SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 10-Q
[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, 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 No. 0-19727
---------------------------------------
CUMBERLAND HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3094503
(State of incorporation) (I.R.S. Employer Identification Number)
4311 West Waters Avenue, Suite 501, Tampa, Florida 33614
(Address of registrant's principal executive offices, including
zip code)
---------------------------------------
(Registrant's telephone number, including area code):(813)885-
2112
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 [ ]
Applicable Only to Corporate Issuers
The number of shares of the Registrant's Common Stock, $.001 par
value, outstanding as of June 30, 1996 was 3,739,307 shares.<PAGE>
CUMBERLAND HOLDINGS, INC.
FORM 10-Q
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed consolidated balance
sheets at December 31, 1995 and
June 30, 1996 (unaudited) . . . . . . . . 1-2
Condensed consolidated statements
of operation for the six months
ended June 30, 1995 and
June 30, 1996 . . . . . . . . . . . . . . . 3
Condensed consolidated statements
of operation for the three months
ended June 30, 1995 and
June 30, 1996 . . . . . . . . . . . . . . . 4
Condensed consolidated statements
of cash flows for the six months
ended June 30, 1995 and 1996
(unaudited) . . . . . . . . . . . . . . . 5-6
Notes to condensed consolidated
financial statements . . . . . . . . . 7-11
Item 2. Management's discussion and analysis
of financial condition and results
of operations . . . . . . . . . . . . . 12-13
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . 14
Item 2. Changes in securities . . . . . . . . . . 14
Item 3. Defaults upon senior securities . . . . . 14
Item 4. Submission of matters to a vote
of security holders . . . . . . . . . . . 14
Item 5. Other information . . . . . . . . . . . . 14
Item 6. Exhibits and Reports of Form 8-K . . . . 14
Signatures . . . . . . . . . . . . . . . 15<PAGE>
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CUMBERLAND HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1996
------------- -------------
ASSETS (unaudited)
------
Investments:
Securities available-for-sale
at fair value:
Fixed maturities . . . . . . $ 3,452,553 $ 3,179,179
Equity securities . . . . . 1,160,500 1,862,265
Fixed maturity securities
held-to-maturity, at
amortized cost . . . . . . . 1,294,758 1,664,312
Residential mortgage loan on
real estate, at unpaid
principal . . . . . . . . . 46,367 46,109
Short-term investments . . . 348,993 323,993
------------- -------------
Total investments . . . . . 6,303,171 7,075,858
------------- -------------
Cash and cash equivalents . . 1,235,930 476,126
Accrued investment income . . 87,231 94,607
Reinsurance recoverable . . . 1,697,417 1,446,790
Accounts receivable:
Trade, less allowance for
doubtful accounts of
December 31, 1995 and June
30, 1996 . . . . . . . . . . 428,376 878,226
Affiliate . . . . . . . . . 122,052 193,287
Deferred policy acquisition
costs . . . . . . . . . . 435,272 452,277
Intangibles, net . . . . . . 2,162,961 2,002,633
Other assets . . . . . . . . 236,566 253,397
------------- -------------
$ 12,708,976 $ 12,873,201
============= =============
See accompanying notes.<PAGE>
CUMBERLAND HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1996
------------- -------------
LIABILITIES AND STOCKHOLDER'S (unaudited)
EQUITY
---------------------------------
Policy liabilities and accruals:
Loss and loss adjustments
expenses . . . . . . . . . . $ 2,351,804 $ 1,944,082
Unearned premiums . . . . . . 1,182,305 1,201,169
Ceded reinsurance payable . . . . - 97,751
Accounts payable and other
liabilities . . . . . . . . . 1,116,815 1,377,240
Short-term borrowings . . . . . . 406,607 863,801
Long-term debt:
Affiliate, including accrued
interest . . . . . . . . . . 4,797,804 5,042,748
Nonaffiliate . . . . . . . . 1,563,870 1,525,062
------------- -------------
Total liabilities . . . . . 11,419,205 12,051,853
