SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995, 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 number 0-4366
Regan Holding Corp.
___________________
(Exact Name of Registrant as Specified in Its Charter)
California 68-0211359
__________ __________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1179 N. McDowell Blvd., Petaluma, California 94954
__________________________________________________
(Address of Principal Executive Offices)(Zip Code)
(707) 778-8638
______________
(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 (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 No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the registrant's common
stock, as of May 12, 1995 was:
Common Stock-Series A 26,899,220
Common Stock-Series B 610,688
Part 1
Financial Information
Item 1. Financial Statements
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
ASSETS: 1995 1994
Investments in securities,
at market value $ 3,298,831 $ 1,735,526
Cash and cash equivalents 575,116 651,189
Accounts receivable 492,029 244,926
Prepaid expenses 207,246 122,133
Inventory-marketing supplies 91,407 74,678
___________ ___________
Total Current Assets 4,664,629 2,828,452
___________ ___________
Computer equipment 706,257 592,642
Leasehold improvements 442,435 458,950
Furniture and equipment 160,802 167,265
___________ ___________
Net Fixed Assets 1,309,494 1,218,857
Organization costs-net of amortization 11,847 15,796
Deferred tax asset 1,900,972 2,689,291
Other assets 86,434 108,382
___________ ___________
TOTAL ASSETS $ 7,973,376 $ 6,860,778
___________ ___________
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Accounts payable $ 12,127 $ 22,575
Income taxes payable 232,786 104,105
Fractional shares payable 44,879 31,217
Accrued liabilities 535,069 719,382
Notes payable-current portion 246,571 280,000
___________ ___________
Total Current Liabilities 1,071,432 1,157,279
___________ ___________
Notes payable-non current portion - 41,956
Loan payable 88,190 88,190
___________ ___________
Total Non Current Liabilities 88,190 130,146
TOTAL LIABILITIES $ 1,159,622 $ 1,287,425
___________ ___________
SHAREHOLDERS' EQUITY:
Preferred stock, no par value:
Authorized: 100,000,000 shares
No shares issued or outstanding
Common stock, no par value:
Authorized: 100,000,000 shares
Issued and outstanding: 27,509,908
and 27,514,462 at March 31, 1995
and December 31, 1994,
respectively. 16,483,754 16,497,416
Accumulated deficit (9,680,680) (10,906,002)
Unrealized gains/(losses) on
investments (net of taxes) 10,680 (18,061)
___________ ___________
TOTAL SHAREHOLDERS' EQUITY 6,813,754 5,573,353
___________ ___________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,973,376 $ 6,860,778
___________ ___________
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Income Statements
(Unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, 1995 March 31, 1994
REVENUE:
Marketing allowances $ 2,573,692 $ 627,670
Commission income 875,736 152,145
Administrative fees 761,738 129,427
Sales promotion fees 11,952 63,308
Investment income 57,079 6,223
Other income 4,482 683
___________ ___________
Total Revenue 4,284,679 979,456
___________ ___________
EXPENSES:
Salaries and related benefits 1,317,157 339,211
Depreciation and amortization 74,133 27,350
Equipment expense 33,361 29,250
Occupancy expense 129,072 9,239
Travel and entertainment 25,870 19,178
Stationery and supplies 23,382 6,144
Courier and postage 59,574 4,624
Other miscellaneous expenses 21,242 1,902
___________ ___________
Subtotal--General & Administrative 1,683,791 436,898
Advertising and sales promotion 216,368 96,004
Agent health plan expense 26,482 -
Producer related expenses 2,476 6,680
Administrative fees - 137
___________ ___________
Subtotal--Agent Related 245,326 102,821
Professional fees
Interest expense 126,183 98,834
TOTAL EXPENSES 4,057 854
___________ ___________
2,059,357 639,407
___________ ___________
Income before income taxes 2,225,322 340,049
Provision for income taxes 1,000,000 -
___________ ___________
NET INCOME $ 1,225,322 $ 340,049
___________ ___________
Weighted average shares outstanding 27,509,908 27,271,503
Earnings per share $ 0.04 $ 0.01
___________ ___________
REGAN HOLDING CORP. AND SUBSIDIARIES
Statement of Shareholders' Equity
(Unaudited)
Number of
Shares Common Accumulated Unrealized
Outstanding Stock Deficit Gains/(Losses) Total
Balance December 31, 27,514,462 $16,497,416 $(10,906,002) $(18,061) $5,573,353
1994
Net income for the
three months ended
March 31, 1995 1,225,322 1,225,322
Unrealized gains
on securities 28,741 28,741
Cash-in-lieu
shares cancelled (4,554) (13,662) (13,662)
