-----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, Mm9uhOiWI7LuTq9exc6BVHKk+e1hzUcjShhh2f7Wi4CRIl4Otu1HYg3X9WlFNU4E jlHcmg92uIM86pKbjdheVA== 0001017062-99-001376.txt : 19990811 0001017062-99-001376.hdr.sgml : 19990811 ACCESSION NUMBER: 0001017062-99-001376 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRIS GROUP INC 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: SEC FILE NUMBER: 001-12099 FILM NUMBER: 99676732 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 FORMER COMPANY: FORMER CONFORMED NAME: US FACILITIES CORP DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FOR PERIOD ENDING 06/30/1999 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-Q (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, 1999 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: 001-12099 ---------------- The Centris Group, Inc. (Exact name of Registrant as specified in its charter) DELAWARE 33-0097221 (State or other jurisdiction (I.R.S. Employer of 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 August 2, 1999: Common Stock, par value $.01 per share:......................... 11,642,776 Common Stock Purchase Rights:................................... 11,642,776
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- INDEX Part I FINANCIAL INFORMATION Item 1. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements: Balance Sheets as of June 30, 1999 and December 31, 1998............ 3 Income Statements for the Quarters and Six Months Ended June 30, 1999 and 1998....................................................... 4 Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998................................................................ 5 Notes to Condensed Consolidated Financial Statements................ 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................................. 9 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK........ 16 Part II OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 17 Item 6. EXHIBITS and REPORTS ON FORM 8-K................................. 18 SIGNATURES................................................................. 19
2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements: THE CENTRIS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
June 30, December 31, 1999 1998 -------- ------------ ASSETS ------ Investments, at market (amortized cost $77,988 at June 30, 1999, $292,181 at December 31,1998)................ $ 77,236 $292,463 Cash and invested cash.................................. 27,529 6,804 Restricted cash and short term investments.............. 31,642 29,799 Accrued investment income............................... 1,349 3,119 Assets held for transfer under pending reinsurance agreement.............................................. 95,721 99,369 Receivables: Reinsurance recoverable on losses and reserves........ 102,943 101,644 Premiums.............................................. 68,744 57,558 Prepaid reinsurance premiums............................ 13,264 14,507 Note receivable......................................... 20,750 -- Other assets............................................ 34,369 32,197 -------- -------- Total assets........................................ $473,547 $637,460 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities Insurance liabilities: Amounts due insurance companies....................... $107,706 $109,516 Losses and loss adjustment expenses................... 114,903 200,908 Unearned premiums..................................... 15,601 32,274 Pending transferable reinsurance........................ 95,721 99,369 Note payable to bank.................................... 25,000 72,550 Accounts payable and accrued expenses................... 22,173 31,809 -------- -------- Total liabilities................................... 381,104 546,426 Stockholders' Equity.................................... 92,443 91,034 -------- -------- Total liabilities and stockholders' equity.......... $473,547 $637,460 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 THE CENTRIS GROUP, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (Dollars in Thousands, except per share data)
Quarter Ended Six Months Ended June 30, June 30, --------------- ----------------- 1999 1998 1999 1998 ------- ------- -------- -------- Revenues: Premiums earned........................... $21,758 $28,880 $ 43,811 $ 56,348 Managed and withdrawal lines.............. 15,760 -- 29,672 -- Commissions and fees...................... 9,639 8,982 18,154 17,520 Net investment income..................... 2,121 1,391 4,057 2,705 Realized investment gains................. 83 1,955 70 2,596 ------- ------- -------- -------- Total revenues.......................... 49,361 41,208 95,764 79,169 ------- ------- -------- -------- Operating Expenses: Losses and loss adjustment expenses incurred................................. 19,590 21,732 37,826 41,219 Managed and withdrawal lines.............. 15,760 -- 29,672 -- Policy acquisition expenses............... 7,504 9,278 14,209 18,700 General and administrative expenses....... 3,656 4,477 8,142 8,673 Interest.................................. 1,078 547 2,176 1,103 ------- ------- -------- -------- Total operating expenses................ 47,588 36,034 92,025 69,695 ------- ------- -------- -------- Income from continuing operations before income taxes............................... 1,773 5,174 3,739 9,474 Income tax expense........................ 606 2,017 1,329 3,694 ------- ------- -------- -------- Income from continuing operations........... 1,167 3,157 2,410 5,780 Income from discontinued operations......... -- 1,344 -- 2,955 ------- ------- -------- -------- Net income.............................. $ 1,167 $ 4,501 $ 2,410 $ 8,735 ======= ======= ======== ======== Basic income per share: Income from continuing operations......... $ .10 $ .26 $ .21 $ .48 Discontinued operations................... -- .11 -- .24 ------- ------- -------- -------- Net income.............................. $ .10 $ .37 $ .21 $ .72 ======= ======= ======== ======== Diluted income per share: Income from continuing operations......... $ .10 $ .25 $ .20 $ .46 Discontinued operations................... -- .11 -- .24 ------- ------- -------- -------- Net income.............................. $ .10 $ .36 $ .20 $ .70 ======= ======= ======== ========
