<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996___________________ Commission File No. 0-6764
MOBILE AMERICA CORPORATION
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1218935
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Fortune Parkway, Jacksonville, Florida 32256
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 363-6339
----------------------------
N/A
- - -------------------------------------------------------------------------------
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 .
--- ---
(APPLICABLE ONLY TO CORPORATE ISSUERS)
There were 6,260,040 shares of common stock, par value $.025 per share,
outstanding as of the close of business on May 10, 1996.
<PAGE> 2
PART I
MOBILE AMERICA CORPORATION
INDEX
<TABLE>
<CAPTION>
Financial Statements: Page
<S> <C>
Part I
Consolidated Balance Sheet 1
Consolidated Statement of Operations 2
Consolidated Statements of Cash Flows 3
Consolidated Statement of Changes in
Stockholders' Equity 4
Notes to Financial Statements 5-8
Management's Discussion and Analysis
of the Consolidated Statements of Income 9
Exhibit 11 - Computations of Earnings Per Share 10
Part II
Other Information, and Signatures 11
</TABLE>
<PAGE> 3
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Investments:
Securities held to maturity $ 61,646,390 $ 52,460,555
at amortized cost (fair value
$61,487,477 and $52,785,561)
Securities available for sale
(amortized cost $32,785,280
and $34,644,650 33,329,982 35,690,835
Notes receivable less unearned
discount 2,176 2,650
Short-term investments 15,703,973 22,470,314
------------ ------------
Total investments 110,682,521 110,624,354
------------ ------------
Cash 2,717,000 6,510,457
Receivables:
Insurance premiums 2,701,339 2,563,715
Accrued investment income and other 2,169,658 1,971,356
Reinsurance 31,147,172 33,822,126
------------ ------------
Total receivables 36,018,169 36,357,197
------------ ------------
Income taxes:
Currently receivable - -
Deferred 785,025 760,025
------------ ------------
Total income taxes 785,025 760,025
------------ ------------
Prepaid reinsurance premiums 21,760,639 24,260,694
Inventory of mobile homes 39,545 39,545
Deferred policy acquisition costs (3,109,967) (4,209,840)
Property and Equipment:
Land, at cost 356,970 356,970
Modular office equipment, at
cost less accumulated
depreciation of $7,982 and $7,982 3,000 3,000
Equipment and leasehold improvements
at cost less accumulated
depreciation and amortization of
$2,002,422 and $1,953,916 608,946 630,458
------------ ------------
Total property and equipment: 968,916 990,428
------------ ------------
Equity in Pools and Associations 4,912,334 4,912,334
Other Assets 510,396 525,968
------------ ------------
$175,284,578 $182,771,162
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------------------------------ ---- ----
<C> <C> <C>
Insurance loss reserves, including
future policy benefits $ 51,128,125 $ 54,645,686
Unearned premiums 36,956,105 39,535,149
Reinsurance funds withheld and
balances payable 23,568,888 26,120,505
Accrued expenses and other liabilities 18,076,871 15,639,062
Deferred income tax on net unrealized gains on
securities available for sale 185,000 355,000
Unearned service fees 2,625,060 2,610,902
Note payable 12,000,000 12,000,000
Current income taxes payable 500,868 551,868
------------ ------------
Total liabilities $145,040,917 $151,458,172
------------ ------------
Stockholders' equity:
Common stock, $.025 par value per share
Authorized - 18,000,000 shares
Issued - 6,720,396 shares 168,010 168,010
Preferred stock, $.10 par value per share
Authorized - 500,000 shares
Issued and outstanding - none - -
Capital in excess of par value 2,686,060 2,686,060
Net unrealized appreciation on securities
available for sale net of deferred income taxes 359,702 691,185
Net unrealized gains/(losses) on equity securities
net of deferred taxes - -
Treasury Stock at cost, 460,356 and
460,356 shares (420,944) (420,944)
Retained Earnings 27,450,833 28,188,679
------------ ------------
Total stockholders' equity 30,243,661 31,312,990
------------ ------------
$175,284,578 $182,771,162
============ ============
See notes to consolidated financial statements
</TABLE>
<PAGE> 4
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENT OF OPERATIONS
QUARTERS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Insurance premiums earned (net of premiums
ceded of $13,691,933 and $13,970,523) $ 9,610,837 $ 7,209,877
Investment income 1,637,385 1,224,635
Equipment rentals - 21,359
Service fees earned 2,514,566 876,527
Other 11,499 -
Sales of modular office equipment - 4,600
Net realized gains on investments 141,239 35,254
----------- -----------
Total revenues 13,915,526 9,372,252
----------- -----------
Expenses:
Losses and loss adjustment expenses (net of
reinsurance recoveries of $9,865,361 and
$9,672,257) 6,717,512 5,852,417
