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 December 31, 1Commission 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 February 1, 1997
(Common stock, $0.10 par value) 25
Class B - Nonvoting Outstanding at February 1, 1997
(Common stock, $0.02 par value) 923,092
<PAGE>
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.,
AND SUBSIDIARIES
PAGE
INDEX NUMBERS
- -----------------------------------------------------------------
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet - 1-2
December 31, 1996 and September 30, 1996
Condensed Consolidated Statement of Income -
three months ended December 31, 1996 and 1995 3
Condensed Consolidated Statement of Cash Flows -
three months ended December 31, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statemen 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
PART I - FINANCIAL INFORMATION
INDEPENDENT RESEARCH AGENCY FOR LIFE INSURANCE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
December 31 September 30,
1996 1996
CURRENT ASSETS (Unaudited) *
Cash and cash equivalents $ 10,980,547 $ 19,448,932
Commissions receivable 2,013,328 2,671,831
Agents' loans and advances 631,283 745,189
Other receivables 289,567 416,220
Prepaid expenses 110,027 110,139
Deferred income taxes 698,456 534,016
------------ ------------
Total Current Assets 14,723,208 23,926,327
------------ ------------
PROPERTY AND EQUIPMENT
Property and equipment 19,933,814 19,907,089
Less: Accumulated depreciation (7,585,050) (7,292,895)
------------ ------------
Total Property and Equipment 12,348,764 12,614,194
------------ ------------
OTHER ASSETS
Marketable securities, at market 53,739,433 52,036,944
Memberships 62,467 62,467
Notes receivable - Other 50,000 50,000
------------ ------------
Total Other Assets 53,851,900 52,149,411
------------ ------------
TOTAL ASSETS $ 80,923,872 $ 88,689,932
============ ============
1
<PAGE>
PART I - FINANCIAL INFORMATION - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 56,180 $ 423,714
Accrued commissions payable 2,829,861 2,758,258
Accrued bonuses payable 5,201,626 9,959,319
Income taxes payable 1,955,255 4,981
Accrued sales meeting expense 1,878,489 1,557,397
Other accrued liabilities 777,646 1,966,287
Notes payable 349,024 613,716
Loans from insurance companies 9,662,257 10,458,853
------------ ------------
Total Current Liabilities 22,710,338 27,742,525
------------ ------------
LONG-TERM OBLIGATIONS
Sales meeting and other 1,036,640 1,611
Notes payable 517,514 494,650
Deferred Career Commission Plan paya 15,985,992 14,571,565
Deferred income taxes 1,286,523 1,930,874
------------ ------------
Total Long-term Obligations 18,826,669 16,998,700
------------ ------------
STOCKHOLDERS' EQUITY
Common stock 55,739 55,739
Additional paid-in capital 2,185,563 2,830,260
Retained earnings 28,096,010 31,223,388
Unrealized holding gains 9,603,624 9,875,400
Treasury stock - at par (36,557) (36,080)
------------ ------------
Total Stockholders' Equity 39,904,379 43,948,707
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 81,441,386 $ 88,689,932
============ ============
* 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>
Three Months Ended
December 31,
1996 1995
<S> <C> <C>
COMMISSIONS REVENUE $ 28,622,831 $ 28,060,226
------------ ------------
OPERATING EXPENSES
Commissions, bonuses, and agent expe(20,070,083) (20,266,389)
General and administrative expenses (6,420,607) (5,526,999)
------------ ------------
Total Operating Expenses (26,490,690) (25,793,388)
------------ ------------
INCOME FROM OPERATIONS 2,132,141 2,266,838
------------ ------------
OTHER INCOME (EXPENSES)
Interest income 276,471 247,332
Investment income 3,526,804 2,512,674
Rental and other income (expense) 78,422 (54,491)
Interest expense (23,081) (10,290)
------------ ------------
Total Other Income 3,858,616 2,695,225
------------ ------------
INCOME BEFORE INCOME TAXES 5,990,757 4,962,063
PROVISION FOR INCOME TAXES (1,619,432) (1,515,445)
------------ ------------
NET INCOME $ 4,371,325 $ 3,446,618
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 964,716 985,588
============ ============
NET INCOME PER SHARE $ 4.53 $ 3.50
============ ============
<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>
Three Months Ended
December 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 4,371,325 $ 3,446,618
Adjustments for non cash items (4,890,364) (2,895,461)
Changes in operating assets and liabilities 3,439,813 (1,173,261)
------------ ------------
Net Cash Provided (USED) by Operating Activities 2,920,774 (622,104)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (2,421,961) (126,000)
Purchase of property and equipment (26,725) (111,305)
------------ ------------
Net Cash Used for Investing Activities (2,448,686) (237,305)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net receipts (payments) on loans from insurance
companies (796,596) (770,252)
Purchase of treasury stock (645,174) (621,183)
Dividends paid (7,498,703) (4,550,795)
------------ ------------
Net Cash Used for Financing Activities (8,940,473) (5,942,230)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,468,385) (6,801,639)
CASH AND CASH EQUIVALENTS - Beginning of Period 19,448,932 16,773,197
------------ ------------
CASH AND CASH EQUIVALENTS - End of Period $ 10,980,547 $ 9,971,558
============ ============
<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 149 cities located in 41
states, 1 U.S. territory and 3 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 December 31, 1996,
the Condensed Consolidated Statement of Income for the three months
ended December 31, 1996 and 1995, and the Condensed Consolidated
Statement of Cash Flows for the three months ended December 31, 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 1996, and the audited consolidated financial statements and
notes thereto included in the Company's September 30, 1996 annual
report to shareholders.