See accompanying notes to condensed consolidated financial statements. 4 THE CENTRIS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Six Months Ended June 30, -------------------------- 1999 1998 ------------ ------------ Cash provided by (used in) operating activities.... $ (7,042) $ 6,645 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investment securities............... (28,128) (23,979) Net proceeds from divestiture.................... 65,355 -- Proceeds from sales of investment securities..... 41,451 25,884 Net purchases of short term investments.......... (2,291) (10,613) Purchases of property and equipment.............. (742) (471) ------------ ------------ Cash provided by (used in) investing activities.................................... 75,645 (9,179) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payment on note payable.......................... (47,550) (2,650) Dividends paid................................... (686) (738) Exercise of stock options........................ 358 337 ------------ ------------ Cash (used in) financing activities............ (47,878) (3,051) ------------ ------------ Net increase (decrease) in cash and invested cash.. 20,725 (5,585) Cash and invested cash at beginning of period...... 6,804 11,122 ------------ ------------ Cash and invested cash at end of period............ $ 27,529 $ 5,537 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid.................................... $ 2,095 $ 1,096 ============ ============ Income taxes paid, net........................... $ 579 $ 4,123 ============ ============
See accompanying notes to condensed consolidated financial statements. 5 THE CENTRIS GROUP, INC. 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 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, 1999 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, 1998 included in the 1998 Annual Report to Stockholders of The Centris Group, Inc. (the "Company"). The Company continues to pursue accretive acquisition and merger opportunities in complementary business lines. Currently the Company is continuing discussions with interested parties regarding the potential sale of the Company, but it is not possible to predict the outcome of these discussions. 2. Changes in Capital Structure On February 3, 1998, the Company announced that its Board of Directors had authorized a two-for-one split of its common stock in the form of a 100% stock dividend to stockholders of record as of February 18, 1998. Certificates reflecting the stock split were issued February 27, 1998. All references in the financial statements to number of shares, per share amounts and market prices of the Company's common stock have been adjusted retroactively for all periods presented to reflect this change in capital structure. On September 3, 1998, the Company announced that its Board of Directors had authorized up to $5,000,000 for the repurchase of shares of the Company's stock. On October 13, 1998, the Company announced that the Board of Directors had authorized the repurchase of an additional $5,000,000 of its common stock under its existing repurchase program. Through June 30, 1999, the Company has acquired 619,000 common shares at a cost of $6,200,000. 3. Reinsurance Agreement In connection with the December 31, 1998, acquisition of Seaboard Life Insurance Company (USA) (now known as Centris Life Insurance Company ("CLIC")), part of the acquisition of The VASA Group Companies, the seller separately negotiated a reinsurance agreement with Life Reassurance Corporation of America covering CLIC's Individual Life and Annuity business to be retroactively effective as of July 1, 1998. The Company has classified the liabilities relating to this agreement as pending transferable reinsurance and has classified the related assets as assets held for transfer. CLIC and Life Re have extended the closure date of the reinsurance transaction in order to complete the process of securing insurance department approvals in Indiana and California. Such approvals have been obtained and the transaction is expected to close in the third quarter of 1999. For the second quarter and six-month periods of 1999, income of $1,667,000 and $2,838,000 respectively was credited to the reinsurer and is excluded from the Company's results. Any income earned or loss incurred from the Individual Life and Annuity business line is credited or charged to the reinsurer. 4. Discontinued Operations The Company announced discontinuance of its property/casualty reinsurance segment as of December 31, 1998 and recorded a $19,621,000 provision for anticipated future costs associated with such discontinuance (the "provision"). On June 29, 1999, the Company completed the sale to Folksamerica Holding Company, Inc. of its property/casualty reinsurance subsidiary, USF RE INSURANCE COMPANY ("USF RE"), for $92,500,000. Terms of the sale included a cash payment of $71,750,000 and a $20,750,000 5-year note which bears interest at 6.4% annually. The note is subject to downward adjustment based on future adverse loss development. As 6 THE CENTRIS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) described below, net losses from discontinued operations of $(3,937,000) and $(5,051,000) for the quarter and six months ended June 30, 1999, respectively, were charged against the provision. The Company also charged transaction fees and the excess of subsidiary equity on the date of sale of $94,815,000 over the sale price of $92,500,000 to the provision. The Company is maintaining the balance of the provision for discontinued operations as the buyer retains control over loss development on discontinued business lines for the next five years. Results of operations for the discontinued property/casualty reinsurance operations (in thousands of dollars) are as follows:
Quarter Ended Six Months June 30, Ended June 30, ---------------- ---------------- 1999 1998 1999 1998 ------- ------- ------- ------- Revenues.................................. $12,773 $16,985 $27,837 $32,941 ======= ======= ======= ======= Income (loss) before income taxes......... $(5,634) $ 1,517 $(7,384) $ 3,400 Provision (benefit) for income taxes...... (1,697) 173 (2,333) 445 ------- ------- ------- ------- Net income (loss)......................... $(3,937) $ 1,344 $(5,051) $ 2,955 ======= ======= ======= =======
