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, 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 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 I.D. No.)
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, 1996:
Common Stock, no par value 2,778,944
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, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income:
Three Months Ended March 31, 1996 and 1995 . . . . . 4
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 1996 and 1995 . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of March 31, 1996 and December 31, 1995
(Unaudited)
3/31/96 12/31/95
Assets
Cash and Cash Equivalents $ 3,111,968 $ 2,527,008
Investments:
Held-to-maturity:
Certificates of deposit 204,334 399,203
Bonds - at amortized cost 4,693,779 4,748,276
Available-for-sale - at market:
Bonds and redeemable preferred stocks 11,122,024 10,310,737
Common and nonredeemable preferred
stocks 3,923,286 4,284,423
Total investments 19,943,423 19,742,639
Receivables:
Premiums, net 1,843,113 1,703,395
Accrued interest and dividends 274,162 299,159
Recoveries of claims previously paid 420,744 426,056
Other 57,026 34,159
Total receivables 2,595,045 2,462,769
Prepaid Expenses and Other Assets 405,381 378,191
Property Acquired in Settlement of Claims 165,500 250,500
Property-At Cost:
Land 782,582 782,582
Office buildings and improvements 1,293,726 1,293,726
Furniture, fixtures and equipment 1,673,485 1,694,657
Automobiles 173,630 151,374
Total 3,923,423 3,922,339
Less accumulated depreciation 1,115,940 1,059,170
Property, net 2,807,483 2,863,169
Total Assets $ 29,028,800 $ 28,224,276
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 624,218 $ 997,823
Commissions and reinsurance payables 30,682 38,601
Premium taxes payable 60,148 35,840
Income taxes payable:
Current 285,326 119,500
Deferred 1,048,918 986,633
Total liabilities 2,049,292 2,178,397
Reserve for Claims 4,186,065 3,836,065
Stockholders' Equity:
Common stock-No par value (shares
authorized 6,000,000; 2,855,744 and
2,855,744 shares issued and 2,778,944 910,970 1,038,414
and 2,790,633 shares outstanding 1996
and 1995, respectively)
Retained earnings 20,864,360 20,173,755
Net unrealized gain on investments
(net of deferred taxes: 1996:
$524,675; 1995: $514,130) 1,018,113 997,645
Total stockholders' equity 22,793,443 22,209,814
Total Liabilities and Stockholders' Equity $ 29,028,800 $ 28,224,276
3
Investors Title Company and Subsidiaries
Consolidated Statements of Income
March 31, 1996 and 1995
(Unaudited)
For The Three
Months Ended
March 31
1996 1995
Revenues:
Underwriting income:
Premiums written $ 4,452,889 3,121,311
Less-premiums for reinsurance ceded 18,090 17,286
Net premiums written 4,434,799 3,104,025
Investment income-interest and dividends 294,791 266,947
Rental income 8,897 4,323
Gain (loss) on disposals of investments
and property, net (26,289) 18,697
Other 47,050 68,818
Total 4,759,248 3,462,810
Operating Expenses:
Salaries 861,886 854,365
Commissions to agents 1,086,952 666,644
Provision for possible claims 681,333 250,091
Employee benefits and payroll taxes 282,250 277,906
Office occupancy and operations 428,973 421,985
Business development 129,165 113,357
Taxes, other than payroll and income 111,552 93,716
Professional fees 32,251 56,251
Interest expense 0 10,638
Other 98,183 29,693
Total 3,712,545 2,774,646
Income Before Income Taxes 1,046,703 688,164
Provision For Income Taxes:
Current 247,245 (32,480)
Deferred 51,739 113,470
Total 298,984 80,990
Net Income $ 747,719 $ 607,174
Net Income Per Share* $ 0.27 $ 0.22
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 shares outstanding (1996, 2,782,457 and 1995, 2,815,152 shares,
respectively.) The effect of stock options is not material to the computation
of earnings per share.
