(2) Income from continuing operations excludes a loss from discontinued operations, net of tax of $3,643,000 in 1999, $2,696,000 in 1998, $1,830,000 in 1997, $6,370,000 in 1996 and $1,163,000 in 1995, related to former affiliates. See Note 15 to the consolidated financial statements.
(6) GAAP ratios have been derived from the results of the Company's domestic and international insurance segments. The 1997 expense ratio includes 3.4 percentage points related to expenses incurred in connection with the Unionamerica acquisition.
Net premiums earned increased by 8.0% to $374.6 million in 1999 from $346.7 million in 1998. Medical malpractice net premiums earned decreased by 17.0% to $164.0 million in 1999 from $197.5 million in 1998. International net premiums earned increased 39.5% to $190.0 million from $136.2 million due to growth in the Company's participation in Lloyd's syndicates as well as third quarter, 1999 premiums for prior policy year swing-rated medical malpractice reinsurance treaties. Other net premiums earned increased 58.5% to $20.6 million from $13.0 million due to growth in medical expense business. The effect of one-time premiums, such as prior acts coverage for new insureds, contributed to the decline in medical malpractice premiums in 1999. During 1999, medical malpractice premiums earned included $10.5 million in such one time premiums, a decrease of $25.3 million from 1998.
Net investment income decreased by 5.6% to $72.3 million in 1999 from $76.6 million in 1998. The decrease in investment income is due to a decrease in invested assets. The Company had net realized losses on investments of $1.0 million in 1999 compared to $2.7 million in net realized gains in 1998.
In addition, two of the Company's more traditional customer blocks of business experienced reserve growth for cases attributable to the 1996-1998 accident years. This growth was primarily the result of increases in average case severity. Losses associated with policies covering healthcare facilities increased by $15.0 million. The Company also increased reserves by $7.9 million for policies covering groups of physicians insured under the Company's clinic programs.
Insurance and administrative expenses increased by 28.9% to $197.3 million in 1999 from $153.1 million in 1998. Included in the 1999 total is $14.0 million in restructuring charges, primarily related to the consulting and fee businesses. These charges related to the impairment of goodwill for certain consulting and fee businesses reflecting unprofitable operating results, discontinuance of certain product offerings, employee termination benefits and disposition of real estate lease obligations in several locations. This increase in insurance and administrative expenses also related to the inclusion of ARM since its date of acquisition in 1999 as well as an increase in acquisition costs related to the growth in international premiums written.
NET INCOME (LOSS) PER SHARE. Diluted net loss per common and common equivalent share was $5.47 in 1999 compared to diluted net income of $0.59 in 1998. Included in both year's totals are losses from discontinued operations of $.19 in 1999 and $.14 in 1998, net of tax; and a loss of $.03 in 1999 and a gain of $.09 in 1998 related to net realized gains and losses on investments, net of tax.
Net premiums earned increased by 20.6% to $346.7 million in 1998 from $287.5 million in 1997. Medical malpractice net premiums earned increased by 28.2% to $197.5 million in 1998 from $154.1 million in 1997. International net premiums earned increased 6.5% to $136.2 million from $127.9 million due to increased premiums from Unionamerica's interest in Lloyd's underwriting syndicate and other net premiums earned increased 136.4% to $13.0 million from $5.5 million. The effect of one-time premiums, such as prior acts coverage for new insureds, contributed to the increase in medical malpractice premium growth in 1998. During
Consulting and fee income was relatively unchanged at $44.5 million in 1998 compared to $44.9 million in 1997. Consulting and fee income as a percentage of net premiums earned and consulting and fee income was 11.4% in 1998 compared to 13.5% in 1997.
Net investment income increased by 1.5% to $76.6 million in 1998 from $75.5 million in 1997. A modest increase in invested assets was partly offset by a slight decrease in portfolio yield. The Company had net realized gains on investments of $2.7 million in 1998 compared to $2.2 million in 1997.