------------- -------------
Stockholders' equity:
Preferred stock, $.001 par
value; 1,000,000 shares
authorized, no shares issued - -
Common stock, $.001 par
value; 10,000 shares
authorized, 4,039,780 shares
issued . . . . . . . . . . . 4,040 4,040
Capital in excess of par
value . . . . . . . . . . . 2,044,794 2,044,794
Net unrealized (depreciation)
appreciation of available-
for-sale securities . . . . 63,045 (56,749)
Accumulated deficit . . . . . (681,193) (961,229)
------------- -------------
1,430,686 1,030,856
Less treasury stock, at cost,
224,263 and 300,473 shares
at December 31, 1995 and
June 30, 1996, respectively (140,915) (209,508)
------------- -------------
Total stockholders' equity . 1,289,771 821,348
------------- -------------
$ 12,708,976 $ 12,873,201
============= =============
See accompanying notes.<PAGE>
CUMBERLAND HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30
---------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
------------- -------------
REVENUES:
Reinsurance premiums assumed $ 2,571,314 $ 1,664,181
Direct premiums earned:
Affiliates . . . . . . . . . - -
Nonaffiliates . . . . . . . 294,387 436,630
Less reinsurance ceded . . . (266,391) (154,885)
------------- -------------
Net premium income . . . . . 2,599,310 1,945,926
Net investment income . . . 212,120 236,740
Other income . . . . . . . . 517,255 1,026,133
------------- -------------
$ 3,328,685 $ 3,208,799
============= =============
Benefits and expenses:
Benefits and claims . . . . . 722,856 753,923
Amortization of deferred
policy acquisition costs . . 1,239,767 878,660
Operating expenses . . . . . 1,174,717 1,551,213
Interest expense to
affiliates, net . . . . . . 218,456 305,038
------------- -------------
$ 3,355,796 $ 3,488,834
============= =============
Income (loss) before income
taxes . . . . . . . . . . . . (27,111) (280,035)
Income taxes . . . . . . . . . . - -
------------- -------------
Net income (loss) . . . . . . . . $ (27,111) $ (280,035)
============= =============
Weighted average number of shares
outstanding . . . . . . . . . 3,830,619 3,796,375
============= =============
Net income (loss)per common . . . $ (.01) $ (.07)
============= =============
See accompanying notes.<PAGE>
CUMBERLAND HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30
---------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
------------- -------------
REVENUES:
Reinsurance premiums assumed $ 1,106,266 $ 825,625
Direct premiums earned . . . 139,104 231,094
Less reinsurance ceded . . . (114,476) (75,259)
------------- -------------
Net premium income . . . . . 1,130,894 981,460
Net investment income . . . 89,517 128,029
Other income . . . . . . . . 407,972 539,449
------------- -------------
$ 1,628,383 $ 1,648,938
============= =============
Benefits and expenses:
Benefits and claims . . . . . 375,622 423,001
Amortization of deferred
policy acquisition costs . . 496,715 429,825
Operating expenses . . . . . 701,449 772,716
Interest expense to
affiliates, net . . . . . . 106,965 153,381
------------- -------------
$ 1,680,751 $ 1,778,923
============= =============
Income before income taxes . . . (52,368) (129,985)
Income taxes . . . . . . . . . . - -
------------- -------------
Net income . . . . . . . . . . . $ (52,368) $ (129,985)
============= =============
Net income per common share . . . $ (.01) $ (.03)
============= =============
Weighted average number of shares
outstanding . . . . . . . . . 3,830,619 3,796,375
============= =============
See accompanying notes.<PAGE>
CUMBERLAND HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30
---------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
------------- -------------
Cash flows from operating
activities:
Net income . . . . . . . . . $ (27,111) $ (280,036)
Adjustments to reconcile net
income to net cash provided
(used) by operating
activities:
Amortization/accretion of
investment premiums and
discounts . . . . . . . . (1,951) (5,882)
Amortization of deferred
policy acquisition costs (142,487) (878,660)
