SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For Quarterly Period Ended June 30, 2003
OR
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Transition Period from to
Commission file number 0-18298
Unitrin, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 95-4255452 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| One East Wacker Drive, Chicago, Illinois | 60601 | |
| (Address of principal executive offices) | (Zip Code) | |
(312) 661-4600
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
67,534,836 shares of common stock, $0.10 par value, were outstanding as of June 30, 2003.
UNITRIN, INC.
| Page | ||||
| PART I. |
FINANCIAL INFORMATION. |
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| Item 1. |
Financial Statements |
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| 1 | ||||
| Condensed Consolidated Balance Sheets as of June 30, 2003 (Unaudited) and December 31, 2002. |
2 | |||
| 3 | ||||
| Notes to the Condensed Consolidated Financial Statements (Unaudited). |
4-15 | |||
| Item 2. |
Management’s Discussion and Analysis of Results of Operations and Financial Condition. |
16-27 | ||
| Item 3. |
28-30 | |||
| Item 4. |
30 | |||
| PART II. |
OTHER INFORMATION. |
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| Item 1. |
31 | |||
| Item 4. |
31 | |||
| Item 6. |
31-33 | |||
| 34 | ||||
UNITRIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
(Unaudited)
| Six Months Ended |
Three Months Ended |
|||||||||||||||
| June 30, 2003 |
June 30, 2002 |
June 30, 2003 |
June 30, 2002 |
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| Revenues: |
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| Premiums |
$ | 1,198.8 | $ | 838.8 | $ | 617.7 | $ | 424.1 | ||||||||
| Consumer Finance Revenues |
95.0 | 81.9 | 48.4 | 42.0 | ||||||||||||
| Net Investment Income |
108.9 | 112.0 | 57.2 | 56.8 | ||||||||||||
| Other Income |
17.0 | 3.9 | 6.7 | 2.1 | ||||||||||||
| Net Realized Investment Gains (Losses) |
16.7 | (1.3 | ) | 10.8 | (1.6 | ) | ||||||||||
| Total Revenues |
1,436.4 | 1,035.3 | 740.8 | 523.4 | ||||||||||||
| Expenses: |
||||||||||||||||
| Insurance Claims and Policyholders’ Benefits |
871.2 | 617.9 | 447.6 | 316.4 | ||||||||||||
| Insurance Expenses |
422.6 | 317.8 | 211.9 | 161.1 | ||||||||||||
| Consumer Finance Expenses |
72.5 | 65.7 | 37.2 | 33.3 | ||||||||||||
| Interest and Other Expenses |
21.0 | 10.0 | 11.3 | 5.2 | ||||||||||||
| Total Expenses |
1,387.3 | 1,011.4 | 708.0 | 516.0 | ||||||||||||
| Income before Income Taxes and Equity in Net Income (Loss) of Investee |
49.1 | 23.9 | 32.8 | 7.4 | ||||||||||||
| Income Tax Expense |
11.6 | 5.2 | 8.3 | 0.6 | ||||||||||||
| Income before Equity in Net Income (Loss) of Investee |
37.5 | 18.7 | 24.5 | 6.8 | ||||||||||||
| Equity in Net Income (Loss) of Investee |
(1.4 | ) | (5.1 | ) | (1.8 | ) | (2.4 | ) | ||||||||
| Net Income |
$ | 36.1 | $ | 13.6 | $ | 22.7 | $ | 4.4 | ||||||||
| Net Income Per Share |
$ | 0.53 | $ | 0.20 | $ | 0.34 | $ | 0.06 | ||||||||
| Net Income Per Share Assuming Dilution |
$ | 0.53 | $ | 0.20 | $ | 0.33 | $ | 0.06 | ||||||||
The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.
