(1) The Company leases an additional 8,858 square feet of the facility to unrelated third parties for approximately $142,000 per year, under leases which expire at various dates after 2001.
(3) The Company leases an additional 12,245 square feet of the facility to unrelated third parties for approximately $165,000 per year, under leases which expire at various dates after 2001.
The following table summarizes the location, square footage and the number of viewing rooms and chapels of the thirteen Company owned mortuaries:
Name of Date Viewing Square Mortuary Location Acquired Room(s) Chapel(s) Footage - ------------ ----------- ---------- -------- --------- -------- Memorial Mortuary 5850 South 900 East Salt Lake City, UT 1973 3 1 20,000
Redwood Mortuary 6500 South Redwood Rd. West Jordan, UT 1973 2 1 10,000
Mountain View Mortuary 3115 East 7800 South Salt Lake City, UT 1973 2 1 16,000 Lakeview Mortuary 1700 East Lakeview Dr. Bountiful, UT 1973 0 1 5,500
Camelback Sunset Funeral Home(1) 301 West Camelback Rd. Phoenix, AZ 1994 2 1 11,000
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, 2001, are derived from the audited consolidated financial statements. The data as of December 31, 2001 and 2000, and for the three years ended December 31, 2001, should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.
(2) Reflects the acquisition of SSLIC Holding Company and subsidiaries as of December 17, 1998.
(3) Reflects the implementation on January 1, 2000 of SAB No. 101, "Revenue recognition in Financial Statements" which changes the Company's accounting policies regarding the manner in which the Company records pre-need sales. The implementation of SAB No. 101 did not have a material effect on the consolidated financial condition, results of operation or cash flows of the Company. The change in the Company's accounting policies resulting from implementation of SAB No. 101 has been treated as a change in accounting principle effective as of January 1, 2000. The cumulative effect of the accounting change through December 31, 1999 was negligible. The following table shows the unaudited proforma effects of retroactive application using the newly adopted accounting policies compared to historical results for the years ended December 31, 1999 and 1998. It was impractical for the Company to obtain the amounts on a pro-forma basis prior to 1998. There were no changes in net earnings or net earnings per common share for those periods since the Company's previous accounting practice did not recognize any significant profits on pre-need sales. The Company's previous accounting practice recorded pre-need sales as revenue but also recorded approximately an equal amount for the sum of the future merchandise cost and sales expense. Implementing SAB 101 changed this practice to defer these pre-need sales and costs to when the merchandise is delivered or the services are performed.
1999 1998 ------- --------- Proforma Historical Proforma Historical ------------ ----------- ----------- ------------ Revenues $48,632,0000 $49,657,000 $31,939,000 $32,820,000
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, 2001, SSLIC Holding held approximately 75% of the outstanding shares of common stock of Southern Security Life Insurance Company ("Southern Security").
Total revenues increased by $18,870,000, or 32.5%, from $58,079,000 for fiscal year 2000 to $76,949,000 for fiscal year 2001. Contributing to this increase in total revenues was a $17,165,000 increase in mortgage fee income, an $810,000 increase in net investment income, a $1,187,000 increase in net mortuary and cemetery sales and a $275,000 increase in insurance premiums and other considerations.
During 2001, there was a net increase of $1,160,000 in death benefits, surrender and other policy benefits, and a decrease of $2,316,000 in future policy benefits from $12,931,000 in 2000 to $11,775,000 in 2001. This net decrease was primarily the result of a decrease in traditional life reserves.
Cost of the mortuary and cemetery goods and services sold decreased by $134,000, from $2,628,000 in 2000 to $2,494,000 in 2001. This decrease was primarily due to greater sales of cemetery burial property sales in 2001, which have a lower cost of goods sold than other funeral products.
Cost of the mortuary and cemetery goods and services sold decreased by $667,000, from $3,295,000 in 1999 to $2,628,000 in 2000. This decrease was primarily due to the change in accounting principles for pre-need funeral and cemetery contract revenues. See Note 1, "Recent Accounting Pronouncements".
