Approximate Owned Square Location Function Leased Footage -------- -------- ------ ------- 5300 So. 360 West Corporate Salt Lake City, UT Headquarters Owned(1) 33,000
(3) The Company leases an additional 5,747 square feet of the facility to unrelated third parties for approximately $109,000 per year, under leases which expire at various dates after 1999.
The Company believes the office facilities it occupies are in good operating condition, are adequate for current operations and has no plan to build or acquire additional office facilities. The Company believes its office facilities are adequate for handling business in the foreseeable future.
(1) The acreage represents estimates of acres that are based upon survey reports, title reports, appraisal reports or the Company's inspection of the cemeteries.
Name of Date Viewing Square Mortuary Location Acquired Room(s) Chapel(s) Footage - ------------ -------- -------- ------- --------- ------- Greer-Wilson:
Greer-Wilson Funeral Home 5921 West Thomas Road Phoenix, AZ 1995 2 2 25,000
Avondale Funeral Home 218 North Central Avondale, AZ 1995 1 1 1,850 Crystal Rose Funeral Home(3) 9155 W. VanBuren Tolleson, AZ 1997 0 1 9,000
The following selected financial data for each of the five years in the period ended December 31, 1999, are derived from the audited consolidated financial statements. The data as of December 31, 1999 and 1998, and for the three years ended December 31, 1999, should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.
(4) Reflects the acquisition of SSLIC Holding Company and subsidiaries as of December 17, 1998.
Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------------------------------------
The Company's operations over the last several years generally reflect three trends or events which the Company expects to continue: (i) increased attention to "niche" insurance products, such as the Company's funeral plan policies and interest sensitive products; (ii) emphasis on cemetery and mortuary business; and (iii) capitalizing on the strong economy in the western United States by originating and refinancing mortgage loans.
On December 17, 1998, the Company purchased all of the outstanding shares of common stock of SSLIC Holding Company ("SSLIC Holding") (formerly "Consolidare Enterprises, Inc.") and Insuradyne Corporation ("Insuradyne") for a total cost of $12,248,194. As of December 31, 1999, SSLIC Holding owns approximately 61.3% of the outstanding shares of common stock of Southern Security Life Insurance Company ("Southern Security").
Net investment income increased by $234,000, from $7,459,000 in 1998 to $7,693,000 in 1999. This increase was primarily the result of the reinvestment of the Company's bonds which matured or were called in 1999 into mortgage loans having higher long-term rates.
Net investment income increased by $319,000, from $7,140,000 in 1997 to $7,459,000 in 1998. This increase was primarily the result of the reinvestment of the Company's bond portfolio in 1998 into higher long-term rates in mortgage loans.
Net mortuary and cemetery sales decreased by $5,000, from $9,231,000 in 1997 to $9,226,000 in 1998. The increase in cemetery sales (primarily trusted merchandise sales) was offset by a decrease in mortuary revenues.
Mortgage fee income increased by $4,420,000, from $5,662,000 in 1997 to $10,082,000 in 1998. This increase was primarily due to the increased number of loan originations in the Company's primary market, the intermountain region, compared to 1997.
During 1998, there was a net increase of $263,000 in death benefits, surrender and other policy benefits, and an increase in future policy benefits from $6,669,000 in 1997 to $6,932,000 in 1998. This increase was primarily due to additional interest credited on annuities and reserve increases on traditional products. This increase was reasonable based on the underlying actuarial assumptions.
Amortization of deferred policy acquisition costs and cost of insurance acquired increased by $141,000, from $1,132,000 in 1997 to $1,274,000 in 1998. This increase was reasonable based on the underlying actuarial assumptions.
Cost of the mortuary and cemetery goods and services sold increased by $244,000 from $2,696,000 in 1997 to $2,940,000 in 1998. This increase was primarily due to the increase in trusted merchandise sales.
