UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: June 30, 1995
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: 0-11774
INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)
North Carolina 56-1110199
(State of Incorporation) (I.R.S. Employer)
121 North Columbia Street, Chapel Hill, North Carolina 27514
(Address of Principal Executive Offices) (Zip Code)
(919) 968-2200
( Registrant's Telephone Number Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 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
Shares outstanding of each of the issuer's classes of common stock
as of June 30, 1995:
Common Stock, no par value 2,800,510
Class Shares Outstanding
1
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INVESTORS TITLE COMPANY AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income:
Six Months and Three Months Ended June 30, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows:
Six Months Ended June 30, 1995 and 1994 . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of June 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<S> <C> <C>
6/30/95 12/31/94
Assets
Cash and Cash Equivalents $ 2,742,702 $ 2,590,071
Investments:
Held to maturity:
Certificates of deposit 384,203 539,203
Bonds - at amortized cost 10,715,409 10,283,644
Available for sale - at market:
Bonds, treasury note and
redeemable preferred stocks 2,557,644 2,839,813
Common and nonredeemable
preferred stocks 3,289,676 2,699,422
Total investments 16,946,932 16,362,082
Receivables:
Premiums, net 1,262,884 1,057,228
Accrued interest and dividends 280,588 309,689
Recoveries of claims previously
paid 322,358 375,061
Refundable income taxes 38,355 62,246
Other 69,174 43,982
Total receivables 1,973,359 1,848,206
Prepaid Expenses and Other Assets 658,837 370,890
Property Acquired in Settlement
of Claims 280,500 170,600
Property-At Cost:
Land 782,582 782,582
Buildings 1,291,776 1,228,375
Furniture and equipment 1,586,813 1,536,745
Automobiles 135,024 118,162
Total 3,796,195 3,665,864
Less accumulated depreciation 914,031 765,653
Property, net 2,882,164 2,900,211
Total Assets $ 25,484,494 $ 24,242,060
Liabilities and Stockholders'
Equity
Liabilities:
Accounts payable and accrued
liabilities $ 321,398 $ 663,124
Accrued vacation 336,735 336,735
Commissions and reinsurance
payables 41,602 52,848
Premium taxes payable 28,766
Note payable 500,000
Income taxes payable:
Current 81,233
Deferred 800,322 470,725
Total liabilities 1,581,290 2,052,198
Reserve for Possible Claims 3,694,850 3,635,850
Stockholders' Equity:
Common stock-No par value
(shares authorized,6,000,000;
2,855,744 and 2,855,744 shares
issued and 2,800,510 1,252,552 1,263,318
and 2,812,062 shares outstanding,
1995 and 1994, respectively)
Retained earnings 18,400,907 17,151,557
Net unrealized gain on investments
(net of deferred taxes:
1995: $282,448; 1994: $72,876) 554,895 139,137
Total stockholders' equity 20,208,354 18,554,012
Total Liabilities and Stockholders'
Equity $ 25,484,494 $ 24,242,060
</TABLE>
3
<PAGE>
Investors Title Company and Subsidiaries
Consolidated Statements of Income
June 30, 1995 and 1994
(Unaudited)
For The Three For The Six
Months Ended Months Ended
June 30 June 30
<TABLE>
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Revenues:
Underwriting
income:
Premiums
written $3,773,439 $4,136,439 $6,894,750 $8,024,816
Less-premiums
for reinsurance
ceded 12,167 12,295 29,453 24,225
Underwriting
income 3,761,272 4,124,144 6,865,297 8,000,591
Investment
income-
interest and
dividends 297,189 263,074 581,169 496,706
Rental income 5,441 4,653 9,764 9,314
Gain on disposals
of investments
and property,
net 27,841 8,113 46,538 2,092
Other 72,205 51,955 123,990 63,290
Total 4,163,948 4,451,939 7,626,758 8,571,993
Operating
Expenses:
Salaries 860,889 877,913 1,715,254 1,774,514
Commissions
to agents 865,818 775,526 1,532,462 1,533,335
Provision for
possible
claims 336,482 350,199 586,573 838,681
Employee
benefits and
payroll taxes 272,413 252,424 550,319 670,640
Office occupancy
and operations 446,411 517,840 868,396 959,844
Business
development 132,302 128,126 245,659 236,731
Taxes, other
than payroll
and income 97,595 97,762 191,311 201,047
Professional
fees 80,737 35,917 136,988 59,993
Interest
expense 8,678 10,638 31,273
Other 32,989 4,368 62,682 38,241
Total 3,125,636 3,048,753 5,900,282 6,344,299
Income Before
Income Taxes 1,038,312 1,403,186 1,726,476 2,227,694
Provision For
Income Taxes:
Current 275,350 446,010 242,870 676,900
Deferred 6,556 (13,781) 120,026 (14,459)
Total 281,906 432,229 362,896 662,441
Net Income $ 756,406 $ 970,957 $1,363,580 $1,565,253
Net Income
Per Share* $ 0.27 $ 0.34 $ 0.49 $ 0.55
Dividends Paid $ 57,116 $ 57,272 $ 114,230 $ 114,386
Dividends Per
Share $ 0.02 $ 0.02 $ 0.04 $ 0.04
* Net income per share is computed based on the weighted average
number of common and dilutive common equivalent shares
outstanding(1995, 2,810,222 and 1994, 2,855,744 shares,
respectively.) Common equivalent shares consist solely of
stock options.
