrative 195 341 (43)% 418 493 (15)% Other -- 547 -- -- 1,242 -- Interest 699 547 28% 1,379 1,089 27% ----- ------- ------ ------- ------- ---- Total expenses 894 1,435 38% 1,797 2,824 (36)% ----- ------- ------ ------- ------- ---- Loss before income taxes $(890) $(1,378) (35)% $(1,039) $(2,574) (60)% ===== ======= ====== ======= ======= ====
In November, 1995, the Company increased its bank loan by $10,000,000, resulting in higher interest expenses in 1996 as compared to 1995. These funds were contributed to the surplus of USF RE to support additional premium growth. ACCOUNTING POLICIES Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" issued in October, 1995, will be adopted by the Company for the year ending December 31, 1996. Adoption is not expected to have a material effect on the financial statements of the Company. INFLATION The healthcare marketplace has long been subject to the effects of increasing costs for provider services. Such inflation in the costs of healthcare tends to generate higher claims payments generally resulting in increases in premiums for medical lines coverage, and in greater revenues. Management believes various cost control initiatives and the trend toward self-insured plans have stabilized the price spiral and have caused a recent decline in the rate of increase in the cost of healthcare. Inflation can negatively impact insurance and reinsurance operations by causing higher claims settlements than may have originally been estimated, while not necessarily allowing an immediate increase in premiums to a level 10 necessary to maintain profit margins. Historically, the Company has made no explicit provisions for inflation, but trends are considered when setting underwriting terms and claim reserves. Such reserves are subjected to a continuing internal and external review process to assess their adequacy and are adjusted as deemed appropriate. Overall, economic trends also affect interest rates, which in turn affect investment income and the market value of the Company's investment portfolio. LIQUIDITY AND CAPITAL RESOURCES The Company utilizes cash from operations and maturing investments to meet its insurance obligations to policyholders and claimants, as well as to meet operating costs. Primary sources of cash from operations include premium collections, investment income and commissions and fees. The principal uses of cash from operations are for premium payments to insurance companies, payments of claims under USF RE's and USFIC's reinsurance and insurance contracts, and operating expenses such as salaries, commissions, taxes and general overhead. As discussed in Note 2 to the Condensed Consolidated Financial Statements, the Company renegotiated its Credit Agreement effective March 29, 1996. The Credit Agreement with the Company's lender contains certain covenants, restrictions and dividend payment limitations with which the Company was in compliance at June 30, 1996. The Company anticipates that it will continue to generate sufficient cash flow from operations to cover its short-term (1-18 months) and long-term (18 months to 3 years) liquidity needs. While the Company currently has no immediate plans for significant capital outlays, from time to time it contemplates acquisition opportunities that complement its business operations. The Company currently invests primarily in the highest grades of bonds, equities, certificates of deposit and short-term instruments. At June 30, 1996, 99% of the fixed income portfolio was in securities rated A or better. All such securities are carried at quoted market values at the latest balance sheet date. The Company does not invest in real estate, derivatives or high yield bonds. LEGISLATIVE AND REGULATORY DEVELOPMENTS As described in prior filings with the Securities and Exchange Commission ("Commission") by the Company, various Federal and state healthcare legislative and regulatory proposals which could impact the financing and delivery of healthcare continue to be considered. The Company cannot predict at this time what impact, if any, adoption of any of these proposals would have on the Company's business. However, based on its review of the latest information it has received, management believes that adoption of such proposals will not have an adverse impact on the Company's business. 