SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999 Commission File No. 1-13990
LANDAMERICA FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1589611
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 Gateway Centre Parkway
Richmond, Virginia 23235-5153
(Address of principal executive offices) (Zip Code)
(804) 267-8000
(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 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, No Par Value 15,352,811 May 6, 1999
------------------ ------------------
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets.................................................................3
Consolidated Statements of Operations ......................................................5
Consolidated Statements of
Cash Flows...............................................................................6
Consolidated Statements of Changes in
Shareholders' Equity.....................................................................7
Notes to Consolidated
Financial Statements.....................................................................8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations...............................................................11
Item 3. Quantitative and Qualitative Disclosures
about Market Risk.......................................................................15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...........................................................16
Signatures.................................................................................17
</TABLE>
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
- ------ 1999 1998
---- ----
<S> <C> <C>
INVESTMENTS:
Fixed maturities available-for-sale - at fair value
(amortized cost: 1999 - $777,602; 1998 - $756,608) $ 785,053 $ 774,856
Equity securities - at fair value (cost: 1999 - $3,321;
1998 - $3,426) 1,794 4,204
Mortgage loans (less allowance for doubtful accounts:
1999 and 1998 - $155) 20,049 11,613
Invested cash 68,751 104,792
------------- -------------
Total investments 875,647 895,465
CASH 62,900 69,235
NOTES AND ACCOUNTS RECEIVABLE:
Notes (less allowance for doubtful accounts: 1999 and
1998 - $2,054) 7,455 7,340
Premiums (less allowance for doubtful accounts: 1999
- $9,261; 1998 - $8,179) 52,815 61,203
Income tax recoverable 2,020 -
------------- -------------
Total notes and accounts receivable 62,290 68,543
PROPERTY AND EQUIPMENT - at cost (less
accumulated depreciation and amortization: 1999 -
$92,497; 1998 - $86,767) 85,762 76,420
TITLE PLANTS 93,980 95,358
GOODWILL (less accumulated amortization: 1999 -
$27,043; 1998 - $24,630) 347,001 348,595
DEFERRED INCOME TAXES 89,414 80,557
OTHER ASSETS 76,264 58,185
------------- -------------
Total assets $ 1,693,258 $ 1,692,358
============= =============
See accompanying notes.
3
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
March 31, December 31,
LIABILITIES 1999 1998
- ----------- ---- ----
POLICY AND CONTRACT CLAIMS $ 533,647 $ 521,894
ACCOUNTS PAYABLE AND ACCRUED
EXPENSES 163,131 181,452
FEDERAL INCOME TAXES - 841
NOTES PAYABLE 207,744 207,792
OTHER 13,015 9,190
-------------- --------------
Total liabilities 917,537 921,169
-------------- --------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, authorized 5,000,000
shares, no shares of Series A Junior Participating
Preferred Stock issued or outstanding; 2,200,000
shares of 7% Series B Cumulative Convertible
Preferred Stock issued and outstanding 175,700 175,700
Common stock, no par value, 45,000,000 shares
authorized, shares issued and outstanding: 1999 -
15,317,042; 1998 - 15,294,572 383,816 382,828
Accumulated other comprehensive income 3,732 12,367
Retained earnings 212,473 200,294
-------------- --------------
Total Shareholders' Equity 775,721 771,189
-------------- --------------
Total Liabilities and Shareholders' Equity $ 1,693,258 $ 1,692,358
============== ==============
</TABLE>
See accompanying notes.
4
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(In thousands of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUES
Title and other operating revenues:
Direction operations $ 216,712 $ 137,110
Agency operations 261,449 112,469
---------- ----------
478,161 249,579
Investment income 12,377 6,923
(Loss) gain on sales of investments (635) 486
---------- ----------
489,903 256,988
---------- ----------
EXPENSES
Salaries and employee benefits 142,911 86,170
Agents' commissions 202,780 84,766
Provision for policy and contract claims 23,495 12,978
Assimilation costs - 9,961
Interest expense 2,895 1,006
General, administrative and other 94,237 54,857
---------- ----------
466,318 249,738
---------- ----------
INCOME BEFORE INCOME TAXES 23,585 7,250
INCOME TAX EXPENSE (BENEFIT)
Current 13,104 8,926
Deferred (4,389) (6,428)
----------- ----------
8,715 2,498
---------- ----------
NET INCOME 14,870 4,752
DIVIDENDS - PREFERRED STOCK (1,925) (727)
---------- ----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 12,945 $ 4,025
========== ==========
NET INCOME PER COMMON SHARE $ 0.85 $ 0.36
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 15,316 11,075
NET INCOME PER COMMON SHARE ASSUMING
DILUTION $ 0.73 $ 0.35
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ASSUMING DILUTION 20,388 11,373
</TABLE>
See accompanying notes.
