UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 20022003
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11774
INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)
North Carolina 56-1110199
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 North Columbia Street
Chapel Hill, North Carolina 27514
(919) 968-2200
Securities registered pursuant to section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, no par value
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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
The aggregate market value of the common shares held by non-affiliates was
$38,094,868$56,480,945 based on the closing sales price on the NASDAQ National Market
System on the last business day of the registrant's most recently completed
second fiscal quarter (June 30, 2002)2003).
As of March 20, 2003,19, 2004, there were 2,855,744 common shares of the registrant
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Investors Title Company's Annual Report to Shareholders for
the fiscal year ended December 31, 20022003 are incorporated by reference in Parts
I, II and IV hereof and portions of Investors Title Company's Proxy Statementdefinitive proxy
statement for the Annual Meeting of Shareholders to be held on May 21, 200319, 2004 are
incorporated by reference in Part III hereof.
SAFE HARBOR STATEMENT
ExceptThis Annual Report on Form 10-K, as well as information included in future
filings by the Company with the Securities and Exchange Commission and
information contained in written material, press releases and oral statements
issued by or on behalf of the Company, contains, or may contain, forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that reflect management's current outlook for future periods. These
statements may be identified by the historical information presented, the matters disclosed in
the foregoing discussion and analysisuse of words such as "plan," "expect,"
"aim," "believe," "project," "anticipate," "intend," "estimate," "will,"
"should," "could" and other parts of this report includeexpressions that indicate future events and trends.
All statements that address expectations or projections about the future,
including statements about the Company's strategy for growth, product and
service development, market position, claims, expenditures and financial
results, are forward-looking statements. TheseForward-looking statements represent the Company's current
judgmentare based on
thecertain assumptions and expectations of future andevents that are subject to risks
and uncertainties that could
cause actualuncertainties. Actual future results and trends may differ materially from
historical results or those projected in any such forward-looking statements
depending on a variety of factors, including, but not limited to, differ materially. Such factors include, without
limitation:the following:
(1) that the demand for title insurance will vary withdue 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;Company's investments; and (4) the Company's dependence of the Company on key
management personnel, the loss of whom could have a material adverse affect 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.
INVESTORS TITLE COMPANY AND SUBSIDIARIES
INDEX
PART I
ItemITEM 1. Business..............................................................................................1
ItemBUSINESS.......................................................................................................4
ITEM 2. Properties............................................................................................9
ItemPROPERTIES....................................................................................................12
ITEM 3. Legal Proceedings.....................................................................................9
ItemLEGAL PROCEEDINGS.............................................................................................12
ITEM 4. Submission of Matters to a Vote of Security Holders...................................................9
ItemSUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................................12
ITEM 4A. Executive Officers of the Company....................................................................10EXECUTIVE OFFICERS OF THE COMPANY.............................................................................12
PART II
ItemITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters................................10
ItemMARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................................13
ITEM 6. Selected Financial Data..............................................................................11
ItemSELECTED FINANCIAL DATA.......................................................................................13
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................11
ItemMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................13
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk...........................................11
ItemQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................................14
ITEM 8. Financial Statements and Supplementary Data..........................................................11
ItemFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................................14
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................11CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........................14
ITEM 9A. CONTROLS AND PROCEDURES.......................................................................................14
PART III
ItemITEM 10. Directors and Executive Officers of the Registrant...................................................12
ItemDIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................................15
ITEM 11. Executive Compensation...............................................................................12
ItemEXECUTIVE COMPENSATION........................................................................................15
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.......12
ItemSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS................15
ITEM 13. Certain Relationships and Related Transactions.......................................................12
ItemCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................................15
ITEM 14. Controls and Procedures..............................................................................12PRINCIPAL ACCOUNTANT FEES AND SERVICES........................................................................15
PART IV
ItemITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................................13
Signatures......................................................................................................16
Certifications..................................................................................................17EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K..............................................16
SIGNATURES.................................................................................................................17
PART I
ITEM 1. BUSINESS
GENERAL
Investors Title Company (the "Company") is a holding company that was
incorporated in the State of North Carolina in February 1973. The Company became
operational on June 24, 1976, when it acquired Investors Title Insurance Company
("ITIC") as a wholly owned subsidiary under a plan of exchange of shares of
common stock. On September 30, 1983, the Company acquired Northeast Investors
Title Insurance Company ("NE-ITIC"), formerly Investors Title Insurance Company
of South Carolina, as a wholly owned subsidiary under a plan of exchange of
shares of common stock. Investors Capital Management Company ("ICMC"), a wholly
owned subsidiary of the Company, was organized on October 17, 2003. The
Company's most recent subsidiary, Investors Trust Company ("Investors Trust"),
was granted a trust charter by the North Carolina Banking Commissioner on
February 17, 2004.
The Company's executive offices are located at 121 North Columbia Street,
Chapel Hill, North Carolina 27514. The Company's telephone number is (919)
968-2200, its facsimile number is (919) 968-2235, and its websiteInternet address is
www.invtitle.com. The Company makes available free of charge on its Internet
website its annual report on Form 10-K, its quarterly reports on Form 10-Q, its
current reports on Form 8-K, and all amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after such materials are electronically
filed with or furnished to the Securities and Exchange Commission.
The Company engages primarily in two segmentsthree lines of business. The main
business activity is the issuance of title insurance through ITIC and NE-ITIC.
The second segmentline of business provides tax-free exchange services through its
subsidiaries, Investors Title Exchange Corporation and Investors Title
Accommodation Corporation. The Company has also recently entered into a third
line of business, which it added to supplement its traditional lines of
business, providing investment management and trust services to individuals,
trusts and other entities. See Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 13 of Notes to Consolidated
Financial Statements in the 20022003 Annual Report to Shareholders incorporated by
reference in this Form 10-K Annual Report for additional information related to
the Company's operating segments.
Title Insurance
Through its two wholly owned subsidiaries, ITIC and NE-ITIC, the Company
underwrites land title insurance for owners and mortgagees as a primary insurer
and as a reinsurer for other title insurance companies. Title insurance protects
against loss or damage resulting from defects that affect the title to real
property. The commitment and policies issued are the standard American Land
Title Association approved forms.
There are two basic types of title insurance policies - one for the
mortgage lender and one for the real estate owner. A lender often requires
property owners to purchase title insurance to protect its position as a holder
of a mortgage loan, but the lender's title insurance policy does not protect the
4
property owner. The property owner needs to purchase an owner's title insurance
policy to protect his investment.
When real property is conveyed from one party to another, occasionally
there is a hidden defect in the title or a mistake in a prior deed, will or
mortgage that may give a third party a legal claim against such property. If a
claim is made against real property, title insurance provides a corporate
guarantee against insured defects, pays all legal expenses to eliminate any
title defects, pays any claims arising from errors in title examination and
recording, and pays any losses arising from hidden defects in title and defects
that are not of record. Title insurance provides an assurance that the insurance
holder's ownership and use of such property will be defended promptly against
claims, at no cost, whether or not the claim is valid.
1
A title defect is one of any number of things that could jeopardize the
property owner's interest. It could be an unsatisfied mortgage, lien, judgment
or other unrecorded claim against the property. It could arise through
easements, use restrictions or other existing covenants, or it could be a hidden
risk. Title insurance generally protects against four kinds of hidden risks --
errors in the public records such as incorrect information in deeds and
mortgages regarding names, signatures and legal descriptions; judgments, liens
and mortgages or any other claims against the property or the seller which
become the new owner's responsibility after closing, such as unpaid taxes,
assessments and other debts to creditors; claims to ownership by the spouse of a
former owner or by the "missing heir" of a deceased owner who did not receive
his share of the estate; and invalid deeds or other transfers by sellers who did
not actually own the property or by previous owners who were minors or not
mentally competent.
