<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 1999
[ ] 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)
South Carolina 57-0507055
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
Post Office Box 789, Wade Hampton Boulevard, Greenville, SC 29602
(Address of principal executive offices)
Registrant's telephone number, including area code: 864/609-8256
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.
Number of shares Outstanding
Title of each class as of June 30, 1999
------------------- ------------------------------
Common Stock 19,335,364
Page 1 of 22 sequentially numbered pages.
The Exhibit Index is on Page 15.
<PAGE> 2
PART I, ITEM 1
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(In 000's)
JUNE 30, December 31,
1999 1998
----------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Investments:
Fixed Maturity Securities available for sale, at market, cost of $899,884 at 6/30/99
and $896,94487 at 12/31/98
897,111 935,178
Equity Securities, at market, cost of $51,020 at 6/30/99 and $54,354 at 12/31/98 65,113 63,658
Mortgage Loans 220,719 215,549
Investment Real Estate 31,904 34,788
Loans to Policyholders 91,094 90,653
Other Long-Term Investments 22,107 21,256
Short-Term Investments 985 250
----------- -----------
Total Investments 1,329,033 1,361,332
Cash 18,004 16,633
Accrued Investment Income 12,919 13,508
Receivables 79,179 69,536
Receivable from Reinsurers 272,466 275,602
Deferred Acquisition Costs and Cost of Business Acquired 299,054 284,366
Buildings and Equipment 97,908 101,523
Intangibles Related to Television Operations 211,218 212,842
Goodwill Related to Insurance Acquisitions 22,386 22,868
Other Assets 52,934 52,473
----------- -----------
Total Assets $ 2,395,101 $ 2,410,683
----------- -----------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Liabilities
Policy Liabilities $ 1,340,354 $ 1,334,531
Notes, Mortgages and Other Debt 280,300 285,000
Accrued Income Taxes 9,642 7,348
Deferred Income Taxes 112,659 122,650
Accounts Payable and Accrued Expenses 103,091 106,523
Other Liabilities 4,240 4,157
----------- -----------
Total Liabilities 1,850,286 1,860,209
----------- -----------
Redeemable Preferred Stock
1994-A Series, $35.00 redemption value, shares issued and outstanding -0- shares in
1999 and 198,259 in 1998 -- 6,939
1994-B Series, $37.50 redemption value, shares issued and outstanding -0- shares in
1999 and 374,059 in 1998 -- 14,028
----------- -----------
Total Redeemable Preferred Stock -- 20,967
----------- -----------
Shareholders' Equity
Common Stock 94,867 70,565
Series 1995-A Convertible Preferred Stock, $35.00 redemption value, shares issued
and outstanding - 582,485 shares in 1999 and 599,985 in 1998 20,386 20,999
Unearned Stock Compensation (6,703) (7,596)
Retained Earnings 425,268 418,790
Accumulated Other Comprehensive Income:
Unrealized Investment Gains 10,997 26,749
----------- -----------
Total Shareholders' Equity 544,815 529,507
----------- -----------
Total Liabilities, Redeemable Preferred Stock and Shareholders' Equity $ 2,395,101 $ 2,410,683
=========== ===========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
2
<PAGE> 3
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months ended Six Months Ended
June 30, June 30,
------------------------- -----------------------
(In 000's, except per share data) 1999 1998 1999 1998
--------------- -------- ---------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Insurance Premiums & Policy Charges $ 63,314 $ 65,284 $ 127,367 $ 153,266
Broadcasting Revenues 47,258 40,654 87,124 73,021
Net Investment Income 25,000 26,205 48,875 66,703
Service Contract Revenue 6,197 4,250 10,865 8,402
Other Income 2,789 586 3,273 980
Realized Investment Gains (650) 1,660 (8,994) 4,789
--------- --------- --------- ---------
Total Revenues 143,908 138,639 268,510 307,161
--------- --------- --------- ---------
EXPENSES
Policyholder Benefits 32,390 32,312 67,878 89,418
Insurance Commissions 18,938 19,484 37,497 40,041
General Insurance Expenses 19,260 18,023 37,270 38,155
Amortization of Deferred Acquisition Costs 10,687 8,906 21,064 21,352
Broadcasting Expenses 32,533 26,278 63,690 50,641
Interest Expense 3,570 3,071 7,497 6,361
Loss on Sale of Subsidiary -- -- -- 13,811
Other Expenses 6,135 5,221 9,757 10,685
--------- --------- --------- ---------
Total Expenses 123,513 113,295 244,653 270,464
--------- --------- --------- ---------
Income Before Income Taxes 20,395 25,344 23,857 36,697
Income Tax Provision 7,328 9,076 8,270 22,852
--------- --------- --------- ---------
NET INCOME $ 13,067 $ 16,268 $ 15,587 $ 13,845
========= ========= ========= =========
EARNINGS PER SHARE:
Basic earnings per common share $ .68 $ .85 $ .79 $ .65
Diluted earnings per common share $ .66 $ .82 $ .78 $ .64
Dividends Per Common Share $ .22 $ .22 $ .44 $ .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
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
(In 000's) 1999 1998
-----------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 15,587 $ 13,845
Adjustments to reconcile net income to net cash provided (used) in operating
activities:
(Decrease) increase in policy liabilities (11,415) (2,971)
Increase (decrease) in accounts payable and accrued liabilities (2,977) (5,831)
(Increase) decrease in receivables (5,688) 2,965
Amortization of policy acquisition costs 21,063 21,352
Policy acquisition costs deferred (24,018) (27,150)
Realized investment losses (gains) 8,994 (4,789)
Gain on sale of operating assets (405) (311)
Loss on sale of subsidiary -- 13,811
Minority interest in earnings of subsidiary -- 849
Depreciation and amortization 11,046 9,495
Amortization of bond premium and discount (2,005) (4,125)
Provision for deferred income taxes (1,495) 1,023
All other operating activities, net 3,287 (7,908)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,974 10,255
INVESTMENT ACTIVITIES
Investment securities sold 41,458 45,798
Investment securities matured or redeemed by issuer 74,827 104,428
Cost of investment securities acquired - available for sale (121,487) (164,163)
Mortgage loans made (17,124) (45,890)
Mortgage loan repayments 11,073 43,568
Purchase of investment real estate, buildings and equipment (7,779) (7,989)
Sale of investment real estate, buildings and equipment 4,931 6,004
Net cash received on sale of subsidiary -- 133,060
Purchase of short-term investments (23,168) (8,255)
Sales of short-term investments 22,434 8,255
All other investment activities, net (714) 10
----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (15,549) 114,826
FINANCING ACTIVITIES
Proceeds from borrowings 1,510,000 2,307,000
Principal payments on debt (1,514,700) (2,346,664)
Dividends paid (9,109) (9,098)
Stock issued for employee benefit and compensation programs 2,933 1,668
Redemption of preferred stock (306) --
Repurchase of common stock -- (125,534)
Return of policyholders' account balances (13,511) (16,810)
Receipts credited to policyholders' account balances 29,639 31,739
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,946 (157,699)
(DECREASE) INCREASE IN CASH 1,371 (32,618)
Cash at beginning of year 16,633 61,786
----------- -----------
CASH AT END OF PERIOD $ 18,004 $ 29,168
=========== ===========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
4
<PAGE> 5
THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
June 30, 1999
(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, 1999, but
it does reflect all adjustments (which are of a normal and recurring
nature) considered, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. For
further information, refer to the consolidated financial statements
and footnotes thereto included in The Liberty Corporation annual
report on Form 10-K for the year ended December 31, 1998.
