The Company believes its owned and leased space is adequate for its current needs. For further information regarding the Company's properties, see Note 5 of Notes to Financial Statements of the Partnership.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS. --------------------------
Security Capital reported net income of $1,013,000 for fiscal year 1996 as compared to net income of $244,000 and a net loss of $69,000 for fiscal years 1995 and 1994, respectively. The net earnings per common share (after accrual for Class A Preferred Stock dividends) were $.14 for fiscal year 1996 as compared to a net loss per common share (after accrual for Class A Preferred Stock dividends) of $.05 and $.24 for fiscal years 1995 and 1994, respectively.
The Company's product sales and gross profit increased to $9,854,000 and $5,090,000, respectively, due to the acquisition of Possible Dreams. Possible Dreams' sales figures reflect the five month period from May 1, 1996 to the end of the fiscal year. Possible Dreams' business is very seasonal in nature because its main products are Christmas related. Therefore, demand for Possible Dreams' products and the company's best sales activity and gross margins are in the last two calendar quarters of any year. Selling, general and administrative expense increased to $4,086,000 for fiscal year 1996 as compared to $695,000 for fiscal year 1995. This increase can be attributed to the addition of five months of Possible Dreams' selling, general and administrative expenses to the Company's results. The Company incurred interest expense of $731,000, primarily due to debt incurred to acquire Possible Dreams and due to increased borrowings by Possible Dreams during its busiest seasonal period. Interest income during the current fiscal year decreased by $53,000 to $362,000, primarily due to the reduction in cash related to the payment of $2,700,000 to the Sellers in connection with the acquisition of Possible Dreams.
The Company's percentage of Bowen, Miclette, Descant & Britt's (the "Partnership's") net revenue and expenses are classified on the Company's income statement under the caption "Income from joint enterprise" and amounted to $362,000 and $415,000 for fiscal years 1996 and 1995. The Company's percentage interest in the net revenues and expenses of the Partnership was 48% for calendar year 1994 and has increased to 50% for every calendar year thereafter. Income from joint enterprise was down $53,000, primarily due to a change in the bonus percentage due certain officers of the Partnership, from 25% to 50%, pursuant to the terms of the Agency Agreement. On August 29, 1996, an officer of the Partnership exercised the put option in the Buy-Sell Agreement to purchase all of the assets, liabilities and business of Foster Insurance Services, Inc.("FIS"), the 50% corporate partner of the Partnership. The purchase price for FIS will be determined by an independent third party appraiser. It is anticipated that the sale of the Company's interest in FIS will be completed during the first half of 1997. Management expects a gain to be recorded in connection with the purchase of FIS by Britt. However, at this time management cannot estimate the gain to be recorded.
Interest income was $513,000 for fiscal year 1995 as compared to $153,000 for fiscal year 1994. This increase in interest income can be attributed to the increase in funds invested by the Company due to the receipt of $6,904,000 from a rights offering effected during the latter part of fiscal year 1994. Selling, general and administrative expenses increased $173,000 to $695,000 for fiscal year 1995 as compared to $522,000 for fiscal year 1994, primarily due to the Company reserving $205,849 for New York State and City tax assessments. The Company paid $155,396 of the above reserve on November 2, 1995 to the City of New York for calendar years 1986 and 1987, which closed out the remaining tax years that the Company was subject to audit with respect to its former New York operations.
Possible Dreams experiences a significant seasonal pattern in its working capital requirements and operating results. Possible Dreams has historically received orders representing approximately 50% of its annual bookings during the first quarter for each of the last three calendar years. It ships product throughout the year, with a majority of the shipping occurring in the third and fourth calendar quarters of each year. Possible Dreams hires temporary employees during its third and fourth calendar quarters to accomodate peak shipping periods. Possible Dreams offers extended payment terms to some of its customers for seasonal merchandise and, accordingly, collects a substantial portion of its accounts receivable in the fourth calendar quarter. Due to the seasonal pattern, Possible Dreams has had greater working capital needs in its second and third calendar quarters and has experienced greater cash availability in its fourth calendar quarter. As a result of this sales pattern, Possible Dreams typically records a substantial portion of its revenues in its third and fourth calendar quarters and expects this seasonal pattern to continue for the foreseeable future. Possible Dreams has historically financed its operations through internally generated cash flow and short term seasonal borrowings.
