<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[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: 0-15196
US FACILITIES CORPORATION
-------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0097221
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
650 Town Center Drive, Suite 1600, Costa Mesa, CA 92626
--------------------------------------------------------
(Address of principal executive offices) (Zip code)
(714)549-1600
-------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(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
----- -----
Number of shares outstanding of each class of the Registrant's Common Stock as
of August 9, 1995:
Common Stock, par value $.01 per share: 5,623,098
Common Stock Purchase Rights: 5,623,098
<PAGE>
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. FINANCIAL INFORMATION
Consolidated Financial Statements:
Condensed Balance Sheets as of June 30, 1995
and December 31, 1994............................. 3
Income Statements for the Quarters and
Six Months Ended June 30, 1995 and 1994........... 4
Statements of Stockholders' Equity for the Six
Months Ended June 30, 1995 and 1994............... 5
Condensed Statements of Cash Flows for
the Six Months Ended June 30, 1995 and 1994....... 6
Notes to Consolidated Financial Statements.......... 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..................................... 8
Part II OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS............................ 14
Item 6. EXHIBITS and REPORTS ON FORM 8-K............... 15
SIGNATURES......................................................... 17
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Financial Statements:
US FACILITIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(000 omitted)
<TABLE>
<CAPTION>
JUNE 30, 1995 DEC. 31, 1994
------------- -------------
<S> <C> <C>
ASSETS:
Investments, at market (amortized
cost $137,279 at June 30, 1995, $137,072 at
December 31, 1994) $142,398 $133,075
Cash and invested cash 9,652 4,502
Restricted cash and short term investments 24,431 21,340
Accrued investment income 2,470 1,844
Receivables:
Reinsurance losses and reserves 15,704 14,301
Premiums 16,746 9,434
Prepaid reinsurance premiums 4,744 3,950
Deferred income taxes 405 3,277
Other assets 6,791 8,014
-------- --------
Total assets $223,341 $199,737
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Insurance liabilities:
Amounts due insurance companies $ 25,043 $ 20,418
Losses and loss adjustment expenses 75,450 69,647
Unearned premiums 17,866 14,613
Note payable 25,000 25,000
Accounts payable and accrued expenses 3,374 6,980
-------- --------
Total liabilities 146,733 136,658
STOCKHOLDERS' EQUITY 76,608 63,079
-------- --------
Total liabilities and stockholders' equity $223,341 $199,737
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
US FACILITIES CORPORATION
CONSOLIDATED INCOME STATEMENTS
(000 omitted except for per share data)
---------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
----------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Premiums earned $30,641 $24,394 $57,336 $47,218
Commissions and fees 6,828 6,341 13,248 12,405
Net investment income 2,411 1,402 4,575 2,800
Realized investment gains 52 48 232 231
------- ------- ------- -------
Total revenues 39,932 32,185 75,391 62,654
------- ------- ------- -------
Operating Expenses:
Losses and loss adjustment
expenses incurred 20,459 16,706 38,099 34,173
Policy acquisition expenses 9,485 8,122 18,245 16,201
General and administrative
expenses 3,871 4,501 7,961 8,998
Other 547 -- 1,242 --
Interest 547 1 1,089 3
------- ------- ------- -------
34,909 29,330 66,636 59,375
Unusual charges:
Expenses related to
unsolicited takeover
proposal -- 1,504 -- 1,504
Restructuring expenses -- 654 -- 654
------- ------- ------- -------
Total operating expenses 34,909 31,488 66,636 61,533
------- ------- ------- -------
Income before income taxes 5,023 697 8,755 1,121
Income tax expense (benefit) 1,174 (64) 1,984 (240)
------- ------- ------- -------
Net Income $ 3,849 $ 761 $ 6,771 $ 1,361
======= ======= ======= =======
Net income per common and
common equivalent share $ 0.67 $ 0.13 $ 1.19 $ 0.23
======= ======= ======= =======
Weighted average number of
common and common equivalent
shares outstanding during period 5,774 6,049 5,675 5,993
------- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
