<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] 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 1-5846
THE LIBERTY CORPORATION
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
South Carolina 57-0507055
---------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
Post Office Box 789, Wade Hampton Boulevard, Greenville, S. C. 29602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 268-8436
---------------------------
NOT APPLICABLE
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(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 Registrant's
classes of common stock as of the latest practicable date.
<TABLE>
<S> <C>
Number of Shares Outstanding
Title of each class as of September 30, 1994
- - ---------------------------------- ----------------------------
Common Stock 19,815,600
</TABLE>
Page 1 of 14 sequentially numbered pages.
The Exhibit Index is on Page 12.
<PAGE> 2
PART I, ITEM 1
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1994 1993
------------ -----------
<S> <C> <C>
Investments:
Fixed Maturity Securities:
Available for Sale, at market, cost of $920,086
at 9/30/94 $ 863,242 $ ---
Held to Maturity, at cost, market of $324,813
at 9/30/94 and $921,169 at 12/31/93 304,882 857,673
Nonredeemable Preferred Stocks, at market,
cost of $41,983 at 9/30/94 and $44,359
at 12/31/93 41,277 48,123
Common Stocks, primarily at market, cost of
$33,352 at 9/30/94 and $16,156 at 12/31/93 37,628 20,268
Mortgage Loans 212,545 165,784
Investment Properties 135,721 84,530
Loans to Policyholders 95,737 86,942
Other Long-Term Investments 32,741 82,826
Short-Term Investments 2,370 13,355
----------- -----------
Total Investments 1,726,143 1,359,501
----------- -----------
Cash 94,914 29,487
Accrued Investment Income 18,156 12,736
Receivables 48,256 46,648
Receivable from Reinsurers 254,478 245,210
Deferred Acquisition Costs 364,989 288,635
Buildings and Equipment 65,783 63,499
Intangibles Related to Television Operations 47,305 48,418
Goodwill Related to Insurance Acquisitions 38,058 27,683
Other Assets 67,511 65,216
----------- -----------
999,450 827,532
----------- -----------
Total Assets $ 2,725,593 $ 2,187,033
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Liabilities
Policy Liabilities $ 1,756,036 $ 1,389,176
Notes, Mortgages and Other Debt 256,648 149,489
Accrued Income Taxes 8,600 12,054
Deferred Income Taxes 111,823 110,004
Accounts Payable and Accrued Expenses 87,004 61,932
Other Liabilities 26,267 30,533
----------- -----------
Total Liabilities 2,246,378 1,753,188
----------- -----------
Redeemable Preferred Stock
1994-A Series, $35.00 redemption value, 668,207
shares issued and outstanding 23,387 ---
1994-B Series, $37.50 redemption value, 598,101
shares issued and outstanding 22,429 ---
Shareholders' Equity
Common Stock 152,284 143,939
Unearned Stock Compensation (5,646) (4,475)
Unrealized Investment Gains (Losses) (30,566) 5,177
Cumulative Foreign Currency
Translation Adjustment (861) (1,529)
Retained Earnings 318,188 290,733
----------- -----------
Total Shareholders' Equity 433,399 433,845
----------- -----------
Total Liabilities, Redeemable Preferred Stock
and Shareholders' Equity $ 2,725,593 $ 2,187,033
=========== ===========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
2
<PAGE> 3
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------------
1994 1993 1994 1993
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES
Insurance Premiums & Policy Charges $ 83,498 $ 63,241 $231,511 $187,153
Broadcasting Revenues 23,154 21,031 70,082 63,887
Net Investment Income 34,999 26,876 97,677 81,925
Service Contract Revenues 1,336 1,975 4,297 6,599
Realized Investment Gains (1,425) 2,626 740 12,717
-------- -------- -------- --------
Total Revenues 141,562 115,749 404,307 352,281
-------- -------- -------- --------
EXPENSES
Policyholder Benefits 60,347 40,666 166,335 121,238
Commissions 12,500 11,034 36,168 33,160
General Insurance Expenses 15,679 16,105 44,868 47,339
Amortization of Deferred
Acquisition Costs 10,129 9,414 31,376 28,062
Broadcasting Expenses 17,138 15,893 50,819 47,634
Interest Expense 3,232 2,794 7,792 8,451
Other Expenses 2,906 2,274 8,840 7,185
-------- -------- -------- --------
Total Expenses 121,931 98,180 346,198 293,069
-------- -------- -------- --------
Income Before Income Taxes & Cumulative
Effect of Accounting Changes 19,631 17,569 58,109 59,212
