-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S4vRhRuflV12guIpGdRlL+tPKFOE3abE9FStaxZn7NRCL9Yh7hqchg7WZqt8t2ma c/VljSBzvCZp5DXlUUCl/w== 0000724024-01-000005.txt : 20010326 0000724024-01-000005.hdr.sgml : 20010326 ACCESSION NUMBER: 0000724024-01-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PHYSICIANS SERVICE GROUP INC CENTRAL INDEX KEY: 0000724024 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 751458323 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-11453 FILM NUMBER: 1577995 BUSINESS ADDRESS: STREET 1: 1301 CAPITAL OF TEXAS HWY STREET 2: C-300 CITY: AUSTIN STATE: TX ZIP: 78746 BUSINESS PHONE: 5123280888 MAIL ADDRESS: STREET 1: 1301 CAPITAL OF TEXAS HIGHWAY CITY: AUTIN STATE: TX ZIP: 78746 10-Q/A 1 0001.txt AMENDED MARCH 31, 2000 FORM 10-Q ===================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 2000 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 0-11453 AMERICAN PHYSICIANS SERVICE GROUP, INC. (Exact name of registrant as specified in its charter) TEXAS 75-1458323 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 1301 CAPITAL OF TEXAS HIGHWAY AUSTIN, TEXAS 78746 (Address of principal executive offices) (Zip Code) (512) 328-0888 (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. NUMBER OF SHARES OUTSTANDING AT TITLE OF EACH CLASS APRIL 30, 2000 -------------------- ---------------- Common Stock, $.10 par value 2,667,233 ============================================================================ PART I FINANCIAL INFORMATION -2- AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands) Three Months Ended March 31, ------------------------ 2000 1999 (Restated) (Restated) ---------- ---------- REVENUES: Financial services $4,319 $2,909 Insurance services 1,275 1,194 Consulting 655 -- Real estate 213 189 Investments and other 40 5 ---------- ---------- Total revenue 6,502 4,297 EXPENSES: Financial services 3,711 2,558 Insurance services 1,275 1,346 Consulting 589 -- Real estate 139 141 General and administrative 436 441 Interest 78 34 ---------- ---------- Total expenses 6,228 4,520 ---------- ---------- Operating income (loss) 274 (223) Equity in earnings of unconsolidated affiliates (Note 4) 4 187 ---------- ---------- Earnings (loss) from continuing operations before income taxes and minority interest 278 (36) Income tax expense (benefit) 109 (15) Minority interest 9 25 --------- --------- Earnings from continuing operations 178 4 Discontinued operations: Earnings from discontinued operations net of income tax of $0 and $28 in 2000 and 1999, respectively. -- 54 ---------- ---------- NET EARNINGS $ 178 $ 58 ========== ========== See accompanying notes to consolidated financial statements - 3 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENT OF EARNINGS PER SHARE (UNAUDITED) (In thousands, except per share amounts) EARNINGS PER COMMON SHARE: Three Months Ended March 31, ------------------------ 2000 1999 (Restated) (Restated) --------- --------- Basic: Earnings from continuing operations $ 0.07 $ -- Discontinued operations -- 0.01 --------- --------- Net earnings $ 0.07 0.01 ========= ========= Diluted: Earnings from continuing opertions $ 0.06 -- Discontinued operations -- 0.01 --------- --------- Net earnings $ 0.06 $ 0.01 ========= ========= Basic weighted average shares outstanding 2,667 4,080 ========= ========= Diluted weighted average shares outstanding 2,750 5,133 ========= ========= See accompanying notes to consolidated financial statements - 4 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) March 31, December 31, 2000 1999 (Restated) (Restated) ------------- ------------- ASSETS Current Assets: Cash and cash investments $3,194 $2,275 Cash - restricted -- 376 Trading account securities 380 348 Management fees and other receivables 1,486 1,344 Notes receivable, net - current 158 270 Deposit with clearing broker 1,036 1,042 Receivable from clearing broker 101 147 Prepaid expenses and other 358 279 Federal income tax receivable -- 200 Deferred income tax asset 763 633 ------------- ------------- Total current assets 7,476 6,914 Notes receivable, less current portion 2,066 2,066 Property and equipment 1,745 1,820 Investment in and advances to affiliates (Note 4) 13,608 14,274 Other investments 3,972 3,969 Goodwill 558 573 Other assets 217 219 ------------- ------------- Total Assets $29,642 $29,835 ============= ============= See accompanying notes to consolidated financial statements - 5 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) March 31, December 31, 2000 1999 (Restated) (Restated) ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable - trade $1,729 $1,242 Payable to clearing broker 1,003 624 Notes payable - short term -- 12 Payable under loan participation agreements 259 259 Income taxes payable 22 -- Accrued incentive compensation 311 818 Accrued expenses and other liabilities (Note 5) 2,627 2,923 ----------- ----------- Total current liabilities 5,951 5,878 Net deferred income tax liability 1,708 1,699 Notes payable - long term 2,854 3,298 ----------- ----------- Total liabilities 10,513 10,875 Minority interest 39 48 Shareholders' Equity: Preferred stock, $1.00 par value, 1,000,000 shares authorized -- -- Common stock, $0.10 par value, shares authorized 20,000,000; issued 