Depreciation and
amortization . . . . . . 72,306 188,962
Net realized (gain) loss on
investments . . . . . . . (7,370) (51,429)
Accrued interest on term
note, net . . . . . . . . 218,426 260,438
(Increase) decrease in:
Reinsurance recoverable . 273,888 348,378
Accrued investment income (31,258) (7,376)
Trade receivables . . . . 290,466 (449,850)
Trade affiliates . . . . 99,435 -
Deferred policy
acquisition costs . . . - 861,655
Other assets . . . . . . . . (119,438) (76,700)
Increase/(decrease) in:
Policy liabilities and
accruals . . . . . . . (1,728,722) (388,858)
Ceded reinsurance payable - -
Other liabilities . . . . (30,518) 260,425
------------- -------------
Total adjustments . . . (1,107,223) 61,103
------------- -------------
Net cash provided (used) in
operating activities . . . . (1,134,334) (218,933)
------------- -------------
See accompanying notes.<PAGE>
CUMBERLAND HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Six Months Ended June 30
---------------------------
1995 1996
------------- -------------
(unaudited) (unaudited)
------------- -------------
Investment activities:
Proceeds from sales and
maturities of investments . 2,369,514 1,818,069
Purchases of investments . . (2,820,702) (2,653,239)
Net advances from KVN . . . . 250,000 -
Payments for business
acquired, net . . . . . . . (452,820) (40,000)
------------- -------------
Net cash provided by (used)
investing activities . . . . (654,008) (875,170)
Financing activities:
Purchases of treasury stock . (23,724) (68,593)
Payments on short-term
borrowings and long-term
debt . . . . . . . . . . . . 876,529 (54,302)
Net proceeds from short-term
borrowings . . . . . . . . . - 457,194
------------- -------------
Net cash provided by financing
activities . . . . . . . . . 852,805 334,299
Net increase/decrease in cash and
cash equivalents . . . . . . (935,537) (759,804)
Cash and cash equivalents,
beginning of period . . . . . 1,700,901 1,235,930
------------- -------------
Cash and cash equivalents, end of
period . . . . . . . . . . . $ 765,364 $ 476,126
============= =============
See accompanying notes.<PAGE>
CUMBERLAND HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organizations and summary of significant accounting policies
Organization - Cumberland Holdings, Inc., ("CHI") a Florida
corporation, was formed on November 18, 1991, to be a
holding company and a wholly-owned subsidiary of Kimmins
Environmental Service Corp. ("KVN"). Effective October 1,
1992, KVN contributed all of the outstanding common stock of
two of its other wholly-owned subsidiaries, Cumberland
Casualty & Surety Company ("CCS") and Surety Specialists,
Inc. ("SSI") to CHI. KVN then distributed to its
stockholders CHI's common stock on the basis of one share of
common stock of CHI for each five shares of KVN common stock
and Class B common stock owned (the Distribution). CHI
conducts its business through six subsidiaries. CCS, a
Florida corporation formed in May 1988, provides reinsurance
for speciality sureties and performance and payment bonds
for contractors. The surety services provided include
reinsurance and, to a lesser extent, direct surety. SSI, a
Florida corporation formed in August 1988, is a general
lines agency which operates as an independent agent. The
Surety Group (SG), a Georgia corporation, and Associates
Acquisition Corp. d/b/a Surety Associates (SA), a South
Carolina corporation, purchased in February and July 1995,
respectively, are general lines agencies which operate as
independent agencies. Official Notary Service of Texas,
Inc., (ONS), a Texas corporation formed in February 1994,
provides registration and sundry services to notaries.
Qualex Consulting, Inc. (Qualex), a Florida corporation
formed in November 1994, provides claims and contracting
consulting services. CHI and its subsidiaries are referred
to herein as the "Company".
Principles of consolidation - The consolidated financial
statements include the accounts of CHI and its wholly-owned
subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation.
