The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The National Security Group, Inc. (referred to in this document as we, our, us, the Company or NSG) and its subsidiaries for the three years ended December 31, 2007. This discussion and analysis of the consolidated results of operations and financial condition of the Company should be read in conjunction with the Selected Financial Data and Consolidated Financial Statements and related notes included elsewhere herein. Please refer to our note regarding forward-looking statements on page 3 of this report.
The following analysis of the Results of Operations should be read in conjunction with the Consolidated Financial Statements, which begin on Page 37 of this Form 10-K. Primary reference is made to the Consolidated Statements of Income on page 41 and related Notes to Consolidated Financial Statements which begin on Page 44.
We reached another milestone in premium revenue in 2007 posting a seventh consecutive year of record premium revenue, an increase of 5.7% over 2006 levels. Growth in the dwelling fire and homeowners lines of business in the property and casualty subsidiaries were the primary contributors to the growth in premium revenue. While the rate of growth is significantly below our 15% annualized growth rate experienced since 2000, the reduction of our growth rate has been necessitated by market conditions. As discussed last year, the more moderate growth rate is in-line with our expectations and is expected to persist over the next two years as we continue to build capital and recover from the adverse operating conditions caused by the unprecedented hurricane activity experienced in 2005 and 2004.
Consolidated income before taxes increased 10.15% from $6,254,000 in 2006 to $6,889,000 in 2007. Just as in 2006, increased earnings in the property and casualty subsidiary were the primary contributor to the increase in earnings for 2007. Life segment operations had modest income before taxes in 2007 of $108,000, compared to a net loss before taxes in 2006 of $(1,122,000). The improvement in life segment operations is primarily due to the 2006 settlement of longstanding litigation. Non-insurance operations consist of the operations of The National Security Group, Inc.
Consolidated net income for 2006 was $4,250,000 compared to $1,558,000 in 2005. On a per share basis, net income was $1.72 in 2006 compared to $0.63 in 2005. Hurricane losses reduced our 2005 net income by $6,804,000 or $2.76 per share. Despite the lack of hurricane activity in 2006, we still incurred losses from catastrophic events in the form of tornado and hail losses that totaled $1,386,000 net of tax and reduced 2006 net income by $0.56 per share. These tornado and hail losses were incurred during the January through April time period of 2006. Partially offsetting 2005 hurricane losses, we realized investment gains of $3,493,000 resulting from the sale of investment securities. Realized investment gains in 2006 totaled $2,565,000, down 27% compared to 2005. Our decisions to sell securities and therefore realize investment gains on our investments is dictated by considerations of market conditions, short term liquidity needs and tax implications, among other factors, and are subject to significant fluctuation from period to period.
The Company’s life, accident and health insurance business is conducted through National Security Insurance Company (NSIC), a wholly owned subsidiary of the Company organized in 1947. Our life segment is the smaller of our insurance segments contributing 11% of total insurance premium revenue for both 2007 and 2006. Premium revenues and operating income for the life segment for the years ended December 31, 2007, 2006 and 2005 are summarized below:
The Company’s property and casualty insurance business is conducted through National Security Fire & Casualty Company (NSFC), a wholly owned subsidiary of the Company organized in 1959, and Omega One Insurance Company (Omega), a wholly owned subsidiary of National Security Fire & Casualty Company organized in 1992. Property and casualty operations constitute our largest segment composing 89% of our total premium revenue in 2007 and 2006. Premium revenues and operating income for the life segment for the years ended December 31, 2007, 2006 and 2005 are summarized below:
Property and casualty premium revenues totaled $55,219,000 in 2007 compared to $52,324,000 in 2006, an increase of 5.5%.
A primary focus in 2007 was working toward improving profitability in all dwelling property lines. The mobile homeowners program showed significant improvement from an underwriting loss of $(237,063) in 2006 to an underwriting income of $583,760 in 2007. The dwelling fire program ended 2007 with underwriting income up almost 60% compared to the same period last year. In addition, the ocean marine program made a significant turnaround ending 2007 with an underwriting income of $371,538 compared to a loss from underwriting of $(393,434) in 2006.