LOSSES AND EXPENSES. Losses and loss adjustment expenses (LAE) increased by 39.2% to $291.5 million in 1998 from $209.4 million in 1997. Medical malpractice liability losses and LAE increased by 50.0% to $193.3 million in 1998 from $128.9 million in 1997. Medical malpractice liability losses and LAE increased due to unfavorable loss experience related to two specific but small areas of the Company's domestic operations: long-term care and a disparate group of clinic clients. In the third quarter 1998, the Company recorded $17.5 million of additional losses and LAE related to this business. The increase in medical malpractice losses and LAE also includes losses related to the increase in one time premiums in the first quarter 1998 that were recorded at a higher loss ratio than the core medical malpractice business as well as an increase in the core loss ratio for the current year's business. International losses and LAE increased 15.2% to $88.0 million in 1998 from $76.4 million due to a growth in earned premiums as well as a third quarter provision of $3.3 million for claims related to asbestos exposures written in prior years. Other losses and LAE increased 146.3% to $10.1 in 1998 from $4.1 million in 1997 due to an increase in other earned premium.
Insurance and administrative expenses increased by 4.1% to $153.1 million in 1998 from $147.0 million in 1997. Included in the 1997 total is $9.7 million of expenses related to the Company's acquisition of Unionamerica, which was completed in December 1997. Before the effect of the acquisition related expenses, insurance and administrative expenses increased 11.5%, principally due to increased commission expense related to premium growth.
Interest expense increased by 56.9% to $10.2 million in 1998 from $6.5 million in 1997 due to an increase in debt outstanding and a higher interest rate related to the Company's issuance of 30 year capital securities in December 1997. Debt outstanding totaled $118.8 million at December 31, 1998.
NET INCOME. Net income decreased by 66.9% to $11.4 million in 1998 from $34.4 million in 1997 as a result of loss reserve development recorded in the third quarter of 1998 as well as a decrease in the consulting and fee segment profit margin in 1998.
NET INCOME PER SHARE. Diluted net income per common and common equivalent share decreased to $0.59 in 1998 from $1.77 in 1997. Included in the 1998 and 1997 amounts are a reduction of $.88 for loss reserve development and $.46 per share for the expenses, net of tax, incurred in connection with the Unionamerica acquisition, respectively. The loss from discontinued operations, net of tax, was $0.14 in 1998 and $0.09 in 1997. Also included is an increase of $.09 in 1998 and an increase of $.07 in 1997 related to net realized gains on investments, net of tax, as well as an extraordinary loss of $.04 in 1997.
As a holding company, the Company's assets consist primarily of the stock of its subsidiaries. The Company's principal sources of operating funds are management fees and dividends from its subsidiaries. In 1999, the Company received dividends from its subsidiaries of $6.0 million, compared to $6.6 million in 1998 and $29.8 million in 1997. Of the 1997 dividend, $20.0 million was a special dividend paid by Health Providers Insurance Company to the Company in 1997 in connection with an intercompany assumption reinsurance transaction. The Company then contributed the $20.0 million to American Continental Insurance Company's statutory surplus. The Company received management fees from its subsidiaries of $29.0 million in 1999, $24.0 million in 1998 and $28.5 million in 1997. The Company's principal uses of funds are operating expenses, acquisitions, debt service and dividends to stockholders.
CASH FLOW. On a consolidated basis, the Company had negative cash flow from operations in 1999 and positive cash flow from operations in 1998 and 1997. Cash flow from operations declined in the most recent year due to an increase in paid losses and loss adjustments expenses. Cash flow from operations is affected by the difference between the collection of premiums and payment of claims and expenses. Because of uncertainty related to the timing of payment of claims, cash from operations for a casualty insurance company can vary substantially from year to year and quarter to quarter. Cash used by operating activities was $53.8 million in 1999 compared to cash provided of $39.2 million in 1998 and $6.5 million in 1997.
INVESTED ASSETS. The Company invests in investment grade fixed income securities and preferred stocks. The estimated fair value of preferred stocks was less than 5.0% of the fair value of total invested assets as of December 31, 1999. The estimated fair value of the Company's short-term, fixed maturity and preferred stock investments was $1,166.0 million as of December 31, 1999, compared to $1,259.4 million as of December 31, 1998. The December 31, 1999 amount includes net unrealized losses of $24.9 million, which represent the amount by which the estimated fair value of the investment portfolio exceeds amortized cost. Unrealized gains were $44.2 million as of December 31, 1998. The decrease in unrealized gains during 1999 was due to an increase in the general level of interest rates.
