UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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 Number: 0-9341
SECURITY NATIONAL FINANCIAL CORPORATION
Exact Name of Registrant.
UTAH 87-0345941
- -------------------------------- ---------------------
(State or other jurisdiction IRS Identification Number
of incorporation or organization)
5300 South 360 West, Salt Lake City, Utah 84123
- ------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code (801) 264-1060
--------------
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 XX NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class A Common Stock, $2.00 par value 3,924,337
- -------------------------------------- -----------------
Title of Class Number of Shares
Outstanding as of
March 31, 1999
Class C Common Stock, $.20 par value 5,387,567
- ------------------------------------ ------------------
Title of Class Number of Shares
Outstanding as of
March 31, 1999
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10Q
QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements Page No.
Consolidated Statements of Earnings -
Three months ended March 31, 1999 and 1998 . . . . . .3
Consolidated Balance Sheets - March 31, 1999
and December 31, 1998. . . . . . . . . . . . . . . . .4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1999 and 1998 . . . . . .6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . .7-9
Item 2 Management's Discussion and Analysis. . . . .10-14
Item 3 Quantitative and Qualitative Disclosure
of Market Risk. . . . . . . . . . . . . . . . . 13
PART II - OTHER INFORMATION
Other Information. . . . . . . . . . . . . . . . .15-16
Signature Page . . . . . . . . . . . . . . . . . . . 17
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended March 31,
1999 1998
Revenues:
- --------
Insurance premiums and
other considerations $3,349,416 $ 1,558,065
Net investment income 2,541,565 1,844,154
Net mortuary and cemetery sales 2,355,618 2,439,292
Realized gains on investments
and other assets 169,693 36,046
Mortgage fee income 3,101,402 1,903,946
Other 36,920 25,922
----------- -----------
Total revenue 11,554,614 7,807,425
Benefits and expenses:
Death benefits 990,810 510,348
Surrenders and other policy benefits 1,213,139 299,489
Increase in future policy benefits 842,179 754,390
Amortization of deferred policy
acquisition costs and cost of
insurance acquired 1,304,553 296,527
General and administrative expenses:
Commissions 2,426,101 1,554,933
Salaries 1,790,153 1,263,270
Other 1,943,659 1,658,126
Interest expense 261,262 185,298
Cost of goods and services sold
of the mortuaries and cemeteries 736,831 670,879
----------- -----------
Total benefits and expenses 11,508,687 7,193,260
----------- -----------
Earnings before income taxes 45,927 614,165
Income tax (expense) benefit 11,981 (135,255)
Minority interest in loss
of subsidiary 31,119 --
------------ ------------
Net earnings $ 89,027 $ 478,910
------------ -----------
Net earnings per common share $0.02 $0.11
===== =====
Weighted average outstanding
common shares 4,463,094 4,185,555
Net earnings per common
share-assuming dilution $0.02 $0.11
===== =====
Weighted average outstanding common shares
assuming-dilution 4,463,094 4,185,555
See accompanying notes to
consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999 December 31,
(Unaudited) 1998
--------------- ------------
Assets:
- -------
Insurance-related investments:
Fixed maturity securities
held to maturity, at amortized cost $42,756,213 $44,984,882
Fixed maturity securities available
for sale, at market 28,129,196 28,675,440
Equity securities available for sale,
at market 5,117,245 5,146,059
Mortgage loans on real estate 13,709,351 12,523,395
Real estate, net of accumulated
depreciation 8,000,755 7,866,151
Policy, student and other loans 11,124,898 11,493,637
Short-term investments 6,223,759 11,543,540
------------- ------------
Total insurance-related
investments 115,061,417 122,233,104
Restricted assets of
cemeteries and mortuaries 4,184,036 4,098,877
Cash 4,100,103 6,670,996
Receivables:
Trade contracts 3,761,348 4,011,722
Mortgage loans sold to investors 20,817,752 21,181,028
Receivable from agents 2,251,449 1,944,449
Receivable from officers 123,800 145,600
Other 954,473 2,603,243
------------ ------------
Total receivables 27,908,822 29,886,042
Allowance for doubtful accounts (1,427,429) (1,576,668)
------------ ------------
Net receivables 26,481,393 28,309,374
Policyholder accounts on deposit
