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Previous: SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC, N-30D, 1996-11-08 |
Next: MCDONALD & CO INVESTMENTS INC, 10-Q, 1996-11-08 |
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, 1996
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 September 30, 1996:
Common Stock, no par value 2,765,291
Class Shares Outstanding
1
<PAGE>
INVESTORS TITLE COMPANY AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income:
Three Months and Nine Months Ended September 30, 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Cash Flows:
Nine Months Ended September 30, 1996 and 1995. . . . . . . . .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. . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of September 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<S>
<C> <C>
9/30/96 12/31/95
Assets
Cash and Cash Equivalents $ 3,577,290 $ 2,527,008
Investments:
Held-to-maturity:
Certificates of deposit 194,334 399,203
Bonds - at amortized cost 5,530,220 4,748,276
Available-for-sale - at market:
Bonds and redeemable preferred stocks 11,239,947 10,310,737
Common and nonredeemable preferred stocks 5,275,938 4,284,423
Total investments 22,240,439 19,742,639
Receivables:
Premiums, net 2,058,987 1,703,395
Accrued interest and dividends 314,235 299,159
Recoveries of claims previously paid 257,123 426,056
Refundable income taxes 22,203 -
Other 14,542 34,159
Total receivables 2,667,090 2,462,769
Prepaid Expenses and Other Assets 394,273 378,191
Property Acquired in Settlement of Claims 165,500 250,500
Property-At Cost:
Land 782,582 782,582
Office buildings and improvements 1,293,726 1,293,726
Furniture, fixtures and equipment 1,825,950 1,694,657
Automobiles 169,423 151,374
Total 4,071,681 3,922,339
Less accumulated depreciation 1,270,074 1,059,170
Property, net 2,801,607 2,863,169
Total Assets $ 31,846,199 $ 28,224,276
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 925,710 $ 997,823
Commissions and reinsurance payables 44,115 38,601
Premium taxes payable 91,194 35,840
Income taxes payable:
Current - 119,500
Deferred 1,181,582 986,633
Total liabilities 2,242,601 2,178,397
Reserve for Claims 4,786,065 3,836,065
Stockholders' Equity:
Common stock-No par value (shares authorized 6,000,000;
2,855,744 and 2,855,744 shares issued and 2,765,291 and
2,790,633 shares outstanding 1996 and 1995, respectively) 746,424 1,038,414
Retained earnings 22,772,704 20,173,755
Net unrealized gain on investments
(net of deferred taxes: 1996: $669,069; 1995: $514,130) 1,298,405 997,645
Total stockholders' equity 24,817,533 22,209,814
Total Liabilities and Stockholders' Equity $ 31,846,199 $ 28,224,276
</TABLE>
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<PAGE>
Investors Title Company and Subsidiaries
Consolidated Statements of Income
September 30, 1996 and 1995
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
For The Three For The Nine
Months Ended Months Ended
September 30 September 30
1996 1995 1996 1995
Revenues:
Underwriting income:
Premiums written $ 5,604,538 $ 4,443,282 $ 15,563,118 $ 11,338,032
Less-premiums for reinsurance ceded 30,295 21,788 72,584 51,241
Net premiums written 5,574,243 4,421,494 15,490,534 11,286,791
Investment income-interest and dividends 329,113 298,430 938,190 879,599
Rental income 13,167 8,313 32,292 18,077
Gain (loss) on disposals of investments and
property, net 37,288 (9,915) 57,802 36,623
Other 70,741 41,769 181,612 165,759
Total 6,024,552 4,760,091 16,700,430 12,386,849
Operating Expenses:
Salaries 1,055,299 849,763 2,836,457 2,565,017
Commissions to agents 1,535,595 959,760 3,984,649 2,492,222
Provision for claims 714,513 508,537 2,226,658 1,095,110
Employee benefits and payroll taxes 296,899 389,515 1,027,280 939,834
Office occupancy and operations 555,629 469,257 1,542,986 1,337,653
Business development 136,261 136,234 432,452 381,893
Taxes, other than payroll and income 183,454 106,522 442,534 297,833
Professional fees 42,595 42,074 113,766 179,062
Interest expense - - - 10,638
Other 26,443 10,431 217,692 73,113
Total 4,546,688 3,472,093 12,824,474 9,372,375
Income Before Income Taxes 1,477,864 1,287,998 3,875,956 3,014,474
Provision For Income Taxes:
Current 335,473 357,873 1,037,095 600,743
Deferred 70,041 16,394 40,010 136,420
Total 405,514 374,267 1,077,105 737,163
Net Income $ 1,072,350 $ 913,731 $ 2,798,851 $ 2,277,311
Net Income Per Share* $ 0.39 $ 0.32 $ 1.01 $ 0.81
Dividends Paid $ 71,394 $ 57,114 $ 199,902 $ 171,344
Dividends Per Share $ 0.025 $ 0.02 $ 0.07 $ 0.06
</TABLE>
* Net income per share is computed based on the weighted average
number of common shares outstanding (1996, 2,774,409 and 1995,
2,807,068 shares, respectively.) The effect of stock options is not
material to the computation of earnings per share.