Cash and cash equivalents decreased by $1,088,000 to $8,706,000 at September 30, 1996, primarily due to the cost of the Possible Dreams acquisition. Of the cash paid to the Sellers, $2,700,000 was provided by the Company, $300,000 was provided from the proceeds of Class A Common Stock of P.D. Holdings, Inc.("Holdings"),the holding company for Possible Dreams, purchased by an executive officer of the Sellers, and the balance was borrowed pursuant to a credit agreement. In connection with the closing of the acquisition, the lenders provided various credit facilities to Possible Dreams to partially finance the acquisition, refinance existing bank debt of the Sellers, provide for seasonal working capital and letter of credit requirements and to pay transaction expenses. The credit facilities consist of a revolving credit facility for short-term working capital and seasonal fluctuations of Possible Dreams' business and $9,250,000 in amortizing term debt maturing from five to seven years from the closing date. The credit facilities are secured by all of the acquired assets, as well as a pledge to the lenders of the capital stock of Possible Dreams owned by Holdings. In connection with the credit facility, the lenders were issued warrants exercisable for 12.5% of the Class B Common Stock, on a fully diluted basis, of Possible Dreams. The Class B Common Stock is non-voting and convertible at any time into voting, Class A Common Stock of Possible Dreams. The warrants have certain restrictions on transfer, registration, put and call rights.
The Company's consolidated working capital at September 30, 1996 increased by $2,437,000 to $11,781,000 from $9,344,000 at September 30, 1995. The main reason for the increase in working capital can be attributed to the impact of the new credit agreement with the lenders, as part of the acquisition of Possible Dreams, on the Company's financial statements. The Company expects no major increase in capital expenditures during fiscal year 1997. The Company believes that with the addition of Possible Dreams, the proceeds from the sale of the Company's insurance agency affiliate, FIS, and from cash and cash equivalents at September 30, 1996, there will be sufficient cash on hand to meet the Company's working capital and operating expenditure requirements during fiscal year 1997 and to compete for other acquisition opportunities.
Independent Auditors' Report. . . .. . . . . . . . . . . . . . . . .. .
Consolidated Statements of Income--For the Years Ended September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . .
Consolidated Statements of Stockholders' Equity--For the Years Ended September 30, 1996, 1995 and 1994 . . . . . . . . . . .
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . .
Statements of Income--For the Years Ended September 30, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows--For the Years Ended September 30, 1996, 1995 and 1994. . . . . . . . . . . . . . .
To the Board of Directors of Security Capital Corporation Houston, Texas 77008
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Security Capital Corporation and subsidiaries at September 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1996 in conformity with generally accepted accounting principles.
Cost of goods sold 4,764 - - - --------------------------------------------------------------------------- Gross profit $ 5,090 $ $ - - ---------------------------------------------------------------------------
- --------------------------------------------------------------------------- Operating income(loss) $ 1,004 $ (695) $ (522) - ---------------------------------------------------------------------------
Other income/expense - -------------------- Income from joint enterprise $ 362 $ 415 $ 282 Interest income 483 513 153 Interest expense (731) - - Other income 82 11 18
Net income(loss) applicable to common stockholders $ 563 $ (206) $ (519) - ---------------------------------------------------------------------------
Security Capital Corporation and Subsidiaries Consolidated Balance Sheets - --------------------------------------------------------------------------- As of September 30, 1996 1995 - --------------------------------------------------------------------------- ASSETS ( In thousands, except par value and shares) - ------ Current assets: Cash and cash equivalents $ 8,706 $ 9,794 Account receivable (net of allowance for doubtful accounts of $412 and $0) 9,793 - Inventory 5,010 - Other current assets 278 180 ------------ ------------ Total current assets 23,787 9,974
- --------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 34,502 $ 10,926 - ---------------------------------------------------------------------------
Consolidated Statements of Cash Flows Security Capital Corporation and Subsidiaries - --------------------------------------------------------------------------- Year ended September 30, 1996 1995 1994 - --------------------------------------------------------------------------- (In thousands)
Cash flows from operating activities: Net income (loss) $ 1,013 $ 244 $ (69) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization of property and equipment, and amortization of deferred items 296 17 41 Provision for possible losses - - 6 Minority interest 129 - - Changes in operating assets and liabilities, net of effects from acquisition of business Increase in accounts receivable (6,969) - - Increase in inventories (1,566) - - (Increase)decrease in other assets 839 (169) (127) Increase(decrease) in payables 885 321 (207)
Source of acquisition funds: Cash $ 2,700,000 Debt issued (Note 5) 14,360,000 Minority interests investment 300,000 ----------------- $17,360,000 ----------------- -----------------
The following unaudited pro forma financial data have been prepared assuming that the acquisition of Possible Dreams occurred on October 1, 1995.