</TABLE>
4
<PAGE>
Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1995 and 1994 (Unaudited)
<TABLE>
<S> <C> <C>
1995 1994
Operating Activities:
Net income $1,363,580 $1,565,253
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 151,081 147,775
Amortization, net of
accretion 34,001 30,826
Loss on disposals of
property 1,019 3,428
Gain on sales of
investments (47,556) (5,519)
Provision (benefit) for
deferred income taxes 120,026 (14,459)
Provision for possible claims 586,573 838,681
Payments of claims, net of
recoveries (527,573) (443,681)
(Increase) decrease in
receivables (149,044) 425,011
Increase in prepaid expenses
and other assets (287,947) (225,216)
Increase in assets acquired
in settlement of claims (109,900) (121,100)
Decrease in accounts payable
and accrued liabilities (341,726) (81,390)
Decrease in commissions and
reinsurance payables (11,246) (72,701)
Decrease in premium taxes
payable (67,121) (77,128)
Increase in income taxes
payable - current 143,479 489,846
Net cash provided by operating
activities 857,646 2,459,626
Investing Activities:
Purchases of investments held
to maturity (995,620) (1,640,789)
Purchases of investments
available for sale (462,212) (141,727)
Proceeds from sales of
investments held to maturity 1,142,979 588,500
Proceeds from sales of
investments available for sale 368,887 244,891
Purchases of property (135,985) (180,295)
Proceeds from sales of property 1,932 5,699
Net cash used in investing
activities (80,019) (1,123,721)
Financing Activities:
Dividends paid (114,230) (114,386)
Repurchases of common stock (10,766)
Repayment of notes payable (500,000) (1,000,000)
Net cash used in financing
activities (624,996) (1,114,386)
Net Increase in Cash and Cash
Equivalents 152,631 221,519
Cash and Cash Equivalents,
Beginning of Year 2,590,071 1,701,786
Cash and Cash Equivalents,
End of Period $2,742,702 $1,923,305
Supplemental Disclosures of
Cash Flow Information:
Cash Paid During the Year for:
Interest $14,476 $35,580
Income Taxes $104,612 $372,000
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1995
(Unaudited)
Note 1 - Basis of Presentation
The consolidated financial statements include Investors Title
Company and its subsidiaries, and have been prepared in
conformity with generally accepted accounting principles.
In the opinion of management all necessary adjustments have been
reflected for a fair presentation of the financial position,
results of operations and cash flows in the accompanying
unaudited consolidated financial statements. All such
adjustments are of a normal recurring nature.
Reference should be made to the "Notes to Consolidated Financial
Statements" of the Registrant's Annual Report to Shareholders
for the year ended December 31, 1994 for a description of
accounting policies.
Note 2 - Reinsurance
The Company assumes and cedes reinsurance with other insurance
companies in the normal course of business. Premiums assumed
and ceded were $19,295 and $29,453, respectively for the six
months ended June 30, 1995, and $31,502 and $24,225,
respectively for the six months ended June 30, 1994.
Note 3 - Reserve for Possible Claims
Transactions in the reserve for possible claims for the six
months ended June 30, 1995 were as follows:
Balance, beginning of year $3,635,850
Provision, charged to operations 586,573
Recoveries 50,012
Payments of claims (577,585)
Balance, June 30, 1995 $3,694,850
In management's opinion, the reserve is adequate to cover
claim losses which might result from pending and possible
claims.
Note 4 - Leases
Rent expense totaled $206,407 and $145,951, respectively for the
six months ended June 30, 1995 and 1994.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The 1994 Form 10-K and the 1994 Annual Report should be read in
conjunction with the following discussion since they contain
important information for evaluating the Company's operating
results and financial condition.
Results of Operations:
For the quarter ended June 30, 1995, premiums written decreased
9% to $3,773,439, investment income increased 13% to $297,189,
revenues decreased 6% to $4,163,948, net income decreased 22%
to $756,406 and net income per share decreased 21% to $.27 all
compared to the same quarter in 1994.
For the six months ended June 30, 1995, premiums written
decreased 14% to $6,894,750, investment income increased 17% to
$581,169, revenues decreased 11% to $7,626,758, net income
decreased 13% to $1,363,580 and net income per share decreased
11% to $.49 all compared to the same period in 1994.
From January until May 1995, premium volume declined primarily
due to a cyclical downturn in the general market. Real estate
activity and the Company's premium volume began to improve in
June as interest rates declined.