The Company maintains a portion of its investment portfolio in high quality, short-term securities to meet its short-term operating liquidity requirements, including the payment of claims and expenses. Short-term investments totaled $82.6 million or 7.1% of invested assets as of December 31, 1999, compared to $50.8 million or 4.0% of invested assets as of December 31, 1998. The Company believes that all of its invested assets are readily marketable.
LINE OF CREDIT. In February 1998, the Company obtained an unsecured revolving credit line of $100.0 million. The Company borrowed $45.0 million against this line of credit in December 1999 to contribute to the capital and surplus of ACIC, replenishing statutory surplus to the level that existed prior to the $60.0 million pre-tax loss reserve strengthening recorded in the third quarter, 1999. The credit agreement provides for interest at a fixed rate equal to the Interbank Offered Rate for periods of up to one year plus a margin of 20 to 40 basis points, and contains financial covenants with respect to minimum net worth and statutory surplus, maximum debt to total capitalization, and minimum risk-based capital levels. The credit agreement also restricts the Company's ability to pay stockholders' dividends in a single year in excess of 50% of the average of the prior three years net income. As a result of net losses incurred, MMI is in non-compliance with a certain covenant which may have resulted in amounts drawn upon the bank line being currently due. MMI obtained a waiver for the covenant in non-compliance through May 31, 2000.
STOCKHOLDERS' EQUITY. The Company's stockholders' equity was $257.4 million as of December 31, 1999, compared to $412.9 million as of December 31, 1998. Changes in stockholders' equity are primarily attributable to net income (loss) of the Company, dividends to stockholders, changes in unrealized gains or losses on investments and issuances of Common Stock. Cash dividends to stockholders totaled $6.9 million in 1999, $6.1 million in 1998 and $4.2 million in 1997. As of December 31, 1999, unrealized losses on investments were $16.2 million, net of deferred tax credit of $8.7 million. As of December 31, 1998 the Company had an unrealized gain, net of taxes, of $29.1 million.
MINIMUM SOLVENCY MARGIN. Under the Insurance Companies Act of 1982, the Financial Services Authority (FSA) authorizes companies in the United Kingdom to engage in the insurance business. Under the 1982 Act, companies authorized to transact business are required to maintain a minimum solvency margin. As of December 31, 1999, Unionamerica's minimum solvency margin was estimated at $28.8 million and its available assets, for U.K. regulatory purposes, were estimated at $40.7 million.
The Company is exposed to various market risks, most specifically changes in interest rates and foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest and foreign currency exchange rates. The Company does not utilize derivative or other similar financial instruments for trading or speculative purposes. The following analysis presents the hypothetical loss in fair value of the financial instruments held by the Company at December 31, 1999 that are sensitive to changes in interest rates and/or foreign currency exchange rates. The range of changes in interest rates used in the analysis reflects the Company's view of changes that are reasonably possible over a one-year period. This discussion of market risks related to the Company's consolidated balance sheet includes estimates of future economic environments caused by changes in interest risks. The effect of actual changes in these risk factors may differ materially from the Company's estimates. In the ordinary course of business, the Company also faces risks that may be either non-financial or non-quantifiable, e.g., credit risk. Such risks are not included in the following analysis.
At December 31, 1999 and 1998 the fair value of the Company's fixed maturity and preferred stock portfolio was $1,083.4 million and $1,208.6 million versus an amortized cost basis of $1,108.3 million and $1,164.4 million, respectively. The estimated fair value of the fixed maturity and preferred stock portfolio resulting from a hypothetical increase in interest rates of 100 basis points at December 31, 1999 would be approximately $1,029.2 million or a decrease of 5.0%. The comparable fair value and decrease at December 31, 1998 are $1,159.0 million and 4.1%, respectively. The Company utilizes several outside investment advisory companies in the management of the portfolio. This portfolio, which is not hedged, consists primarily of U.S. dollar denominated, investment grade, taxable and tax advantaged fixed maturity securities. The primary objectives of the portfolio are to provide the Company with a stable, long term, after tax yield with sufficient quality and liquidity to meet its cash flow needs and to provide an after tax total return to meet its profit objectives.