with reinsurer 8,426,975 8,518,571
Land and improvements held for sale 8,465,671 8,405,725
Accrued investment income 1,764,450 1,440,860
Deferred policy acquisition costs 10,474,934 10,501,281
Property, plant and equipment, net 10,705,676 10,682,085
Cost of insurance acquired 10,134,322 10,462,446
Excess of cost over net assets
of acquired subsidiaries 1,387,515 1,414,910
Other 439,262 526,918
------------ ------------
Total assets $201,625,754 $213,265,147
============ ============
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
March 31, 1999 December 31,
(Unaudited) 1998
Liabilities:
- ------------
Future life, annuity, and other
policy benefits $134,831,331 $134,899,870
Unearned premium reserve 2,294,690 2,565,968
Line of credit for financing
of mortgage loans 1,697,213 7,577,248
Bank loans payable 7,420,250 11,909,980
Notes and contracts payable 3,345,573 3,399,272
Estimated future costs of
pre-need sales 6,432,457 6,376,651
Payable to endowment care fund 685,912 540,504
Accounts payable 793,391 1,321,559
Funds held under reinsurance
treaties 1,405,916 1,419,357
Other liabilities and accrued
expenses 3,840,866 3,787,385
Income taxes 5,813,935 6,008,537
------------ -----------
Total liabilities 168,561,534 179,806,331
Minority interest 6,473,651 6,778,557
Stockholders' Equity:
Common stock:
Class A: $2 par value, authorized
10,000,000 shares, issued 4,617,330
shares in 1999 and 1998 9,234,660 9,234,660
Class C: $0.20 par value, authorized
7,500,000 shares, issued 5,446,595
shares in 1999 and 1998 1,089,319 1,089,319
------------ ------------
Total common stock 10,323,979 10,323,979
Additional paid-in capital 9,596,444 9,596,444
Accumulated other comprehensive income,
net of deferred taxes 902,397 1,081,113
Retained earnings 7,563,809 7,474,783
Treasury stock at cost (692,993 Class
A shares and 59,028 Class C shares
in 1999 and 1998 (1,796,060) (1,796,060)
------------ ------------
Total stockholders' equity 26,590,569 26,680,259
------------ ------------
Total liabilities and
stockholders' equity $201,625,754 $213,265,147
============ ============
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
1999 1998
---------- --------
Cash flows from operating activities:
Net cash provided by (used in)
operating activities $ 2,800,657 $(4,341,206)
Cash flows from investing activities:
Securities held to maturity:
Purchase - fixed maturity securities -- (524,563)
Calls and maturities - fixed
maturity securities 2,269,641 1,299,923
Securities available for sale:
Purchases - equity securities (87,979) --
Sales - equity securities -- 92,402
Purchases of short-term investments (4,333,270) (1,158,545)
Sales of short-term investments 9,653,051 2,200,000
Purchases of restricted assets (85,159) (25,340)
Mortgage, policy, and other loans made (1,897,705) (2,150,000)
Payments received for mortgage,
policy, and other loans 1,073,459 1,282,791
Purchases of property, plant,
and equipment (187,740) (382,022)
Purchases of real estate 179,343 (102,354)
Disposal of property, plant
and equipment (229,166) --
----------- -----------
Net cash provided by
investing activities 6,354,475 532,292
Cash flows from financing activities:
Annuity receipts 2,359,009 646,503
Annuity withdrawals (3,661,570) (965,212)
Repayment of bank loans and
notes and contracts payable (4,543,429) (196,108)
Net change in line of credit
for financing of mortgage loans (5,880,035) 1,900,000
------------ -----------
Net cash (used in) provided by
financing activities (11,726,025) 1,385,183
------------ -----------
Net change in cash (2,570,893) (2,423,731)
Cash at beginning of period 6,670,996 3,408,179
------------ -----------
Cash at end of period $ 4,100,103 $ 984,448
============ ===========
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
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 of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1999, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1999. For further information, refer to
the consolidated financial statements and footnotes thereto for the
year ended December 31, 1998, included in the Company's Annual
Report on Form 10-K (file number 0-9341).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims,
those used in determining valuation allowances for mortgage loans on
real estate, and those used in determining the estimated future
costs for pre-need sales. Although some variability is inherent in
these estimates, management believes the amounts provided are
adequate.