- ---------------------------------------------------------- Year ended September 30, 1996 1995 - ---------------------------------------------------------- (In thousands, except per share amounts)
Revenues $18,189 $20,655 Net income $534 $951 Earnings per share $.02 $.12
REVENUE RECOGNITION Revenues from product sales are recognized in the period in which the merchandise is shipped.
PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Fixed assets are comprised of the following:
- ----------------------------------------------------------------- September 30, 1996 1995 - ----------------------------------------------------------------- (In thousands) Land and improvements $ 370 $ - Buildings and improvements 630 - Machinery and equipment 24 - Data processing equipment 52 176 Furniture and fixtures 229 191 ----------------------------------- Total cost $ 1,305 $ 367 ----------------------------------- Less: accumulated depreciation 200 353
FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments consist of current assets, current liabilities, notes payable and long-term debt. Current assets and current liabilities are carried at cost, which approximates fair value. Note payable and long-term debt bear interest at current market rates and, accordingly, the carrying value of the debt approximates fair value.
The weighted average number of shares outstanding used in the computations of primary earnings per share was 4,060,166, 4,060,659 and 2,145,873 for fiscal years 1996, 1995 and 1994, respectively. All references to amounts per share and number of shares in the financial statements and elsewhere throughout this report are restated to give effect to the one-for-eight reverse stock split effected in March 1996.
Security Capital's 1982 Incentive Stock Option Plan (the "Plan"), as amended on December 10, 1990, provides for the granting of options to purchase up to 950,000 shares of Class A Common Stock to eligible employees of the Company at the fair market value on the date of the grant. Options may be exercised in installments over the option period, but no options may be exercised after 10 years from the date of the grant. The Plan terminated on January 25, 1992.
Outstanding at September 30, 1993 4,325 $5.00 - $49.04 Granted - Exercised - Canceled -
- ------------------------------------------------------------------------------- Outstanding at September 30, 1994 4,325 $5.00 - $49.04 Granted - Exercised - Canceled 313
Security Capital files a consolidated Federal income tax return with its subsidiaries.
At September 30, 1996, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $17.0 million, the expiration dates of which are as follows:
- ------------------------------------------------------------------------------- September 30, Amount - ------------------------------------------------------------------------------- (In thousands) 1998 $ 200 1999 2,500 2000 1,300 2001 3,600 2002 1,800 2003 4,000 2004 2,400 2006 400 2007 200 2008 600 - ------------------------------------------------------------------------------- $ 17,000 - -------------------------------------------------------------------------------
In addition, in connection with the disposition of a former subsidiary of the Company, the Company incurred a tax loss amounting to approximately $26 million during the year ended September 30, 1988. The Company believes that a substantial portion of this loss is an ordinary loss for Federal income purposes which may be carried forward to 2003, although there can be no assurance that this position would prevail, if challenged. The Company believes that approximately $7.4 million of the loss is a capital loss which expired unused at September 30, 1994. The Company's Federal income tax returns have been examined by the Internal Revenue Service (the "IRS") through fiscal 1986 and the above loss carryforwards, including the loss on disposition of the aforementioned subsidiary, remain subject to review by the IRS.