ITIC was incorporated in the State of North Carolina on January 28, 1972,
and became licensed to write title insurance in the State of North Carolina on
February 1, 1972. At present, ITIC mainly writes land title insurance both as a
primary insurer and as a reinsurer throughout the eastern and midwestern United
States. ITIC is the leading title insurer of North Carolina property and has
held this position of most premiums written for nineteentwenty years based on amounts
reported to the North Carolina Department of Insurance. ITIC writes title
insurance through issuing agents or branch offices in the District of Columbia
and the States of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana,
Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri,
Nebraska, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, Virginia, West Virginia and Wisconsin. In addition to the states in
which ITIC currently writes title insurance, it is also licensed to write title
insurance in the States of Arizona, Colorado, Connecticut, Delaware, Idaho,
Kansas, Louisiana, Maine, Massachusetts, Missouri, Montana, Nevada, North Dakota, Oklahoma, Rhode
Island, Texas, Utah, Vermont and Wyoming. Agents issue policies for ITIC and may
provide other services such as escrowsearch and settlement services.
The Settlement Services division of ITIC, which became operational in
January 2002, provides a variety of closing-related services to lenders. The
services provided by this division include scheduling closings for lenders,
preparing HUD statements, paying off existing mortgages and liens, making
post-closing disbursements and providing witness closers upon request. By
December 31, 2002, Settlement Services was providing closing assistance to
lenders in Maryland, Michigan and Virginia, and it anticipates expanding into
additional states in 2003. The Settlement Services division derives its income
from the fees it charges on a transactional basis, and such fees vary based upon
the state in which services are provided.
NE-ITIC was incorporated in the State of South Carolina on February 23,
1973, and became licensed to write title insurance in that state on November 1,
1973. It currently writes title insurance as a primary insurer and as a
reinsurer in the State of New York. NE-ITIC is also licensed to write title
insurance in North Carolina and South Carolina.
Each state license authorizing ITIC or NE-ITIC to write title insurance
must be renewed annually. These licenses are necessary for the companies to
operate as a title insurer in each state in
5
which they are held and the loss of a license in any state by either company
would prevent the company from issuing title insurance in that state.
2
In the State of North Carolina, ITIC issues title insurance commitments
and policies through its home office and its 27 branch offices that are located
throughout North Carolina.
In the ordinary course of business, ITIC and NE-ITIC reinsure certain
risks with other title insurers for the purpose of limiting their exposure. They
also assume reinsurance for certain risks of other title insurers for which they
receive additional income. For the last three years, reinsurance activities
accounted for less than 1% of total premium volume.
As of December 31, 2002,2003, ITIC had a risk retention limit of $2,000,000,$2,750,000,
meaning that it assumed primary risks up to $2,000,000.$2,750,000. It then reinsured the
next $250,000 of risk with NE-ITIC, and all risks above $2,250,000$3,000,000 were
reinsured with an unrelated reinsurer.
As of December 31, 2002,2003, NE-ITIC had a risk retention limit of $250,000,
meaning that it assumed primary risks up to $250,000. It then reinsured the next
$2,000,000$2,750,000 of risk with ITIC, and all amounts above $2,250,000$3,000,000 were reinsured
with an unrelated reinsurer.
Both ITIC's and NE-ITIC's risk retention limits are self-imposed and are
more conservative than state insurance regulations require. ITIC's self-imposed
retention of $2,000,000$2,750,000 is only 14.9%17.2% of its statutorily permitted retention of
$13,398,715.$16,019,023. NE-ITIC's self-imposed retention of $250,000 is only 14.6%13.3% of its
statutorily permitted retention of $1,708,111.
ITIC's financial stability$1,882,469.
ITIC has been recognized by two independent Fannie Mae-approved actuarial
firms, Demotech, Inc. and LACE Financial Corporation, with rating categories of
"A Double Prime - unsurpassed
financial stability"Prime" and "A - strong overall financial condition."A." NE-ITIC's financial stability also has been recognized
by two Fannie Mae-
approved actuarial firmsDemotech, Inc. and LACE Financial Corporation with rating categories of "A
Prime -Prime" and "A+." According to Demotech, title insurance underwriters earning a
financial stability rating of A" (A Double Prime) or A' (A Prime) possess
unsurpassed financial stability" andstability related to maintaining positive surplus as
regards policyholders, regardless of the severity of a general economic downturn
or deterioration in the title insurance cycle. A LACE rating of "A+ -" or "A"
indicates that a title insurance company has a strong overall financial
condition."condition that will allow it to meet its future claims and that, generally, the
company has good operating earnings, is well capitalized and has adequate
reserves.
Exchange Services
In 1988, the Company established Investors Title Exchange Corporation, a
wholly owned subsidiary ("ITEC"), to provide services in connection with
tax-free exchanges of like-kind property. ITEC acts as an intermediary in
tax-free exchanges of property held for productive use in a trade or business or
for investments, and its income is derived from fees for handling exchange
transactions.
The Company established South Carolina Document Preparation Company
("SCDPC") as a wholly owned subsidiary in 1994. In the first quarter of 2001,
SCDPC changed its name to Investors Title Accommodation Corporation ("ITAC") and
began serving as an exchange accommodation titleholder, offering a vehicle for
accomplishing a reverse exchange when a taxpayer must acquire replacement
property before selling the relinquished property.
36
Investment Management and Trust Services
The Company organized ICMC, a wholly owned subsidiary, as a North Carolina
corporation on October 17, 2003. ICMC is currently licensed as an investment
adviser in North Carolina and South Carolina. Investors Trust, also a wholly
owned subsidiary of the Company, received its North Carolina trust charter on
February 17, 2004. The Company anticipates that ICMC and Investors Trust will
work together to provide investment management and trust services to
individuals, companies, banks and trusts. These subsidiaries did not have any
significant activities in 2003, and are not currently a reportable segment for
which financial information is presented in the financial statements and there
is no assurance that this business will be successful.
OPERATIONS OF SUBSIDIARIES
For a description of net premiums written geographically, refer to
Management's Discussion and Analysis of Financial Condition and Results of
OperationsOperations. See Note 13 of Notes to Consolidated Financial Statements in the
20022003 Annual Report to Shareholders incorporated by reference in this Form 10-K
Annual Report.Report for additional information related to the Company's operating
segments.
Title Insurance
ITIC and NE-ITIC offer primary title insurance coverage to owners and
mortgagees of real estate and reinsurance of title insurance risks to other
title insurance companies. Title insurance premiums written reflect a one-time
premium payment, with no recurring premiums. Premiums are recorded and policies
or commitments are issued upon receipt of final certificates or preliminary
reports with respect to titles. Title insurance commissions earned by the
Company's agents are recognized as expense concurrently with premium
recognition.
See Note 13 of Notes to Consolidated Financial Statements in the
2002 Annual Report to Shareholders incorporated by reference in this Form 10-K
Annual Report for additional information related to the Company's operating
segments.
Exchange Services
ITEC and ITAC offerprovide services in connection with tax-free exchanges. See
Note 13 of Notes to Consolidated Financial Statements in the 2002 Annual Report
to Shareholders incorporated by reference in this Form 10-K Annual Report for
additional information related to the Company's operating segments.
SEASONALITY
Title Insurance
Title insurance premiums are closely related to the level of real estate
activity and the average price of real estate sales. The availability of funds
to finance purchases directly affects real estate sales. Other factors include
consumer confidence, economic conditions, supply and demand, mortgage interest
rates and family income levels. Historically, the first quarter has the least
real estate activity because fewer real estate transactions occur, while the
remaining quarters are more active. Refinance activity is generally less
seasonal, but it is subject to interest rate volatility. Fluctuations in
mortgage interest rates can cause shifts in real estate activity outside of the
normal seasonal pattern.
7
Exchange Services
Seasonal factors affecting the level of real estate activity and the
volume of title premiums written will also affect the demand for exchange
services.