1
UNITRIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
| June 30, 2003 |
December 31, 2002 | |||||
| (Unaudited) | ||||||
| Assets: |
||||||
| Investments: |
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| Fixed Maturities at Fair Value (Amortized Cost: 2003—$3,347.1; 2002—$2,887.7) |
$ | 3,519.8 | $ | 3,023.0 | ||
| Northrop Grumman Corporation Preferred Stock at Fair Value (Cost: 2003—$177.5; 2002—$177.5) |
218.3 | 218.9 | ||||
| Northrop Grumman Corporation Common Stock at Fair Value (Cost: 2003—$661.5; 2002—$661.5) |
661.4 | 743.6 | ||||
| Other Equity Securities at Fair Value (Cost: 2003—$356.1; 2002—$384.5) |
425.9 | 431.8 | ||||
| Investee (UNOVA, Inc.) at Cost Plus Cumulative Undistributed Earnings (Fair Value: 2003—$140.5; 2002—$75.9) |
62.4 | 64.9 | ||||
| Short-term Investments at Cost which Approximates Fair Value |
497.5 | 556.8 | ||||
| Other |
285.3 | 264.8 | ||||
| Total Investments |
5,670.6 | 5,303.8 | ||||
| Cash |
21.5 | 16.9 | ||||
| Consumer Finance Receivables at Cost (Fair Value: 2003—$895.4; 2002—$829.9) |
895.7 | 830.3 | ||||
| Other Receivables |
917.4 | 669.6 | ||||
| Deferred Policy Acquisition Costs |
398.9 | 382.6 | ||||
| Goodwill |
344.7 | 344.7 | ||||
| Other Assets |
142.8 | 157.7 | ||||
| Total Assets |
$ | 8,391.6 | $ | 7,705.6 | ||
| Liabilities and Shareholders’ Equity: |
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| Insurance Reserves: |
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| Life and Health |
$ | 2,247.8 | $ | 2,216.5 | ||
| Property and Casualty |
1,339.4 | 974.9 | ||||
| Total Insurance Reserves |
3,587.2 | 3,191.4 | ||||
| Investment Certificates and Savings Accounts at Cost (Fair Value: 2003—$929.2; 2002—$864.7) |
925.7 | 857.6 | ||||
| Unearned Premiums |
810.1 | 734.3 | ||||
| Accrued and Deferred Income Taxes |
327.3 | 350.5 | ||||
| Note Payable under Revolving Credit Agreement at Cost which Approximates Fair Value |
120.0 | 80.0 | ||||
| Senior Notes Payable at Amortized Cost (Fair Value: 2003—$319.0; 2002—$315.0) |
297.4 | 297.1 | ||||
| Accrued Expenses and Other Liabilities |
556.8 | 392.3 | ||||
| Total Liabilities |
6,624.5 | 5,903.2 | ||||
| Shareholders’ Equity: |
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| Common Stock, $0.10 par value, 100 million Shares Authorized; 67,534,836 and 67,596,409 Shares Issued and Outstanding at June 30, 2003 and December 31, 2002 |
6.8 | 6.8 | ||||
| Paid-in Capital |
513.8 | 512.9 | ||||
| Retained Earnings |
1,065.4 | 1,086.4 | ||||
| Accumulated Other Comprehensive Income |
181.1 | 196.3 | ||||
| Total Shareholders’ Equity |
1,767.1 | 1,802.4 | ||||
| Total Liabilities and Shareholders’ Equity |
$ | 8,391.6 | $ | 7,705.6 | ||
The Notes to the Condensed Consolidated Financial Statements are an integral part of these financial statements.
2
UNITRIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
| Six Months Ended |
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| June 30, 2003 |
June 30, 2002 |
|||||||
| Operating Activities: |
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| Net Income |
$ | 36.1 | $ | 13.6 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities: |
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| Increase in Deferred Policy Acquisition Costs |
(15.0 | ) | (13.8 | ) | ||||
| Equity in Net Loss of Investee before Taxes |
2.2 | 7.9 | ||||||
| Amortization of Investments |
5.6 | 3.6 | ||||||
| (Increase) Decrease in Other Receivables |
38.4 | (35.4 | ) | |||||
| Increase in Insurance Reserves and Unearned Premiums |
182.9 | 125.0 | ||||||
| Decrease in Accrued and Deferred Income Taxes |
(15.0 | ) | (17.3 | ) | ||||
| Increase (Decrease) in Accrued Expenses and Other Liabilities |
128.8 | (24.2 | ) | |||||
| Net Realized Investment (Gains) Losses |
(16.7 | ) | 1.3 | |||||
| Provision for Loan Losses |
23.3 | 19.5 | ||||||
| Other, Net |
23.9 | 17.6 | ||||||
| Net Cash Provided by Operating Activities |
394.5 | 97.8 | ||||||
| Investing Activities: |
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| Sales and Maturities of Fixed Maturities |
915.8 | 835.4 | ||||||
| Purchases of Fixed Maturities |
(1,373.3 | ) | (482.6 | ) | ||||
| Sales and Redemptions of Equity Securities |
58.4 | 3.5 | ||||||
| Purchases of Equity Securities |
(18.5 | ) | (58.8 | ) | ||||
| Change in Short-term Investments |
59.4 | (119.5 | ) | |||||
| Acquisition and Improvements of Investment Real Estate |
(19.5 | ) | (11.3 | ) | ||||
| Sale of Investment Real Estate |
— | 5.4 | ||||||
| Change in Other Investments |
(3.9 | ) | (9.2 | ) | ||||
| Acquisition of Business |
— | (30.9 | ) | |||||
| Change in Consumer Finance Receivables |
(88.6 | ) | (62.6 | ) | ||||
| Change in Capital Assets |
(7.2 | ) | (14.5 | ) | ||||
| Net Cash Provided (Used) by Investing Activities |
(477.4 | ) | 54.9 | |||||
| Financing Activities: |
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| Change in Investment Certificates and Savings Accounts |
68.0 | 32.2 | ||||||
| Change in Universal Life and Annuity Contracts |
2.5 | 3.2 | ||||||
| Change in Liability for Funds Held for Securities on Loan |
34.5 | (94.5 | ) | |||||
| Notes Payable Proceeds |
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