2. REDEMPTION OF 1994-A and 1994-B SERIES PREFERRED STOCK
On May 25, 1999 ("the redemption date") the Company completed the
redemption of all of the outstanding shares of its 1994-A Series
voting cumulative preferred stock, and its 1994-B Series voting
cumulative preferred stock. Shares were called for redemption at
$35.00 per share and $37.50 per share for the 1994-A and 1994-B
preferred stock, respectively, plus accrued interest from April 1,
1999 through the redemption date. Prior to the redemption date, all
shares of the 1994-A Series were converted into common stock, and all
but 8,170 shares of the 1994-B Series were converted into common
stock.
3. COMPREHENSIVE INCOME
The components of comprehensive income, net of related income taxes,
for the three-month and six-month periods ended June 30, 1999 and
1998, respectively, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------------------------
(In 000's)
<S> <C> <C> <C> <C>
Net Income $ 13,067 $ 16,268 $ 15,587 $ 13,845
Unrealized losses on securities (8,190) (28,701) (15,752) (29,303)
Foreign currency translation adjustments
-- (481) -- (335)
-------- -------- -------- --------
Comprehensive income (loss) $ 4,877 $(12,914) $ (165) $(15,793)
======== ======== ======== ========
</TABLE>
5
<PAGE> 6
4. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
(In 000's except per share data) Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------
(Unaudited)
NUMERATOR - EARNINGS:
<S> <C> <C> <C> <C>
Net Income $ 13,067 $ 16,268 $ 15,587 $ 13,845
Preferred Dividends (255) (923) (789) (1,348)
-------- -------- -------- --------
Numerator for basic earnings per share
12,812 15,596 14,798 12,497
Effect of Dilutive Securities:
Redeemable Preferred Stock -- 410 272 --
Convertible Preferred Stock 255 262 517 --
-------- -------- -------- --------
Numerator for diluted earnings per share
$ 13,067 $ 16,268 $ 15,587 $ 12,497
======== ======== ======== ========
DENOMINATOR - AVERAGE SHARES OUTSTANDING:
Denominator for basic earnings per share - weighted
average shares 18,806 18,438 18,684 19,299
Effect of Dilutive Securities:
Stock Options 184 164 184 169
Redeemable Preferred Stock 309 716 421 --
Convertible Preferred Stock 591 600 595 --
-------- -------- -------- --------
Denominator for diluted earnings per share
19,890 19,918 19,878 19,468
======== ======== ======== ========
Basic Earnings Per Share $ .68 $ .85 $ .79 $ .65
Diluted Earnings Per Share $ .66 $ .82 $ .78 $ .64
</TABLE>
6
<PAGE> 7
5. SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). This Standard is
effective for financial statements issued for periods beginning after
December 15, 1997. SFAS 131 requires that a public company report
financial and descriptive information on the basis that it is reported
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company adopted this standard as of January 1,
1998.
The Company operates primarily in the television broadcasting and life
insurance industries. The Company currently has five reportable segments.
Prior to the sale of Pierce in April 1998, the Company had six reportable
segments. All segments except television broadcasting are included in
Insurance Operations. The Company evaluates segment performance based on
several factors. For segments that are comprised of a separate company
(LIS and Cosmos) the primary factor is net income excluding unusual,
non-operating items. For those segments that are not separate companies
performance is evaluated based on income before income taxes excluding
realized gains and losses and unusual, non-operating items. See the
Company's 1998 form 10K for additional information on the types of
operations for each of the Company's segments.
The following tables summarize financial information by segment for the
three and six month periods ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
For the three Cosmos-
months ended June Liberty LIS Television
30, 1999 Liberty Life Pierce Insurance Adjust- Total Broadcast
Life Liberty National- Admin- Corporate ments Insurance Broad- Elimi- Total
Agency Direct Pre-need istration & Other (1) Operations casting nations Consolidated
------------------- -------- --------- --------- --------- --------- --------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outside revenues $ 50,670 $29,700 -- $6,197 $10,733 $ (650) $ 96,650 $ 47,258 $ 143,908
Intersegment
revenues -- -- -- 9,402 4,839 -- 14,241 -- $ (14,241) --
Segment profit
(loss) before
income taxes 4,072 2,539 -- 532 4,305 (650) 10,798 9,597 20,395
Income tax
expense (benefit) -- 171 3,332 3,503 3,825 7,328
--------- ------ --------- -------- ----------
Segment net income -- $ 361 $ 7,295 $ 5,772 $ 13,067
========= ====== ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
For the three Cosmos-
months ended June Liberty LIS Television
30, 1998 Liberty Life Pierce Insurance Adjust- Total Broadcast
Life Liberty National- Admin- Corporate ments Insurance Broad- Elimi- Total
Agency Direct Pre-need istration & Other (1) Operations casting nations Consolidated
------------------- -------- --------- --------- --------- --------- --------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outside revenues $ 52,763 $30,999 $ 561 $4,250 $8,313 $1,099 $97,985 $40,654 $138,639
Intersegment
revenues -- -- -- 7,534 3,842 (561) 10,815 -- $(10,815) --
Segment profit
(loss) before
income taxes 7,656 4,121 483 (1,014) 676 1,590 13,512 11,832 25,344
Income tax
expense (benefit) 172 (399) 4,583 4,356 4,720 9,076
------ ------ ------- ------- --------
Segment net income
$ 311 $ (615) $ 9,156 $ 7,112 $ 16,268
====== ====== ======= ======= ========
</TABLE>
(1) The adjustments column reflects unallocated realized investment gains
and losses, income taxes, and unusual, non-operating items, including the
$13.8 million loss on the sale of pierce in the first quarter of 1998.