The results of operations for the three months ended December 31,
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 three months ended December 31, 1996, stockholders' equity was changed by the fo
transactions:
Additional Unrealized
Common Paid-in Retained Holding Treasury
Balance - Stock Capital Earnings Gain Stock
<S> <C> <C> <C> <C> <C>
September 30, 1996 $ 55,739 $ 2,830,260 $ 31,223,388 $ 9,875,400 $ (36,080)
Purchase of 23,860 shares
of treasury stock (644,697) (477)
Payment of dividend (7,498,703)
Net income 4,371,325
Net change in unrealized
holding gain on securities
available for sale (271,776)
Balance - ----------- ------------ ------------ ------------ ------------
December 31, 1996 $ 55,739 $ 2,185,563 $ 28,096,010 $ 9,603,624 $ (36,557)
=========== ============ ============ ============ ============
</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
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 - COMPARISON
During the three months ended December 31, 1996, the demand for
life insurance and mutual fund investments marketed by the Company to
U.S. military personnel remained strong. Commission revenue for the
three months ended December 31, 1996, increased 2.0% to $28,622,831
from $28,060,226 recorded during the comparable period in 1995. This
overall increase in commission revenue is a trend which has occurred
over the past several years. It 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 three months ended
December 31, 1996 decreased 1.0%, or $196,306, from the same period in
1995. Generally, in the past there has been a constant relationship
between commission revenues and commissions, bonuses, and agent
expenses. Commissions, bonuses, and agent expenses have decreased as a
percentage of commission revenues due to a decline in the voluntary
allocation to the agents' Deferred Career Commission Plan (DCCP) of
$126,000 from the comparative three month period in 1995. Without this
reduction to the DCCP; commissions, bonuses, and agent expenses would
have remained unchanged from the comparative period.
General and administrative expenses for the three months ended
December 31, 1996 increased 16.2%, or $893,608, from the same period in
1995. This increase is primarily due to costs involved in the redesign
of the corporate database used by the home office. This redesign will
result in improved efficiencies in both personnel and computer hardware
costs in the future. In addition, increased data processing costs and
general inflationary factors contributed to higher operating costs.
The total of other income for the initial three months of fiscal
year 1997 increased 43.2% to $3,858,616 from $2,695,225 earned in the
comparable three month period for 1996. This increase is primarily
attributable to greater distributions from mutual funds.
8
<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
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 new first year
insurance commission loans. The Company had a ratio of current assets
to current liabilities of .63 to 1 and .86 to 1 at December 31, 1996,
and September 30, 1996, respectively. The decline in the current ratio
is the result of paying dividends of $7,498,703 on December 1, 1996, to
the shareholders of record as of September 30, 1996, and the paying of
normal year-end incentive bonuses of $5,597,907 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 have been accumulated in anticipation of future capital
expenditures and as an additional reserve against contingencies. As of
December 31, 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 $2.2
million.
9
<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 December 31, 1996.
10
<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 February 13, 1997 By /S/ Lamar C. Smith
----------------- --------------------
LAMAR C. SMITH
Chairman of the Board and
Chief Executive Officer
(Duly Authorized Officer)
Date February 13, 1997 By /S/ Martin R. Durbin
----------------- --------------------
MARTIN R. DURBIN
Treasurer and
Chief Financial Officer
(Principal Financial Officer)
11
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 10980547
<RECEIVABLES> 2934178
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 53739433
<PP&E> 12348764
<TOTAL-ASSETS> 81441386
<SHORT-TERM> 0
<PAYABLES> 40501979
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 517514
0
0
<COMMON> 55739
<OTHER-SE> 39848640
<TOTAL-LIABILITY-AND-EQUITY> 81441386
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 276471
<COMMISSIONS> 28622831
<INVESTMENT-BANKING-REVENUES> 3526804
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 23081
<COMPENSATION> 20070083
<INCOME-PRETAX> 5990757
<INCOME-PRE-EXTRAORDINARY> 4371325
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4371325
<EPS-PRIMARY> 4.53
<EPS-DILUTED> 4.53
</TABLE>