5. Managed and Withdrawal Lines In connection with the December 31, 1998 acquisition of the VASA Group companies, the Company agreed to run off the remaining VASA Group medical stop-loss, group-term life insurance and other medical lines business in exchange for a fee that was included within the purchase price. The seller is providing loss protection for the run-off of this business so that the Company will have neither an underwriting gain nor incur an underwriting loss on such business. Such items are reported as "Managed and withdrawal lines" revenues and expenses in the Company's income statement. During the six-month period ended June 30,1999, receivables due from the seller of $2,949,000 related to this loss protection were recorded. 6. Note Payable An aggregate amount of $47,550,000 of the sale proceeds received by the Company from the sale of USF RE was used to reduce the principal amount of Centris' outstanding note payable to Fleet National Bank from $72,550,000 to $25,000,000. In this connection Centris entered into a Sixth Amendment to its December 1994 Credit Agreement with Fleet National Bank ("Fleet Bank"), pursuant to which Amendment certain terms and conditions of the Credit Agreement were modified. Such modifications include changes in the Company's capital requirements and interest rates applicable to the outstanding balance of the note. Amounts outstanding bear interest at LIBOR plus a margin, currently 1.25%. The Company's Credit Agreement contains certain covenants, restrictions and dividend payment limitations and call provisions in the event of non-compliance. The Company has notified Fleet Bank that the sale of USF RE and the charge of $19,621,000 taken by the Company in connection with discontinuing the property/casualty reinsurance segment in the fourth quarter of 1998 will impact those covenants which are based upon the prior four quarters of financial data. As of June 30,1998, the Company notified Fleet Bank that it will not meet the minimum fixed charge coverage ratio and minimum debt service coverage ratio covenants due to the circumstances previously described. Fleet Bank has indicated that a debt covenant waiver will be issued to the Company. However, Fleet Bank retains the option to call the note as prescribed in the Credit Agreement if the waiver is not issued. The Company has received no indication that Fleet Bank intends to call the debt. 7 THE CENTRIS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. Income Per Share Reconciliation of income and outstanding shares and related per share amounts adjusted to reflect the February 27, 1998 two-for-one stock split, is presented below (in thousands of dollars, except per share data):
Six months Quarter Ended Ended June June 30, 30, ------------- ------------- 1999 1998 1999 1998 ------ ------ ------ ------ Income(Numerator) Income applicable to common stock for Basic and Diluted income per share: Income from continuing operations.......... $1,167 $3,157 $2,410 $5,780 Discontinued operations.................... -- 1,344 -- 2,955 ------ ------ ------ ------ Net income................................. $1,167 $4,501 $2,410 $8,735 ====== ====== ====== ====== Weighted Average Shares (Denominator) Basic Shares................................. 11,615 12,180 11,606 12,174 Effect of dilutive securities Common Stock Equivalents..................... 174 377 185 318 ------ ------ ------ ------ Diluted Shares................................. 11,789 12,557 11,791 12,492 ====== ====== ====== ====== Basic Income Per Share Income from continuing operations............ $ .10 $ .26 $ .21 $ .48 Discontinued operations...................... -- .11 -- .24 ------ ------ ------ ------ Net income................................... $ .10 $ .37 $ .21 $ .72 ====== ====== ====== ====== Diluted Income Per Share Income from continuing operations............ $ .10 $ .25 $ .20 $ .46 Discontinued operations...................... -- .11 -- .24 ------ ------ ------ ------ Net income................................... $ .10 $ .36 $ .20 $ .70 ====== ====== ====== ======
8. Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income" was adopted by the Company effective January 1, 1998. Comprehensive income represents a measure of all changes in equity of an enterprise that result from recognized transactions and other economic events of the period, other than transactions with owners in their capacity as owners. Comprehensive income for the quarterly periods ended June 30, 1999 and 1998 was $3,658,000 and $3,872,000, respectively. Comprehensive income for the six-month periods ended June 30, 1999 and 1998 was $1,738,000 and $8,767,000, respectively. The Company's comprehensive income is comprised of net income for the period plus the tax effected increase or decrease in unrealized investment gains occurring during the period. 9. Certain Reclassifications The 1998 Consolidated Balance Sheet presentation has been revised to conform to the 1999 presentation. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Business Operations General During the second quarter of 1999 the Company continued its transformation into a specialty insurance company focused on medical and related niche markets. In the second quarter of 1999 the Company completed the sale of its USF RE INSURANCE COMPANY ("USF RE") subsidiary, reduced its outstanding debt by $47,550,000 to $25,000,000, increased its free cash flow position, maintained its risk retention level at 25% (down from 50% in prior years) for its medical lines business and continued the assimilation of the VASA Group companies, acquired December 31, 1998. These major transactions, which are more fully described in the Company's Annual Report on Form 10-K for the year ended December 31,1998 ("1998 Form 10-K"), are reflected in the 1999 periods and result in reduced premiums in the medical lines segment and significant changes in the Company's balance sheet. The Company completed the sale to Folksamerica Holding Company, Inc. of its property/casualty reinsurance subsidiary USF RE, for $92,500,000 on June 29, 1999. Terms of the sale included a cash payment of $71,750,000 and a $20,750,000 5-year interest-bearing note. The note, which accrues interest at the U.S. Treasury Note rate plus 50 basis points, is adjustable downward based on adverse loss development of USF RE's reserves at December 31, 1998. The 1999 results of operations were unaffected by the results of the property/casualty reinsurance lines due to the provision for discontinued operations (the "provision") reflected in the Company's December 31, 1998 results of operations. Net losses from discontinued operations of $(3,937,000) and $(5,051,000) for the quarter and six months ended June 30, 1999, respectively, were charged against the provision. The Company also charged transaction fees and the excess of USF RE equity on the date of sale, $94,815,000, over the sale price of $92,500,000 to the