5
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,870 $ 4,752
Depreciation and amortization 8,325 4,162
Amortization of bond premium 442 159
Realized investment losses (gains) 635 (486)
Deferred income tax (4,389) (6,428)
Change in assets and liabilities, net of businesses
acquired:
Notes receivable (115) (102)
Premiums receivable 8,388 6,547
Income taxes receivable/payable (2,861) 8,725
Policy and contract claims 11,753 4,031
Accounts payable and accrued expenses (18,321) (14,565)
Other (12,564) (4,145)
----------- ----------
Net cash provided by operating activities 6,163 2,650
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment, net (13,876) (2,486)
Purchase of business, net of cash acquired - (124,019)
Cost of investments acquired:
Fixed maturities - available-for-sale (293,680) (32,571)
Mortgage loans - net (8,436) -
Proceeds from investment sales or maturities:
Fixed maturities - available-for-sale 269,204 20,477
Mortgage loans - net - 964
----------- ----------
Net cash used in investing activities (46,788) (137,635)
----------- ----------
Cash flows from financing activities:
Proceeds from the sale of common shares 988 77,125
Dividends paid (2,691) (1,479)
Proceeds from issuance of notes payable - 207,500
Payments on notes payable (48) (55,898)
----------- ----------
Net cash (used in) from financing activities (1,751) 227,248
----------- ----------
Net (decrease) increase in cash and invested cash (42,376) 92,263
Cash and invested cash at beginning of period 174,027 70,049
----------- ----------
Cash and invested cash at end of period $ 131,651 $ 162,312
=========== ==========
</TABLE>
See accompanying notes.
6
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(In thousands of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other Total
Preferred Stock Common Stock Comprehensive Retained Shareholders'
Shares Amounts Shares Amounts Income Earnings Equity
------ ------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997 - $ - 8,964,633 $168,066 $ 7,536 $116,802 $ 292,404
Net income - - - - - 4,752 4,752
Other comprehensive income
Net unrealized gain on securities,
net of tax of $554 - - - - 1,028 - 1,028
---------
Comprehensive income 5,780
---------
Common and preferred stock issued 2,200,000 175,700 6,051,973 206,603 - - 382,303
Stock option and incentive plans - - 43,463 1,251 - - 1,251
Preferred dividends (7%) - - - - - (727) (727)
Common dividends ($0.05/share) - - - - - (752) (752)
--------- ------- --------- -------- ------- -------- ---------
Balance - March 31, 1998 2,200,000 $175,700 15,060,069 $375,920 $ 8,564 $120,075 $ 680,259
========= ======== ========== ======== ======= ======== =========
Balance - December 31, 1998 2,200,000 $175,700 15,294,572 $382,828 $12,367 $200,294 $ 771,189
Net income - - - - - 14,870 14,870
Other comprehensive income
Net unrealized gain on securities,
net of tax of $4,467 - - - - (8,635) - (8,635)
---------
Comprehensive income 6,235
---------
Common stock issued - - - - - - -
Stock option and incentive plans - - 22,470 988 - - 988
Preferred dividends (7%) - - - - - (1,925) (1,925)
Common dividends ($0.05/share) - - - - - (766) (766)
--------- ------- --------- -------- ------- -------- ---------
Balance - March 31, 1999 2,200,000 $175,700 15,317,042 $383,816 $ 3,732 $212,473 $ 775,721
========= ======== ========== ======== ======= ======== =========
</TABLE>
See accompanying notes
7
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC. 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, 1998 filed
with the Securities and Exchange 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.
Certain 1998 amounts have been reclassified to conform to the 1999
presentation.
