<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
_____ 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 0-8628
FOUR CORNERS FINANCIAL CORPORATION (as of April 12, 1988)
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-2044086
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 East Avenue, Rochester, New York 14604
(Address of principal executive offices - Zip Code)
(716) 454-2263
(Registrant's Telephone Number, including Area Code)
_______________________________________________________
(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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At November 12, 1996 there were 3,293,733 of the registrant's $.04 par value
common stock outstanding.
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION ------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of 1-2
September 30, 1996 (Unaudited) and
December 31, 1995
Consolidated Statements of Operations for the 3-4
Three Months and Nine Months Ended September 30,
1996 and 1995 (Unaudited)
Consolidated Statements of Changes in 5
Stockholders' Investment for the Nine Months
Ended September 30, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows for the 6
Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Notes to Condensed Consolidated Financial 7-13
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of 14-15
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Default Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of 16
Security Holders
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and equivalents $ 14,270 $ 62,791
Cash - escrow deposits 79,389 90,403
Accounts receivable - trade, net of
allowance for doubtful accounts of $84,000
in 1996 and 1995, respectively 502,896 464,288
Prepaid expenses 2,876 13,316
Other receivables 6,411 893
Current portion of note receivable 2,500 2,500
Income tax receivable --- ---
---------- ----------
Total current assets 608,342 634,191
---------- ----------
TITLE PLANT 367,283 367,283
---------- ----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation 158,719 195,940
---------- ----------
OTHER ASSETS:
Note receivable, net of current portion 7,500 10,000
Cash value of life insurance 17,616 17,616
Other assets 9,257 15,256
---------- ----------
34,373 42,872
---------- ----------
$1,168,717 $1,240,286
========== ==========
The accompanying notes are an integral part of these statements.
- 1 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' INVESTMENT
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
CURRENT LIABILITIES:
Line-of-credit $ 50,000 $ 35,000
Current portion of notes payable 98,551 104,961
Current portion of obligations under
capital leases 5,050 32,738
Notes payable to officers/principal
stockholders 14,000 27,500
Accounts payable 385,437 393,179
Accounts payable - related parties 20,000 20,000
Escrow deposits 79,389 90,403
Accrued income taxes 1,500 1,500
Other accrued expenses 34,227 50,886
----------- -----------
Total current liabilities 688,154 756,167
----------- -----------
LONG-TERM LIABILITIES:
Notes payable, net of current portion 163,942 227,924
Obligations under capital leases, net
of current portion --- 590
Due to officer/principal stockholder 225,000 200,000
----------- -----------
Total long-term liabilities 388,942 428,514
----------- -----------
Total liabilities 1,077,096 1,184,681
----------- -----------
STOCKHOLDERS' INVESTMENT:
Common stock, $.04 par value, 15,000,000
shares authorized, 3,348,733 issued and
3,293,733 outstanding in 1996 and 1995,
respectively 133,752 133,752
Additional paid-in-capital 835,402 835,402
Accumulated deficit (846,908) (907,924)
----------- -----------
122,246 61,230
Less: Treasury stock at cost (30,625) (5,625)
----------- -----------
Total stockholders' investment 91,621 55,605
----------- -----------
$ 1,168,717 $ 1,240,286
=========== ===========
The accompanying notes are an integral part of these statements.