2. Comprehensive Income
For the three months ended March 31, 1999 and 1998 total
comprehensive income (loss) amounted to $(89,689) and $568,379,
respectively.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
3. Capital Stock
In accordance with SFAS 128, the basic and diluted earnings per
share amounts were calculated as follows:
Three Months Ended March 31,
1999 1998
---------- -----------
Numerator:
Net income $ 89,027 $ 478,910
========== ==========
Denominator:
Denominator for
basic earnings per
share-- weighted-
average shares 4,463,094 4,185,555
Effect of
dilutive securities:
Employee stock
options -- --
Stock appreciation
rights -- --
----------- ------------
Dilutive potential
common shares -- --
------------ ------------
Denominator
for diluted
earnings per
share-adjusted
weighted-average
shares and
assumed
conversions 4,463,094 4,185,555
========== ==========
Basic earnings
per share $0.02 $0.11
===== =====
Diluted earnings
per share $0.02 $0.11
===== =====
There are no dilutive effects on net income for purpose of this
calculation.
4. Subsequent Events
The Company's subsidiary, Southern Security received $719,000 on
April 23, 1999 as partial settlement to a lawsuit filed by Southern
Security against AEGON US and PFL Life Insurance Company.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
5. Business Segment
----------------
Life Cemetery/
Insurance Mortuary Mortgage
---------- ----------- --------
For the Three Months Ended
March 31, 1999
- ---------------------------
Revenues from external
customers $ 5,609,486 $ 2,543,302 $ 3,393,470
Intersegment
revenues 482,687 -- --
Segment profit (177,014) 53,326 (136,479)
Identifiable
assets 181,740,571 33,509,562 3,394,944
For the Three Months Ended
March 31, 1998
- --------------------------
Revenues from external
customers $ 3,026,623 $ 2,625,997 $ 2,151,521
Intersegment
revenues 333,581 -- --
Segment profit 261,514 260,392 19,662
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
5. Business Segment
----------------
Reconciling
Corporate Items Consolidated
--------- ------------ ------------
For the Three Months Ended
March 31, 1999
- --------------------------
Revenues from external
customers $ 8,356 $ -- $ 11,554,614
Intersegment
revenues 957,851 (1,440,538) --
Segment profit 306,094 -- 45,927
Identifiable assets 3,029,159 (20,048,482) 201,625,754
For the Three Months Ended
March 31, 1998
- --------------------------
Revenues from external
customers $ 3,284 $ -- $ 7,807,425
Intersegment revenues 189,049 (522,630) --
Segment profit 72,597 -- 614,165
Item 2. Management's Discussion and Analysis
------------------------------------
Overview
The Company's operations over the last several years generally
reflect three trends or events which the Company expects to
continue: (i) increased attention to "niche" insurance products,
such as the Company's funeral plan policies and interest sensitive
products; (ii) emphasis on cemetery and mortuary business; and (iii)
capitalizing on the strong economy in the western United States by
originating and refinancing mortgage loans.
On December 17, 1998, the Company purchased all of the outstanding
shares of common stock of Consolidare Enterprises, Inc.,
("Consolidare") for a total cost of $12,248,194. Consolidare owns
approximately 57.4% of the outstanding shares of common stock of
Southern Security Life Insurance Company and all of the outstanding
shares of stock of Insuradyne Corp.
