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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _____________
North Carolina 56-1110199 -------------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) |
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 2003
and December 31, 2002..............................................1
Consolidated Statements of Income:
Three Months Ended March 31, 2003 and 2002.........................2
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2003 and 2002.........................3
Notes to Consolidated Financial Statements.........................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk .........10
Item 4. Controls and Procedures.............................................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................10
SIGNATURES...................................................................11
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PART I. FINANCIAL INFORMATION
Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2003 and December 31, 2002
March 31, 2003 December 31, 2002
---------------------------------------------
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 5,289,205 $ 3,781,961
Investments in securities:
Fixed maturities:
Held-to-maturity, at amortized cost 4,191,196 4,395,081
Available-for-sale, at fair value 51,988,574 52,491,648
Equity securities, at fair value 7,761,187 7,884,928
Other investments 1,047,159 564,782
---------------- -------------
Total investments 64,988,116 65,336,439
Premiums receivable, less allowance for doubtful accounts of 8,052,168 7,949,904
$1,875,000 and $1,800,000 for 2003 and 2002, respectively
Accrued interest and dividends 652,101 720,902
Prepaid expenses and other assets 927,799 1,095,230
Property acquired in settlement of claims 759,431 749,562
Property, net 4,099,541 4,109,885
Deferred income taxes, net 681,540 893,263
---------------- -------------
Total Assets $ 85,449,901 $ 84,637,146
================ =============
Liabilities and Stockholders' Equity
Liabilities:
Reserves for claims (Note 2) $ 26,075,000 $ 25,630,000
Accounts payable and accrued liabilities 2,622,944 4,780,865
Commissions and reinsurance payables 298,871 401,040
Premium taxes payable 413,530 268,972
Current income taxes payable 997,963 888,085
---------------- -------------
Total liabilities 30,408,308 31,968,962
---------------- -------------
Stockholders' Equity:
Class A Junior Participating preferred stock
(shares authorized 100,000; no shares issued) - -
Common stock-no par value (shares authorized 10,000,000;
2,510,379 and 2,515,804 shares issued and outstanding 2003 and 2002,
respectively, excluding 345,365 and 339,940 shares 2003 and 2002,
respectively, of common stock held by the Company's subsidiary) 1 1
Retained earnings 52,008,343 49,613,044
Accumulated other comprehensive income, net of deferred taxes of
$1,563,154 and $1,574,431 for 2003 and 2002, respectively (Note 3) 3,033,249 3,055,139
---------------- -------------
Total stockholders' equity 55,041,593 52,668,184
---------------- -------------
Total Liabilities and Stockholders' Equity $ 85,449,901 $ 84,637,146
================ =============
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See notes to consolidated financial statements.
Investors Title Company and Subsidiaries Consolidated Statements of Income For the Three Months Ended March 31, 2003 and 2002
(Unaudited)
2003 2002
----------- ----------
Revenues:
Underwriting income:
Premiums written $ 19,840,174 $ 14,783,848
Less-premiums for reinsurance ceded 97,189 103,123
----------- -----------
Net premiums written 19,742,985 14,680,725
Investment income - interest and dividends 674,578 669,038
Net realized gain on sales of investments 23,047 285,807
Other 662,833 434,003
----------- -----------
Total 21,103,443 16,069,573
----------- -----------
Operating Expenses:
Commissions to agents 9,392,790 7,009,679
Provision for claims (Note 2) 2,083,038 1,679,411
Salaries, employee benefits and payroll taxes 3,547,057 2,938,591
Office occupancy and operations 1,097,116 1,200,397
Business development 380,952 388,121
Taxes, other than payroll and income 54,123 76,237
Premium and retaliatory taxes 421,286 329,766
Professional fees 207,344 210,255
Other 126,931 37,937
----------- -----------
Total 17,310,637 13,870,394
----------- -----------
Income Before Income Taxes 3,792,806 2,199,179
Provision For Income Taxes 1,184,245 652,000
----------- -----------
Net Income $ 2,608,561 $ 1,547,179
=========== ===========
Basic Earnings Per Common Share (Note 4) $ 1.04 $ 0.61
=========== ===========
Weighted Average Shares Outstanding - Basic (Note 4) 2,513,507 2,516,555
=========== ===========
Diluted Earnings Per Common Share (Note 4) $ 1.00 $ 0.60
=========== ===========
Weighted Average Shares Outstanding - Diluted (Note 4) 2,610,242 2,585,773
=========== ===========
Dividends Paid $ 75,471 $ 73,904
=========== ===========
Dividends Per Share $ 0.03 $ 0.03
=========== ===========
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See notes to consolidated financial statements.
