<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 June 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 August 13, 1996 there were 3,343,733 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
June 30, 1996 (Unaudited) and
December 31, 1995
Consolidated Statements of Operations for the 3-4
Three Months and Six Months Ended June 30, 1996
and 1995 (Unaudited)
Consolidated Statements of Changes in 5
Stockholders' Investment for the Six Months
Ended June 30, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows for the 6
Six Months Ended June 30, 1996 and 1995
(Unaudited)
Notes to Condensed Consolidated Financial 7-11
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of 12
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Default Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of 13
Security Holders
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 49,734 $ 62,791
Cash - escrow deposits 58,588 90,403
Accounts receivable - trade, net of
allowance for doubtful accounts of $84,000
in 1996 and 1995, respectively 518,312 464,288
Prepaid expenses 2,357 13,316
Other receivables 10,266 893
Current portion of note receivable 1,250 2,500
Income tax receivable -- --
----------- -----------
Total current assets 640,507 634,191
----------- -----------
TITLE PLANT 367,283 367,283
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation 175,030 195,940
----------- -----------
OTHER ASSETS:
Note receivable, net of current portion 10,000 10,000
Cash value of life insurance 17,616 17,616
Other assets 9,257 15,256
----------- -----------
36,873 42,872
----------- -----------
$ 1,219,693 $ 1,240,286
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 1 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Line-of-credit $ 50,000 $ 35,000
Current portion of notes payable 101,422 104,961
Current portion of obligations under
capital leases 13,377 32,738
Notes payable to officers/principal
stockholders 18,500 27,500
Accounts payable 466,023 393,179
Accounts payable - related parties 20,000 20,000
Escrow deposits 58,588 90,403
Accrued income taxes 1,500 1,500
Other accrued expenses 35,962 50,886
------------ -------------
Total current liabilities 765,372 756,167
------------ -------------
LONG-TERM LIABILITIES:
Notes payable, net of current portion 187,657 227,924
Obligations under capital leases, net
of current portion -- 590
Due to officer/principal stockholder 200,000 200,000
------------ -------------
Total long-term liabilities 387,657 428,514
------------ -------------
Total liabilities 1,153,024 1,184,681
------------ -------------
STOCKHOLDERS' INVESTMENT:
Common stock, $.04 par value, 15,000,000
shares authorized, 3,348,733 issued and
3,343,733 outstanding in 1996 and 1995 133,752 133,752
Additional paid-in-capital 835,402 835,402
Accumulated deficit (896,865) (907,924)
------------ -------------
72,289 61,230
Less: Treasury stock at cost (5,625) (5,625)
------------ -------------
Total stockholders' investment 66,664 55,605
------------ -------------
$ 1,219,693 $ 1,240,286
============ =============
</TABLE>
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 JUNE 30, 1996 AND 1995
1996 1995
----------- -----------
(Unaudited) (Unaudited)
REVENUE:
Title insurance premiums $ 371,883 $ 348,107
Abstract and appraisal fees 667,370 604,897
----------- -----------
1,039,253 953,004
----------- -----------
DIRECT COSTS OF REVENUE:
Title insurance (108,830) (109,088)
Abstract and appraisal services (106,914) (76,140)
----------- -----------
(215,744) (185,228)
----------- -----------
Gross profit 823,509 767,776
OPERATING EXPENSES: (761,637) (679,021)
----------- -----------
Income from operations 61,872 88,755
----------- -----------
INTEREST, NET: (14,893) (19,103)
----------- -----------
NET INCOME $ 46,979 $ 69,652
=========== ===========
NET INCOME PER SHARE $ .01 $ .02
=========== ===========
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
------------ ------------
(Unaudited) (Unaudited)
REVENUE:
Title insurance premiums $ 712,176 $ 696,567
Abstract and appraisal fees 1,215,811 1,096,180
------------ ------------
1,927,987 1,792,747
------------ ------------
DIRECT COSTS OF REVENUE:
Title insurance (224,958) (223,390)
Abstract and appraisal services (192,907) (134,292)
------------ ------------
(417,865) (357,682)
------------ ------------
Gross profit 1,510,122 1,435,065
OPERATING EXPENSES: (1,468,796) (1,422,875)
------------ ------------
Income from operations 41,326 12,190
------------ ------------
INTEREST, NET: (30,267) (37,606)
------------ ------------
NET INCOME/LOSS $ 11,059 $ (25,416)
============ ============
NET INCOME/LOSS PER SHARE $ .01 $ (.02)