The purchase of Consolidare, including its subsidiaries was
accounted for using the purchase method of accounting. Thus the
results of operations of the Company for the three months ended
March 31, 1998 do not include the results of Consolidare. In the
Management's Discussion and Analysis of the Results of Operations
the results of Consolidare for the three months ended March 31, 1999
have been excluded. See table "Consolidated Statements of Earnings
without Consolidare and Subsidiaries" at the end of Management's
Discussion and Analysis which shows the effect of excluding the
results of Consolidare for the three months ended March 31, 1999,
including Consolidare total revenues increased by $3,748,000, or
48.0% to $11,555,000 for the three months ended March 31, 1999, from
$7,807,000 for the three months ended March 31, 1998 and total
expenses increased by $4,316,000, or 60.0% to $11,509,000 for the
three months ended March 31, 1999, from $7,193,000 for the three
months ended March 31, 1998. The results for Consolidare for the
three months ended March 31, 1999 are not necessarily indicative of
the results that may be expected for the year ending December 31,
1999, since the Company has not yet realized many of the reduced
costs of consolidation of administrative functions and the
implementation of new computer systems.
Results of Operations
First Quarter of 1999 Compared to First Quarter of 1998
Total revenues increased by $1,286,000, or 16.5%, to $9,093,000 for
the three months ended March 31, 1999, from $7,807,000 for the three
months ended March 31, 1998. Contributing to this increase in total
revenues was a $1,197,000 increase in mortgage fee income, a
$134,000 increase in realized gains on investments and a $40,000
increase in insurance premiums and other considerations. These
increases were partially offset by a $13,000 decrease in net
investment income and an $83,000 decrease in net mortuary and
cemetery sales.
Insurance premiums and other considerations increased by $40,000, or
2.6%, to $1,598,000 for the three months ended March 31, 1999, from
$1,558,000 for the comparable period in 1998. This increase was
primarily due to an increase in new business.
Net investment income decreased by $13,000, or .7%, to $1,831,000
for the three months ended March 31, 1999, from $1,844,000 for the
comparable period in 1998. This decrease was attributable to a
lower yield on the Company's investments.
Net mortuary and cemetery sales decreased by $83,000, or 3.4%, to
$2,356,000 for the three months ended March 31, 1999, from
$2,439,000 for the comparable period in 1998. This decrease was the
result of a reduction in pre-need and at-need sales.
Mortgage fee income increased by $1,197,000, or 62.9%, to $3,101,000
for the three months ended March 31, 1999, from $1,904,000 for the
comparable period in 1998. This increase was primarily attributable
to more loan originations during the first quarter of 1999 due to
the expansion of business activities in new geographic markets.
Total benefits and expenses were $9,024,000, or 99.2% of total
revenues for the three months ended March 31 1999, as compared to
$7,193,000, or 92.1% of total revenues for the comparable period in
1998.
Death benefits, surrenders and other policy benefits and increase in
future policy benefits increased by $222,000, or 14.2%, to
$1,786,000 for the three months ended March 31, 1999, from
$1,564,000 for the comparable period in 1998. This increase was
primarily the result of accumulative interest on policyholder funds
and an increase in death claims.
Amortization of deferred policy acquisition costs and cost of
insurance acquired decreased by $4,000, or 1.3%, to $293,000, for
the three months ended March 31, 1999, from $297,000 for the
comparable period in 1998. This decrease was in line with the
actuarial assumptions.
General and administrative expenses increased by $1,471,000 or
32.9%, to $5,947,000 for the three months ended March 31, 1999, from
$4,476,000 for the comparable period in 1998. This increase
primarily resulted from an increase in commissions and other
expenses due to additional mortgage loan originations having been
made by the Company's mortgage subsidiary during the first quarter
of 1999 due to the expansion of its business activities in new
geographic markets.
Interest expense increased by $76,000, or 41.0%, to $261,000 for the
three months ended March 31, 1999, from $185,000 for the comparable
period in 1998. This increase was primarily due to the additional
bank borrowings required for the acquisition of Consolidare.
Cost of goods and services sold of the mortuaries and cemeteries
increased by $66,000, or 9.8%, to $737,000 for the three months
ended March 31, 1999, from $671,000 for the comparable period in
1998. This increase was primarily related to an increase in
merchandise product prices.