Due to the unprecedented hurricane activity in 2004 and 2005, we have experienced a significant increase in the cost of our catastrophe reinsurance over the last three years. Our catastrophe reinsurance rate increased 12.8% from 2006 to 2007. In order to minimize the impact of the rate increase, we increased our reinsurance deductible by 50% to $3 million in 2006 and 16.7% to $3.5 million in 2007. We also added an additional layer of reinsurance protection during 2007 which increased our coverage from an ultimate loss payout of $42.5 million to $47.5 million. Reinsurance rates are not subject to review by state insurance regulators and are more market driven allowing reinsurers to react more rapidly to changing market conditions. Consequently, we incur significant lag time between the time we incur an increase in our cost of reinsurance and the time we are able to reflect these increased costs in our rates. Our rates are subject to review and approval by state regulators and consequently we often experience significant delays in our ability to adjust rates. These delays result in lag times of at least six months and can last up to 18 months. Also, we have experienced political climates in some states that make it difficult for us to factor in the full impact of our increased cost of claims and reinsurance especially in many coastal areas of the Southeast US. However, we made significant progress in adjusting our rates in 2007 and experienced some moderation in our catastrophe reinsurance rates for 2008, so we expect a more favorable pricing environment in 2008 particularly in our homeowners program which has significantly underperformed.
Several of the property and casualty programs showed improved results with a decline in the loss ratio. The core line of business is the dwelling fire program which ended 2007 with a loss ratio of 56.2% compared to 59.5% for the same period last year. Additional noteworthy programs were the mobile homeowners and ocean marine lines of business which ended 2007 with loss ratios of 55.6% and 31%, respectively compared to 70% and 91.5%, respectively for 2006.
Property and casualty premium revenues totaled $52,324,000 in 2006 compared to $47,329,000 in 2005, an increase of 10.6%. Catastrophe reinstatement premium charges totaling $2,400,000 reduced 2005 premium revenue by five percentage points. We did not experience any losses that exceeded our catastrophe reinsurance retention limit of $3,000,000 per event in 2006, so no catastrophe reinstatement premium charges were incurred in 2006. Without the reinstatement premium charge in 2005, premium revenue in 2006 increased 5.2% over 2005.
Overall premium revenue growth has moderated significantly over the past two years, compared to our 17% compound annual growth rate experienced since 2000. We expect the trend of more moderate growth to continue in 2007 as we focus on improvement in profitability of all lines of business, institute rate increases dictated by the significant increase in our catastrophe reinsurance protection and rebuild capital levels after the adverse impact of the 2004 and 2005 hurricane seasons.
While the lack of hurricane activity in the Gulf of Mexico and Atlantic Coast were the primary drivers of our improved operating performance, we still incurred significant losses in our two primary lines of business. Our dwelling and homeowners lines of business incurred $2.0 million in tornado and hail storm related losses in the first half of 2006 ($1,386,000 net of tax). These events increased our combined ratio for the year by four percentage points. However, these amounts were within our expectations of losses to be incurred in a more normal year and losses from catastrophe related events were down significantly compared to 2005 and 2004.
Our core dwelling fire line of business produced solid results in 2006 with a combined ratio of 93%. The dwelling fire line of business produces 41% of total property and casualty premium revenue and is our largest contributor to underwriting profits.
While the overall frequency of claims declined significantly in 2006 compared to 2005, the more severe spring storm season resulted in a higher frequency of tornado losses elevating the average severity of claims in the dwelling fire and homeowners line of business. The average severity for 2006 was $4,272 per claim compared to $4,086 per claim in 2005. Again, the increase is primarily attributable to the increased tornado related losses in the first half of 2006 compared to 2005.