7
<PAGE> 8
5. SEGMENT REPORTING (CONTINUED)
<TABLE>
<CAPTION>
For the six months Cosmos-
ended June 30, 1999 Liberty LIS Television
Liberty Life Pierce Insurance Adjust- Total Broadcast
Life Liberty National- Admin- Corporate ments Insurance Broad- Elimi- Total
Agency Direct Pre-need istration & Other (1) Operations casting nations Consolidated
------------------- -------- --------- --------- --------- --------- --------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outside revenues $102,117 $ 59,411 -- $ 10,865 $17,987 $ (8,994) $ 181,386 $ 87,124 $ 268,510
Intersegment
revenues -- -- -- 19,014 10,139 29,153 -- $ (29,153) --
Segment profit
(loss) before 7,379 4,660 -- (581) 8,096 (8,994) 10,560 13,297 23,857
income taxes
Income tax
expense (benefit) -- (214) 3,474 3,260 5,010 8,270
--------- --------- --------- -------- ----------
Segment net income -- $ (367) $ 7,300 $ 8,287 $ 15,587
========= ========= ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
For the six months Cosmos-
ended June 30, 1998 Liberty LIS Television
Liberty Life Pierce Insurance Adjust- Total Broadcast
Life Liberty National Admin- Corporate ments Insurance Broad- Elimi- Total
Agency Direct Pre-need istration & Other (1) Operations casting nations Consolidated
------------------- -------- --------- --------- --------- --------- --------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outside revenues $105,298 $59,594 $39,021 $ 8,402 $17,597 $ 4,228 $234,140 $ 73,021 $307,161
Intersegment
revenues -- -- -- 17,440 6,150 23,590 -- $(23,590) --
Segment profit
(loss) before
income taxes 13,691 7,887 6,123 (364) 1,936 (9,873) 19,400 17,297 36,697
Income tax
expense (benefit) 2,270 (150) 14,281 16,401 6,451 22,852
------- ------- -------- -------- --------
Segment net income
$ 3,853 $ (214) $ 2,999 $ 10,846 $ 13,845
======= ======= ======== ======== ========
</TABLE>
(1) The adjustments column reflects unallocated realized investment gains
and losses, income taxes, and unusual, non-operating items, including the
$13.8 million loss on the sale of Pierce in the first quarter of 1998.
6. COMMITMENTS AND CONTINGENCIES
At June 30, 1999, the Company had made commitments as shown below:
(In 000's)
<TABLE>
<S> <C>
Investment real estate $ 802
Mortgage loans and fixed maturity securities 9,668
Other 2,919
-------
$13,389
=======
</TABLE>
8
<PAGE> 9
6. SALE OF PIERCE NATIONAL LIFE
On April 8, 1998, the Company completed the sale of Pierce National
Life Insurance Company to Fortis, Inc. Fortis purchased 21% of the
common stock of Pierce as of December 31, 1997. The Company received
cash totaling approximately $139 million at closing. The Company
recognized a loss on the sale of Pierce of $18.9 million during the
first quarter of 1998.
7. RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements to make the prior year amounts comparable to those
of the current year. Such reclassifications had no effect on previously
reported net income, total assets, or shareholders' equity.
9
<PAGE> 10
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
The Liberty Corporation is a holding company with operations in insurance and
broadcasting. Liberty ("the Company") markets its insurance products through
Liberty Life Insurance Company. Additionally, Liberty is one of the nation's
largest life insurance third-party administrators, providing administrative
services for over 4.5 million policies through Liberty Insurance Services
Corporation. The Company's broadcasting subsidiary, Cosmos Broadcasting,
consists of eleven network-affiliated stations in the Southeast and Midwest. Six
stations are affiliated with NBC, three with ABC, and two with CBS.
SIGNIFICANT TRANSACTIONS AFFECTING COMPARABILITY BETWEEN PERIODS
REDEMPTION OF 1994-A AND 1994-B SERIES PREFERRED STOCK
On May 25, 1999 ("the redemption date") the Company completed the redemption of
all of the outstanding shares of its 1994-A Series voting cumulative preferred
stock, and its 1994-B Series voting cumulative preferred stock. Shares were to
be redeemed at $35.00 per share and $37.50 per share for the 1994-A and 1994-B
preferred stock, respectively, plus accrued interest from April 1, 1999 through
the redemption date. Prior to the redemption date, all shares of the 1994-A
Series were converted into common stock, and all but 8,170 shares of the 1994-B
Series were converted into common stock.
TELEVISION STATION ACQUISITIONS
During 1998 the Company completed the acquisition of three television stations.
WALB was acquired in July for $78.6 million, KGBT in November for $42.9 million
and WWAY in December for $35.4 million. All of these acquisitions were accounted
for as purchases with the results of operations included in the accompanying
consolidated financial statements since the respective dates of acquisition. The
purchase of these stations was funded using proceeds from the Company's credit
facility.
SALE OF PIERCE NATIONAL LIFE
On April 8, 1998, Liberty completed the sale of Pierce National Life Insurance
Company ("Pierce") to Fortis, Inc. Liberty recognized a loss of approximately
$18.9 million related to the sale of Pierce in the first quarter of 1998.
STOCK REPURCHASE
On March 11, 1998, Liberty completed the repurchase of 2.4 million shares of
common stock at a price of $52 per share. The stock repurchase was funded from
the Company's credit facility.
RESULTS OF OPERATIONS
Liberty reported consolidated second quarter net income of $13.1 million
compared with net income of $15.6 million for the second quarter of 1998 (see
table below). Operating earnings (which exclude net realized investment gains
and losses and the loss on the Pierce sale) were $13.4 million, a decrease of
approximately 11% compared with the $15.2 million reported in the comparable
prior-year quarter. Contributing to the decline in operating earnings was the
dilutive impact of the three television station acquisitions Cosmos completed in
the second half of 1998, and higher policyholder benefit costs and lower
investment income in Liberty Life. Net income reflects after-tax realized
investment losses of $0.4 million in the second quarter of 1999 compared with
gains of $1.1 million in the second quarter of 1998.