The Company is subject to foreign currency exchange risk due to several primary reasons, including its United Kingdom-based subsidiaries, which incur expenses, denominated in British pound sterling and hold invested assets in foreign currencies which result primarily from business generated in foreign currencies. While there is exposure to several currencies, the predominant exposure is in British pound sterling.
The Company manages its market risk by matching the projected cash inflows of assets with liabilities. For all its financial assets and liabilities, the Company seeks to reasonably match durations consistent with the Company objectives of maximization of income without sacrificing investment quality and providing for necessary liquidity, return and diversification.
The estimated fair values at current market rates discussed above for financial instruments subject to interest rate risk are the same as those in Note 4 to the consolidated financial statements. The estimated fair value at the adjusted market rates (assuming a 100 basis point increase in market interest rates) are calculated using discounted cash flow methods and duration modeling, where appropriate. The foreign currency exposure risk analysis assumes a year end spot rate on the British pound sterling of 1.61 at December 31, 1999.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MMI Companies, Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
MMI COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP) and include the accounts and operations of MMI and its majority owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior years' financial statements in order to conform to the current year presentation. MMI's participation in Lloyd's Non-Marine Syndicate 205 through its majority investment in Jago Capital Limited and Marketform Syndicate 2468 is consolidated with the international insurance segment results.
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that can affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
Consulting and fee income is derived from fixed fee contracts and projects performed on a per diem basis. Fixed fee contracts are for a specific period of time, generally one year, in which MMI provides services that are delivered over the entire contract term. Ratable recognition of fixed fee contract revenue results in a matching with expenses incurred as the related expenses are principally employee compensation and benefits. Revenues from projects are recognized as the services are rendered.
Commissions and other costs that vary with, and are primarily related to, the production of new and renewal business have been deferred and are amortized over the period of the related insurance policies. Such unamortized amounts included in other assets amounted to $31,600,000 and $28,300,000 at December 31, 1999 and 1998, respectively. Amortization of such costs are included in insurance and administrative expenses and amounted to $64,700,000 in 1999, $56,200,000 in 1998 and $49,000,000 in 1997.
The costs of furniture and equipment are depreciated over their estimated useful lives of three to seven years using the straight line method. As of December 31, 1999 and 1998, accumulated depreciation amounted to $14,100,000 and $16,100,000, respectively.
MMI and its United States subsidiaries file a consolidated federal income tax return. Unionamerica and its subsidiaries file tax returns with Inland Revenue in the United Kingdom. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using tax rates and laws that are expected to be in effect when the differences reverse.
Earnings per share are computed based on the weighted average number of common and common equivalent shares outstanding during the respective period. Common equivalent shares include incremental shares from dilutive stock options. Refer to Note 9 for more information.
As of January 1, 1999, MMI adopted AICPA Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires specific accounting treatment for the capitalization of internal use software at cost. The adoption of SOP 98-1 did not have a material effect on consolidated operating results or financial position.
In December 1997, the AcSEC issued SOP 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments". SOP 97-3 provides guidance on when an insurance enterprise should recognize a liability for guaranty fund or other assessments and how to measure the liability. SOP 97-3 was effective January 1, 1999. The adoption of SOP 97-3 did not have a significant impact on MMI's consolidated operating results or financial position.
In February 1999, Professional Risk Management, Inc. (PRM), a subsidiary of MMI, acquired Applied Risk Management (ARM), Inc., a privately held third party administrator and consulting firm that specializes in workers' compensation. PRM provides third party administration and consulting related to professional and general liability risks and claims primarily for self-insured organizations. The purchase price for ARM, including expenses, was $7,927,000 in cash. This acquisition was accounted for as a purchase.