provision. The Company is maintaining the balance of the provision for discontinued operations as the buyer retains control over loss development on discontinued business lines for the next five years. Completion of this transaction substantially eliminates the Company's exposure to the risks of property/casualty reinsurance losses from catastrophic events and exposure to losses from Year 2000 claims. As more fully discussed in the Company's 1998 Form 10-K, the VASA Group companies were acquired effective December 31,1998. The Purchase Agreement provides for adjustment of the purchase price based upon an audit of the financial results of the insurance company members of the group as of December 31,1998. Presently, the Company is continuing its final purchase price negotiations with the seller, which are expected to be completed during the third quarter of 1999. The purchase did not include the Individual Life and Annuity ("ILA") business which is being sold separately and is expected to close in the third quarter of 1999. Accordingly, the ILA business has no effect on the Company's results of operations. The Company continues to pursue accretive acquisition and merger opportunities in complementary business lines. Currently the Company is continuing discussions with interested parties regarding the potential sale of the Company, but it is not possible to predict the outcome of these discussions. Managed And Withdrawal Lines For the quarterly and year-to-date periods ended June 30, 1999 the Company reported $15,760,000 and $29,672,000, respectively in both revenue and expenses from Managed and withdrawal lines. These lines of business were acquired as part of the VASA Group transaction, and pursuant to the terms of the purchase agreement, the Company can neither profit nor suffer loss from running off this business due to loss protections provided by the seller. For further discussion of the terms and conditions of the purchase of the VASA Group companies see the Company's 1998 Form 10-K. 9 Results Of Operations Effective January 1, 1999, the Company's risk retention level on medical stop loss and provider excess business produced by its subsidiary, USBenefits, was reduced to 25% from 50% in prior years. This action substantially reduced the Company's exposure to underwriting risk. The decrease in the risk retention level produces the declines in premiums earned in the 1999 periods as compared to the 1998 periods. Accordingly, consolidated revenues, excluding Managed and withdrawal lines, decreased 18.5% to $33,601,000 for the second quarter ended June 30, 1999 from $41,208,000 in the 1998 second quarter, and decreased 16.5% to $66,092,000 for the first six months of 1999 from $79,169,000 for the 1998 six month period. Total medical lines business production during the second quarter and year to date periods of 1999 increased 9.9% and 6.7%, respectively over the 1998 periods. Commissions and fees increased in the 1999 periods as a result of higher production levels and the effect of rate increases of between 12% to 15%. The Company's acquisition and divestiture activities yield a decrease in invested assets from $292,463,000 at December 31,1998 to $77,236,000 at June 30, 1999 which will produce lower levels of investment income in future periods. Insurance and reinsurance companies establish reserves for losses incurred, but not yet paid or reported, in order to match such losses with the related premiums earned. The process of establishing loss reserves is subject to uncertainties that are a normal, recurring aspect of the insurance business which requires the use of informed judgments and estimates. Loss and loss adjustment expense ("LAE") reserve development is reviewed on a regular basis, incorporating analysis of current trends, market changes in the Company's business segments and historical experience to analyze the Company's actuarial assumptions. As additional experience and other data becomes available, the Company's actuarial estimates may be revised. Such revisions may impact earnings. Loss and loss adjustment expense decreased by 9.9%, to $19,590,000 for the 1999 second quarter compared to $21,732,000 for the 1998 quarter, and decreased 8.2% to $37,826,000 in the 1999 year to date period from $41,219,000 in the 1998 period. These results reflect changes in the net risk retention level in the medical lines segment to 25% on policies effective January 1, 1999 and continuing loss development on policy year 1998 and prior years for which the Company had a net retention level of 50%. During the second quarter of 1999, the Company purchased reinsurance coverage in connection with the sale of USF RE that provides $5,000,000 of protection on further development of policy year 1998 losses. No benefit was recorded as a result of the reinsurance agreement in the second quarter of 1999. Specialty lines experience primarily reflects changes since January 1, 1999 in retrocessional arrangements and termination of the intercompany pooling agreement with USF RE. Policy acquisition expenses decreased to $7,504,000, or 19.1% in the 1999 second quarter, from $9,278,000, and declined 24% to $14,209,000 in the 1999 year to date period from $18,700,000 in the 1998 year to date period due primarily to reductions in the cost structures associated with 1999 medical lines policies. General and administrative expenses of continuing operations for the second quarter of 1999 declined 18.3% as compared to the 1998 second quarter and declined 6.1% on a year to date basis. These results are primarily due to allocation methods used to distribute costs between continuing and discontinued operations. During the second half of 1999, the Company expects general and administrative expenses to rise as it completes its major transactions. On a year to date basis, interest expense rose to $2,176,000, from $1,103,000 in the 1999 period as compared to the 1998 period, due to the December, 1998 increase in borrowing levels to finance the VASA group acquisition. An aggregate amount of $47,550,000 of the sale proceeds received by the Company from the June, 1999 sale of USFRE was used to reduce the principal amount of the Company's outstanding note payable to $25,000,000 from $72,550,000. Accordingly, interest expense will decline significantly in the third quarter of 1999. Net income from continuing operations decreased by 63% to $1,167,000 for the second quarter of 1999 from $3,157,000 in the second quarter of 1998, and decreased 58.3% to $2,410,000 for the first six months of 1999 as compared to $5,780,000 in the 1998 six month period. These outcomes reflect completion of the Company's major transactions begun in 1998 as well as loss development on policy year 1998 and prior years in the medical lines segment. 