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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996 Commission File No. 0-13990
LAWYERS TITLE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1589611
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
6630 West Broad Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 281-6700
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 8,887,316 April 30, 1996
------------------ ------------------
No Par Value
1
<PAGE>
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets............................... 3
Consolidated Statements of Operations
and Retained Earnings ................................ 5
Consolidated Statements of
Cash Flows............................................ 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 1. Legal Proceedings ...................................... 10
Item 6. Exhibits and Reports on Form 8-K........................ 11
Signatures.............................................. 12
2
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- ------ ---- ----
<S> <C>
INVESTMENTS:
Fixed maturities:
Available-for-sale - at fair value (amortized
cost: 1996 - $182,877; 1995 - $179,182) $ 185,290 $ 187,270
Equity securities - at fair value (cost: 1996 -
$44,290; 1995 - $43,327) 58,881 56,540
Mortgage loans (less allowance for doubtful
accounts: 1996 and 1995 - $150) 1,005 1,015
Invested cash 19,585 21,805
------------ -----------
Total investments 264,761 266,630
CASH 16,902 18,842
NOTES AND ACCOUNTS RECEIVABLE:
Notes (less allowance for doubtful accounts:
1996 - $765; 1995 - $365) 7,047 7,565
Premiums (less allowance for doubtful accounts:
1996 - $1,981; 1995 - $1,898) 17,330 17,242
Income tax benefits - 301
------------ -----------
Total notes and accounts receivable 24,377 25,108
PROPERTY AND EQUIPMENT - at cost (less accumulated depreciation and
amortization:
1996 - $38,527; 1995 - $36,581) 21,254 20,850
TITLE PLANTS 48,814 48,731
GOODWILL (less accumulated amortization:
1996 - $10,548; 1995 - $10,174) 53,086 53,645
DEFERRED INCOME TAXES 16,701 16,127
OTHER ASSETS 28,308 25,910
------------ -----------
$ 474,203 $ 475,843
============ ===========
</TABLE>
3
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES 1996 1995
- ----------- ---- ----
<S> <C> <C>
POLICY AND CONTRACT CLAIMS $ 192,815 $ 193,791
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES 33,617 34,933
INCOME TAXES PAYABLE 651 -
OTHER 7,312 8,734
------------ -----------
Total liabilities 234,395 237,458
------------ -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, authorized
5,000,000 shares, none issued or outstanding - -
Common stock, no par value, authorized 45,000,000
shares, issued and outstanding, 8,887,316 in
1996 and 8,885,991 in 1995 167,020 167,006
Unrealized investment gains (less related
deferred income tax expense of $5,951
in 1996 and $7,456 in 1995) 11,053 13,845
Retained earnings 61,766 57,689
Receivable from employee benefit plan (31) (155)
------------ -----------
Total shareholders' equity 239,808 238,385
------------ -----------
$ 474,203 $ 475,843
============ ===========
</TABLE>
See accompanying notes.
4
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
REVENUES
<S> <C> <C>
Premiums $ 94,720 $ 88,086
Title search and escrow 22,749 16,752
Investment income, net 5,345 3,301
------------ -----------
122,814 108,139
------------ -----------
EXPENSES
Salaries and employee benefits 43,287 38,084
Agents' commissions 37,133 40,453
Provision for policy and contract claims 6,286 4,965
Other 29,391 23,242
------------ -----------
116,097 106,744
------------ -----------
OPERATING INCOME BEFORE INCOME TAXES 6,717 1,395
INCOME TAX EXPENSE
Current 1,264 (872)
Deferred 932 1,252
------------ -----------
2,196 380
------------ -----------
NET INCOME 4,521 1,015
DIVIDENDS (444) (267)
RETAINED EARNINGS BEGINNING OF PERIOD 57,689 42,237
------------ -----------
RETAINED EARNINGS END OF PERIOD $ 61,766 $ 42,985
============ ===========
EARNINGS PER COMMON SHARE $0.51 $0.11
===== =====
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 8,887 8,884
</TABLE>
See accompanying notes.
5
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,521 $ 1,015
Depreciation & amortization 2,072 1,919
Amortization of bond premium 217 377
Realized investment gains (2,171) (216)
Deferred income tax 932 1,252
Change in assets & liabilities:
Notes receivable 518 83
Premiums receivable (88) 1,396
Income taxes receivable/payable 952 (2,117)
Policy & contract claims (976) (2,683)
Accounts payable and accrued expenses (1,316) (7,201)
Cash surrender value of life insurance (996) (574)
Other (954) (511)
------------ -----------
Net cash provided by (used in) operating activities 2,711 (7,260)
------------ -----------
Cash flows from investing activities:
Purchase of property & equipment - net (2,185) (1,018)
Purchases of businesses, net of cash acquired - (3,511)
Cost of investments acquired:
Fixed maturities (29,687) (18,441)
Equity securities (11,235) (7,985)
Proceeds from investment sales or maturities:
Fixed maturities 26,020 19,902
Equity securities 12,197 5,744
Mortgage loans 10 111
------------ -----------
Net cash used in investing activities (4,880) (5,198)
------------ -----------
Cash flows from financing activities:
Dividends paid (444) (267)
Change in notes payable (1,547) 10,338
------------ -----------
Net cash (used in) provided by financing activities (1,991) 10,071
------------ -----------
Net decrease in cash and invested cash (4,160) (2,387)
Cash & invested cash at beginning of period 40,647 31,989
------------ -----------
Cash & invested cash at end of period $ 36,487 $ 29,602
============ ===========
</TABLE>
See accompanying notes.