Provision for Income Taxes 6,729 9,491 20,034 23,839
-------- -------- -------- --------
Income Before Cumulative Effect of
Accounting Changes 12,902 8,078 38,075 35,373
Cumulative Effect of Accounting Changes --- --- --- (11,940)
-------- -------- -------- --------
NET INCOME $ 12,902 $ 8,078 $ 38,075 $ 23,433
======== ======== ======== ========
EARNINGS PER SHARE: (Exhibit 11) $ .62 $ .41 $ 1.85 $ 1.20
======== ======== ======== ========
Dividends Per Common Share $ .155 $ .14 $ .465 $ .42
======== ======== ======== ========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
3
<PAGE> 4
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1994 1993
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 38,075 $ 23,433
Adjustments to reconcile net income to net cash
provided (used) in operating activities:
Increase in policy liabilities 37,849 28,401
Increase (decrease) in accounts payable and
accrued liabilities 24,398 524
(Increase) decrease in receivables (1,217) 1,374
Amortization of policy acquisition costs 29,705 28,062
Policy acquisition costs deferred (45,530) (44,843)
Realized investment (gains) losses (740) (12,717)
Gain on sale of operating assets (2,083) ---
Depreciation and amortization 11,630 10,875
Amortization of bond premium and discount (3,425) (3,215)
Provision for deferred income taxes 4,958 6,399
All other operating activities, net (15,395) 10,230
---------- ----------
NET CASH PROVIDED IN OPERATING ACTIVITIES 78,225 48,523
---------- ----------
INVESTING ACTIVITIES
Investment securities sold - available for sale 143,969 39,774
Investment securities matured or redeemed by issuer-
available for sale 49,989 ---
Investment securities matured or redeemed by issuer-
held to maturity 58,540 140,562
Cost of investment securities acquired - available
for sale (284,833) ----
Cost of investment securities acquired - held to maturity ---- (243,462)
Mortgage loans made (32,548) (16,532)
Mortgage loan repayments 16,450 15,876
Purchase of investment properties, buildings and equipment (76,090) (24,729)
Sale of investment properties, buildings and equipment 24,409 23,859
Purchases of short-term investments (370,497) (267,280)
Sales of short-term investments 381,679 288,430
Net cash paid on purchases of insurance companies (48,742) ----
All other investment activities, net (3,175) (7,456)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (140,849) (50,958)
---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings 1,841,806 1,757,635
Principal payments on debt (1,739,736) (1,771,383)
Dividends paid (10,619) (8,108)
Stock issued for employee benefit and compensation
programs 2,602 6,277
Common stock offering ---- 8,543
Return of policyholders' account balances (22,186) (19,680)
Receipts credited to policyholders' account balances 56,186 48,093
---------- ----------
NET CASH PROVIDED IN FINANCING ACTIVITIES 128,053 21,377
---------- ----------
INCREASE IN CASH 65,429 18,942
Cash at beginning of year 29,485 32,180
---------- ----------
CASH AT END OF PERIOD $ 94,914 $ 51,122
========== ==========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
4
<PAGE> 5
THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
September 30, 1994
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated and condensed financial
statements of The Liberty Corporation and Subsidiaries have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
information included is not necessarily indicative of the annual
results that may be expected for the year ended December 31, 1994, but
it does reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the
interim periods presented.
2. FINANCIAL ACCOUNTING STANDARDS STATEMENT NO. 115 - ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
As a result of adopting FAS 115 on January 1, 1994, the opening
balance of shareholders' equity was increased by $11.4 million related
to unrealized gains, net of adjustments to deferred acquisition costs
and deferred taxes, on the fixed income securities classified as
available-for-sale previously carried at amortized cost or cost.
There was no effect on net income as a result of the adoption of FAS
115. During the nine month period following adoption, net unrealized
losses of $47.1 million were reported, resulting in a net decrease in
shareholders equity of $35.7 million for the period. Of this amount,
$44.2 million resulted directly from the implementation of FAS 115.
