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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Nine Months Ended September 30, 1995 Commission File Number 0-3296
DIXIE NATIONAL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0440887
---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3760 I-55 North 39211-6323
P.O. Box 22587, Jackson, Mississippi 39225-2587
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (601)982-8210
NONE
---------------------------------------------------
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at November 3, 1995
Common Stock, $1.00 par value 10,494,973
<PAGE>
DIXIE NATIONAL CORPORATION
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1995 and
December 31, 1994 4
Consolidated Statements of Operations for the Three
and Nine Months ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 16
2
<PAGE>
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Dixie National Corporation
follow.
3
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
DIXIE NATIONAL CORPORATION
<CAPTION>
September 30 December 31
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
NON-LIFE
Marketable Investments
Marketable equity securities $ 2,000,000 $ 2,000,000
Cash and cash equivalents 202,918 218,258
Other 126,200 26,200
------------ ------------
2,329,118 2,244,458
Investment in other equity securities 1,051,217
Property and equipment 390,243 419,292
------------ ------------
TOTAL NON-LIFE ASSETS 3,770,578 2,663,750
LIFE
Investments
Fixed Maturities, at market 17,842,803 17,332,660
Policy loans 3,042,430 3,060,185
Government guaranteed student loans,
less allowance for uncollectible loans
of $464,603 at September 30, 1995 and
December 31, 1994 5,232,822 5,978,288
Short-term investments 567,480 4,860,347
Equipment leases 503,258
Cash and cash equivalents 4,625,846 240,851
------------ ------------
TOTAL LIFE INVESTMENTS 31,814,639 31,472,331
Accounts receivable, less allowance for
doubtful accounts of $195,885 at
September 30, 1995 and December 31, 1994 623,072 761,219
Accrued investment income 420,323 412,705
Deferred policy acquisition costs, net 6,354,309 6,626,230
Value of life insurance purchased, net 1,469,356 1,589,356
Property and equipment, less accumulated
depreciation of $705,483 at September 30,
1995 and $652,748 at December 31, 1994 112,666 165,402
Other assets 835,537 886,459
Unallocated loss on sale of subsidiary (4,207,001)
------------ ------------
TOTAL LIFE ASSETS 37,422,901 41,913,702
------------ ------------
TOTAL ASSETS $41,193,479 $44,577,452
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
NON-LIFE LIABILITIES
Notes payable and other debt $ 499,511 $ 524,304
Accrued liabilities and expenses 40,567 3,475
------------ ------------
TOTAL NON-LIFE LIABILITIES 540,078 527,779
LIFE LIABILITIES
Policy liabilities
Future policy benefits 27,303,198 27,538,803
Other policy claims and benefits payable 293,793 240,766
Other policyholders' funds 1,738,131 826,055
------------ ------------
TOTAL POLICY LIABILITIES 29,335,122 28,605,624
Notes payable and other debt 5,534,134 5,579,535
Income taxes 139,865 3,599
Accrued liabilities and expenses 434,970 679,460
------------ ------------
TOTAL LIFE LIABILITIES 35,444,091 34,868,218
STOCKHOLDERS' EQUITY
Common Stock 10,494,973 8,394,973
Discount on Common Stock (996,222)
Retained earnings (deficit) (4,289,441) 1,711,493
Unrealized holding losses on investments
available for sale - (925,011)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 5,209,310 9,181,455
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $41,193,479 $44,577,452
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
DIXIE NATIONAL CORPORATION
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Premiums $ 888,710 $ 1,042,639 $ 2,485,974 $ 9,011,962
Net investment income 645,397 555,182 1,878,749 1,629,003
Realized investment gains 108,964 10,579 145,721 4,585
------------ ------------ ------------ ------------
TOTAL REVENUES 1,643,071 1,608,400 4,510,444 10,645,550
BENEFITS AND EXPENSES
Benefits and claims to policyholders 863,165 1,324,268 1,536,126 6,422,849
Amortization of deferred policy
acquisition costs 230,972 48,218 699,285 1,198,859