2,667,233 at 3/31/00 and 2,667,033 at 12/31/99 278 278 Additional paid-in capital 5,549 5,549 Retained earnings 13,822 13,644 Less: Common stock of parent company held by a subsidiary (559) (559) ----------- ----------- Total shareholders' equity 19,090 18,912 Total Liabilities and Shareholders' Equity $29,642 $29,835 =========== =========== See accompanying notes to consolidated financial statements - 6 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Three Months Ended March 31, 2000 1999 (Restated) (Restated) ----------- ----------- Cash flows from operating activities: Cash received from customers $6,317 $4,962 Cash paid to suppliers and employees (5,996) (5,328) Change in trading account securities (62) 104 Change in receivable from clearing broker 431 (62) Interest paid (78) (34) Income taxes paid -- (330) Interest, dividends and other investment proceeds 98 79 ----------- ----------- Net cash provided by (used in) operating activities 710 (609) Cash flows from investing activities: Proceeds from sale of property and equipment 13 -- Payments for purchase property and equipment (24) (12) Discontinued operations -- 98 Funds loaned to others (670) (2,503) Collection of notes receivable 1,340 963 Other 7 (14) ----------- ----------- Net cash provided by/(used in) investing activities 666 (1,468) Cash flows from financing activities: Proceeds from borrowings 307 1,600 Payment of long term debt (764) -- Purchase/retire treasury stock -- (25) ----------- ----------- Net cash provided by/(used in) financiang activities (457) 1,575 ----------- ----------- Net change in cash and cash equivalents $919 ($502) ----------- ----------- Cash and cash equivalents at beginning of period 2,275 3,214 ----------- ----------- Cash and cash equivalents at end of period $3,194 $2,712 =========== =========== See accompanying notes to consolidated financial statements - 7 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (In thousands) Three Months Ended March 31, 2000 1999 --------- --------- (Restated) (Restated) Reconciliation of net earnings to net cash from operating activities: Net earnings $178 $58 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 157 150 Provision for bad debts 129 42 Earnings from discontinued operations -- (57) Minority interest in consolidated earnings (9) (25) Undistributed earnings of affiliate 51 (145) Write-off of fixed assets 2 -- Change in federal income tax payable 222 (405) Provision for deferred tax asset (121) 92 Change in trading securities (62) 104 Change in payable to clearing broker 431 (62) Change in management fees & other receivables (142) 669 Change in prepaids & other current assets (79) 79 Change in trade payables 863 (71) Change in accrued expenses & other liabilities (910) (1,038) --------- --------- Net cash from operating activities $ 710 ($609) ========= ========= See accompanying notes to consolidated financial statements - 8 - AMERICAN PHYSICIANS SERVICE GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (Unaudited) 1. RESTATEMENT The accompanying consolidated financial statements have been restated to reflect changes in accounting for Syntera and Uncommon Care. In the previously reported consolidated financial statements for the three month period ended March 31, 1999, the Company had accounted for its ownership of Syntera on the equity method because of management's belief that majority control of Syntera was temporary based on management's initial business plan. This plan anticipated that the Company's ownership would decrease to a minority position as physician practices were acquired over a relatively short period of time. Syntera was not able to acquire the number of practices originally anticipated, accordingly Syntera has been consolidated in these restated consolidated financial statements. Syntera's business was distinct from other services offered by the Company and it had separate management that reported directly to the Company's CEO; accordingly, the results of operations of Syntera are reflected as loss from discontinued operations as Syntera was acquired by an unrelated company effective August 31, 1999. The Company's previously filed consolidated financial statements should have reflected Syntera as a discontinued operation beginning in late 1998 when management decided to dispose of the segment. In addition, in the previously reported consolidated financial statements as of March 31, 2000 and December 31, 1999 and for the three month periods ended March 31, 2000 and March 31, 1999, the Company had accounted for its ownership of Uncommon Care on the cost basis. The restated consolidated financial statements account for the investment in Uncommon Care on the equity method. The change from the cost to the equity method is based on management's ability to exert significant influence over the operations of Uncommon Care. A summary of the effects of these restatements on the accompanying consolidated financial statements is as follows (in thousands): March 31, 2000 December 31, 1999 -------------- ----------------- As Previously As Previously Reported As Restated Reported As Restated ------------- ----------- ------------- ----------- Assets $ 33,020 $ 29,642 $ 32,661 $ 29,835 Liabilities 11,462 10,513 11,647 10,875 