This resulted in an unrealized loss balance of $30.6 million at
September 30, 1994. This significant decrease reflects the impact of
rising interest rates as well as the addition of the new 1994
acquisitions which provided approximately $9.7 million of net
unrealized losses. On a consolidated basis, the Company initially
classified approximately 66% of its bond portfolio as
available-for-sale and 34% as held-to-maturity; and classified 100% of
its redeemable preferred stocks as available for sale. In accordance
with FAS 115, the Company did not restate prior period financial
statements to reflect this change in accounting principle. For
additional information on FAS 115, see the Company's 1994 First
Quarter Form 10-Q.
3. REDEEMABLE PREFERRED STOCK
On February 24, 1994, the Company issued 598,656 shares of Series
1994-B Voting Cumulative Preferred Stock having a total redemption
value of $22,449,600 or $37.50 per share in connection with the
acquisition of American Funeral Assurance Company. Additionally, on
April 1, 1994, the Company issued 668,207 shares of Series 1994-A
Voting Cumulative Preferred Stock having a total redemption value of
$23,387,245 or $35.00 per share in connection with the acquisition of
State National Capital Corporation. Both the Company and the holders
of the Preferred Stock 1994-A Series and 1994-B Series have the right
to redeem any or all of the shares from time to time at any time
beginning five years and one month after the date of issue in exchange
for cash or shares of the Company's common stock. Each share of
preferred stock is convertible, at the option of the shareholder, at
any time into one share of the Company's common stock. For additional
information see the Company's 1994 First Quarter Form 10-Q.
5
<PAGE> 6
4. ACQUISITIONS
(In 000's, except for per share data)
North American National Corporation, American Funeral Assurance
Company and State National Capital Corporation were acquired by the
Company on February 23, February 24, and April 1, respectively. The
following unaudited combined results of operations for the nine months
ended September 30, 1994 and 1993 give effect to these acquisitions as
though they had occurred at the beginning of each period. None of
these acquisitions were individually material for financial reporting
purposes and accordingly the following pro forma financial data
reflects the effect of these acquisitions in the aggregate. Pro forma
results are not necessarily indicative of the results that actually
would have occurred had the Company owned these acquisitions during
these periods or which will be obtained in the future.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1994 1993
-------- --------
<S> <C> <C>
Revenues $423,371 $437,791
======== ========
Net Income Before Cumulative Effect
of Accounting Changes $ 38,921 $ 34,405
======== ========
Net Income $ 38,921 $ 22,465
======== ========
Earnings Per Share:
Net Income Before Cumulative Effect
of Accounting Changes $ 1.86 $ 1.64
======== ========
Net Income $ 1.86 $ 1.03
======== ========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
At September 30, 1994, the Company had made commitments as shown below:
<TABLE>
<CAPTION>
(In 000's)
<S> <C>
Buildings and equipment $ 7,438
Mortgage loans and bonds 17,720
-------
$25,158
=======
</TABLE>
The Company is contingently liable for reinsurance ceded ($4.8 billion
at September 30, 1994) should any reinsurer be unable to meet the
obligations assumed.
6
<PAGE> 7
6. SUPPLEMENTAL INFORMATION ON INSURANCE OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- --------------
1994 1993 1994 1993
---- ------ ---- ------
(In millions)
<S> <C> <C> <C> <C>
Increase in net
insurance in force $ 309 $ (141) $ 1,233 $ 99
====== ======= ======= =======
Net insurance
in force $16,667 $15,670
======= =======
</TABLE>
7
<PAGE> 8
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
Operations
Consolidated third quarter net income of $12.9 million increased 60% or $4.8
million from 1993's third quarter (see table below). The increase in net
income was due to: (1) a $2.0 million increase in income before taxes; and (2)
a $2.8 million decrease in income taxes, primarily related to the $3.8 million
charge taken during the third quarter of 1993 resulting from changing the
Company's federal income tax rate from 34% to 35%. Of that total,
approximately $3.6 million was related to taxes on periods prior to the third
quarter of 1993. The increase in income before taxes was a function of
increased earnings of $0.9 million from the Insurance Group, increased earnings
of $0.8 million from Broadcasting Operations coupled with a decreased loss of
$0.3 million in the Parent Company.