10
<PAGE> 11
Year-to-date net income of $15.6 million was 13% higher than the net income of
$13.8 million reported for the comparable 1998 period (see table below).
Year-to-date operating earnings (which exclude net realized investment gains and
losses and the loss on the Pierce sale) were $21.3 million, a decrease of
approximately 28% compared with the $29.7 million reported in the comparable
prior-year period. Contributing to the decline in operating earnings was the
dilutive impact of the three television station acquisitions Cosmos completed in
the second half of 1998, along with the higher policyholder benefit costs and
lower investment income in Liberty Life mentioned above. Net income reflects
after-tax realized investment losses of $5.8 million in the first half of 1999
compared with gains of $3.1 million in 1998.
<TABLE>
<CAPTION>
Second Quarter Year-to-date
------------------------ -------------------------
1999 1998 1999 1998
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Insurance revenues $ 97,300 $ 96,325 $ 190,380 $ 229,351
Broadcasting revenues 47,258 40,654 87,124 73,021
--------- -------- --------- ---------
Total revenues (excluding realized gains and losses) 144,558 136,979 277,504 302,372
========= ======== ========= =========
Insurance operating earnings $ 7,676 $ 8,075 $ 13,062 $ 18,835
Broadcasting operating earnings 5,772 7,111 8,287 10,845
--------- -------- --------- ---------
Total operating earnings 13,448 15,186 21,349 29,680
Net realized investment gains (losses) (381) 1,082 (5,762) 3,084
Loss on sale of subsidiary -- -- -- (18,919)
--------- -------- --------- ---------
Net income $ 13,067 $ 16,268 $ 15,587 $ 13,845
========= ======== ========= =========
</TABLE>
Consolidated revenues (excluding realized gains and losses) increased $7.6
million (6%) compared with the second quarter of 1998. Adjusting to exclude the
prior year revenues of Pierce National Life Insurance Company, which was sold in
April 1998, and excluding realized investment gains and losses, both
second-quarter and year-to-date revenues increased 5 percent compared with the
comparable period of 1998. Both the second quarter and year-to-date pro-forma
insurance revenues were level with the comparable prior-year period, while
broadcasting revenues increased 16% and 19% for the second quarter and
year-to-date periods respectively. Excluding the impact of the three stations
acquired during 1998, broadcasting revenues increased 1% and 3%, for the second
quarter and year-to-date respectively.
Insurance operating earnings declined $0.4 million from the prior year second
quarter. On a pro forma basis (adjusting for the sale of Pierce) operating
earnings declined approximately $0.2 million and $2.7 as compared to the prior
year second quarter and year-to-date results respectively.
Liberty Life operating earnings were down $2.9 million compared with the second
quarter of 1998 as investment income declined $2.0 million and deferred
acquisition cost amortization increased $1.8 million. Year-to-date 1999
operating earnings for Liberty Life were down $5.5 million due to higher benefit
costs, lower investment income, and an increase in deferred acquisition cost
amortization, as compared with the first six months of 1998.
Liberty Insurance Services contribution to second quarter 1999 results was $1.0
million higher than the second quarter 1998 as a result of lower expenses in
some service areas and earnings from an additional contract not present during
the second quarter of 1998. Year to date the operating loss for Liberty
Insurance Services was $0.4 million, compared to an operating loss of $0.2
million for the first six months of 1998.
The broadcasting operations reported operating earnings of $5.8 million, down
$1.3 million from the $7.1 million reported in the prior-year second quarter.
The decline in earnings is attributable to higher levels of non-cash
amortization expense and additional financing costs related to the 1998 station
acquisitions. Year-to-date operating earnings were $2.5 million lower than the
previous year six month period.
11
<PAGE> 12
INVESTMENTS
As of June 30, 1999, Liberty's consolidated investment portfolio was carried at
$1.3 billion. Approximately 68% of consolidated invested assets were in fixed
maturity securities (bonds and redeemable preferred stocks), 17% were in
mortgage loans, 7% in policy loans, with the balance consisting of equity
securities (4%), real estate (2%), and other long term investments (2%).
The overall average investment rating of fixed maturity securities as of June
30, 1999 was A. Less than investment grade securities comprised 5.7% of the
fixed maturity portfolio at June 30, 1999, compared with 4.9% at December 31,
1998.
In accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", the Company reported in its balance
sheet an unrealized gain of $11.0 million on fixed maturity securities available
for sale and equity securities at June 30, 1999. This compares with an
unrealized gain of $26.7 million at December 31, 1998. Due to the requirements
of SFAS No. 115, shareholders' equity will be subject to future volatility from
the effects of interest rate fluctuations on the fair value of fixed maturity
securities.
CAPITAL, FINANCING AND LIQUIDITY
At June 30, 1999 the Company's borrowings and notes payable amounted to $280.3
million, a decrease of $4.7 million from the $285.0 million outstanding at
December 31, 1998.
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
annual report on Form 10K for the year ended December 31, 1998.
Further discussion of investments and valuation is contained in Notes 1 and 2 to
the Consolidated Financial Statements in the Company's annual report on Form 10K
for the year ended December 31, 1998.
CASH FLOWS
The Company's net cash flow from operating activities was $12.0 million for the
first six months of 1999 compared to $10.3 million for the same period of 1998.
The Company's net cash used in investing activities was $15.5 million for the
six month period ended June 30, 1999, compared to cash provided by investing
activities of $114.8 million for the same period of 1998. Of the $114.8 million
of cash provided by investing activities in 1998, $133.1 million represents net
cash proceeds from the sale of Pierce National. Net cash provided by financing
activities for the six months ended June 30, 1999 was $4.9 million, compared to
net cash used in financing activities of $157.7 million for the first six months
of 1998. The decrease in cash used in financing activities is due to the
repurchase of shares of the Company's common stock in the open market during
1998, with no such repurchases in 1999.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs written to use two digits
rather than four to define the applicable year. Any of the Company's computer
programs or hardware that have date sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations including among other things, a temporary inability to process
transactions, send premium billings, pay personnel properly, or engage in normal
business activities.
12
<PAGE> 13
The Company determined that it was required to modify or replace significant
portions of its software and certain hardware so that its systems would properly
utilize dates beyond December 31, 1999. The Company believes that the
modifications and replacements made to certain software and hardware will
mitigate the Year 2000 issue. However, if these modifications and replacements
are not sufficient to mitigate the Year 2000 issue, it could have a material
impact on the operations of the Company.