Commissions, net 117,899 184,087 385,354 1,732,625
General expenses, net 755,398 349,960 2,108,498 1,857,174
Interest expense 133,266 135,284 426,726 308,036
Insurance taxes, licenses and fees 93,015 60,108 315,822 462,317
Provision for litigation settlement 1,007,271
Loss on sale of accident and health
business 256,811 1,196,811
------------ ------------ ------------ ------------
TOTAL BENEFITS AND EXPENSES 2,193,715 2,358,736 6,479,082 13,178,671
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES AND
ESTIMATED LOSS ON SALE OF SUBSIDIARY (550,644) (750,336) (1,968,638) (2,533,121)
------------ ------------ ------------ ------------
Income tax benefit
LOSS BEFORE ESTIMATED
LOSS ON SALE OF SUBSIDIARY (550,644) (750,336) (1,968,638) (2,533,121)
Estimated loss on sale of subsidiary (355,296) (4,032,296)
------------ ------------ ------------ ------------
NET LOSS $ (905,940) $ (750,336) $(6,000,934) $(2,533,121)
============ ============ ============ ============
Primary and fully diluted
per share amounts: $ (0.05) $ (0.12) $ (0.22) $ (0.40)
============ ============ ============ ============
Loss before estimated loss on sale of
subsidiary $ (0.09) $ (0.12) $ (0.66) $ (0.40)
============ ============ ============ ============
Net loss
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
DIXIE NATIONAL CORPORATION
<CAPTION>
Nine Months
Ended September 30
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $(6,000,934) $(2,533,121)
Adjustments to reconcile net income to net
cash provided by operating activities:
Estimated loss on sale of subsidiary 4,032,296
Loss on sale of accident and health 1,196,811
business
Increase (decrease) in policy liabilities (235,605) 1,953,663
Amotization of deferred policy acquisition
costs and and value of life insurance
purchased 699,285 1,198,859
Decrease in deferred income taxes (94,987) (598,671)
Decrease in accrued liabilities (207,398) (1,968)
Policy acquisition costs deferred (307,364) (1,217,248)
Increase in accounts receivable 138,147 1,177,655
Increase in policyowner funds on
deposit 912,076 280,413
Depreciation 131,430 87,632
Other, net 38,543 (123,881)
NET CASH PROVIDED (USED) ------------ ------------
BY OPERATING ACTIVITIES (894,511) 1,420,144
Cash flows from investing activities:
Proceeds from investments sold or matured:
Fixed maturities:
Maturities 2,019,389 1,137,460
Calls 4,000 1,074,057
Sales 560,000
Repayment of policy and student loans 1,350,353 1,503,814
Cost of investments acquired:
Fixed maturities (1,615,581) (6,589,895)
Equipment leases (539,891)
Policy and student loans (587,132) (618,433)
Temporary investments, net 4,192,867 2,548,554
Additions to property and equipment (49,645) (92,634)
NET CASH PROVIDED (USED) ------------ ------------
BY INVESTING ACTIVITIES 5,334,360 (1,037,077)
Cash flows from financing activities:
Additional borrowing 50,000
Payments on debt (120,194) (115,336)
------------ ------------
NET CASH USED BY
FINANCING ACTIVITIES (70,194) (115,336)
------------ ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 4,369,655 267,731
Cash and cash equivalents - beginning of year 459,109 4,655,458
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 4,828,764 $ 4,923,189
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for income taxes $ 129,429 $ 598,668
============ ============
Cash payments for interest $ 398,656 $ 323,905
============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Common Stock issued for investment in other
equity securities $ 1,103,778
============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DIXIE NATIONAL CORPORATION
SEPTEMBER 30, 1995
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
financial statements of Dixie National Corporation ("Corporation"), its
wholly-owned subsidiaries and Dixie National Life Insurance Company ("Dixie
Life"), which was approximately 99% owned at September 30, 1995, (collectively
"Company") and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the detail and disclosures required by generally accepted
accounting principles for complete financial statements. Operating results for
the nine month period ended September 30, 1995 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1995.