Balance March 31, 27,509,908 $16,483,754 $(9,680,680) $10,680 $6,813,754
1995 __________ ___________ ___________ _______ __________
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
(Unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, 1995 March 31, 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,225,322 $340,049
Adjustments to reconcile net income
provided by operating activities:
Depreciation and amortization 70,18425,495
Amortization of organization costs 3,9491,856
Deferred income taxes 788,319 -
Accretion/amortization of
investment securities (13,785) -
Net change in investment income receivable (24,114) (7,311)
Net change in accounts receivable (222,988) (25,620)
Net change in prepaid expenses (85,113) -
Net change in supply inventory (16,729) -
Net change in accounts payable (10,448) (33,354)
Net change in income taxes payable 128,681 -
Net change in accrued liabilities (184,313) 52,238
Net change in other liabilities - (55,373)
_ ________
Net cash provided by operating activities 1,658,965 297,980
____________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments (2,004,832) (749,041)
Proceeds from maturities of investments 506,000 -
Purchase of fixed assets (160,821) (30,615)
____________ ________
Net cash used in investing activities (1,659,653) (779,656)
____________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 400
Payments on notes payable (75,385) (102,882)
____________ ________
Net cash used in financing activities (75,385) (102,482)
____________ ________
Decrease in cash and cash equivalents (76,073) (584,158)
Cash and cash equivalents,
beginning of period 651,189 880,934
____________ ________
Cash and cash equivalents, end of period $575,116 $296,776
____________ ________
Interest paid $4,057 $854
Income taxes paid $196,300 $ -
REGAN HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Information
The accompanying consolidated financial statements are
prepared in conformity with generally accepted
accounting principles and include the accounts of Regan
Holding Corp., and its wholly-owned subsidiaries,
Legacy Marketing Group, LifeSurance Corporation and
Producers Securities Corporation (dissolved December
31, 1994). All intercompany transactions have been
eliminated.
The statements are unaudited but reflect all
adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management,
necessary for a fair presentation of the Company's
financial position and results of operations. The
results for the three month periods ended March 31,
1995 and March 31, 1994, are not necessarily indicative
of the results to be expected for the entire year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Financial Condition
The Company's financial condition continues to improve
since it switched its focus in 1993 from that of an
insurance holding company to an insurance marketing and
administration company. Total assets increased 16%,
from $6.9 million at December 31, 1994 to $8.0 million
at March 31, 1995. The increase is attributed
primarily to $1.6 million of additional investments in
marketable securities offset by a $.8 million reduction
in deferred taxes.
Net fixed assets increased $90,000, or 7%, representing
purchases of $160,000 offset by depreciation charges of
$70,000. The purchases were primarily for computer
hardware as the Company upgrades its current systems
and expands its PC network for added employees.
The Company's total liabilities were reduced from $1.3
million at December 31, 1994 to $1.2 million at March
31, 1995, a 10% decrease. The decrease primarily
reflects a $200,000 reduction in accrued liabilities
offset by a $100,000 increase in income taxes payable.
Accrued liabilities at December 31, 1994 included
$260,000 of accrued year-end bonuses paid in January
1995.
Shareholders' equity increased from $5.6 million at
December 31, 1994 to $6.8 million at March 31, 1995, or
approximately 22%. Book value per share was $.20 per
share at December 31, 1994 compared with $.25 per share
at March 31, 1995.
Results of Operations
The Company recorded net income of $1.2 million, or
$.04 per share, for the three months ended March 31,
1995 compared with $.3 million, or $.01 per share, for
the three months ended March 31, 1994.
Revenue
Total sales of insurance products by the Company's
distribution systems during the three months ended
March 31, 1995 resulted in premiums of approximately
$183 million for American National Insurance Company
compared with $45 million for the three months ended
March 31, 1994. Correspondingly, quarterly revenue
from insurance sales activities for the Company
increased from $909,000 in the first quarter of 1994 to
$4,211,000 in the first quarter of 1995.
