-----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, U67qGngCj3A8lgt470jrAl8Zark0x7Z0rpXvObQyzdqaiO+sQgqzQ0anQM4cva4m e0LKHlgzPWGD55bemufB0A== 0000724024-01-000007.txt : 20010326 0000724024-01-000007.hdr.sgml : 20010326 ACCESSION NUMBER: 0000724024-01-000007 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 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: 1578013 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 SEPTEMBER 30, 2000 FORM 10-Q ===================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 AMENDMENT NO. 1 TO 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 SEPTEMBER 30, 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 OCTOBER 31, 2000 -------------------- ---------------- Common Stock, $.10 par value 2,361,233 ============================================================================ PART I FINANCIAL INFORMATION 2 AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------ 2000 1999 2000 1999 (Restated) (Restated) (Restated) (Restated) ---------- ---------- --------- -------- REVENUES: Financial services $2,334 $2,505 $7,942 $8,168 Insurance services 1,699 1,098 4,115 3,207 Consulting 536 163 1,852 163 Real estate 177 169 1,370 526 Investments and other 60 66 177 1,703 ---------- ---------- -------- ------- Total revenue 4,806 4,001 15,456 13,767 EXPENSES: Financial services 2,177 2,275 7,235 7,248 Insurance services 1,493 1,070 3,847 3,427 Consulting 557 162 1,765 162 Real estate 118 142 384 420 General and administrative 314 803 1,150 2,909 Interest 116 80 271 170 ---------- ---------- -------- ------- Total expenses 4,775 4,532 14,652 14,336 ---------- ---------- -------- ------- Operating income(loss) 31 (531) 804 (569) Equity (loss) in earnings of unconsolidated affiliates (Note 4) (117) 272 (89) 666 ---------- ---------- -------- ------- Earnings (loss) from continuing operations before income taxes and minority interest (86) (259) 715 97 Income tax expense (benefit) (23) (87) 304 (57) Minority interest (22) -- (19) 37 ---------- ---------- -------- ------- Earnings (loss) from continuing Operations (85) (172) 392 191 Discontinued operations: Earnings from discontinued operations net of income tax of $0 and $100 for the three months and $0 and $9 for the nine months in 2000 and 1999, respectively. -- 193 -- 18 ---------- ---------- -------- ------- NET EARNINGS (LOSS) $ (85) $ 21 $ 392 $ 209 ========== ========== ======== =======
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 Nine Months Ended September 30, September 30, ------------------------ ---------------------------- 2000 1999 2000 1999 (Restated) (Restated) (Restated) (Restated) --------- --------- --------- --------- Basic: Earnings (loss) from continuing Operations $ (0.03) $(0.06) $ 0.15 $ 0.06 Discontinued operations -- 0.07 -- -- --------- --------- -------- -------- Net earnings (loss) $ (0.03) $ 0.01 $ 0.15 $ 0.06 ========= ========= ======== ======== Diluted: Earnings (loss) from continuing Operations $ (0.03) $(0.06) $ 0.14 $ 0.06 Discontinued operations -- 0.07 -- -- --------- --------- -------- -------- Net earnings (loss) $ (0.03) $ 0.01 $ 0.14 $ 0.06 ========= ========= ======== ======== Basic weighted average shares outstanding 2,706 2,738 2,535 3,275 ========= ========= ======== ======== Diluted weighted average shares outstanding 2,746 2,768 2,747 3,299 ========= ========= ======== ========
See accompanying notes to consolidated financial statements 4 AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 2000 1999 (Restated) (Restated) ------------- ------------- ASSETS Current Assets: Cash and cash investments $2,994 $2,275 Cash - restricted -- 376 Trading account securities 117 348 Management fees and other receivables 1,295 1,344 Notes receivable, net - current 58 270 Deposit with clearing broker 495 1,042 Receivable from clearing broker 150 147 Prepaid expenses and other 396 279 Income taxes receivable 394 200 Deferred income tax asset 176 633 ------------- ------------- Total current assets 6,075 6,914 Notes receivable, net, less current portion 2,066 2,066 Property and equipment 1,483 1,820 Investment in and advances to affiliates (Note 4) 14,042 