The Company's investment policy is to invest predominately in fixed maturity securities, mortgage loans, and warehouse mortgage loans on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing the life insurance subsidiaries. Bonds owned by the insurance subsidiaries amounted to $49,271,000 as of December 31, 2001 compared to $62,889,000 as of December 31, 2000. This represents 55% of the total insurance related investments in 2001 as compared to 60% in 2000. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners (NAIC). Under this rating system, there are six categories used for rating bonds. At December 31, 2001, 5.0% ($2,438,000) and at December 31, 2000, .68% ($429,000) of the Company's total bond investments were invested in bonds in rating categories three through six which are considered non-investment grade.
The Company has classified certain of its fixed income securities, including high-yield securities, in its portfolio as available for sale, with the remainder classified as held to maturity. However, in accordance with Company policy, any such securities purchased in the future will be classified as held to maturity. Business conditions, however, may develop in the future which may indicate a need for a higher level of liquidity in the investment portfolio. In that event the Company believes it could sell short-term investment grade securities before liquidating higher-yielding longer term securities.
At December 31, 2001, $24,776,305 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.
Consolidated Statement of Stockholders' Equity, Years Ended December 31, 2001, 2000 and 1999. .....................................................30
Consolidated Statement of Cash Flows, Years Ended December 31, 2001, 2000 and 1999 .......................................................31
I. Summary of Investments -- Other than Investments in Related Parties...............................63
We have audited the accompanying consolidated balance sheet of Security National Financial Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the three years in the period ended December 31, 2001. In connection with our audits of the consolidated financial statements, we have also audited the amounts included in the consolidated financial statement schedules as listed in the accompanying index under Item 8. These consolidated financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits.
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, 2001 and 2000, and the consolidated results of their operations and their cash flows for the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
December 31, Assets: 2001 2000 - ------- ---- ---- Insurance-related investments: Fixed maturity securities held to maturity, at amortized cost (market $28,697,986 and $39,283,266 for 2001 and 2000) $27,799,909 $39,384,168 Fixed maturity securities available for sale, at market (cost $20,565,833 in 2001 and 23,556,864 in 2000) 21,470,729 23,504,989 Equity securities available for sale, at market (cost $1,605,980 and $1,617,363 for 2001 and 2000) 2,641,549 2,774,077 Mortgage loans on real estate 15,479,305 17,435,178 Real estate, net of accumulated depreciation and allowances for losses of $3,523,913 and $3,088,761 for 2001 and 2000 9,051,691 8,564,395 Policy, student and other loans 11,277,975 11,277,742 Short-term investments 1,453,644 1,027,927 ------------- ------------ Total insurance-related investments 89,174,802 103,968,476 Restricted assets of cemeteries and mortuaries 5,339,436 4,841,819 Cash 8,757,246 11,275,030 Receivables: Trade contracts 6,945,274 5,342,380 Mortgage loans sold to investors 50,695,073 26,886,162 Receivable from agents 2,061,541 2,225,784 Receivable from officers 102,200 111,500 Other 1,183,927 3,503,320 ------------- ------------- Total receivables 60,988,015 38,069,146 Allowance for doubtful accounts (2,287,241) (1,656,223) ------------- ------------- Net receivables 58,700,774 36,412,923 Policyholder accounts on deposit with reinsurer 7,148,068 7,434,750 Land and improvements held for sale 8,346,448 8,485,523 Accrued investment income 1,059,789 1,302,552 Deferred policy and pre-need acquisition costs 14,453,023 13,603,182 Property, plant and equipment, net 10,802,387 10,824,700 Cost of insurance acquired 7,615,348 8,729,264 Excess of cost over net assets of acquired subsidiaries 1,065,045 1,172,599 Other 597,209 695,683 ------------- ------------- Total assets $213,059,575 $208,746,501 ============= =============
Stockholders' Equity: - -------------------- Common stock: Class A: $2 par value, authorized 10,000,000 shares, issued 5,363,591 shares in 2001 and 5,107,631 shares in 2000 10,727,182 10,215,262 Class C: $0.20 par value, authorized 7,500,000 shares, issued 6,113,430 shares in 2001 and 5,827,805 shares in 2000 1,222,686 1,165,561 ------------- ------------- Total common stock 11,949,868 11,380,823 Additional paid-in capital 10,168,523 10,054,714 Accumulated other comprehensive income, net of deferred taxes (benefit) of $212,734 and $(66,043) for 2001 and 2000 1,223,930 836,751 Retained earnings 9,989,230 7,831,306 Treasury stock at cost (1,294,716 Class A shares and 68,332 Class C shares in 2001; 1,233,064 Class A shares and 65,078 Class C shares in 2000, held by affiliated companies) (3,362,233) (3,362,233) ------------- ------------- Total stockholders' equity 29,969,318 26,741,361 ------------- ------------- Total liabilities and stockholders' equity $213,059,575 $208,746,501 ============= =============