Policy acquisition costs 1,688,494 (521,036)
Salaries and wages 1,775,077 1,359,120
General and administrative 1,560,553 1,161,521
Cost of sales of modular office equipment - 44
Interest on note 255,500 -
----------- -----------
Total expenses 11,997,136 7,852,066
----------- -----------
Income before provision for income taxes 1,918,390 1,520,186
Provision for income taxes:
Current 510,000 600,659
Deferred (25,000) (209,000)
----------- -----------
Total provision for income taxes 485,000 391,659
----------- -----------
Net income $ 1,433,390 $ 1,128,527
=========== ===========
Earnings per share:
Net income $ .23 $ .18
=========== ===========
Weighted average number of common stock and
common stock equivalents 6,260,040 6,264,040
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE> 5
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CASH FLOWS
QUARTERS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 1,433,390 $ 1,128,527
Adjustments to reconcile net income to
net cash provided by operating activities:
Provisions for depreciation 48,506 54,783
(Gain) loss on sale of investments (141,239) (35,254)
Increase in insurance premiums receivable (137,624) (510,973)
Increase in accrued investment income and other (198,302) (53,182)
(Increase) decrease in deferred policy acquisition costs (1,099,873) 218,718
Decrease in prepaid expenses and other assets 15,572 100,341
Decrease in insurance loss reserves (3,517,561) (2,172,594)
Decrease in unearned premiums (2,579,044) (893,855)
Decrease in reinsurance funds held and
balances payable (2,551,617) (1,067,903)
Increase in accrued expenses
and other liabilities 2,437,809 5,663,233
Increase (decrease) in current income taxes (51,000) 435,363
Decrease in deferred income taxes (25,000) (209,000)
Decrease in reinsurance premiums receivable 2,674,954 362,136
Decrease in prepaid reinsurance premiums 2,500,055 781,289
Increase in unearned service fees 14,160 85,936
------------ ----------
Net cash (used by) provided by operating activities (1,176,814) 3,887,565
------------ ----------
Cash Flows from Investing Activities:
Net change in short term investments 6,766,341 (1,483,653)
Purchase of equity securities (729,531) (660,845)
Sale of equity securities 470,785 605,675
Purchase of modular offices, equipment
and leasehold improvements 31,594 140,032
Purchase of fixed maturities (16,828,908) (5,738,229)
Sales of fixed maturities 9,848,438 4,023,906
Notes receivable 474 903
Sales of modular offices, equipment and leasehold improvements (4,600) -
------------ ----------
Net cash used in investing activities (445,407) (3,104,211)
------------ ----------
Cash Flows from Financing Activities:
Dividends paid to shareholders (2,171,236) (946,223)
------------ ----------
Net cash used in financing activities (2,171,236) (946,223)
------------ ----------
Net decrease in cash (3,793,457) (162,869)
Cash, beginning year 6,510,457 5,479,899
------------ ----------
Cash, end of period $ 2,717,000 $ 5,317,030
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 6
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
QUARTERS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Common Stock:
No change during period $ 168,010 $ 168,010
----------- -----------
Preferred Stock:
No change during period - -
----------- -----------
Capital in excess of par value:
No change during period 2,686,060 2,686,060
----------- -----------
Net unrealized appreciation on securities
available for sale:
Balance at beginning of period 691,185 -
Increase (decrease) (501,483) -
Deferred taxes on unrealized gains 170,000 -
----------- -----------
Balance at end of period 359,702 -
----------- -----------
Net unrealized investment gains (losses)
on equity securities:
Balance at beginning of period - (158,099)
Increase (decrease) - 94,868
Deferred taxes on unrealized gains - -
----------- -----------
Balance at end of period - (63,231)
----------- -----------
Treasury Stock:
Balance at beginning of period (420,944) (388,441)
Purchases - -
----------- -----------
Balance at end of period (420,944) (388,441)
----------- -----------
Retained earnings:
Balance at beginning of period 28,188,679 23,306,761
Net income 1,433,390 1,128,527
Cash dividends $.35 and $.18
per share (2,171,236) (946,223)
----------- -----------
Balance at end of period 27,450,833 23,489,065
----------- -----------
Total stockholders' equity at end of period $30,243,661 $25,891,463
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 7
MOBILE AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 1996 AND 1995
Note 1
In the opinion of the Registrant, the accompanying unaudited, consolidated,
condensed financial statements contain all adjustments (consisting of only
normal occurring accruals) necessary to present fairly its financial position
as of March 31, 1996, and the results of its operations and statement of cash
flow for the three months ended March 31, 1996.