Minority interest 39 39 48 48 Shareholders equity 21,519 19,090 20,966 18,912 9 Three Months Ended Three Months Ended March 31, 2000 March 31, 1999 ------------------ ------------------ As Previously As Previously Reported As Restated Reported As Restated ------------- ----------- ------------- ----------- Revenue $ 6,557 $ 6,502 $ 4,371 $ 4,297 Operating income (loss) 329 274 (149) (223) Equity in earnings of unconsolidated affiliates 471 4 518 187 Earnings from continuing operations 523 178 268 4 Earnings from discontinued operations -- -- 63 54 Net earnings 523 178 331 58 Earnings per common share: Basic: Continuing operations $0.20 $0.07 $0.07 $ -- Discontinued operations $ -- $ -- $0.01 $0.01 Net earnings $0.20 $0.07 $0.08 $0.01 Diluted: Continuing operations $0.19 $0.06 $0.05 $ -- Discontinued operations $ -- $ -- $0.01 $0.01 Net earnings $0.19 $0.06 $0.06 $0.01 2. GENERAL The accompanying unaudited consolidated financial statements have been prepared in conformity with the generally accepted accounting principles described in the audited financial statements for the year ended December 31, 1999 and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position as of March 31, 2000 and the results of operations for the periods presented. These statements have not been audited by the Company's independent certified public accountants. The operating results for the interim periods are not necessarily indicative of results for the full fiscal year. The notes to consolidated financial statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 filed with the Securities Exchange Commission should be read in conjunction with this Quarterly Report on Form 10-Q. There have been no significant changes in the information reported in those notes other than from normal business activities of the Company. Certain reclassifications have been made to amounts presented in prior periods to be consistent with the 2000 presentation. 10 3. CONTINGENCIES In conjunction with a settlement agreement, the Company's broker/dealer subsidiary, APS Financial, guaranteed the future yield of a customer's investment portfolio beginning in November 1994 for up to a five and one-half year period ending in May, 2000. On April 28, 2000 the Company liquidated the holdings in the customer's investment portfolio and tendered payment to the customer. Reflected in this period's Form 10-Q is a charge to income totaling $129,000 which represents the shortfall in the portfolio after liquidation. 4. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES At March 31, 2000 the Company owned 14.4% (2,344,000 shares) of the outstanding common stock of Prime Medical Services, Inc. ("Prime"). The Company records its pro-rata share of Prime's results on the equity method, as the Company continues to exercise significant influence over operating and financial policies, primarily through Board of Directors and senior officers. Two of Prime Medical's seven member board are also member of American Physicians' board. Mr. Shifrin is CEO of American Physicians and chairman of the board of both companies. Mr. Hummel is a director of American Physicians and is CEO and President of Prime Medical. Mr. Searles is a director of both companies. American Physicians continues to be Prime's largest shareholder. According to information in Prime's most recent Proxy statement, American Physicians and its two directors who are also Prime directors have 18.5% beneficial ownership in Prime. Prime is primarily in the business of providing lithotripsy and refractive vision surgery services. The common stock of Prime is traded in the over-the-counter market under the symbol "PMSI". Prime is a Delaware corporation which is required to file annual, quarterly and other reports and documents with the Securities and Exchange Commission, which reports and documents contain financial and other information regarding Prime. Such reports and documents may be examined and copies may be obtained from the offices of the Securities and Exchange Commission. At March 31, 2000 the Company owned preferred shares of Uncommon Care, a developer and operator of dedicated Alzheimer's care facilities. The preferred shares owned by the Company are convertible into approximately a 34% common stock interest in the equity of Uncommon Care on a fully converted basis. The Company's investment entitles it to vote in certain instances and to elect two of the five members of the board of directors of Uncommon Care. In addition, pursuant to a shareholders agreement between Uncommon Care and its shareholders, one of the directors elected by the holders of the preferred stock must consent to Uncommon Care's taking certain important corporate actions specified in the shareholders agreement. As a result, APSG accounts for this investment on the equity method. The Company has applied the guidance of EITF 99-10, specifically the percentage of ownership method, in applying the equity method to its investment in Uncommon Care. Uncommon Care's common stock equity had been reduced to zero prior to the Company's investment and, accordingly, the Company has recognized 100% of the losses of Uncommon Care based on its ownership of 100% of Uncommon Care's preferred stock equity. At March 31, 2000 and 1999, the Company's consolidated retained earnings included losses of Uncommon Care totaling $2,032,000 and $797,000 respectively. 