MARKETING
Title Insurance
ITIC's marketing plan is based upon providing fast and efficient service
in the delivery of title insurance coverage through a home office, branch
offices, and issuing agents. In North Carolina, ITIC operates through a home
4
office and 27 branch offices. In South Carolina and Michigan, ITIC operates
through a branch office and issuing agents located conveniently to customers
throughout the state. ITIC also writes title insurance policies through issuing
agents in the District of Columbia and the States of Alabama, Arkansas, Florida,
Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota,
Mississippi, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Pennsylvania,
Tennessee, Virginia, West Virginia and Wisconsin.
NE-ITIC currently operates through agency offices in the State of New
York.
ITIC and NE-ITIC strive to provide superior service to their customers and
consider this an important factor in attracting and retaining customers. Branch
and corporate personnel strive to develop new business and agency relationships
to increase market share. Ashare and ITIC's Commercial Services Division established in the
first quarter of 2001 provides
services to commercial clients. The Company's marketing efforts are also
enhanced through advertising in various periodicals.
Exchange Services
Marketing of exchange services offered by ITEC and ITAC has been
increasingly incorporated into the marketing of the core title products offered
by ITIC and NE-ITIC. ITEC and ITAC are also promoted through the marketing
efforts of this division. The Commercial Services Division of ITIC also markets the
services offered by ITEC and ITAC to its clients.
CUSTOMERS
The Company is not dependent upon any single customer or a few customers,
and the loss of any single customer would not have a material adverse effect on
the Company.
RESERVES
The total reserve for all reported and unreported losses the Company
incurred through December 31, 2002, is represented by the reserve for claims.
The Company's reserves for unpaid losses and loss adjustment expenses are
established using estimated amounts required to settle claims for which notice
has been received (reported) and the amount estimated to be required to satisfy
incurred claims of policyholders which may be reported in the future. Despite
the variability of such estimates, management believes that the reserves are
adequate to cover claim losses which might result from pending and future
claims. The Company continually reviews and adjusts its reserve estimates to
reflect its loss experience and any new information that becomes available.
Claims and losses paid are charged to the reserves for claims. Although
claims losses are typically paid in cash, occasionally claims are settled by
purchasing the interest of the insured or the claimant in the real property.
When this occurs, the acquiring company carries assets at the lower of cost or
estimated realizable value, net of any indebtedness on the property. Refer to
Note 6 of Notes to Consolidated Financial Statements in the 2002 Annual Report
to Shareholders incorporated by reference in this Form 10-K Annual Report for a
further discussion of reserves.
5
INSURED RISK ON POLICIES IN FORCE
Generally, the amount of the insured risk on a title insurance policy is
equal to the lesser of the amount of the loan secured by the policy, the purchase price of the insured property or the fair
market value of the property. In the event that a claim is made against the
property, the insurer is also responsible for paying all legal expenses in
connection with defending the insured party and eliminating any title defects
affecting the property. The insurer may, however, choose to pay the policy
limits to the insured, at which time the insurer's duty to defend the claim is
satisfied.
8
At any given time, the insurer's actual financial risk is only a portion
of the aggregate insured risk of all policies in force. The reduction in risk
results in part from the reissuance of title insurance policies by other
underwriters when the property is conveyed or refinanced. An owner's policy is
effective only as long as the insured has an ownership interest in the property
or has liability under warranties of title. Furthermore, the coverage on a
lender's title insurance policy is reduced and eventually terminated as the loan
it secures is paid. Due to the variability of these factors, the aggregate
contingent liability of the Company and its subsidiaries cannot be determined
with any precision.
ENVIRONMENTAL MATTERS
The title insurance policies ITIC and NE-ITIC currently issue exclude
liability for environmental risks and contamination. Although older policies doissued
prior to 1992 may not specifically exclude such environmental risks, they
generally do not provide affirmative coverage for such risks. As a result, the
Company does not anticipate that it or its subsidiaries will incur any
significant expenses related to environmental claims.
In connection with effecting tax-free exchanges of like-kind property,
ITEC and ITAC may temporarily hold title to property pursuant to an
accommodation titleholder agreement. In such situations, the person or entity
for which title is being held must execute an indemnification agreement pursuant
to which it agrees to indemnify ITEC or ITAC, as appropriate, for any
environmental or other claims which may arise as a result of the arrangement.
REGULATIONS
Title Insurance
The Company is an insurance holding company and therefore it is subject to
regulation in the states in which its insurance subsidiaries do business. These
regulations, among other things, require insurance holding companies to register
and file certain reports and require prior regulatory approval of the payment of
dividends and other intercompany transfers.
Title insurance companies are extensively regulated under applicable state
laws. TheAll states have requirements for admission to do business as an insurance
company, including minimum levels of capital and surplus. State regulatory
authorities monitor the stability and service of insurance companies and possess
broad powers with respect to the licensing of title insurers and agents, rates,
investments, policy forms, financial reporting, reserve requirements, and
dividend restrictions, as well as examinations and audits of title insurers. The
Company's two insurance subsidiaries are subject to examination at any time by
the insurance regulators in the states where they are licensed.
Proposals to change the laws and regulations governing insurance holding
companies and the title insurance industry are often introduced in Congress, in
the state legislatures and before the various insurance regulatory agencies. The
Company regularly monitors such proposals and legislation, although the
likelihood and timing of them and the impact they may have on the Company and
its subsidiaries cannot be determined at this time.
9
ITIC is domiciled in North Carolina and is subject to North Carolina
insurance regulations. The North Carolina Department of Insurance typically
schedules financial examinations every five years. ITIC was last examined by the
North Carolina Department of Insurance for the period January 1, 1995 through
December 31, 1999. No material deficiencies were noted in the report.
ITIC is also subject to an annual financial examination by the Illinois
Department of Insurance. On September 11, 2003, the Illinois Department of
Insurance completed its examination of ITIC for the period July 1, 2002 through
June 30, 2003. No material deficiencies were noted in the report.
NE-ITIC is domiciled in South Carolina and subject to South Carolina
insurance regulations. The South Carolina Department of Insurance periodically
schedules financial examinations. NE-ITIC was examined by the South Carolina
6
Department of Insurance for the period January 1, 1998 through December 31,
2000. No material deficiencies were noted in the report.
In addition to financial examinations, both ITIC and NE-ITIC are subject to
market conduct examinations.examinations by the North Carolina Department of Insurance and
the South Carolina Department of Insurance, respectively. These audits examine
domiciled state activity. ITIC's last market conduct examination commenced on
April 19, 1999 for the period January 1, 1996 through December 31, 1998, with no
material deficiencies noted. NE-ITIC's last market conduct examination coincided
with its financial examination, which commenced on November 19, 2001 for the
period January 1, 1998 through December 31, 2000. No material deficiencies were
noted for NE-ITIC by the market conduct examiners.
In accordance with the insurance lawsBoth ITIC and regulations applicable to title
insurance in the State of North Carolina, ITIC has established and maintains a
statutory premium reserve for the protection of policyholders. As of December
31, 2002, ITIC's statutory premium reserve was $25,176,594. For years prior to
1999, ITIC reserved an amount equal to 10% of current year premiums written and
reduced such amounts annually by 5% beginning one year subsequent to the annual
addition. For years after 1998, 10% of direct premiums written plus premiums for
reinsurance assumed less premiums for reinsurance ceded is reserved and reduced
annually, one year subsequent to the annual addition, over a period of 20 years,
as follows: 20% the first year, 10% the second and third year, 5% for years four
through ten, 3% for years eleven through fifteen, and 2% for years sixteen
through twenty.
NE-ITIC has established and maintains a statutory premium reserve as
required by the insurance laws and regulations of the State of New York. As of
December 31, 2002, NE-ITIC's statutory premium reserve was $290,870. NE-ITIC has
accumulated a statutory premium reserve equal to $1.50 for each risk assumed
under a policy or commitment plus one-eightieth of one percent of the face
amount of each commitment or policy. Beginning in the year following the annual
addition, the reserve is reduced by 5%.