Liquidity and Capital Resources
The Company's life insurance subsidiary and cemetery and mortuary
subsidiaries realize cash flow from premiums, contract payments and
sales on personal services rendered for cemetery and mortuary
business, from interest and dividends on invested assets, and from
the proceeds from the maturity of held-to-maturity investments, or
sale of other investments. The mortgage subsidiary realizes cash
flow from fees generated by originating and refinancing mortgage
loans and interest earned on mortgages sold to investors. The
Company considers these sources of cash flow to be adequate to fund
future policyholder and cemetery and mortuary liabilities, which
generally are long-term, and adequate to pay current policyholder
claims, annuity payments, expenses on the issuance of new policies,
the maintenance of existing policies, debt service, and operating
expenses.
The Company attempts to match the duration of invested assets with
its policyholder and cemetery and mortuary liabilities. The Company
may sell investments other than those held-to-maturity in the
portfolio to help in this timing; however, to date, that has not
been necessary. The Company purchases short-term investments on a
temporary basis to meet the expectations of short-term requirements
of the Company's products. The Company's investment philosophy is
intended to provide a rate of return which will persist during the
expected duration of policyholder and cemetery and mortuary
liabilities regardless of future interest rate movements.
The Company's investment policy is to invest predominantly in fixed
maturity securities, mortgage loans, and warehouse mortgage loans on
a short-term basis before selling the loans to investors in
accordance with the requirements and laws governing the life
insurance subsidiaries. Bonds owned by the life insurance
subsidiaries amounted to $70,857,000 as of March 31, 1999 compared
to $73,598,000 as of December 31, 1998. This represents 61% and 61%
of the total insurance-related investments as of March 31, 1999 and
December 31, 1998, respectively. Generally, all bonds owned by the
life insurance subsidiaries are rated by the National Association of
Insurance Commissioners. Under this rating system, there are six
categories used for rating bonds. At March 31, 1999, .65%
($460,000) and at December 31, 1998, .63% ($460,000) of the
Company's total investment in bonds were invested in bonds in rating
categories three through six, which are considered non-investment
grade.
The Company has classified certain of its fixed income securities,
including high-yield securities, in its portfolio as available for
sale, with the remainder classified as held to maturity. However,
in accordance with Company policy, any such securities purchased in
the future will be classified as held to maturity. Business
conditions, however, may develop in the future which may indicate a
need for a higher level of liquidity in the investment portfolio.
In that event the Company believes it could sell short-term
investment grade securities before liquidating higher-yielding
longer term securities.
The Company is subject to risk based capital guidelines established
by statutory regulators requiring minimum capital levels based on
the perceived risk of assets, liabilities, disintermediation, and
business risk. At March 31, 1999 and December 31, 1998, the life
insurance subsidiary exceeded the regulatory criteria.
The Company's total capitalization of stockholders' equity and bank
debt and notes payable was $37,356,000 as of March 31, 1999 as
compared to $41,990,000 as of December 31, 1998. Stockholders'
equity as a percent of capitalization increased to 71% as of March
31, 1999 from 64% as of December 31, 1998.
Lapse rates measure the amount of insurance terminated during a
particular period. The Company's lapse rate for life insurance in
1998 was 6.0% as compared to a rate of 11.7% for 1997. The 1999
lapse rate is approximately the same as 1998.
At March 31, 1999, $20,243,000 of the Company's consolidated
stockholders' equity represents the statutory stockholders' equity
of the Company's life insurance subsidiaries. The life insurance
subsidiary cannot pay a dividend to its parent company without the
approval of insurance regulatory authorities.
Year 2000 Issues
The Company is aware of the issues associated with the programming
code in existing computer systems as the millennium (Year 2000)
approaches. The Year 2000 problem is pervasive and complex as
virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is whether
computer systems will properly recognize date sensitive information
when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a
system to fail.
The Company's insurance operations have two different administrative
systems for its insurance operations. The system used for Security
National Life Insurance Company was converted to a Year 2000
compliant version in the fourth quarter of 1998. The Company
expended approximately $52,000 for the conversion to this latest
version. As part of the acquisition of Southern Security Life
Insurance Company ("Southern Security"), the Company purchased a new
system which is Year 2000 compliant. The Company successfully
converted Southern Security's existing system to the new system on
January 1, 1999. The Company paid in 1998 approximately $1 million
for this new system.
The Company's mortgage subsidiary uses a Year 2000 compliant system.
