FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996 Commission file number 33-56402-FW
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1731373
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
4100 South Hulen Street
Fort Worth, Texas 76109
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number,
including area code (817) 731-8621
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 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 A - Voting Outstanding at July 1, 1996
(Common stock, $0.10 par value) 25
Class B - Nonvoting Outstanding at July 1, 1996
(Common stock, $0.02 par value) 881,567
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
PAGE
INDEX NUMBERS
- --------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet - 1-2
June 30, 1996 and September 30, 1995
Condensed Consolidated Statement of Income -
three months and nine months ended June 30, 1996 and 3
Condensed Consolidated Statement of Cash Flows -
nine months ended June 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
PART I - FINANCIAL INFORMATION
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
June 30, September 30,
1996 1995
CURRENT ASSETS (Unaudited) *
Cash and cash equivalents $ 13,384,801 $ 16,773,197
Commissions receivable 1,586,238 2,319,856
Agents' loans and advances 649,403 940,067
Other receivables 496,949 1,132,978
Prepaid expenses 210,158 48,803
Deferred income taxes 58,628 152,128
------------ ------------
Total Current Assets 16,386,177 21,367,029
------------ ------------
PROPERTY AND EQUIPMENT
Property and equipment 19,964,260 19,732,134
Less: Accumulated depreciation (7,105,720) (6,428,646)
------------ ------------
Total Property and Equipment 12,858,540 13,303,488
------------ ------------
OTHER ASSETS
Marketable securities, at market 50,549,419 44,852,015
Memberships 62,467 62,467
Notes receivable - Other 50,000 50,000
------------ ------------
Total Other Assets 50,661,886 44,964,482
------------ ------------
TOTAL ASSETS $ 79,906,603 $ 79,634,999
============ ============
1
<PAGE>
PART I - FINANCIAL INFORMATION - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 73,079 $ 486,402
Accrued commissions payable 2,499,304 2,533,614
Accrued bonuses payable 9,460,375 9,210,740
Income taxes payable (14,102) 626,927
Other accrued liabilities 3,549,185 2,066,251
Loans from insurance companies 10,927,348 12,319,485
------------ ------------
Total Current Liabilities 26,495,189 27,243,419
------------ ------------
LONG-TERM OBLIGATIONS
Sales meeting and other 1,611 289,111
Deferred Career Commission Plan payable 13,784,860 9,796,309
Deferred income taxes 1,086,075 2,291,415
------------ ------------
Total Long-term Obligations 14,872,546 12,376,835
------------ ------------
STOCKHOLDERS' EQUITY
Common stock 55,739 55,739
Additional paid-in capital 185,705 3,472,253
Retained earnings 29,182,484 28,305,327
Unrealized holding gains 9,153,045 8,217,001
Treasury stock - at par (38,105) (35,575)
------------ ------------
Total Stockholders' Equity 38,538,868 40,014,745
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUIT$ 79,906,603 $ 79,634,999
============ ============
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
financial statements.
2
<PAGE>
<TABLE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
COMMISSIONS REVENUE $ 86,655,888 $ 80,358,680 $ 29,243,229 $ 27,658,397
------------ ------------ ------------ ------------
OPERATING EXPENSES
Commissions, bonuses, and agent expense(64,487,657) (59,737,290) (22,113,778) (20,315,634)
General and administrative expenses (17,731,606) (17,074,515) (6,193,298) (6,575,443)
------------ ------------ ------------ ------------
Total Operating Expenses (82,219,263) (76,811,805) (28,307,076) (26,891,077)
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 4,436,625 3,546,875 936,153 767,320
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES)
Interest income 592,444 508,606 177,547 216,995
Investment income 3,198,321 3,199,020 17,688 203
Rental and other income (expense) (140,881) (85,196) (27,458) (8,373)
Gain (Loss) on disposal of equipment 4,247 (64,759) 0 863
Interest expense (40,121) (17,388) (19,025) (5,804)
------------ ------------ ------------ ------------
Total Other Income 3,614,010 3,540,283 148,752 203,884
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 8,050,635 7,087,158 1,084,905 971,204
PROVISION FOR INCOME TAXES (2,622,683) (2,343,352) (406,627) (409,213)
------------ ------------ ------------ ------------
NET INCOME $ 5,427,952 $ 4,743,806 $ 678,278 $ 561,991
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 944,652 910,256 898,816 971,546
============ ============ ============ ============
NET INCOME PER SHARE $ 5.75 $ 5.21 $ 0.84 $ 0.58
============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 5,427,952 $ 4,743,806
Adjustments for non cash items (3,239,857) (3,537,777)
Changes in operating assets and liabilities 4,854,955 2,117,103
------------ ------------
Net Cash Provided by Operating Activities 7,043,050 3,323,132
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (745,838) (850,964)
Purchase of property and equipment (453,598) (3,338,164)
Memberships purchased - (15,000)
Sale of property and equipment - 13,300
------------ ------------
Net Cash Used for Investing Activities (1,199,436) (4,190,828)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net receipts (payments) on loans from insurance
companies (1,392,137) 1,258,516
Proceeds of stock issuance - 3,400,984
Purchase of treasury stock (3,289,078) (898,542)
Dividends paid (4,550,795) (4,390,233)
------------ ------------
Net Cash Used for Financing Activities (9,232,010) (629,275)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,388,396) (1,496,971)
CASH AND CASH EQUIVALENTS - Beginning of Period 16,773,197 16,273,929
------------ ------------
CASH AND CASH EQUIVALENTS - End of Period $ 13,384,801 $ 14,776,958
============ ============
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
4
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND OPERATION
Independent Research Agency for Life Insurance, Inc. (IRA, Inc.) was
chartered in Texas in December 1980. The Company began operations in March
1981 and is the continuation of a business formerly operated as
Independent Research Agency for Life Insurance, a Texas partnership.