2. Acquisition
On February 27, 1998, the Company acquired all of the issued and
outstanding shares of capital stock of Commonwealth Land Title
Insurance Company and Transnation Title Insurance Company
(Commonwealth/Transnation) from Reliance Insurance Company, a
subsidiary of Reliance Group Holdings, Inc. (the "Acquisition"). The
shares were acquired in exchange for 4,039,473 shares of the Company's
common stock (book value, net of offering costs - $130,728); 2,200,000
shares of the Company's 7% Series B Cumulative Convertible Preferred
Stock, which are the equivalent of 4,824,561 shares of common stock
(book value - $175,700); the net proceeds of an offering of 1,750,000
shares of common stock ($65,921); and cash financed with bank debt
($200,681). The Acquisition has been accounted for by the Company using
the "purchase" method of accounting. The assets and liabilities of
Commonwealth/Transnation have been revalued to their respective fair
market values. The financial statements of the Company reflect the
combined operations of the Company and Commonwealth/Transnation from
the closing date of the Acquisition.
Pursuant to EITF 94-3, the Company has recorded assimilation costs of
approximately $11.5 million on a pre-tax basis related to exit and
termination costs incurred in connection with the acquisition of
Commonwealth/Transnation. Costs incurred to exit certain leases and to
dispose of certain title plants comprised $9.4 million of this amount.
The remaining $2.1 million primarily relates to the termination of
employees for which employee severance benefits have been accrued.
Assimilation costs paid in the quarter ended March 31, 1999 were $2.5
million and the total paid to date was $10.0 million. Exit and
termination costs of
8
<PAGE>
Commonwealth/Transnation leases and employees necessary to assimilate
the operations of Commonwealth/Transnation with the Company have been
capitalized as part of the purchase price.
The following unaudited pro forma results of operations of the Company
give effect to the acquisition of Commonwealth/Transnation as though
the transaction had occurred on January 1, 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
--------------
<S> <C>
Operating revenues $ 388,711
Investment income 12,990
-----------
Gross revenues 401,701
Expenses 386,380
-----------
Income before income taxes 15,321
Income tax expense 5,366
-----------
Net income 9,955
Less: preferred dividends 1,925
-----------
Net income available to common
shareholders $ 8,030
===========
Net income per common share $ 0.53
=======
Net income per common share assuming
dilution $ 0.49
=======
Weighted number of average common
shares outstanding 15,042
======
Weighted number of average common
shares outstanding assuming dilution 20,165
======
</TABLE>
9
<PAGE>
3. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
<S> <C> <C>
Numerator:
Net income - numerator for diluted
earnings per share $ 14,870 $ 4,752
Less preferred dividends (1,925) (727)
---------- ---------
Numerator for basic earnings per share $ 12,945 $ 4,025
========== =========
Denominator:
Weighted average shares - denominator
for basic earnings per share 15,316 11,075
Effect of dilutive securities:
Assumed weighted average conversion
of preferred stock 4,825 -
Employee stock options 247 298
---------- ---------
Denominator for diluted earnings per
share 20,388 11,373
========== =========
Basic earnings per common share $ 0.85 $ 0.36
========== =========
Diluted earnings per common share $ 0.73 $ 0.35
========== =========
</TABLE>
On February 27, 1998, the Company issued 6,051,973 shares of common
stock and 2,200,000 shares of convertible preferred stock in connection
with the acquisition of Commonwealth/Transnation (see Note 2). For the
three months ended March 31, 1998 the effect of converting the
preferred stock results in antidilution and therefore has been excluded
from the diluted EPS calculation.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
General
On February 27, 1998, the Company acquired all of the issued and outstanding
shares of capital stock of Commonwealth Land Title Insurance Company and
Transnation Title Insurance Company ("Commonwealth/Transnation") as described in
Note 2 of the Notes to Consolidated Financial Statements set forth elsewhere in
this report. The assets and liabilities of Commonwealth/Transnation have been
revalued to their respective fair market values. The financial statements of the
Company reflect the combined operations of the Company and
Commonwealth/Transnation from the closing date of the acquisition.
The following discussion includes information on pro forma results of operations
that assumes that the Commonwealth/Transnation operations were included for the
entire first quarter of 1998.