- 2 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
----------- -----------
(Unaudited) (Unaudited)
REVENUE:
Title insurance premiums $ 322,529 $ 399,379
Abstract and appraisal fees 604,867 599,672
--------- ---------
927,396 999,051
--------- ---------
DIRECT COSTS OF REVENUE:
Title insurance (68,384) (116,046)
Abstract and appraisal services (106,180) (73,818)
--------- ---------
(174,564) (189,864)
--------- ---------
Gross profit 752,832 809,187
OPERATING EXPENSES: (688,906) (742,760)
--------- ---------
Income from operations 63,926 66,427
--------- ---------
INTEREST, NET: (13,975) (18,502)
--------- ---------
NET INCOME $ 49,951 $ 47,925
========= =========
NET INCOME PER SHARE $ .01 $ .01
========= =========
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
----------- -----------
(Unaudited) (Unaudited)
REVENUE:
Title insurance premiums $ 1,034,705 $ 1,095,945
Abstract and appraisal fees 1,820,678 1,695,853
----------- -----------
2,855,383 2,791,798
----------- -----------
DIRECT COSTS OF REVENUE:
Title insurance (293,343) (208,108)
Abstract and appraisal services (299,087) (339,437)
----------- -----------
(592,430) (547,545)
----------- -----------
Gross profit 2,262,953 2,244,253
OPERATING EXPENSES: (2,157,701) (2,165,635)
----------- -----------
Income from operations 105,252 78,618
----------- -----------
INTEREST, NET: (44,242) (56,109)
----------- -----------
NET INCOME $ 61,010 $ 22,509
=========== ===========
NET INCOME PER SHARE $ .02 $ .01
=========== ===========
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
---- Common Stock ---- Additional Total
Paid-in- Accumulated Treasury Stockholders'
Shares Amount Capital Deficit Stock Investment
--------- -------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December
31, 1994 3,343,802 $133,752 $835,402 $(1,005,308) $ (5,625) $(41,779)
Net income for the
nine months ended
September 30,
1995 (Unaudited) --- --- --- 22,509 --- 22,509
--------- -------- -------- ----------- -------- --------
BALANCE, September
30, 1995 (Unaudited) 3,343,802 $133,752 $835,402 $ (982,799) $ (5,625) $(19,270)
========= ======== ======== =========== ======== ========
BALANCE, December
31, 1995 3,343,733 $133,752 $835,402 $ (907,918) $ (5,625) $ 55,611
Purchase of
treasury stock 50,000 --- --- --- (25,000) (25,000)
Net income for the
nine months ended
September 30,
1996 (Unaudited) --- --- --- 61,010 --- 61,010
--------- -------- -------- ----------- -------- --------
BALANCE, September
30, 1996 (Unaudited) 3,293,733 $133,752 $835,402 $ (846,908) $(30,625) $ 91,621
========= ======== ======== =========== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
----------- -----------
(Unaudited) (Unaudited)
CASH FLOW OPERATING ACTIVITIES:
Net income $ 61,010 $ 22,509
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation and amortization 61,342 79,541
Increase in accounts receivable (38,608) (51,684)
Decrease in other current assets 4,922 6,622
Increase/(decrease) in accounts payable (7,742) 77,071
Decrease in other current liabs. (16,659) (29,215)
-------- ---------
Net cash flow from operating activities 64,266 104,844
-------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment,
net of disposals (24,116) 6,051
Decrease / (Increase) in other assets 8,499 (2,011)
Investment in cash value of life insurance --- (2,991)
-------- ---------
Net cash flow from investing activities (15,617) 1,049
-------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Decrease in notes payable, net (70,392) (47,853)
Decrease in obligations under
capital leases, net (28,278) (34,074)
Increase in line-of-credit 15,000 ---
Purchase of treasury stock (25,000) ---
Increase in amount due to
officer/principal stockholder 11,500 ---
-------- ---------
Net cash flow from financing activities (97,170) (81,927)
-------- ---------
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS: (48,521) 23,966
CASH AND EQUIVALENTS - beginning of period 62,791 28,932
-------- ---------
CASH AND EQUIVALENTS - end of period $ 14,270 $ 52,898
======== =========
The accompanying notes are an integral part of these statements.
- 6 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
(1) General
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate in order that
the information presented is not misleading. All adjustments for a fair
presentation of financial information contained herein have been made.
(2) Organization
The Company -
Four Corners Financial Corporation (FCFC) and its Subsidiaries, Four
Corners Abstract Corporation (FCAC) and Proper Appraisal Specialists,
Inc. provide services and products including real estate title
searching, preparation of abstracts of title, issuance of title
insurance as an agent for certain national underwriting companies and
real estate appraisals, primarily in western and central New York
State. All of these services and products are required in connection
with the mortgaging, sale or purchase of real property.
Unless otherwise indicated, the term "Company" refers to Four Corners
Financial Corp. and its Subsidiaries. The Company operates in one
business segment.
(3) Summary of Significant Accounting Policies
Principles of Consolidation -
The consolidated financial statements include the accounts of FCFC and
all of its subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Cash and Equivalents -
Cash and equivalents include time deposits and other instruments with a
maturity of three months or less at the time of purchase. The Company
maintains cash balances at several banks. Accounts at each institution
are insured by The Federal Deposit Insurance Corporation up to
$100,000.
- 7 -
<PAGE>
(3) Summary of Significant Accounting Policies (Continued)
Property and Equipment -
Property and equipment is stated at cost and is depreciated using
accelerated and straight-line methods over the following useful lives:
Buildings 15 - 31.5 years
Furniture and Equipment 3 - 10 years
Vehicles 5 years
Leasehold Improvements Life of lease
At the time of retirement or other disposition of property, the cost
and accumulated depreciation are removed from the accounts and any gain
or loss is reflected in the statements of operations. Repairs and
maintenance costs are charged to expense when incurred.