In April 1999, MMI issued 117,143 shares of common stock in connection with the acquisition of a 20% minority interest in MMedica Insurance Limited, now a wholly owned subsidiary of MMI Companies, Inc.
On December 11, 1997, MMI acquired the capital stock of Unionamerica Holdings plc (Unionamerica Holdings), in exchange for 7,100,000 shares of MMI Common Stock. Unionamerica Holdings' principal subsidiary, Unionamerica Insurance Company Limited is a United Kingdom-domiciled insurance and reinsurance company. The acquisition was accounted for as a pooling of interests and, as such, MMI's 1997 consolidated financial statements, and all prior periods presented, were restated as if the acquisition had occurred at the beginning of the earliest period presented.
Effective January 1, 1997, MMI purchased substantially all of the net assets of Equifax Medical Credentials Verification Services (EMCVS), a unit of Atlanta-based Equifax, Inc. and acquired by merger all of the outstanding stock of PRM. The total purchase price of EMCVS and PRM was $8,300,000 in cash and $2,000,000 of MMI Common Stock.
Fair values of investments are principally based on quoted market prices. Short-term investments are comprised principally of corporate and municipal securities.
The amortized cost and fair value of fixed maturities at December 31, 1999, by contractual maturity, are as follows (in thousands):
The changes in unrealized gains and losses, which are recorded in stockholders' equity as accumulated other comprehensive income (loss), were as follows (in thousands):
Net realized gains(losses) on investments are comprised of the following (in thousands):
The components of accumulated other comprehensive income are as follows (in thousands):
At December 31, 1999, investments with a fair value of $11,905,709 were on deposit to meet domestic statutory requirements.
Federal income taxes have not been provided on the difference between the amount for financial reporting and the tax basis in the stock of the foreign subsidiaries because management intends to indefinitely invest that difference in these subsidiaries. Determination of the amount of the unrecognized deferred United States income tax liability is not practicable.
MMI's net payments of income taxes were $488,000, $7,947,000, and $9,302,000 during 1999, 1998 and 1997, respectively. As of December 31, 1999, MMI had federal net operating loss carry-forwards of approximately $28,000,000 that, if not utilized, expire beginning in 2019. As of December 31, 1999, MMI had an alternative minimum tax credit carryforward of $14,389,000 that may be carried forward indefinitely. The United Kingdom group had net operating loss carry-forwards of approximately $91,000,000 that may be carried forward indefinitely.
effective through June 30, 2000. This rate will then be reset as of June 30, 2000. At December 31, 1999, notes payable amounted to $45,000,000. As a result of net losses incurred, MMI is in noncompliance with a certain covenant which, if not waived, would result in amounts drawn upon the bank line being currently due. MMI obtained a waiver through May 31, 2000 for the noncompliant covenant.
Total interest paid in 1999, 1998 and 1997 was $10,000,000, $9,800,000 and $6,400,000, respectively.
The provision for losses and LAE in the foregoing schedule for 1999 in connection with prior years are a result of loss reserve strengthening of $156,000,000 (after-tax impact of $5.56 per share) recorded in the third and fourth quarter. Domestically, loss reserve strengthening related to two specific areas of operations: long-term care and a disparate group of clinic accounts. Internationally, loss reserve development related principally to United States medical malpractice and surplus lines business and, to a lesser extent, short-tail lines, primarily property and medical expense business. Loss reserve strengthening of $20,800,000 recorded in the third quarter 1998 related to long-term care and a disparate group of clinic accounts for the domestic insurance segment and asbestos exposures for the international insurance segment.
The above statutory-basis capital and surplus amounts relate to MMI's direct domestic insurance subsidiary, ACIC. The capital and surplus amounts for ACIC include the capital and surplus of American Continental Life Insurance Company (ACLIC), a life insurance company owned by ACIC, in the amount of $15,800,000 at December 31, 1999 and $16,000,000 at December 31, 1998. Statutory net income (loss) of ACLIC amounted to $(304,000) in 1999, $500,000 in 1998 and $300,000 in 1997.