The Company's plan to resolve the Year 2000 issue involves the following four
phases: assessment, remediation, testing, and implementation. The Company has
completed the full assessment of all systems that could be significantly
affected by the Year 2000. The completed assessment indicated that a number of
the Company's information technology systems could be affected, particularly the
insurance administration, billing, and commissioning systems. The Company also
completed an assessment of the equipment used at the television stations. In
addition, the Company is gathering information about the Year 2000 compliance
status of its significant suppliers and business partners and is continuing to
monitor their compliance.
PROGRESS IN BECOMING YEAR 2000 COMPLIANT
As mentioned previously the Company has completed the assessment phase to
determine its information technology exposures. Liberty is 100% complete with
its assessment phase, approximately 95% complete on the remediation phase, 95%
complete with its testing phase and has implemented a number of business
critical Year 2000 compliant systems. The Company substantially completed its
testing efforts by June 30, 1999. The Company substantially completed the
implementation phase for all significant systems by July 31, 1999.
The Company is approximately 95% complete in the remediation phase of its
operating equipment used in the broadcasting operations. The Company is
approximately 95% complete with the testing of its remediated operating
equipment. Once testing is complete, the operating equipment will be ready for
immediate use. Testing and implementation of affected equipment is expected to
be 100% complete by July 31, 1999.
NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR
2000
The Company's insurance collection system interfaces directly with significant
third party vendors including a large number of banks and financial
institutions. The Company is in the process of working with its primary third
party vendors to ensure that the Company's systems that interface directly with
third parties are Year 2000 compliant by December 31, 1999. The Company has
completed its remediation efforts on its collection system and is 95% complete
with the testing phase. Testing of all significant systems that are tied to
vendor interfaces was completed by December 31, 1998. The Company has asked its
critical vendors to provide, in written form, documentation relating to their
Year 2000 compliance. The Company has received responses from over 88% of those
sent. Certain of the responses were not deemed acceptable, and follow up
procedures are currently being performed on these vendors, and those that have
not yet replied. The Company has no means of ensuring that its suppliers or
subcontractors will be Year 2000 ready. The inability of the Company's suppliers
or subcontractors to complete their Year 2000 resolution process in a timely
fashion could materially impact the Company, although the effect of
non-compliance by significant suppliers or subcontractors is not fully
determinable. The Company will continue to monitor correspondence from
significant suppliers and subcontractors and develop contingency plans where
deemed appropriate.
RISK AND RISK FACTORS
Management believes that its program to address the Year 2000 issue will be
effective. As noted above, the Company has not yet completed all necessary
phases of the Year 2000 program. In the event that the Company, for unforeseen
reasons, does not complete the additional phases, the Company may not be able to
correctly issue certain insurance policies, invoice customers, collect payments
or pay agents properly. Disruptions in the economy generally resulting from Year
2000 issues could also adversely affect the Company. Additionally, the Company
could be subject to litigation for computer systems product failure, such as,
equipment shutdown or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
13
<PAGE> 14
CONTINGENCY PLANS
The Company has contingency plans for certain critical applications and is
working on such plans for others. Draft contingency plans have been submitted to
the Company's internal Year 2000 Program Office. Finalized plans are to be
implemented and tested by September 30, 1999. These contingency plans involve,
among other actions, manual workarounds and adjusting staffing strategies.
Additionally, the Company has decided to remediate and test older systems that
were planned for replacement during the first half of 1999. Thus, if replacement
projects are delayed for any reason, the older systems will function beyond the
Year 2000.
YEAR 2000 COSTS
The Company is using both internal and external resources to reprogram or
replace, test and implement the software and equipment to ensure it is Year 2000
compliant. The Company has implemented several major systems projects during the
last three and one-half years that were not specifically performed to remediate
Year 2000 issues. However, during the course of those projects, systems have
been modified to ensure that they were Year 2000 compliant. The total cost of
the projects to be undertaken for which a component of the project, or the
entire project, has to do with remediating the Year 2000 problem is estimated to
be approximately $17.2 million and is being funded through operating cash flows.
Of the total, approximately $11.1 million is expected to be expensed, with the
remainder to be capitalized as it relates primarily to upgrading or replacing
systems for business reasons other than the Year 2000. To date the Company has
incurred approximately $16.6 million of these costs.
ACCOUNTING DEVELOPMENTS
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This standard is required to be adopted in years
beginning after June 15, 1999. The Company has not determined when it will adopt
this standard. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will be either offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company's use of derivatives is limited to fixing
the cost of borrowings on a portion of the outstanding debt. The Company has not
yet determined what the effect of Statement 133 will be on the earnings and
financial position of the Company, but it is not expected to be material.
FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained herein or in any
other written or oral statements made by, or on behalf of the Company, are or
may be viewed as forward looking. Although the Company has used appropriate care
in developing any such forward looking information, forward looking information
involves risks and uncertainties that could significantly impact actual results.
These risks and uncertainties include, but are not limited to, the following:
changes in general economic conditions, including the performance of financial
markets and interest rates; competitive, regulatory, or tax changes that affect
the cost of or demand for the Company's products; and adverse litigation
results. The Company undertakes no obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
developments, or otherwise.
14
<PAGE> 15
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 second quarter
of 1999.
INDEX TO EXHIBITS
EXHIBIT 3.2 Bylaws, as amended through August 3, 1999
EXHIBIT 11 Consolidated Earnings Per Share Computation (included in Note
4 of Notes to Consolidated and Condensed Financial Statements)
EXHIBIT 27 Financial Data Schedule (for SEC use only)
15
<PAGE> 16
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: August 9, 1999
- -----------------------
(Registrant)
/s/ Kenneth W. Jones
- -----------------------
Kenneth W. Jones
Corporate Controller
/s/ Martha G. Williams
- -----------------------
Martha G. Williams
Vice President, General Counsel and Secretary
16
<PAGE> 1
EXHIBIT 3.2
THE LIBERTY CORPORATION
BYLAWS
ARTICLE I - SHAREHOLDERS
Section 1. Annual Meetings. The annual meeting of the shareholders of
the Company shall be held on such day during the first one hundred and fifty
days of the calendar year as the Board of Directors may determine.
Section 2. Special Meetings. Special meetings of the shareholders may
be called at any time by a majority of the Board of Directors, the Chairman of
the Board, the Chief Executive Officer, the President, or upon request of
shareholders holding at least one-tenth of the outstanding stock of the Company
entitled to vote at such meeting.
