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: September 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
Identification Number)
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 September 30, 1995:
Common Stock, no par value 2,800,973
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 September 30, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income:
Nine Months and Three Months Ended September 30, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Cash Flows:
Nine Months Ended September 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 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 September 30, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<S> <C> <C>
9/30/95 12/31/94
Assets
Cash and Cash Equivalents $ 2,602,658 $ 2,590,071
Investments:
Held to maturity:
Certificates of deposit 399,203 539,203
Bonds - at amortized cost 11,602,486 10,283,644
Available for sale - at market:
Bonds, treasury note and
redeemable preferred stocks 2,456,285 2,839,813
Common and nonredeemable
preferred stocks 3,817,101 2,699,422
Total investments 18,275,075 16,362,082
Receivables:
Premiums, net 1,582,897 1,057,228
Accrued interest and dividends 279,742 309,689
Recoveries of claims
previously paid 377,356 375,061
Refundable income taxes 62,246
Other 39,377 43,982
Total receivables 2,279,372 1,848,206
Prepaid Expenses and Other Assets 679,036 370,890
Property Acquired in Settlement
of Claims 250,500 170,600
Property-At Cost:
Land 782,582 782,582
Buildings 1,291,776 1,228,375
Furniture and equipment 1,605,298 1,536,745
Automobiles 135,024 118,162
Total 3,814,680 3,665,864
Less accumulated depreciation 987,137 765,653
Property, net 2,827,543 2,900,211
Total Assets $ 26,914,184 $ 24,242,060
Liabilities and Stockholders'
Equity
Liabilities:
Accounts payable and accrued
liabilities $ 578,721 $ 663,124
Accrued vacation 336,735 336,735
Commissions and reinsurance
payables 45,070 52,848
Premium taxes payable 27,608 28,766
Note payable 500,000
Income taxes payable:
Current 57,883
Deferred 919,978 470,725
Total liabilities 1,965,995 2,052,198
Reserve for Possible Claims 3,794,850 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 2,800,973 1,149,411 1,263,318
and 2,812,062 shares
outstanding, 1995 and 1994,
respectively)
Retained earnings 19,257,524 17,151,557
Net unrealized gain on
investments(net of deferred
taxes: 1995: $385,709;
1994: $72,876) 746,404 139,137
Total stockholders' equity 21,153,339 18,554,012
Total Liabilities and
Stockholders' Equity $ 26,914,184 $ 24,242,060
</TABLE>
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Investors Title Company and Subsidiaries
Consolidated Statements of Income
September 30, 1995 and 1994
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
For The Three For The Nine
Months Ended Months Ended
September 30 September 30
1995 1994 1995 1994
Revenues:
Underwriting
income:
Premiums
written $ 4,443,282 $ 3,825,492 $11,338,032 $11,850,308
Less-premiums
for
reinsurance
ceded 21,788 13,463 51,241 37,688
Underwriting
income 4,421,494 3,812,029 11,286,791 11,812,620
Investment
income-interest
and dividends 298,430 292,730 879,599 789,436
Rental income 8,313 5,143 18,077 14,457
Gain (loss) on
disposals of
investments and
property, net (9,915) 28,742 36,623 30,834
Other 41,769 53,586 165,759 116,876
Total 4,760,091 4,192,230 12,386,849 12,764,223
Operating
Expenses:
Salaries 849,763 843,958 2,565,017 2,618,472
Commissions
to agents 959,760 836,425 2,492,222 2,369,760
Provision for
possible claims 508,537 515,967 1,095,110 1,354,648
Employee
benefits and
payroll taxes 389,515 209,523 939,834 880,163
Office occupancy
and operations 469,257 470,915 1,337,653 1,430,759
Business
development 136,234 123,822 381,893 360,553
Taxes, other
than payroll
and income 106,522 97,817 297,833 298,864
Professional
fees 42,074 24,402 179,062 84,395
Interest
expense 9,469 10,638 40,742
Other 10,431 25,229 73,113 63,470
Total 3,472,093 3,157,527 9,372,375 9,501,826
Income Before
Income Taxes 1,287,998 1,034,703 3,014,474 3,262,397
Provision For
Income Taxes:
Current 357,873 216,258 600,743 893,158
Deferred 16,394 79,542 136,420 65,083
Total 374,267 295,800 737,163 958,241
Net Income $ 913,731 $ 738,903 $ 2,277,311 $ 2,304,156
Net Income
Per Share* $ 0.32 $ 0.27 $ 0.81 $ 0.82
Dividends
Paid $ 57,114 $ 57,182 $ 171,344 $ 171,568
Dividends Per
Share $ 0.02 $ 0.02 $ 0.06 $ 0.06
* Net income per share is computed based on the weighted average
number of common and dilutive common equivalent shares
outstanding(1995, 2,807,068 and 1994, 2,810,645 shares,
respectively.) Common equivalent shares consist solely of
stock options.