More detailed information is contained in the Notes to Consolidated Financial
Statements included in the Corporation's 1994 Form 10-K Annual Report. See
Note 9 for information regarding the sale of Dixie Life on October 2, 1995.
All adjustments which, in the opinion of management, are necessary for a
fair presentation of such financial statements are included and consisted only
of normal recurring adjustments.
NOTE 2--STATUTORY ACCOUNTING
A reconciliation of Dixie Life's statutory net income to the Company's
consolidated GAAP net income for the nine months ended September 30, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Statutory net income $(1,485,603) $ 725,434
Estimated loss on sale of subsidiary (4,032,296)
Deferral of acquisition costs 307,364 1,217,248
Amortization of acquisition costs (699,285) (1,198,859)
Differences in insurance policy
liabilities, excluding effect of
sale of block of business 1,412,889 720,044
Deferred income taxes (681,000)
Premium income (1,282,072) (215,583)
Investment income 81,592 78,630
Interest expense (426,726) (308,036)
General insurance expenses 677,870 789,461
Supplementary contracts (103,544) (104,680)
Other 556,148 (398,193)
Provision for litigation settlement (1,007,271)
Statutory write-off of Vanguard debenture 2,000,000
Statutory gain of sale of accident and health business (5,322,776)
GAAP Loss on sale of accident and health business (1,196,811)
------------ ------------
GAAP Net Income (Loss) $(6,000,934) $(1,782,785)
============ ============
</TABLE>
7
<PAGE>
A reconciliation of Dixie Life's statutory stockholders' equity to the
Company's Consolidated GAAP stockholders' equity at September 30, 1995 is as
follows:
<TABLE>
<S> <C>
Statutory Stockholders' Equity $ 4,130,151
Differences in insurance policy liabilities (146,508)
Deferred acquisition costs 6,354,309
Deferred income taxes (139,865)
Debt of parent company (5,908,258)
Asset Valuation Reserve 129,809
Value of life insurance purchased 1,469,356
Non-admitted assets 241,648
Common stock issued 3,049,155
Other 236,514
Unallocated loss on sale of subsidiary (4,207,001)
------------
GAAP Stockholders' Equity $ 5,209,310
============
</TABLE>
NOTE 3--INVESTMENTS
The Company's investments in fixed maturity securities available for sale
at September 30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Government agencies and authorities $ 9,597,252 $ 291,647 $ 56,547 $ 9,832,352
States, municipalities and political subdivisions 50,000 50,000
Special revenue 10,278 178 10,100
Public utilities 2,334,670 47,944 13,252 2,369,362
All other corporate 5,675,898 33,904 128,813 5,580,989
------------ ------------ ------------ ------------
$17,668,098 $ 373,495 $ 198,790 $17,842,803
============ ============ ============ ============
</TABLE>
Net investment income for the nine months ended September 30, 1995 and
1994 consists of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Investment income
Fixed maturities $ 1,038,589 $ 867,396
Policy loans 137,150 133,777
Student loans 295,301 288,933
Interest on Accounts Receivable 44,051 130,986
Short-term investment 33,099 26,550
Other 332,559 181,361
------------ ------------
Net investment income $ 1,878,749 $1,629,003
============ ============
</TABLE>
8
<PAGE>
Net realized investment gains for the nine months ended September 30,
1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Realized gains $ 145,721 $ 12,001
Realized losses 7,416
---------- ----------
Net realized gains (losses) $ 145,721 $ 4,585
========== ==========
</TABLE>
As consideration for extension of the Corporation's Convertible Notes
(Note 7), the Corporation pledged 990,770 shares of its Alanco stock with a
carrying value of $2,000,000 (market value of $2,062,000 at September 30,
1995) as additional collateral to the Convertible Notes. See Note 9 regarding
the satisfaction of the Convertible Notes and release of the Alanco shares
subsequent to September 30, 1995.