11 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consists of the following: March 31 December 31 2000 1999 ---- ---- Taxes payable $ 64,000 160,000 Deferred income (Note 7) 549,000 528,000 Contractual/legal claims 1,537,000 1,409,000 Vacation payable 116,000 116,000 Funds held for others 25,000 402,000 APS Systems disposition costs discontinued operations ) 10,000 10,000 Other 326,000 298,000 --------- -------- $2,627,000 2,923,000 ========= ========= 6. EARNINGS PER SHARE Basic earnings per share is based on the weighted average shares outstanding without any dilutive effects considered. Diluted earnings per share reflect dilution from all contingently issuable shares, including options and convertible debt. A reconciliation of income and average shares outstanding used in the calculation of basic and diluted earnings per share from continuing operations follows: 12 6. EARNINGS PER SHARE, continued For the Three Months Ended March 31, 2000 ------------------------------------------ Income Shares Per Share (Numerator) (Denominator) Amount Earnings from continuing operations $ 178,000 Basic EPS Earnings available to common stockholders 178,000 2,667,000 0.07 Effect of Dilutive Securities -- 83,000 ------- --------- Diluted EPS Earnings available to common stockholders and assumed conversions $ 178,000 2,750,000 0.06 ======== ========= ==== For the Three Months Ended March 31, 1999 ------------------------------------------- Income (loss) Shares Per Share (Numerator) (Denominator) Amount Earnings from continuing operations $ 4,000 Basic EPS Earnings available to Common stockholders 4,000 4,080,000 $0.00 Effect of dilutive securities Options -- 32,000 Contingently issuable shares (14,000) 1,021,000 -------- --------- Diluted EPS Earnings (loss) available to common stockholders and assumed conversions $ (10,000) 5,133,000 $0.00 ======= ========= ==== 13 6. EARNINGS PER SHARE, continued Unexercised employee stock options to purchase 649,900 and 985,500 shares of the Company's common stock as of March 31, 2000 and 1999, respectively, were not included in the computations of diluted EPS because the effect would be antidilutive. 7. DEFERRED INCOME The Company collects commissions on certain medical malpractice insurance policies. Such commissions are collected in advance. Income is earned ratably on the policy over the course of the life of the policy, typically twelve months. Commissions which are not yet earned are recorded as deferred income on the balance sheet. 8. Segment Information The Company's segments are distinct by type of service provided. Comparative financial data for the three month periods ended March 31, 2000 and 1999 are shown as follows (in thousands): March 31, ---------------------------------- 2000 1999 Operating Revenues: ------------ -------------- Financial services 4,319 2,909 Insurance services 1,275 1,194 Consulting 655 -- Real estate 263 232 Corporate 40 5 ---------- ---------- $6,552 $4,340 ========== ========== Reconciliation to Consolidated Statement of Earnings: Total segment revenues $6,552 $4,340 Less: Intercompany profits (50) (43) ----------- ---------- Total Revenues $6,502 $4,297 =========== ========= 14 8. SEGMENT INFORMATION, (continued) ------------------- Operating Profit (Loss) Financial services 595 349 Insurance services -- (152) Consulting 65 -- Real estate 74 48 Corporate (460) (468) -------- ------- $ 274 $(223) ======== ======= Total segments operating profits/(loss) 274 (223) Equity in earnings of affiliates 4 187 ------- ------- Earnings (loss) from continuing 278 (36) operations before income taxes and minority interests Income tax expense (benefit) 109 (15) Minority interests 9 25 -------- ------- Earnings from continuing 178 4 operations -------- ------- Net profit from discontinued operations, net of income tax -- 54 -------- ------- Net earnings $ 178 $ 58 ======= ======= 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements All statements past and future, written or oral, made by the Company or its officers, directors, shareholders, agents, representatives or employees, including without limitation, those statements contained in this Report on Form 10-Q, that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, intentions or strategies regarding the future. Forward-looking statements may appear in this document or other documents, reports, press releases, and written or oral presentations made by officers of the Company to shareholders, analysts, news organizations or others. Readers should not place undue reliance on forward-looking statements. All forward-looking statements are based on information available to the Company and the declarant at the time the forward-looking statement is made, and the Company assumes no obligation to update any such forward-looking statements. It is important to note that the Company's actual results could differ materially from those described in such forward-looking statements. In addition to any risks and uncertainties specifically identified in connection with such forward-looking statements, the reader should consult the Company's reports on