Note 2
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
Note 3 - Summary of Significant Accounting Policies
(a) Basis of Financial Statement Presentation
The consolidated financial statements have been prepared on the basis of
generally accepted accounting principles which vary from statutory reporting
practices prescribed or permitted for insurance companies by regulatory
authorities.
(b) Principles of Consolidation
The accompanying consolidated financial statements include Mobile America
Corporation (the Registrant) and its subsidiaries, all of which are
wholly-owned. All significant intercompany transactions have been eliminated
in consolidation.
(c) Basis of Inventory Valuation
Inventories are valued at the lower of cost or market, with cost being
determined primarily under the specific identification method.
(d) Method for Valuing Investments
The Registrant implemented Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" as of January 1, 1994. The Registrant classified its entire fixed
maturity investment portfolio as "held to maturity". Accordingly, these
investments are reported at amortized cost, adjusted for amortization of
premiums or discounts and other than
-5-
<PAGE> 8
temporary declines in fair value. At December 29, 1995, the Registrant
reassessed the appropriateness of the classifications of all securities held at
that time and reclassified from the held to maturity category a portion of the
Registrant's fixed maturity portfolio to the available for sale category.
Classifying these securities as available for sale did not impact net income.
Common Stock, redeemable preferred stock, bonds and notes not classified as
held to maturity are reported at fair value, with unrealized gains and losses
reported as a separate component of stockholders' equity. Fair values are
based on quoted market prices or dealer quotes, if available. If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar
(e) Realized Investment Gains and Losses
The cost of securities sold is based upon the specific identification
method and any gains or losses are reflected in the accompanying statements of
operations.
(f) Deferred Policy Acquisition Costs
The costs associated with acquiring new insurance contracts have been
deferred. Such costs are being amortized over the premium paying period or in
proportion to premiums earned on those contracts.
(g) Depreciation and Amortization
Depreciation and amortization of properties, equipment and leasehold
improvements are calculated principally under the straight-line method based on
the estimated useful life of the asset for financial reporting purposes.
Maintenance and repairs are charged to expenses as incurred; additions and
major betterments are capitalized and depreciated. At the time of retirement
or other disposition of property, equipment or leasehold improvements, the
accounts are relieved of the cost and the related accumulated depreciation and
any gains or losses are reflected in income.
-6-
<PAGE> 9
(h) Insurance Contracts
The insurance contracts accounted for in these financial statements include
both short-duration contracts and long-duration contracts. Short-duration
contracts provide insurance protection for a fixed period of short duration and
enable the insurer to cancel the contract or to adjust the provisions at the
end of any contract period. Most property-liability insurance contracts and
certain term life insurance contracts, such as credit life insurance, are
short-duration contracts. Long-duration contracts generally are not subject to
unilateral changes in their provisions and require the performance of various
functions and services, including insurance protection, for an extended period.
Long-duration contracts include whole-life contracts and guaranteed renewable
term life contracts. Accident and health insurance contracts may be
short-duration or long-duration depending on whether the contracts are expected
to remain in force for an extended period. The Company has not issued any
participating policies.
(I) Insurance Loss Reserves
The liability for future policy benefits of long-duration contracts has
been provided for on a net level premium method based on estimated investment
yields, withdrawals, mortality, terminations, morbidity, and other assumptions
which were appropriate at the time the contracts were issued. Such estimates
were based on past experience as adjusted to provide for possible adverse
deviation from the estimates. Interest assumptions are based on historical
assumptions and experience, and range from 3% to 4.5% at March 31, 1996.
The liabilities for unpaid claims of short-duration contracts and related
adjustment expenses are determined using case basis evaluations and statistical
analysis and represent estimates of the ultimate net cost of all reported and
unreported claims relating to insured events which are unpaid at year-end. The
liabilities include estimates of future trends in claims severity and frequency
and other factors which could vary as the claims are ultimately settled.
Although such
-7-
<PAGE> 10
estimates may vary, management believes that the liabilities for unpaid claims
and related adjustment expenses are adequate. The estimates are continually
reviewed, and as adjustments to these liabilities become necessary, they are
reflected in current operations.