Operating expenses for the three months ended June 30, 1995
increased 3% primarily as a result of an increase in commissions
and professional fees, partially offset by a reduction in office
occupancy and operations. The increase in commissions is the
result of the Company's expansion into new markets primarily
through establishing new agency relationships. A scheduled
regulatory audit and related costs contributed to the increase
in professional fees. The decline in the Company's office
occupancy and operations is primarily a result of the Company's
continuing efforts to control overhead costs.
Operating expenses for the six months ended June 30, 1995
decreased 7% primarily due to a reduction in salaries expenses,
the provision for possible claims, employee benefits and payroll
taxes, office occupancy and operations, partially offset by an
increase in professional fees. The provision for possible
claims was lower in 1995 compared to 1994 due to improved claims
experience. These remaining operating expense declines were
primarily due to the decrease in premium volume and the
Company's cost control efforts.
The provision for current income taxes declined in 1995 due to
loss carrybacks related to the 1992 loss as well as a reduction
in income. These carrybacks could not be utilized until 1995
as a result of recent tax legislation. The decline in the
provision for current income taxes was partially offset by an
increase in the provision for deferred income taxes. Deferred
income taxes increased primarily as a result of an increase in
the statutory unearned premium reserve which is deductible from
taxable income but not expensed under generally accepted
accounting principles.
7
<PAGE>
Liquidity and Capital Resources:
Net cash provided by operating activities for the six months
ended June 30, 1995, amounted to $857,646 compared to $2,459,626
for the same six month period during 1994. This decrease is
attributable to the decline in net income and a number of other
factors, including a decrease in receivables that contributed
to net cash in the first half of 1994 but not in 1995, a smaller
increase in current federal taxes payable in 1995, a larger
decrease in accounts payable and accrued liabilities in 1995,
and a lower provision for possible claims in 1995 (which is
added back to net income to reconcile net income to net cash).
Cash flows from operations provided funds to repay the Company's
$500,000 note payable in the first quarter of 1995.
Investments increased primarily from funds retained in the
business and increases in the market value of securities
available for sale.
The deferred income tax liability increased primarily due to an
increase in the net unrealized gain on investments and the
increase in the statutory unearned premium reserve described
above.
The Company continues to have plans to construct a five-story
home office at 137 East Rosemary Street, Chapel Hill, the site
of its former offices. However, no decision has been made as
to when the Company will pursue construction of this facility.
Management believes that funds generated from operations
(primarily underwriting and investment income) will enable the
Company to adequately meet its operating needs. In addition to
operational liquidity, the Company maintains a high degree of
liquidity within the investment portfolio in the form of
short-term investments and other readily marketable securities.
8
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Investors Title Company's Annual Meeting of Shareholders was
held May 16, 1995. The proposals voted upon and the results of
the voting were as follows:
1. Election of three Directors for a three-year term.
Broker
Non-
For Against Abstentions Withheld Votes
J. Allen Fine 2,311,548 N/A N/A 17,506 N/A
David L. Francis 2,326,492 N/A N/A 2,562 N/A
A. Scott Parker, Jr. 2,318,186 N/A N/A 10,868 N/A
2. Ratification of the selection of Deloitte & Touche LLP,
Certified Public Accountants to audit the books and accounts of the
Company for the calendar year ending December 31, 1995.
Broker
Non-
For Against Abstentions Withheld votes
2,316,953 3,199 8,902 N/A N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for this quarter.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed in
its behalf by the undersigned hereunto duly authorized.
INVESTORS TITLE COMPANY
(Registrant)
By: /s/J. Allen Fine
J. Allen Fine
President, Chairman
By: /s/Elizabeth P. Bryan
Elizabeth P. Bryan
Vice President
(Principal Accounting
Officer)
Dated: August 11, 1995
10
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
*Not disclosed on a quarterly basis.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1995
<PERIOD-END> MAR-31-1995 JUN-30-1995
<DEBT-HELD-FOR-SALE> 2,500,451 2,557,644
<DEBT-CARRYING-VALUE> 10,557,522 10,775,433
<DEBT-MARKET-VALUE> 0* 0*
<EQUITIES> 3,136,953 3,289,676
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 16,559,105 16,946,932
<CASH> 2,542,249 2,742,702
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 24,399,314 25,484,494
<POLICY-LOSSES> 3,584,850 3,694,850
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 41,599 41,602
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 0 0
<COMMON> 1,253,212 1,252,552
0 0
0 0
<OTHER-SE> 18,023,760 18,955,802
<TOTAL-LIABILITY-AND-EQUITY> 24,399,314 25,484,494
3,104,025 6,865,297
<INVESTMENT-INCOME> 283,980 581,169
<INVESTMENT-GAINS> 17,991 47,556
<OTHER-INCOME> 56,814 132,736
<BENEFITS> 250,091 586,573
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 2,524,555 5,313,709
<INCOME-PRETAX> 688,164 1,726,476
<INCOME-TAX> 80,990 362,896
<INCOME-CONTINUING> 607,174 1,363,580
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 607,174 1,363,580
<EPS-PRIMARY> .22 .49
<EPS-DILUTED> .22 .49
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