Sales promotion fees totaled $12,000 for the three
months ended March 31, 1995 compared with $63,000 for
the three months ended March 31, 1994. The 1994 amount
includes a one-time receipt of a $56,000 printing
reimbursement from American National.
Investment income is attributed primarily to earnings
from the Company's investment in marketable securities.
Until March 1994, the Company's excess cash was
maintained in a savings account. The Company earned
$10,000 in savings interest and $47,000 of investment
income during the first quarter of 1995, for a total of
$57,000 compared with the $6,000 of savings interest in
the first quarter of 1994.
Expenses
As a service organization, the Company's major expense
is salaries and related employee benefits. Increasing
sales have caused management to continually hire new
employees, growing total employment from approximately
25 in January 1994 to approximately 90 full-time
equivalent employees by March 31, 1995. Total salaries
increased from $339,000, or 35% of total revenue, for
the three months ended March 31, 1994 to $1,317,000, or
31% of total revenue, for the three months ended March
31, 1995.
After salaries, occupancy costs account for a
significant portion of the Company's expenses. The
Company did not pay certain occupancy costs in 1994 due
to an arrangement with the Georgia State Insurance
Regulators. Beginning in January 1995, the Company
began paying these costs. As a result, total occupancy
costs were $9,000, or 1% of total revenue, for the
three months ended March 31, 1994 compared with
$129,000, or 3% of total revenue, for the three months
ended March 3, 1995.
Advertising and sales promotion expense consists
primarily of sales promotion meetings and the design
and printing of sales brochures for use by agents
throughout the Company's distribution system and .
This expense totaled $216,000 for the first quarter of
1995 compared with $96,000 for the first quarter of
1994, an increase of over 100%. The increase reflects
the Company's new life products introduced in the first
quarter of 1995, the higher cost of the semi-annual
producer meeting held in February and the cost of a
promotional trip for top-producing agents.
Professional fees which include legal, outside
accounting and consulting fees, totaled $126,000 for
the three months of 1995 versus $99,000 for the three
months of 1994. The 1995 expense reflects legal and
accounting costs associated with the 1994 audit and
annual filing with the Securities & Exchange Commission
which were not incurred in 1994. The 1994 expense
reflects costs associated with outside accounting and
consulting services which will not be incurred in 1995.
Overall this expense is expected to decline in 1995
from the 1994 cost levels.
Provision for Income Taxes
The Company files consolidated returns for federal
purposes but files separate company returns for state
purposes. The Company had both federal and state net
operating losses ("NOL's") in prior years which can be
used to offset taxes payable in future profitable
years. The provision for income taxes for the three
months ended March 31, 1995 was $1,000,000 representing
utilization of NOL's and estimated taxes due for the
period. Alternative minimum tax regulations have
resulted in the Company incurring some income taxes
payable even with NOL's available. The Company's
effective tax rate for the first quarter of 1995 is 45%
on income before taxes. No tax expense was recorded
for the first quarter of 1994 due to incomplete
information at the time. The Company expects to fully
utilize its federal NOL during 1995.
Liquidity and Capital Resources
The positive cash flows generated from operations have
been invested in U. S. Treasury securities and
obligations of U. S. Government agencies and
corporations. The Company has increased its holdings
of marketable securities from $1.7 million at December
31, 1994 to $3.3 million at March 31, 1995,
representing a 90% increase for the quarter. As of
March 31, 1995, approximately 49% of total assets are
cash and marketable securities reflecting the Company's
highly liquid position.
The Company's business is not capital intensive, its
major expenditures are computer upgrades and furniture
acquisitions to accommodate its new employees.
Management's primary goal is to control operating
expenses in relation to the demands placed upon the
organization from increased sales. Consequently,
management believes that its capital resources are
adequate to meet the Company's operating requirements
over the next twelve months.
PART II
Item 6. Exhibits
a) Exhibit 27 - Financial Data Schedule For the Three
Months Ended March 31, 1995.
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.
REGAN HOLDING CORP.
Date: May 10, 1995 Signature: /s/ Linda Regan
Lynda Regan
President & CEO
Date: May 11, 1995 Signature: /s/ R. Preston Pitts
R. Preston Pitts
Chief Financial Officer