These statutory premium reserves are not recorded for financial reporting
under accounting principles generally accepted in the United States of America
("GAAP") and changes inmeet the statutory premium reserve have no effect on net
income of the Company or its subsidiaries for GAAP reporting purposes.
The Company is an insurance holding companyrequirements and therefore it is subject to
regulation in the states in which its insurance subsidiaries do business. These
regulations, among other things, require insurance holding companies to register
and file certain reports and require prior regulatory approval of intercorporate
transfers. All states set requirements for admission to do business, including
minimum levels of capital and surplus. State insurance departments have broad
administrative powers and monitor the stability and service of insurance
companies.
In addition to the financial statements which are required to be filed as
part of this report and are prepared on the basis of generally accepted
accounting principles, the Company's insurance subsidiaries also prepare
financial statements in accordance with statutory accounting principles
prescribed or permitted by state regulations. Based upon the latter principles,
as of December 31, 2002, ITIC reported $33,496,787 of capital and surplus, and
net income of $7,696,548; and NE-ITIC reported $3,416,221 of capital and
surplus, and net income of $370,423.
7
Both ITIC and NE-ITIC meet
the minimum capital and surplus requirements of the states in which they are
licensed.
Exchange Services
Intermediary services are not federally regulated and neither ITEC nor
ITAC operate in any states that regulate this industry.
COMPETITION
Title Insurance
ITIC currently operates primarily in Michigan, North Carolina,
Pennsylvania, South Carolina, Tennessee and Virginia.Virginia and NE-ITIC currently
operates in New York. ITIC's and NE-ITIC's major competitors, which together
comprise a majority of the title insurance market on a national level, are
Chicago Title Insurance Company, Commonwealth Land Title Insurance Company,
Fidelity National Title Insurance Company, First American Title Insurance
Company, Lawyers Title Insurance Corporation, Old Republic National Title
Insurance Company and Stewart Title Guaranty Company. Key elementsfactors that affect
competition in the title insurance industry are price, expertise, timeliness and
quality of service and the financial strength and size of the insurer. Title
insurance underwriters also compete for agents based upon the ratio of premium
splits between the underwriter and the agent.
In addition, there are numerous industry-related regulations and statutes
that set out conditions and requirements to conduct business. Changes to or the
removal of such regulations and statutes
10
could result in additional competition from alternative title insurance products
or new entrants into the industry that could materially affect ourthe Company's
business operations and financial condition.
Exchange Services
Competition for ITEC and ITAC comes from other title insurance companies
as well as some major banks that offer exchange services. Key elements that
affect competition are price, expertise, timeliness and quality of service and
the financial strength and size of the company. Exchange services are not a
regulated industry; therefore, there is no market data available regarding the
Company's market position in this industry.
The exchange segment is dependent upon current Internal Revenue Service
("IRS") regulations that provide taxpayers a safe harbor by using a qualified
intermediary to structure tax-free exchanges of property and using an exchange
accommodation titleholder to hold property in reverse exchange transactions.
Changes to current IRS regulations could materially affect the Company's
operations.
INVESTMENTS
The Company and its subsidiaries derive a substantial portion of their
income from investments in bonds (municipal and corporate) and equity
securities. The investment policy is designed to maintain a high quality
portfolio and maximize income. Some state laws impose restrictions upon the
types and amounts of investments that can be made by the Company's insurance
subsidiaries.
See Note 3 of Notes to Consolidated Financial Statements in the 20022003
Annual Report to Shareholders incorporated by reference in this Form 10-K Annual
Report for the major categories of investments, earnings by investment
categories, scheduled maturities, amortized cost, and market values of
investment securities.
8
EMPLOYEES
The Company has no paid employees. NE-ITIC had one full-time paid employee
as of December 31, 2002. Officers of the Company are full-time
paid employees of ITIC, which had 203216 full-time employees and 1513 part-time
employees as of December 31, 2002.2003. In addition, NE-ITIC had one full-time paid
employee and ICMC had three full-time paid employees as of December 31, 2003.
None of the employees of the Company or its subsidiaries are subject to a
collective bargaining agreement. Management considers its relationship with its
employees to be favorable.
INTELLECTUAL PROPERTY
The Company has registered two service marks with the United States Patent
and Trademark Office (the "USPTO"). The first mark was registered with the USPTO
on September 12,August 29, 2000 and the second mark was registered on August 29,September 12, 2000. In
addition, ITIC registered a service mark with the USPTO on February 3, 1987. In
the Company's opinion, the loss of these registrations would not materially
affect its business or the business of its subsidiaries.
11
ADDITIONAL INFORMATION
The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and amendments to those reports filed with or
furnished to the Securities and Exchange Commission pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 are available on the Company's
website (www.invtitle.com) as soon as reasonably practicable after the Company
electronically files such material with, or furnishes it to, the Securities and
Exchange Commission.
ITEM 2. PROPERTIES
The Company owns thetwo adjacent office buildingbuildings and property located on the
corner of North Columbia and West Rosemary Streets in Chapel Hill, North
Carolina, which serves as the Company's corporate headquarters. The main
building contains approximately 23,000 square feet.feet and has on-site parking
facilities. The Company's principal subsidiary, ITIC, leases office space in 2933
locations throughout North Carolina, South Carolina, Michigan, Nebraska and
Michigan.Tennessee. NE-ITIC leases office space in one location in New York.
The Company also owns several parcels and two buildings adjacent to the
Company's facility.
See Note 9 of Notes to Consolidated Financial Statements in the 2002
Annual Report to Shareholders incorporated by reference in this Form 10-K Annual
Report for the amounts of future minimum lease payments. Each of the
office facilities occupied by the Company and its subsidiaries are in good
condition and adequate for present operations.operations, although the Company may look at
additional space in Chapel Hill in 2004 in order to meet its future needs.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various routine legal proceedings
that are incidental to their business. AllIn the Company's opinion, based on the
present status 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2002.
9
2003.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
Following is information regarding the executive officers of the Company
as of December 31, 2002.March 19, 2004. Each officer is appointed at the annual meeting of the
Board of Directors to serve until the next annual meeting of the Board or until
his or her respective successor has been elected and qualified.
Name Age Position with Registrant Officer Since
- ---- --- ------------------------ --------------
J. Allen Fine 68 Chairman, 1973
Name Age Position with Registrant
- ---- --- ------------------------
J. Allen Fine 69 Chief Executive Officer and Chairman of the Board
James A. Fine, Jr 41 President, Treasurer, Chief Financial Officer and Director
W. Morris Fine 37 Executive Vice President, Secretary and Director
and
CEO
James A. Fine, Jr. 40 President, Director 1987
and Treasurer
W. Morris Fine 36 Executive Vice 1992
President, Director
and Secretary
12
J. Allen Fine has been Chief Executive Officer and Chairman of the Board of the
Company since its incorporation in 1973. Mr. Fine also served as President of
the Company until May 1997. Mr. Fine is the father of James A. Fine, Jr.,
President, Treasurer and Director of the Company, and W. Morris Fine, Executive
Vice President, Secretary and Director of the Company.
James A. Fine, Jr. was named Vice President of the Company in 1987. In 1997, Mr.
Fine was named President and Treasurer and appointed as a Director of the
Company. James A. Fine, Jr. is the son of J. Allen Fine, Chief Executive Officer
and Chairman of the Board of the Company, and the brother of W. Morris Fine,
Executive Vice President, Secretary and Director of the Company.
W. Morris Fine was named Vice President of the Company in 1992. In 1993, Mr.
Fine was named Treasurer of the Company and served in that capacity until 1997.