IRA, Inc. acquired United Services Planning Association, Inc., a Texas
corporation (USPA), and Independent Research Agency for Life Insurance,
Inc., a Hawaii Corporation (IRA Hawaii), in March 1981. IRA, Inc.
organized Independent Research Agency for Life Insurance, Inc., a Wyoming
Corporation (IRA Wyoming), in April 1982; Independent Research Agency for
Life Insurance, Inc., a Montana Corporation (IRA Montana), in February
1983; Independent Research Agency (New York), Inc., a New York Corporation
(IRA New York), in September 1983; Independent Research Agency for Life
Insurance, Inc., a Nevada Corporation (IRA Nevada), in January 1988; and
Independent Research Agency for Life Insurance, Inc., an Alabama
Corporation (IRA Alabama), in June 1994.
The subsidiaries IRA Hawaii, IRA Wyoming, IRA Montana, IRA New York, IRA
Nevada and IRA Alabama are maintained solely to permit IRA, Inc. to do
business in those states and are engaged in the sale of life insurance to
United States professional military personnel. USPA is engaged in the sale
of mutual funds to United States professional military personnel as a
broker-dealer registered with the Securities and Exchange Commission and
the National Association of Securities Dealers, Inc. The companies share
common employees, sales agents and representatives, and office facilities.
Home offices are located in Fort Worth, Texas. The companies' agents and
representatives maintain offices in approximately 143 cities located in 41
states, 1 U.S. territory and 2 foreign countries.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Condensed Consolidated Financial Statements include the accounts of
IRA, Inc. and its wholly-owned subsidiaries, USPA, IRA Hawaii, IRA
Wyoming, IRA Montana, IRA New York, IRA Nevada and IRA Alabama. All
intercompany accounts and transactions have been eliminated.
5
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
BASIS OF PRESENTATION
The Condensed Consolidated Balance Sheet as of June 30, 1996, the
Condensed Consolidated Statement of Income for the three months and nine
months ended June 30, 1996 and 1995, and the Condensed Consolidated
Statement of Cash Flows for the nine months ended June 30, 1996 and 1995
included herein are unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of results
for the interim periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in the
annual Form 10-K filed with the Securities and Exchange Commission in
December 1995, and the audited consolidated financial statements and
notes thereto included in the Company's September 30, 1995 annual
report to shareholders.
The results of operations for the three months and nine months ended
June 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
6
<PAGE>
<TABLE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - STOCKHOLDERS' EQUITY
<CAPTION>
During the nine months ended June 30, 1996, stockholders' equity was changed by the following
transactions:
Additional Unrealized
Common Paid-in Retained Holding Treasury
Balance - Stock Capital Earnings Gain Stock
<S> <C> <C> <C> <C> <C>
September 30, 1995 $ 55,739 $ 3,472,253 $ 28,305,327 $ 8,217,001 $ (35,575)
Purchase of 126,488 shares
of treasury stock (3,286,548) (2,530)
Payment of dividend (4,550,795)
Net income 5,427,952
Net change in unrealized
holding gain on securities
available for sale 936,044
Balance - ------------ ------------ ------------ ------------ ------------
June 30, 1996 $ 55,739 $ 185,705 $ 29,182,484 $ 9,153,045 $ (38,105)
============ ============ ============ ============ ============
</TABLE>
7
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position
and operating results during the periods included in the accompanying
condensed consolidated financial statements.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 AND 1995 - COMPARISON
During the nine months ended June 30, 1996, the demand for life
insurance and mutual fund investments marketed by the Company to U.S.
military personnel remained strong and total sales continued to increase.
Commission revenue for the nine months ended June 30, 1996, increased
7.8% to $86,655,888 from $80,358,680 recorded during the comparable
period in 1995. This increase in commission revenue is attributable to
IRA, Inc. and each of its subsidiaries. This overall increase in
commission revenue is considered to be continuing a trend which has
occurred over the past several years, and is expected to continue in the
future due to the long term personal financial management philosophy
espoused to clients, an effectively trained sales force and efficient
marketing practices used by the Company's sales agents. The Company's
analysis of the impact of base closures and force reduction in the U.S.