Operating Revenues
Operating revenues for the first quarter of 1999 were $478.2 million, compared
to $249.6 million in the first quarter of 1998. In addition to the current
year's full first quarter inclusion of revenues from Commonwealth/Transnation,
the increase is the result of strong volumes in both resale and refinancing
transactions, reflecting relative stability in the interest rate environment and
general health in the real estate markets. On a pro forma basis, assuming the
inclusion of Commonwealth/Transnation for the entire first quarter of 1998,
operating revenues for that period would have been $388.7 million.
The Company opened 251,500 new orders for title insurance in branch offices in
the first quarter of 1999 compared to 285,850 on a pro forma basis in the first
quarter of 1998.
Investment Income
Investment income was $12.4 million in the first quarter of 1999 compared to
$6.9 million in the first quarter of 1998. The increase was largely attributable
to the increased level of invested assets held as a result of the
Commonwealth/Transnation acquisition.
Expenses
The Company's operating margin, before claims, interest expense, goodwill
amortization and investment income, and excluding 1998 assimilation costs in
connection with the Commonwealth/ Transnation acquisition, was 8.5% in the first
quarter of 1999, as compared to 10.1% in the first quarter of 1998. The change
in the operating margin from the first quarter of 1998 to the first quarter of
1999 was principally attributable to the shift in the source of revenues toward
agency operations, which accounted for 54.7% of operating revenues in the
quarter, compared to 45.1% in the prior year
11
<PAGE>
quarter. Claims experience has continued to be extremely favorable, as reflected
in the provision for claims at 4.9% of operating revenue for the first quarter
compared to 5.2% in the first quarter of 1998.
Net Income
Net income was $14.9 million, or $0.73 per share on a diluted basis, for the
quarter ended March 31, 1999, compared to net income of $4.8 million, or $0.35
per share on a diluted basis, for the quarter ended March 31, 1998. The 1999
first quarter results included an after-tax loss from sales of investments of
$0.4 million, or $0.02 per share on a diluted basis, and the 1998 first quarter
results included an after-tax gain on sales of investments of $0.3 million, or
$0.02 per share on a diluted basis. The weighted average number of diluted
shares outstanding was 20.4 million for the 1999 first quarter, compared to 11.4
million for the prior year quarter.
Liquidity and Capital Resources
Cash provided by operating activities for the three months ended March 31, 1999
was $6.2 million. As of March 31, 1999, the Company held cash and invested cash
of $131.7 million and fixed maturity securities of $785.1 million.
In addition, the Company has a working capital line of credit in the amount of
$30.0 million which was unused at March 31, 1999.
On April 14, 1999, the Company announced that the Board of Directors had
approved a stock repurchase program pursuant to which the Company expects to
purchase up to one million shares, or approximately 6.5%, of its issued and
outstanding Common Stock primarily on the open market over the ensuing 12
months. The Company began share repurchases under the program on or about May 1,
1999. Repurchases are expected to be funded from available corporate funds, an
existing credit facility and future excess cash flow.
The Company believes that it will have sufficient liquidity and capital
resources to meet both its short and long term capital needs.
Year 2000 Issues
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering the
impact of the change in the century. If not corrected, many date-sensitive
applications could fail or create erroneous results by or in the year 2000. The
Company understands the importance of having systems and equipment operational
through the year 2000 and beyond and is committed to addressing these challenges
while continuing to fulfill its business obligations to its clients and business
partners.
Year 2000 readiness is a major undertaking involving the review and modification
of multiple, interacting information technology systems, including the Company's
systems, equipment, facilities, services and products as well as those of third
party business partners (essential suppliers, vendors, service contractors,
distributors, joint venturers, creditors, borrowers, financial service
organizations,
12
<PAGE>
etc.). Certain equipment and facilities (such as telephones, voicemail,
elevators) may contain embedded chips or microcontrollers that will need to be
replaced.