10 Income taxes as a percentage of pre-tax income fluctuate depending on the proportion of tax exempt investment income to total pre-tax income and the proportion of total income subject to state income taxes. The statutory combined ratio is the traditional indicator of the potential underwriting profitability of an insurance company's business. The Company's statutory combined ratios were 111.0 and 100.4 for the six-month periods ended June 30, 1999 and 1998, respectively. Business Segments The Company conducts business in two segments: MEDICAL LINES includes (i) medical stop-loss and provider excess coverages marketed and underwritten by USBenefits Insurance Services, Inc. ("USBenefits") on behalf of The Continental Insurance Company ("Continental"), one of the CNA Insurance Companies; (ii) catastrophic accident and health risks underwritten and managed nationally and internationally by INTERRA, Inc. ("INTERRA"); and (iii) reinsurance of 50% of such business by USF RE through December 31, 1998, at which time USF RE terminated its reinsurance of the medical lines business on a run-off basis. Effective January 1, 1999 Centris Life Insurance Company ("CLIC") (formerly known as Seaboard Life Insurance Company (USA)) and Centris Insurance Company ("CIC") (formerly known as VASA North Atlantic Insurance Company) became reinsurers of the medical lines business with net retained liability under all medical stop-loss and provider excess contracts limited to 25%. CLIC and CIC are rated "A-" (Excellent) by A. M. Best Company. Medical stop-loss coverage is a form of excess insurance that protects employers that self-fund their employee healthcare plans by limiting their exposure from the risk of loss. Provider excess coverage limits the financial risks healthcare providers face from medical plans that prepay the providers fixed sums per plan participant (capitated fees) or provide specified rates for services. Medical lines products are marketed through a network of unaffiliated third party administrators, insurance agents, brokers and consultants. SPECIALTY LINES insurance underwriting is conducted by the Company's USF Insurance Company ("USFIC") subsidiary, which is presently rated "A" (Excellent) by A.M. Best Company, a rating that it previously shared with USF RE, under an intercompany pooling agreement that has been terminated effective as of January 1, 1999. A.M. Best Company has placed USFIC's rating under review pending a visit by management to discuss historical results and future operations. There can be no assurance that USFIC will continue to be rated by A.M. Best Company following the disposition of USF RE or that if USFIC continues to be rated, that it will retain its current rating of "A". USFIC writes both standard and surplus lines insurance on commercial and personal property/casualty risks which are marketed exclusively through managing general agents, general agents and program administrators. 11 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, 1999 and 1998, respectively. MEDICAL LINES (Dollars in Thousands)
Six Months Ended June Quarter Ended June 30, 30, ---------------------- ------------------------ % % 1999 1998 Change 1999 1998 Change ------- ------- ------ -------- -------- ------ Premium Production............ $59,932 $54,558 9.9 % $113,366 $106,238 6.7 % ======= ======= ======== ======== Revenues: Premiums earned............. $20,875 $27,279 (23)% $ 41,839 $ 53,119 (21)% Commissions and fees........ 9,578 8,982 7 % 18,066 17,520 3 % Investment income........... 1,871 1,063 76 % 3,432 2,060 67 % ------- ------- -------- -------- Total revenues.............. 32,324 37,324 (13)% 63,337 72,699 (13)% ------- ------- -------- -------- Expenses: Losses and loss adjustment.. 18,733 20,770 (10)% 36,116 38,994 (7)% Policy acquisition.......... 7,251 9,081 (20)% 13,730 18,173 (24)% General and administrative.. 2,858 3,404 (16)% 6,435 6,679 (4)% ------- ------- -------- -------- Total expenses.............. 28,842 33,255 (13)% 56,281 63,846 (12)% ------- ------- -------- -------- Income before income taxes.... $ 3,482 $ 4,069 (14)% $ 7,056 $ 8,853 (20)% ======= ======= ======== ========
The decline in premiums earned in the 1999 periods as compared to 1998 is the result of the Company reducing its exposure to underwriting risk by limiting its risk retention level on business written by USBenefits to 25% on policies effective January 1, 1999 from 50% in prior periods. Total business production for the segment increased 9.9% and 6.7% in the 1999 periods, incorporating rate increases of 12% to 15%. Commission and fee income on this production increased moderately in the 1999 period due to expansion of INTERRA brokerage operations and higher production levels. Loss and loss adjustment expenses declined 10% and 7% in the 1999 quarterly and year to date periods. These results reflect a reduction in the net risk retention level in the medical lines segment to 25% on policies effective January 1, 1999 as well as loss development on policy year 1998 and prior years for which the Company had a net retention level of 50%. During the second quarter of 1999, the Company purchased reinsurance coverage in connection with the sale of USF RE that provides $5,000,000 of protection on further development of policy year 1998 losses. 12 SPECIALTY LINES (Dollars in Thousands)
Quarter Ended Six Months Ended June 30, June 30, --------------------- -------------------- % % 1999 1998 Change 1999 1998 Change ------ ------ ------ ------ ------ ------ Revenues: Premiums earned.................. $ 883 $1,601 (45)% $1,972 $3,229 (39)% Investment income................ 249 292 (15)% 624 585 7 % ------ ------ ------ ------ Total revenues................... 1,132 1,893 (40)% 2,596 3,814 (32)% ------ ------ ------ ------ Expenses: Losses and loss adjustment....... 857 962 (11)% 1,710 2,225 (23)% Policy acquisition............... 253 197 28 % 479 527 (9)% General and administrative....... (181) 336 (154)% 94 488 (81)% ------ ------ ------ ------ Total expenses................... 929 1,495 (38)% 2,283 3,240 (30)% ------ ------ ------ ------ Income before income taxes......... $ 203 $ 398 (49)% $ 313 $ 574 (45)% ====== ====== ====== ======
