1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995 Commission File No. 0-6764
-------------------
MOBILE AMERICA CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1218935
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Fortune Parkway, Jacksonville, Florida 32256
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 363-6339
-----------------------------
N/A
--------------------------------------------------------------------------------
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 X . No .
----- -----
(APPLICABLE ONLY TO CORPORATE ISSUERS)
There were 6,264,040 shares of common stock, par value $.025 per share,
outstanding as of the close of business on June 30, 1995.
2
PART I
MOBILE AMERICA CORPORATION
INDEX
Financial Statements: Page
Part I
------
Consolidated Balance Sheet 1
Consolidated Statement of Operations 2
Consolidated Statements of Cash Flows 3
Consolidated Statement of Changes in
Stockholders' Equity 4
Notes to Financial Statements 5-8
Management's Discussion and Analysis
of the Consolidated Statements of Income 9
Exhibit 11 - Computations of Earnings Per Share 10
Part II
-------
Other Information, and Signatures 11
3
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1995 AND DECEMBER 31, 1994
ASSETS 1995 1994
------ ---- ----
Investments:
Fixed maturities held to maturity $ 73,852,325 $ 70,287,568
at amortized cost (fair value
$74,160,103 and $69,817,915)
Equity Securities, at market 2,871,100 1,929,557
(cost $2,801,720 and $2,087,656)
Notes receivable less unearned 3,684 5,012
discount of $312 and $379
Short-term investments 16,477,345 14,369,810
------------ ------------
Total investments 93,204,454 86,591,947
------------ ------------
Cash 4,025,123 5,479,899
Receivables:
Insurance premiums 3,781,758 712,658
Accrued investment income and other 2,552,485 1,460,572
Reinsurance 24,842,031 24,832,401
------------ ------------
Total receivables 31,176,274 27,005,631
------------ ------------
Income taxes:
Currently receivable (1,460,631) 178,413
Deferred 641,398 607,398
------------ ------------
Total income taxes (819,233) 785,811
------------ ------------
Prepaid reinsurance premiums 21,715,732 22,412,328
Inventory of mobile homes 39,545 39,545
Deferred policy acquisition costs (3,845,648) (3,774,978)
Property and Equipment:
Land, at cost 356,970 356,970
Modular office equipment, at cost less
accumulated depreciation of $308,090
and $320,470 11,602 12,883
Equipment and leasehold improvements
at cost less accumulated
depreciation and amortization of
$1,821,280 and $1,725,426 783,963 727,104
------------ ------------
Total property and equipment: 1,152,535 1,096,957
------------ ------------
Prepaid expenses and other assets - 100,693
Equity in Pools and Associations 4,077,462 4,077,462
------------ ------------
$150,726,244 $143,815,295
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
Insurance loss reserves, including
future policy benefits $ 41,818,900 $ 43,950,469
Unearned premiums 36,308,028 34,639,680
Reinsurance funds held and
balances payable 27,846,645 29,061,872
Accrued expenses and other liabilities 15,146,142 9,351,078
Income taxes payable - -
Unearned service fees 1,793,020 1,197,905
------------ ------------
Total liabilities $122,912,735 $118,201,004
------------ ------------
Stockholders' equity:
Common stock, $.025 par value per share
Authorized - 18,000,000 shares
Issued
6,720,396 shares 168,010 168,010
Preferred stock, $.10 par value per share
Authorized - 500,000 shares
Issued and outstanding - none - -
Capital in excess of par value 2,686,060 2,686,060
Net unrealized losses on equity securities 69,380 (158,099)
Treasury Stock at Cost, 456,356 and
456,356 shares (388,441) (388,441)
Retained Earnings 25,278,500 23,306,761
------------ ------------
Total stockholders' equity 27,813,509 25,614,291
------------ ------------
$150,726,244 $143,815,295
============ ============
See notes to consolidated financial statements
4
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENT OF OPERATIONS
QUARTERS ENDED JUNE 30, 1995 AND 1994, SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Six Months Ended
Quarters Ended June 30, June 30,
-------------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Insurance premiums earned