-200 bps -100 bps +100 bps +200 bps ----------------------------------------- Change in Market Value (in thousands) $11,361 $5,389 $(5,122) $(9,783)
outstanding shares of common stock of Consolidare. Consolidare owns approximately 61.3% of the outstanding shares of common stock of Southern Security Life Insurance Company, a Florida corporation ("SSLIC"), and all of the outstanding shares of stock of Insuradyne Corp., a Florida corporation ("Insuradyne").
On June 30, 1999 the Company entered into a Coinsurance and Assumption Agreement (the "Agreement") with Menlo Life Insurance Company ("Menlo Life"), wherein the Company has assumed 100% of the policies in force of Menlo Life. The Agreement was not in effect until it was approved by Menlo Life's domiciled state of Arizona and the state of California. These approvals were obtained on September 9, 1999 for the Arizona Insurance Department, and on December 9, 1999 for the California Insurance Department. Menlo Life will pay consideration to the Company in the form of statutory admitted assets to equal the liabilities assumed. The liabilities assumed at December 31, 1999 was approximately $3,120,000. The consideration will be paid in the second quarter of 2000.
At December 31, 1999, $21,066,134 of the Company's consolidated stockholders' equity represents the statutory stockholders' equity of the Company's insurance subsidiaries. The life insurance subsidiaries cannot pay a dividend to its parent company without the approval of insurance regulatory authorities.
all derivatives in the statement of financial position at fair value. Changes in derivative fair values will either be recognized in earnings as offsets to the changes in fair value of related hedged assets, liabilities and firm commitments or, for forecasted transactions, deferred and recorded as a component of equity until the hedged transactions occur and are recognized in earnings. The ineffective portion of a hedging derivative's change in fair value will be immediately recognized in earnings. The impact of SFAS 133 on the Company's financial statements will depend on a variety of factors, including future interpretive guidance from the FASB, the future level of forecasted and actual foreign currency transactions, the extent of the Company's hedging activities, the types of hedging instruments used and the effectiveness of such instruments. However, the Company does not believe the effect of adopting SFAS 133 will be material to its financial position.
I. Summary of Investments -- Other than Investments in Related Parties.........................................73
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Security National Financial Corporation and subsidiaries at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. 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.
December 31, ------------ 1999 1998 ---- ---- Liabilities: - ------------ Future life, annuity, and other policy benefits $ 138,501,316 $ 134,899,870 Unearned premium reserve 1,866,523 2,565,968 Line of credit for financing of mortgage loans 8,687,023 7,577,248 Bank loans payable 10,768,098 11,909,980 Notes and contracts payable 3,885,684 3,399,272 Estimated future costs of pre-need sales 6,817,685 6,376,651 Accounts payable 804,133 1,321,559 Funds held under reinsurance treaties 1,475,512 1,419,357 Other liabilities and accrued expenses 3,219,166 4,327,889 Income taxes 5,736,860 6,008,537 ----------- ----------- Total liabilities 181,762,000 179,806,331
Legal/Regulatory Risk - the risk that changes in the legal or regulatory environment in which the Company operates will create additional expenses and/or risks not anticipated by the Company in developing and pricing its products. That is, regulatory initiatives designed to reduce insurer profits, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other public policy or legislative changes may affect the Company's mortgage sales. Also, the Company may be subject to further regulations in the cemetery/mortuary business. The Company mitigates this risk by offering a wide range of products and by diversifying its operations, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices which identify and minimize the adverse impact of such risk.
Security National Life Insurance Company Security National Mortgage Company Memorial Estates, Inc.
Commissions and other costs, net of commission and expense allowances for reinsurance ceded, that vary with and are primarily related to the production of new insurance business have been deferred. Deferred policy acquisition costs for traditional life insurance are amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. For interest-sensitive insurance products, deferred policy acquisition costs are amortized
Participating business constitutes 2%, 1%, and 8% of insurance in force for 1999, 1998 and 1997, respectively. The provision for policyholders' dividends included in policyholder obligations is based on dividend scales anticipated by management. Amounts to be paid are determined by the Board of Directors.