The Company's mortuary and cemetery operations converted to the
latest version for Year 2000 software during March 1999. The
Company's general accounting and payroll systems were converted to
Year 2000 versions during March 1999. The cost for these conversions
were not significant to consolidated net income.
The anticipated future costs of addressing potential Year 2000
problems are not currently expected to have a material adverse impact
on the Company's financial position, results of operations or cash
flows in future periods. However, if the Company, its customers or
vendors are unable to resolve such processing issues in a timely
manner, it could result in a material financial risk. Management
believes that manual policy and claims administration could be
performed in the unlikely event that one or more of its systems did
not function.
The Company has tested each personal computer being used for Year
2000 compliance and has installed or replaced the necessary software
to meet compliance. The Company is monitoring the progress of third
party vendors which the Company relies upon, such as software
suppliers, telephone equipment and communication suppliers,
electricity suppliers, natural gas suppliers, banks, brokers, U.S.
Postal Service and express mail services. The Company is not aware
of any of its suppliers that will not be Year 2000 compliant and will
continue to monitor and make the necessary contingency plans where
needed. The Company is aware of the risks associated with any of its
internal systems or those of its suppliers that are not Year 2000
compliant.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
------------------------------------------------------
There have been no significant changes since the annual report Form
10-K filed for the year ended December 31, 1998.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Without Consolidare and Subsidiaries
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
Consolidare
and
Subsidiaries
REVENUES: 1999 1998 1999
- -------- ---------- ---------- -------------
Insurance premiums
and other considerations $3,349,416 $1,558,065 $1,751,040
Net investment income 2,541,565 1,844,154 710,754
Net mortuary and cemetery income 2,355,618 2,439,292 --
Realized gains on investments
and other assets 169,693 36,046 --
Mortgage fee income 3,101,402 1,903,946 --
Other 36,920 25,922 --
----------- ---------- ----------
Total Revenues 11,554,614 7,807,425 2,461,794
BENEFITS AND EXPENSES:
- ---------------------
Death benefits 990,810 510,348 284,159
Surrenders and other
policy benefits 1,213,139 299,489 848,631
Increase in future policy benefits 842,179 754,390 127,104
Amortization of deferred policy
acquisition costs and cost of
insurance acquired 1,304,553 296,527 1,012,001
General and administrative
expenses:
Commissions 2,426,101 1,554,933 53,168
Salaries 1,790,153 1,263,270 106,400
Other 1,943,659 1,658,126 52,851
Interest expense 261,262 185,298 --
Cost of mortuaries and cemeteries
goods and services sold 736,831 670,879 --
----------- ----------- -----------
Total benefits and expenses 11,508,687 7,193,260 2,484,314
Earnings before income taxes 45,927 614,165 (22,520)
Income tax (expense) benefit 11,981 (135,255) 47,981
Minority interest in loss
of subsidiary 31,119 -- 31,119
----------- ----------- ----------
Net earnings $ 89,027 $ 478,910 $ 56,580
=========== ========== ==========
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Without Consolidare and Subsidiaries
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
Variance
Without without
Consolidare Consolidare
and and
Subsidiaries Subsidiaries
REVENUES: 1999 Amount Percent
- --------- ---------- ---------- --------
Insurance premiums
and other considerations $1,598,376 $ 40,311 2.6%
Net investment income 1,830,811 (13,343) (.7)
Net mortuary and cemetery
income 2,355,618 (83,674) (3.4)
Realized gains on investments
and other assets 169,693 133,647 370.8
Mortgage fee income 3,101,402 1,197,456 62.9
Other 36,920 10,998 42.4
----------- ------------
Total Revenues 9,092,820 1,285,395 16.5
BENEFITS AND EXPENSES:
- ---------------------