US FACILITIES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(000 omitted)
<TABLE>
<CAPTION>
Net
unrealized
Common Paid in gain(loss) Retained Treasury
stock capital on securities earnings stock Total
---------- -------- -------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $59 $43,156 $ 443 $20,306 $ (631) $63,333
Cumulative effect of
adoption of SFAS 115
at January 31, 1994 - - 3,838 - - 3,838
Net income - - - 1,361 - 1,361
Exercise of stock
options - 368 - - 300 668
Unrealized investment
loss, net - - (4,737) - - (4,737)
--- ------- ------- ------- ------- -------
Balance at
June 30, 1994 $59 $43,524 $ (456) $21,667 $ (331) $64,463
=== ======= ======= ======= ======= =======
Balance at
December 31, 1994 $59 $44,261 $(2,637) $26,544 $(5,148) $63,079
Net income - - - 6,771 - 6,771
Exercise of
stock options - (124) - - 1,428 1,304
Dividends paid - - - (551) - (551)
Unrealized investment
gain, net - - 6,005 - - 6,005
--- ------- ------- ------- ------- -------
Balance at
June 30, 1995 $59 $44,137 $ 3,368 $32,764 $(3,720) $76,608
=== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
US FACILITIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 omitted)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1995 1994
-------- -------
<S> <C> <C>
Cash provided by operating activities $ 4,252 $ 4,070
-------- -------
Cash flows from investing activities:
Purchases of fixed maturity investments (72,386) (7,968)
Purchases of equity securities (1,924) (6,138)
Proceeds from sales of investment
securities 54,568 10,223
Net sales (purchases) of short-term
investments 20,011 (934)
Purchases of property and equipment (124) (125)
-------- -------
Cash provided by (used in) investing activities 145 (4,942)
-------- -------
Cash flows from financing activities:
Dividends paid (551) ---
Exercise of stock options 1,304 669
-------- -------
Cash provided by financing activities 753 669
-------- -------
Net increase (decrease) in cash
and invested cash 5,150 (203)
Cash and invested cash at beginning of period 4,502 2,851
-------- -------
Cash and invested cash at end of period $ 9,652 $ 2,648
======== =======
Supplemental Disclosure of
Cash Flow Information:
Interest paid $ 1,078 $ 0
======== =======
Income taxes paid $ 1,780 $ 530
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
US FACILITIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL. The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
and with the instructions to Form 10-Q. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. The
results of operations for the six months ended June 30, 1995 are not
necessarily indicative of the results to be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant's 1994 Annual Report to
Stockholders.
2. OTHER. Other expenses include $547,000 incurred in the second quarter of
1995 resulting from the closure of the Registrant's US MedCare Review
operations effective May 31,1995. Results for the 1995 six month period
also include an expense of $695,000 pertaining to the resignation of the
Registrant's former Chief Executive Officer.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
- ---------------------
The Registrant's consolidated revenues for the second quarter ended June
30, 1995 increased 24% to $39,932,000 from $32,185,000 in the 1994 quarter, and
increased 20% to $75,391,000 for the first six months of 1995 from $62,654,000
for the 1994 period. Consolidated net income for the second quarter of 1995
increased 406% to $3,849,000 from $761,000 for the second quarter of 1994, and
for the first six months of 1995 increased 398% to $6,771,000 from $1,361,000 in
the 1994 six month period.
The 1995 results reflect improvements in profitability in each of the
Registrant's business segments resulting from growth in revenues due to
increased marketing efforts, lower claims cost and the effect of the
Registrant's cost control programs which began during 1994. The Registrant
incurred an expense of $547,000 in the second quarter of 1995 resulting from the
closure of its US MedCare Review ("USMCR") operations effective May 31,1995.
Results for the 1995 six month period also include an expense of $695,000
pertaining to the resignation of the Registrant's former Chief Executive
Officer.
Net income for the 1994 six month period was negatively impacted by several
events. The Registrant became the target of an unsolicited take-over proposal
and involved in a proxy contest with Fidelity National Financial, Inc.