Military indicates to the Company a minimal impact upon existing agents
in the field and a market which will continue to present an opportunity
for growth of the Company's business.
Commissions, bonuses, and agent expenses for the nine months ended June
30, 1996 increased 7.9% or $4,750,367 from the same period in 1995.
Generally, there has been a constant relationship between commission
revenues and commissions, bonuses, and agent expenses. Commissions,
bonuses, and agent expenses represented 74% of commission revenues and
includes a voluntary allocation to the agents' Deferred Career Commission
Plan (DCCP).
General and administrative expenses for the nine months ended June
30, 1996 increased 3.8%, or $657,091, from the same period in 1995. This
increase is the result of higher data processing costs and general
inflationary factors.
The total of other income for the initial nine months of 1996
improved 2.1% to $3,614,010 from $3,540,283 earned in the comparable
period in 1995. This increase is primarily attributable to the use on
repurchase agreements on bank cash balances initiated in the second
quarter of 1995. The offering is being made not to raise capital, but
rather to offer opportunity for ownership or increased ownership to our
current agents and officers.
8
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 AND 1995 - COMPARISON
Income from operations for the third fiscal quarter of 1996 increased
$113,701, or 11%, from the same period in 1995. The improved earnings for
the current quarter versus the comparable period in 1995 reflect a
$922,817 decrease in costs associated with "WinUSPA", partially offset by
$255,586 in costs related to the database redesign project "Phoenix '96".
An additional offsetting factor was a $500,000 increase in the voluntary
allocation to the agents' Deferred Career Commission Plan.
The total of other income for the current quarter of 1996 declined
27% to $148,752 from $203,884 earned in the comparable three month period
in 1995. This decrease is primarily attributable to reduced interest
income (partially the result of lower volumes) from money market funds in
1996.
LIQUIDITY AND FINANCIAL RESOURCES
The Company has historically operated with a working capital
deficiency. The Company has been able to do this because of its loans
from insurance companies. As long as the Company does business with these
insurance companies (there are no current intentions to change) the loan
balance will continue to replenish itself from first year insurance
commission advances. The Company had a ratio of current assets to current
liabilities of .62 to 1 and .78 to 1 at June 30, 1996, and September 30,
1995, respectively. The current ratios when excluding the loans from
insurance companies balances are 1.05 to 1 at June 30, 1996 and 1.43 to 1
at September 30, 1995. The decline in the current ratio is the result of
paying dividends of $4,550,795 on December 1, 1995, to the shareholders
of record as of September 30, 1995, and the paying of normal year-end
incentive bonuses of $4,692,989 to the Company's sales agents. The
current ratio is expected to improve due to income from operations during
the fiscal year.
Cash and cash equivalents, consisting primarily of money market funds
are used to finance the Company's current operations and are held as a
reserve for the payment of current liabilities. Marketable securities,
which are investments in mutual funds that can be easily liquidated, are
being accumulated in anticipation of future capital expenditures and as
an additional reserve against contingencies. As of June 30, 1996, the
significant nonrecurring short-term obligation requiring the immediate
use of resources is the completion of the "WinUSPA" and "Phoenix '96"
software projects for approximately $1.4 million.
9
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND FINANCIAL RESOURCES - Continued
The Company is planning to complete a stock offering during the
quarter ended September 30, 1996. The estimated net proceeds of $2.8
million shall be used for the continuing operation of the Company's
business, for further development and expansion, and for limited
contingency planning. It is not anticipated that any part of the net
proceeds will be used for the purpose of retiring or reducing any
indebtedness of the Company.
10
<PAGE>
PART II - OTHER INFORMATION
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibit No. 11:Computation of net income per
common share information is presented on
face of Statement of Income.
(b) No reports on Form 8-K have been filed during the
quarter ended June 30, 1996.
11
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
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.
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
(Registrant)
Date: August 1, 1996 By /S/ Lamar C. Smith
----------------- --------------------
LAMAR C. SMITH
Chairman of the Board and
Chief Executive Officer
(Duly Authorized Officer)
Date: August 1, 1996 By /S/ William A. Dast
----------------- --------------------
WILLIAM A. DAST
Treasurer and Director
(Principal Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 13384801
<RECEIVABLES> 3113843
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 50549419
<PP&E> 12858540
<TOTAL-ASSETS> 79906603
<SHORT-TERM> 0
<PAYABLES> 41367735
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 55739
<OTHER-SE> 38483129
<TOTAL-LIABILITY-AND-EQUITY> 79906603
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 592444
<COMMISSIONS> 86655888
<INVESTMENT-BANKING-REVENUES> 3061687
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 40121
<COMPENSATION> 64487657
<INCOME-PRETAX> 8050635
<INCOME-PRE-EXTRAORDINARY> 5427952
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5427952
<EPS-PRIMARY> 5.75
<EPS-DILUTED> 5.75
</TABLE>