Year-to-date net income before the cumulative effect of accounting changes
increased $2.7 million from last year primarily due to the decline in income
taxes previously mentioned, a decrease in realized gains of $6.8 million, and
earnings contributions from the acquisitions of $3.7 million.
<TABLE>
<CAPTION>
Third Quarter Year-to-Date
-------------------------- --------------------------
1994 1993 1994 1993
-------- -------- -------- --------
(000's) (000's)
<S> <C> <C> <C> <C>
Income Before Income Taxes
and the Cumulative Effect of
Accounting Changes 19,631 17,569 58,109 59,212
Income Taxes 6,729 9,491 20,034 23,839
-------- -------- -------- --------
Income Before the Cumulative
Effect of Accounting Changes $ 12,902 $ 8,078 $ 38,075 $ 35,373
Cumulative Effect of Accounting
Changes --- --- --- (11,940)
-------- -------- -------- --------
Net Income $ 12,902 $ 8,078 $ 38,075 $ 23,433
======== ======== ======== ========
</TABLE>
The $0.9 million (4%) increase in the Insurance Group's third quarter income
before taxes was primarily a function of a pretax earnings contribution from
the 1994 acquisitions of $5.6 million, offset by lower realized investment
gains. The pre-need business provided a pretax earnings increase of $2.1
million -- approximately $2.4 million came from the acquisitions of North
American National Corporation and American Funeral Assurance Company which
closed in late February, with Pierce National Life Insurance Company
experiencing a decrease of $0.3 million due to higher claims and foreign
currency translation. State National Corporation, a home service company
acquired on April 1, 1994, provided a pretax earnings contribution of $0.7
million. Additionally, the Insurance Group's earnings benefitted from
improving lapse experience in the home service business and an overall
improvement from the mortgage protection business, offset by alower average
yield on it's investment portfolio.
The decline in the Insurance Group's year-to-date pretax earnings reflects
primarily lower realized investment gains of $5.6 million offset by the
earnings contributions from the acquisitions.
The $0.8 million (26%) increase in pretax earnings from broadcasting operations
was largely due to a substantial increase in political revenues coupled with
strong national revenue growth. Year-to-date pre-tax earnings, up $3.0 million
(27%), reflect stronger local revenues as well as higher political revenues.
8
<PAGE> 9
The decrease in the parent company's before-tax loss was a result of lower
interest expense and strong real estate land and lot sales.
The 22% increase in consolidated revenues for the quarter was due to the 1994
insurance acquisitions which contributed $29 million. Without the
acquisitions, consolidated revenues were down slightly primarily due to the
sale of the medicare business in late 1993 offset by higher broadcasting
revenues.
The 32% growth in third quarter insurance premiums was due to additional
premiums of $21.1 million from the Pre-need Group with the new acquisitions --
American Funeral and North American -- contributing an increase of $19 million
and Pierce National contributing an incremental $2.2 million. The home service
acquisition -- State National -- provided additional premiums of $1.7 million.
In Liberty Life premiums were down $2.6 million primarily due the sale of its
medicare supplement business in December of 1993. The medicare business
produced $3.1 million of premiums in the third quarter of 1993.
Year-to-date premiums were up 24% reflecting the impact of $47.4 million of
additional premiums from the acquisitions. Excluding the acquisitions,
premiums were down 2% due to the sale of medicare and lower mortgage protection
premiums.
The 30% increase in net investment income for the quarter was also primarily
due to the acquisitions. The acquisitions contributed $6.1 million to net
investment income. Year-to-date net investment income was up 19%, but
relatively flat compared to last year (excluding the acquisitions), as the
overall yield on the portfolio dropped, reflecting lower fixed income rates.
Realized investment gains were down significantly from last year for both the
quarter and year-to-date. Contributing factors to a significantly greater
amount of investment gains last year include: (1) a high level of repayments on
bonds and preferred stock due to early calls and redemptions, (2) planned sales
of shopping centers in the parent company's real estate operation, and (3)
gains taken on common stocks due to market prospects and timing.
Broadcasting revenues for the quarter, up 10%, benefitted primarily from a $.8
million increase in political revenues as well as continued strong national
revenue growth which produced a $.9 million increase, in addition to first time
cable related revenues of $.6 million.