Benefits and expenses: - --------------------- Death benefits 5,354,522 3,959,811 4,780,063 Surrenders and other policy benefits 1,467,323 1,702,251 1,494,863 Increase in future policy benefits 4,953,008 7,268,720 5,700,784 Amortization of deferred policy and pre-need acquisition costs and cost of insurance acquired 3,870,158 3,188,752 4,857,662 General and administrative expenses: Commissions 29,859,295 18,401,314 11,850,763 Salaries 9,027,523 7,667,263 7,409,298 Other 13,360,362 9,890,197 7,698,779 Interest expense 2,790,627 2,126,169 1,119,402 Cost of goods and services sold of the mortuaries and cemeteries 2,494,367 2,628,260 3,294,983 ------------ ------------ ------------
Earnings before income taxes 3,772,110 1,246,123 1,450,781 Income tax expense (913,539) (304,640) (230,516) Minority income (17,791) (45,754) (244,370) ------------ ------------ ------------ Net earnings $2,840,780 $895,729 $975,895 ============ ============ ============
Net earnings per common share $.63 $.21 $.22 ============ ============ ============
The accompanying consolidated financial statements include the accounts and operations of the Company. The Company's subsidiaries at December 31, 2001, are as follows:
On December 17, 1998, the Company purchased all of the outstanding shares of common stock of SSLIC Holding Company (formerly Consolidare Enterprises, Inc.), (SSLIC Holding) and Insuradyne Corporation (Insuradyne) for a total cost of $12,248,194. SSLIC Holding owns approximately 75% of the outstanding shares of common stock of Southern Security Life Insurance Company (Southern Security). The acquisition was accounted for using the purchase method.
Short-term investments - consists of certificates of deposit and commercial paper with maturities of up to one year.
Property, plant and equipment is recorded at cost. Depreciation is calculated principally on the straight-line method over the estimated useful lives of the assets which range from three to thirty years. Leasehold improvements are amortized over the lesser of the useful life or remaining lease terms.
Future policy benefit reserves for traditional life insurance are computed using a net level method, including assumptions as to investment yields, mortality, morbidity, withdrawals, and other assumptions based on the life insurance subsidiaries experience, modified as necessary to give effect to anticipated trends and to include provisions for possible unfavorable deviations. Such liabilities are, for some plans, graded to equal statutory values or cash values at or prior to maturity. The range of assumed interest rates for all traditional life insurance policy reserves was 4.5% to 10.0% in 2001, 2000, and 1999. Benefit reserves for traditional limited-payment life insurance policies include the deferred portion of the premiums received during the premium-paying period. Deferred premiums are recognized as income over the life of the policies. Policy benefit claims are charged to expense in the period the claims are incurred.
Cemetery merchandise and services trust investment earnings - investment earnings generated by assets included in merchandise and services trusts are deferred until the associated merchandise is delivered or services performed.
The Company is required to place specified amounts into restricted asset accounts for products sold on a pre-need basis. Income from assets placed in these restricted asset accounts are used to offset required increases to the estimated future liability.
All loans are sold to third party investors and the Company does not retain servicing rights. The amounts sold to investors are shown on the balance sheet as mortgage loans sold to investors and are shown on the basis of the amount due from the each investor. Any impairment to sold loans or possible loan losses are included in the provision for doubtful accounts. At December 31, 2001 and 2000 the provision for doubtful loan losses was not significant.
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 $1,269,816 and $1,162,262 at December 31, 2001 and 2000, respectively.
The weighted average fair value of options granted in 2001 under the 1993 Plan and the 2000 Plan is estimated at $1.25 as of the grant date using the Black Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, volatility of 31.8%, risk-free interest rate of 5.14%, and an expected life of five to ten years.
The Company adopted Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101) which changes the Company's accounting policies regarding the manner in which the Company records pre-need sales activities. The implementation of SAB No. 101 did not have a material effect on the consolidated financial condition, results of operations or cash flows of the Company.