11 Some of the statements included within Management's Discussion and Analysis of Financial Condition and Results of Operations and in the Condensed Consolidated Financial Statements and related Notes may be considered to be forward looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995), and which are subject to certain risks and uncertainties. Among those factors which could cause the actual results to differ materially from those suggested by such statements are the following: catastrophe losses in the Company's insurance lines or a material aggregation of losses; changes in federal or state law affecting an employer's ability to self-insure; the availability of adequate retrocessional insurance coverage at appropriate prices; stock and bond market volatility; the effects of competitive market pressures within the medical or property/casualty insurance marketplaces; the effect of changes required by generally accepted accounting principles or statutory accounting principles; and other risks which are described from time to time in the Company's filings with the Commission. PART II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's 1996 Annual Meeting of Stockholders ("Annual Meeting") was held on May 22, 1996 in Costa Mesa, California. A total of 5,537,208 shares were present at the Annual Meeting in person or by proxy, representing 94.9% of the 5,834,598 shares of the Company's $.01 par value common stock issued and outstanding on the record date, April 5, 1996, and eligible to vote. (b) The Company's board currently consists of seven directors, each serving for three years, who are divided into three classes. Two directors are elected at two Annual Meetings and three directors are elected at a third Annual Meeting. At this Annual Meeting, the Company's stockholders were asked to elect two of the Company's seven directors who would serve for a term of three years expiring at the 1999 Annual Meeting of Stockholders. Management nominated Bernard H. Ross and Kenneth C. Tyler for the two directorships, and no individuals were nominated in opposition to management's slate of directors. Set forth below are the results of the voting for the director nominees as reported by the Inspector of Elections for the Company's Annual Meeting. There were no broker non-votes. Name For Withhold - ------------------ ------------------ -------- Bernard H. Ross 5,468,948 68,260 Kenneth C. Tyler 5,467,948 69,260 12 The directors who are continuing in office are David L. Cargile, John F. Kooken, L. Steven Medgyesy, M.D., Charles L. Schultz, and Howard S. Singer. (c) The Company's stockholders were asked to consider three other matters as noted below. The affirmative vote of a majority of the shares of the Company's common stock present at the Annual Meeting in person or by proxy and entitled to vote was required for adoption of each such matter. The results of the vote on these proposals as reported by the Inspector of Elections are set forth below. There were no broker non-votes on any proposal. (1) Approval of a proposal to amend the US Facilities Corporation 1991 Employee Stock Option Plan in various aspects as described in the proxy statement prepared and filed with the Commission for the Annual Meeting in accordance with Regulation 14A. For Against Abstain -------------- -------- --------- 2,904,553 803,264 10,801 (2) Approval of a proposal to amend the US Facilities Corporation 1991 Directors Stock Option Plan in various aspects as described in the aforenoted proxy statement. For Against Abstain ------------- -------- -------- 3,523,693 154,811 40,114 (3) Ratification of the selection by the Board of Directors of KPMG Peat Marwick LLP to continue to serve as the Company's independent auditors for the fiscal year ending December 31, 1996. For Against Abstain ------------- -------- ------- 5,224,476 307,675 5,057 13 Item 6. EXHIBITS and REPORTS ON FORM 8-K. (a) The following is a list of exhibits required to be filed as part of this Form 10-Q by Item 601 of Regulation S-K: 3.1, 4.1 Restated Certificate of Incorporation, as amended, as presently in effect. Filed as Exhibits 3.1 and 3.1.1 to the Company's Form S-1 Registration Statement declared effective by the Securities and Exchange Commission on October 31, 1986 (the "Registration Statement"), and incorporated herein by this reference; and as Exhibit 3 to the Company's Current Report on Form 8-K dated May 24, 1990, and incorporated herein by this reference. 3.2, 4.2 Bylaws of US Facilities Corporation, as amended, as presently in effect. Filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 24, 1996, and incorporated herein by this reference. 4.3 Common Stock Certificate of US Facilities Corporation. Filed as Exhibit 4.1 to the Company's Registration Statement, and incorporated herein by this reference. 4.4 Rights Agreement. Filed as Exhibit 2 to the Company's Current Report on Form 8-K dated May 24, 1990, and incorporated herein by this reference. 4.5 First Amendment to Rights Agreement. Filed as Exhibit 1 to the Company's Current Report on Form 8-K dated January 16, 1992, and incorporated herein by this reference. 