6
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars except per share amounts)
1. Interim Financial Information
The unaudited consolidated financial information included in this report
has been prepared in conformity with the accounting principles and
practices reflected in the consolidated financial statements included in
the Form 10-K for the year ended December 31, 1995 filed with the
Commission under the Securities Exchange Act of 1934. This report should be
read in conjunction with the aforementioned Form 10-K. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of this information have been made. The
results of operations for the interim periods are not necessarily
indicative of results for a full year.
2. Pending Legal Proceedings
For additional information, see Pending Legal Proceedings on page F-26 and
Legal Proceedings on page 14 of the December 31, 1995 Form 10-K and Part
II, Item 1 of this report.
7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.
LAWYERS TITLE CORPORATION AND SUBSIDIARIES
Results of Operations
Operating Revenues
Operating revenues for the first quarter of 1996 were $117.5 million, compared
to $104.8 million for the first quarter of 1995. This year-over-year revenue
gain of more than 12.1 %, which was attributable to strength in the Company's
direct operations, reflects the continuation of a modest recovery started in
residential real estate markets earlier this year, as well as heavier
residential refinancing activity resulting from the lower interest rate
environment seen in the latter part of 1995 and early 1996.
For the first quarter of 1996, new orders opened in Company offices were almost
107,000, an increase of over 45% from the first quarter of 1995 and the best
quarter the Company has ever seen for new open orders. While there is no
assurance that these open orders will close, and the recent increases in
mortgage rates will likely dampen refinancing activity, the open order count
seen in the first quarter sets a strong platform for the Company to move into
the second quarter of 1996.
Investment Income
Investment income totaled $5.3 million in the first quarter of 1996 compared to
$3.3 million in the comparable 1995 period. The change was primarily due to an
increase in capital gains in the 1996 period compared to the 1995 period.
Expenses
The operating margin, before claims and investment income, showed strong
improvement to 6.5% during the first quarter of 1996 as compared with 2.9% in
the first quarter of 1995 when salary reductions were in place throughout much
of the Company. Claims experience continued to show the positive effects of
favorable development patterns seen throughout 1995 as claims were only 5.4% of
title revenues. This compared to the 4.7% posted in the first quarter of 1995,
which was benefited by favorable developments in two previously reserved large
claims.
The rate used for discounting loss reserves on current issues is determined at
the beginning of each year. The rate established at the beginning of 1996 for
the year was 6.0%.
8
Net Income
Net earnings for the first quarter of 1996 were $4.5 million or $.51 per share
compared to $1.0 million or $.11 per share in the first quarter of 1995.
Liquidity and Capital Resources
Management believes that the Company holds adequate resources to meet its short
and long-term capital needs at March 31, 1996. At that date cash and invested
cash balances of $36.5 million and fixed maturity and equity security balances
totaling $245.2 million were held by the Company. Additionally, the Company
maintained an unused $20.0 million line of credit at March 31, 1996.
9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
With respect to the Brown and Segall litigation as reported on pages 14, 15 and
16 of the Registrant's December 31, 1995 Form 10-K (1995 Form 10-K), on May 3,
1996, the District Court in Arizona approved the settlement as described in the
1995 Form 10-K and authorized notice to the class. The Court still has pending
before it petitions for attorneys' fees and costs.
10
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
11
Signature
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.
LAWYERS TITLE CORPORATION
(Registrant)
Date: May 13, 1996 /s/ Charles Henry Foster, Jr.
Charles Henry Foster, Jr.
Chairman and Chief Executive Officer
Date: May 13, 1996 /s/ George William Evans
George William Evans
Vice President and Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 185,290
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 58,881
<MORTGAGE> 1,005
<REAL-ESTATE> 0
<TOTAL-INVEST> 264,761
<CASH> 16,902
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 474,203
<POLICY-LOSSES> 192,815
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 167,020
<OTHER-SE> 72,788
<TOTAL-LIABILITY-AND-EQUITY> 474,203
94,720
<INVESTMENT-INCOME> 5,345
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 22,749
<BENEFITS> 6,286
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 109,811
<INCOME-PRETAX> 6,717
<INCOME-TAX> 2,196
<INCOME-CONTINUING> 4,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,521
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
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