The obligation of the purchasers of the Corporation's Common Stock in the
November Transaction (Notes 3 and 16 to the Corporation's Consolidated
Financial Statements contained in its 1994 Form 10-K Annual Report) to cover
any market depreciation, as defined, was extended to the maturity of the Term
Loan. At September 30, 1995, market value of the Corporation's holdings in
equity securities subject to this obligation, based on the average closing bid
and asked price, was $2,062,000.
NOTE 4--DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs for the nine months
ended September 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Balance at beginning of period $ 6,626,230 $19,759,110
Deferred during the period:
Commissions 242,616 933,460
Other Expenses 64,748 283,788
------------ ------------
Total Deferred 307,364 1,217,248
DAC on policies sold (13,157,839)
Amortized during the period (579,285) ( 1,078,859)
------------ ------------
Balance at end of period $ 6,354,309 $ 6,379,660
============ ============
</TABLE>
NOTE 5--VALUE OF LIFE INSURANCE PURCHASED
An analysis of the value of life insurance purchased for the nine months
ended September 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Balance at beginning of period $ 1,589,356 $ 1,749,356
Amortized during the period (120,000) (120,000)
------------ ------------
Balance at end of the period $ 1,469,356 $ 1,629,356
============ ============
</TABLE>
9
<PAGE>
NOTE 6--PROPERTY AND EQUIPMENT
A summary of property and equipment at September 30, 1995 follows:
<TABLE>
<S> <C>
Home office property $ 795,038
Data Processing Equipment 818,149
Furniture, Equipment and Autos 503,652
------------
$ 2,116,839
Less accumulated depreciation 1,613,930
------------
$ 502,909
============
</TABLE>
NOTE 7--NOTES PAYABLE AND OTHER DEBT
<TABLE>
The Company had the following notes payable at September 30, 1995:
<CAPTION>
<S> <C>
NON-LIFE:
Note payable to a bank bearing interest
at prime plus 1% (at September 30, 1995
the rate was 10%), payable in monthly
installments of $1,389 with the balance
due June 8, 1998 $ 45,833
Note payable to a bank bearing interest
at prime plus 3/4% (at September 30,
1995, the rate was 9.75%), payable in
monthly installments of $11,846 through
January 5, 2001; secured by home office
property 453,678
------------
499,511
LIFE:
Note payable to an insurance company
bearing interest at prime plus 1% (at
September 30, 1995, the rate was
9.75%), payable interest only monthly
until closing of the sale of Dixie Life
at which time the note is due,
collateralized by common stock of Dixie
Life ("Term Loan") 3,688,746
10% Convertible Notes due May 1, 1995
("Convertible Notes") with interest
payable semi-annually until maturity,
convertible to common stock on the
basis of one share for each $1 of Note
principal, collateralized by second
security interest in common stock of
Dixie Life 1,720,000
Obligation under capital lease 125,388
------------
5,534,134
------------
$ 6,033,645
============
</TABLE>
The Restated Stock Purchase Agreement with Standard Life Insurance
Company (Note 9) waived all financial covenants contained in the Term Loan
agreement.
10
<PAGE>
The Term Loan, originally due March 31, 1995, became due at closing of
the sale of Dixie Life or 180 days following cancellation of the Restated
Stock Purchase Agreement by either party. The Convertible Notes were due at
the earliest of closing of the sale of Dixie Life, 90 days following
cancellation of the Restated Stock Purchase Agreement or December 27, 1995.
The Term Loan and Convertible Notes were satisfied as part of the sale of
Dixie Life and the capital lease obligation remained an obligation of Dixie
Life following the sale.
