UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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: 0-11774
INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)
North Carolina
56-1110199
(State of Incorporation) (I.R.S. Employer)
121 North Columbia Street, Chapel Hill, North Carolina 27514
(Address of Principal Executive Offices) (Zip Code)
(919) 968-2200
(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 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
Shares outstanding of each of the issuer's classes of common stock
as of March 31, 1995:
Common Stock, no par value 2,813,120
Class Shares Outstanding
1
INVESTORS TITLE COMPANY AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Income:
Three Months Ended March 31, 1995 and 1994 . . . . . . 4
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 1995 and 1994 . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of March 31, 1995 and December 31, 1994
(Unaudited)
3/31/95 12/31/94
Assets
Cash and Cash Equivalents $ 2,542,249 $ 2,590,071
Investments:
Held to maturity:
Certificates of deposit 444,203 539,203
Bonds-at amortized cost 10,477,498 10,283,644
Available for sale - at
market:
Bonds, treasury note and
redeemable preferred
stocks 2,500,451 2,839,813
Common and nonredeemable
preferred stocks 3,136,953 2,699,422
Total investments 16,559,105 16,362,082
Receivables:
Premiums, net 931,494 1,057,228
Accrued interest and
dividends 276,486 309,689
Recoveries of claims
previously paid 490,269 375,061
Refundable income taxes 94,657 62,246
Other 104,270 43,982
Total receivables 1,897,176 1,848,206
Prepaid Expenses and Other
Assets 370,807 370,890
Property Acquired in
Settlement of Claims 150,600 170,600
Property-At Cost:
Land 782,582 782,582
Buildings 1,240,375 1,228,375
Furniture and equipment 1,559,574 1,536,745
Automobiles 135,024 118,162
Total 3,717,555 3,665,864
Less accumulated
depreciation (838,178) (765,653)
Property, net 2,879,377 2,900,211
Total Assets $ 24,399,314 $ 24,242,060
Liabilities and
Stockholders' Equity
Liabilities:
Accounts payable
and accrued
liabilities $ 422,053 $ 663,124
Accrued vacation 336,735 336,735
Commissions and
reinsurance payables 41,599 52,848
Premium taxes payable 58,635 28,766
Note payable 500,000
Deferred income taxes
payable 678,470 470,725
Total liabilities 1,537,492 2,052,198
Reserve for Possible Claims 3,584,850 3,635,850
Stockholders' Equity:
Common stock-No par value
(shares authorized,
6,000,000; 2,855,744 and
2,855,744 shares issued
and 2,813,120 and 1,253,212 1,263,318
2,812,062 shares
outstanding, 1995 and
1994, respectively)
shares outstanding)
Retained earnings 17,701,617 17,151,557
Net unrealized gain on
investment
securities
net of
deferred taxes: 1995:
$167,152; 1994:
$72,876) 322,143 139,137
Total stockholders'
equity 19,276,972 18,554,012
Total Liabilities and
Stockholders' Equity $ 24,399,314 $ 24,242,060
3
Investors Title Company and Subsidiaries
Consolidated Statements of Income
March 31, 1995 and 1994
(Unaudited)
For The Three
Months Ended
March 31
1995 1994
Revenues:
Underwriting income:
Premiums written $ 3,121,311 $ 3,888,377
Less-premiums for
reinsurance ceded 17,286 11,930
Underwriting income 3,104,025 3,876,447
Investment income-
interest and dividends 283,980 233,632
Rental income 4,323 4,661
Gain (loss) on disposals
of investments and 18,697 (6,021)
property, net
Other 51,785 11,335
Total 3,462,810 4,120,054
Operating Expenses:
Salaries 854,365 896,601
Commissions to agents 666,644 757,809
Provision for possible
claims 250,091 488,482
Employee benefits and
payroll taxes 277,906 418,216
Office occupancy and
operations 421,985 442,004
Business development 113,357 108,605
Taxes, other than
payroll and income 93,716 103,285
Professional fees 56,251 24,076
Interest expense 10,638 22,595
Other 29,693 33,873
Total 2,774,646 3,295,546
Income Before Income
Taxes 688,164 824,508
Provision For Income
Taxes:
Current (32,480) 230,890
Deferred 113,470 (678)
Total 80,990 230,212
Net Income $ 607,174 $ 594,296
Net Income Per Share* $ 0.22 $ 0.21
Dividends Paid $ 57,114 $ 57,114
Dividends Per Share $ 0.02 $ 0.02
* Net income per share is computed based on the weighted
average number of common and dilutive common equivalent shares
outstanding (1995, 2,815,152 and 1994, 2,855,744 shares,
respectively.) Common equivalent shares consist solely of stock
options.