(j) Recognition of Premium Revenues and Costs
Premiums for long-duration contracts are recognized as revenues when due
from the policyholders. A liability for the expected costs relating to such
long-duration contracts is accrued over the current and expected renewal
periods.
Premiums for short-duration contracts are recognized as revenues over the
period of the contract in proportion to the amount and duration of insurance
protection provided.
-8-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Total consolidated revenues increased 48% to $13,915,526 in the first quarter
1996 from $9,372,252 for the first quarter 1995.
Insurance premiums increased 25% for the first quarter 1996 over the first
quarter 1995. This increase is due primarily to a 14% decrease in the
reinsurance cession rate ,effective January 1, 1996, as well as a fourth
quarter 1995 rate increase in the core personal injury protection and property
damage liability business of the Registrant's principal property and casualty
subsidiary. Investment income rose 34% from $1,224,635 for the first quarter
1995 to $1,637,385 for the first quarter 1996. This increase is attributable
to an increase in invested assets, the migration of invested assets from
lower-yielding short term investments to higher-yielding investments with an
average maturity of three to four years and an overall increase in yields. Net
realized gains on the sale of investments increased from $35,254 in the first
quarter 1995 to $141,239 in the first quarter 1996. Service fees earned
increased 187% from $876,527 in the first quarter 1995 to $2,514,566 in the
first quarter 1996 due to the strong volume of policies administered for the
State of Florida's joint underwriting associations as well as continued growth
in the Registrant's premium finance business.
Consolidated expenses increased 53% from $7,852,066 in the first quarter 1995
to $11,997,136 in the first quarter 1996. This increase is principally due to
the reduction in both the reinsurance cession rate and the ceding commission
rate itself. Both of these result in lower ceding commissions which offset
policy acquisition costs. Interest on Note is generated from the $12,000,000
loan that was consummated in the fourth quarter 1995.
Cash dividend and capital expenditure requirements continue to be provided by
funds generated from operations. The Registrant maintains sufficient liquidity
to meet operational needs. The Registrant's investment policy continues to
emphasize high quality securities matched closely with the Registrant's short
liability duration.
-9-
<PAGE> 12
Part II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
11. Unaudited computations of earnings per share.
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8K
No reports on Form 8K were filed for the quarter ended
March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MOBILE AMERICA CORPORATION
Registrant
May 13, 1996 By /s/ Thomas L. Stinson
--------- -------------------------
Date Thomas L. Stinson
Vice President Financial Reporting
-11-
<PAGE> 1
EXHIBIT II
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED COMPUTATIONS OF EARNINGS PER SHARE
QUARTERS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Net Income $1,433,390 $1,128,527
========== ==========
Common shares outstanding 6,260,040 6,264,040
Effect of weighting treasury stock acquired - -
--------- ----------
Common and common equivalent shares used in
computing earnings per share 6,260,040 6,264,040
========== ==========
Earnings per share $ .23 $ .18
========== ==========
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MOBILE AMERICA FOR THE THREE MONTHS MARCH 31, 1996, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 33,329,982
<DEBT-CARRYING-VALUE> 61,646,390
<DEBT-MARKET-VALUE> 61,487,477
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 356,970
<TOTAL-INVEST> 110,682,521
<CASH> 2,717,000
<RECOVER-REINSURE> 31,147,172
<DEFERRED-ACQUISITION> (3,109,967)
<TOTAL-ASSETS> 175,284,578
<POLICY-LOSSES> 51,128,125
<UNEARNED-PREMIUMS> 36,956,105
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 12,000,000
0
0
<COMMON> 168,010
<OTHER-SE> 30,075,651
<TOTAL-LIABILITY-AND-EQUITY> 175,284,578
9,610,837
<INVESTMENT-INCOME> 1,637,385
<INVESTMENT-GAINS> 141,239
<OTHER-INCOME> 2,526,065
<BENEFITS> 6,717,512
<UNDERWRITING-AMORTIZATION> 1,688,494
<UNDERWRITING-OTHER> 3,591,130
<INCOME-PRETAX> 1,918,390
<INCOME-TAX> 485,000
<INCOME-CONTINUING> 1,433,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,433,390
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
<RESERVE-OPEN> 20,808,027
<PROVISION-CURRENT> 6,568,240
<PROVISION-PRIOR> 197,722
<PAYMENTS-CURRENT> 1,111,871
<PAYMENTS-PRIOR> 6,492,965
<RESERVE-CLOSE> 19,965,414
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