The tax effects of the items comprising the Company's net deferred tax asset at September 30, 1996 and 1995 in the Company's statement of financial position are as follows:
- ------------------------------------------------------------------------------- September 30, 1996 1995 - ------------------------------------------------------------------------------- (In thousands) Deferred tax assets (credits): Allowance for doubtful accounts $ 39 $ - Operating loss carryforwards 12,122 12,635 Partnership income (loss) (139) Accelerated depreciation (17) - ---------------- ------------------- 12,144 12,496
Net deferred tax asset $ -0- $ -0- ---------------- ------------------- ---------------- -------------------
Income taxes based on 34% of net income $ 344 Utilization of net operating loss carryforwards (352) State income taxes 58 Other 8 Provision for income taxes $ 58
Long-term debt consists of the following at September 30, 1996 (there was no debt outstanding at September 30, 1995):
Tranche A Term Loan, payable in twenty quarterly installments through July 1, 2001. The loan bears interest at the commercial paper rate plus 4% (9.46% at September 30, 1996). Interest is payable monthly. $5,750,000
Tranche B Term Loan, payable in seven annual installments through April 1, 2003. The loan bears interest at the commercial paper rate plus 6% (approximately 11.46% at September 30, 1996). Interest is payable monthly. 3,500,000
Subordinated promissory notes payable to the former owners of Possible Dreams, interest rates ranging from 10 - 14% ( 10% at September 30, 1996) per annum. The principal payments are due in one installment on May 31, 2003. Interest is payable in semi-annual installments on May 1 and November 1. 2,460,000 ------------------ 11,710,000 Less amounts representing debt discount (371,089) Less current portion (1,010,000) ------------------ Total long term debt $10,328,911 ------------------ ------------------
September 30, Amount ------------- ------ 1997 $1,010,000 1998 1,000,000 1999 1,250,000 2000 1,250,000 2001 1,240,000 Thereafter 5,960,000
In addition, the Company entered into a Consolidated Income Tax Sharing Agreement (the "Tax Sharing Agreement") with Possible Dreams and P.D. Holdings, Inc. whereby Possible Dreams will calculate and pay to the Company the amount of its income tax liability as if Possible Dreams was not part of a consolidated group. The excess of the payment made by Possible Dreams to the Company over the Company's tax liability will accrue to the Company subject to certain rights of the lenders. The lenders required the Company to set aside in a separate account such excess amounts paid by Possible Dreams to the Company during the first three years of the Tax Sharing Agreement and to pledge the Company's rights in such account to the lenders as additional collateral for the loans to Possible Dreams. The amount to be segregated for the five months ended September 30, 1996 is $385,000.
Note Payable - Bank - The Company maintains a $10,000,000 revolving line of credit that expires on May 17, 2003. The amount outstanding under the revolving line of credit was $8,884,410 at September 30,
FGS and its designees purchased 30,000 shares of Preferred Stock from the Company for $3,000,000, on July 30, 1993. This non-voting preferred stock is subject to mandatory redemption on the following date or dates: (1) eight years from the date of issuance of the first shares of such stock; (2) the occurrence of a change of control in the majority of the Board of Directors; or (3) each date, if any, on which an adjustment to the purchase price of the stock shall be required. The stock has a purchase price and redemption price equal to the liquidation value, which is $100 per share. In addition, the Class A Preferred Stock bears a dividend of 15% per annum payable in cash. Until redemption or the liquidation of the Company, dividends on Preferred Stock are payable only out of cumulative net income since January 1, 1990. (At a redemption date or upon the liquidation of the Company, accumulated but unpaid dividends are payable in full regardless of earnings since January 1, 1990.) Therefore, since there has been a cumulative net loss since January 1, 1990 of $456,000, preferred stock dividends of $1,425,000 accrued from July 30, 1993 to September 30, 1996, were in arrears at September 30, 1996.
On January 26, 1990, Security Capital executed a Stock Purchase Agreement with FGS, Inc., a Delaware corporation ("FGS"). Pursuant to the Stock Purchase Agreement, FGS and its designees had acquired for an aggregate consideration to date of $4,416,613 (subject to adjustments as noted below) 4,483,975 shares (without adjusting for the reverse stock split) of Class A Common Stock, 1,025 shares (without adjusting for the reverse stock split) of Common Stock and 30,000 shares of Class A Preferred Stock. The original purchase price per share for such Common Equity purchased by FGS and its designees was $.3822816 per share. This per share price was the unconsolidated net book value of the Company's Common Stock as of September 30, 1989 subject to various adjustments pursuant to the Stock Purchase Agreement. The adjustments to the Per Share Price under the Stock Purchase Agreement which have been made since the purchase of capital stock by FGS, and which may in the future be made, reflect the difference, if any, between estimated amounts and actual amounts (a) received in connection with (i) the liquidation of the Company's investment in Security Capital Lloyds("SCL"), (ii) the sale of certain assets of the Company and (iii) the termination of the Company's pension plan and (b) expended in connection with termination of the lease of the Company's New York office. Such adjustments shall be made no less frequently than every six months with the final adjustment no later than the date of termination of the sublease of the Company's former New York office in January 1995. In addition, the Per Share Price is subject to adjustment (i) to reflect liabilities of the Company, if any, existing prior to January 26, 1990 not included in the calculation of the Per Share Price or (ii) in satisfaction of Security Capital's obligation to indemnify FGS for losses resulting from or relating to (x) any misrepresentation, breach of warranty or breach of covenant in the Stock Purchase Agreement or (y) operations of the Company prior to January 26, 1990. As of the date of this report, the only known remaining adjustments to the per share price under the Stock Purchase Agreement relate to possible amounts due to the City and State of New York. During fiscal year 1996, the Company paid $166,000 to FGS and its designees for prior year adjustments.