ACIC's GAAP-basis net assets amounted to $258,000,000 at December 31, 1999. The excess of these combined net assets over ACIC's maximum dividend amount represents restricted consolidated net assets.
On June 14, 1997, the Board of Directors declared a dividend distribution to holders of record on June 30, 1997 of one right (Right) to purchase 1/100 share of Series B Junior Participating preferred stock on each outstanding share of MMI Common Stock. The Rights issued under the Plan become exercisable only when a person or group acquires or announces its intention to acquire more than 15% of the Common Stock of MMI. Under certain conditions, each Right would, upon exercise, entitle stockholders, other than the third party acquirer, to buy $150 worth of a MMI Common Stock equivalent at an exercise price of $75. If MMI is acquired in a merger or other business combination transaction that has not been approved by the Board of Directors, each Right will entitle its holder to acquire common stock of the acquiring company with a market value equal to two times the exercise price of the Right, a purchase value of $150 of the common stock of the acquiring company for $75. At any time prior to the distribution date, the Board of Directors retains the right to amend the Rights Plan and to redeem the Rights at $.01 per Right. The Rights Plan was amended in connection with the signing of the definitive merger agreement with The St. Paul so that The St. Paul will not be considered an acquiring person who would trigger the rights under the Plan. See Note 17 to the consolidated financial statements. The Rights have a ten year term.
In 1999, all outstanding stock options were excluded from the calculation of diluted earnings per share since MMI reported a loss from continuing operations. Options to purchase 585,000 and 143,000 shares of Common Stock were outstanding during 1998 and 1997, respectively, but were not included in the computation of the dilutive effect of stock options. These options were excluded from the computation because the options' exercise prices were greater than the average market price of the common shares and, therefore, would be anti-dilutive.
MMI has an employee stock plan that authorizes the issuance, subject to directors' approval, of nonqualified stock options, incentive stock options and restricted stock, and a nonqualified formula stock option plan for non-employee directors. In addition, MMI has adopted the Long-Term Incentive Plan (LTIP) of 1997 under which it has issued restricted stock and stock options to non-executives. The directors plan provides for the issuance of 1,375 options annually for each director and 4,125 options to a new director joining MMI's Board of Directors, with exercise prices equal to fair value at the grant date. In addition, performance options for 2,500 shares are granted to each non-employee director on January 1 of each year. All options, other than options issued in replacement of Unionamerica options, have 10-year terms and generally vest and become fully exercisable six months after the date of grant.
A summary of the MMI stock option activity, and related information for the years ended December 31 follows:
Shares available for grant exclude LTIP shares. Other information regarding options outstanding and exercisable as of December 31, 1999 is as follows:
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' six-month vesting period. MMI's pro forma information is as follows:
MMI is engaged in various legal actions incident to the nature of its business. Management is of the opinion that the outcome of the litigation will not have a material effect on MMI's financial position or results of operations.
MMI leases its office space and certain equipment under noncancelable leases. Rental expense for 1999, 1998 and 1997 was $12,900,000, $10,100,000 and $8,600,000, respectively. As of December 31, 1999 aggregate minimum rental commitments under noncancelable leases amounted to $9,000,000 in 2000, $8,100,000 in 2001, $7,600,000 in 2002, $4,400,000 in 2003, $4,300,000 in 2004 and $16,700,000 thereafter.
Presentation of MMI's operations has been classified and summarized into three reportable segments: domestic insurance, international insurance, and consulting and fees. Reportable segments are classified by the product lines of insurance and consulting and fees with insurance segments classified along geographic lines of domestic and international. Segment revenues and segment income (loss) exclude realized gains (losses) on investments. Intersegment revenues are not material. There are no individual customers which account for ten percent or more of MMI's revenue (in thousands).
Effective March 31, 1999, MMI sold the net assets of Healthcare Credentials Management Services, its credentials verification organization subsidiary. MMI received $4,000,000 in cash proceeds. There was a loss on this transaction of $3,643,000, net of taxes of $1,962,000. Revenues for the years ended December 31, 1999, 1998 and 1997 were $889,000, $4,439,000 and $6,764,000, respectively.