NOTE 8--INCENTIVE STOCK OPTION PLANS
Options to purchase common stock of the Corporation previously have been
granted under two incentive stock option plans, each of which has expired. At
September 30, 1995, options granted under such plans to purchase 395,768
shares were outstanding, including (at per share exercise prices): 92,061 at
$1.23; 87,816 at $1.69; 16,991 at $1.77; 34,496 at $1.41; 45,161 at $1.38;
48,548 at $1.50 and 70,695 at $1.00.
Options for the purchase of 5,000 shares of Common Stock were granted
under the 1995 Stock Option Plan ("1995 Plan") upon its adoption on May 26,
1995 to each of the Corporation's seven non-employee directors, and an option
for 25,000 shares also was granted to G. Thomas Reed, Senior Vice President of
the Corporation. The options are exercisable at $25/32, the closing bid price
on the last trade date (May 25, 1995), prior to the date of grant.
NOTE 9--SALE OF DIXIE LIFE SUBSEQUENT TO SEPTEMBER 30, 1995
On October 2, 1995, the Corporation completed the sale of Dixie Life,
which was 99.3% owned by the Corporation, to Standard Life Insurance Company
of Indiana ("Standard"). Dixie Life represented virtually all of the Company's
assets and operations. The selling price of the Corporation's interest in
Dixie Life to Standard ("Standard Transaction") was $7,389,086, of which
$3,646,468 was in cash. The Corporation used $1,720,000 of the cash proceeds
to repay the Convertible Notes and to purchase from Dixie Life lease
receivables of $503,258. Standard canceled the $3,688,746 Term Loan. The
Corporation will also receive up to $53,872 of collections after June 30, 1995
on a specific receivable as of that date by Dixie Life.
The sale resulted in a loss. An estimated loss of $4,635,000 ($.55 per
share) was recorded in the three months ended March 31, 1995. The estimated
loss was revised to $3,677,000 ($.44 per share) by a credit of $958,000 ($.12
per share) in the quarter ended June 30, 1995 and further revised to
$3,593,538 ($.39 per share) in the quarter ended September 30, 1995. The sale
of Dixie Life constitutes discontinuance of the life insurance business by the
Corporation. The loss on the sale is reported in a manner substantially the
same as discontinued operations. The Corporation continues to report insurance
operations in the same manner as prior to the measurement date of March 6,
1995. Accounting Principles Board Opinion No. 30 (APB 30) calls for reporting
the operations of discontinued operations as a single net amount in the
statement of operations but, in management's opinion, reducing virtually all
of the Corporation's operations to a single amount in the statement of
operations would not be meaningful to readers of the Corporation's financial
statements. The Corporation anticipates entry into some other line of
business. When the Corporation enters another line of business, but no later
than 1996, insurance operations will be reported as discontinued operations in
accordance with APB 30.
11
<PAGE>
The following pro forma consolidated balance sheet of the Company gives
pro forma effect to the sale of Dixie Life immediately after the closing on
October 2, 1995.
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and cash equivalents $ 1,626,128
Marketable equity securities 1,998,470
Leases receivable 503,258
Investment in other equity securities 1,051,217
Property and Equipment 390,243
Other 180,072
------------
$5,749,388
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage note payable $ 499,511
Other 40,567
------------
540,078
STOCKHOLDERS' EQUITY 5,209,310
------------
$5,749,388
============
</TABLE>
NOTE 10--SETTLEMENT OF LITIGATION
Dixie Life was a defendant in a suit filed on January 7, 1994 by David
William Becker, plaintiff, in the Circuit Court of Montgomery County, Alabama.
(See Note 13 to the Corporation's Consolidated Financial Statements contained
in its 1994 Form 10-K Annual Report.)
On October 6, 1995, the Circuit Court of Montgomery County, Alabama
approved a settlement of this matter which provides, among other things:
1. For the purposes of settlement only, certification of a
class consisting of all owners of "Charter Contracts" as
of January 7, 1994.