Specialty lines operating results reflect changes in reinsurance programs and termination of the inter-company pooling agreement with the Company's USF RE subsidiary effective January 1, 1999. These operating changes are the principal factors impacting premiums earned, loss and loss adjustment expenses and policy acquisition costs in the 1999 periods. Holding Company (Dollars in Thousands)
Quarter Ended Six Months Ended June June 30, 30, ---------------------- ---------------------- % % 1999 1998 Change 1999 1998 Change ------- ------ ------ ------- ------ ------ Revenues: Commission and fee income...... $ 61 $ -- $ 88 $ -- Investment income.............. 1 36 1 60 (98)% Realized gains................. 83 1,955 (96)% 70 2,596 (97)% ------- ------ ------- ------ Total revenues................. 145 1,991 (93)% 159 2,656 (94)% ------- ------ ------- ------ Expenses: General and administrative..... 979 737 33 % 1,613 1,506 7 % Interest....................... 1,078 547 97 % 2,176 1,103 97 % ------- ------ ------- ------ Total expenses................. 2,057 1,284 60 % 3,789 2,609 45 % ------- ------ ------- ------ Loss before income taxes......... $(1,912) $ 707 $(3,630) $ 47 ======= ====== ======= ======
Changes in realized gains in the 1999 period as compared to the 1998 period arise from the continuous evaluation of the investment portfolio in accordance with the Company's investment guidelines. General and administrative expenses in the 1999 periods fluctuate based upon the timing of purchased services and the allocation of services provided to the operating subsidiaries. Interest expense for the 1999 periods rose due to higher borrowing levels to finance the VASA Group acquisition. Interest expense will decline in the 1999 third quarter following the reduction of outstanding debt by $47,550,000 to $25,000,000 as a result of the completion of the sale of USF RE on June 29,1999. 13 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, commissions and fees and investment income. The principal uses of cash from operations are for premium payments to insurance companies, payments of claims under reinsurance and insurance contracts, and operating expenses such as salaries, commissions, taxes and general overhead. Cash available from operations varies between periods primarily due to the timing of premium collections and the payment of claims. In December 1998, the Company borrowed an additional $42,700,000 under its existing Credit Agreement for the purchase of the VASA Group companies. As previously noted, the Company received $71,750,000 in cash upon completion of the sale of USF RE on June 29,1999 and utilized $47,550,000 to pay down the loan balance on its Credit Agreement to $25,000,000, resulting in a greater than 50% reduction of the debt to total capitalizaiton ratio to 21%. This transaction also produced additional cash of $24,000,000 available to fund the Company's business. In connection with the sale of USF RE, the Company entered into a Sixth Amendment to its December 1994 Credit Agreement with Fleet National Bank ("Fleet Bank"), pursuant to which Amendment certain terms and conditions of the Credit Agreement were modified. Such modifications include changes in the Company's capital requirements and interest rates applicable to the outstanding balance of the bank debt. Amounts outstanding bear interest at LIBOR plus a margin, currently 1.25%. The Company's Credit Agreement contains certain covenants, restrictions and dividend payment limitations and call provisions in the event of non- compliance. The Company has notified Fleet Bank that the sale of USF RE and the charge of $19,621,000 taken by the Company in connection with discontinuing the property/casualty reinsurance segment in the fourth quarter of 1998 will have a negative impact on covenants that are based upon the prior four quarters of financial data. As of June 30,1999, the Company notified Fleet Bank that it will not meet the minimum fixed charge coverage ratio and minimum debt service coverage ratio covenants due to the circumstances previously described. Fleet Bank has indicated that a debt covenant waiver will be issued to the Company. However, Fleet Bank retains the option to call the note as prescribed in the Credit Agreement if the waiver is not issued. The Company has received no indication that Fleet Bank intends to call the debt. The investment portfolio reflects an allocation of approximately 92% in fixed-income investments, primarily taxable, with an "AA" average fixed income portfolio rating, and 8% in equities. The portfolio does not contain any real estate investments, derivatives, high yield bonds, private placements or mortgage loans. Year 2000 As the Year 2000 approaches, the Company recognizes the need to ensure that its operations will not be adversely affected by Year 2000 computer software and hardware issues. Such issues pertain to date sensitive software and hardware which could incorrectly recognize a two digit date field. This could result in a system miscalculation or failure and lead to a disruption of operations, including, among other things, a temporary inability to process transactions, send invoices, make claims or other payments or engage in similar activities. The Company adopted and has implemented a formal plan to evaluate and implement solutions to Year 2000 related problems which focuses on eight separate compliance issues: (i) the ability of the Company's systems to handle the transition to the Year 2000; (ii) the ability of the Company's customers and business partners to handle the transition to the Year 2000; (iii) the ability of the Company's vendors and service providers to handle the transition to the Year 2000; (iv) the Company's disclosure of its Year 2000 compliance efforts to investors and regulators; (v) the Company's potential exposure to losses from Year 2000 claims under its reinsurance contracts and insurance policies; (vi) the Company's ability to secure and maintain insurance coverages protecting the Company against Year 2000 losses; (vii) budget and resource issues; and (viii) development and implementation of a Year 2000 contingency plan. The evaluation phase of the plan was completed in December 1997. Commencing in 1998 and continuing in 1999, the Company has implemented and tested Year 2000 compliant systems for its corporate financial reporting system and its medical lines operations. The Company believes that all of its internal systems have reached a state of Year 2000 readiness and expects to continue testing its systems during the remainder of 1999. 