Investors Title Company and Subsidiaries Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2003 and 2002
(Unaudited)
2003 2002
------------------ ------------------
Operating Activities:
Net income $ 2,608,561 $ 1,547,179
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 198,341 280,317
Amortization, net 5,867 5,372
Issuance of common stock in payment of bonuses and fees 5,014 27,338
Provision for losses on premiums receivable 75,000 -
Net loss on disposals of property 2,128 2,320
Net realized gain on sales of investments (23,047) (285,807)
Provision (benefit) for deferred income taxes 223,000 (84,400)
Changes in assets and liabilities:
Decrease in receivables and other assets 49,099 1,121,530
Decrease in accounts payable and accrued liabilities (2,157,921) (942,952)
Increase (decrease) in commissions and reinsurance
payables (102,169) 2,751
Increase (decrease) in premium taxes payable 144,558 (171,974)
Increase in current income taxes payable 109,878 620,914
Provision for claims 2,083,038 1,679,411
Payments of claims, net of recoveries (1,638,038) (887,411)
------------------ ------------------
Net cash provided by operating activities 1,583,309 2,914,588
------------------ ------------------
Investing Activities:
Purchases of available-for-sale securities (2,317,518) (4,160,011)
Purchases of held-to-maturity securities (3,035) (162,470)
Purchases of other securities (486,000) (257,800)
Proceeds from sales of available-for-sale securities 2,928,643 2,676,095
Proceeds from sales of held-to-maturity securities 205,000 258,750
Proceeds from other securities 5,246 -
Purchases of property (190,310) (73,988)
Proceeds from sales of property 185 665
------------------ ------------------
Net cash provided by (used in) investing activities 142,211 (1,718,759)
------------------ ------------------
Financing Activities:
Repurchases of common stock (174,691) (14,354)
Exercise of options 31,886 890
Dividends paid (75,471) (73,904)
------------------ ------------------
Net cash used in financing activities (218,276) (87,368)
------------------ ------------------
Net Increase in Cash and Cash Equivalents 1,507,244 1,108,461
Cash and Cash Equivalents, Beginning of Year 3,781,961 3,069,929
------------------ ------------------
Cash and Cash Equivalents, End of Period $ 5,289,205 $ 4,178,390
================== ==================
Supplemental Disclosures:
Cash Paid During the Year for:
Income Taxes, net of refunds $ 862,000 $ 118,000
================== ==================
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Noncash Financing Activities:
Bonuses and fees totaling $5,014 and $27,338 were paid for the three months
ended March 31, 2003 and 2002, respectively, by issuance of the Company's common
stock.
See notes to consolidated financial statements.
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Principles of consolidation - The unaudited consolidated financial statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in conformity with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated in consolidation.
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.
Reclassification - Certain 2002 amounts have been reclassified to conform to 2003 classifications.
Earnings per share - Basic net income per share information is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed using the weighted average number of shares of common and dilutive potential common shares outstanding during the period.
Recent Accounting Pronouncements - In June 2002, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 addresses accounting and reporting for costs associated with exit or disposal activities and supercedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this statement had no material impact on the financial statements.
FASB Interpretation No. 45, Guarantor's Accounting and Disclosures Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others, became effective on December 31, 2002. This Interpretation addresses the disclosure requirements for guarantees and indemnification agreements entered into by the entity. The implementation of this pronouncement did not have any effect on the Company's financial statements.