============ ============
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 SIX MONTHS ENDED JUNE 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 loss for the six months ended
June 30, 1995 (Unaudited) -- -- -- (25,416) -- (25,416)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1995 (Unaudited) 3,343,802 $ 133,752 $ 835,402 $(1,030,724) $ (5,625) $ ( 67,195)
=========== =========== =========== =========== =========== ===========
BALANCE, December 31, 1995 3,343,802 $ 133,752 $ 835,402 $ (907,924) $ (5,625) $ 55,605
Net income for the six months ended
June 30, 1996 (Unaudited) -- -- -- 11,059 -- 11,059
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, June 30, 1996 (Unaudited) 3,343,802 $ 133,752 $ 835,402 $ (896,865) $ (5,625) $ 66,664
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW OPERATING ACTIVITIES:
Net income/(loss) $ 11,059 $ ( 25,416)
Adjustments to reconcile net loss to
net cash flow from operating activities:
Depreciation and amortization 42,812 55,081
Increase in accounts receivable (54,024) (58,597)
Decrease in other current assets 2,836 7,682
Increase in accounts payable 72,844 145,747
Decrease in other current liabilities (14,929) (29,956)
---------- ----------
Net cash flow from operating activities 60,598 94,541
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment,
net of disposals (21,897) (12,686)
Decrease/(Increase) in other assets 5,999 (397)
Investment in cash value of life insurance -- (2,991)
---------- ----------
Net cash flow from investing activities (15,898) (16,064)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Decrease in notes payable, net (43,806) (48,043)
Decrease in obligations under
capital leases, net (19,951) (22,636)
Increase in line-of-credit 15,000 --
Increase/(decrease) in amount due to
officer/principal stockholder (9,000) 15,000
---------- ----------
Net cash flow from financing activities (57,757) (55,679)
---------- ----------
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS: (13,057) 22,798
CASH AND EQUIVALENTS - beginning of period 62,791 28,932
---------- ----------
CASH AND EQUIVALENTS - end of period $ 49,734 $ 51,730
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
- 6 -
<PAGE>
FOUR CORNERS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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.
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.
- 7 -
<PAGE>
(3) Summary of Significant Accounting Policies (Continued)
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.
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 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 is 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 June 30, 1996. Therefore, no deferred taxes have been provided.
At December 31, 1995, the Company has available a net operating loss
carryforward 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.
- 8 -
<PAGE>
(3) Summary of Significant Accounting Policies (Continued)
(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 $58,588 and $90,403 at June 30, 1996 and
December 31, 1995, respectively, are recorded as both a current asset
and a current liability in the accompanying consolidated balance
sheets.
(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 as of June
30, 1996. The note payable and line-of-credit have been classified in
accordance with the new agreement. 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, and June 30, 1996, the Company was in compliance
with all covenants.
Notes payable consisted of the following:
June 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. $ 272,292 $ 318,333
Various notes payable in
aggregate monthly installments
of $1,679 including interest at
rates ranging from 7.9% to 9.5%.
These notes mature through
November, 1999 and are
collateralized by the related
equipment. 16,787 14,552
---------- ----------
289,079 332,885
Less: Current Portion (101,422) (104,961)
---------- ----------
$ 187,657 $ 227,924
========== ==========
- 9 -
<PAGE>
Obligations Under Capital Leases:
The Company has entered into several capital lease agreements for
equipment. These obligations consist of the following:
June 30, December 31,
1996 1995
---------- ----------
Various leases payable in
aggregate monthly installments
of $4,257 including interest at
rates ranging from 8.4% to
11.0%. These leases mature
through January, 1997 and are
collateralized by the equipment. $ 13,377 $ 33,328
Less: Current Portion (13,377) (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 June 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 June 30, 1995 and December 31, 1995, there
were no borrowings on this line-of-credit.
