1959 IN REVIEW Earnings and Dividends Consolidated net income for the year ended October 31, 1959 amounted to $551,040.63, a slight increase Consolidated net income was satisfactory in view of the adverse factors encountered during the year. The book value per share of common stock increased from $27.44 at October 31, 1958 to $29.55 at Consolidated net income: 800 700 600 500 400 300 200 100 Book value per share: Obligatory prepayments of subordinated debt of $299,000.00, and preferred stock redemptions of 1957 $35 $30 $25 $20 $15 $10 $5 VALUE IN DOLLARS The increase in outstanding receivables necessitated greater short term borrowings, which resulted in the ratio of senior debt to capital funds less noncurrent assets increasing to 3.3 to 1 at the year end, compared to a ratio of 2.4 to 1 a year earlier. We expect the volume of business purchased to remain at a high level during the coming year and that outstanding receivables will continue to increase. To carry these additional receivables it will be necessary to increase the capital funds of the Company; therefore, we have initiated negotiations to place additional subordinated debentures. 14 12 10 8 6 4 2 MILLIONS OF DOLLARS Volume and Outstandings Total finance receivables purchased during the year amounted to $62,111,987, an increase of 29% over the $48,074,020 purchased during the 1958 fiscal year. This increase in volume reflects the increase in sales in the automobile industry generally, the increased number of branch offices, and the deeper penetration of the market by the direct loan division. Total finance receivables outstanding at the year end amounted to $34.329,892.49, compared to $28,162,219.70 a year earlier, an increase of 22%. Retail instalment receivables amounted to 61% of this total, direct instalment loans 29% and wholesale loans 8%. Of the total retail and direct instalment loans outstanding, 38% were secured with new cars as collateral, 45% were secured with used cars and 17% with other security, principally household goods, as collateral. Credit Losses The trend of increasing credit losses and repossession frequency was reversed during the year and at the year end were at a satisfactory level. During the year ended October 31, 1959, credit losses arising from retail and direct instalment loans amounted to $268,162.34, equal to 1.01% of liquidations, compared to 2.02% during the previous year. The reserve for losses was maintained at 2% of related receivables outstanding. Finance volume: 70 60 50 40 30 20 10 6 MILLIONS OF DOLLARS Reserve for Unearned The reserves for unearned finance charges and the reserve for unearned insurance premiums are Insurance Companies Southern Insurance Company had a net loss from operations of $8,449.14, compared to a net loss Net earned income of Industrial Life Insurance Company amounted to $550,522.30 for the year Federal Income Taxes As commented upon in other sections of this report, Congress in June, 1959 revised the income tax Finance receivables outstanding: 35 30 25 20 15 10 5 MILLIONS OF DOLLARS Reserve for unearned finance charges: 3.5 3.0 2.5 2.0 1.5 1.0 .5 73326 0-61-pt. 249 In addition to the retroactive revision of the tax laws, Field Agents of the Internal Revenue Service have proposed an additional tax of $919,360 covering the years 1955 through 1958. The Company has filed a protest against the proposed assessment. In the opinion of legal counsel for the Company, the claim for additional tax is without merit and no reserves have been provided for this purpose. Expansion As reported in our semi-annual report, the Company acquired three branch offices in the Houston area by purchasing the receivables of the Gulf Acceptance Corporation and taking over the operation of their offices. In addition, new offices were opened in Shreveport and New Orleans, Louisiana during January and February. These new outlets should become profitable operations during the coming year. The increased volume of business, especially in the insurance companies, had greatly overcrowded the home office facilities and early in the year it became necessary to provide additional space. The original building was designed for three stories, and a finished second floor and an unfinished third floor were added. The additional space was completed and occupied during November of this year. The total cost of the home office property is $628,813.27 and is subject to a mortgage in the amount of $420,000.00 We are justifiably proud and pleased with the home office building and are confident that the additional space will increase the efficiency of the personnel. Profit Sharing Plan During the year, a Profit Sharing Plan was instituted for the benefit of the employees. The Company contributes 5% of consolidated net income before provision for income taxes, within certain limitations, to the Profit Sharing Trust Fund which is administered by the Board of Directors of the Company. Each full time employee automatically becomes a participant in the plan on the date of employment. The plan was designed to enable the employee to participate in the profits of the Company thereby giving the employee an added incentive for increased efficiency and greater desire to remain with the Company. It is believed that the Company contributions and earnings of the trust fund will accelerate the growth of the fund and it will reach substantial size within a very few years. |