14 In addition, the Company has solicited its trading partners including agents and brokers, suppliers, financial institutions and others who could directly or indirectly affect the Company's operations as to their Year 2000 compliance efforts. Presently, these trading partners are in various stages of completion of their own Year 2000 remediation efforts. The third party vendors providing the Company's significant operational and financial software systems have represented to the Company that the software now in use is Year 2000 compliant. The Company will continue to monitor the Year 2000 readiness of its own systems, as well as the readiness of its customers, business partners, vendors and service providers on an ongoing basis. It is presently not possible to quantify the aggregate cost to the Company with respect to external Year 2000 issues, if any, although the Company does not expect such matters to have a material adverse effect on its operations. The Company continues to monitor the status of external Year 2000 issues and is developing contingency plans for issues that may arise. In support of this objective, the Company has developed a worst case scenario relating to Year 2000 situations. This scenario indicates that Year 2000 risks relate to the Company's relationships with its trading partners where concerns such as telephone availability, fax services and telecommunications including internet service usage could cause the Company to revise its business practices in the event of the non availability of such common services. The Company is presently developing alternative methods to conducting its business in the event that a worst case scenario or element thereof was to occur. This scenario considers it unlikely that all external trading relationships would become useless simultaneously. Therefore, the Company's contingency plan is based upon alternatives to the specific loss of up to two of the identified worst case items described. The Company intends to continue testing elements of its contingency plan throughout 1999. Strategies have been developed to include identification of and management of resources which can be operated in reduced or minimal modes, appropriate recovery processes and use of alternate methods to process data. For example, insured name clearance can be accomplished using copies of data currently being compiled and stored off-premises, quote issuance can be performed manually, and policy issuance can also be performed manually, so long as the Company has access to photocopy systems and can maintain a log, either via spreadsheet or manual listing. If necessary, claims could be processed and paid manually and the data could be input into its systems once any problems are resolved. Premiums, commissions, and other financial data could be processed on a spreadsheet and checks typed on a manual basis. Alternatively, record keeping could be kept in spreadsheet format, and the Company may rely on the systems of one or more of its affiliated companies to perform some of the functions affected. In the event that the Company's systems do not function as expected and the Company has to implement its contingency plan, the Company does not believe there will be a material impact on the Company's operations. Critical operational tasks which could be negatively impacted include: insured name clearance, quote issuance, policy contract issuance, claims processing, generation of management reports, accounting, and communications with clients. Critical operational task data currently being produced is backed-up daily and stored at an off-site facility and will be available for processing by either an outside third party vendor or by the Company on a manual basis or on off- the-shelf software which could be purchased. As mentioned, the Company is working to make certain that its business partners are aware of the potential risks and that they are taking steps to make certain their systems are Year 2000 compliant. In the event a vendor, supplier or service provider cannot certify or establish Year 2000 compliance status to the Company by October 1, 1999, the Company will contract with alternative sources for products and services. Further, the failure of one of the Company's business partners to achieve compliance, or a finding that its systems do not function as expected, may have an impact on the Company. The Company has communicated with its business partners to determine their extent of compliance and has learned that a variety of operating systems are being used by them. The Company believes that it is unlikely that the failure of one operating system to perform as expected will affect a significant portion of its business partners at any one time. 15 The Company has also taken steps to ensure that it will have adequate insurance coverages for any Year 2000 losses that it may incur by monitoring its coverages to ensure that there are no Year 2000 restrictions or limitations on its policies, renewing its D&O and E&O coverages early without any limitations pertaining to Year 2000, and by obtaining multi-year contracts that will extend beyond the Year 2000 to ensure that its coverages are not restricted or canceled during 1999. In addition, it is the Company's intention to renew all of its other principal coverages to ensure that such coverages also do not contain Year 2000 restrictions. Forward Looking Statements Some of the statements included within this quarterly report on Form 10-Q, including but not limited to Management's Discussion and Analysis of Financial Condition and Results of Operations, Condensed Consolidated Financial Statements and related notes thereto, which are not historical facts may be considered to be forward looking statements within the meaning of Section 29A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward looking statements are subject to certain risks and uncertainties which could cause the actual results to differ materially from those suggested by such statements. Such risks and uncertainties include, but are not limited to the following: catastrophic losses or a material aggregation of such losses in the Company's insurance lines; changes in federal or state law affecting an employer's ability to self-insure or other adverse regulatory changes; the adequacy of the Company's reinsurance programs; general economic conditions in this country or abroad; adverse developments in the securities markets and their impact on the Company's investment portfolio; the effects of competitive market pressures within the medical lines or property/casualty