Basis of Presentation - The accompanying unaudited
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles
which, as to the subsidiary insurance company, differ from
statutory accounting practices prescribed or permitted by
regulatory authorities. The significant accounting policies
followed by CHI and subsidiaries that materially affect the
financial statements are summarized in this note.<PAGE>
CUMBERLAND HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Net income per share
Net income per share for the three and six months ended June
30, 1996 is based on the weighted average number of shares
outstanding, adjusted for the dilative effect of stock
options, and is the same on both a primary diluted basis.
3. Term note due affiliate
In 1988, CCS issued a surplus debenture to KVN in exchange
for $3,000,000 which bore interest at 10 percent per annum.
Interest and principal payments were due quarterly only if
and when CCS's surplus, as defined below, exceeded
$4,000,000 and are limited to an amount equal to one-half of
the statutory net income before dividends and federal and
foreign income taxes of CCS during that year.
In 1992, the debenture due to KVN from CCS was assigned to
CHI. CHI entered into a term note agreement with KVN for
the outstanding amount of the debenture, including interest
arrearage ($4,291,049) at September 30, 1992. The term note
is pari passi with the other debts of CHI, bears interest at
10 percent and is due on October 1, 2002. Interest and
principal are due quarterly with minimum payments equal to
one half of net earnings before interest and federal income
taxes. Payments for the second five years are due quarterly
and are payable in equal installments to amortize the
remaining balance over the next 20 quarters. Each of these
payments will be credited first to the accrued interest and
then to principal.
Interest arrearage on these two term notes at December 31,
1995 and June 30, 1996 is $1,797,804 and $2,042,748
respectively, which is due only if and when the CCS surplus
funds exceeds $4,000,000.
The term note is subordinate in right of payment to all
policyholders of CCS. Surplus funds are defined as funds of
CCS remaining after deduction of capital, insurance reserves
and all other liabilities, in accordance with accounting
practices prescribed or permitted by the Florida Insurance
Department.<PAGE>
CUMBERLAND HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Notes payable to nonaffiliates
In connection with the acquisition of certain agencies
during 1995 (see Note 10), the Company entered into two
notes payable with the agencies' previous owners. One note
is due March 1, 2002 and bears interest at 8% through
February 28, 2001 and 10% thereafter. Principal payments of
$150,000 are due annually beginning March 1, 2000. The
other is due June 30, 2010 and bears interest at 8% through
July 31, 1999 and 9% thereafter. Principal payments of
$40,000 are due annually for three years beginning January
5, 1996 and then principal payments of $7,803 are due
monthly beginning July 31, 1999.
5. Short-term borrowings
During 1995, the Company entered in to a margin loan
agreement with an investment firm which enables the Company
to borrow funds up to a percentage of the Company's invested
funds. As of December 31, 1995, and June 30, 1996, the
Company had $406,607 and $863,801 outstanding under the
agreement. As of December 31, 1995, and June 30, 1996, the
Company had preferred and common stocks with a fair market
value of $1,160,500 and $1,862,265 on account with the
investment firm. The loan is payable on demand and must be
repaid prior to liquidating the Company's portfolio with the
investment firm.
6. Intangibles
Intangible assets are stated at cost and principally
represent purchased customer accounts, noncompete
agreements, purchased contract agreements, and the excess of
costs over the fair value of identifiable net assets
acquired (goodwill). Purchased customer accounts,
noncompete agreements, and purchased contract agreements are
being amortized on a straight-line basis over the related
estimated lives and contract periods, which range from 3 to
15 years. The excess of costs over the fair value of
identifiable net assets acquired is being amortized on a
straight-line basis over 15 years. Purchased customer
accounts are records and files obtained from acquired
businesses that contain information on insurance policies
and the related insured parties that is essential to policy
renewals.<PAGE>
CUMBERLAND HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying value of goodwill and other intangible assets
will be reviewed if circumstances suggest that they may be
impaired. If this review indicates that the intangible
assets will not be recoverable, as determined based on the
undiscounted cash flows of the entity acquired over the
remaining amortization period, the Company's carrying value
of the goodwill will be reduced by the estimated shortfall
of cash flows.