previous Forms 10-Q and other filings under the Securities Act of 1933 and the Securities Exchange Act of 1934, for factors that could cause actual results to differ materially from those presented. Forward-looking statements are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors and legislative, judicial and other governmental authorities and officials. Assumptions relating to the foregoing involve judgements with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Any such assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements by the Company or its officers, directors, shareholders, agents, representatives or employees, including those forward-looking statements contained in this Report on Form 10-Q, will prove to be accurate. RESULTS OF OPERATIONS REVENUES Revenues from operations increased $2,205,000 (51%) for the three month period ended March 31, 2000 compared to the same period in 1999. Revenues increased at all segments in the current period compared to the same period in 1999. 16 Financial services revenues increased $1,410,000 (48.5%) for the three month period ended March 31, 2000 compared to the same period in 1999. The increase was due to greater commission income at APS Financial Corp., a broker/dealer division of APS Investment Services, Inc. The increase in current quarter commission income is the result of successfully producing additional business through broker sales efforts aided by internally generated market research. The Company's brokers have achieved an increased number of accounts as they have become more established in the business, through referrals and direct solicitation marketing. Internal market research contributes to higher commissions by providing additional investment ideas to be marketed by the brokers to a greater number of customers. During the first three months of 2000, APS Financial employed two research analysts compared to one in the same period in 1999. Insurance services revenues from premium-based insurance management fees increased $81,000 (6.8%) for the three month period ended March 31, 2000 compared to the same period in 1999. The increase in the current year was due to a 58% increase in commissions earned on a higher volume of new business. Partially offsetting the revenue increase was a 5% decline in commissions earned on renewal business. Renewal business declined as a result of raising premiums to reduce the effective underwriting loss ratio. Although the premium increase will result in fewer renewals and lower revenues, the profitability per renewed policy will be greater. Consulting revenue increased $655,000 for the three month period ended March 31, 2000 compared to the same period in 1999. Since the Company did not begin consolidating the financial results of APS Consulting until the third quarter of 1999, no revenues were recorded during the first three months of 1999. Real estate revenues increased $24,000 (12.7%) for the three period ended March 31, 2000 compared to the same period in 1999. The current year increase is primarily the result of an increase in rent charged to the Company's tenants. As of March 31, 2000 the occupancy rate of the building space owned by the Company was 100%. With the continued strength of the Austin real estate market, rent revenues should be secure for the foreseeable future. Investment and other income increased $35,000 for the three month period ended March 31, 2000 compared to the same period in 1999. The increase in the current quarter was the result of a rise in interest income resulting from line of credit loans granted to FemPartners, Inc. EXPENSES Total operating expenses increased $1,708,000 (37.8%) for the three month period ended March 31, 2000 compared to the same period in 1999. Expenses at the financial services and consulting segments increased while expenses at the insurance services, real estate and investments segments decreased in the current period. 17 Financial services expense increased $1,153,000 (45.1%) for the three month period ended March 31, 2000 compared to the same period in 1999. The primary reason for the current year three month increase is higher commission expense resulting from an increase in commission revenue at APS Financial, the broker/dealer division of APS Investment Services, Inc. Insurance services expenses at the insurance management subsidiary decreased $71,000 (5.3%) for the three month period March 31, 2000 compared to the same period in 1999. The current period decrease is due primarily to a 31% reduction in the amount of incentive compensation expensed in the first three months of 2000 compared to the same three months in 1999. Real estate expenses decreased $2,000 (1.4%) for the three month period March 31, 2000 compared to the same period in 1999 primarily due to lower depreciation resulting from some assets becoming fully depreciated since the first quarter of 1999. General and administrative expense decreased $5,000 (1.1%) for the three month period ended March 31, 2000 compared to the same period in 1999. Personnel costs were lower in the current period due to a 32% decrease in management incentive paid. Professional fees were 92% lower in 2000 as legal fees associated with the Consolidated Eco-Systems note were incurred