In 1997, Mr. Fine was named Executive Vice President and Secretary of the
Company. In 1999, he was appointed as a Director of the Company. W. Morris Fine
is the son of J. Allen Fine, Chief Executive Officer and Chairman of the Board
of the Company, and the brother of James A. Fine, Jr., President, Treasurer and
Director of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The high and low sales prices for the Company's common stock, as reported
on the NASDAQ National Market System, and the dividends paid per common share
for each quarter in the last two fiscal years are set forth under the caption
"Corporate Information""Common Stock Data" in the 20022003 Annual Report to Shareholders and are
incorporated by reference in this Form 10-K Annual Report. For a discussion of
10
restrictions limitingfactors that may limit the Company's ability to pay dividends on its common
stock, refer to the subsection of Management's Discussion and Analysis of
Financial Condition and Results of Operations entitled "Liquidity and Capital
Resources" in the 20022003 Annual Report to Shareholders, incorporated by reference
in this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the last five fiscal years of the Company
and its subsidiaries is set forth under the caption "Financial Highlights" in
the 20022003 Annual Report to Shareholders and is incorporated by reference in this
Form 10-K Annual Report. The information should be read in conjunction with the
Consolidated Financial Statements, Notes to Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 20022003 Annual Report to Shareholders, which are incorporated by
reference in this Form 10-K Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 20022003 Annual Report to Shareholders is incorporated by
reference in this Form 10-K Annual Report.
13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The subsection entitled "Quantitative and Qualitative Disclosures about
Market Risk" in Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 20022003 Annual Report to Shareholders is incorporated
by reference in this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data in the 20022003 Annual Report
to Shareholders are incorporated by reference in this Form 10-K Annual Report.
The financial statements meeting the requirements of Regulation S-X are
attached hereto as Schedules I, II, III, IV and V.
The supplementary financial information set forth in the section entitled
"Selected Quarterly Financial Data" in Management's Discussion and Analysis of
Financial Condition and Results of Operations in the 20022003 Annual Report to
Shareholders is incorporated by reference in this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in, nor disagreements with, accountants on
accounting and financial disclosure.
11ITEM 9A. CONTROLS AND PROCEDURES
The Company's disclosure controls and procedures are designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the Securities Exchange Act of 1934 (the "Act") was
recorded, processed, summarized and reported within the time periods specified
by the Securities and Exchange Commission's rules and forms. An evaluation was
performed under the supervision and with the participation of the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-14(c) under the Act. Based on that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective
as of December 31, 2003. In reaching this conclusion, the Company's Chief
Executive Officer and Chief Financial Officer determined that the Company's
disclosure controls and procedures were effective in ensuring that such
information was accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure.
There was no change in the Company's internal control over financial
reporting identified in connection with the above-referenced evaluation that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information pertaining to Directors of the Company under the heading
"Election of Directors" in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on May 21, 200319, 2004 is incorporated by
reference in this Form 10-K Annual Report. Other information with respect to
executive officers is contained in Part I - Item 4(a) under the caption
"Executive Officers of the Company".
The Company has adopted a written Code of Business Conduct and Ethics that
applies to all officers, directors and employees of the Company and its
subsidiaries. The Code of Business Conduct and Ethics can be found on the
Company's website at www.invtitle.com. The Company intends to make all required
disclosures concerning any amendments to, or waivers from, the Code of Business
Conduct and Ethics on its website. A copy of the Code of Business Conduct and
Ethics has also been attached to this Annual Report on Form 10-K as Exhibit 14.
ITEM 11. EXECUTIVE COMPENSATION
Information set forth under the headings "Executive Compensation",
"Performance Graph" and
"Compensation Committee Interlocks and Insider Participation" in the Company's
definitive Proxy Statement relating to the Annual Meeting of Shareholders to be
held on May 21, 200319, 2004 is incorporated by reference in this Form 10-K Annual
Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information pertaining to securities ownership of certain beneficial
owners and management under the heading "Ownership"Stock Ownership of Stock by Executive Officers
and Certain Beneficial Owners" in the Company's definitive Proxy Statement
relating to the Annual Meeting of Shareholders to be held on May 21,
200319, 2004 is
incorporated by reference in this Form 10-K Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has nothing to report in response to this Item.
ITEM 14. CONTROLS AND PROCEDURES
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 submitsInformation set forth 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 changesheading "Executive Employment Agreements"
in the Company's internal controls or in
other factors that could significantly affect these controls subsequentdefinitive Proxy Statement relating to the dateAnnual Meeting of
their evaluation.
12Shareholders to be held on May 19, 2004 is incorporated by reference in this
Form 10-K Annual Report
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information pertaining to principal accountant fees and services under the
heading "Independent Auditor Fees" in the Company's definitive Proxy Statement
relating to the Annual Meeting of Shareholders to be held on May 19, 2004 is
incorporated by reference in this Form 10-K Annual Report.
15
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The following financial statements in the 20022003 Annual Report to
Shareholders are hereby incorporated by reference in this Form 10-K Annual
Report:
Consolidated Balance Sheets as of December 31, 20022003 and 20012002
Consolidated Statements of Income for the Years Ended December 31,
2003, 2002 2001 and 20002001
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 2003, 2002 2001 and 20002001
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 2003, 2002 2001 and 20002001
Consolidated Statements of Cash FlowFlows for the Years Ended
December 31, 2003, 2002 2001 and 20002001
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a)(2) Financial Statement Schedules.
Following is a list of financial statement schedules filed as part of this
Form 10-K Annual Report:
Schedule Number Description
--------------- -----------
I Summary of Investments - Other Than Investments in Related Parties
II Condensed Financial Information of Registrant
III Supplementary Insurance Information
IV Reinsurance
V Valuation and Qualifying Accounts
All other schedules are omitted, as the required information either is not
applicable, is not required, or is presented in the consolidated financial
statements or the notes thereto.
(a)(3) Exhibits.
Exhibit Incorporated by
Number Description Reference to
- ------ ----------- ------------
3(i) ArticlesThe exhibits filed as a part of Incorporation Exhibit 1 to Form 10,
dated June 12, 1984
13
3(ii) Bylaws - Restatedthis report and Amended Included herewith
through November 12, 2002
4 Rights Agreement, dated as of November Exhibit 1 to Form 8-A
12, 2002, between Investors Title filed November 15, 2002
Company and Central Carolina Bank,
a division of National Bank of Commerce
Management contracts or compensatory plans or arrangements
10(i) 1993 Incentive Stock Option Plan Exhibit 10 to Form 10-K
for the year ended
December 31, 1993
10(ii) Employment Agreement dated Exhibit 10 to Form 10-K
February 9, 1984 with for the year ended
J. Allen Fine, Chairman December 31, 1985
10(iii) Form of Incentive Stock Option Exhibit 10(v) to Form 10-K
Agreement under 1993 Incentive for the year ended
Stock Option Plan December 31, 1994
10(iv) 1997 Stock Option and Restricted Exhibit 10(viii) to Form
Stock Plan 10-K for the year ended
December 31, 1996
10(v) Form of Nonqualified Stock Option Exhibit 10(ix) to Form 10-Q
Agreement to Non-employee Directors for the quarter ended
dated May 13, 1997 under the 1997 June 30, 1997
Stock Option and Restricted Stock Plan
10(vi) Form of Nonqualified Stock Option Exhibit 10(x) to Form 10-K
Agreement under 1997 Stock Option for the year ended
and Restricted Stock Plan December 31, 1997
10(vii) Form of Incentive Stock Option Exhibit 10(xi) to Form 10-K
Agreement under 1997 Stock Option for the year ended
and Restricted Stock Plan December 31, 1997
10(viii) Form of Amendment to Incentive Exhibit 10(xii) to Form
Stock Option Agreement between 10-Q for the quarter ended
Investors Title Company and James June 30, 2000
Allen Fine, James Allen Fine, Jr.,
William Morris Fine, George Abbitt
Snead, Ralph Nichols Strayhorn, III
and Raeford Wilder Wall, Jr., respectively
14
Exhibit Incorporated by
Number Description Reference to
- ------ ----------- ------------
10(ix) 2001 Stock Option and Restricted Exhibit 10(xiii) to Form
Stock Plan 10-K for the year ended
December 31, 2000
13 Portions of 2002 Annual Included herewith
Report to Shareholders
incorporated herein by
reference to other documents are listed in the Index to Exhibits to this report as set forth
in Parts I, II and IV hereof
21 Subsidiaries of Registrant Included herewith
23 Independent Auditors Consent and Included herewithAnnual
Report on SchedulesForm 10-K.