2. For payment to the class of $550,000.
3. For issuance to each class member of additional paid up
insurance in the amount of 15% of the face amount of each
Charter Contract presently in force.
4. Adjudication of an agreed method of computing and
allocating dividends in the future on Charter Contracts.
Four policyholders elected not to participate in the litigation as
members of the class.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The sale of Dixie Life to Standard was completed October 2, 1995 and
solved significant liquidity problems which the Corporation has faced for
several years. These problems were discussed in the Corporation's Form 10-K
Annual Reports, its Form 10-Q Quarterly Reports and its Proxy Statement for
the 1995 Annual Meeting of Shareholders held on September 19, 1995, at which
the sale of Dixie Life was approved by shareholders.
Immediately following the sale, the Corporation had consolidated assets
of $5,749,388, including cash of $1,626,128 and marketable equity securities
of $1,998,470. Other assets included an investment in Phoenix Medical
Management, Inc. ($1,051,217), lease receivables ($503,258) and property and
equipment ($390,243). The Corporation's only significant liability is a
mortgage note payable of $499,511 on an office building (included in property
and equipment). The pro forma financial condition of the Corporation and its
remaining subsidiaries immediately following the close of the Standard
Transaction is reflected in the pro forma balance sheet included in Note 9 of
the Notes to Consolidated financial Statements included in Part I, Item 1 of
this Form 10-Q.
RESULTS OF OPERATIONS
As discussed under Liquidity and Capital Resources above, the Corporation
completed the sale of Dixie Life on October 2, 1995. Following the sale, the
Corporation and its remaining subsidiaries are no longer in the life insurance
business. Management is actively reviewing other business opportunities with
the goal of entering actively another line of business within the next 12
months. The operations of the Company for the nine and three months ended
September 30, 1995 and 1994 bear no relation to the future operations of the
Company.
The sale of Dixie Life constitutes discontinuance of the life insurance
business by the Corporation. The loss on the sale is reported in a manner
substantially the same as discontinued operations. The Corporation continues
to report insurance operations in the same manner as prior to the measurement
date of March 6, 1995, the date of a letter of intent preceding the Restated
Stock Purchase Agreement. Accounting Principles Board Opinion No. 30 (APB 30)
calls for reporting the operations of discontinued operations as a single net
amount in the statement of operations but, in management's opinion, reducing
virtually all of the Company's operations to a single amount in the statement
of operations would not be meaningful to readers of the Corporation's
financial statements. When the Corporation enters some other line of business,
but no later than 1996, insurance operations will be reported as discontinued
operations in accordance with APB 30.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995. In the nine month period ended September 30, 1995, the
Company incurred a net loss of $6,000,934 ($.66 per share) compared to a net
loss of $2,533,121 ($.40 per share) in the comparable period of 1994. The 1995
loss included an estimated loss of $4,032,296 ($.44 per share) from the
proposed sale of Dixie Life which was closed October 2, 1995.
13
<PAGE>
Total revenues decreased $6,135,106 and benefits and expenses decreased
$6,699,589 in the nine month period ended September 30, 1995 compared to the
same period in 1994. Both of these decreases were primarily as a result of the
sales of Dixie Life's accident and health business.
In 1995, Dixie Life settled pending litigation regarding certain policies
previously issued and recorded a charge of $1,007,271 related to this
statement.
In 1994, the Corporation recognized a loss of $1,196,811 on the sale of
Dixie Life's accident and health business.
The Corporation recognized no income tax benefit on the loss before
income taxes and estimated loss on sale of subsidiary because it is more
likely than not that the resultant deferred tax assets would not be realized.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1994. In the three month period ended September 30, 1995, the
Company incurred a net loss of $905,940 ($.09 per share) compared to a net
loss of $750,336 ($.12 per share) in the comparable period of 1994. The 1995
loss included a charge of $355,296 ($.04 per share) to adjust the estimated
loss from the proposed sale of Dixie Life.