14,274 Other investments 4,212 3,969 Goodwill 592 573 Other assets 217 219 ------------- ------------- Total Assets $28,687 $29,835 ============= ============= See accompanying notes to consolidated financial statements 5 AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 2000 1999 (Restated) (Restated) ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable - trade $1,177 $1,242 Payable to clearing broker 593 624 Notes payable - short term -- 12 Payable under loan participation agreements 259 259 Accrued incentive compensation 499 818 Accrued expenses and other liabilities (Note 5) 1,118 2,923 ----------- ----------- Total current liabilities 3,646 5,878 Net deferred income tax liability 1,661 1,699 Notes payable - long term 4,816 3,298 ----------- ----------- Total liabilities 10,123 10,875 Minority interest 86 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 2,377,233 at 9/30/00 and 2,667,233 at 12/31/99 278 278 Additional paid-in capital 5,549 5,549 Retained earnings 14,069 13,644 Unrealized holding gains 34 -- Less: Treasury stock (1,452) (559) ----------- ---------- Total shareholders' equity 18,478 18,912 Total Liabilities and Shareholders' Equity $28,687 $29,835 =========== ========== See accompanying notes to consolidated financial statements 6 AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended September 30, 2000 1999 (Restated) (Restated) ----------- ----------- Cash flows from operating activities: Cash received from customers $14,561 $12,668 Cash paid to suppliers and employees (15,895) (13,509) Change in trading account securities 235 42 Change in receivable from clearing broker 513 114 Interest paid (271) (170) Income taxes paid (72) (385) Interest, dividends and other investment Proceeds 361 309 ----------- ----------- Net cash used in operating Activities (568) (931) Cash flows from investing activities: Proceeds from the sale of fixed assets 966 -- Payments for purchase property and equipment (111) (148) Proceeds from prior year disposition -- 40 Discontinued operations -- (62) Proceeds from subsidiary acquisition -- 149 Funds loaned to others (1,451) (4,437) Payments for purchse of equity investment (188) -- Collection of notes receivable 1,455 1,138 Other 46 32 ----------- ----------- Net cash provided by/ (used in) investing activities 717 (3,288) Cash flows from financing activities: Proceeds from borrowings 2,285 3,050 Payment of long term debt (766) -- Exercise of stock options -- 75 Purchase/retire treasury stock (949) (25) ----------- ---------- Net cash provided by financing Activities 570 3,100 ----------- ----------- Net change in cash and cash equivalents $719 ($1,119) ----------- ----------- Cash and cash equivalents at beginning of period 2,275 3,214 ----------- ----------- Cash and cash equivalents at end of period $2,994 $2,095 =========== =========== See accompanying notes to consolidated financial statements 7 AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (In thousands) Nine Months Ended September 30, 2000 1999 (Restated) (Restated) --------- --------- Reconciliation of net earnings to net cash from operating activities: Net earnings $ 392 $ 209 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 471 494 Provision for bad debts -- 1,869 Earnings from discontinued operations -- (81) Minority interest in consolidated earnings 19 (37) Undistributed earnings of affiliate 277 (513) Undistributed gain of other investment (18) -- Gain on sale of fixed assets (770) -- Gain on exchange of common stock -- (1,635) Change in federal income tax receivable (194) (431) Provision for deferred tax asset 419 305 Change in trading securities 235 42 Change in payable to clearing broker 513 114 Change in management fees & other receivables 48 564 Change in prepaids & other current assets (117) (265) Change in trade payables 311 (161) Change in accrued expenses & other liabilities (2,154) (1,405) --------- -------- Net cash from operating activities $ (568) $(931) ========= ======== Summary of non-cash transactions: During the second quarter, 1999, the Company acquired $4,862,000 in treasury stock by exchanging $4,862,000 in Prime Medical