4
<PAGE>
Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995 (Unaudited)
<TABLE>
<S> <C> <C>
1996 1995
Operating Activities:
Net income $2,798,851 $2,277,311
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 239,261 225,071
Amortization, net of accretion 9,287 46,063
(Gain) loss on disposals of property (10,991) 5,601
Gain on sales of investments (46,810) (42,223)
Provision for deferred income taxes 40,010 136,420
Provision for possible claims 2,226,658 1,095,110
Payments of claims, net of recoveries (1,276,658) (936,110)
Increase in receivables (204,321) (493,412)
Increase in prepaid expenses and other assets (16,082) (308,146)
(Increase) decrease in assets acquired in settlement of claims 85,000 (79,900)
Decrease in accounts payable and accrued liabilities (72,113) (84,403)
Increase (decrease) in commissions and reinsurance payables 5,514 (7,778)
Increase (decrease) in premium taxes payable 55,354 (1,158)
Increase (decrease) in income taxes payable - current (119,500) 120,129
Net cash provided by operating activities 3,713,460 1,952,575
Investing Activities:
Purchases of investments held-to-maturity (997,220) (2,129,088)
Purchases of investments available-for-sale (2,833,523) (743,094)
Proceeds from sales of investments held-to-maturity 862,019 1,040,200
Proceeds from sales of investments available-for-sale 964,146 835,249
Purchases of property (251,062) (161,161)
Proceeds from sales of property 84,354 3,157
Net cash used in investing activities (2,171,286) (1,154,737)
Financing Activities:
Dividends paid (199,902) (171,344)
Repurchases of common stock, net (291,990) (113,907)
Repayment of notes payable - (500,000)
Net cash used in financing activities (491,892) (785,251)
Net Increase in Cash and Cash Equivalents 1,050,282 12,587
Cash and Cash Equivalents, Beginning of Year 2,527,008 2,590,071
Cash and Cash Equivalents, End of Period $3,577,290 $2,602,658
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest - $14,476
Income Taxes $1,329,196 $486,602
</TABLE>
5
<PAGE>
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(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, 1995 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 $30,456 and $72,584, respectively for the nine
months ended September 30, 1996, and $27,565 and $51,241,
respectively for the nine months ended September 30, 1995.
Note 3 - Reserve for Claims
Transactions in the reserve for claims for the nine months ended
September 30, 1996 were as follows:
Balance, beginning of year $3,836,065
Provision, charged to operations 2,226,658
Recoveries 238,420
Payments of claims (1,515,078)
Balance, September 30, 1996 $4,786,065
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 $292,604 and $294,377, respectively for the
nine months ended September 30, 1996 and 1995.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The 1995 Form 10-K and the 1995 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, 1996, premiums written
increased 26% to $5,604,538, investment income increased 16%
to $329,113, revenues increased 27% to $6,024,552, net income
increased 17% to $1,072,350 and net income per share
increased 22% to $.39 all compared to the same quarter in
1995.
For the nine months ended September 30, 1996, premiums
written increased 37% to $15,563,118, investment income
increased 14% to $938,190, revenues increased 35% to
$16,700,430, net income increased 23% to $2,798,851 and net
income per share increased 25% to $1.01 all compared to the
same period in 1995.
Growth in sales has resulted from a combination of continued
marketing efforts and a generally healthy real estate market,
despite an approximately one point rise in mortgage rates
since January. The volume of business continued to increase
in the third quarter of 1996 as the number of policies and
commitments issued rose to 36,149, an increase of 17%
compared to 30,964 in the same period in 1995. However, by
the end of the third quarter, the pace of sales had begun to
decline. Policies and commitments issued for the nine months
ended September 30, 1996 were 105,391 compared to 79,286 in
1995. Premiums from direct operations increased 27%, while
premiums from agency operations increased 58% for the nine
months ended September 30, 1996 compared to the same period
in 1995.