- ------------------------------------------------------------------------------- 8. Related party transactions - ------------------------------------------------------------------------------- On April 27, 1990, Security Capital entered into an Advisory Services Agreement effective as of January 26, 1990 (the "Advisory Agreement") with Capital Partners, Inc. ("CP, Inc."), an entity affiliated with FGS, pursuant to which such entity provides certain advisory services in the areas of investments, general administration, corporate development, strategic planning, stockholder relations, financial matters and general business policy in lieu of the services previously provided by certain of the Company's officers and other support personnel from the Company's former New York office. The annual fee for such services pursuant to the Advisory Agreement was $150,000 (due in quarterly installments in advance) plus certain out-of-pocket costs (which do not include rent and utilities of CP, Inc. and compensation of CP, Inc. employees). In connection with the acquisition of Possible Dreams, the Company entered into an amendment to the Advisory Agreement with CP, Inc. to provide management advisory services to Possible Dreams for an increase in the annual fee of $175,000 to $325,000. Such fee is subject to appropriate adjustment should the scope of operations of the Company change, whether from an acquisition or otherwise. Pursuant to the Advisory Agreement, no compensation is paid to the current Chairman of the Board, President and Secretary and Assistant Secretary in their respective capacities as such.
The Advisory Agreement states that, from time to time, CP, Inc. may present acquisition opportunities to the Company that it believes may be appropriate for the Company, but that CP, Inc. is under no obligation to present any or all acquisition candidates of which it is aware to the Company except for insurance agency business. If the Company or any of its subsidiaries completes any acquisition which was presented by CP, Inc., the Company is obligated to pay CP, Inc. an investment banking fee at the usual and customary rate for transactions of such size and complexity. In connection with the Possible Dreams acquisition, an investment banking fee of $200,000 was paid to CP, Inc.
Effective September 1, 1992, FIM entered into (i) an Agency and Management Services Agreement (as amended, the "Agency Agreement") with FIS which replaced a previous agreement with Stanley L. Spring, and (ii) a Buy-Sell Agreement (the "Buy-Sell Agreement") with FIS and Edward G. Britt, Jr. ("Britt"), the sole shareholder of FIS.
Operating revenues $ - $ - $ 1,453 $ 8,401 Net income (loss) 12 249 (272) 1,024 Earnings (loss) per common share (.02) .03 (.09) .22 Dividends per share of common stock - - - -
Operating revenues $ - $ - $ - $ - Net income (loss) (101) 277 (114) 182 Earnings (loss) per common share (.05) .04 (.06) .02 Dividends per share of common stock - - - -
By notice received January 3, 1994, the Company's insurance agency affiliate, FIS, was sued in the 281st Judicial District Court of Harris County, Texas by Quality Oilfield Products, Inc. for damages of at least $2,000,000 plus attorneys' fees, plus potentially treble damages, for alleged failure to provide a policy of insurance for compensation for future losses related to business interruption. FIS has turned the claim into its Errors & Omissions Insurance carrier to handle the litigation and to respond to the lawsuit. FIS' Errors and Omissions carrier has responded to the lawsuit and both parties are in the discovery phase of the suit. Although there can be no assurance, the Company does not believe that FIS will incur any loss with respect to this matter in excess of insurance coverage.
To the Board of Directors of Bowen, Miclette, Descant & Britt Houston, Texas 77008
In our opinion, such financial statements present fairly, in all material respects, the financial position of Bowen, Miclette, Descant & Britt at September 30, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 1996 in conformity with generally accepted accounting principles.