("Fidelity National"). The expenses of responding to those issues reduced the
Registrant's pretax income by $1,504,000 for the quarter and six months ended
June 30, 1994. The Registrant also posted a non-recurring restructuring charge
during the second quarter of 1994 which reduced pretax income by $654,000. In
addition to the unusual expenses noted above, claims incurred as a result of the
Northridge, California earthquake in January 1994 reduced pre-tax income by
$2,100,000 for the six month period ended June 30, 1994.
Consolidated net investment income increased 72% to $2,411,000 in the 1995
quarter compared to $1,402,000 in the 1994 quarter, and increased 63% to
$4,575,000 for the 1995 six month period from $2,800,000 in the 1994 six month
period, reflecting continuing growth in USF RE's asset base and generally higher
rates of interest earned on securities purchased during the latter part of 1994
and the first quarter of 1995. Additionally, during 1995 the Registrant
invested new funds in taxable bonds rather than tax-exempt bonds. Tax-exempt
bonds continue to account for the major portion of the investment portfolio.
8
<PAGE>
Consolidated general and administrative expenses declined 14% to $3,871,000
in the 1995 quarter from $4,501,000 in the 1994 quarter, and decreased 12% to
$7,961,000 for the 1995 six month period from $8,998,000 in the 1994 six month
period, primarily due to cost savings realized from a restructuring involving
closings of branch offices, reductions in personnel, and expense controls
implemented during the second half of 1994.
Income tax as a percentage of pre-tax income fluctuates depending on the
proportion of tax-exempt investment income to total pre-tax income.
Business Segments
- -----------------
The Registrant conducts business primarily in two segments:
(a) Medical stop-loss and employee benefit products, which includes all
commission and fee-based revenues of the Registrant and reinsurance of
50% of the medical stop-loss business generated by the Registrant's
wholly owned subsidiary, USBenefits Insurance Services, Inc.
("USBenefits"). USBenefits acts as the underwriting manager and
marketing organization for medical stop-loss coverages issued for The
Continental Insurance Company, an unaffiliated party which during the
second quarter of 1995 became a member of the CNA Insurance Companies
Group. USBenefits also markets other employee benefits related
products.
(b) Property and casualty insurance and reinsurance underwriting conducted
by the Registrant's wholly-owned subsidiaries, USF RE INSURANCE
COMPANY ("USF RE") and USF Insurance Company ("USFIC"). Business
lines included in this segment are property/casualty reinsurance
assumed nationwide from unaffiliated insurance companies, primarily
through reinsurance intermediaries, and surplus lines insurance
underwritten by USFIC. During the second quarter of 1995 USF RE
ceased writing new business in its plate glass insurance line of
business, which line accounted for 5% of earned premiums in 1994.
The tables set forth below present pre-tax operating information for each
of the Registrant's business segments and for its holding company operations
(including realized gains) for the quarters and six month periods ended June 30,
1995 and 1994:
9
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
1995 1994 %Change 1995 1994 %Change
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stop-Loss and Employee
- ----------------------
Benefit Products
- ----------------
(000 omitted)
Revenue:
Premiums earned $21,366 $18,977 13 % $40,938 $37,271 10 %
Commissions & fees 6,828 6,341 8 % 13,248 12,405 7 %
Investment income 876 547 60 % 1,620 1,066 52 %
------- ------- ------- -------
Total Revenues 29,070 25,865 12 % 55,806 50,742 10 %
------- ------- ------- -------
Expenses:
Losses & loss
adjustment 13,855 12,651 10 % 26,678 25,139 6 %
Policy acquisition 7,272 6,160 18 % 13,694 12,353 11 %
General and administrative 2,816 3,292 (14)% 5,863 6,869 (15)%
------- ------- ------- -------
Total Expenses 23,943 22,103 8 % 46,235 44,361 4 %
------- ------- ------- -------
Income before income taxes $ 5,127 $ 3,762 36 % $ 9,571 $ 6,381 50 %
======= ======= ======= =======
</TABLE>
Medical stop-loss production increased 10% in the 1995 quarter and 9% in
the 1995 six month periods over the 1994 comparable periods, generating the
indicated gains in premiums earned and commissions and fees revenues. The
changes in medical stop-loss production were primarily due to strong retention
of in-force accounts and continuing growth in new business. The increase in
profitability of medical stop-loss is due, in part, to the declining rate of