Intangible Assets -
Intangible assets consist of goodwill and covenants not-to-compete
resulting from the 1987 acquisition of the Albany branch, the 1989
acquisition of Livingston Abstract Corporation, the 1990 acquisition of
Picciano Abstract Company, Inc. and the 1991 acquisition of Proper
Appraisal Specialists, Inc. These assets were fully amortized during
1995.
Title Plant -
Title plant consists of copies of public records, maps and other
relevant historical documents which facilitate the preparation of title
abstract reports without the necessity of manually searching official
public records.
The Company has incurred identifiable costs related to the activities
necessary to construct a title plant which are reflected as assets. A
title plant is regarded as a tangible asset having an indefinite
economic life; accordingly, title plant costs are not depreciated.
Revenue Recognition -
Title insurance is provided to purchasers or financiers of real
property purchases. The related revenue is recognized when policies
become effective, generally at the property or mortgage loan closing.
Under terms of the Company's agreements with its title insurance
underwriters, a commission of 15% to 20% is paid to its underwriter on
all title insurance policies written. Pricing is based on a rate
schedule established by the Insurance Department of the State of New
York which provides for varying rates for services rendered. Commission
expense is reflected as a direct cost of title insurance revenue in the
statement of operations.
- 8 -
<PAGE>
(3) Summary of Significant Accounting Policies (Continued)
Revenue Recognition - (Continued)
The Company also performs title abstract research and provides
appraisals on real properties under an exclusive arrangement with a
local appraisal company. Abstract and appraisal revenue is recognized
as earned. Direct costs of abstract and appraisal revenue reflects the
cost of work performed by subcontractors in geographical areas where
the Company does not maintain an office, among other direct costs.
(4) Acquisitions
The Company acquired Proper Appraisal Specialists, Inc. (1991),
Picciano Abstract Company, Inc. (1990), Livingston Abstract Corporation
(1989) and Mid-State (1988) for cash, notes and common stock totalling
approximately $185,000. These acquisitions were accounted for as
purchases. Goodwill, representing the excess of purchase price over the
fair value of tangible assets acquired related to these acquisitions,
totalled approximately $66,000 and was being amortized over five years.
These companies were subsequently merged into FCAC.
(5) Income Taxes
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109
requires an asset and a liability approach to measuring deferred income
taxes. Previous standards required an income statement approach.
There were no material temporary differences at December 31, 1995 or at
September 30, 1996. Therefore, no deferred taxes have been provided.
At December 31, 1995, the Company has available a net operating loss
carry-forward of approximately $360,000, which begins to expire in
2002. The Company has recorded a valuation allowance equal to the
deferred tax asset related to the carryforward.
(6) Escrow Deposits
As a service to its customers, FCAC administers escrow deposits
representing undisbursed amounts received for settlements of mortgage
loans or property sales and indemnities against specific title risks.
These funds, totalling $79,389 and $90,403 at September 30, 1996 and
December 31, 1995, respectively, are recorded as both a current asset
and a current liability in the accompanying consolidated balance
sheets.
- 9 -
<PAGE>
(7) Notes Payable and Obligations Under Capital Leases
Notes Payable -
On December 13, 1995, the amount outstanding on the note payable to a
bank, $133,333, and $185,000 of the amount borrowed under its
line-of-credit agreement were refinanced with the same bank. The note
payable to the bank requires the company to meet certain financial
covenants at December 31, 1995 as follows:
a. Working capital deficit of $140,000.
b. Current ratio of .85 to 1
c. Minimum tangible net worth of $250,000
d. Total liabilities to tangible net worth of not more than 3.9 to 1.
e. Debt service ratio of not less than 1.75 to 1.
These ratios are adjusted on a quarterly or semi-annual basis during
1996 and thereafter. The agreement also limits the Company's ability to
make acquisitions, pay dividends and make capital expenditures, and
requires the Company to submit certain financial information. At
December 31, 1995, the Company was in compliance with all covenants. As
of September 30, 1996, the Company was not in compliance with certain
financial covenants associated with this loan.