Stock-Based Compensation - The Company accounts for stock-based compensation based on the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees ("APB No. 25"), which states that, for fixed plans, no compensation expense is recorded for stock options or other stock-based awards to employees that are granted with an exercise price equal to or above the estimated fair value per share of the Company's common stock on the grant date. In the event that stock options are granted with an exercise price below the estimated fair value of the Company's common stock at the grant date, the difference between the fair value of the Company's common stock and the exercise price of the stock option is recorded as deferred compensation. Deferred compensation is amortized to compensation expense over the vesting period of the stock option. The Company has adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), and Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment to FASB Statement No. 123, which together require compensation expense to be disclosed based on the fair value of the options granted at the date of the grant.
Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method required by SFAS No. 123, the Company's net income and diluted net income per common share would have been the pro forma amounts indicated in the following table:
For the Three-Month Periods Ended
March 31
---------------------------------------
2003 2002
---------------------------------------
Net income as reported $ 2,608,561 $ 1,547,179
Less: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (37,913) (29,504)
---------------------------------------
Pro forma net income $ 2,570,648 $ 1,517,675
============== ============
Net income per share:
Basic - as reported $ 1.04 $ 0.61
Basic - pro forma $ 1.02 $ 0.60
Diluted - as reported $ 1.00 $ 0.60
Diluted - pro forma $ 0.98 $ 0.59
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Transactions in the reserves for claims for the three months ended March 31, 2003 and the twelve months ended December 31, 2002 were as follows:
March 31, 2003 December 31, 2002
---------------------- ---------------------------
Balance, beginning of year $ 25,630,000 $ 21,460,000
Provision, charged to operations 2,083,038 6,871,822
Payments of claims, net of recoveries (1,638,038) (2,701,822)
-------------- -------------
Ending balance $ 26,075,000 $ 25,630,000
============== =============
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In management's opinion, the reserves are adequate to cover claim losses which might result from pending and possible claims.
Total comprehensive income for the three months ended March 31, 2003 and 2002 was $2,586,671 and $1,300,961, respectively. Other comprehensive income is comprised solely of unrealized gains or losses on the Company's available-for-sale securities.
Employee stock options are considered outstanding for the diluted earnings per common share calculation and are computed using the treasury stock method. The total increase in the weighted average shares outstanding related to these equivalent shares was 96,735 and 69,218 for the three months ended March 31, 2003 and 2002, respectively. Options to purchase 313,021 and 288,566 shares of common stock were outstanding for the three months ended March 31, 2003 and 2002, respectively. Of the total options outstanding, 60,436 and 54,686 options were not included in the computation of diluted EPS for the three months ended March 31, 2003 and 2002, respectively because the options' exercise prices were greater than the average market price of the common shares.
Income
Three Months Operating Before
Ended Revenues Income Taxes Assets
---------------------------------------------------------------------------------------------------------
March 31, 2003
---------------------------------------------------------------------------------------------------------
Title Insurance $20,066,446 $ 3,733,657 $78,237,765
Exchange Services 101,089 (34,880) 336,576
All Other 238,283 94,029 6,875,560
---------------------------------------------------------------------------------------------------------
$20,405,818 $ 3,792,806 $85,449,901
---------------------------------------------------------------------------------------------------------
March 31, 2002
---------------------------------------------------------------------------------------------------------
Title Insurance $14,823,720 $ 2,147,332 $66,951,379
Exchange Services 106,255 (20,302) 242,881
All Other 184,753 72,149 4,567,110
---------------------------------------------------------------------------------------------------------
$15,114,728 $ 2,199,179 $71,761,370
---------------------------------------------------------------------------------------------------------
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Operating revenues represent net premiums written and other revenues, excluding investment income and net realized gain on sales of investments.
The Company and its subsidiaries are involved in various routine legal proceedings that are incidental to their business. All of these proceedings arose in the ordinary course of business and, in the Company's opinion, any potential liability of the Company or its subsidiaries with respect to these legal proceedings will not, in the aggregate, be material to the Company's consolidated financial condition or operations.
The Company's 2002 Form 10-K and 2002 Annual Report to Shareholders should be read in conjunction with the following discussion since they contain important information for evaluating the Company's operating results and financial condition.