Section 3. Place of Meetings. Each annual and special meeting of the
shareholders shall be held at the principal office of the Company, or at such
other place within or without the State of South Carolina as shall be designated
by the Board of Directors or the officer calling such meeting.
Section 4. Notice of Meetings. Written or printed notice stating the
place, day and hour of meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be mailed by or at
the direction of the Secretary, an Assistant Secretary or officer calling the
meeting, not less than ten nor more than fifty days before the date of the
meeting, to each shareholder of record, addressed to him at his address as it
appears on the stock books of the Company, as of the date set pursuant to
Section 4 of Article VI hereof.
Section 5. Proxies. At a meeting of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder and filed with the
Secretary of the Company, bearing date within eleven months prior to the meeting
unless a longer period is provided therein and is permitted by law. In lieu of
voting by proxy executed in writing, a shareholder may vote by proxy transmitted
to the Secretary of the Company, or such other person or entity authorized by
the Company to receive proxies, by telegram, cablegram, telephone, or other
means of electronic transmission, provided that any such transmission must set
forth or be submitted with information from which it can be determined that such
transmission was authorized by the shareholder. Any copy, facsimile
telecommunication or other reliable reproduction of such writing or transmission
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that any such reproduction is a complete reproduction of the
entire original writing or transmission.
Section 6. Quorum. A majority of the issued and outstanding shares of
the Company, present in person or by proxy and entitled to vote thereat, shall
constitute a quorum at a meeting of shareholders.
<PAGE> 2
Section 7. Voting. Subject to the laws of the State of South Carolina
with respect to multiple ownership of stock and the provisions of the Articles
of Incorporation and Article VI hereof, each shareholder shall be entitled to
one vote for each share of stock standing in his name on the books of the
Company. Only those whose names appear as shareholders on the books of the
Company, or their proxies or legal representatives, shall be entitled to vote or
to participate in any meeting of shareholders. A majority of the votes cast at a
duly called meeting at which a quorum is present shall decide any question that
may come before the meeting, except as otherwise provided by law, these Bylaws
or the Articles of Incorporation of the Company.
Section 8. Control Share Statute. Article 1 of Title 36, Chapter 2 of
the Code of Laws of South Carolina 1976 does not apply to control share
acquisition of shares of this Corporation (as defined in such Article).
Section 9. Shareholder Nominations and Proposals. At a meeting of the
shareholders, only such business shall be conducted which has been properly
brought before the meeting. To be properly brought before a meeting, business
must be specified in the notice of the meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or
otherwise properly brought before the meeting by a shareholder.
For business to be properly brought before a meeting by a shareholder,
the Secretary of the Company must have received written notice thereof from the
shareholder describing the nomination or proposal not less than one hundred and
twenty nor more than one hundred and fifty calendar days before the date of the
Company's proxy statement released to shareholders in connection with the
previous year's annual meeting; provided however, that in the event an annual
meeting was not held during the previous year, or if the date of the current
year's annual meeting has been changed by more than thirty days from the date of
the previous year's meeting, the required notice by the shareholder of such
nomination or proposal to be timely must be received by the Secretary of the
Company within a reasonable time before the Company begins to print its proxy
materials.
In the case of shareholder nominations for election to the Board of
Directors, the shareholder's notice to the Secretary shall set forth (a) as to
each person whom the shareholder proposes to nominate for election or
re-election as a director: (i) the name, age, business address and, if known,
residence address, (ii) the principal occupation or employment for the past five
years, (iii) the class and number of shares of the Company which are legally or
beneficially owned, (iv) other directorships held, (v) the names of business
entities of which each such nominee owns a ten percent or more legal or
beneficial interest, and (vi) all other information with respect to the nominees
required by the Federal proxy rules in effect at the time the notice is
submitted; and (b) as to the shareholder giving the notice (i) the name and
record address of the shareholder and (ii) the class and number of shares of
capital stock of the Company which are legally or beneficially owned by the
shareholder. In addition, the notice shall be accompanied by a written statement
of each proposed nominee consenting to the proposed nomination, agreeing to
serve as a director if elected, and confirming the accuracy of the information
relating to the proposed nominee as set forth in the notice. The Company may
require any proposed nominee to furnish such other information as may be
reasonably required to determine the eligibility of such nominee to serve as a
director of the Company. No person shall be eligible for election as a director
of the Company unless nominated in accordance with the procedures set forth
herein.
In the case of shareholder proposals other than the election of
directors, the shareholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before the meeting (i) a brief description of the
business to be brought before the meeting, (ii) the name, business and residence
address of each of the shareholders submitting the proposal, (iii) the principal
occupation or employment of that shareholder, (iv) the class and number of
shares of the Company which are legally or beneficially owned by such
shareholder, (v) any material interest of the shareholder in such business, and
(vi) such other information as the Board of Directors reasonably determines is
necessary or appropriate.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a shareholder nomination or proposal was not made in
accordance with the procedures prescribed in these Bylaws or is otherwise not in
accordance with law. If the Chairman should so determine, he shall so declare to
the meeting and the defective nomination or proposal shall be disregarded.
Notwithstanding anything in these Bylaws to the contrary, no elections or other
business shall be conducted at any meeting of the shareholders except in
accordance with the procedures set forth in Section 9 of Article I hereof.
<PAGE> 3
ARTICLE II - DIRECTORS
Section 1. General Powers and Authority. The business and property of
the Company shall be managed by the Board of Directors and they shall and may
exercise all powers and authority of the Company except as limited by law, the
Articles of Incorporation, or elsewhere by these Bylaws. They shall have power
and authority to make all necessary rules and regulations for their government
and for the regulation of the business of the Company which are not inconsistent
with the Articles of Incorporation and these Bylaws, and shall have general
management and control of the Company. The Board of Directors may delegate from
time to time to any committee, officer or agent, such power and authority as
permitted by law.
Section 2. Number, Election and Terms. Except as otherwise fixed
pursuant to Article 4 of the Restated Articles of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation (the "Preferred Stock") to
elect additional directors under specified circumstances, the number of
directors shall be 12; provided however, that the number of directors may be
fixed from time to time at any number, not less than 9 nor more than 16, by
resolution adopted by the Board of Directors. The directors, other than those
who may be elected under specified circumstances by the holders of any class or
series of Preferred Stock, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
of members as possible, as determined by the Board of Directors. One such class
shall hold office initially for a term expiring at the annual meeting of
shareholders to be held in 1986, another class shall hold office initially for a
term expiring at the annual meeting of shareholders to be held in 1987, and
another class shall hold office initially for a term expiring at the annual
meeting of shareholders to be held in 1988. At each annual meeting of
shareholders, the successors to the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the third year following the year of their
election, and the successor to any director previously elected by the directors
pursuant to Section 3 below as a member of a class whose term is not expiring at
that meeting shall be elected by the shareholders for the remainder of the full
term of the class of directors in which the new directorship was created or the
vacancy occurred. The members of each class of directors shall hold office until
their successors are elected and qualified or until their earlier resignation,
disqualification, disability, death or removal from office.