The Company, through its mortuary and cemetery operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive future goods and services at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the customer an increasing benefit life insurance policy that is assigned to the mortuaries. If, at the time of need, the policyholder/potential mortuary customer utilizes one
of the Company's facilities, the guaranteed funeral arrangement contract that has been assigned will provide the funeral goods and services at the contracted price. The increasing life insurance policy will cover the difference between the original contract prices and current prices. Risks may arise if the difference cannot be fully met by the life insurance policy. However, management believes that given current inflation rates and related price increases of goods and services, the risk of exposure is minimal.
Previous acquisitions have been accounted for as purchases under which assets acquired and liabilities assumed were recorded at their fair values. The excess of cost over net assets of acquired businesses is being amortized over a range of fifteen to twenty years using the straight-line method. The Company periodically evaluates the recoverability of amounts recorded. Accumulated amortization was $1,029,528 and $919,951 at December 31, 1999 and 1998, respectively.
The Company has one fixed option plan (the "1993 Plan"). In accordance with APB Opinion No. 25, no compensation cost has been recognized for the 1993 plan. Had compensation cost for the 1993 plan been determined based upon the fair value at the grant date consistent with the methodology prescribed under SFAS No. 123, the Company's net income would have been reduced by approximately $9,000, $110,000, and $10,000 in 1999, 1998, and 1997, respectively. As a result, basic and diluted earnings per share would have been reduced by $0, $0.03, and $0 in 1999, 1998, and 1997, respectively.
The weighted average fair value of options granted in 1999 under the 1993 Plan is estimated at $0.04 as of the grant date using the Black Scholes Option Pricing Model with the following assumptions: dividend yield of 5%, volatility of 28.83%, risk-free interest rate of 8.25%, and an expected life of ten years.
The weighted average fair value of each option granted in 1998 under the 1993 Plan is estimated at $0.81 as of the grant date using the Black Scholes option-pricing model with the following assumptions: dividend yield of 5%, volatility of 29.3%, risk-free interest rate of 5.7%, and an expected life of five years.
The Company also has one variable option plan (the "1987 Plan"). In accordance with APB Opinion No. 25, compensation cost related to options granted and outstanding under the 1987 Plan is estimated and recognized over the period of the award based on changes in the current market price of the Company's stock over the vesting period. Options granted under the 1987 Plan are exercisable for a period of ten years from the date of grant.
In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which the Company is required to adopt January 1, 2000. SFAS 133 will require the Company to include all derivatives in the statement of financial position at fair value. Changes in derivative fair values will either be recognized in earnings as offsets to the changes in fair value of related hedged assets, liabilities and firm commitments or, for forecasted transactions, deferred and recorded as a
component of equity until the hedged transactions occur and are recognized in earnings. The ineffective portion of a hedging derivative's change in fair value will be immediately recognized in earnings. The impact of SFAS 133 on the Company's financial statements will depend on a variety of factors, including future interpretive guidance from the FASB, the future level of forecasted and actual foreign currency transactions, the extent of the Company's hedging activities, the types of hedging instruments used and the effectiveness of such instruments. However, the Company does not believe the effect of adopting SFAS 133 will be material to its financial position.
Certain amounts in prior years have been reclassified to conform with the 1999 presentation.
Due in 2000 $ 5,456,257 $ 5,408,398 Due in 2001 through 2004 19,474,680 19,763,420 Due in 2005 through 2009 8,223,804 7,974,416 Due after 2009 438,089 467,382 Mortgage-backed securities 6,009,010 5,799,815 Redeemable preferred stock 28,011 40,021 ----------- ----------- $39,629,851 $39,453,452
Other assets 212,923 (5,265) -- --------- -------- --------- Total $ 313,013 $ 74,121 $ 252,635 ========= ======== =========
Investments, aggregated by issuer, in excess of 10% of shareholders' equity (before net unrealized gains and losses on available for sale securities) at December 31, 1999, other than investments issued or guaranteed by the United States Government, are as follows:
Net investment income includes net investment income earned by the restricted assets of the cemeteries and mortuaries of approximately $733,000, $683,000 and $609,000 for 1999, 1998, and 1997, respectively.