The Company began its formal Year 2000 compliance program in 1996. The Year 2000
Project Team was appointed to assess the Year 2000 vulnerability of the
Company's significant systems, equipment, facilities, services and products. The
Year 2000 Project Team is comprised of internal and external personnel. Several
Company executives, including the Company's President, serve as Project Team
Sponsors. The Year 2000 Project Team is separate and distinct from the Company's
information and technology department. Through the Year 2000 Project Team, the
Company has undertaken an internal quality assurance program to evaluate and
test its significant systems, equipment, facilities, services and products. The
Year 2000 Project Team is independently validating the initial assessment and
recommendations made by the quality assurance program. The internal and external
assessments are the basis of a full remediation and testing process. In addition
to the Project Team Sponsors, the Year 2000 compliance program is subject to the
independent review of a Corporate Steering Committee. Both the Project Team
Sponsors and Corporate Steering Committee review the Year 2000 compliance
program for its impact (and the impact of the Year 2000 issues) on all phases of
the Company's business.
The Year 2000 Project Team has divided its Year 2000 compliance program into
four (4) phases with estimated completion deadlines: assessment (internal fourth
quarter 1998, external first quarter 1999), remediation/replacement (second
quarter 1999), testing (second quarter 1999), and integration (third quarter
1999). As of March 31, 1999 the Company had almost completed all necessary
inventories and company-wide testing. The assessment of vendors and service
providers was in process. The Company's headquarters mainframe was upgraded and
a compliant version of the operating system was installed. All other systems
vital to the operation of the Company were either being remediated or replaced.
Headquarters facilities had been assessed and facilities related remediation
plans were under development.
Although the Company has developed a Year 2000 compliance program, there is no
guarantee that the systems of other companies, upon which the Company's systems
rely, will be properly converted in a timely manner or will not have an adverse
effect on the Company's systems. Thus, the Company has surveyed and continues to
monitor its important business partners to analyze and report any Year
2000-related issues that might impact the Company. The Company considers the
Year 2000 readiness of its business partners as an important factor in its
business dealings and relationships. Of course, notwithstanding the Company's
efforts or results, the actions or omissions of third parties beyond the
Company's knowledge or control may adversely affect its ability to function
unaffected to and through the Year 2000, including the possibility of lost
revenues or lawsuits by third parties.
Realizing the importance of Year 2000 readiness, the Company has allocated
approximately $14.1 million in the aggregate from its general operating funds to
the Year 2000 issue. Although significant, this amount is not material to the
Company's operational budget. An approximate allocation of the budgeted amount
is $4.0 million for assessment, $5.0 million for remediation/ replacement, $2.5
million for testing, $1.3 million for integration, and $1.3 million for
contingencies. Through March 31, 1999, approximately $6.2 million has been spent
in the assessment, remediation and testing, and contingency planning phases.
Since the Year 2000 Project Team is separate from the Company's information and
technology department and the amount allocated to the Year 2000 issue is
13
<PAGE>
specifically allocated for that purpose, the allocation has not resulted in the
delay of any other non-Year 2000 related information and technology projects.
The Company believes that it has identified all of the business systems vital to
its operations and that its Year 2000 compliance program will result in the
continuation of the Company's operations to and through the Year 2000 and
beyond. However, the Year 2000 issue, and its resolution, is complex and
multifaceted. The success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems and
equipment address Year 2000 date data prior to year 2000). Even with appropriate
and diligent pursuit of a well-conceived response plan, including testing
procedures, there is no certainty that any company will achieve complete
success. However, the Company is diligently trying to ensure that its
significant systems, equipment, facilities, services and products will not be
adversely affected by the Year 2000 problem. As such, the Company has appointed
a Corporate Contingency Planner to develop a contingency plan to address the
worst case scenario relative to Year 2000 compliance. The Contingency Planner
has implemented a risk management process, defined Year 2000 failure scenarios,
and assessed existing business continuity, contingency, and disaster recovery
plans and capabilities. The Contingency Planner has also begun assessing the
costs and benefits of alternatives in an effort to select and implement the best
contingency strategy for the Company's mission critical systems. All contingency
strategies are scheduled for testing during the third quarter.
