<PAGE> 1
FORM 10-Q/A
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 March 31, 1996
[ ] 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 1-12688
-------
STEWART INFORMATION SERVICES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 74-1677330
- -------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1980 Post Oak Blvd., Houston, TX 77056
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(713) 625-8100
---------------
(Registrant's telephone number, including area code)
________________________________________________________________________________
(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, 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 6,150,226
Class B Common 525,006
<PAGE> 2
FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 1996
TABLE OF CONTENTS
-----------------
Item No. Page
- ------- ----
Part I
1. Financial Statements 1
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II
1. Legal Proceedings 8
6. Exhibits and Reports on Form 8-K 9
Signature 13
<PAGE> 3
STEWART INFORMATION SERVICES CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
FIRST QUARTER
----------------------
1996 1995
------- --------
($000 Omitted)
<S> <C> <C>
Revenues
Title premiums, fees and related revenues 74,636 55,024
Investment income 3,446 3,318
Investment gains 374 53
Other income (452) (347)
------- -------
78,004 58,048
Expenses
Employee costs 40,747 31,973
Other operating expenses 22,914 19,189
Title losses and related claims 7,960 6,627
Depreciation and amortization 2,465 2,263
Interest 284 152
Minority interests 236 (42)
------- ------
74,606 60,162
Income (loss) before taxes 3,398 (2,114)
Income taxes (benefit) 1,223 (687)
------- ------
Net income (loss) 2,175 (1,427)
======= ======
Average number of shares outstanding (000) 6,666 6,217
Earnings (loss) per share
Net income (loss) 0.33 (0.23)
======= ======
</TABLE>
-1-
<PAGE> 4
STEWART INFORMATION SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
MAR 31 DEC 31
1996 1995
------- -------
($000 Omitted)
<S> <C> <C>
Assets
Cash and cash equivalents 16,737 16,698
Short-term investments 27,122 28,238
Investments - statutory reserve funds 117,961 118,040
Investments - other 69,785 67,716
Receivables 30,860 30,240
Property and equipment, net 26,158 24,271
Title plants 19,109 19,243
Deferred taxes 16,000 14,108
Other 34,428 32,805
------- -------
358,160 351,359
======= =======
Liabilities
Notes payable 13,081 12,589
Accounts payable and accrued liabilities 20,897 21,041
Estimated title losses 142,284 138,312
Minority interest 4,561 4,565
Contingent liabilities and commitments
Stockholders' equity
Common and Class B Common Stock and
additional paid-in capital 56,537 52,335
Net unrealized investment gains, less
deferred taxes 447 3,970
Retained earnings 120,353 118,547
------- -------
Total stockholders' equity ($26.57 per share at
March 31, 1996) 177,337 174,852
------- -------
358,160 351,359
======= =======
</TABLE>
-2-
<PAGE> 5
STEWART INFORMATION SERVICES CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------- -------
($000 Omitted)
<S> <C> <C>
Net cash flow provided by operating activities (Note) 7,201 (6,771)
Cash flow from investing activities:
Purchases of property and equipment and title plant (2,086) (2,934)
Proceeds of investments matured to sold 30,732 26,606
Purchases of investments, excluding mortgage loans (35,995) (21,967)
Increases in mortgages and other notes (373) (181)
Collections on mortgages and other notes 706 403
Proceeds from issuance of stock 0 252
Cash paid for the purchase of subsidiaries - net (231) 0
------- -------
Net cash (used) provided by investing activities (7,247) 2,179
Cash flow from financing activities:
Dividends paid (369) (285)
Proceeds of notes payable 1,002 419
Payments on notes payable (548) (708)
------- -------
Net cash provided (used) by financing activities 85 (574)
------- -------
Net increase (decrease) in cash and cash equivalents 39 (5,166)
======= =======
NOTE: Reconciliation of net income to above amounts:
Net income 2,175 (1,427)
Add (deduct):
Depreciation and amortization 2,484 2,281
Provision for title losses in excess of payments 3,972 610
Provision for uncollectible amounts (110) 151
Increase in accounts receivable, net (1,355) (3,383)
Decrease in accounts payable and accrued liabilities (291) (5,210)
Minority interest expense 236 (42)
Equity in net earnings of investees 404 360
Realized investment losses (gains) - net (374) 53
Other, net 60 (164)
------- -------
Net cash flow provided (used) by operating activities 7,201 (6,771)
======= =======
</TABLE>
-3-
<PAGE> 6
STEWART INFORMATION SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Note 1: Interim Financial Statements
The financial information contained in this report for the three month
periods ended March 31, 1996 and 1995, and as at March 31, 1996, is unaudited.
In the opinion of management, all adjustments necessary for a fair presentation
of this information for all unaudited periods, consisting only of normal
recurring accruals, have been made. The results of operations for the interim
periods are not necessarily indicative of results for a full year.