Section 3. Newly Created Directorships and Vacancies. Except for any
directors who may be elected under specified circumstances by the holders of any
class or series of Preferred Stock, newly created directorships resulting from
any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding sentence
shall hold office until the next shareholders' meeting at which directors of any
class are elected and until such director's successor shall have been elected
and qualified, or until his earlier resignation, disqualification, disability,
death or removal from office. At the time of any increase in the number of
directors, except in the case of directors elected in specified circumstances by
the holders of any class or series of Preferred Stock, the Board of Directors
shall specifically allocate the additional directorships among the three classes
so as to make the three classes as nearly equal in number of members as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director, but subject to this
restriction, the Board of Directors shall effect and allocate any decrease in
the number of directors in a manner and at such time or times so as to keep the
three classes as nearly equal in number of members as possible.
Section 4. Removal. Except for any directors who may be elected under
specified circumstances by the holders of any class or series of Preferred
Stock, any director may be removed from office, without cause, only by the
affirmative vote of the holders of 80% of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class.
Section 5. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the date, time and place, either within or
without the State of South Carolina, for the holding of additional regular
meetings without other notice than such resolution.
Section 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Executive Committee, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer or upon request of a majority
of the Board, and may be held at such time and place, either within or without
the State of South Carolina, as may be specified in the notice
<PAGE> 4
thereof. To the extent permitted by applicable law, special meetings of the
Board of Directors, or of any committee thereof, may be held by conference
telephone communication.
Section 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors, stating the time, manner and place where the meeting is to
be held, shall be given by or at the direction of the Secretary or an Assistant
Secretary by mailing the same to each director at his residence or business
address not less than three days before such meeting, or by giving the same to
him personally or telegraphing or telephoning the same to him at his residence
or business address not later than the day before the day on which the meeting
is to be held. Any and all requirements for call and notice of meetings may be
dispensed with if all directors are present at the meeting or if those not
present at the meeting shall at any time waive or have waived notice thereof.
Section 8. Quorum and Manner of Action. A majority of the number of
directors then in office shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors. Except as otherwise provided
in the Restated Articles of Incorporation, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 9. Compensation. The directors shall receive such fees,
retainers, expenses and the like for attendance at meetings of the Board and
performance of their duties, as may be determined by the Board of Directors;
provided, however, that no salaried officer shall receive a fee or retainer for
attendance at such meetings or performance of such Board duties.
ARTICLE III - COMMITTEES
Section 1. Executive Committee. The Executive Committee shall consist
of not less than two members, all of whom shall be members of the Board of
Directors. Except as otherwise limited by law, the Executive Committee shall be
vested with full authority to act for and on behalf of the Board of Directors in
the management of the business and affairs of the Company and to do all things,
including actions specified by these Bylaws to be performed by the Board of
Directors, in the same manner and with the same authority and effect as if such
acts had been performed by the Board of Directors.
The members of the Executive Committee shall be elected by the Board of
Directors and shall serve at the pleasure of the Board of Directors. The Board
of Directors shall designate the chairman of such committee, or if for any
reason the Board shall fail to designate the chairman, then such committee shall
elect its own chairman. Meetings of each such committee shall be held at such
times and places as may be determined by its chairman or as may be agreed upon
by members of the committee. A quorum at any meeting of such committee shall
consist of a majority of the committee, and any action taken by such committee
shall require the assent of at least a majority of the members who are present.
Notice of meetings shall be given in the same manner as for special meetings of
the Board of Directors. Any action taken by the Executive Committee shall be
deemed to be action taken by the Board of Directors and shall be binding on the
Company, but the Board of Directors shall at all times have the power to reverse
and overrule any action taken by such committee, provided that the exercise of
such power by the Board of Directors shall not in any way abrogate the
obligations or duties owing by the Company to third parties who have acted in
reliance on the action taken by such committee. All proceedings by such
committee and all action taken by each such committee shall be reported to the
Board of Directors at the meeting of the Board of Directors next following such
proceedings or action.
Section 2. Other Committees. There shall be such other committees
consisting of directors, officers and employees of the Company as the Board of
Directors, chairman of the Board, or the Chief Executive Officer of the Company
may appoint from time to time.
Section 3. Compensation. Members of committees shall receive such fees,
retainers and expenses for attendance at committee meetings and performance of
committee duties as may be determined by the Board of Directors; provided,
however, that no salaried officer of the Company shall receive a fee or retainer
for attendance at such meetings or performance of such committee duties.
<PAGE> 5
ARTICLE IV - OFFICERS
Section 1. Designation and Number. The Board of Directors of the
Company may appoint such officers or assistant officers as may be deemed
necessary, with such designation of rank, powers and duties as the Board of
Directors may from time to time designate and determine. One officer shall be
designated as "Secretary" and shall be responsible for preparing minutes and
authenticating records of the Company.
Section 2. Election and Tenure. The officers of the Company shall be
elected annually at the first regular meeting of the Board of Directors held
after each annual meeting of shareholders, or at a special meeting called for
that purpose if for any reason officers should not be elected at such first
meeting, and shall hold office until the first regular meeting of the Board of
Directors held after the next annual meeting of shareholders and their
successors are duly elected and qualified; provided, however, that any officer
may be removed from office by the Board of Directors at any regular or special
meeting, meeting, and any vacancy in any office, however caused, may be filled
by the Board of Directors at any regular or special meeting.
Section 3. Duties of Officers. The Board of Directors shall, from time
to time, in its discretion, designate and prescribe the duties incident to each
office, and it may, at any time, expressly authorize any officer to perform any
duty or function which is usually performed by any other officer.
Section 4. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors or by a committee of the Board. No
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Company.
