UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the plan year ended September 30, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 0-18786
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
PICO HOLDINGS, INC.
875 PROSPECT STREET, SUITE 301
LA JOLLA, CALIFORNIA 92037
Index to Exhibits appears on Page 11
Page 1 of 12 pages
REQUIRED INFORMATION
The following financial statements and schedules for PICO Holdings, Inc.
Employees 401(k) Retirement Plan and Trust are being filed herewith:
Signature
Report of Independent Registered Public Accounting Firm
Financial Statements:
Statements of Net Assets Available for Benefits, September 30, 2003 and
2002
Statement of Changes in Net Assets Available for Benefits for the Year
Ended September 30, 2003
Notes to the Financial Statements
Supplemental Schedules:
Form 5500, Schedule H, Part IV, Line 4i - Schedule of Assets Held for
Investment Purposes as of September 30, 2003
Index to Exhibits
Exhibit 1 - Consent of Independent Registered Public Accounting Firm
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SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
/s/ Maxim C. W. Webb
---------------------------------------
Date: July 13, 2004 Chief Financial Officer and Treasurer
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PICO Holdings, Inc.
Employees 401(k) Retirement Plan and Trust
Columbus, Ohio
We have audited the accompanying statements of net assets available for benefits
of PICO Holdings, Inc. Employees 401(k) Retirement Plan and Trust (the "Plan")
as of September 30, 2003 and 2002, and the related statement of changes in net
assets available for benefits for the year ended September 30, 2003. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
September 30, 2003 and 2002, and the changes in net assets available for
benefits for the year ended September 30, 2003, in conformity with accounting
principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of September 30, 2003 is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan's management. Such supplemental schedule has been
subjected to the auditing procedures applied in our audit of the basic 2003
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic 2003 financial statements
taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
July 9, 2004
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 2003 AND 2002
ASSETS 2003 2002
INVESTMENTS:
Mutual funds $3,196,075 $4,236,420
Common stock 662,056 739,052
Cash and cash equivalents 1,258,937 1,598,391
--------- ---------
Total investments 5,117,068 6,573,863
RECEIVABLES:
Employer's matching contributions 9,290 10,773
Participants' contributions 4,234 11,550
Employer's profit sharing contributions 200,189 467,791
------- -------
Total receivables 213,713 490,114
------- -------
NET ASSETS AVAILABLE FOR BENEFITS $5,330,781 $7,063,977
========== ==========
See notes to financial statements.
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED SEPTEMBER 30, 2003
ADDITIONS:
Interest and dividends $ 104,651
Net appreciation in fair value of investments 790,610
Contributions:
Employer 457,171
Participants 439,510
-------
Total additions 1,791,942
BENEFITS PAID TO PARTICIPANTS (3,525,138)
----------
NET DECREASE IN NET ASSETS AVAILABLE FOR BENEFITS (1,733,196)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,063,977
---------
End of year $ 5,330,781
===========
See notes to financial statements.
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
1. DESCRIPTION OF PLAN
The following description of the PICO Holdings, Inc. Employees 401(k)
Retirement Plan and Trust (the "Plan") provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
GENERAL -- The Plan is a defined contribution 401(k) profit sharing plan
covering eligible employees, as defined in the Plan Agreement of PICO
Holdings, Inc. (the "Plan Sponsor"). The Plan was adopted to provide
retirement benefits to employees of the Plan Sponsor. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA") and has been determined to be qualified for tax-exempt status by
the Internal Revenue Service ("IRS").
CONTRIBUTIONS -- Each year, participants may contribute up to the maximum
allowed by law of pretax annual compensation, as defined in the Plan, not
to exceed $10,000 (based on Section 401(a)(17) compensation limit of
$200,000 as indexed). The Plan Sponsor matches up to 5% of the elective
deferral of base compensation that a participant contributes to the Plan.
The Plan Sponsor's matching contribution does not begin until the first
day of the quarter after an employee completes one year of service.
Additional amounts which represent profit sharing, as defined in the Plan,
may be contributed at the option of the Plan Sponsor's Board of Directors.
PARTICIPANT ACCOUNTS -- Each participant's account is credited with the
participant's contributions, employer matching contributions, earnings as
applicable, and allocations of (a) the Plan Sponsor's discretionary profit
sharing contributions and (b) Plan earnings, and debited for withdrawals
as applicable. Forfeited balances of terminated participants' nonvested
accounts are used to first reinstate previously forfeited account balances
of reemployed participants and any remainder will be used to reduce the
Plan Sponsor's discretionary profit sharing contribution for the current
or subsequent Plan year in which the forfeiture occurs. Forfeitures of
$25,173 and $22,035 in 2003 and 2002, respectively, were used to reduce
the Plan Sponsor's discretionary profit sharing contribution.
VESTING -- Participants are immediately vested in their contributions, the
employer matching contributions, plus earnings thereon. Vesting in the
Plan Sponsor's discretionary profit sharing contribution portion of their
accounts plus actual earnings thereon is based on years of credited
service in accordance with the following schedule:
YEARS OF SERVICE PERCENTAGE
Less than three 0 %
3 20 %
4 40 %
5 60 %
6 80 %
7 or more 100 %
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INVESTMENT OPTIONS -- Upon enrollment in the Plan, a participant may
direct 100% of elective deferrals, employer match and discretionary profit
sharing amounts. A participant chooses from a number of different mutual
fund options. In addition, participants are able to invest in the stock of
PICO Holdings, Inc., the Plan Sponsor.
LOANS TO PARTICIPANTS -- Loans to participants are not permitted under the
Plan, and no loans were outstanding at September 30, 2003 and 2002.