Securities on deposit for regulatory authorities as required by law amounted to $9,632,937 at December 31, 1999 and $9,924,315 at December 31, 1998.
1999 1998 1997 ---- ---- ---- Balance at beginning of year $ 10,462,446 $ 3,370,018 $ 3,748,654 Cost of insurance acquired -- 7,389,340 --
Presuming no additional acquisitions, net amortization charged to income is expected to approximate $860,000, $824,000, $759,000, $702,000, and $649,000 for the years 2000 through 2004. Actual amortization may vary based on changes in assumptions or experience.
Land and Buildings $ 10,171,943 $ 9,983,828 Furniture and equipment 6,384,208 6,011,048 ------------ ------------ 16,556,151 15,994,876 Less accumulated depreciation (5,989,643) (5,312,791) ------------ ------------ Total $ 10,566,508 $ 10,682,085 ============ ============
December 31, ------------ 1999 1998 ---- ---- One year treasury constant maturity plus 2.75% (8.59% at December 31, 1999) note payable in monthly installments of $6,000, including principal and interest, collateralized by real property, which book value is approximately $414,000, due October 2002. 182,089 239,134
Bank prime rate less 1.35% (7.15% at December 31, 1999) note payable in monthly installments of $20,836, including principal and interest, collateralized by real property, which book value in approximately $1,077,000, due November 2007. 1,703,915 1,755,736
$5,863,000 revolving line of credit at bank prime rate less 1%, (7.5% at December 31, 1999) interest only to December 1999 thereafter interest and principal, collateralized by 15,000 shares of Security National Life Insurance Company stock, due December 2005. 5,610,111 6,246,400
Less current installments 1,143,823 3,181,330 ----------- ---------- Bank loans, excluding current installments $ 9,624,275 $8,728,650 =========== ==========
$15 million revolving line of credit at LIBOR plus 1.50% (7.32% at December 31, 1999), payable within 30 days collateralized by receivable rom mortgage loans sold to investors .$ 8,687,023 $7,577,248 =========== ==========
In addition to the lines of credit described above, the Company has line of credit agreements with banks for $2,000,000 and $5,000,000, of which none were outstanding at December 31, 1999 or 1998. The lines of credit are for general operating purposes. The $2,000,000 line of credit bears interest at the bank's prime rate and must be repaid every 30 days. The $5,000,000 line of credit bears interest at a variable rate with interest payable monthly and is collateralized by student loans equaling 115% of the unpaid principal balance.
December 31, ------------ 1999 1998 ---- ---- Due to former stockholders of Deseret Memorial, Inc. resulting from the acquisition of such entity. Amount represents the present value discounted at 8% of monthly annuity payments ranging from $4,600 to $5,000 plus an index adjustment in the 7th through the 12th years, due September 2011. $ 646,294 $ 667,829
Due to former stockholders of Civil Service Employees Life Insurance Company resulting from the acquisition of such entity. 7% note payable in seven annual installments with principal payments of $151,857, due December 2003. 455,571 607,429
Due to Memorial Estates Endowment Care Trust Fund for the remodel of the Cottonwood Funeral Home. 6% note payable in monthly installments of $5,339 including principal and interest collateralized by the Funeral Home, which book value is approximately $1,348,000 due March 2030 890,500 --
Other notes payable 643,366 729,365 ---------- ---------- Total notes and contracts payable 3,885,684 3,399,272 Less current installments 414,421 416,679 ---------- ----------
2000 $10,245,267 2001 1,920,260 2002 2,008,230 2003 1,898,830 2004 2,030,122 Thereafter 5,238,096 ----------- Total $23,340,805 ===========
The Company owns and operates several endowment care cemeteries, for which it has established and maintains an endowment care fund. The Company records a liability to the fund for each space sold at current statutory rates. The Company is not required to transfer assets to the fund until the spaces are fully paid for. As of December 31, 1999 the Company had transferred $179,939 in excess of the required contribution to the fund. As of December 31, 1998, the Company had recorded a liability to the fund of $540,504.