4.6 Second Amendment to Rights Agreement. Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 29, 1994, and incorporated herein by this reference. 4.7 Third Amendment to Rights Agreement. Filed on October 3, 1995, as Exhibit 4 to the Company's Current Report on Form 8-K dated September 28, 1995, and incorporated herein by this reference. 14 10.1* Form of Stock Option Agreement under the US Facilities Corporation Amended and Restated 1991 Employee Stock Option Plan. 10.2* Form of Stock Option Agreement under the US Facilities Corporation 1991 Directors Stock Option Plan Amended and Restated. 11* US Facilities Corporation and Subsidiaries Computation of Earnings Per Share. 15* Independent Auditors' review report regarding unaudited interim financial information. 27* Financial Data Schedules (b) No reports on Form 8-K were filed by the Company during the quarter ended June 30, 1996. * Describes exhibits filed with this Quarterly Report on Form 10-Q. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. US FACILITIES CORPORATION Date: August 6, 1996 By: /S/DAVID L. CARGILE ---------------------------- DAVID L. CARGILE Chairman of the Board, President and Chief Executive Officer Date: August 6, 1996 By: /S/MARK BURKE ---------------------------- MARK BURKE Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 16 EX-10.1 2 EXHIBIT 10.1 EXHIBIT 10.1 (US Facilities Corporation Letterhead) (Date) (Name of Optionee) Re: STOCK OPTION AGREEMENT Dear (Name): US Facilities Corporation (the "Corporation") hereby confirms the grant to you by the Compensation Committee ("Committee") of the Board of Directors of the Corporation ("Board") of an option (the "Option") to purchase a total of (Amount) shares of the Corporation's common stock, par value $0.01 per share ("Common Stock"), at (Price) per share, under the US Facilities Corporation Amended and Restated 1991 Employee Stock Option Plan ("Plan") effective as of (Date). Pursuant to the terms of the Plan, the exercise price of (Price) is the fair market value of the Common Stock on the date of the grant. This Option is intended to be a (non-qualified/incentive) stock option within the meaning of section 422 of the Internal Revenue Code of 1954, as amended (the "Code"). This Option is issued to you subject to the following general terms and conditions, as well as all the terms and conditions of the Plan, a copy of which has been delivered to you and receipt of which is acknowledged by your execution of this Stock Option Agreement: 1. EXERCISABILITY AND TERM OF OPTION. Beginning on (Date), this Option is exercisable, subject to the provisions hereof and of the Plan, with respect to 50% of the total number of shares subject hereto; and on (Date) it shall be exercisable for the remaining 50% of the total number of shares subject hereto. This Option shall expire at the close of business at the principal offices of the Corporation on (Date). Except as otherwise provided in the Plan, the Option shall expire upon the termination of your employment with the Corporation. 2 2. OPTION SUBJECT TO PLAN. The Corporation and you agree that this Option shall be subject to all the terms and provisions of the Plan which are applicable to non-qualified stock options, and you agree to abide by and be bound by all rules, regulations and determinations of the Board or the Committee now or hereafter made in connection with the administration of the Plan. This Option is not transferable by you other than by will or by the laws of descent and distribution and is exercisable, during your lifetime, only by you. 3. NO AGREEMENT OF EMPLOYMENT. It is understood that neither the granting of this Option nor any terms or conditions hereof shall constitute or be evidence of any understanding, express or implied, on the part of the Corporation to employ you for any specific period. 4. CONFIDENTIALITY OF INFORMATION. In consideration of the issuance of this Option, you agree not to disclose any trade secret, proprietary information or any other confidential information acquired by you relating to the Corporation or a subsidiary of the Corporation. This obligation will survive the termination of your employment. 