marketplaces; the effect of changes required by generally accepted accounting practices or statutory accounting practices; failure of the company's computer systems to perform in an appropriate manner following Year 2000 remediation efforts; failure of the company's trading partners, customers or key vendors to make their computer systems Year 2000 compliant in a timely manner; and other risks which are described from time to time in the company's filings with the Securities and Exchange Commission. The words "believes", "anticipates", " expects" and similar expressions are intended to identify forward-looking statements. Although the Company believes that the assumptions underlying the forward- looking statements contained herein are reasonable, any of the assumptions could prove to be inaccurate and, therefore there can be no assurance that such forward-looking statements will themselves prove to be accurate. In the light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by the Company or by any other person that the objectives and plans of the Company will be achieved. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company does not believe there have been any material changes in the market risks since December 31, 1998, which would impact the fair value of certain assets and liabilities included in the Condensed Consolidated Balance Sheets. 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's 1999 Annual Meeting of Stockholders ("Annual Meeting") was held on May 12, 1999 at the Company's offices in Costa Mesa, California. A total of 10,364,216 shares were voted at the Annual Meeting in person or by proxy, representing 89% of the shares of the Company's $.01 par value common stock issued, outstanding and eligible to vote on the record date, March 19, 1999. (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 1999 Annual Meeting, the Company's stockholders elected two of the Company's seven directors for a term of three years, which term expires at the Annual Meeting of Stockholders in the year 2002. The two individuals nominated by the Company for election at this 1999 Annual Meeting were existing director Roxani M. Gillespie and Jose A. Velasco, the Company's Senior Vice President and General Counsel. No individuals were nominated in opposition to the Company'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 on this proposal.
Name For Against ---- ---------- ------- Roxani M. Gillespie.................................... 10,279,620 84,595 Jose A. Velasco........................................ 10,283,863 80,352
The five directors who are continuing in office are David L. Cargile, John F. Kooken, L. Steven Medgyesy, Charles L. Schultz and Howard S. Singer. (c) The Company's stockholders were asked to consider one other matter 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 such matter. The results of the vote on the proposal as reported by the Inspector of Elections is set forth below. Ratification of the selection by the Board of Directors of KPMG LLP to continue to serve as the Company's independent auditors for the fiscal year ending December 31, 1999. Broker For Against Abstain Non-Votes ---------- ------- ------- ---------- 10,073,443 277,878 12,895 --
17 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 The Company's Restated Certificate of Incorporation, as amended, as presently in effect. Filed as Exhibits 3.1 and 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K"), and incorporated herein by this reference. 3.2, 4.2 Amended and Restated Bylaws of the Company, as presently in effect. Filed as Exhibits 3.2 and 4.2 to the Company's 1997 Form 10-K, and incorporated herein by this reference. 4.3 Stock Certificate of the Company. Filed as Exhibit 4.3 to the Company's Quarterly report on Form 10-Q for the quarter ended June 30, 1997, 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 as Exhibit 4 to the Company's Current Report on Form 8-K dated September 28, 1995, and incorporated herein by this reference. 4.8 Fourth Amendment to Rights Agreement. Filed as Exhibit 1 to the Company's Current Report on Form 8-K dated July 23, 1997, and incorporated herein by this reference. 4.9 Fifth Amendment to Rights Agreement. Filed as Exhibit 1 to the Company's Current Report on Form 8-K dated January 28, 1998, and incorporated herein by this reference. 11. Computation of Earnings per Share See Note 7 of the Notes to the Condensed Consolidated Financial Statements of The Centris Group, Inc. for the period ended June 30,1999 set forth in Item 1 of Part 1 hereof. 15.* Independent Auditors' letter regarding unaudited interim financial information. 27.* Financial Data Schedules
- -------- * Describes exhibits filed with this Quarterly Report on Form 10-Q. (b) During the second quarter of 1999, from April 1, 1999 through June 30, 1999 the Company did not file any Current Reports on Form 8-K with the Securities and Exchange Commission. 18 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. The Centris Group, Inc. Date: August 2, 1999 By: /s/ David L. Cargile ---------------------------------- David L. Cargile Chairman of the Board, President and Chief Executive Officer Date: August 2, 1999 By: /s/ Charles M. Caporale ---------------------------------- Charles M. Caporale Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 19 EX-15 2 INDEPENDENT AUDITOR'S REVIEW REPORT EXHIBIT 15 Independent Auditors' Review Report ----------------------------------- The Board of Directors and Shareholders The Centris Group, Inc.: We have reviewed the condensed consolidated balance sheet of The Centris Group, Inc. and subsidiaries as of June 30, 1999, and the related condensed consolidated income statements for the quarters and six-month periods ended June 30, 1999 and 1998, and condensed consolidated statements of cash flows for the six-month periods ended June 30, 1999 and 1998. 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 The Centris Group, Inc. and subsidiaries as of December 31, 1998, 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 March 26, 1999, 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, 1998, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /S/ KPMG LLP Los Angeles, California July 27, 1999 EX-27 3 ARTICLE 7 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 0 0 0 0 0 0 72,236 27,529 171,687 0 473,547 114,903 15,601 0 0 25,000 0 0 0 0 473,547 43,811 4,057 70 47,826 37,826 14,209 39,990 3,739 1,329 0 0 0 0 2,410 0.21 0.20 0 0 0 0 0 0 0
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