The Company has established and maintains certain restricted asset accounts to provide for future merchandise obligations incurred in connection with its pre-need sales. Such amounts are reported as restricted assets of cemeteries and mortuaries in the accompanying balance sheet.
Cash and cash equivalents $ 2,361,597 $ 2,243,808 Mutual funds 132,945 132,945 Fixed maturity securities 295,771 294,210 Equity securities 77,778 71,054 Participation in mortgage loans with Security
December 31, ------------ 1999 1998 ---- ---- Current $ 142,002 $ 141,352 Deferred 5,594,858 5,867,185 ---------- ---------- Total $5,736,860 $6,008,537 ========== ==========
1999 1998 ---- ---- Assets - ------ Future policy benefits $(1,740,203) $(2,138,384) Unearned premium (1,950,587) (965,574) Difference between book and tax basis of bonds (56,489) (46,885) AMT credits -- (11,658) Net operating loss carryforwards expiring in the years 2001 through 2010 (219,249) (213,409) Other (329,361) (126,125) ----------- ----------- Total deferred tax assets $(4,295,889) $(3,502,035)
Liabilities ----------- Deferred policy acquisition costs $ 4,485,047 $ 2,186,241 Cost of insurance acquired 1,884,547 3,198,551 Installment sales 1,323,994 351,080 Depreciation 660,369 758,149 Trusts 821,165 899,415 Tax on unrealized appreciation (9,299) 541,901 Other 724,924 1,433,883 ----------- ----------- Total deferred tax liabilities 9,890,747 9,369,220 ----------- ----------- Net deferred tax liability $ 5,594,858 $ 5,867,185 =========== ===========
The Company paid no income taxes in 1999, 1998 and 1997. The Company's income tax expense (benefit) is summarized as follows:
Current $ 2,052 $ (84,948) $200,173 Deferred 228,464 339,763 159,935 -------- --------- -------- Total $230,516 $ 254,815 $360,108 ======== ========= ========
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended December 31, 1999, 1998, and 1997
The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:
The insurance companies have remaining loss carry forwards for tax purposes of approximately $1,600,000, approximately $286,000 of which is subject to an annual limitation of approximately $300,000.
Mortgage loans originated and sold to unaffiliated investors are sold subject to certain recourse provisions.
Security National Mortgage Company ("Security National Mortgage"), a wholly-owned subsidiary of the Company, has been notified that it may be subject to an administrative action by the U.S. Department of Housing and Urban Development ("HUD"). By way of letter from HUD to Security National Mortgage dated February 15, 2000 and received on February 25, 2000, Security National Mortgage was advised "that the Mortgage Review Board" of HUD "is considering an administrative action against Security National Mortgage .... pursuant to 24 CFR Part 25 ... and a civil money penalty pursuant to 24 CFR part 30 ....". In the letter, HUD set forth alleged violations of HUD/Federal Housing Administration ("FHA") requirements which included among such violations: (1) failure to comply with Security National Mortgage's own policy and procedures outlined in a July 17, 1997 letter to HUD; (2) acceptance of loans originated by personnel not employed by or not exclusively employed by Security National Mortgage; (3) acceptance of loans originated by non-HUD approved entities; (4) payment of fees and compensation to unauthorized entities or individuals in connection with FHA insured mortgages; and (5) certification of inaccurate HUD's.
The Company is also a defendant in various other legal actions arising from the normal conduct of business. Management believes that none of the actions will have a material effect on the Company's financial position or results of operations.
Class A Class C ---------- ----------- Balance at December 31, 1996 4,110,709 4,967,072
Stockholders of both classes of common stock have received 5% stock dividends in the years 1989 through 1999, as authorized by the Company's Board of Directors.
Numerator: Net income $ 975,895 $ 771,229 $1,308,941 ========= ============ ==========
The 1993 Plan is administered by the Board of Directors or by a committee designated by the Board. The 1993 Plan provides that if the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of options shall be increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. No options may be exercised for a term of more than ten years from the date of grant.