During the quarter ended March 31, 2003, the Company made no changes in its critical accounting policies as previously disclosed within the Company's Annual Report on Form 10-K for the year ended December 31, 2002.
For the quarter ended March 31, 2003, net premiums written increased 34% to $19,742,985, investment income increased 1% to $674,578, revenues increased 31% to $21,103,443 and net income increased 69% to $2,608,561, all compared with the same quarter in 2002. Net income per basic and diluted common share increased 70% and 67%, respectively, to $1.04 and $1.00, as compared with the same prior year period. For the quarter ended March 31, 2003, the title insurance segment's operating revenues increased 35% versus the first three months of 2002, while the exchange services segment's revenues decreased 5% for the three months ended March 31, 2003, compared with the same quarter in 2002.
Operating results continued to be driven by low interest rates and ongoing strength in mortgage lending. Mortgage interest rates drifted lower from the levels of the previous quarter supporting strong demand for both refinancing and home sales in the face of a sluggish economy. According to the Freddie Mac Weekly Mortgage Rate Survey, the monthly average 30-year fixed mortgage interest rates decreased to an average of 5.84% for the quarter ended March 31, 2003, compared with 6.97% for the quarter ended March 31, 2002. The volume of business increased in the first quarter of 2003 as the number of policies and commitments issued rose to 98,227, an increase of 34.4% compared with 73,082 in the same period in 2002.
Branch net premiums written as a percentage of total net premiums written were 36% for both the three months ended March 31, 2003 and 2002. Net premiums written from branch operations increased 34% and 22% for the three months ended March 31, 2003 and 2002, respectively, as compared with the same period in the prior year.
Agency net premiums written as a percentage of total net premiums written were 64% for both the three months ended March 31, 2003 and 2002. Agency net premiums increased 35% and 32% for the three months ended March 31, 2003 and 2002, respectively, as compared with the same period in the prior year.
Shown below is a schedule of premiums written for the three months ended March 31, 2003 and 2002 in all states in which the Company's two insurance subsidiaries, Investors Title Insurance Company and Northeast Investors Title Insurance Company, currently underwrite insurance:
State 2003 2002
----- ---- ----
Alabama $ 283,964 $ 144,395
Arkansas 12,018 -
District of Columbia 3,025 -
Florida 14,980 -
Georgia (9,487) (33,505)
Illinois 313,331 -
Indiana 86,965 2,984
Kentucky 431,100 257,156
Louisiana 1,204 -
Maryland 404,913 300,362
Michigan 1,896,418 2,227,176
Minnesota 607,769 392,241
Mississippi 237,484 223,025
Missouri 6,582 -
Nebraska 494,856 200,666
New Jersey 17,084 3,545
New York 1,412,888 825,582
North Carolina 7,067,357 5,229,578
Ohio 24,286 1,440
Pennsylvania 1,563,339 916,885
South Carolina 1,572,149 1,127,063
Tennessee 925,698 737,215
Virginia 2,024,708 1,831,338
West Virginia 444,058 382,719
Wisconsin (100) 3,330
--------------------- ---------------------
Direct Premiums 19,836,589 14,773,195
Reinsurance Assumed 3,585 10,653
Reinsurance Ceded (97,189) (103,123)
--------------------- ---------------------
Net Premiums $19,742,985 $14,680,725
===================== =====================
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Total operating expenses increased 25% for the three-month period ended March 31, 2003, compared with the same period in 2002. This was due primarily to an increase in commission expense as a result of increased business from agent sources. The increase in volume of premiums
and costs associated with entering and supporting new markets also contributed to the increase in operating expenses.
The provision for claims as a percentage of net premiums written was 10.55% for the three months ended March 31, 2003, versus 11.44% for the same period in 2002. The decrease in the percentage of the provision for claims to net premiums written is primarily the result of improved claims experience.
The provision for income taxes was 31.22% of income before income taxes for the three months ended March 31, 2003, versus 29.65% for the same period in 2002. The increase in the tax provision was primarily due to a lower mix of tax-exempt investment income to taxable income in 2003 compared with 2002.