</TABLE>
4
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Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1994 (Unaudited)
<TABLE>
<S> <C> <C>
1995 1994
Operating Activities:
Net income $2,277,311 $2,304,156
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 225,071 242,776
Amortization, net of accretion 46,063 40,687
Loss on disposals of property 5,601 7,721
Gain on sales of investments (42,223) (38,554)
Provision for deferred
income taxes 136,420 65,083
Provision for possible claims 1,095,110 1,354,648
Payments of claims, net of
recoveries (936,110) (1,066,798)
(Increase) decrease in receivables (493,412) 453,368
(Increase) decrease in prepaid
expenses and other assets (308,146) 112,549
Increase in assets acquired in
settlement of claims (79,900) (25,000)
Decrease in accounts payable and
accrued liabilities (84,403) (293,493)
Decrease in commissions and
reinsurance payables (7,778) (73,545)
Decrease in premium taxes payable (1,158) (12,583)
Increase in income taxes payable -
current 120,129 510,182
Net cash provided by operating
activities 1,952,575 3,581,197
Investing Activities:
Purchases of investments held
to maturity (2,129,088) (2,274,602)
Purchases of investments
available for sale (743,094) (436,483)
Proceeds from sales of investments
held to maturity 1,040,200 1,062,903
Proceeds from sales of investments
available for sale 835,249 394,441
Purchases of property (161,161) (290,729)
Proceeds from sales of property 3,157 6,876
Net cash used in investing
activities (1,154,737) (1,537,594)
Financing Activities:
Dividends paid (171,344) (171,568)
Repurchases of common stock (113,907) (397,677)
Repayment of notes payable (500,000) (1,000,000)
Net cash used in financing
activities (785,251) (1,569,245)
Net Increase in Cash and Cash
Equivalents 12,587 474,358
Cash and Cash Equivalents,
Beginning of Year 2,590,071 1,701,786
Cash and Cash Equivalents,
End of Period $2,602,658 $2,176,144
Supplemental Disclosures of
Cash Flow Information:
Cash Paid During the Year for:
Interest $ 14,476 $ 40,742
Income Taxes $ 486,602 $ 568,000
</TABLE>
5
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INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 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 $27,565 and $51,241,
respectively for the nine months ended September 30, 1995,
and $42,125 and $37,688, respectively for the nine months
ended September 30, 1994.
Note 3 - Reserve for Possible Claims
Transactions in the reserve for possible claims for the nine
months ended September 30, 1995 were as follows:
Balance, beginning of year $3,635,850
Provision, charged to operations 1,095,110
Recoveries 88,035
Payments of claims (1,024,145)
Balance, September 30, 1995 $3,794,850
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 $294,377 and $231,242, respectively for
the nine months ended September 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 September 30, 1995, premiums
written increased 16% to $4,443,282, investment income
increased 2% to $298,430, revenues increased 14% to
$4,760,091, net income increased 24% to $913,731 and net
income per share increased 19% to $.32 all compared to
the same quarter in 1994.
For the nine months ended September 30, 1995, premiums
written decreased 4% to $11,338,032, investment income
increased 11% to $879,599, revenues decreased 3% to
$12,386,849, net income decreased 1% to $2,277,311 and
net income per share decreased 1% to $.81 all compared to
the same period in 1994.
Sales growth in the third quarter 1995 resulted from a
combination of concentrated marketing efforts and
continued strength in the real estate market.
Additionally, the Company achieved significant gains in
operating efficiency as a 10% increase in operating
expenses supported the 14% increase in revenues. In
September 1995, volume in the Company's branch offices
increased over 40% compared to the same period last year.