On November 7, 1996 the Company amended the Articles of Incorporation as follows: (i) to increase the number of shares of Class A Common Stock reserved for issuance under the plan from 300,000 Class A shares to 600,000 Class A shares; and (ii) to provide that the stock subject to options, awards and purchases may include Class C common stock.
Outstanding at December 31, 1998 407,339 $2.34 - $4.16 Dividend 24,762 Granted 190,000 Expired (102,103) ----------
The Company's life insurance subsidiaries are domiciled in Utah and Florida and prepare their statutory-basis financial statements in accordance with accounting practices prescribed or permitted by the Utah and Florida Insurance Departments. "Prescribed" statutory accounting practices are interspersed throughout state insurance laws and regulations, the National Association of Insurance Commissioners ("NAIC") Accounting Practices and Procedures Manual and a variety of other NAIC publications. "Permitted" statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, may differ from company to company within a state, and may change in the future.
prescribed statutory basis of accounting for insurance companies domesticated within those states. Accordingly, before Codification becomes effective for the Company, the states of Florida and Utah must adopt Codification as the prescribed basis of accounting on which domestic insurers must report their statutory-basis results to the Insurance Departments. At this time it is unclear when the states of Florida and Utah will adopt Codification. Management has not yet determined the impact of Codification to the Company's statutory-basis financial statements. Statutory net income and statutory stockholder's equity for the life subsidiaries as reported to state regulatory authorities, is presented below:
Security National Life $628,538 346,659 712,219 Southern Security Life 533,233 (486,825) 45,398
Security National Life $12,089,618 12,083,747 11,789,615 Southern Security Life 8,976,516 8,627,252 9,316,923
The Company has three reportable segments: life insurance, cemetery and mortuary, and mortgage loans. The Company's life insurance segment consists of life insurance premiums and operating expenses from the sale of insurance products sold by the Company's independent agency force and net investment income derived from investing policyholder and segment surplus funds. The Company's cemetery and mortuary segment consists of revenues and operating expenses from the sale of pre-need and at-need cemetery and mortuary merchandise and services at its mortuaries and cemeteries and the net investment income from investing segment surplus funds. The Company's mortgage loan segment consists of loan originations fee income and expenses from the originations of residential mortgage loans and interest earned and interest expenses from warehousing pre-sold loans before the funds are received from financial institutional investors. In addition, the Company has a corporate segment which provides administrative and marketing services to the reportable segments described above.
Mortgage, Policy, Student, and Collateral Loans: The fair values are estimated using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values.
1999 1998 1997 ---- ---- ---- Unrealized gains (losses) on available for-sale securities $(696,162) $ 405,047 $ 928,917 Less: reclassification adjustment for net realized gains in net income (14,126) (62,702) (227,097) --------- --------- --------- Net unrealized gains (losses) (710,288) 342,345 701,820 Tax expense on net unrealized gain (losses) 294,866 (92,171) (130,796) --------- --------- --------- Other comprehensive income (loss) $(415,422) $ 250,174 $ 571,024 ========= ========= =========
Amount at Which Shown Estimated in the Type of Investment Amortized Fair Balance - ------------------ Cost Value Sheet -------- --------- ------- Fixed maturity securities held to maturity:
Bonds: U.S. Treasury securities and obligations of U.S. Government agencies $ 12,822,025 $ 12,686,643 $12,822,025 Obligations of states and political subdivisions 176,499 167,116 176,499 Corporate securities including public utilities 20,594,306 20,759,857 20,594,306 Mortgage backed securities 6,009,010 5,799,814 6,009,010 Redeemable preferred stocks 28,011 40,022 28,011 ------------ ------------ -----------