Notes payable consisted of the following:
September 30, December 31,
1996 1995
------------- ------------
Note payable to Marine Midland Bank, due
in monthly installments of $7,674 through
October, 1997 and $6,230 through October,
1999 plus interest at the bank's prime
rate plus 1.25%. This note is guaranteed
by the officers/ stock-holders of the
Company and is collateralized by
substantially all of the Company's
assets. $249,271 $318,333
Various notes payable in aggregate
monthly installments of $1,103 including
interest at rates ranging from 8.0% to
9.5%. These notes mature through
November, 1999 and are collateralized by
the related equipment. 13,222 14,552
-------- --------
262,492 332,885
Less: Current Portion (98,551) (104,961)
-------- --------
$163,942 $227,924
======== ========
- 10 -
<PAGE>
Obligations Under Capital Leases:
The Company has entered into several capital lease agreements for
equipment. These obligations consist of the following:
September 30, December 31,
1996 1995
------------- ------------
Various leases payable in aggregate
monthly installments of $1,522 including
interest at rates ranging from 8.4% to
11.0%. These leases mature through
January, 1997 and are collateralized by
the equipment. $ 5,050 $ 33,328
Less: Current Portion (5,050) (32,738)
------- --------
$ --- $ 590
======= ========
(8) Lines-of-Credit
The Company may borrow up to $50,000 under the terms of a new line-of-
credit agreement with a bank. This line-of-credit is renewable
annually. Amounts borrowed bear interest at the bank's prime interest
rate plus 1% and are collateralized by substantially all assets of the
Company and are guaranteed by the officers/stockholders of the Company.
On December 13, 1995 $185,000 of the amount borrowed under this
line-of-credit was refinanced as part of the note payable to the same
bank. At December 31, 1995 and September 30, 1996, there was $35,000
and $50,000 respectively, outstanding under this line-of-credit.
The Company may also borrow up to $100,000 under the terms of an
unsecured line-of-credit with another bank. Amounts borrowed bear
interest at the bank's prime rate plus 1%. Borrowings under this
line-of-credit are personally guaranteed by the Company's principal
officer/stockholder. At September 30, 1996 and December 31, 1995, there
were no borrowings on this line-of-credit.
- 11 -
<PAGE>
(9) Stockholders' Investment
Stock Options -
In July, 1992, the Company's Board of Directors adopted and the
stockholders approved the 1992 Stock Option Plan (1992 Plan) which
replaced the 1988 Stock Incentive Plan (1988 Plan).
Under the 1992 Plan, the Company may issue incentive stock options,
non-statutory options, non-employee director options and reload
options. The exercise price of incentive, non-statutory and reload
options will not be less than fair market value at date of grant.
Incentive and non-statutory options will generally expire ten years
from date of grant. Reload options will have a term equal to the
remaining option term of the underlying option.
The 1992 Plan also provides for annual grants of stock options to
purchase 500 shares of the Company's common stock to non-employee
directors of the Company with an exercise price not less than fair
market value at date of grant. These options will expire ten years from
date of grant.
Options issued under the 1988 Plan expired in 1995. No further options
will be granted under the 1988 Plan.
The Company has reserved 520,000 common shares for issuance under the
1992 plan.
At September 30, 1996 and December 31, 1995, there were 271,000 options
outstanding under the 1992 and 1988 Plans.
(10) Related Party Transactions
Due to Officers/Principal Stockholders -
During 1996, 1995, and 1994, one of the Company's principal officers/
stock-holders made advances to the Company. These advances bear
interest at the prime rate plus 3% and repayment is subordinated to the
amounts outstanding under all other bank debt agreements. The principal
officer/stockholder has agreed not to require payment of this amount
through January, 1998.
At September 30, 1996 and December 31, 1995, the amount outstanding on
this debt was $225,000 and $200,000 respectively.
During 1995, certain of the Company's officers/principal stockholders
advanced $29,000 to the company in the form of non-interest bearing
notes. These notes have no formal repayment terms. As of September 30,
1996, $14,000 of this amount remains outstanding. Although no formal
repayment terms exist, it is anticipated that these notes will be fully
paid during 1997.
- 12 -
<PAGE>
Office Lease Commitment -
The Company leases its Rochester facility from a party related through
common management. The Company has a five year lease agreement through
June 30, 2000 at an annual rental of $72,000. Rent and common area
charges were approximately $72,000, $58,000 and $213,000 in 1995, 1994
and 1993, respectively. The Company owed approximately $20,000 for
unpaid rent at September 30, 1996 and December 31, 1995. During 1994,
total unpaid rent of $109,000 was forgiven by the related party. This
amount has been reflected as an extraordinary item, net of income
taxes, of $44,000.
Significant Customer -
In 1995, 1994 and 1993, 4% of revenue was derived from a related party.
(11) Lease Commitments
FCAC leases other office facilities under lease agreements expiring
through March, 1998.