increase in the cost of healthcare over the prior year, reduction in general and
administrative expenses and improved underwriting selection. The increases in
acquisition expenses are primarily related to the additional revenues produced.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
-------------------------- ------------------------------
1995 1994 %Change 1995 1994 %Change
--------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property and
- ------------
Casualty Underwriting
- ---------------------
(000 omitted)
Revenue:
Premiums earned $ 9,275 $5,417 71 % $16,398 $ 9,947 65%
Investment income 1,530 855 79 % 2,937 1,734 69%
------- ------ ------- --------
Total revenues 10,805 6,272 72 % 19,335 11,681 66%
------- ------ ------- --------
Expenses:
Losses & loss
adjustment 6,604 4,055 63 % 11,421 9,034 26%
Policy Acquisition 2,213 1,962 13 % 4,551 3,848 18%
General and Administrative 714 918 (22)% 1,605 1,612 -
------- ------ ------- --------
Total Expenses 9,531 6,935 37 % 17,577 14,494 21%
------- ------ ------- --------
Income (loss) before income taxes $1,274 $( 663) - $ 1,758 $( 2,813) -
====== ====== ======= ========
</TABLE>
10
<PAGE>
The increases in premiums earned during the 1995 periods as compared to the
1994 periods result from the continued growth of USF RE's property/casualty
reinsurance operations due to marketing efforts, increased production from its
client base, and an increase in statutory surplus. Also contributing to this
increase was growth in surplus lines premium writings as USFIC expanded its
operations into additional states. The increases in losses and loss adjustment
expenses in 1995 resulted directly from the increase in earned premiums, while
the second quarter of 1994 was affected by an abnormal frequency of large
claims. For the six months ended June 30, 1994, losses and loss adjustment
expenses includes $2.1 million of claims incurred as a result of the Northridge,
California earthquake in January 1994. Increases in policy acquisition
expenses, which include commissions and a portion of general and administrative
expenses, result from the increases in earned premiums, and vary depending on
the mix of business written and the total amount of general and administrative
expenses.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------------- ---------------------------
1995 1994 %Change 1995 1994 %Change
------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Holding Company Operations
- --------------------------
(000 omitted)
Revenues:
Investment income $ 5 $ - - $ 18 $ - -
Realized gains 52 48 8 % 232 231 -
------ ------ ------ ------
Total revenues 57 48 19 % 250 231 8 %
Expenses:
General and administrative 341 291 17 % 493 517 (5)%
Expenses related to
unsolicited takeover proposal - 1,504 - - 1,504 -
Restructuring - 654 - - 654 -
Other 547 - - 1,242 - -
Interest 547 1 - 1,089 3 -
------ ------ ------ ------
Total expenses 1,435 2,450 (41)% $2,824 $2,678 5 %
------ ------ ------ ------
Loss before income taxes $(1,378) $(2,402) (43)% $(2,574) $(2,447) 5 %
======= ======= ======= =======
</TABLE>
The increase in interest expense resulted from a $25,000,000 bank loan
obtained by the Registrant in December 1995. Of this amount, $20,000,000 was
contributed to the surplus of USF RE and USFIC to support additional growth in
both medical stop-loss and property/casualty premiums in 1995 and beyond.
Accounting Policies
- -------------------
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," will be adopted by the Registrant for the
year ending December 31,1995. Adoption is not expected to have a material effect
on the financial statements of the Registrant.
11
<PAGE>
Inflation
- ---------
The healthcare marketplace has been subject to the effects of increasing
costs for provider services. Such growth in the costs of healthcare tends to
generate not only increases in premiums for medical stop-loss coverage,
resulting in greater revenues, but also higher claim payments.
Inflation can negatively impact insurance and reinsurance operations by
causing higher claim settlements than may have originally been estimated, while
not necessarily allowing an immediate increase in premiums to a level necessary
to maintain profit margins. The Registrant makes no explicit provisions for
inflation, but trends are considered when setting underwriting terms and claim
reserves. Such reserves are subjected to a continuing review process to assess
their adequacy and are adjusted as deemed appropriate. Overall economic trends
also affect interest rates, which in turn affect investment income and the
market value of the Registrant's investment portfolio.