Premium income decreased $153,929 in the three month period ended
September 30, 1995 compared to the same period in 1994. This decrease was
offset by increases in investment income and realized investment gains of
$90,215 and $98,385, respectively, resulting in an increase in total revenue
of $34,671. Benefits and expenses decreased $165,021 in the three month period
ended September 30, 1995 compared to the same period in 1994, primarily as a
result of the sales of Dixie Life's accident and health business.
The Corporation recognized no income tax benefit on the loss before
income taxes and estimated loss on sale of subsidiary because it is more
likely than not that the resultant deferred tax assets would not be realized.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 10 of the Notes to Consolidated Financial Statements contained
in this Form 10-Q with respect to the approval by the Circuit Court of
Montgomery County, Alabama, of a settlement of certain litigation in which
Dixie Life was a defendant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation's Annual meeting of Shareholders was held September 19,
1995.
Shareholders approved the sale of Dixie Life to Standard, with 9,114,564
shares voting for approval, 50,850 shares voting against and 3,040 shares
abstaining.
The following table shows the votes for and agianst nominees to the
Corporation's Board of Directors, each of whom was elected to serve until
their successor is elected:
<TABLE>
<CAPTION>
NOMINEE FOR AGAINST
- ------- --------- -------
<S> <C> <C>
Marcia C. Cohen 9,135,277 33,945
T. H. Etheridge 9,134,622 33,945
John E. Haggar 9,132,348 33,945
Robert B. Neal 9,131,321 33,945
Dennis Nielsen 9,134,820 33,945
Joe D. Pegram 9,135,055 33,945
S. L. Reed, Jr. 9,134,891 33,945
James G. Ricketts 9,134,820 33,945
Herbert G. Rogers, III 9,135,113 33,945
</TABLE>
There were no broker nonvotes. Votes were withheld by certain shareholders and
recast, under the cumulative voting provisions of the Corporation's by laws,
for the remaining directors. Votes were withheld on proxies voting 5,496
shares in the aggregate.
Shareholders approved a stock option plan for key employees and
directors, with 9,062,916 shares voting for approval, 99,806 shares voting
against and 5,732 shares abstaining.
Shareholders ratified the selection of Horne CPA Group to serve as
independent auditors for 1995, with 9,142,606 shares voting for approval,
21,558 shares voting against and 4,290 shares abstaining.
ITEM 5. OTHER INFORMATION
SALE OF DIXIE NATIONAL LIFE INSURANCE COMPANY AND SATISFACTION OF INDEBTEDNESS
As reported in its Form 8-K Current Report dated October 2, 1995 and more
fully discussed in Note 9 of the Notes to Consolidated Financial Statements
contained in this Form 10-Q, on October 2, 1995, the Corporation completed the
sale of Dixie Life to Standard.
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
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.
Dixie National Corporation
--------------------------
(Registrant)
/s/G. Thomas Reed
Date: November 7, 1995 ------------------
G. Thomas Reed
President
Date: November 7, 1995 /s/Monroe M. Wright
-------------------
Monroe M. Wright
Senior Vice President & Treasurer
16
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 27188793
<DEBT-MARKET-VALUE> 27188793
<EQUITIES> 3051217
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 30240041
<CASH> 4828764
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 6354309
<TOTAL-ASSETS> 41193497
<POLICY-LOSSES> 27303198
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 293,793
<POLICY-HOLDER-FUNDS> 1738131
<NOTES-PAYABLE> 6034645
<COMMON> 10494973
0
0
<OTHER-SE> (5,285,663)
<TOTAL-LIABILITY-AND-EQUITY> 41193479
2485974
<INVESTMENT-INCOME> 1878749
<INVESTMENT-GAINS> 145721
<OTHER-INCOME> 0
<BENEFITS> 1536126
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (1968638)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1968638)
<DISCONTINUED> (4032296)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,000,934)
<EPS-PRIMARY> (.66)
<EPS-DILUTED> (.66)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