Local revenues, however, were up only 1% largely reflecting the trade-off in
advertising time for political advertising. The cable operation currently
generates revenues from two sources: (1) third party sales of advertising time
on cable by Cosmos sales representatives; and (2) advertising insertion, which
allows Cosmos stations' advertisements to be inserted into other markets for
advertising on cable. Year-to-date revenues, up 9%, reflect the impact of
national and political revenues.
The 48% increase in policy benefits was primarily due to the new acquisitions;
excluding the new acquisitions, policy benefits were up 6%. Year-to-date
policy benefits increased 37% reflecting the impact of acquisitions as well as
unfavorable claims experience, primarily in the first half of the year in home
service and mortgage protection.
Commissions for the Insurance Group increased 13% for the third quarter;
without the new acquisitions, commissions were down 4% reflecting a lower
premium base as well as improvement in home service commissions due to changes
in agent compensation. Year-to-date commissions were up 9%, but were down 7%
excluding the acquisitions.
9
<PAGE> 10
General expenses for the Insurance Group were down 3% compared to last year's
third quarter due largely to lower expenses in Liberty Life reflecting cost
reduction efforts. The two new pre-need acquisitions added approximately $2.5
million to general expenses and the new home service acquisition added $.3
million. Year-to-date general insurance expenses were down 5% despite $6.1
million of additional general expenses attributed to the acquisitions.
The 7% increase in amortization of deferred acquisition costs was also a
function of the new acquisitions; excluding these acquisitions, amortization of
deferred acquisition costs decreased 11% due to an overall improvement in home
service and mortgage protection lapses. Year-to-date amortization of deferred
acquisition costs was up 12%; without the acquisitions, amortization of
deferred acquisition costs was up 2% reflecting an improving trend in home
service lapses in the third quarter compared to the first and second quarters.
Broadcasting expenses were up 8% for the quarter due to the additional expenses
associated with its start-up venture with cable operators. Without the cable
operation expenses, expenses were up 3% for the quarter. Year-to-date
broadcasting expenses were up 7%.
Investments
As of September 30, 1994, approximately 61% of the Company's $1.7 billion
consolidated invested assets were in bonds with an overall average credit
rating of AA. Less than 5% of the bond portfolio was rated below investment
grade.
Approximately 55% of the Company's $1.1 billion bond portfolio at September 30,
1994 was comprised of mortgage-backed securities compared to 60% at December
31, 1993. Certain mortgage-backed securities are subject to significant
prepayment risk due to the fact that in periods of declining interest rates
mortgages may be repaid more rapidly than scheduled as borrowers refinance
higher rate mortgages to take advantage of the lower current rates. As a
result, holders of mortgage-backed securities may receive large prepayments on
their investments which cannot be reinvested at interest rates comparable to
the rates on the prepaid mortgages. In periods of increasing interest rates,
prepayments may decrease resulting in lower amounts of funds being available to
reinvest at the higher interest rates. Mortgage-backed pass-through securities
and "sequential" CMO's, which comprised 18% of the book value of the Company's
mortgage-backed securities at September 30, 1994 and 22% at December 31, 1993,
are sensitive to prepayment and extension risk.
The remaining 82% of the Company's mortgage-backed investment portfolio of
September 30, 1994 consisted of planned amortization class ("PAC") instruments
compared to approximately 78% at December 31, 1993. These investments are
designed to amortize in a more predictable manner by shifting the primary risks
of prepayment and extension to investors in other tranches of the CMO.
Mortgage loans of $212.5 million comprised 12% of the consolidated investment
portfolio at September 30, 1994. They are commercial mortgages with a loan to
value ratio not exceeding 75% when made. These loans are concentrated in the
southeast primarily in the states of North Carolina, South Carolina, Georgia,
Florida, Virginia, Tennessee, and Louisiana.
Investment real estate at September 30, 1994 of $135.6 million comprised 8% of
the consolidated investment portfolio compared to 6% at December 31, 1993.
Four key property types made up approximately 90% of the Company's real estate
investment assets: residential land development, business parks, business
property rentals and shopping centers.
The majority of the Company's investment real estate is located in South
Carolina, Florida, Georgia, and North Carolina.
10
<PAGE> 11
Financial Position
As a result of the first quarter acquisitions of North American and American
Funeral and the second quarter acquisition of State National, the Company's
consolidated assets increased approximately $430 million, of which
approximately $307 million were in investments, and total liabilities increased
approximately $337 million, of which approximately $307 million were related to
policy liabilities.