Liquidity and Financial Resources
- ---------------------------------
The Registrant utilizes cash from operations and maturing investments to
meet its insurance obligations to policyholders and claimants. Primary sources
of cash from operations include premium collections, investment income and
commissions and fees. The principal uses of cash from operations are for premium
payments to insurance companies, payments of claims under insurance and
reinsurance contracts, and operating expenses such as salaries, commissions,
taxes and general overhead.
The Registrant anticipates that it will continue to generate sufficient
cash flow from operations to cover its short-term (1 to 18 months) and long-term
(18 months to 3 years) liquidity needs. While the Registrant currently has no
immediate plans for significant capital outlays, it is contemplating acquisition
opportunities that complement its business operations.
The Registrant invests primarily in the highest grades of bonds, equities,
certificates of deposit and other short-term instruments. At June 30, 1995, 99%
of its investment portfolio was rated A or better. All such securities are
carried at quoted market values as of the balance sheet date.
Other than as discussed above, the Registrant is not aware of any known
trends, events or uncertainties that have had or are reasonably likely to have a
material effect on the Registrant's liquidity, capital resources or operations.
12
<PAGE>
Legislative and Regulatory Developments.
- ---------------------------------------
Healthcare legislation, which was extensively considered but not adopted by
Congress during 1994, has been taken up by the 1995 Congress. As with prior
efforts, such legislation concerns government regulation and control of the
financing and delivery of healthcare. Among the items being considered are
proposals concerning the scope of the preemptive provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). Some of these proposals would
reinforce the ERISA preemption of state regulation of self-insured plans, while
others would permit states the authority to regulate specific aspects of self-
insured plans.
At the present time, some states are seeking to implement their own
healthcare legislation. Many of these state initiatives have focused on small
group health plans (50 employees or less), which currently account for
approximately 14% of the Registrant's medical stop-loss premiums. Other state
efforts include attempts to regulate self-insured plans directly or indirectly
by regulating companies providing stop-loss coverage. In addition, the National
Association of Insurance Commissioners has drafted a "model law" that would seek
to indirectly regulate self-insured plans by imposing conditions on medical
stop-loss policies issued to self-insured employers that could affect the
ability of certain employers to self-insure their health plans. Among such
conditions is a requirement that stop-loss policies contain a minimum specific
attachment point of $20,000. Presently, self-insured plans with specific
attachment points of less than $20,000 account for approximately 18% of the
Registrant's medical stop-loss premiums. The draft NAIC Model Law is expected to
be submitted for adoption by the NAIC at its September meeting. Thereafter, it
must be adopted by legislative action in each state before it can become law in
such state.
The Registrant does not know at this time the extent to which the federal
or state legislative or regulatory initiatives discussed above will be adopted,
or what impact they would have on the Company's business. Management believes
that changes to the healthcare system which ultimately may be adopted will
continue to recognize employers' self-insurance of healthcare benefits as a
viable and cost effective method of financing healthcare. Accordingly,
management believes that its stop-loss products will continue to be an
appropriate component to assure the solvency of self-insured plans, and will
remain a source of revenues to the Registrant.
13
<PAGE>
PART II OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's 1995 Annual Meeting of Stockholders ("Annual Meeting")
was held on May 24, 1995 in Costa Mesa, California. A total of 4,925,840 shares
were present at the Annual Meeting in person or by proxy, representing 88.7% of
the 5,552,798 shares of the Registrant's $.01 par value common stock issued and
outstanding on the record date, March 31, 1995, and eligible to vote.
(b) (i) The Registrant's stockholders were asked to elect three of the
Registrant's nine directors who would serve for a term of three years expiring
at the 1998 Annual Meeting of Stockholders. Management nominated David L.
Cargile, Charles L. Schultz and Howard S. Singer for the three directorships.
All of management's nominees were elected as directors at the Annual Meeting and
no individuals were nominated in opposition to management's slate of directors.
(ii) Set forth below are the results of the voting for the director
nominees as reported by the Inspector of Elections for the Registrant's Annual
Meeting. There were no broker non-votes.