Interest Rate Risk
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For investment
securities, the table presents principal cash flows and related weighted
interest rates by expected maturity dates. Actual cash flows could differ from
the expected amounts.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
(dollars in thousands)
<TABLE>
<CAPTION>
2004 and
1999 2000 2001 2002 2003 after Total Fair Value
---- ---- ---- ---- ---- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Taxable
available-for-sale
securities:
Book value $11,453 $20,770 $39,847 $31,428 $64,626 $315,060 $483,184 $486,859
Average yield 6.2% 6.9% 5.9% 6.2% 5.9% 6.9%
Non-taxable
available-for-sale
securities:
Book value 1,161 6,839 6,513 12,238 14,861 188,813 230,425 233,564
Average yield 5.8% 3.6% 3.7% 4.6% 4.1% 4.8%
Preferred stock:
Book value - - - - - 63,993 63,993 64,630
Average yield - - - - - 7.5%
</TABLE>
14
<PAGE>
The Company also has long-term debt of $207.5 million bearing interest at 5.30%
at March 31, 1999. A .25% change in the interest rate would affect income before
income taxes by approximately $0.5 million annually.
Forward-Looking and Cautionary Statements
Certain information contained in this Quarterly Report on Form 10-Q includes
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Among other things, these statements
relate to the financial condition, results of operation and business of the
Company. In addition, the Company and its representatives may from time to time
make written or oral forward-looking statements, including statements contained
in other filings with the Securities and Exchange Commission and in its reports
to shareholders. These forward-looking statements are generally identified by
phrases such as "the Company expects," "the Company believes" or words of
similar import. These forward-looking statements involve certain risks and
uncertainties and other factors that may cause the actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Further, any such statement is specifically qualified in its entirety by the
following cautionary statements.
In connection with the title insurance industry in general, factors that may
cause actual results to differ materially from those contemplated by such
forward-looking statements include the following: (i) the costs of producing
title evidence are relatively high, whereas premium revenues are subject to
regulatory and competitive restraints; (ii) real estate activity levels have
historically been cyclical and are influenced by such factors as interest rates
and the condition of the overall economy; (iii) the value of the Company's
investment portfolio is subject to fluctuation based on similar factors; (iv)
the title insurance industry may be exposed to substantial claims by large
classes of claimants; (v) the industry is regulated by state laws that require
the maintenance of minimum levels of capital and surplus and that restrict the
amount of dividends that may be paid by the Company's insurance subsidiaries
without prior regulatory approval; and (vi) the risks and uncertainties
associated with the Year 2000 readiness of third parties with whom the Company
does business.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statement that may be made from time to time by or on behalf of the Company.
Item 3. Quantitative and Qualitative Disclosures
about Market Risk
The information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Interest Rate Risk" in Item 2 of this report.
15
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
--------
Exhibit No. Document
---------- --------
11 Statement re: Computation of Earnings Per Share.
27 Financial Data Schedule (electronic copy only).
b) Reports on Form 8-K
-------------------
None.
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.
LANDAMERICA FINANCIAL GROUP, INC.
(Registrant)
Date: May 12, 1999 /s/ Charles Henry Foster, Jr.
-------------------- ---------------------------------------
Charles Henry Foster, Jr.
Chairman and Chief Executive Officer
Date: May 12, 1999 /s/ Jeffrey Alan Tischler
--------------------- ---------------------------------------
Jeffrey Alan Tischler
Executive Vice President and Chief
Financial Officer
17
<PAGE>
EXHIBIT INDEX
No. Description
- --- -----------
11 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule (electronic copy only)
Exhibit 11
LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES
Statement Re: Computation of Earnings Per Share
The information required by this Exhibit is contained in Note 3 to the
Consolidated Financial Statements of LandAmerica Financial Group, Inc. and its
subsidiaries for the quarter ended March 31, 1999 set forth on page 10 of this
report.
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 785,053
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 20,049
<REAL-ESTATE> 0
<TOTAL-INVEST> 875,647
<CASH> 62,900
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,693,258
<POLICY-LOSSES> 533,647
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 207,744
0
175,700
<COMMON> 383,816
<OTHER-SE> 216,205
<TOTAL-LIABILITY-AND-EQUITY> 1,693,258
478,161
<INVESTMENT-INCOME> 12,377
<INVESTMENT-GAINS> (635)
<OTHER-INCOME> 0
<BENEFITS> 23,495
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 442,823
<INCOME-PRETAX> 23,585
<INCOME-TAX> 8,715
<INCOME-CONTINUING> 14,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,870
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.73
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