This increase in demand was met on a timely basis without
incremental increases in direct costs. The Company's
ability to efficiently process this higher volume in its
branches reflects the Company's automation and internal
reorganization efforts over the past three years.
The 10% increase in operating expenses for the three
months ended September 30, 1995 compared to the same
period in 1994 primarily resulted from an increase in
commissions and employee benefits. The increase in
commissions is the result of the Company's expansion into
new markets primarily through establishing new agency
relationships rather than branch offices. Employee
benefits rose due to an increase in accrued bonuses.
Operating expenses for the nine months ended September
30, 1995 decreased 1% compared to the same period in 1994
primarily due to a reduction in salaries, the provision
for possible claims, and office occupancy and operations
expenses, offset by an increase in commissions, employee
benefits and payroll taxes, and professional fees. The
provision for possible claims was lower in 1995 compared
to 1994 due to improved claims experience. A scheduled
regulatory audit and related costs contributed to the
increase in professional fees. The 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
primarily due to loss carrybacks related to the 1992
loss. These carrybacks could not be utilized until 1995
7
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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. The total provision for income taxes for the
third quarters of 1995 and 1994 remained at approximately
29% of income before income taxes.
Liquidity and Capital Resources:
Net cash provided by operating activities for the nine
months ended September 30, 1995, amounted to $1,952,575
compared to $3,581,197 for the same nine month period
during 1994. This decrease is attributable to a number
of factors, including a decrease in receivables and
prepaid expenses 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, and a lower
provision for possible claims in 1995 (which is added
back to net income to reconcile net income to net cash),
partially offset by a larger decrease in accounts
payable and accrued liabilities in 1994.
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
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PART II. OTHER INFORMATION
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: November 14, 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> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1995 JAN-01-1995
<PERIOD-END> MAR-31-1995 JUN-30-1995 SEP-30-1995
<DEBT-HELD-FOR-SALE> 2,500,451 2,557,644 2,456,285
<DEBT-CARRYING-VALUE> 10,557,522 10,775,433 11,642,510
<DEBT-MARKET-VALUE> *0 *0 *0
<EQUITIES> 3,136,953 3,289,676 3,817,101
<MORTGAGE> 0 0 0
<REAL-ESTATE> 0 0 0
<TOTAL-INVEST> 16,559,105 16,946,932 18,275,075
<CASH> 2,542,249 2,742,702 2,602,658
<RECOVER-REINSURE> 0 0 0
<DEFERRED-ACQUISITION> 0 0 0
<TOTAL-ASSETS> 24,399,314 25,484,494 26,914,184
<POLICY-LOSSES> 3,584,850 3,694,850 3,794,850
<UNEARNED-PREMIUMS> 0 0 0
<POLICY-OTHER> 41,599 41,602 45,070
<POLICY-HOLDER-FUNDS> 0 0 0
<NOTES-PAYABLE> 0 0 0
<COMMON> 1,253,212 1,252,552 1,149,411
0 0 0
0 0 0
<OTHER-SE> 18,023,760 18,955,802 20,003,928
<TOTAL-LIABILITY-AND-EQUITY> 24,399,314 25,484,494 26,914,184
3,104,025 6,865,297 11,286,791
<INVESTMENT-INCOME> 283,980 581,169 879,599
<INVESTMENT-GAINS> 17,991 47,556 42,223
<OTHER-INCOME> 56,814 132,736 178,236
<BENEFITS> 250,091 586,573 1,095,110
<UNDERWRITING-AMORTIZATION> 0 0 0
<UNDERWRITING-OTHER> 2,524,555 5,313,709 8,277,265
<INCOME-PRETAX> 688,164 1,726,476 3,014,474
<INCOME-TAX> 80,990 362,896 737,163
<INCOME-CONTINUING> 607,174 1,363,580 2,277,311
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 607,174 1,363,580 2,277,311
<EPS-PRIMARY> .22 .49 .81
<EPS-DILUTED> .22 .49 .81
<RESERVE-OPEN> 0 0 0
<PROVISION-CURRENT> 0 0 0
<PROVISION-PRIOR> 0 0 0
<PAYMENTS-CURRENT> 0 0 0
<PAYMENTS-PRIOR> 0 0 0
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</TABLE>