(b) Reports on Form 8-K.
No reports were filedOn October 29, 2003, the Company furnished a report on Form 8-K duringthat
reported under Item 12 that, on October 29, 2003, the fourthCompany released earnings
for the quarter of 2002.
15ended September 30, 2003.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrantregistrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INVESTORS TITLE COMPANY
By: /s/J. Allen Fine
-----------------------------------------------------------
J. Allen Fine, Chairman and Chief Executive
Officer Date:(Principal Executive Officer)
March 26, 200330, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 26th30th day of March, 2003.2004.
/s/J. Allen Fine /s/James R. Morton
- -------------------------------------------- ------------------------------------------------- -------------------
J. Allen Fine, Chairman and Chiefof the Board James R. Morton, Director
and Chief Executive Officer
(Principal Executive Officer)
/s/James A. Fine, Jr. /s/Lillard H. Mount A. Scott Parker III
- -------------------------------------------- ------------------------------------------------------- -----------------------
James A. Fine, Jr., President, Treasurer A. Scott Parker III, Director
and Lillard H. Mount, Director Director (Principal Financial Officer
and Principal Accounting Officer)
/s/W. Morris Fine /s/A. Scott Parker III H. Joe King, Jr.
- -------------------------------------------- -------------------------------------------------- --------------------
W. Morris Fine, Executive Vice President, A. Scott Parker III,H. Joe King, Jr., Director
Secretary and Director
/s/David L. Francis /s/William J. Kennedy III
- ---------------------------------------------------------------- -------------------------
David L. Francis, Director William J. Kennedy III, Director
/s/Loren B. Harrell, Jr.
- --------------------------------------------------------------------
Loren B. Harrell, Jr., Director
/s/William J. Kennedy III
- --------------------------------------------
William J. Kennedy III, Director
/s/H. Joe King, Jr.
- --------------------------------------------
H. Joe King, Jr., Director
16
Certifications
I, J. Allen Fine, certify that:
1. I have reviewed this annual report on Form 10-K of Investors Title Company;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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 annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual 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
functions):
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
annual 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: March 26, 2003
/s/J. Allen Fine
- -----------------------
J. Allen Fine
Chief Executive Officer
17
Certifications (continued)
I, James A. Fine, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Investors Title Company;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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 annual 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
annual report (the "Evaluation Date"); and
c) presented in this annual 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
functions):
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
annual 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: March 26, 2003
/s/ James A. Fine, Jr.
- -----------------------
James A. Fine, Jr.
Chief Financial Officer
18
SCHEDULE I
----------
INVESTORS TITLE COMPANY AND SUBSIDIARIES
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
As of December 31, 20022003
- ---------------------------------------------------------------------------------------------------------------------------
Amount at
which shown
in the
Type of Investment Cost(1) Market Value Balance Sheet(2)
------- ------------ ----------------Sheet (2)
- ---------------------------------------------------------------------------------------------------------------------------
Fixed Maturities:
Bonds:
States, municipalities and political
subdivisions $29,255,117 $31,316,899 $31,134,911$31,946,705 $34,007,562 $33,842,046
Public utilities 199,439 231,156 231,156199,547 224,832 224,832
All other corporate bonds 13,776,077 15,002,497 15,002,49718,465,006 19,476,895 19,476,895
Short-term investments 9,741,387 9,741,387 9,741,387
Certificates of deposit 10,518,165 10,518,165 10,518,165
----------- ----------- -----------1,044,677 1,044,677 1,044,677
----------------- ----------------- ----------------
Total fixed maturities 53,748,798 57,068,717 56,886,729
----------- ----------- -----------61,397,322 64,495,353 64,329,837
----------------- ----------------- ----------------
Equity Securities:
Common Stocks:
Public utilities 349,966 588,180 588,180186,529 445,084 445,084
Banks, trust and insurance companies 289,195 1,097,152 1,097,152291,442 1,104,113 1,104,113
Industrial, miscellaneous and all other 1,676,011 2,020,826 2,020,8261,857,844 2,808,158 2,808,158
Nonredeemable preferred stocks 4,078,117 4,178,770 4,178,770
----------- ----------- -----------stock 8,953,190 9,199,430 9,199,430
Redeemable preferred stock 1,000,000 1,000,000 1,000,000
----------------- ----------------- ----------------
Total equity securities 6,393,289 7,884,928 7,884,928
----------- ----------- -----------12,289,005 14,556,785 14,556,785
----------------- ----------------- ----------------
Other Investments 564,782 564,782
----------- -----------955,561 955,561
----------------- ----------------
Total investments per the consolidated balance sheet 60,706,869 65,336,439
----------- -----------
Cash equivalents 2,486,871 2,486,871
----------- -----------
Total investments 63,193,740 67,823,310
=========== ===========$ 74,641,888 $ 79,842,183
================= ================
(1) Fixed maturities are shown at amortized cost and equity securities are
shown at original cost.
(2) Bonds of states, municipalities and political subdivisions are shown at
amortized cost for held-to-maturity bonds and fair value for
available-for-sale bonds. Equity securities are shown at fair value.
SCHEDULE II
-----------
INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
AS OF DECEMBER 31, 20022003 AND 20012002
2003 2002 2001
Assets
Cash and cash equivalents $ 142,038121,587 $ 436,014142,038
Investments in equity securities 30,0002,030,000 30,000
Investments in fixed maturities,available-for-sale 3,268,225 5,036,231 2,025,748
Other investments 829,123 385,195 --
Investments in affiliated companies 47,741,967 42,928,30152,597,051 45,334,102
Other receivables 1,756,867 310,778 315,345
Deferred income taxes, net 62,046 43,067
44,318Income taxes receivable 1,327,456 --
Prepaid expenses and other assets 16,927 19,641 52,525
Property, net 2,108,948 2,074,844 2,148,622
----------- -----------
Total Assets $55,783,761 $47,980,873$64,118,230 $53,375,896
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 475,387929,484 $ 337,087475,387
Income taxes payable -- 232,325 390,097
----------- -----------
Total liabilities 929,484 707,712 727,184
----------- -----------
Stockholders' Equity:
Class A Junior Participating preferred stock - no par value
(shares authorized 100,000; no shares issued) -- --
Common stock-no par (shares authorized,
10,000,000; 2,855,744 and 2,855,744 shares issued and
2,515,8042,503,923 and 2,516,2982,515,804 shares outstanding 2003 and
2002, and
2001, respectively) 1,650,350 1,650,3501 1
Retained earnings 53,400,579 45,592,29559,756,927 49,613,044
Accumulated other comprehensive income
(net of deferred taxes: 2003: $1,768,477; 2002: $12,939, 2001: $5,689) 25,120 11,044$1,574,431) 3,431,818 3,055,139
----------- -----------
Total stockholders' equity 55,076,049 47,253,68963,188,746 52,668,184
----------- -----------
Total Liabilities and Stockholders' Equity $55,783,761 $47,980,873$64,118,230 $53,375,896
=========== ===========
See notes to condensed financial statements.