----- Proforma Historical --------- ----------- Revenues $48,632,000 $49,657,000 Total benefits and expenses 47,181,000 48,207,000
In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No. 141) and No. 142, "Goodwill and Other Intangibles SFAS No. 142). SFAS No. 141 and No. 142 are effective for the Company on July 1, 2001. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The statement also establishes specific criteria for recognition of intangible assets separately from goodwill and requires unallocated negative goodwill to be written off immediately as an extraordinary gain. SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. The statement requires that goodwill and indefinite lived intangible assets no longer be amortized and be tested for impairment at least annually. The amortization period of intangible assets with finite lives will no longer be limited to forty years.
In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Long-Lived Assets". This Statement addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. This Statement supersedes FASB Statement 121 and APB Opinion No. 30. However, this Statement retains certain fundamental provisions of Statement 121, namely; recognition and measurement of the impairment of long-lived assets to be held and used, and measurement of long-lived assets to be disposed of by sale. The Statement also retains the requirement of Opinion 30 to report discontinued operations separately from continuing operations. This Statement also Amends ARB No. 51 to eliminate the exception of consolidation for a temporarily controlled subsidiary. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001.
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations". This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002.
Due in 2002 $3,333,806 $3,371,856 Due in 2003 through 2006 13,382,582 14,043,241 Due in 2007 through 2011 3,751,727 3,949,820 Due after 2011 97,718 105,812 Mortgage-backed securities -- -- ----------- ----------- $20,565,833 $21,470,729 =========== ===========
2001 2000 1999 ---- ---- ---- Fixed maturity securities held to maturity: Gross realized gains $20,228 $3,125 $87,859 Gross realized losses (565) (53) (1,895)
Generally gains and losses from held to maturity securities are a result of early calls and related amortization of premiums or discounts.
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, 2001, 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 $872,000, $717,000 and $733,000 for 2001, 2000, and 1999, respectively.
2001 2000 1999 ---- ---- ---- Balance at beginning of year $8,729,264 $9,597,306 $10,462,446 Cost of insurance acquired (289,754) -- --
Presuming no additional acquisitions, net amortization charged to income is expected to approximate $737,000, $679,000, $626,000, $572,000, and $520,000 for the years 2002 through 2006. Actual amortization may vary based on changes in assumptions or experience.
December 31, ------------ 2001 2000 ---- ---- 6.59% note payable in monthly installments of $34,680 including principal and interest, collateralized by 15,000 shares of Security National Life stock, due December 2004 $1,101,543 $1,425,967
10% note payable in monthly installments of $8,444 including principal and interest, collateralized by real property, which book value is approximately $1,013,000, due January 2013 680,020 711,608
$4,171,803 revolving line of credit at 6.15% interest payable monthly and a reduction in principal due in semi-annual installments collateralized by 15,000 shares of Security National Life Insurance Company stock, due December 2005 3,703,767 4,904,426
Bank prime rate plus 1/2% (5.25% at December 31, 2001) note payable in monthly installments of $7,235 including principal and interest, collateralized by real property, which book value is approximately $812,000, due August 2004 235,450 301,516
7.35% note payable in monthly installments of $14,975 including principal and interest collaterized by 15,000 shares of Security National Life Insurance Company stock, due December 2006 750,000 --
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, 2001 or 2000. 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, ------------ 2001 2000 ---- ---- 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 $604,265 $628,802
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 2002 151,857 303,714
Due to former stockholders of Crystal Rose Funeral Home resulting from the acquisition of such entity. Amount represents the present value discounted at 9% of monthly annuity payments of $5,350 due February 2007 35,420 62,892
Other notes payable 512,213 596,537 ---------- ---------- Total notes and contracts payable 3,635,776 4,240,830 Less current installments 600,894 615,291 ---------- ----------
2002 $ 2,278,577 2003 2,199,069 2004 2,333,860 2005 1,427,640 2006 652,806 Thereafter 3,205,724 ----------- Total $12,097,676 ===========
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, 2000 the Company had transferred $20,373 in excess of the required contribution to the fund, and as of December 31, 2001, owed the fund $5,586.