5. LAW GOVERNING. This instrument shall be governed by and construed in accordance with the laws of the State of Delaware. Please indicate your acceptance of this Option and your agreement to the terms on which this Option is granted by signing and returning to the Corporation, attention: Jose A. Velasco, the accompanying copy of this instrument, whereupon this will be a binding agreement between you and the Corporation. Very truly yours, US FACILITIES CORPORATION David L. Cargile Chairman of the Board, President, and Chief Executive Officer Accepted and agreed as of the date first written above: - ---------------------------- Print Name - ---------------------------- Signature - ---------------------------- Social Security Number EX-10.2 3 EXHIBIT 10.2 EXHIBIT 10.2 US FACILITIES CORPORATION US Facilities Corporation 1991 Directors Stock Option Plan Amended and Restated as of July 26, 1995 and March 27, 1996 STOCK OPTION AGREEMENT This Stock Option Agreement (the "Agreement") is made effective as of (Date), by and between US FACILITIES CORPORATION (the "Company") and (Name) (the "Optionee"), pursuant to that certain US Facilities Corporation 1991 Directors Stock Option Plan Amended and Restated as of July 25, 1995 and March 27, 1996 (the "Plan"). 1. STOCK OPTION GRANTED. Subject to the limitations set forth herein and in the Plan, Optionee may purchase all or any part of an aggregate of (Amount) shares of Common Stock of the Company (the "Shares") at an exercise price of (Price) per share, payable in cash or in Common Stock of the Company as set forth in the Plan. 2. EXERCISE FEATURES. Stock Options granted by this Agreement shall be exercisable pursuant to the terms and conditions of the Plan, which include but are not limited to the following: A. Options covering 50% of the total shares subject to the options granted hereby shall become exercisable after (Date), and Options covering the remaining 50% of such shares become exercisable after (Date). B. Once exercisable (including the application of any grace period), Options shall expire if not earlier exercised upon the earlier to occur of (i) one year following termination of Optionee's status as a Nonemployee Director of the Company, or (ii) five years after date of grant of such Option. 3. GENERAL. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, shall be binding upon the successors and assigns of the parties hereto and shall be subject to all of the terms and provisions of the Plan, a copy of which has been delivered to Optionee, receipt of which is acknowledged by the Optionee's execution hereof. 2 IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written. OPTIONEE: US FACILITIES CORPORATION - ------------------------------- ------------------------------- David L. Cargile, Chairman of the Board, President and Chief Executive Officer EX-11 4 EXHIBIT 11 EXHIBIT 11 US FACILITIES CORPORATION AND SUBSIDIARIES Computation of Earnings Per Share The computation of per share income is based upon the weighted average number of common and common equivalent shares outstanding during each quarter ended June 30 as follows: (000 Omitted)
Quarter Ended Six Months Ended June 30 June 30 ------------- ------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net Income $3,585 $3,849 $7,393 $6,771 ====== ====== ====== ====== Weighted average shares outstanding during the period 5,851 5,571 5,837 5,506 Common stock equivalent shares 121 203 134 169 ------ ------ ------ ------ Common and common stock equivalent shares outstanding for purposes of calculating income per share 5,972 5,774 5,971 5,675 Incremental shares to reflect full dilution -- 51 -- 85 ------ ------ ------ ------ Total shares for purpose of calculating fully diluted income per share 5,972 5,825 5,971 5,760 ====== ====== ====== ====== Net income per common and common equivalent share $ 0.60 $ 0.67 $ 1.24 $ 1.19 ====== ====== ====== ======
EX-15 5 EXHIBIT-15 INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors and Shareholders US Facilities Corporation: We have reviewed the condensed consolidated balance sheet of US Facilities Corporation and subsidiaries as of June 30, 1996, and the related condensed consolidated income statements for the three-month and six-month periods ended June 30, 1996 and 1995, and condensed consolidated statements of cash flows for the six-month periods ended June 30, 1996 and 1995. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of US Facilities Corporation and subsidiaries as of December 31, 1995, and the related consolidated income statement, statements of stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 6, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /S/ KPMG PEAT MARWICK LLP Los Angeles, California July 25, 1996 EX-27 6 EXHIBIT 27 (FDS)
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFROMATION EXTRACTED FROM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 0 0 0 0 0 0 177,616 33,053 20,538 3,132 263,436 86,877 20,798 0 0 35,000 0 0 0 0 263,436 58,859 4,968 726 12,894 41,694 17,692 6,924 9,758 2,365 0 0 0 0 7,393 1.24 1.24 0 0 0 0 0 0 0
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