The results of these ratios for the past three years were:
The non-insurance operations of the Company consist of our parent company, The National Security Group, Inc. The National Security Group has no material sources of revenue and relies almost entirely on dividends from the insurance operations to pay expenses. These dividends are eliminated upon consolidation of the subsidiaries in the audited financials included herein. The expenses of the group consist of expenses associated with the public listing of our stock, taxes and fees, and directors’ fees. The most significant expense of the group is interest expense associated with $12,372,000 in debt. This debt is composed of two trust preferred securities offerings, the first being $9,279,000 issued in the December 2005 and the second being $3,093,000 issued in June 2007. The primary use for these proceeds was to add capital to the property and casualty subsidiaries to allow flexibility in continuing to increase new business production at a moderate rate. Total interest expense for the Group associated with these borrowings in 2007 was $1,012,000 compared to $1,011,000 in 2006.
For 2007, total net income from discontinued operations totaled $1,319,000 compared to a net loss from discontinued operations of $189,000 in 2006. The gain on disposal of Mobile Attic was the primary difference contributing to net income from discontinued operations in 2007.
For 2006, Mobile Attic posted a net loss from discontinued operations of $189,000 compared to net income of $137,000 in 2005. A decline in leasing revenues due to a decline in rental rates of a major customer was the primary factor contributing to the decline in profitability from 2005 to 2006.
The Company classifies fixed maturity securities in accordance with Financial Accounting Standards Board Statement 115 and has classified a portion of its fixed maturity securities portfolio as “available-for-sale,” with the remainder being classified as “held-to-maturity.” The fixed maturity securities classified as “available-for-sale” are carried at fair value and changes in fair values, net of related income taxes, are charged or credited to shareholders’ equity (see Note 4 to the consolidated financial statements).
The insurance subsidiaries’ fixed maturity securities include mortgage-backed bonds, primarily collateralized mortgage obligations (CMO’s), of $24.2 million and $21.6 million at December 31, 2007 and 2006 respectively. The mortgage-backed bonds are subject to risks associated with variable prepayments of the underlying mortgage loans. Prepayments cause those securities to have different actual maturities than were expected at the time of purchase. Securities that are purchased at a premium to par value and prepay faster than expected will incur a reduction in yield or loss. Securities that are purchased at a discount to par value and prepay faster than expected will generate an increase in yield or gain. The degree to which a security is susceptible to either gains or losses is influenced by the difference between amortized cost and par value, the relative sensitivity of the underlying mortgages backing the assets to prepayments in a changing interest rate environment and the repayment priority of the securities in the overall securitization structure. In order to minimize risk associated with prepayments on collateralized mortgage obligations, the Company typically invests primarily in more predictable planned amortization class (PAC) structures of CMO’s and typically avoids investment in CMO’s priced at significant premiums above par value.
At December 31, 2007 less than 1% of total investments in the fixed income portfolio was classified as below investment grade. Due to the high concentration of government and agency securities, we have experienced no material write-downs during 2007 in values of investments in the fixed income portfolio.
As of December 31, 2007, the maturity schedule for all bonds and notes held by the Company, stated at amortized cost, was as follows:
It should be noted that the above table is maturities based on stated maturity. Due to call and prepayment features inherent in some debt securities, actual repayment will differ from stated maturities. The Company routinely evaluates the impact of changing interest rates on the projected maturities of bonds in the portfolio and actively manages the portfolio in order to minimize the impact of interest rate risk.
The National Security Group’s consolidated statement of cash flows indicates that operating activities provided (used) cash of $3,833,000, $7,802,000, and $(5,449,000) in 2007, 2006, and 2005, respectively. The considerable decrease in cash flow from operating activities in 2007 is primarily due to reduction in amounts recovered under reinsurance contracts by the property and casualty subsidiaries. The significant increase in cash flow from operating activities in 2006 was primarily due to the improvement in underwriting results in the property and casualty subsidiaries and significant recoveries from reinsurers associated with prior year hurricanes. The negative cash flow from operations in 2005 was due to the significant increase in hurricane losses.
Short term debt obligations consist of a $900,000 revolving line of credit. The line of credit is due in April 2008 and management anticipates repaying the line of credit at maturity.