SCHEDULE II
-----------
INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 2001 AND 20002001
2003 2002 2001 2000
Revenues:
Investment income - interestincome-interest and dividends $ 96,952 $ 91,619 $ 96,624
$ 74,105
Rental income 503,031 516,018 510,132
482,267
Miscellaneous income 11,000 5,017 1,000
45
--------------------- ---------- ----------
Total 610,983 612,654 607,756
556,417
--------------------- ---------- ----------
Operating Expenses:
Office occupancy and operations 242,861 247,244 170,445
148,750
Business development 31,098 24,077 21,928
14,116
Taxes - otherTaxes-other than payroll and income 65,461 61,107 65,917
66,948
Professional fees 52,758 63,490 30,191
40,311
Other expenses 47,635 45,332 43,215
48,939
--------------------- ---------- ----------
Total 439,813 441,250 331,696
319,064
--------------------- ---------- ----------
Equity in Net Income of Affiliated Cos.* 10,850,844 7,991,438 5,850,938
2,988,984
--------------------- ---------- ----------
Income Before Income Taxes 11,022,014 8,162,842 6,126,998
3,226,337
--------------------- ---------- ----------
Provision for Income Taxes 57,000 54,000 118,000
85,874
--------------------- ---------- ----------
Net Income $10,965,014 $8,108,842 $6,008,998
$3,140,463
===================== ========== ==========
Basic Earnings per Common Share $ 4.38 $ 3.22 $ 2.35
$ 1.21
===================== ========== ==========
Weighted Average Shares Outstanding-Basic 2,503,659 2,517,328 2,554,204
2,594,891
===================== ========== ==========
Diluted Earnings Per Common Share $ 4.18 $ 3.12 $ 2.31
$ 1.21
===================== ========== ==========
Weighted Average Shares Outstanding-Diluted 2,624,473 2,597,979 2,599,714
2,601,283
===================== ========== ==========
* Eliminated in consolidation
See notes to condensed financial statements.
SCHEDULE II
INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 2001 AND 20002001
2003 2002 2001 2000
Operating Activities:
Net income $ 10,965,014 $ 8,108,842 $ 6,008,998 $ 3,140,463
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in net earnings of subsidiaries less net dividends received
of $3,177,772, $900,000 and $625,000 in 2002, 2001 and
2000, respectively (4,813,666) (4,950,938) (2,363,984)(10,850,843) (7,991,439) (5,850,938)
Depreciation 70,944 72,467 76,206
72,517
Amortization, net 10,601 11,977 -- --
Net gain on disposals of property -- (532) -- --
Benefit for deferred income taxes (12,000) (6,000) (11,400) (1,081)
(Increase) decrease in receivables (1,446,089) 4,567 (203,869)
(8,465)
Decrease(Increase) decrease in income taxes receivable-current (1,327,456) -- 404,548 442,536
(Increase) decrease in prepaid expenses 2,714 32,884 (40,598)
8,270
Increase (decrease) in accounts payable and accrued liabilities 454,097 138,300 193,821 (5,310)
Increase (decrease) in income taxes payable-current (232,325) (157,772) 390,097
--
----------- ----------- ----------------------- ------- -------
Net cash provided by operating activities 3,391,067 1,866,865 1,284,946
----------- ----------- -----------(2,365,343) 213,294 966,865
------------ ------- -------
Investing Activities:
Capital contribution to subsidiarysubsidiaries (325,000) -- --
(600,000)Dividends received from subsidiaries 3,782,400 3,177,772 900,000
Purchases of available-for-sale securities (3,599,096) (382,526) (402,073)-- (3,599,095) (2,009,015)
Proceeds from available-for-sale securities --1,736,879 597,962 661,397 --
Purchases of available-for-sale bonds -- (1,626,489)held-at-cost securities (486,000) (385,195) --
Proceeds from available-for-sale bonds 597,962held-at-cost securities 42,072 -- --
Purchases of held-at-costequity securities (385,195)(2,000,000) -- --
Proceeds from the sale of equity securities -- -- 45,000 --
Purchases of furniture and equipment (105,048) (8,157) (11,075) (34,387)
Proceeds from the sale of furniture and equiment -- 10,000 --
--
----------- ----------- ----------------------- ------- -------
Net cash used in investing activities (3,384,486) (1,313,693) (1,036,460)
----------- ----------- -----------2,645,303 (206,713) (413,693)
------------ ------- -------
Financing Activities:
Dividends paid (net dividends paid to subsidiary of $42,278 in 2003
and $42,132 in 2002) (300,411) (300,557) (342,689)
(342,689)
----------- ----------- ------------------------ ------- -------
Net cash used in financing activities (300,411) (300,557) (342,689)
(342,689)
----------- ----------- ------------------------ ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (20,451) (293,976) 210,483 (94,203)
Cash and Cash Equivalents, Beginning of Year 142,038 436,014 225,531
319,734
----------- ----------- ------------------------ ------- -------
Cash and Cash Equivalents, End of Year $ 121,587 $ 142,038 $ 436,014
$ 225,531
======================= =========== ===========
Supplemental Disclosures:
Cash Paid (Refunded) During the Year For:
Income Taxes $ 1,638,949 $ 217,772 $ (109,359)
$ 490,592
======================= =========== ===========
See notes to condensed financial statements.
SCHEDULE II
-----------
INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The accompanying condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
of Investors Title Company and Subsidiaries.
2. Cash dividends paid to Investors Title Company by its wholly owned
subsidiariessubsidiary were as follows:
Subsidiaries 2003 2002 2001
2000
---------- -------- --------------------------------------------------------------------------------------------------------------
Investors Title Insurance Company, net * $2,857,772 $350,000 $350,000
Northeast Investors Title Insurance Company -- -- --$ 3,307,400 $ 2,857,772 $ 350,000
Investors Title Exchange Corporation 175,000 160,000 550,000 275,000
Investors Title Accommodation Corporation 100,000 -- --100,000 -
Investors Title Management Services, Inc. 200,000 60,000 -- --
---------- -------- --------
$3,177,772 $900,000 $625,000
========== ======== ========-
-----------------------------------------------------
$ 3,782,400 $ 3,177,772 $ 900,000
=====================================================
* Total*Total dividends of $3,349,678 and $2,899,904 paid to the Parent Company in 2003
and 2002, respectively, netted with dividends of $42,278 and $42,132 received
from the Parent.Parent in 2003 and 2002, respectively.