(net of premiums ceded of
$14,906,650, $11,795,895,
$28,877,173 and $23,181,930) $ 6,986,398 $ 9,951,653 $14,196,275 $18,997,590
Investment income 1,340,321 1,046,774 2,564,956 2,165,889
Equipment rentals 18,179 17,163 39,538 41,931
Service fees earned 2,397,195 1,115,850 4,132,062 1,794,143
Other 26,817 8,350 26,817 10,057
Sales of modular office equipment 4,000 19,003 8,600 29,809
Net realized gains on investments 69,299 313,272 104,553 823,096
----------- ----------- ----------- -----------
Total revenues 10,842,209 12,472,065 21,072,801 23,862,515
----------- ----------- ----------- -----------
Expenses:
Losses and loss adjustment
expenses (net of reinsurance
recoveries of $10,236,917,
$9,608,102, $19,909,174
and $16,928,259) 6,374,375 6,539,360 12,226,792 12,703,095
Policy acquisition costs (1,095,173) 1,286,571 (757,869) 1,906,457
Salaries and wages 1,228,736 1,034,782 2,587,856 2,273,372
General and administrative 1,490,392 1,081,609 2,651,913 2,173,656
Cost of sales of modular office
equipment - 1,312 44 1,596
----------- ----------- ----------- -----------
Total expenses 7,998,330 9,943,634 16,708,736 19,058,176
----------- ----------- ----------- -----------
Income before provision for
income taxes 2,843,879 2,528,431 4,364,065 4,804,339
Provision for income taxes:
Current 879,444 1,042,950 1,480,103 1,743,000
Deferred 175,000 (132,000) (34,000) (163,000)
----------- ----------- ----------- -----------
Total provision for
income taxes 1,054,444 910,950 1,446,103 1,580,000
----------- ----------- ----------- -----------
Net income $ 1,789,435 $ 1,617,481 $ 2,917,962 $ 3,224,339
=========== =========== =========== ===========
Earnings per share:
Net income $ .29 $ .26 $ .47 $ .51
=========== =========== =========== ===========
Weighted average number of
common stock and common stock
equivalents 6,264,040 6,264,040 6,264,040 6,264,040
=========== =========== =========== ===========
See accompanying notes to financial statements.
2
5
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
1995 1994
---- ----
Cash Flows from Operating Activities:
Net Income $ 2,917,962 $ 3,224,339
Adjustments to reconcile net income to
net cash provided by operating activities:
Provisions for depreciation 109,814 150,943
(Gain) loss on sale of investments (104,553) (823,096)
(Increase) decrease in insurance premiums receivable (3,069,100) 120,469
(Increase) in accrued investment income and other (1,091,913) (418,288)
(Increase) decrease in deferred policy acquisition costs 70,670 (91,872)
(Increase) decrease in prepaid expenses and other assets 100,693 895
Increase (decrease) in insurance loss reserves 2,131,569 (3,728,980)
Increase in unearned premiums 2,263,463 158,149
Increase (decrease) in reinsurance funds held
and balances payable (1,215,227) (1,810,328)
Increase (decrease) in accrued expenses
and other liabilities 5,795,064 1,047,918
Increase (decrease) in current income taxes 1,639,044 2,260,527
Increase (decrease) in deferred income taxes (34,000) (163,000)
(Increase) decrease in reinsurance premiums receivable (9,630) 3,262,814
(Increase) decreases in prepaid reinsurance premiums 696,596 (2,378,469)
------------ ------------
Net cash provided by operating activities 10,200,452 812,021
------------ ------------
Cash Flows from Investing Activities:
Net change in short term investments (2,107,535) (12,205)
Purchase of equity securities (2,087,390) (1,310,867)
Sale of equity securities 1,082,553 2,781,677
Purchase of modular offices, equipment
and leasehold improvements 158,326 (119,253)
Purchase of fixed maturities (11,628,022) (12,006,169)
Sales of fixed maturities 6,781,287 10,521,827
Notes receivable 1,328 2,590
------------ ------------
Net cash used in investing activities (7,799,453) (142,400)
------------ ------------
Cash Flows from Financing Activities:
Purchase of Treasury Stock (51,875)
Dividends paid to shareholders (946,223) (1,304,142)
------------ ------------
Net cash used in financing activities (946,223) (1,356,017)
------------ ------------
Net increase (decrease) in cash (1,454,776) (686,396)
Cash, beginning year 5,479,899 4,662,848
------------ ------------
Cash, end of period $ 4,025,123 $ 3,976,452
============ ============
See notes to consolidated financial statements.