December 31, ------------ 2001 2000 ---- ---- Current $(86,569) $57,471 Deferred 6,961,166 6,067,041 ----------- ----------- Total $6,874,597 $6,124,512 =========== ===========
2001 2000 ---- ---- Assets Future policy benefits $(1,727,742) $(2,021,798) Unearned premium (1,829,505) (1,939,023) Difference between book and tax basis of bonds (43,176) (49,498) Net operating loss carryforwards expiring in the years 2002 through 2010 (84,350) (210,848) Other (631,375) (633,007) ------------ ------------ Total deferred tax assets (4,316,148) (4,854,174)
The Company paid $564,327 and $94,365 in income taxes for 2001 and 2000, respectively, and did not pay any income taxes for 1999. The Company's income tax expense (benefit) is summarized as follows:
2001 2000 1999 ---- ---- ---- Computed expense at statutory rate $1,282,517 $423,682 $493,266 Special deductions allowed small life insurance companies (356,734) (68,769) (122,204) Dividends received deduction (6,405) (24,418) (24,401) Minority interest taxes (7,466) (19,222) (102,828) Other, net 1,627 (6,633) (13,317) ----------- ----------- ----------- Tax expense $913,539 $304,640 $230,516 =========== =========== ===========
A portion of the life insurance income earned prior to 1984 was not subject to current taxation but was accumulated for tax purposes, in a "policyholders' surplus account." Under provisions of the Internal Revenue Code, the policyholders' surplus account was frozen at its December 31, 1983 balance and will be taxed generally only when distributed. As of December 31, 2001, the policyholders' surplus accounts approximated $4,500,000. Management does not intend to take actions nor does management expect any events to occur that would cause federal income taxes to become payable on that amount. However, if such taxes were accrued, the amount of taxes payable would be approximately $1,500,000.
The Company is 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.
The Company and its subsidiaries have a noncontributory Employee Stock Ownership Plan (ESOP) for all eligible employees. Eligible employees are primarily those with more than one year of service, who work in excess of 1,040 hours per year. Contributions, which may be in cash or stock of the Company, are determined annually by the Board of Directors. The Company's contributions are allocated to eligible employees based on the ratio of each eligible employee's compensation to total compensation for all eligible employees during each year. ESOP contribution expense totaled $191,557, $0, and $56,277 for 2001, 2000, and 1999, respectively. At December 31, 2001 the ESOP held 577,402 shares of Class A and 1,341,575 shares of Class C common stock of the Company. All shares held by the ESOP have been allocated to the participating employees and all shares held by the ESOP are considered outstanding for purposes of computing earnings per share.
The Company has a 401(k) savings plan covering all eligible employees, as defined above, which includes employer participation in accordance with the provisions of Section 401(k) of the Internal Revenue Code. The plan allows participants to make pretax contributions up to the lesser of 15% of total annual compensation or the statutory limits. The Company may match up to 50% of each employee's investment in Company stock, up to 1/2% of the employee's total annual compensation. The Company's match will be Company stock and the amount of the match will be at the discretion of the Company's Board of Directors. The Company's matching 401(k) contributions for 2001, 2000, and 1999 were approximately $18,458, $0, and $3,858 respectively. Also, the Company may contribute at the discretion of the Company's Board of Directors an Employer Profit Sharing Contribution to the 401-K savings plan. The Employer Profit Sharing Contribution shall be divided among three different classes of participants in the plan based upon the participant's title in the Company. The Company contribution for 2001, 2000 and 1999 were $260,350, $0, and $130,958, respectively. All amounts contributed to the plan are deposited into a trust fund administered by an independent trustee.
In 2001, the Company's Board of Directors adopted a Deferred Compensation Plan. Under the terms of the Plan, the Company will provide deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended. The Board has appointed a Committee of the Company to be the Plan Administrator and to determine the employees who are eligible to participate in the plan. The employees who participate may elect to defer a portion of their compensation into the plan. The Company may contribute into the plan at the discretion of the Company's Board of Directors. The Company's contribution for 2001 was $220,038.