Net cash provided by operating activities for the three months ended March 31, 2003, amounted to $1,578,295 compared with $2,887,250 for the same three-month period of 2002. The decrease is primarily the result of a decrease in accounts payable and accrued liabilities, primarily due to the payment of accrued bonuses and retirement contributions, and an increase in payments of claims, net of recoveries offset by an increase in net income.
On May 9, 2000, the Board of Directors approved the repurchase of 500,000 shares of the Company's common stock. Pursuant to this approval, the Company repurchased 59,172 shares at an average price of $17.06 per share. For the three months ended March 31, 2003 and 2002, a total of 7,854 and 775 shares at an average price of $22.24 and $18.52 per share, respectively, were repurchased.
During the three months ended March 31, 2003, the Company repurchased common stock for $174,691 and issued common stock totaling $36,900 in satisfaction of stock option exercises, stock bonuses and other stock issuances.
Management believes that funds generated from operations (primarily underwriting and investment income) will enable the Company to adequately meet its operating needs and is unaware of any trend likely to result in adverse liquidity changes. 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.
Except for the historical information presented, the matters disclosed in the foregoing discussion and analysis and other parts of this report include forward-looking statements. These statements represent the Company's current judgment on the future and are subject to risks and uncertainties that could cause actual results to differ materially. Such factors include, without limitation: (1) that the demand for title insurance will vary due to factors beyond the control of the Company such as changes in mortgage interest rates, availability of mortgage funds, level of real estate activity, cost of real estate, consumer confidence, supply and demand for real estate, inflation and general economic conditions; (2) that losses from claims may be greater than anticipated such that reserves for possible claims are inadequate; (3) that unanticipated adverse changes in securities markets could result in material losses on investments made by the Company; and (4) the
Company's dependence on key management personnel, the loss of whom could have a material adverse effect on the Company's business. Other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission.
The Company's market risk exposure has not changed materially from the exposure as disclosed in the Company's 2002 Annual Report on Form 10-K.
Based on their evaluation of the Company's disclosure controls and procedures, which was completed within 90 days prior to the filing of this report, the Chief Executive Officer and the Chief Financial Officer of the Company concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission's rules and forms. In reaching this conclusion, the Company's Chief Executive Officer and Chief Financial Officer determined that the Company's disclosure controls and procedures are effective in ensuring that such information is accumulated and communicated to the Company's management to allow timely decisions regarding required disclosure.
There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
3(iv) Articles of Amendment to Articles of Incorporation
99(i) Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
During the quarterly period covered by this report, the Company did not file any reports on Form 8-K.
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
By: /s/ James A. Fine, Jr.
----------------------
James A. Fine, Jr.
President, Principal Financial Officer and
Principal Accounting Officer
Dated: May 14, 2003
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Exhibit 3(iv)
ARTICLES OF AMENDMENT
of
INVESTORS TITLE COMPANY
The undersigned corporation hereby submits these Articles of Amendment for the purpose of amending its Articles of Incorporation to fix the designation, preferences, limitations, and relative rights of a series of its Preferred Stock:
1. The name of the corporation is Investors Title Company.
2. The following resolution relating to the fixing of the designation, preferences, limitations, and relative rights of the Series A Junior Participating Preferred Stock of the Corporation was duly adopted by the Board of Directors of the Corporation at a meeting held on the 12th day of November, 2002, without shareholder approval, which was not required because the Articles of Incorporation, as amended, of the Corporation provide that the Board of Directors may determine the preferences, limitations, and relative rights of that class:
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation (the "Board of Directors") by the Articles of Incorporation, as amended, of the Corporation, the Board of Directors hereby creates a series of Preferred Stock of the Corporation and hereby states the designation and number of shares, and fixes the preferences, limitations, and relative rights thereof as follows:
1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock"), and the number of shares constituting the Series A Preferred Stock shall be 100,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of capital stock ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock (as defined in paragraph 12 below), and of any Junior Stock (as defined in paragraph 12 below), shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 15th day of March, June, September, and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. If the Corporation shall at any time after November 12, 2002 (the "Rights Declaration Date") declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination of the outstanding shares of Common Stock ( by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) The Board of Directors shall declare a dividend or distribution on the Series A Preferred Stock as provided in subparagraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is on or before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue and be cumulative from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series A Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of shareholders of the Corporation. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as a single class on all matters submitted to a vote of shareholders of the Corporation.