Operating expenses increased 31% and 37% for the three and
nine months ended September 30, 1996, respectively, when
compared to the same periods in 1995. Salaries increased due
to additional staffing needed to process the rise in premium
volume. Office occupancy and operations and premium taxes
rose primarily due to the increase in premium volume. The
increase in commissions is the result of the Company's
expansion into new markets primarily through establishing new
agency relationships.
The year-to-date provision for possible claims increased as
a result of the increase in premiums written coupled with a
36% increase in claims payments compared to the same period
in 1995. The increase in claim payments was largely the
result of the occurrence of a few larger than average claims.
The reserve for claims has increased $950,000 in 1996
compared to year-end based on management's assessment of the
reserve.
The provision for current income taxes increased in 1996
compared to 1995 primarily due to a 1995 current income tax
benefit resulting from loss carrybacks, an increase in the
reserve for claims in 1996 which is not currently tax
deductible, and an increase
7
<PAGE>
in income in 1996. The increase in the provision for current
income taxes was partially offset by a decline in the provision
for deferred income taxes. Deferred income taxes decreased
primarily as a result of the increase in the reserve for
claims which is not deductible from taxable income.
Liquidity and Capital Resources:
Net cash provided by operating activities for the nine months
ended September 30, 1996, amounted to $3,713,459 compared to
$1,952,575 for the same nine month period during 1995. This
increase is attributable to the increase in net income and
a number of other factors, including a smaller increase in
prepaid expenses and receivables in 1996, a decrease in
assets acquired in settlement of claims in 1996, and a higher
provision for possible claims in 1996 net of payments (which
is added back to net income to reconcile net income to net
cash), partially offset by a smaller provision for deferred
income taxes and a decrease in current income taxes payable
in 1996.
The Board of Directors has approved the repurchase by the
Company of shares of the Company's common stock from time to
time at prevailing market prices for the purpose of issuances
of stock in connection with stock options and stock bonuses.
For the nine months ended September 30, 1996, the Company
repurchased 34,936 shares at an average purchase price of
$11.19 per share. The Board has authorized management to
repurchase up to an additional 9,732 shares.
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.
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.
8
<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 8, 1996
9
<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-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<DEBT-HELD-FOR-SALE> 11,122,024 10,247,774 11,239,947
<DEBT-CARRYING-VALUE> 4,773,802 5,385,784 5,579,075
<DEBT-MARKET-VALUE> 0* 0* 0*
<EQUITIES> 3,923,286 4,908,399 5,275,938
<MORTGAGE> 0 0 0
<REAL-ESTATE> 0 0 0
<TOTAL-INVEST> 19,943,423 20,675,968 22,240,439
<CASH> 3,111,968 3,029,399 3,577,290
<RECOVER-REINSURE> 0 0 0
<DEFERRED-ACQUISITION> 0 0 0
<TOTAL-ASSETS> 29,028,800 30,141,064 31,846,199
<POLICY-LOSSES> 4,186,065 4,486,065 4,786,065
<UNEARNED-PREMIUMS> 0 0 0
<POLICY-OTHER> 30,682 36,063 44,115
<POLICY-HOLDER-FUNDS> 0 0 0
<NOTES-PAYABLE> 0 0 0
0 0 0
0 0 0
<COMMON> 910,970 783,200 746,424
<OTHER-SE> 21,882,473 22,853,262 24,071,109
<TOTAL-LIABILITY-AND-EQUITY> 29,028,800 30,141,064 31,846,199
4,434,799 9,916,291 15,490,534
<INVESTMENT-INCOME> 294,791 609,077 938,190
<INVESTMENT-GAINS> (40,052) 8,604 46,810
<OTHER-INCOME> 69,710 141,906 224,896
<BENEFITS> 681,333 1,512,145 2,226,658
<UNDERWRITING-AMORTIZATION> 0 0 0
<UNDERWRITING-OTHER> 3,031,212 6,765,641 10,597,816
<INCOME-PRETAX> 1,046,703 2,398,092 3,875,956
<INCOME-TAX> 298,984 671,591 1,077,105
<INCOME-CONTINUING> 747,719 1,726,501 2,798,851
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 747,719 1,726,501 2,798,851
<EPS-PRIMARY> .27 .62 1.01
<EPS-DILUTED> .27 .62 1.01
<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
<RESERVE-CLOSE> 0 0 0
<CUMULATIVE-DEFICIENCY> 0 0 0
</TABLE>
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