Class A Class C ------- ------- Balance at December 31, 1998 4,617,330 5,446,595
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended December 31, 2001, 2000, and 1999
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions 4,506,858 4,335,044 4,397,141 ========== ========== ========== Basic earnings per share $.63 $.21 $.22 ========== ========== ========== Diluted earnings per share $.63 $.21 $.22 ========== ========== ==========
Number Option of Shares Price ---------- ----------- Outstanding at December 31, 1998 163,170 $4.08 - $4.49
Available options for future grant 1987 Stock Incentive Plan -0- =============
Available options for future grant 1993 Stock Incentive Plan 365,099 =============
Number Option of Shares Price --------- ------- Outstanding at December 31, 1999 0 Dividend 200 Granted 4,000 -----
Statutory Net Income (Loss) December 31, 2001 2000 1999 ---- ---- ----
The Utah and Florida Insurance Departments impose minimum risk-based capital requirements that were developed by the NAIC on insurance enterprises. The formulas for determining the risk-based capital ("RBC") specify various factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio (the "Ratio") of the enterprise's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level, as defined by the NAIC. Enterprises below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. The life insurance subsidiaries have a Ratio that is greater than 690% of the first level of regulatory action.
Investment Contracts: The fair values for the Company's liabilities under investment- type insurance contracts are estimated based on the contracts' cash surrender values. The carrying amount and fair value as of December 31, 2001 were approximately $86,544,000 and $83,021,000, respectively.
2001 2000 1999 ---- ---- ---- Unrealized gains (losses) on available for-sale securities $769,684 $736,803 $(696,162) Less: reclassification adjustment for net realized gains in net income (10,428) (420,739) (14,126) --------- --------- --------- Net unrealized gains (losses) 759,256 316,064 (710,288) Tax expense on net unrealized gain (losses) (372,077) (145,004) 294,866 --------- --------- --------- Other comprehensive income (loss) $387,179 $171,060 $(415,422) ========= ========= =========
As of December 31, 2001: 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 $4,212,280 $4,439,726 $4,212,280 Obligations of states and political subdivisions 180,660 185,484 180,660 Corporate securities including public utilities 19,206,038 19,773,918 19,206,038 Mortgage backed securities 4,172,926 4,270,550 4,172,926 Redeemable preferred stocks 28,005 28,308 28,005 ----------- ----------- -----------
Total Fixed Securities held to maturity 27,799,909 28,697,986 27,799,909 ----------- ----------- -----------
Property, plant and equipment, at cost, net of accumulated depreciation of $457,338 for 2001 and $344,296 for 2000 427,345 537,433
Other assets 21,366 47,004 ------------ ------------ Total assets $48,200,852 $43,258,978 ============ ============
Additional paid-in capital 10,168,523 10,054,714 Accumulated other comprehensive income 1,223,930 836,751 Retained earnings 9,989,230 7,831,306 Treasury stock at cost (1,294,716 Class A shares and 68,332 Class C shares in 2001; 1,233,064 Class A shares and 65,078 Class C shares in 2000, held by affiliated companies) (3,362,233) (3,362,233) ------------ ------------ Total stockholders' equity 29,969,318 26,741,361 ------------ ------------ Total liabilities and stockholders' equity $ 48,200,852 $ 43,258,978 ============ ============
Expenses: General and administrative expenses 4,082,438 1,873,323 2,396,015 Interest expense 373,815 593,228 641,282 ----------- ----------- ----------- Total expenses 4,456,253 2,466,551 3,037,297 ----------- ----------- -----------
6.59% note payable in monthly installments of $34,680 including principal and interest, collateralized by 15,000 shares of Security National Life stock, due December 2004 1,101,543 1,425,967
7.35% note payable in monthly installments of $14,975 including principal and interest collaterized by 15,000 shares of Security National Life Insurance Company stock, due December 2006 750,000 -- ---------- ----------
Due to former stockholders of Civil Service Employees Life Insurance Company resulting from the acquisition of such entity. 7% note payable in seven annual principal payments of $151,857 due December 2002 151,857 303,714
2002 $1,539,675 2003 1,504,827 2004 1,632,508 2005 845,186 2006 185,932 Thereafter -- ---------- Total $5,708,128 ==========
3) Advances from Affiliated Companies December 31, 2001 2000 Non-interest bearing advances ----- ----- from affiliates: Cemetery and Mortuary subsidiary $ 1,366,930 $ 1,366,930 Life Insurance subsidiary 9,054,301 7,227,066 Mortgage subsidiary 10,000 10,000 ----------- ----------- $10,431,231 $ 8,603,996 =========== ===========
No dividends have been paid to the registrant for each of the last three years by any subsidiaries.