(c) Except as set forth herein or as otherwise provided in the Articles of Incorporation, as amended, of the Corporation, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding shares of Series A Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions on, or redeem or repurchase or otherwise acquire for consideration, any shares of Junior Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of Parity Stock (as defined in paragraph 12 below), except dividends paid ratably on the Series A Preferred Stock and all such Parity Stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or repurchase or otherwise acquire for consideration shares of any Parity Stock; provided, however, that the Corporation may at any time redeem, repurchase or otherwise acquire shares of any such Parity Stock in exchange for shares of any Junior Stock; or
(iv) repurchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of Parity Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under subparagraph (a) above, purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in this resolution, in the Articles of Incorporation, as amended, of the Corporation or in any other Articles of Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of Junior Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, or (b) to the holders of Parity Stock, except distributions made ratably on the Series A Preferred Stock and all such other Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Preferred Stock were entitled immediately prior to such event under the proviso set forth in (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. If the Corporation shall enter into any consolidation, merger, share exchange, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, or any combination of the foregoing, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash or any other property, as the case may be, into which or for which each share of Common Stock is changed or exchanged. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
8. No Redemption. The Series A Preferred Stock shall not be redeemable.
9. Rank. The Series A Preferred Stock shall rank junior to all other series and classes of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series or class shall provide otherwise.
10. Amendment. The Articles of Incorporation, as amended, of the Corporation, including, without limitation, this resolution, shall not be amended in any manner (whether by merger, consolidation or otherwise) so as to adversely affect the powers, preferences or special rights of the Series A Preferred Stock without the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock.
12. Certain Definitions. As used herein with respect to the Series A Preferred Stock, the following terms shall have the following meanings:
(a) "Common Stock" means the common stock, no par value, of the Corporation at the date hereof or any other stock resulting from successive changes or reclassification of the common stock.
(b) "Junior Stock" means the Common Stock and any other class or series of capital stock of the Corporation hereafter authorized or issued over which the Series A Preferred Stock has preference or priority as to the payment of dividends or distributions of assets upon any liquidation, dissolution or winding up of the Corporation.
(c) "Parity Stock" means any class or series of capital stock of the Corporation hereafter authorized or issued ranking pari passu with the Series A Preferred Stock as to the payment of dividends or distributions of assets upon any liquidation, dissolution or winding up of the Corporation.
IN WITNESS WHEREOF, Investors Title Company has caused these Articles of Amendment, which were duly adopted by the Board of Directors of the Corporation on November 12, 2002, to be signed by its Chief Executive Officer on this 12th day of November, 2002.
INVESTORS TITLE COMPANY
B
By /s/ J. Allen Fine
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J. Allen Fine
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Exhibit 99(i)
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections
(a) and (b) of section 1350, a chapter 63 of title 18, United States
Code), each of the undersigned officers of Investors Title Company, a
North Carolina corporation (the "Company"), does hereby certify that:
The Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 14, 2003 /s/ J. Allen Fine
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J. Allen Fine
Chief Executive Officer
Dated: May 14, 2003 /s/ James A. Fine, Jr.
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James A. Fine, Jr.
Chief Financial Officer
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The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.
A signed original of this written statement required by Section 906 has been provided to Investors Title Company and will be retained by Investors Title Company and furnished to the Securities and Exchange Commissionor its staff upon request.
Certification
I, J. Allen Fine, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investors Title Company;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 14, 2003 /s/ J. Allen Fine ------------------ J. Allen Fine Chief Executive Officer |
Certification
I, James A. Fine, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investors Title Company;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: May 14, 2003 /s/ James A. Fine, Jr. ---------------------- James A. Fine, Jr. Chief Financial Officer |