Year ended September 30, 1996 1995 1994 - --------------------------------------------------------------------------- (In thousands)
Changes in operating assets and liabilities: Decrease (increase) in assets Accounts receivable - premiums (566) 447 1,105 Other receivables (274) (177) 271 Federal income tax recoverable - - 6 Prepaid insurance (13) (6) (8) Expense advances - (109) (115) -------- -------- -------- Subtotal (853) 155 1,259
Capital expenditures (400) (318) (345) Other - - 123 - ------------------------------------------------------------------------------ Net cash flow provided (used) for investing activities (400) (318) (222) - ------------------------------------------------------------------------------ Cash flows from financing activities: Distribution to partners (1,291) (291) (43) Lease payments (204) (132) (81) Note payments (13) (7) (22) Partners' advances 160 (198) 100 - ------------------------------------------------------------------------------ Net cash provided (used) by financing activities (1,348) (628) (46) - ------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (319) 539 (518) Cash and cash equivalents, beginning of the year 1,019 480 998 - ------------------------------------------------------------------------------ Cash and cash equivalents, end of the year $700 $1,019 $480 - ------------------------------------------------------------------------------ The accompanying Notes to Financial Statements are an integral part of these financial statements.
Statement of Partners' Equity Bowen, Miclette, Descant & Britt - ------------------------------------------------------------------------------ (In Thousands) Partners' Equity - ------------------------------------------------------------------------------ Balance, October 1, 1993 $ 43 - ------------------------------------------------------------------------------ Net income for fiscal year 1994 579
Bowen, Miclette, Descant and Britt, a general partnership (the "Company" or "BMDB"), is a licensed local recording insurance agency domiciled in the State of Texas. Foster Insurance Services, Inc. ("FIS") and Bowen, Miclette and Descant, Inc. ("BMD"), two unaffiliated independent insurance agencies, are the corporate partners of BMDB. On July 23, 1993, the Texas State Board of Insurance approved the application for an insurance license for BMD and FIS to form the general partnership. The Company began operating as a general partnership effective October 1, 1993.
CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Interest paid during the twelve month periods ended September 30, 1996, 1995 and 1994 was $45,750, $40,916 and $35,392, respectively.
PROVISION FOR POSSIBLE LOSSES A provision for possible losses is included in expense based on management's evaluation of customer receivables under existing economic conditions. The provision for possible losses is based on estimates, and actual losses may vary from current estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.
Leased Equipment $1,063 $ 779 Furniture and Fixtures 102 67 Leasehold Improvements 105 89 Automobiles 93 92 Computers 174 129 ------------------------------------ Total $1,537 $1,156 ------------------------------------ Less: accumulated depreciation 650 400 ------------------------------------ Net book value $ 887 $ 756 ------------------------------------ ------------------------------------
Frost Bank-auto loan 14 20 --------------------------------------- Total $15 $28 --------------------------------------- Less: current portion 9 13 --------------------------------------- Long-term portion $ 6 $15 ---------------------------------------
- ------------------------------------------------------------------------------ (In thousands) 1997 $258 1998 218 1999 116 2000 59 2001 12 - ------------------------------------------------------------------------------ Total minimum lease payments $663 - ------------------------------------------------------------------------------ Less: amount representing interest 81 - ------------------------------------------------------------------------------ Present value of net minimum lease payments including current maturity of $213 $582 - ------------------------------------------------------------------------------ 6. Related party transactions - ------------------------------------------------------------------------------
BMD&B, Inc. acts as agent for BMD, FIS and the partnership (hereinafter "Affiliated Companies") for the following limited purposes: (i) to continue as lessee of the office facilities and equipment; (ii) to process specific insurance business which the Affiliated Companies decide to handle in BMD&B, Inc.'s name; and (iii) to render personnel and employment services for the Affiliated Companies, including acting as common paymaster for BMD, FIS and the partnership. As payment for rendering personnel and employment services to BMDB, BMD&B, Inc. has charged BMDB $2,500 per month, or $30,000 annually since October 1, 1993.
On August 29, 1996, Edward G. Britt, Jr.("Britt") exercised his put option under the Buy-Sell Agreement to purchase all of the assets, liabilities, and business of FIS, the 50% corporate partner of BMDB for a price to be determined by an independent third party appraiser. It is expected that Britt's purchase of FIS will be concluded in the first half of 1997. This transaction is not expected to have any significant effect on the operations of the Company.