Included in long term debt held by the Company is the issuance of $9,279,000 in subordinated debentures completed on December 15, 2005. The proceeds from the debentures were used to make a $6,000,000 capital infusion in the P&C subsidiary National Security Fire and Casualty with the remainder to be held for general corporate purposes. The subordinated debentures mature December 15, 2035. It is anticipated that principal payments will not be made until the expiration of the fixed rate period on the debt in 2015. Also included in long-term debt is the issuance of $3,093,000 in subordinated debentures completed June 21, 2007. The proceeds from the debentures were used to fund general corporate expenses thereby reducing the amount of dividends to the Group paid by the P&C subsidiary National Security Fire & Casualty thereby continuing to restore capital in the P&C subsidiary National Security Fire and Casualty to pre-hurricane levels. The second issue matures June 15, 2037 and may be redeemed following the fifth anniversary of issuance. For further discussion of the subordinated debentures please review Note 8 to the consolidated financial statements and Form 8-Ks filed June 14, 2007 and December 12, 2005, which is incorporated herein by reference.
The ratios of Total Adjusted Capital to Authorized Control Level RBC for The National Security Group’s life/health and property/casualty insurance subsidiaries are all in excess of 5.3 to 1 at December 31, 2007.
At December 31, 2007, the estimated reinsurance recoverable recorded was $917,000. The Company does not anticipate any issues with collection of the recorded amount.
The reinsurance related amounts recorded have been estimated based upon management’s interpretation of the related reinsurance treaty. Areas in which judgment has been used regarding said estimates include: assessing the financial viability and credit quality of each reinsurer as well as the ability of each reinsurer to pay amounts owed.
For more information regarding reinsurance, please see Note 10 to our consolidated financial statements.
Investments are recorded at fair value based upon quoted prices when available. Quoted prices are available for every investment debt and equity security included in the financial statements. Periodically, the carrying values of an individual investment may become temporarily impaired because of time value, volatility, credit quality and existing market conditions. Management evaluates investments to determine whether the impairment is other-than-temporary. Evaluation criteria include credit quality of security, severity of decrease between cost and market value, length of time of the impairment and likelihood that the impairment will reverse in the near future. This evaluation requires significant assumptions, estimates and judgments by management. If the impairment is determined to be other-than-temporary, the investment is written down to the current fair value and a realized loss is recorded on the income statement. We have very limited exposure to less liquid and difficult to value investments such as collateralized debt obligations and private label mortgage backed securities.
The accompanying consolidated financial statements include the accounts of The National Security Group, Inc. (the Company) and its wholly-owned subsidiaries: National Security Insurance Company (NSIC), National Security Fire and Casualty Company (NSFC) and NATSCO, Inc. (NATSCO). NSFC includes a wholly-owned subsidiary - Omega One Insurance Company (Omega). All significant intercompany transactions and accounts have been eliminated.
NSIC is licensed in the states of Alabama, Florida, Georgia, Mississippi, South Carolina and Texas and was organized in 1947 to provide life and burial insurance policies to the homeservice market. Business is now produced by both company and independent agents. Primary products include ordinary life, accident and health, supplemental hospital, and cancer insurance products.
The significant accounting policies followed by the Company and subsidiaries that materially affect financial reporting are summarized below. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) which, as to the subsidiary insurance companies, differ from statutory accounting practices permitted by regulatory authorities.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among the more significant estimates included in these financial statements are reserves for future policy benefits, losses and loss adjustment expenses and deferred policy acquisition costs. Actual results could differ from those estimates.
Unrealized holding gains and losses, net of tax, on securities available-for-sale are reported as a net amount in a separate component of shareholders’ equity until realized.
Realized gains and losses on the sale of investments available-for-sale are determined using the specific-identification method.
Generally, realized gains and losses on sales of other investments are recognized in net income
Mortgage loans and policy loans are stated at the unpaid principal balance of such loans. Investment real estate is reported at cost, less allowances for depreciation computed on the straight-line basis. Short-term investments are carried at cost, which approximates market value. Investments with other than temporary impairment in value are written down to estimated realizable values and losses recognized in the determination of net income.