4
Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995 (Unaudited)
1996 1995
Operating Activities:
Net income $747,719 $607,174
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 74,715 72,525
Amortization, net of accretion 3,426 25,017
Gain on disposals of property (13,763) (706)
(Gain) loss on sales of investments 40,052 (17,991)
Provision for deferred income taxes 51,739 113,470
Provision for possible claims 681,333 250,091
Payments of claims, net of recoveries (331,333) (301,091)
Increase in receivables (132,276) (48,970)
(Increase) decrease in prepaid
expenses and other assets (27,190) 83
Decrease in assets acquired in
settlement of claims 85,000 20,000
Decrease in accounts payable and
accrued liabilities (373,605) (241,071)
Decrease in commissions and
reinsurance payables (7,918) (11,249)
Increase in premium taxes payable 24,308 29,869
Increase in income taxes
payable - current 165,826 0
Net cash provided by operating activities 988,033 497,151
Investing Activities:
Purchases of investments held-to-maturity (153,886) (501,672)
Purchases of investments available-for-sale (807,108) (332,084)
Proceeds from sales of investments
held-to-maturity 371,019 553,980
Proceeds from sales of investments
available-for-sale 376,726 353,008
Purchases of property (85,616) (51,691)
Proceeds from sales of property 80,350 706
Net cash provided by (used in) investing
activities (218,515) 22,247
Financing Activities:
Dividends paid (57,114) (57,114)
Repurchases of common stock, net (127,444) (10,106)
Repayment of notes payable 0 (500,000)
Net cash used in financing activities (184,558) (567,220)
Net Increase (Decrease) in Cash and Cash
Equivalents 584,960 (47,822)
Cash and Cash Equivalents, Beginning of Year 2,527,008 2,590,071
Cash and Cash Equivalents, End of Period $3,111,968 $2,542,249
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest $0 $14,476
Income Taxes $235,275 $5,632
5
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1996
(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, 1995 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 $12,770 and $18,090, respectively for the three
months ended March 31, 1996, and $9,171 and $17,286,
respectively for the three months ended March 31, 1995.
Note 3 - Reserve for Possible Claims
Transactions in the reserve for possible claims for the three
months ended March 31, 1996 were as follows:
Balance, beginning of year $3,836,065
Provision, charged to operations 681,333
Recoveries 28,354
Payments of claims (359,687)
Balance, March 31, 1996 $4,186,065
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 $92,292 and $98,013, respectively for the
three months ended March 31, 1996 and 1995.
6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The 1995 Form 10-K and the 1995 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, 1996, premiums written
increased 43% to $4,452,889, investment income increased 10%
to $294,791, revenues increased 37% to $4,759,248, net income
increased 23% to $747,719 and net income per share increased
23% to $.27, all compared to the same quarter in 1995.
Sales growth in the first quarter 1996 resulted from a
combination of concentrated marketing efforts and continued
strength in the real estate market. The number of policies
and commitments issued in the first quarter 1996 was 32,215
versus 22,128 in the first quarter 1995. Additionally, the
Company achieved significant gains in operating efficiency
as a 34% increase in operating expenses supported the 43%
increase in revenues. Direct business increased 34%, while
agent business increased 61% in the first quarter 1996
compared to the first quarter 1995. The Company's ability
to efficiently process this higher volume in its branches
reflects the Company's automation and internal reorganization
efforts over the past three years.
The 34% increase in operating expenses for the three months
ended March 31, 1996 compared to the same period in 1995
primarily resulted from an increase in commissions and the
provision for claims. The increase in commissions is the
result of the Company's expansion into new markets primarily
through establishing new agency relationships rather than
branch offices. The increase in the provision for claims
unfavorably impacted net income but was necessary based on
the increase in premiums written and management's assessment
of the reserve for claims.
The provision for current income taxes primarily increased
in 1996 compared to 1995 due to a 1995 current income tax
benefit resulting from loss carrybacks related to the 1992
loss, an increase in the reserve for claims in 1996 which is
not currently tax deductible, and an increase in income in
1996. The increase in the provision for current income taxes
was partially offset by a decline in the provision for
deferred income taxes. Deferred income taxes decreased
primarily as a result of the increase in the reserve for
claims which is not deductible from taxable income.
Liquidity and Capital Resources:
Net cash provided by operating activities for the three
months ended March 31, 1996, amounted to $988,033 compared
to $497,151 for the same three month period during 1995.
This increase is primarily attributable to the increases in
net income, the provision for possible claims and current
income taxes payable described above.
Investments increased primarily from funds retained in the
business and increases in the market value of securities
available for sale.
7
Accounts payable and accrued liabilities decreased due to
payment of cash bonuses and contributions to employee
retirement accounts.
The Board of Directors has approved the repurchase by the
Company of shares of the Company's common stock from time to
time at prevailing market prices for the purpose of issuances
of stock in connection with stock options and stock bonuses.
During the first quarter of 1996, the Company repurchased
21,000 shares at an average purchase price of $10.61 per
share.
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
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for this quarter.
8
SIGNATURES
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: May 13, 1996
9