-4-
<PAGE> 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
A comparison of the results of operations of the Company for the first three
months of 1996 with the first three months of 1995 follows:
General
The Company's dominant segment of operations is the land title business. In
general, the principal factors which contribute to increases in title revenues
include declining mortgage interest rates (which usually increase home sales),
increases in refinancing ("refis") transactions, rising home prices, higher
premium rates, increased market share, additional revenues from new offices and
increased revenue from non-residential commercial transactions. Although
relatively few in number, large commercial transactions usually yield higher
premiums.
Revenues
The Company's revenues from title premiums and fees rose $19.6 million, or
35.6%, in the first three months of 1996 as compared to the first three months
of 1995. Mortgage interest rates in early 1996 were significantly lower than a
year ago, causing higher real estate activity in the current year.
The number of closings handled by the Company were up approximately 52.0%.
Closings increased in California, Texas, Colorado and most of the Company's
other major markets. The average revenue per closing fell in 1996 because more
refinancing transactions (which are discounted) were handled. Premium revenues
from nontitle operations and new and existing agents increased in 1996 over
1995.
Investment income was up slightly in 1996, due to an increase in the average
balance invested.
Expenses
Employee expenses increased $8.8 million, or 27.4%, in 1996 primarily because
of an increase in the average number of employees, from 3,398 a year ago to
3,925 in 1996. The increase in staff in 1996 was primarily in California,
Colorado, Nevada, new offices and automation. While the Company continues to
monitor overall employee expenses, it has chosen to increase cost levels in
automation and real estate information areas. The Company believes the
development and sale of new products and services for new and
-5-
<PAGE> 8
existing customers is important to its future. Through automating operating
processes, the Company expects to add customer revenue and reduce operating
expenses and title losses in the future.
Other operating expenses increased by $3.7 million, or 19.4%, in 1996 primarily
because of new offices and increased volume. Other operating expenses include
business promotion, premium taxes, title plant expenses, office rent,
telephone, policy forms, delivery expenses, travel and fees paid to attorneys
for examination and closing services.
Provisions for title losses and related claims were up $1.3 million in 1996.
The Company's recent experience in claims has improved significantly. As a
percentage of title premiums, fees and related revenues, provisions decreased
to 10.7% in 1996 versus 12.0% in 1995. The ratio was 11.1% for the full year
1995.
In December 1994 the California Board of Equalization (CBOE) ruled in favor of
the Company concerning an assessment of additional premium taxes for the year
1987. However, an additional assessment for retaliatory taxes for 1987 was
left pending. In April 1996 the CBOE ruled in favor of the Company on the
retaliatory assessment.
Five other states have also assessed the Company additional premium or
retaliatory taxes. The Company cannot predict whether additional taxes of this
nature will be assessed in material amounts. State taxing authoratives are
under increasing pressure to collect additional tax revenues. The Company
intends to vigorously oppose any assessments and believes its tax payments are
correct. However, there can be no assurances the Company will prevail in these
controversies.
The provision for income taxes represented a 36.0% effective tax rate in 1996
and a 32.5% effective tax rate in 1995.
Liquidity and capital resources
Operating earnings represent the primary source of financing, but this may be
supplemented by bank borrowings. The capital resources of the Company, and the
present debt-to-equity relationship, are considered satisfactory.
-6-
<PAGE> 9
PART II
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4. - Rights of Common and Class B Common 9
Stockholders
27.0 - Financial data schedule 10
28.2 - Details of Investments as reported in the 12
Quarterly Report to Shareholders
(b) There were no reports on Form 8-K filed during the
quarter ended March 31, 1996
</TABLE>
-7-
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
Guaranty and 18 other title insurers are defendants in a consolidated
class action proceeding originating from complaints first filed in April 1990.
The suit is currently pending in the United States District Court for the
District of Arizona. The plaintiffs allege that the defendants violated
federal antitrust law by participating in title insurance rating bureaus in
Arizona and Wisconsin in the early 1980s through which they allegedly agreed
upon the prices and other terms and conditions of sale for title search and
examination services. The plaintiffs request treble damages in an unspecified
amount, costs and attorneys' fees.
The parties have negotiated and proposed to the court a settlement
pursuant to which members of the class would receive cash (not to exceed
approximately $4.1 million from all defendants) and additional coverage under,
and discounts on, title insurance policies. In addition, the defendants and
counsel for certain plaintiffs have proposed to the Court that it award such
counsel the negotiated sum of $1.3 million in fees and expenses. Following
hearings on these matters, the Court has certified the proceeding as a class
action and taken the remaining issues under advisement.
The Registrant is a party to routine lawsuits incidental to its
business most of which involve disputed policy claims. In many of these suits,
the plaintiff seeks exemplary or treble damages in excess of policy limits
based on the alleged malfeasance of an issuing agent of the Registrant.
-8-
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Stewart Information Services Corporation
----------------------------------------
(Registrant)
May 8, 1996
- -----------
Date
/s/ Max Crisp
_____________________________________
Max Crisp
(Vice President - Finance, Secretary-Treasurer,
Director and Principal Financial
and Accounting Officer)
-9-
<PAGE> 12
EXHIBIT INDEX
4. - Rights of Common and Class B Common
Stockholders
27.0 - Financial data schedule
28.2 - Details of Investments as reported in the
Quarterly Report to Shareholders