As a result of adopting FAS 115, "Accounting for Certain Investments in Debt
and Equity Securities" on January 1, 1994, a significant portion of fixed
maturity securities were classified as available-for-sale and accordingly
carried on the balance sheet at fair value. Prior to the adoption of FAS 115,
the fixed income securities were carried at either amortized cost or cost and
therefore no unrealized gain or loss was reflected on the balance sheet. The
1993 balance sheet has not been restated for this change in accounting
principle as prescribed by FAS 115. At September 30, 1994, fixed income
securities reported as available-for-sale had a gross unrealized loss of $56.8
million. Held-to-maturity securities, however, had an unrealized gain of $19.9
million which was not reflected in the balance sheet since these securities
continue to be carried at cost. Although the initial adoption of FAS 115
resulted in a net unrealized gain of $11.4 million on January 1, 1994, the
decline in market value since that time resulted in a net decrease in
shareholders' equity of $44.2 million for the period ended September 30, 1994.
Thus, the net impact of FAS 115 on shareholders' equity has been a decline of
$32.8 million.
Capital, Financing and Liquidity
The Company's net cash flow from operating activities was $78.2 million for the
first nine months of 1994 compared to $48.5 million for the same period of
1993. The Company's net cash used in investing activities was $140.8 million,
and cash flow provided from financing activities was $128.1 million. As a
result of its activities, the Company generated a $65.4 million increase in
cash compared to $18.9 million in the same period in 1993. The net cash used
in investing activities was primarily related to net cash paid on the purchase
of North American, American Funeral, State National, and certain real estate
assets of SCANA Development Corporation. The net cash provided from financing
activities was primarily from proceeds from borrowings net of principal
payments on debt. The proceeds from borrowings were used to partially finance
acquisitions and to repay an intercompany note.
At September 30, 1994, borrowings against the Company's revolving credit
facility and lines of credit amounted to $245.5 million, an increase from the
$145.5 million outstanding at December 31, 1993. The increase was primarily a
function of borrowings related to the insurance acquisitions -- North American
of $51.9 million, American Funeral of $5.6 million and State National of $.9
million -- as well as a bulk real estate purchase of $42.8 million.
The Company financed the $51.9 million purchase price of North American, which
closed on February 23, 1994, entirely with proceeds borrowed under its
revolving credit facility. Of the $28.1 million American Funeral purchase
price, approximately $22.5 million was financed with a new class of redeemable,
convertible preferred stock (1994-B Series) issued at the time of closing on
February 24, 1994; and the remaining $5.6 million was financed from the
Company's credit facility. The 1994-B Series preferred stock has a stated
value of $37.50 per share and will pay an annual dividend of 5.6%.
11
<PAGE> 12
On April 1, 1994, the Company closed its acquisition of State National for
$27.5 million which was financed through a combination of cash of $.9 million,
Liberty Common Stock of 113,611 shares valued at $3.2 million and a new class
of redeemable, convertible preferred stock (1994-A Series) valued at $23.4
million. The stated value of the 1994-A Series preferred stock is $35.00 per
share with an annual dividend of 6%.
Both the 1994-A Series and 1994-B Series preferred stock will be convertible
into shares of the Company's common stock on a share for share basis. Both the
1994-A and 1994-B Series of preferred stock may be redeemed at the option of
either the holder of the stock or by the Company beginning five years and one
month after the effective dates of the acquisitions. The 1994-A Series and
1994-B Series preferred stock was only issued to State National and American
Funeral shareholders, respectively, in connection with the acquisitions of each
company and no additional shares of these Series were made available to the
public.
On May 5, 1994, the Company closed the residential portion of the acquisition
of certain real estate assets of SCANA Development Corporation for
approximately $13 million. On May 27, 1994, the Company closed the remaining
$29.8 million of the total $42.8 million cash purchase price, consisting of
rental properties, industrial parks and undeveloped land. Financing of the
acquisition was initially completed through the Company's credit facility.
However, the Company plans to use internal funds to repay a substantial portion
of the purchase price prior to year-end.
Other Company commitments are shown in Note 5 contained in the accompanying
financial statements. Additional detail as to commitments and financing is
contained in the Notes to the Consolidated Financial Statements in the
Company's 1993 Annual Report to Shareholders.