4
INVESTORS TITLE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (UNAUDITED)
1995 1994
Operating Activities:
Net income $607,174 $594,296
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 72,525 47,283
Amortization, net of accretion 25,017 18,144
(Gain) loss on disposals of
property (706) 1,415
(Gain) loss on sales of
investments (17,991) 4,606
Provision (benefit) for deferred
income taxes 113,470 (678)
Provision for possible claims 250,091 488,482
Payments of claims, net of
recoveries (301,091) (293,482)
(Increase) decrease in
receivables (48,970) 338,786
Decrease in prepaid expenses
and other assets 83 3,599
Decrease in assets acquired
in settlement of claims 20,000
Decrease in accounts payable
and accrued liabilities (241,071) (415,635)
Increase(decrease)in
commissions and reinsurance
payables (11,249) 18,386
Decrease in premium taxes payable 29,869 5,642
Decrease in income taxes payable-
current 417,330
Net cash provided by operating
activities 497,151 1,228,174
Investing Activities:
Purchases of investments held
to maturity (501,672) (445,490)
Purchases of investments
available for sale (332,084) (89,690)
Proceeds from sales of
investments held to maturity 553,980 152,500
Proceeds from sales of
investments available for sale 353,008 91,689
Purchases of property (51,691) (116,518)
Proceeds from sales of property 706 3,428
Net cash provided by (used in)
investing activities 22,247 (404,081)
Financing Activities:
Dividends paid (57,114) (57,114)
Repurchases of common stock (10,106)
Repayment of notes payable (500,000) (1,000,000)
Net cash used in financing
activities (567,220) (1,057,114)
Net Decrease in Cash and Cash
Equivalents (47,822) (233,021)
Cash and Cash Equivalents,
Beginning of Year 2,590,071 1,701,786
Cash and Cash Equivalents,
End of Period $2,542,249 $1,468,765
Supplemental Disclosures of
Cash Flow Information:
Cash Paid During the Year for:
Interest $14,476 $29,812
Income Taxes $5,632 $1,556
See notes to consolidated financial statements.
5
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1995
(Unaudited)
Note 1 - Basis of Presentation
The consolidated financial statements include Investors Title
Company and its subsidiaries, and have been prepared in
conformity with generally accepted accounting principles.
In the opinion of management all necessary adjustments have
been reflected for a fair presentation of the financial
position, results of operations and cash flows in the
accompanying unaudited consolidated financial statements. All
such adjustments are of a normal recurring nature.
Reference should be made to the "Notes to Consolidated
Financial Statements" of the Registrant's Annual Report to
Shareholders for the year ended December 31, 1994 for a
description of accounting policies.
Note 2 - Reinsurance
The Company assumes and cedes reinsurance with other
insurance companies in the normal course of business.
Premiums assumed and ceded were $9,171 and $17,286,
respectively for the three months ended March 31, 1995, and
$17,492 and $11,930, respectively for the three months ended
March 31, 1994.
Note 3 - Reserve for Possible Claims
Transactions in the reserve for possible claims for the three
months ended March 31, 1995 were as follows:
Balance, beginning of year $3,635,850
Provision, charged to operations 250,091
Recoveries 23,783
Payments of claims (324,874)
Balance, March 31, 1995 $3,584,850
In management's opinion, the reserve is adequate to cover
claim losses which might result from pending and possible
claims.
Note 4 - Leases
Rent expense totaled $98,013 and $78,865, respectively for
the three months ended March 31, 1995 and 1994.
6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The 1994 Form 10-K and the 1994 Annual Report should be
read in conjunction with the following discussion since
they contain important information for evaluating the
Company's operating results and financial condition.