SCHEDULE III
INVESTORS TITLE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
For the Years Ended December 31, 2003, 2002 2001 and 20002001
- ------------------------------------------------------------------------------------------------------------------
Future
Policy Other
Benefits, Policy
Deferred Losses, Claims
Policy Claims and Net
Acquisition and Loss Unearned Benefits Premium Investment
Segment Cost Expenses Premiums Payable Revenue ----------- ----------- -------- --------- -----------Income
- ------------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 2003
Title Insurance --- $ 30,031,000 --- $ 726,191 $ 83,927,312 $ 2,589,228
Exchange Services --- --- --- --- --- 2,818
All Other --- --- --- --- --- 99,641
-----------------------------------------------------------------------------------------
--- $ 30,031,000 --- $ 726,191 $ 83,927,312 $ 2,691,687
=========================================================================================
Year Ended
December 31, 2002
Title Insurance -- $25,630,000 ----- $ 25,630,000 --- $ 401,040 $67,693,617$ 67,298,617 $ 2,706,886
Exchange Services -- -- -- -- ----- --- --- --- --- 6,115
All Other -- -- -- -- --
----------- ----------- -------- --------- -----------
-- $25,630,000 ----- --- --- --- --- 93,807
-----------------------------------------------------------------------------------------
--- $ 25,630,000 --- $ 401,040 $67,693,617
=========== =========== ======== ========= ===========$ 67,298,617 $ 2,806,808
=========================================================================================
Year Ended
December 31, 2001
Title Insurance -- $21,460,000 ----- $ 21,460,000 --- $ 281,961 $59,480,545$ 58,800,545 $ 2,626,053
Exchange Services -- -- -- -- ----- --- --- --- --- 16,245
All Other -- -- -- -- --
----------- ----------- -------- --------- -----------
-- $21,460,000 ----- --- --- --- --- 97,982
-----------------------------------------------------------------------------------------
--- $ 21,460,000 --- $ 281,961 $59,480,545
=========== =========== ======== ========= ===========
Year Ended
December 31, 2000
Title Insurance -- $17,944,665 -- $ 222,748 $37,690,752
Exchange Services -- -- -- -- --
All Other -- -- -- -- --
----------- ----------- -------- --------- -----------
-- $17,944,665 --58,800,545 $ 222,748 $37,690,752
=========== =========== ======== ========= ===========2,740,280
=========================================================================================
- ---------------------------------------------------------------------------------------
Benefits Amortization
Claims, of Deferred
Net Losses and Policy Other
Investment
Settlement Acquisition Operating Premiums
Segment Income Expenses Costs Expenses Written
----------- ---------- -------- ------------ -------- ---------------------------------------------------------------------------------------
Year Ended
December 31, 2003
Title Insurance $ 9,292,739 --- $ 63,495,050 N/A
Exchange Services --- --- 495,119 N/A
All Other --- --- 1,375,949 N/A
---------------------------------------------
$ 9,292,739 --- $ 65,366,118
=============================================
Year Ended
December 31, 2002
Title Insurance $ 2,706,8866,871,822 --- $ 6,871,822 -- $ 53,167,68052,772,681 N/A
Exchange Services 6,115 -- ----- --- 441,386 N/A
All Other 93,807 -- -- 1,097,610--- --- 1,097,609 N/A
----------- ---------- -------- ------------
$ 2,806,808----------------------------------------------
$ 6,871,822 ----- $ 54,706,676
=========== =========== ======== ============54,311,676
==============================================
Year Ended
December 31, 2001
Title Insurance $ 2,626,0536,786,263 --- $ 6,786,263 -- $ 47,449,61546,769,615 N/A
Exchange Services 16,245 -- -- 433,811--- --- 433,810 N/A
All Other 97,982 -- -- 1,063,758--- --- 1,063,759 N/A
----------- ---------- -------- ------------
$ 2,740,280----------------------------------------------
$ 6,786,263 ----- $ 48,947,184
=========== =========== ======== ============
Year Ended
December 31, 2000
Title Insurance $ 2,436,561 $ 5,865,355 -- $ 31,060,289 N/A
Exchange Services 17,478 -- -- 225,330 N/A
All Other 74,104 -- -- 818,331 N/A
----------- ---------- -------- ------------
$ 2,528,143 $ 5,865,355 -- $ 32,103,950
=========== =========== ======== ============48,267,184
==============================================
SCHEDULE IV
-----------
INVESTORS TITLE COMPANY AND SUBSIDIARIES
REINSURANCE
For the Years Ended December 31, 2003, 2002 2001 and 20002001
- --------------------------------------------------------------------------------------------------------------------------------
Ceded to Assumed from Percentage of
Gross Other Other Net Amount
Amount Companies Companies Amount Assumed to Net
------ --------- --------- ------ --------------- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, 2003
Title Insurance $84,359,310 $438,229 $ 6,231 $83,927,312 0.01%
YEAR ENDED
DECEMBER 31, 2002
Title Insurance $68,021,272 $ 348,395 $ 20,740 $67,693,617$67,626,272 $348,395 $20,740 $67,298,617 0.03%
YEAR ENDED
DECEMBER 31, 2001
Title Insurance $59,799,379 $ 340,228 $ 21,394 $59,480,545$59,119,379 $340,228 $21,394 $58,800,545 0.04%
YEAR ENDED
DECEMBER 31, 2000
Title Insurance $38,020,917 $ 362,528 $ 32,363 $37,690,752 0.09%
SCHEDULE V
----------
INVESTORS TITLE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2003, 2002 2001 and 20002001
- -------------------------------------------------------------------------------------------------------------------------------
Balance at Additions Additions Charged
Beginning Charged to to Other Deductions- Balance at
Description of Period Costs and Expenses Accounts - Describe describe* End of Period
--------- ------------------ ------------------- --------- -------------- -------------------------------------------------------------------------------------------------------------------------------
2003
Premiums Receivable
Valuation Provision $ 1,800,000 $5,477,324 $ -- $(4,803,324) $ 2,474,000
Reserves for
Claims $25,630,000 $9,292,739 $ -- $(4,891,739) $30,031,000
2002
Premiums Receivable
Valuation Provision $ 1,405,000 $ 4,600,806$4,600,806 $ -- $(4,205,806) $ 1,800,000
Reserves for
Claims $21,460,000 $ 6,871,822$6,871,822 $ -- $(2,701,822) $25,630,000
2001
Premiums Receivable
Valuation Provision $ 725,000 $ 3,484,380$3,484,380 $ -- $(2,804,380) $ 1,405,000
Reserves for
Claims $17,944,665 $ 6,786,263$6,786,263 $ -- $(3,270,928) $21,460,000
2000
Premiums Receivable
Valuation Provision $ 775,000 $ 2,219,190 $ -- $(2,269,190) $ 725,000
Reserves for
Claims $15,864,665 $ 5,865,355 $ -- $(3,785,355) $17,944,665
*Cancelled premiums and change in allowance for bad debts
*Payments of claims, net of recoveries
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
3(i) Articles of Incorporation dated January 22, 1973, incorporated by
reference to Exhibit 1 to Form 10 dated June 12, 1984
3(ii) Bylaws - Restated and Amended as of May 21, 2003
4 Rights Agreement, dated as of November 12, 2002, between
Investors Title Company and Central Carolina Bank, a division of
National Bank of Commerce, incorporated by reference to Exhibit 1
to Form 8-A filed November 15, 2002
10(i) 1993 Incentive Stock Option Plan, incorporated by reference to
Exhibit 10 to Form 10-K for the year ended December 31, 1993
10(ii) Form of Incentive Stock Option Agreement under 1993 Incentive
Stock Option Plan, incorporated by reference to Exhibit 10(v) to
Form 10-K for the year ended December 31, 1994
10(iii) 1997 Stock Option and Restricted Stock Plan, incorporated by
reference to Exhibit 10(viii) to Form 10-K for the year ended
December 31, 1996
10(iv) Form of Nonqualified Stock Option Agreement to Non-employee
Directors dated May 13, 1997 under the 1997 Stock Option and
Restricted Stock Plan, incorporated by reference to Exhibit
10(ix) to Form 10-Q for the quarter ended June 30, 1997
10(v) Form of Nonqualified Stock Option Agreement under 1997 Stock
Option and Restricted Stock Plan, incorporated by reference to
Exhibit 10(x) to Form 10-K for the year ended December 31, 1997
10(vi) Form of Incentive Stock Option Agreement under 1997 Stock Option
and Restricted Stock Plan, incorporated by reference to Exhibit
10(xi) to Form 10-K for the year ended December 31, 1997
10(vii) Form of Amendment to Incentive Stock Option Agreement between
Investors Title Company and James Allen Fine, James Allen Fine,
Jr., William Morris Fine, George Abbitt Snead, Ralph Nichols
Strayhorn, III and Raeford Wilder Wall, Jr., respectively,
incorporated by reference to Exhibit 10(xii) to Form 10-Q for the
quarter ended June 30, 2000
10(viii) 2001 Stock Option and Restricted Stock Plan, incorporated by
reference to Exhibit 10(xiii) to Form 10-K for the year ended
December 31, 2000
10(ix) Form of Employment Agreement dated November 17, 2003 with each of
J. Allen Fine, James A. Fine, Jr. and W. Morris Fine
13 Portions of 2003 Annual Report to Shareholders incorporated by
reference in this report as set forth in Parts I, II and IV
hereof
14 Code of Business Conduct and Ethics
21 Subsidiaries of Registrant
23 Independent Auditors Consent and Report on Schedules
31(i) Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31(ii) Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002