3
6
MOBILE AMERICA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
1995 1994
----------- -----------
Common Stock:
No change during period $ 168,010 $ 168,010
----------- -----------
Preferred Stock:
No change during period - -
----------- -----------
Capital in excess of par value:
No change during period 2,686,060 2,686,060
----------- -----------
Net unrealized investment gains (losses) 69,380 (201,783)
----------- -----------
Treasury Stock (388,441) (388,441)
----------- -----------
Retained earnings:
Balance at beginning of period 23,306,761 20,562,457
Net income 2,917,962 3,224,339
Cash Dividends $.18 and $.21 per share (946,223) (1,304,142)
----------- -----------
Balance at end of period 25,278,500 22,482,654
----------- -----------
Total stockholders' equity at end of period $27,813,509 $24,746,500
=========== ===========
See accompanying notes to financial statements.
4
7
MOBILE AMERICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1995 AND 1994
Note 1
In the opinion of the Registrant, the accompanying unaudited,
consolidated, condensed financial statements contain all adjustments
(consisting of only normal occurring accruals) necessary to present fairly its
financial position as of June 30, 1995, and the results of its operations and
statement of cash flow for the six months ended June 30, 1995.
Note 2
The results of operations for the six months ended June 30, 1995 are
not necessarily indicative of the results to be expected for the full year.
Note 3 - Summary of Significant Accounting Policies
(a) Basis of Financial Statement Presentation
The consolidated financial statements have been prepared on the basis
of generally accepted accounting principles which vary from statutory reporting
practices prescribed or permitted for insurance companies by regulatory
authorities.
(b) Principles of Consolidation
The accompanying consolidated financial statements include Mobile
America Corporation (the Company) and its subsidiaries, all of which are
wholly-owned. All significant intercompany transactions have been eliminated
in consolidation.
(c) Basis of Inventory Valuation
Inventories are valued at the lower of cost or market, with cost being
determined primarily under the specific identification method.
5
8
(d) Investments
The portfolio of marketable equity securities available for sale is
carried at fair value. Fixed maturity investments are all classified as held
to maturity and are recorded at amortized cost. The cost of securities sold is
based upon the specific identification method and any gains or losses are
reflected in earnings.
(e) Deferred Policy Acquisition Costs
The costs associated with acquiring new insurance contracts have been
deferred. Such costs are being amortized over the premium paying period or in
proportion to premiums earned on those contracts.
(f) Depreciation and Amortization
Depreciation and amortization of properties, equipment and leasehold
improvements are calculated principally under the straight-line method based on
the estimated useful life of the asset for financial reporting purposes.
Maintenance and repairs are charged to expenses as incurred; additions
and major betterments are capitalized and depreciated. At the time of
retirement or other disposition of property, equipment or leasehold
improvements, the accounts are relieved of the cost and the related accumulated
depreciation and any gains or losses are reflected in income.
(g) Insurance Contracts
The insurance contracts accounted for in these financial statements
include both short-duration contracts and long-duration contracts.
Short-duration contracts provide insurance protection for a fixed period of
short duration and enable the insurer to cancel the contract or to adjust the
provisions at the end of any contract period. Most property- liability
insurance contracts and certain term life insurance contracts,
6
9
such as credit life insurance, are short-duration contracts. Long-duration
contracts generally are not subject to unilateral changes in their provisions
and require the performance of various functions and services, including
insurance protection, for an extended period. Long-duration contracts include
whole-life contracts and guaranteed renewable term life contracts. Accident
and health insurance contracts may be short-duration or long-duration
depending on whether the contracts are expected to remain in force for an
extended period. The Company has not issued any participating policies.
(h) Insurance Loss Reserves
The liability for future policy benefits of long-duration contracts
has been provided for on a net level premium method based on estimated
investment yields, withdrawals, mortality, terminations, morbidity, and other
assumptions which were appropriate at the time the contracts were issued. Such
estimates were based on past experience as adjusted to provide for possible
adverse deviation from the estimates. Interest assumptions are based on
historical assumptions and experience, and range from 3% to 4.5% at June 30,
1995.