(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 expire in 1995. No further options
will be granted under the 1988 Plan.
The Company has reserved 520,000 common shares for issuance under both
plans.
At June 30, 1996 and December 31, 1995, there were 271,000 options
outstanding under the 1992 and 1988 Plans.
- 10 -
<PAGE>
(10) Related Party Transactions
Due to Officers/Principal Stockholders -
During 1995, 1994, and 1993, one of the Company's principal officers/
stockholders 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 June 30, 1996 and December 31, 1995, the amount outstanding on this
debt was $200,000.
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 June 30,
1996, $18,500 of this amount remains outstanding. These notes have no
formal repayment terms, however, it is anticipated that these notes
will be fully paid during 1997.
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 June 30, 1996 and December 31, 1995.
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.
- 11 -
<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 six months of 1996, cash reserves of $62,791 and cash flow
from operating activities of $60,598 were sufficient to fund the Company's net
asset investments of $15,898 and a negative cash flow from debt financing
activities of $57,757.
Cash Flow from Operations: The Company had positive cash flow from operating
activities through the first six months of 1996 of $60,598 compared to $94,541
for the same period in 1995. The decrease in total operating cash flow was
primarily due to an smaller increase in accounts payable relative to that of
the prior year. This increase in accounts' payable was $145,747 in 1995 while
only $72,844 in 1996.
Cash Flow from Investing Activities: The only capital expenditures incurred by
the Company during the first six months of 1996 related to assets necessary for
the operation of the Rochester corporate office building. 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 second quarter. At June, 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
and advances made by principal stockholders. Despite the effort to support the
ongoing operations during the first half of 1996, the Company was able to repay
a portion of its borrowings from its principal officer/stockholder by $9,000.
Additional borrowings of $15,000 from an available line-of-credit were also
required in 1996. 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.
Results of Operations
Total revenues for the first six months of 1996 were $1,927,987 as compared to
$1,792,747 for the same six month period of 1995. This increase of $135,240 or
8% resulted from a slight increase in sales order volume resulting from
stronger economic conditions. The revenues generated from title insurance
premiums increased by 2% to $712,176 as compared to $696,567 for the first two
quarters of the 1995 calendar year. In addition, revenues from abstract and
appraisal fees increased during the first six months of 1996 increased by
$119,631 to $1,215,811 as compared to $1,096,180 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 six months of 1996.
Correspondingly, direct costs of revenue increased to 21.7% for this period of
1996 reflecting the higher cost producing abstracts of title in areas where the
company does not have a direct operation, as compared to 19.9% for the same
period in 1995. Gross profit for the quarters ended June 30, 1996 was
$1,510,122 or 78.3%, as compared to $1,435,065 or 80% of sales for the first
half of 1995. Operating expenses for the months of January, 1996 through June
of 1996 were $1,468,796 or 76.2% of revenues as compared to $1,422,875 or 79.4%
of revenues for the same six months in 1995. The increase in operating expenses
is primarily due to increased variable costs associated with a higher sales
volume. The Company anticipates an increase in revenues during the remaining
quarters of 1996 and a corresponding percentage reduction in operating costs to
further enhance the company's profitability by year end 1996. The $11,059 net
income in the first two quarters of 1996 compares to a net loss of $25,416
incurred for the same period in 1995.
The Company's ratio of current assets to current liabilities at June 30, 1996
and December 31, 1995 was 84:1. Accordingly, the Company had a working capital
deficit of $124,865 as of June 30, 1996 compared to $121,976 as of December 31,
1995.
- 12 -
<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
- 13 -
<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 August 14, 1996 By /s/ William S. Gagliano
--------------------------- ---------------------------------------
William S. Gagliano
Executive Vice President and
Chief Accounting Officer
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
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