7. Loss and loss adjustment expenses
The liability for unpaid claims including incurred but not
reported losses is based on the estimated ultimate cost of
settling the claim (including the effects of inflation and
other societal and economic factors), using past experience
adjusted for current trends and any other factors that would
modify past experience. These estimates are subject to the
effects of trends in loss severity and frequency. Although
considerable variability is inherent in such estimates,
management believes that the reserve for loss and loss
adjustment expenses are adequate. The estimates are
continually reviewed and adjusted as necessary as experience
develops or new information becomes known. Such adjustments
are included in current operations. A liability for all
costs expected to be incurred in connection with the
settlement of unpaid claims (claim adjustment expense) is
accrued when the related liability for unpaid claims is
accrued. Claim adjustment expenses include costs associated
directly with specific claims paid or in the process of
settlement, such as legal and adjusters' fees. Claim
adjustment expenses also include other costs that cannot be
associated with specific claims but are related to claims
paid or in the process of settlement, such as internal costs
of the claims function.
The Company does not discount its reserves for losses and
loss adjustment expenses. The Company writes primarily
surety contracts which are of short duration.
The Company does not consider investment income in
determining if a premium deficiency relating to short
duration contracts exists.
8. Unearned premiums
Unearned premiums are calculated using the monthly pro rata
basis.<PAGE>
CUMBERLAND HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Reinsurance
The Company assumes and cedes reinsurance and participates
in various pools. The accompanying financial statements
reflect premiums, benefits and settlement expenses, and
deferred policy acquisition costs, net of reinsurance ceded.
Amounts recoverable from reinsurers are estimated in a
manner consistent with the future policy benefit and claim
lability associated with the reinsured policies. Accounts
recoverable from reinsurers are presented as an asset in the
accompanying consolidated financial statements.
CCS also cedes reinsurance from other insurance companies.
Reinsurance does not relieve an insurer of its liability to
the policyholder for the full amount of the policy, however,
the reinsurer is obligated to the insurer for the portion
assumed by such reinsurer. Reinsured risks give rise to
liability to CCS as the insurer only in the event that the
reinsurer is unable to meet its obligation under the
reinsurance agreement in force.
10. Acquisitions
Effective February 28, 1995, the Company acquired
substantially all of the assets of The Surety Group, a
Georgia insurance agency specializing in the sales of surety
bond policies. The purchase price of $850,000 is comprised
of $325,000 paid at closing, the assumption of $25,000 of
capital lease obligations and a $500,000 note to the seller.
The purchase agreement provides that the purchase price may
be reduced, but not increased, based on the agency's
operating results during the three-year period ending
February 28, 1998. The balance at June 30, 1996 is
$415,062.
Effective July 1, 1995 the Company acquired substantially
all of the assets of Surety Associates, Inc., a South
Carolina insurance agency specializing in the sales of
surety bond and certain types of property and casualty
insurance policies. The purchase price of $1,330,241 is
comprised of $180,241 paid at closing, and a $1,150,000 note
payable to the seller. The balance at June 30, 1996 is
$1,110,000.
Both acquisitions have been accounted for using the purchase
method. The results of operations of the acquired entities
have been included in the accompanying consolidated
statements of operations since their respective purchase
date.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The capacity of a surety company to underwrite insurance and
reinsurance is based on maintaining liquidity and capital
resources sufficient to pay claims and expenses as they become
due. Based on standards established by the National Association
of Insurance Commissioners (NAIC) and promulgated by the Florida
State Board of Insurance, CCS could write premiums up to an
amount equal to six times the statutory surplus, or approximately
$30,000,000 at June 30, 1996. The primary sources of liquidity
for the Company are funds generated from surety premiums,
investment income, and proceeds from sales and maturities of
portfolio investments. The principal expenditures are payment of
losses and loss adjustment expenses, insurance operating
expenses, and commissions.