PAYMENT OF BENEFITS -- Upon termination of service, a participant may
elect to receive either a lump-sum amount equal to the value of the
participant's vested interest in his or her account, or annual
installments. If the value of the participant's account is $5,000 or less,
the Trustee shall distribute the entire vested account to the participant.
Amounts payable to such participants at September 30, 2003 and 2002 were
$0 and $4,570, respectively.
PLAN TERMINATION -- While the Plan Sponsor has not expressed any intent to
discontinue the Plan or its contributions thereto, they have the right to
do so at any time, subject to the provisions of ERISA. In the event of
partial or total termination of the Plan, participants' account balances
become fully vested and the disposition of the net assets must be made for
the benefit of the participants or their beneficiaries (See Note 6).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The accounting records of the Plan are maintained
on the accrual basis. Purchases and sales of securities are recorded on
the trade date. Interest income is recorded as earned and dividend income
is recorded on the ex-dividend date.
INVESTMENT VALUATION -- Investments in mutual funds, money market funds
and PICO Holdings, Inc. common stock fund are valued at quoted market
prices.
ADMINISTRATIVE EXPENSES -- The Plan's expenses are paid by the Plan
Sponsor.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of net assets and the changes in net assets during
the reporting period and disclosure of contingent assets at the date of
the financial statements. Actual results could differ from those
estimates.
INVESTMENT RISK -- The Plan utilizes various investment instruments.
Investment securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility. Due to the level of
risk associated with certain investment securities, it is reasonably
possible that changes in the values of investment securities will occur in
the near term and that such changes could materially affect the amounts
reported in the statements of net assets available for benefits.
RECLASSIFICATIONS -- Certain reclassifications have been made to the 2002
financial statements to conform to the 2003 presentation.
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3. TAX STATUS
The Internal Revenue Service has determined and informed the Company, by a
letter dated September 17, 2003, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code ("IRC"). The Plan has been amended since the latest determination
letter. However, the Plan administrator believes the Plan, as currently
designed, is in compliance and is being operated within the applicable
requirements of the IRC.
4. INVESTMENTS
The Plan's investments which exceeded 5% of net assets available for
benefits as of September 30 consisted of the following:
2003 2002
Smith Barney Money Market -- Government Portfolio $1,258,937 $1,590,954
Strong Government Securities 411,165 784,066
PICO Holdings, Inc., Common Stock 662,056 739,052
American Century Ultra Fund 413,012 685,188
Royce Premier Fund 478,503 493,394
Citi S&P 500 Index Funds 321,769
Neuberger Berman Focus Trust Fund 290,433
5. RELATED PARTY TRANSACTIONS
Plan investments include common stock of PICO Holdings, Inc. and Smith
Barney Money Market Government Portfolio funds. PICO Holdings, Inc. is the
Plan Sponsor, Smith Barney Corporate Trust Company is the Plan Custodian,
and Citistreet Retirement Services is the record keeper. The Plan Sponsor
pays all administrative expenses of the Plan.
6. CHANGES IN PLAN PARTICIPATION
On March 31, 2003, approximately 51% of Plan participants were terminated
from the Plan as a result of PICO Holdings, Inc.'s sale of its subsidiary
Sequoia Insurance Company. Participants' account balances became fully
vested upon termination. As of the end of the plan year, six terminated
Sequoia employees maintain participants' account balances in the Plan. The
value of these six accounts as of September 30, 2003 totaled $362,942.
******
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PICO HOLDINGS, INC. EMPLOYEES 401(k)
RETIREMENT PLAN AND TRUST
FORM 5500 SCHEDULE H, PART IV LINE 4I -- SCHEDULE OF ASSETS HELD
FOR INVESTMENT PURPOSES (AT END OF YEAR)
SEPTEMBER 30, 2003
NUMBER FAIR
OF MARKET
DESCRIPTION SHARES COST VALUE
INVESTMENTS -- MUTUAL FUNDS:
ABN AMRO Montag & Caldwell Growth -- N Share 4,227 $ 118,959 $ 84,713
American Century Ultra Fund 16,934 623,104 413,012
Citi S&P 500 Index Funds 31,484 354,002 321,769
Credit Suisse Warburg Pincus 4,677 46,576 49,674
Dreyfus Emerging Markets 6,562 81,711 94,754
Dreyfus Founders Discovery Fund 6,900 253,904 158,834
Dreyfus US Treasury Long 1,731 27,640 29,199
Europacific Growth Fund 6,374 159,478 170,249
Gabelli Growth Fund 6,049 210,179 133,210
Gabelli Global Growth Fund 1,662 31,321 24,537
ING GNMA Income Fund 8,480 74,502 75,556
INVESCO Health Sciences 4,770 228,134 207,197
Merril Lynch International Value Fund 936 19,522 17,744
Neuberger Berman Focus Trust Fund 12,348 393,542 290,433
Royce Premier Fund 41,718 436,443 478,503
Strong Government Securities 36,678 393,016 411,165
Washington Mutual Investors 9,136 239,639 235,526
------- -------
Total Mutual Funds 3,691,672 3,196,075
PICO Holdings, Inc., Common Stock 50,156 601,078 662,056
Smith Barney Money Market -- Government Portfolio 1,258,937 1,258,937 1,258,937
--------- ---------
TOTAL $5,551,687 $5,117,068
========== ==========
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PICO HOLDINGS, INC.
EMPLOYEES 401(k) RETIREMENT PLAN & TRUST
ANNUAL REPORT ON FORM 11-K
FOR PLAN YEAR ENDED SEPTEMBER 30, 2003
INDEX TO THE EXHIBITS
Exhibit Number Description
-------------- -----------
1 Consent of Deloitte & Touche LLP, Independent
Registered Public Accounting Firm
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