The liabilities for unpaid claims of short-duration contracts and
related adjustment expenses are determined using case basis evaluations and
statistical analysis and represent estimates of the ultimate net cost of all
reported and unreported claims relating to insured events which are unpaid at
the statement date. The liabilities include estimates of future trends in
claims severity and frequency and other factors which could vary as the claims
are ultimately settled. Although such estimates may vary, management believes
that the liabilities for unpaid claims and related adjustment expenses are
adequate. The estimates are continually reviewed, and as adjustments to these
liabilities become necessary, they are reflected in current operations.
7
10
(i) Recognition of Premium Revenues and Costs
Premiums for long-duration contracts are recognized as revenues when
due from the policyholders. A liability for the expected costs relating to
such long-duration contracts is accrued over the current and expected renewal
periods.
Premiums for short-duration contracts are recognized as revenues over
the period of the contract in proportion to the amount and duration of
insurance protection provided.
(j) Commitments and Contingencies
The IRS recently concluded its examination of the company's 1993 tax
return. The result of this examination was an adjustment in the timing of
revenue recognition for that year. Accordingly, while revenue was under
reported in 1992, this effect has reversed in subsequent periods. The net
impact on the Company's financial statement was deemed to be immaterial.
Note 4
Service fees earned of $2,397,195 in the second quarter of 1995 and
$4,132,064 in the first six months of 1995 as well as $1,115,850 in the second
quarter of 1994 and $1,794,143 in the first six months of 1994 reflect a
reclassification of fees earned by the company's managing general agency for
the servicing of insurance policies. In prior periods those amounts were
reported as a reduction to policy acquisition costs.
The amounts reclassified from policy acquisition costs to service fees
earned are as follows:
Quarter Ended June 30, Six Months Ended June 30,
1994 1995 1994 1995
----------- ----------- ----------- -----------
$ 717,656 $ 1,315,458 $ 1,296,100 $ 2,173,798
8
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Operations
Total consolidated revenues decreased by 12% from $23,862,515 for the
first six months of 1994 to $21,072,801 for the first six months of 1995.
Correspondingly, total consolidated expenses decreased 12% from $19,058,176 for
the first six months of 1994 to $16,708,736 for the first six months of 1995.
While insurance premiums earned declined 25% from $18,997,590 in the
first six months of 1994 to $14,196,275 for the first six months of 1995,
principally due to the classification of certain premiums as fees, service fees
earned increased over 700% from $1,794,143 during the first six months of 1994
to $4,132,062 during the first six months of 1995. The service fee growth is
due to a strong volume of policies administered for the State of Florida's
joint underwriting associations as well as growth of the company's premium
finance business unit. Investment income increased from $2,165,889 for the
first six months of 1994 to $2,564,956 during the first six months of 1995, an
increase of 18%. The increase in investment income was offset by a decline in
net realized capital gains from $823,096 in the first six months of 1994 to
$104,553 during the first six months of 1995.
Loss and loss adjustment expenses as a percentage of earned premium
increased from 67% for the first six months of 1994 to 86% for the first six
months of 1995. This is the result of the company's continuing efforts to
strengthen reserves in the private passenger personal injury protection line of
business. Salaries and wages and general and administrative expenses increased
from $4,447,028 during the first six months of 1994 to $5,239,769 during the
first six months of 1995.
Financial Condition
Cash dividend and any capital expenditure requirements continue to be
provided by funds generated from operations. Liquidity remains substantial as
emphasis continues to be placed on investment portfolio strength and
flexibility so as to take advantage of investment yield opportunities as well
as the timely payment of claims.
9
12
Part II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
11. Unaudited computations of earnings per share.
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8K
No reports on Form 8K were filed for the quarter ended
June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MOBILE AMERICA CORPORATION
--------------------------
Registrant
August 14, 1995 By/s/ Joseph M. Bost
--------------- --------------------------
Date Joseph M. Bost
Chief Financial Officer
By/s/ Thomas L. Stinson
-----------------------
Thomas L. Stinson
Vice President
10