At June 30, 1996, the Company's $12,873,201 of total assets
calculated based on generally accepted accounting principles were
distributed primarily as follows: 58.7 percent in cash and
investments 20.3 percent in receivables, 3.5 percent in deferred
policy acquisition costs, 15.5 percent in intangibles and 2.0
percent in other assets.
The Company maintains a liquid operating position and
follows investment guidelines that are intended to provide for an
acceptable return on investment while maintaining sufficient
liquidity to meet its obligations.
Net cash (used) in operating activities was $(218,933) and
$(1,134,334) for the six months ended June 30, 1996 and 1995,
respectively. The cash used in both periods was primarily the
results of an increase in trade accounts receivable and a
decrease in policy liabilities and accruals.
Net cash provided by (used in) investing activities was
$(875,170) and $(654,008) for the six months ended June 30, 1996
and 1995, respectively. The cash used in both periods primarily
related to the net increase in investment purchases and during
1995 for the purchase of one of the two insurance agencies
purchased during 1995.
The Company believes that its available investments, its
short term borrowing availability and its cash flow from
operations in the future will be sufficient to meet its normal
operating needs in the near term.<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATION
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1995
During the six months ended June 30, 1996, net premium
income totaled $1,945,926 representing a decrease of 25 percent
from that of the same period in 1995 ($2,599,310). The decrease
is due primarily to the decrease in the amount of premiums
assumed through a pooling agreement.
During the six months ended June 30, 1996, net investment
income of $236,740 increased by 12 percent from that of the same
period in 1995 ($212,120). The fluctuation of investment income
is attributed to a decrease in earnings of $48,300; an increase
in investment expenses of $14,100 offset by capital gains during
1996 of $51,429 as compared to capital loss of $7,370 during 1995
for the same period.
During the six months ended June 30, 1996, benefits and
claims expenses remained relatively flat as compared to the same
period in 1995. The ratio of benefit and claim expenses to net
premium income increased to 39 percent in 1996 from 28 percent in
1995.
During the six months ended June 30, 1996, the amortization
of deferred policy acquisition costs decreased to $878,660 from
$1,239,767 for the same period in the preceding year. The ratio
of amortization of deferred policy acquisition costs to net
premium income for 1996 (45%) decreased from that of 1995 (48%).
The decrease is attributed to the decrease in premiums assumed
through a pooling agreement.
During the six months ended June 30, 1996, operating expenses
increased by 32% to $1,551,213 from $1,174,717 for the six months
ended June 30, 1995. This increase is due to additional
marketing expenses associated with the operation of the agencies
acquired during 1995.
Net interest expense increased to $305,038 in 1996 from
$218,456 in 1995. The increase during 1996 is due to interest
payments on the loans in connection with the agencies purchased
in 1995. Interest expense for affiliated loans are $244,944 and
$218,456 during 1996 and 1995, respectively. 1996 interest
expense attributed to agencies purchased in 1995 is $60,094.
The Cumberland Group's effective tax rate was 38.5 percent
the six months ended June 30, 1995 and (-0-) for the six months
ended June 30, 1996 due to the net operating loss in 1996. The
tax benefit generated for the 1996 period has been offset in its
entirety by a valuation allowance.<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
None
Item 2. Changes in securities
None
Item 3. Defaults upon senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
Item 6. Exhibits and reports on Form 8-K
(a) The following document is filed as an exhibit to
this Quarterly Report on Form 10-Q.
27 - Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.<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.
CUMBERLAND HOLDINGS, INC.
Date: August 14, 1996 By: /s/ Joseph M. Williams
------------------------ --------------------------
Joseph M. Williams,
President and
Chief Executive Officer
(Principle Executive
Officer)
Date: August 14, 1996 By: /s/ Carol S. Black
------------------------ --------------------------
Carol S. Black
Controller and
Chief Financial Officer
(Principle Accounting and
Financial Officer)<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 3,179,179
<DEBT-CARRYING-VALUE> 1,664,312
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0
0
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1,945,926
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</TABLE>