Inventory consists of finished goods inventory and is carried at the lower of cost (first-in, first-out
The table below presents the carrying value and fair value of the Company’s financial instruments, as defined in accordance with applicable requirements. Fair values of the Company’s financial instruments are estimated by reference to quoted prices from market sources and financial institutions, as well as other valuation techniques. In cases where quoted
Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Amounts paid for prospective reinsurance contracts are reported as prepaid reinsurance premiums and amortized over the remaining contract period. In the normal course of business, NSIC seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage contracts. NSIC retains a maximum of $50,000 of coverage per individual life. The cost of reinsurance is amortized over the contract period of the reinsurance.
The Company maintains cash depository accounts which, at times, may exceed federally insured limits. These amounts represent actual account balances held by financial institutions at the end of the period, and unlike the balance reported in the financial statements, the account balances do not reflect timing delays inherent in reconciling items such as outstanding checks and deposits in transit. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
SFAS No. 141 (revised 2007), Business Combinations, SFAS No. 141 (revised 2007) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2008. The adoption of this statement is not expected to have a material impact on the Company’s financial position or results of operations.
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 (revised 2007) also amends consolidation procedures in ARB 51 for consistency with the requirements of SFAS No. 160. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The adoption of this statement is not expected to have a material impact on the Company’s financial position or results of operations.
subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the
The amortized cost and aggregate fair value of debt securities at December 31, 2007, by contractual maturity, are as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
For 2007, gross gains of $1,466,000 ($2,637,000 for 2006 and $3,793,000 for 2005) and gross losses of $207,000 ($86,000 for 2006 and $66,000 for 2005) were realized on sales of available-for-sale-securities.
A summary of securities available-for-sale with unrealized losses as of December 31, 2007 and 2006 along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows:
A summary of securities held-to-maturity with unrealized losses as of December 31, 2007and 2006 along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows:
Depreciation expense for the year ended December 31, 2007 was $538,000 ($486,000 for the year ended December 31, 2006 and $551,000 for the year ended December 31, 2005).
The Company adopted the provisions of FASB Interpretation (FIN) No. 48 effective January 1, 2007. As of the date of adoption, the company did not have any gross unrecognized tax benefits that would exceed a materiality threshold and therefore, there was no reduction to Retained Earnings in the Company’s Consolidated Balance Sheet at January 1, 2007. The Company recognizes tax-related interest and penalties as a component of tax expense. The Company does not have any interest or penalties accrued for unrecognized tax benefits at December 31, 2007. The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is not subject to examinations by authorities related to its U.S. federal or state income tax filings for years prior to 2003. No income tax returns are currently under examination by the Internal Revenue Service or any state or local taxing authority.
Under pre-1984 life insurance company tax laws, a portion of NSIC’s gain from operations was not subject to current income taxation, but was accumulated for tax purposes in a memorandum account designated “policyholders’ surplus”. The aggregate balance in this account, $3,720,000 at December 31, 2007, would be taxed at current rates only if distributed to shareholders or if the account exceeded a prescribed minimum. The Deficit Reduction Act of 1984 eliminated additions to policyholders’ surplus for 1984 and thereafter. Deferred taxes have not been provided on amounts designated as policyholders’ surplus. The deferred income tax liability not recognized is approximately $1,270,000 at December 31, 2007.
Short-term debt consisted of the following as of December 31, 2007 and December 31, 2006:
Long-term debt consisted of the following as of December 31, 2007 and December 31, 2006:
On September 13, 2007, The Company entered into a 5 year swap effective September 17, 2007 with a notional amount of $3 million and designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate (LIBOR) associated with the subordinated debentures issued on June 21, 2007. Commencing December 17, 2007, under the terms of the swap, the Company will pay interest at the three-month LIBOR rate plus 3.4% and receive interest at the fixed rate of 8.34%. A loss of $88,000 is included in other comprehensive income related to the swap agreement.
hurricanes and earthquakes may produce significant damage in large, heavily populated areas. The Company generally seeks to reduce its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance. At December 31, 2007, the Company’s estimate of unpaid losses and adjustment expenses for hurricane related claims incurred in prior years totaled $690,000 before reinsurance. Because the Company has exhausted its catastrophe coverage for Hurricane Katrina any additional development will not be covered by reinsurance. The Company maintains case reserves of $300,000 for losses in excess of catastrophe reinsurance.