during the first three months of 1999. Partially offsetting these decreases was a $129,000 charge incurred in the current period to cover a shortfall in the portfolio of a certain investor whose return on investment was guaranteed by the Company. Interest expense increased $44,000 (129.4%) for the three month period ended March 31, 2000 compared to the same period in 1999. The primary cause of the current period rise is an increase of $1,225,000 in the Company's line of credit payable. EQUITY IN EARNINGS/(LOSS) OF UNCONSOLIDATED AFFILIATES The Company's equity in earnings of Prime Medical Services, Inc. ("Prime") decreased $88,000 (15.7%) for the three month period ended March 31, 2000 compared to the same period in 1999. Although earnings at Prime were up approximately 4% in the current period, the Company holds a smaller percentage ownership in Prime resulting from the common stock exchanges to acquire treasury shares that occurred in the second quarter of 1999. As a result of these exchanges, the Company's percentage ownership of Prime dropped from an average of 17.8% during the first three months of 1999 to an average of 14.2% during the first three months of 2000. During the first three months of 2000 and 1999, the Company recorded losses from its equity investment in Uncommon Care of ($467,000) and ($372,000), respectively. These losses were expected during Uncommon Care's early growth stage. The expenses incurred to develop new facilities and to bring them to full occupancy exceed profits from the limited early operations and will continue to do so until the operations are sufficiently large to cover the development expenses, or until a slowdown in development of new facilities. Uncommon Care continues to develop new projects and plans to do so through the end of 2000. 18 MINORITY INTEREST Minority interest represents the combination of two outside interests in subsidiaries of the Company: a twenty percent interest of Insurance Services owned by Florida Physicians Insurance Group, Inc., an A- (Excellent) rated insurance company as rated by AM Best; and a five percent interest of APS Asset Management, a division of the financial services subsidiary of the Company (APS Investment Services), owned by key individuals within APS Asset Management. LIQUIDITY AND CAPITAL RESOURCES Current assets exceeded current liabilities by $1,525,000 and $1,036,000 at March 31, 2000, and December 31, 1999, respectively. The primary cause of the rise in working capital is cash collected from prior period loans to Uncommon Care. This loan is recorded as an investment in/advance to an affiliate. In addition, working capital was higher as a result of cash provided by operating activities. Capital expenditures through the three month period ended March 31, 2000 were approximately $24,000. Total capital expenditures are expected to be approximately $125,000 in 2000. Historically, the Company has maintained a positive working capital position and, has been able to satisfy its operational and capital expenditure requirements with cash generated from its operating and investing activities. These same sources of funds have also allowed the Company to pursue investment and expansion opportunities consistent with its growth plans. To further its ability to meet its liquidity requirements and to accelerate its growth, the Company established a revolving line of credit with Bank of America. In May, 1999 the amended total funds available to the Company was lowered from $10,000,000 to $7,500,000. Funds advanced under the agreement bear interest at the prime rate less 1/4%. The Company will pledge shares of Prime Medical to the bank as funds are advanced under the line. A balance of $2,825,000 was owed under this credit line as of March 31, 2000. The Company believes that its positive working capital position together with its ability to draw upon its line of credit will provide sufficient working capital for its foreseeable future needs. New Accounting Pronouncements None 19 PART II OTHER INFORMATION 20 Item 1. LEGAL PROCEEDINGS The Company is involved in various claims and legal actions that have arisen in the ordinary course of business. The Company believes that the liability provision in its financial statements is sufficient to cover any unfavorable outcome related to lawsuits in which it is currently named. Management believes that liabilities, if any, arising from these actions will not have a significant adverse effect on the financial condition of the Company. However, due to the uncertain nature of legal proceedings, the actual outcome of these lawsuits may differ from the liability provision recorded in the Company's financial statements. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Current reports on Form 8-K. None 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN PHYSICIANS SERVICE GROUP, INC. Date: March 23, 2001 By: /s/ William H. Hayes -------------------------------------- William H. Hayes, Vice President and Chief Financial Officer - 22 - EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 3,194 380 158 0 0 7,476 3,928 2,184 29,642 5,951 0 0 0 278 18,812 29,642 0 6,502 155 6,237 222 129 78 278 109 178 0 0 0 178 0.07 0.06
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