Further discussion of investments and valuation is contained in Notes 1 and 2
to the Consolidated Financial Statements in the Company's 1993 Annual Report to
Shareholders.
Accounting Developments
Accounting developments are summarized in the Notes of the accompanying
Financial Statements and are discussed in detail in the Management Discussion
and Analysis in the Company's 1993 Annual Report to Shareholders and the Form
10-Q for the first quarter ended March 31, 1994.
PART II, ITEM 6. Exhibit and Reports on Form 8-K
(a) A list of the exhibits filed with this report is included in
the Index to Exhibits filed herewith.
(b) The filing of Form 8-K was not required during the third
quarter of 1994.
INDEX TO EXHIBITS
EXHIBIT 11 Consolidated Earnings Per Share Computation
EXHIBIT 27 Financial Data Schedule (Electronic Filing Only)
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE LIBERTY CORPORATION Date: November 11, 1994
- - -----------------------
(Registrant)
/s/ H. Ray Eanes
- - -----------------------
H. Ray Eanes
Senior Vice President Finance & Treasurer
/s/ John Smith
- - -----------------------
John Smith
Controller
13
<PAGE> 1
Exhibit 11
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED EARNINGS PER SHARE COMPUTATION
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY SHARES
- - --------------
Common Shares Outstanding - End of Period 19,815,600 19,461,034 19,815,600 19,461,034
=========== =========== =========== ===========
Weighted Average Common Shares 19,803,157 19,384,178 19,686,447 19,279,662
=========== =========== =========== ===========
Common Stock Options Outstanding During
Period (Weighted Average) 93,042 202,524 91,560 192,294
----------- ----------- ----------- -----------
Total Primary Shares 19,896,199 19,586,702 19,778,007 19,471,956
=========== =========== =========== ===========
Fully Diluted Shares
- - --------------------
Weighted Average Common Shares 19,803,157 19,384,178 19,686,447 19,279,662
Common Stock Options Outstanding During 93,042 202,601 94,879 198,647
Period (Weighted Average)
Weighted Average Redeemable
Preferred Shares* 1,266,521 --- 924,282 ---
--------- ----------- ---------- ----------
Total Fully Diluted Shares 21,162,720 19,586,779 20,705,608 19,478,309
========== =========== ========== ==========
NET INCOME
- - ----------
Earnings $12,902,000 $ 8,078,000 $38,075,000 $23,433,000
=========== =========== =========== ===========
Primary Earnings per Common Share $ .62 $ .41 $ 1.85 $ 1.20
(Earnings/Total Primary Shares) =========== =========== =========== ===========
Fully Diluted Earnings per Common $ .61 $ .41 $ 1.84 $ 1.20
Share (Earnings/Total Fully Diluted =========== =========== =========== ===========
Shares)
</TABLE>
*The preferred stock 1994-A and 1994-B series is not considered a common stock
equivalent for purposes of the primary earnings per share computation.
14
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
Exhibit 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE LIBERTY CORPORATION FOR THE PERIOD ENDED SEPTEMBER
30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 863,242
<DEBT-CARRYING-VALUE> 304,882
<DEBT-MARKET-VALUE> 324,813
<EQUITIES> 37,628
<MORTGAGE> 212,545
<REAL-ESTATE> 135,721
<TOTAL-INVEST> 1,726,143
<CASH> 94,914
<RECOVER-REINSURE> 254,478
<DEFERRED-ACQUISITION> 364,989
<TOTAL-ASSETS> 2,725,593
<POLICY-LOSSES> 1,706,915
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 22,140
<POLICY-HOLDER-FUNDS> 26,981
<NOTES-PAYABLE> 256,648
<COMMON> 152,284
45,816
0
<OTHER-SE> 281,115
<TOTAL-LIABILITY-AND-EQUITY> 2,725,593
231,511
<INVESTMENT-INCOME> 97,677
<INVESTMENT-GAINS> 740
<OTHER-INCOME> 74,379
<BENEFITS> 166,335
<UNDERWRITING-AMORTIZATION> 31,376
<UNDERWRITING-OTHER> 81,036
<INCOME-PRETAX> 58,109
<INCOME-TAX> 20,034
<INCOME-CONTINUING> 38,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,075
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.84
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