Securities available for sale: Bonds: U.S. Treasury securities and obligations of U.S. Government agencies 4,596,294 4,579,332 4,579,332 Corporate securities including public utilities 20,270,712 19,449,746 19,449,746 Mortgage-backed securities 90,341 90,112 90,112 Nonredeemable preferred stock 70,431 106,450 106,450 Common stock: Public utilities 285,723 396,487 396,487 Banks, trusts and insurance companies 251,083 603,764 603,764 Industrial, miscellaneous and all other 3,742,902 4,638,512 4,638,512 ------------ ------------ -----------
Mortgage loans on real estate 18,926,628 18,926,628 Real estate 7,629,952 7,629,952 Policy loans 11,607,993 11,607,993 Other investments 1,290,310 1,290,310 ------------ -----------
Property, plant and equipment, at cost, net of accumulated depreciation of $314,392 for 1999 and $313,859 for 1998 10,535 66
Notes and contracts payable: Current installments 152,818 181,319 Long-term 303,713 455,572
Additional paid-in capital 10,015,942 9,596,444 Accumulated other comprehensive income 665,691 1,081,113 Retained earnings 7,516,640 7,474,783 Treasury stock at cost (966,139 Class A shares and 61,979 Class C shares in 1999; 692,993 Class A shares and 59,028 Class C shares in 1998, held by affiliated companies) (2,547,112) (1,796,060) ------------ ------------ Total stockholders' equity 26,489,693 26,680,259 ------------ ------------ Total liabilities and stockholders' equity $ 43,458,071 $ 38,178,127 ============ ============
Revenue: Net investment income $ 39,694 $ 18,145 $ 16,878 Fees from affiliates 3,838,704 755,951 757,567 ----------- --------- ----------- Total revenue 3,878,398 774,096 774,445 ----------- --------- ----------- Expenses: General and administrative expenses 2,396,015 195,148 138,425 Interest expense 641,282 257,162 260,293 ----------- --------- ----------- Total expenses 3,037,297 452,310 398,718 ----------- --------- ----------- Earnings (loss) before income taxes, and earnings of subsidiaries 841,101 321,786 375,727
Equity in earnings of subsidiaries 412,604 563,789 1,057,470 ----------- --------- ----------- Net earnings $ 975,895 $ 771,229 $ 1,308,941 =========== ========= ===========
SECURITY NATIONAL FINANCIAL CORPORATION (Parent Company Only) Statements of Cash Flow
Year Ended December 31, ----------------------- 1999 1998 1997 ---- ---- ---- Cash flows from operating activities:
Net earnings $ 975,895 $ 771,229 $ 1,308,941 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 533 4,655 10,644 Undistributed earnings of affiliates (412,604) (563,789) (1,057,470) Provision for income taxes 277,810 114,346 124,254 Change in assets and liabilities: Accounts receivable 57,802 (90,600) 86,403 Other assets (72,245) (396) 202 Accounts payable and accrued expenses -- 4,697 31,046 Other liabilities 17,687 263,926 (43,732) ----------- ----------- ----------- Net cash provided by operating activities 844,878 504,068 460,288
Cash flows from financing activities: Proceeds from advances from affiliates 6,388,198 200,000 -- Payments of advances to affiliates (169,023) (200,000) -- Payments of notes and contracts payable (1,094,150) (398,353) (386,799) Purchase of treasury stock -- -- -- Sale of treasury stock -- -- 44,994 Proceeds from borrowings on notes and contracts payable -- 6,246,400 -- ----------- ----------- ----------- Net cash provided by financing activities 5,125,025 5,848,047 (341,805) ----------- ----------- ----------- Net change in cash (134,370) 90,378 39,194 Cash at beginning of year 118,731 28,353 (10,841) ----------- ----------- ----------- Cash at end of year $ (15,639) $ 118,731 $ 28,353 =========== =========== ===========
December 31, ------------ 1999 1998 ---- ---- $5,863,000 revolving line of credit at bank prime rate less 1%, (7.5% at December 31, 1999) interest only to December 1999 thereafter interest and principal, collateralized by 15,000 shares of Security National Life Insurance Company stock, due December 2005 $5,610,111 $6,246,400
December 31, ------------ 1999 1998 ---- ---- 10 year notes due April 16, 1999, 1% over U.S. Treasury 6 month bill rate $ 535 $ 28,187
Total notes and contracts 456,531 636,891 Less current installments 152,818 181,319 --------- -------- Notes and contracts, excluding current installments $303,713 $455,572 ======== ========