INSURANCE COMPANIES: Southern Insurance Company, the wholly owned subsidiary 1959 to $355,197.27 for the current year. The decrease in net earnings is the result of an accounting change that has no material effect on consolidated earnings. Net premiums written by this subsidiary increased $728,313 over the previous year. Satisfactory progress was made in the solicitation of insurance premiums from sources other than the parent company. This division made a substantial contribution to the consolidated net earnings and will be an important factor in the earnings picture in future years. FEDERAL INCOME TAXES: The government's claim for an additional assessment of federal income tax was settled during the year. The financial statements for the years involved, used in this report for comparative purposes, have been re-stated to give effect to the settlement, and the 1960 provision for taxes is based on the principles involved in the settlement. PERSONNEL: The personnel development program was continued throughout the year with emphasis being placed on the training of employees in the operation of a dual office. Sales discount personnel were indoctrinated in operations of a direct loan office, and direct loan personnel were schooled in sales discount oper ations, at a series of one-week schools held at the home office. At the branch level, on-the-job training was stressed with abundant use of audio-visual training aids and training courses pre pared by the employee training department. Well trained employees will be available to staff the managerial positions in new combination offices to be opened under the Company's expansion program. The Company makes an annual contribution of 5% of net profits before taxes to the profit sharing fund for employees. The 1960 contribution was $50,102.76, compared to $38,988.19 in 1959. The employees' noncontributory life insurance program was revised by approximately doubling the amount of insurance in force for each employee. PEAT, MARWICH, Mricheta, & Go BAIKAN 1. PRRAR The hoard of Direcik Accountants' Report We have examined the dnnaptobated balance beat of In our opinion, the accompanying mulated in went with that of the preceding year, Dallas, Texas PRAT, MARWICK, MITCHELL & GO December 16, 1960 1960 October 31, 1960 with comparative figures for 1959 1959 Cash United States Government obligations, at amortized value (market value, $598,003.75) of which Retail installment notes. Direct installment loans. Wholesale $ 7,557,294.17 $ 7,313,681.26 694,626.40 10,114,736.39 607,097.32 21,785,777.36 21,137,599.45 10,900,328.77 3,488,846.37 2,758,346.96 Fixed assets (at cost), less allowance for depreciation: Home office property, net of encumbrance, 1960, $401,077.39 (note 3) 189,415.13 168,443.10 73326 0-61-pt. 2 Dealers' and agents' reserves. Policy reserve and reserve for insurance losses. Unearned insurance premiums.... Long-term notes payable - nonsubordinated (noncurrent portion): 4%, maturing annually through 1965. 44%, maturing annually through 1968. 1,600,000.00 2,100,000.00 733,063.61 676,025.67 3,042,051.86 2,000,000.00 2,400,000.00 Total noncurrent portion of long-term notes payable nonsubordinated. 3,700,000.00 4,400,000.00 5% capital notes, maturing annually through 1970. 6% capital notes, maturing annually through 1975. 6% capital debentures, sinking fund contributions annually through 1972. Total noncurrent portion of subordinated debt. Stockholders' equity: Cumulative preferred stock, $100.00 par value per share (note 4): 5%; authorized and issued 19,617 shares; outstanding, 1960, 19,338 shares. 6%, 1958 Series; authorized and issued 5,000 shares; outstanding, 1960, 4,875 shares. Common stock, $5.00 par value per share; 1960, authorized, issued and outstanding. Total noncurrent portion of subordinated debt and stockholders' equity. See accompanying notes to financial statements. 5,818,918.98 4,948,243.28 Deductions: Operating expenses 2,749,502.40 Provision for losses (finance operations) 502,673.88 2,574,957.78 Amortization of excess of cost of a finance subsidiary's stock over book value at date of acquisition. Amortization of deferred development expense. 2,292.71 3,930.24 Total deductions 3,264,443.18 2,974,968.38 Remainder 2,600,415.80 2,043,871.90 456,100.00 534,932.10 535,146 54 Finance charges earned on retail installment notes and discount-basis installment loans. $3,757,140.43 $3,238,567.51 267,539.76 183,422.00 Insurance premium income, less commissions, losses and loss expenses. 1,571,694.43 1,409,606.29 Sundry 222,544.36 116,647.48 Total income during the development period.. Add deferment of development expenses - excess of new loan office expenses over income 2,554,475.80 1,973,274.90 45,940.00 70,597.00 Earnings from operations before cost of borrowings and taxes on income. Cost of borrowings: Interest on short-term notes payable Interest on long-term debt. Amortization of debt discount and expense Total cost of borrowings. Earnings before taxes on income. Federal and state taxes on income, estimated (note 2) Net earnings 1,085,319.22 748,363.07 487,808.43 443,344.46 36,256.05 35,523.74 1,609,383.70 1,227,231.27 991,032.10 816,640.63 281,494.09 |