insurance subsidiaries evaluate the financial conditions of their reinsurers and monitor concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize their exposure to significant losses from reinsurance insolvencies. At December 31, 2007, reinsurance receivables with a carrying value of $14,000 ($175,000 at December 31, 2006) and prepaid reinsurance premiums of $3,000 ($16,000 at December 31, 2006) were associated with a single reinsurer. The amounts of recoveries pertaining to reinsurance contracts that were deducted from losses incurred during 2007, 2006 and 2005 were approximately $383,000, $7,525,000, and $32,613,000, respectively. The Company did not incur any losses from an event occurring in 2007. Amounts reported as ceded incurred losses in 2007 were due to development of losses from prior year catastrophic losses primarily associated with prior year catastrophes.
NSFC is similarly restricted in the amount of dividends payable to the Company; dividends may not exceed the greater of 10% of statutory surplus as of the end of the preceding year, or net income for the preceding year. At December 31, 2007, NSFC’s retained earnings unrestricted for the payment of dividends in 2008 amounted to $4,609,000.
The Company and its subsidiaries operate primarily in the insurance industry. Selected balance sheet information by industry segment for the years ended December 31, 2007 and 2006 is summarized below:
On December 12, 2005, the United States District court for the Middle District of Alabama (the “Court”) entered an order preliminarily approving a proposed settlement of a case pending against a subsidiary of the Company styled Mary W. Williams, et al v. National Security Insurance Company (“Williams Litigation”) and preliminarily certifying such case as a class action. The Williams Litigation related primarily to claims that a subsidiary of the Company sold industrial burial insurance policies to racial minorities on which it charged higher premiums or provided inferior benefits than premiums charged to or policy benefits provided to similarly situated non-minority policyholders.
The Company’s subsidiary has not sold industrial burial insurance for more than 20 years. Following a fairness hearing held on August 22, 2006, the Court, in an order dated August 30, 2006, granted final approval to the proposed settlement. The effective date of the settlement was September 30, 2006, with an implementation date of December 29, 2006. The settlement provided for the Company’s subsidiary to, among other matters, provide additional policyholder benefits, including premium adjustments and benefit enhancements on existing policies and additional benefits on matured policies and pay attorneys fees. The Company had previously established litigation reserves with respect to this matter and had taken a policy reserve charge with respect to adjustments to the subject policies that were voluntarily made in 2000. The remaining costs associated with this settlement, including costs associated with prospective enhancements, are fully reflected in the attached financial statements for the period ending December 31, 2006. The class, as certified, did not permit any class members to opt out of the settlement and enjoined all similar litigation against the Company’s subsidiary. In the settlement, the Company’s subsidiary denied all claims and allegations made in the lawsuit.
The company establishes and maintains reserves on contingent liabilities. In many instances, however, it is not feasible to predict the ultimate outcome with any degree of accuracy. While a resolution of these matters may significantly impact consolidated earnings and the Company’s consolidated financial position, it remains management’s opinion, based on information presently available, that the ultimate resolution of these matters will not have a material impact on the Company’s consolidated financial position.
Assets and liabilities available for sale at December 31, 2006 related to Mobile Attic are as follows:
Cash paid for interest during 2007 was $1,072,000 ($1,846,000 in 2006 and $1,139,000 in 2005). Cash paid for income taxes in 2007 was $2,330,000 ($300,000 in 2006 and $400,000 in 2005). Significant noncash transactions included $1,781,000 reduction in accounts receivable of discontinued operations; $428,000 reduction of inventory of discontinued operations; $8,844,000 reduction in property and equipment of discontinued operations; and $9,409,000 reduction of notes payable of discontinued operations.
included with financial statements prepared in accordance with generally accepted accounting
Dividends of $3.0 million in 2007, $1.5 million in 2006, and $2.5 million in 2005, were paid to the