Results of Operations:
For the quarter ended March 31, 1995, premiums written
decreased 20% to $3,121,311, investment income
increased 22% to $283,980, revenues decreased 16% to
$3,462,810, net income increased 2% to $607,174 and net
income per share increased 5% to $.22 all compared to
the same quarter in 1994.
Premium volume declined primarily due to the effects of
higher mortgage interest rates on real estate sales and
and a decline in refinancing activity in the first
quarter of 1995 compared to the same period in 1994.
Operating expenses for the three months ended March 31,
1995 decreased 16% primarily as a result of a decline
in salaries, commissions, employee benefits and payroll
taxes, as well as the provision for possible claims.
The provision for possible claims was lower in the
first quarter of 1995 as a result of a decision by
management to reduce the Company's reserve for possible
claims in view of continuing declines in claims
payments. These remaining operating expense declines
were primarily due to the decrease in premium volume.
The provision for current income taxes in the first
quarter of 1995 declined due to loss carrybacks related
to the 1992 loss as well as a reduction in income.
These carrybacks could not be utilized until 1995 as a
result of recent tax legislation. The decline in the
provision for current income taxes was partially offset
by the provision for deferred income taxes, which
increased primarily as a result of the reduction of the
Company's reserve for possible claims.
Liquidity and Capital Resources:
Net cash provided by operating activities for the three
months ended March 31, 1995, amounted to $497,151
compared to $1,228,174 for the same three month period
during 1994.
This decrease is primarily because decreases in
receivables and in current federal taxes payable
contributed to net cash in the first quarter of 1994
but not in 1995 and the provision for possible claims,
which is added back to net income to reconcile net
income to net cash, was lower in 1995 than in the first
quarter of 1994. These changes were partially offset
in the first quarter of 1995 by the higher provision
for deferred income taxes and a smaller decrease in
accounts payable and accrued liabilities.
Cash flows from operations provided funds to repay the
Company's $500,000 note payable in the first quarter of
1995.
7
Investments increased primarily from funds retained in
the business. The net unrealized gain on investments
increased due to increased due to increases in the
market value of securities available for sale.
The deferred income tax liability increased primarily
due to an increase in the net unrealized gain on
investments and an increase in the statutory
unearned premium reserve, which is deductible from
taxable income.
The Company continues to have plans to construct a
five-story home office at 137 East Rosemary Street,
Chapel Hill, the site of its former offices. However,
no decision has been made as to when the Company will
pursue construction of this facility.
Management believes that funds generated from
operations (primarily underwriting and investment
income) will enable the Company to adequately meet its
operating needs. In addition to operational liquidity,
the Company maintains a high degree of liquidity within
the investment portfolio in the form of short term
investments and other readily marketable securities.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*(10)(i) 1988 Incentive Stock Option Plan,
Filed as Exhibit 10, page 31, to
Form 10-K dated December 31, 1989
*(10)(ii) 1993 Incentive Stock Option Plan,
Filed as Exhibit 10, page 32, to
Form 10-K dated December 31, 1993
*(10)(iii) 1993 Incentive Stock Option Plan -
W. Morris Fine, filed as Exhibit 10,
page 33, to Form 10-K dated
December 31, 1993
*(10)(iv) Employment Agreement, dated February
9, 1984 with J. Allen Fine,
President, filed as Exhibit 10, page
14, to Form 10-K dated December 31, 1985
*(10)(v) Form of Incentive Stock Option
Agreement under 1933 Incentive Stock
Option Plan, filed as Exhibit 10(v),
page 29, to Form 10-K dated
December 31, 1994
8
(10)(vi) Form of Amendment dated November 8,
1994 to Stock Option Agreement dated
As of November 13, 1989
(10)(vii) Form of Stock Option Agreement dated
November 13, 1989
(27) Financial Data Schedule
*incorporated by reference to the report indicated
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for this
quarter.
9
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
in its behalf by the undersigned hereunto duly authorized.
INVESTORS TITLE COMPANY
(Registrant)
By: /s/ J. Allen Fine
J. Allen Fine
President, Chairman
By: /s/ Elizabeth P. Bryan
Elizabeth P. Bryan
Vice President
(Principal Accounting
Officer)
Dated: April 28, 1995
10