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the extent permitted by and subject to the laws of the State of
South Carolina, any present or former director, officer or employee of the
Company, or any person who, at the request of the Company, express or implied,
may have served as a director or officer of another Company in which this
Company owns shares or of which this Company is a creditor, shall be entitled to
reimbursement of expenses and other liabilities, including attorney's fees
actually and reasonably incurred by him and any amount owing or paid by him in
discharge of a judgment, fine, penalty of costs against him or paid by him in a
settlement approved by a court of competent jurisdiction, in any action or
proceeding, including any civil, criminal or administrative action, suit,
hearing or proceeding, to which he is a party by reason of being or having been
a director, officer or employee of this or such other Company.
To the extent permitted by and subject to the laws of the State of
South Carolina, the Company is authorized to purchase and maintain insurance on
behalf of any present or former director, officer, or employee of the Company,
or any person who, at the request of the Company, express or implied, may have
served as a director or officer of another company in which this Company owns
shares or of which this Company is a creditor, against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such together with such costs, fees, penalties, fines and the like
with respect thereto, all as set forth hereinabove.
This section is not intended to extend or to limit in any way the
rights and remedies provided with respect to indemnification of directors,
officers, employees, and other persons provided by the laws of the State of
South Carolina but is intended to express the desire of the shareholders of this
Company that indemnification be granted to such directors, officers, employees
and other persons to the fullest extent allowable by such laws.
ARTICLE VI - CAPITAL STOCK
Section 1. Certificates of Stock. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and every holder of
uncertificated shares, upon request, shall be entitled to have a
<PAGE> 6
certificate, which shall be in such form as may be prescribed by the Board of
Directors, shall be signed by the Chairman, Vice Chairman, Chief Executive
Officer, President or a Vice President and by the Treasurer or the Secretary or
an Assistant Secretary, and shall be sealed with the Company's seal or a
facsimile thereof; provided, however, that if the certificate is countersigned
by a transfer agent or any assistant transfer agent, or is registered by a
registrar, other than the Company itself or an employee of the Company, such
certificates may be signed with the facsimile signatures of the officers
authorized to execute such certificates. All certificates shall be consecutively
numbered or otherwise identified. Except as otherwise expressly provided by law,
the rights and obligations of the holders of uncertificated stock and the rights
and obligations of the holders of certificates representing stock of the same
class and series shall be identical.
Section 2. Stock Record. The name and address of the person or entity
to whom shares of the capital stock are issued, together with the certificate
number, if a certificate is issued, number of shares and date of issue, shall be
entered on the stock transfer books of the Company. All certificates surrendered
to the Company for transfer shall be canceled, and no new certificate or record
of uncertificated shares shall be issued or made until the former certificate
for a like number of shares shall have been surrendered and canceled. In the
case of a lost, destroyed or mutilated certificate, a new certificate of stock
or record of uncertificated shares may be issued or made therefor upon such
terms and indemnity to the Company as the Board of Directors may prescribe.
Section 3. Transfer of Stock. Transfer of stock of the Company shall be
made on the books of the Company by direction of the person or entity named in
the certificate or, in the case of uncertificated shares, by the person or
entity in whose name shares stand on the books of the Company, or his attorney,
lawfully constituted in writing, and upon the surrender of the certificate or
certificates for such shares, where certificated, properly endorsed, with such
evidence of the authenticity of such transfer, authorization and other matters
as the Company or its agents may reasonably require, and accompanied by any
necessary stock transfer tax stamps; or if the Board of Directors shall by
resolution so provide, transfer of stock may be made in any other manner
provided by law. Any such resolution providing for the issuance of
uncertificated shares shall not apply to shares represented by a certificate
until such certificate is surrendered to the Company. The person or entity in
whose name shares stand on the books of the Company shall be deemed by the
Company to be the owner thereof for all purposes.
Section 4. Closing Stock Transfer Books and Fixing Record Date. The
Board of Directors shall have power to close the stock transfer books of the
Company for a period not exceeding fifty days preceding the date of any meeting
of shareholders, payment of dividends, allocation of rights, change, conversion
or exchange of capital stock, or the date of determining shareholders for any
other purpose. In lieu of closing the stock transfer books, in order to
determine the holders of record of the Company's stock who are entitled to
notice of meetings, to vote at a meeting or adjournment thereof or to receive
payment of any dividend or allotment of rights, or to exercise rights with
respect to any change, conversion or exchange of capital stock, or to give
consent, or to make a determination of the shareholders of record for any other
purpose, the Board of Directors of the Company may fix in advance a record date
for such determination of shareholders, which date shall not be more than fifty
days prior to the date of the action which requires such determination, nor, in
the case of a shareholders' meeting, shall it be less than ten days in advance
of such meeting.
ARTICLE VII - AMENDMENTS
Section 1. Amendment by Shareholders. These Bylaws may be added to,
amended or repealed, by the majority vote of the entire outstanding stock of the
Company at any regular meeting of the shareholders, or at any special meeting,
where such proposed action has been announced in the call and notice of such
meeting.
Section 2. Amendment by Board of Directors. Subject to the right of the
shareholders to adopt, amend or repeal Bylaws, the Board of Directors shall have
the power to adopt, amend or repeal Bylaws, by an affirmative vote of a majority
of all directors then holding office, provided that notice of the proposal to
adopt, amend or repeal the Bylaws is included in the notice to the directors
with respect to the meeting at which such action takes place.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LIBERTY CORP. FOR THE 6 MONTHS ENDED JUNE 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 897,111
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 65,113
<MORTGAGE> 220,719
<REAL-ESTATE> 31,904
<TOTAL-INVEST> 1,329,033
<CASH> 18,004
<RECOVER-REINSURE> 272,466
<DEFERRED-ACQUISITION> 299,054
<TOTAL-ASSETS> 2,395,101
<POLICY-LOSSES> 1,284,642
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 30,955
<POLICY-HOLDER-FUNDS> 24,757
<NOTES-PAYABLE> 280,300
0
20,386
<COMMON> 94,867
<OTHER-SE> 429,562
<TOTAL-LIABILITY-AND-EQUITY> 2,395,101
127,367
<INVESTMENT-INCOME> 48,875
<INVESTMENT-GAINS> (8,994)
<OTHER-INCOME> 101,262
<BENEFITS> 67,878
<UNDERWRITING-AMORTIZATION> 21,064
<UNDERWRITING-OTHER> 74,767
<INCOME-PRETAX> 23,857
<INCOME-TAX> 8,270
<INCOME-CONTINUING> 15,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,587
<EPS-BASIC> .79
<EPS-DILUTED> .78
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
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</TABLE>