Minimum lease payments under non-cancelable lease agreements are as
follows at December 31, 1995:
1996........................................ 103,479
1997........................................ 62,980
1998........................................ 53,895
1999........................................ 9,368
2000........................................ 781
--------
$230,503
========
Rent expense related to these operating leases was approximately
$124,000, $135,000 and $127,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
(12) Reverse Stock Split
In July, 1992, the Company's stockholders approved a one-for-four
reverse stock split. In conjunction with this reverse stock split, the
authorized number of shares was reduced to 15,000,000 and par value was
increased to $.04 per share. These actions have been retroactively
reflected in the financial statements.
- 13 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company's cash flow results from operations, bank loans, advances made by
principal stockholders and from sales of common stock.
During the first nine months of 1996, cash reserves of $62,791 and cash flow
from operating activities of $64,266 were sufficient to fund the Company's net
asset investments of $15,617 and a negative cash flow from debt financing
activities of $97,170.
Cash Flow from Operations: The Company had positive cash flow from operating
activities through the first nine months of 1996 of $64,266 compared to $104,844
for the same period in 1995. The decrease in total operating cash flow was
primarily due to a decrease in accounts payable of $7,742, while accounts
payable for the 1995 time period increased dramatically by $77,071.
Cash Flow from Investing Activities: The only capital expenditures incurred by
the Company during the first nine months of 1996 related to capital improvements
for the Rochester corporate office building and an additional company vehicle.
The Company made no title plant investment in 1995 or 1996. In addition, the
Company maintains an investment in a Keyman life insurance policy with a cash
surrender value of $17,616 as of the end of the third quarter. At September, 30,
1996, the Company had no material purchase commitments.
Cash Flow from Financing Activities: Primary cash flows from financing
activities relate to changes in financing under lines-of-credit, notes payable,
advances made by principal stockholders and treasury stock purchases. Despite
the effort to support the ongoing operations during the third quarter of 1996,
the Company was able to repay a portion of its borrowings from notes and loans
by $70,392. In addition, the company purchased treasury stock in the amount of
$25,000 whereas no similar purchases were made for the same period in 1995. This
negative cash flow was adequately funded through positive operating cash flows
and the cash reserve available at the beginning of 1996.
The Company expects that the cash flow generated from operations and bank lines-
of-credit currently available will be adequate to meet its working capital and
capital expenditure needs for the remainder of 1996.
- 14 -
<PAGE>
Results of Operations
Total revenues for the first nine months of 1996 were $2,855,383 as compared to
$2,791,798 for the same period during 1995. This increase of $63,585 or 2%
resulted from a slight increase in sales order volume resulting from stronger
economic conditions. The revenues generated from title insurance premiums
decreased by 5% to $1,034,705 as compared to $1,095,945 for the first three
quarters of the 1995 calendar year. Despite this slight decrease associated with
title operations, revenues from abstract and appraisal fees during the first
nine months of 1996 increased by $124,825 to $1,820,678 as compared to
$1,695,853 for the same period in 1995.
Due to the increased sales order volume in areas where the Company does
business, as well as a reduction in internal staffing the need for subcontractor
services escalated during the first nine months of 1996. Correspondingly, direct
costs of revenue increased to 20.7% of revenues for this time period in 1996 as
compared to 19.6% for the same period in 1995. Gross profit for the quarter
ended September 30, 1996 was $2,262,953 or 79.3% of gross revenues. The
corresponding figures for 1995 were $2,244,253 or 20.4%. Operating expenses for
the months of January, 1996 through September, 1996 were $2,157,701 or 75.6% of
revenues as compared to $2,165,635 or 77.6% of revenues for the same nine months
in 1995. The reduction in operating expenses is primarily due to a decrease in
personnel and the related variable payroll costs as well as continuous cost-
cutting efforts relating to general and administrative expenses. The Company
anticipates revenues to remain relatively stable during the final quarter of
1996. The $61,010 net income in the first three quarters of 1996 compares
favorably to the net income incurred through September, 1995 of $22,509.
The Company's ratio of current assets to current liabilities at September 30,
1996 and December 31, 1995 was 88:1 and 84:1, respectively. Accordingly, the
Company had a working capital deficit of $79,812 as of September 30, 1996
compared to $121,976 as of December 31, 1995.
- 15 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
- 16 -
<PAGE>
SIGNATURE
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.
FOUR CORNERS FINANCIAL CORPORATION
Date: November 14, 1996 By /s/ William S. Gagliano
William S. Gagliano
Executive Vice President and
Chief Accounting Officer
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,270
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0
0
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</TABLE>