<TABLE>
<CAPTION>
Name For Withhold
- --------------------- --------- --------
<S> <C> <C>
David L. Cargile 4,537,217 388,623
Charles L. Schultz 4,533,817 392,023
Howard S. Singer 4,537,317 388,523
</TABLE>
(iii) The names of the directors who are continuing in office are as
follows: Jonathan D. DuBois, Bernard H. Ross, Kenneth C. Tyler, John A.
Allison, John F. Kooken and L. Steven Medgyesy.
(c) In addition to the election of directors, the Registrant's stockholders
were asked to consider two other matters.
(i) Stockholders were asked to consider a resolution to amend the
Registrant's 1991 Employee Stock Option Plan to increase the number of shares
authorized for issuance under the Plan. The affirmative vote of the holders of
a majority of the shares of the Registrant's common stock voting on this
proposal was required for adoption. The proposal was adopted by the
Registrant's stockholders at the Annual Meeting. The results of the vote on
this proposal as reported by the Inspector of Elections is set forth below.
There were no broker non-votes.
14
<PAGE>
For Against Abstain
- --- ------- -------
4,198,854 664,712 7,739
(ii) Stockholders were also asked to ratify the selection by the Board
of Directors of KPMG Peat Marwick to continue to serve as the Registrant's
independent auditors for the fiscal year ending December 31, 1995, unless in the
opinion of the Board of Directors, KPMG Peat Marwick is not in a position to
continue providing its services to the Registrant or the continuation of the
audit relationship is inappropriate.
The affirmative vote of the holders of a majority of the shares of the
Registrant's common stock voting on this proposal was required for its adoption.
The proposal was adopted by the Registrant's stockholders at the Annual Meeting.
The results of the vote on this proposal as reported by the Inspector of
Elections is set forth below. There were no broker non-votes.
For Against Abstain
- --- ------- -------
4,648,814 272,486 4,539
Item 6. EXHIBITS and REPORTS ON FORM 8-K.
(a) The following is a list of exhibits required to be filed as part of
this Form 10-Q by Item 601 of Regulation S-K:
3.1, 4.1 Restated Certificate of Incorporation, as amended, as presently
in effect. Filed as Exhibits 3.1 and 3.1.1 to the Registrant's
Form S-1 Registration Statement declared effective by the
Securities and Exchange Commission on October 31, 1986 (the
"Registration Statement"), and incorporated herein by this
reference; and as Exhibit 3 to the Registrant's Current Report
on Form 8-K dated May 24, 1990, and incorporated herein by this
reference.
3.2, 4.2 Bylaws of US Facilities Corporation, as amended, as presently
in effect. Filed as Exhibit 4.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by this reference.
4.3 Stock Certificate of US Facilities Corporation. Filed as
Exhibit 4.1 to the Registrant's Registration Statement, and
incorporated herein by this reference.
15
<PAGE>
4.4 Rights Agreement. Filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated May 24, 1990, and incorporated
herein by this reference.
4.5 First Amendment to Rights Agreement. Filed as Exhibit 1 to the
Registrant's Current Report on Form 8-K dated January 16, 1992,
and incorporated herein by this reference.
4.6 Second Amendment to Rights Agreement. Filed as Exhibit 10.1 to
the Registrant's Current Report on Form 8-K dated April 29,
1994, and incorporated herein by this reference.
11 US Facilities Corporation and Subsidiaries Computation of
Earnings Per Share.
15 Independent Auditors' letter regarding unaudited interim
financial information.
27 Financial Data Schedules
(b) No current reports on Form 8-K were filed by the Registrant during the
quarter ended June 30, 1995.