Death benefits 706,651 196,303 38.5
Surrenders and other
policy benefits 364,508 65,019 21.7
Increase in future
policy benefits 715,075 (39,315) (5.2)
Amortization of deferred
policy acquisition
costs and cost of
insurance acquired 292,552 (3,975) (1.3)
General and administrative
expenses:
Commissions 2,372,933 818,000 52.6
Salaries 1,683,753 420,483 33.3
Other 1,890,808 232,682 14.0
Interest expense 261,262 75,964 41.0
Cost of mortuaries and
cemeteries goods and
services sold 736,831 65,952 9.8
---------- -----------
Total benefits
and expenses 9,024,373 1,831,113 25.5
Earnings before income taxes 68,447 (545,718) (88.9)
Income tax (expense) benefit (36,000) 99,255 (73.4)
Minority interest in loss
of subsidiary -- --
----------- -----------
Net earnings $ 32,447 $ (446,463) (93.2%)
========== ===========
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
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. A. Articles of Restatement of Articles of Incorporation (8)
B. Bylaws (1)
4. A. Specimen Class A Stock Certificate (1)
B. Specimen Class C Stock Certificate (1)
C. Specimen Preferred Stock Certificate and Certificate of
Designation of Preferred Stock (1)
10. A. Restated and Amended Employee Stock Ownership Plan and
Trust Agreement (1)
B. Deferred Compensation Agreement with George R. Quist (2)
C. 1993 Stock Option Plan (3)
D. Promissory Note with Key Bank of Utah (4)
E. Loan and Security Agreement with Key Bank of Utah (4)
F. General Pledge Agreement with Key Bank of Utah (4)
G. Note Secured by Purchase Price Deed of Trust and
Assignment of Rents with the Carter Family Trust and the
Leonard M. Smith Family Trust (5)
H. Deed of Trust and Assignment of Rents with the Carter
Family Trust and the Leonard M. Smith Family Trust (5)
I. Promissory Note with Page and Patricia Greer (6)
J. Pledge Agreement with Page and Patricia Greer (6)
K. Promissory Note with Civil Service Employees Insurance
Company (7)
L. Deferred Compensation Agreement with William C. Sargent
(8)
M. Employment Agreement with Scott M. Quist. (8)
N. Acquisition Agreement with Consolidare Enterprises, Inc.,
and certain shareholders of Consolidare. (9)
O. Agreement and Plan of Merger between Consolidare
Enterprises, Inc., and SSLIC Holding Company. (10)
P. Administrative Services Agreement with Southern Security
Life Insurance Company. (11)
Q. Promissory Note with George R. Quist. (12)
(1) Incorporated by reference from Registration Statement
on Form S-1, as filed on June 29, 1987.
(2) Incorporated by reference from Annual Report on Form
10-K, as filed on March 31, 1989.
(3) Incorporated by reference from Annual Report on Form
10-K, as filed on March 31, 1994.
(4) Incorporated by reference from Report on Form 8-K, as
filed on February 24, 1995.
(5) Incorporated by reference from Annual Report on Form
10K, as filed on March 31, 1995.
(6) Incorporated by reference from Report on Form 8-K, as
filed on May 1, 1995.
(7) Incorporated by reference from Report on Form 8-K, as
filed on January 16, 1996.
(8) Incorporated by reference from Annual Report on Form
10-K, as filed on March 31, 1998.
(9) Incorporated by reference from Report on Form 8-K, as
filed on May 11, 1998.
(10) Incorporated by reference from Report on Form 8-K, as
filed on January 4, 1999.
(11) Incorporated by reference from Report on Form 8-K, as
filed on March 4, 1999.
(12) Incorporated by reference from Annual Report on Form
10-K, as filed on April 14, 1999.
27. Financial Data Schedule
(b) Reports on Form 8-K:
On January 4, 1998, the Company filed a report on Form 8-K
regarding the acquisition of Consolidare Enterprises, Inc.
On March 5, 1999, the Company filed a report on Form 8-K/A-1
regarding the acquisition of Consolidare Enterprises, Inc.
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.
REGISTRANT
SECURITY NATIONAL FINANCIAL CORPORATION
Registrant
DATED: May 20, 1999 By: George R. Quist,
------------ ---------------
President and Chief
Executive Officer
(Principal Executive
Officer)
DATED: May 20, 1999 By: Scott M. Quist
------------ --------------
First Vice President,
General Counsel and
Treasurer (Principal
Financial and Accounting
Officer)