16
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
US FACILITIES CORPORATION
Date: August 9, 1995 By: /S/ DAVID L. CARGILE
--------------------------
DAVID L. CARGILE
Chairman of the Board, President and Chief
Executive Officer
Date: August 9, 1995 By: /S/ MARK BURKE
--------------------------
MARK BURKE
Senior Vice President, Chief Financial
Officer and Treasurer (Principal Financial
and Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S> <C>
4.1 Restated Certificate of Incorporation, as amended, as presently in effect.
Filed as Exhibits 3.1 and 3.1.1 to the Registrant's Form S-1 Registration
Statement declared effective by the Securities and Exchange Commission on
October 31, 1986 (the "Registration Statement"), and incorporated herein by
this reference; and as Exhibit 3 to the Registrant's Current Report on Form
8-K dated May 24, 1990, and incorporated herein by this reference.
4.2 Bylaws of US Facilities Corporation, as amended, as presently in effect.
Filed as Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by this reference.
4.3 Stock Certificate of US Facilities Corporation. Filed as Exhibit 4.1 to
the Registrant's Registration Statement, and incorporated herein by this
reference.
4.4 Rights Agreement. Filed as Exhibit 2 to the Registrant's Current Report on
Form 8-K dated May 24, 1990, and incorporated herein by this reference.
4.5 First Amendment to Rights Agreement. Filed as Exhibit 1 to the
Registrant's Current Report on Form 8-K dated January 16, 1992, and
incorporated herein by this reference.
4.6 Second Amendment to Rights Agreement. Files as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated April 29, 1994, and
incorporated herein by this reference.
11 US Facilities Corporation and Subsidiaries Computation of Earnings Per
Share.
15 Independent Auditors' letter regarding unaudited interim financial
information.
27 Financial Data Schedules
</TABLE>
18
<PAGE>
EXHIBIT 11
US FACILITIES CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
The computation of per share income is based upon the weighted average
number of common and common equivalent shares outstanding during each quarter
ended June 30, as follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
----------------- ------------------
1995 1994 1995 1994
------ ------ ------ ------
(000 omitted, except per share data)
<S> <C> <C> <C> <C>
Net income $3,849 $ 761 $6,771 $1,361
====== ====== ====== ======
Weighted average shares
outstanding during the
period 5,571 5,777 5,506 5,761
Common stock equivalent
shares 203 272 169 232
------ ------ ------ ------
Common and common stock
equivalent shares out-
standing for purposes of
calculating income per
share 5,774 6,049 5,675 5,993
Incremental shares to reflect
full dilution 51 11 85 51
------ ------ ------ ------
Total shares for purpose of
calculating fully diluted
income per share 5,825 6,060 5,760 6,044
====== ====== ====== ======
Net income per common and
common equivalent share $ 0.67 $ 0.13 $ 1.19 $ 0.23
====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 15
Independent Auditors' Review Report
-----------------------------------
The Board of Directors and Shareholders
US Facilities Corporation:
We have reviewed the condensed consolidated balance sheet of US Facilities
Corporation and subsidiaries as of June 30, 1995, and the related consolidated
income statements for the three-month and six-month periods ended June 30, 1995
and 1994, and the related consolidated statements of stockholders' equity and
condensed consolidated statements of cash flows for the six-month periods ended
June 30, 1995 and 1994. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of US Facilities Corporation and
subsidiaries as of December 31, 1994, and the related consolidated income
statements, statements of stockholders' equity and cash flows for the year then
ended (not presented herein); and in our report dated February 17, 1995, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1994, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG PEAT MARWICK LLP
Los Angeles, California
July 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1995 JAN-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<DEBT-HELD-FOR-SALE> 0 0
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 0 142,398
<CASH> 0 34,083
<RECOVER-REINSURE> 0 15,704
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 0 223,341
<POLICY-LOSSES> 0 75,450
<UNEARNED-PREMIUMS> 0 17,866
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 0 25,000
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 223,341
30,641 57,366
<INVESTMENT-INCOME> 2,411 4,575
<INVESTMENT-GAINS> 52 232
<OTHER-INCOME> 6,828 13,248
<BENEFITS> 20,459 38,099
<UNDERWRITING-AMORTIZATION> 9,485 18,245
<UNDERWRITING-OTHER> 3,871 7,961
<INCOME-PRETAX> 5,023 8,755
<INCOME-TAX> 1,174 1,984
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,849 6,771
<EPS-PRIMARY> 0.67 1.19
<EPS-DILUTED> 0.67 1.19
<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>