Services, Inc. common stock. The treasury stock was subsequently retired and the amount in excess of par was charged to Retained Earnings. See accompanying notes to consolidated financial statements 8 AMERICAN PHYSICIANS SERVICE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 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 nine month period ended September 30, 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 September 30, 2000 and December 31, 1999 and for the nine month periods ended September 30, 2000 and September 30, 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): September 30, 2000 December 31, 1999 ------------------ ----------------- As Previously As Previously Reported As Restated Reported As Restated ------------- ----------- ------------- ----------- Assets $ 33,208 $ 28,687 $ 32,661 $ 29,835 Liabilities 11,460 10,123 11,647 10,875 Minority interest 67 86 48 48 Shareholders equity 21,681 18,478 20,966 18,912 9 Three Months Ended Three Months Ended September 30, 2000 September 30, 1999 ------------------ ------------------ As Previously As Previously Reported As Restated Reported As Restated ------------- ----------- ------------- ----------- Revenue $ 4,878 $ 4,806 $ 4,104 $ 4,001 Operating income (loss) 103 31 (428) (531) Equity in earnings (loss) of unconsolidated 435 (117) 608 272 affiliates Earnings (loss) from continuing operations 327 (85) 128 (172) Earnings from discontinued operations -- -- 194 193 Net earnings (loss) 327 (85) 322 21 Earnings per common share: Basic: Continuing operations $0.12 ($0.03) $0.05 ($0.06) Discontinued operations $ -- $ -- $0.07 $0.07 Net earnings $0.12 ($0.03) $0.12 $0.01 Diluted: Continuing operations $0.12 ($0.03) $0.05 ($0.06) Discontinued operations $ -- $ -- $0.07 $0.07 Net earnings $0.12 ($0.03) $0.12 $0.01 Nine Months Ended Nine Months Ended September 30, 2000 September 30, 1999 ------------------ ------------------ As Previously As Previously Reported As Restated Reported As Restated ------------- ----------- ------------- ----------- Revenue $ 15,644 $ 15,456 $ 14,048 $ 13,767 Operating income (loss) 992 804 (480) (569) Equity in earnings (loss) of unconsolidated 1,388 (89) 1,600 666 affiliates Earnings from continuing operations 1,492 392 777 191 Earnings from discontinued operations -- -- 257 18 Net earnings 1,492 392 1,034 209 Earnings per common share: Basic: Continuing operations $0.59 $0.15 $0.24 $0.06 Discontinued operations $ -- $ -- $0.08 $ -- Net earnings $0.59 $0.15 $0.32 $0.06 Diluted: Continuing operations $0.54 $0.14 $0.24 $0.06 Discontinued operations $ -- $ -- $0.08 $ -- Net earnings $0.54 $0.14 $0.31 $0.06 10 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 September 30, 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, explained as explained in Note 3 to these financial statements, 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. 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 the earnings for the first nine months of 2000 is a charge to income totaling $192,000 which represents the shortfall in the portfolio after liquidation. In connection with the development of Syntera HealthCare Corporation, the Company entered into Share Exchange Agreements ("Agreements") with the physician shareholders of Syntera. The Agreements provide that the Syntera shareholders may, at their option, exchange their shares for a fixed dollar amount of the Company's common stock in the event that the Syntera shares are not publicly traded by certain dates. The Company has the option of purchasing any or all of the shares at the weighted average dollar amount of $5.26 per share rather than exchanging its common stock. As a result of Syntera's merger with FemPartners, Inc. in 1999, the Syntera shares were converted to FemPartners shares, with such shares retaining all of the conversion features. These shares began to become eligible to exchange in the first quarter of 2000 and continue to become eligible into the first quarter of 2002. Should all eligible FemPartners shares (248,000) be presented for exchange and the Company elected to purchase the shares for cash, the amount would be approximately $3,900,000. As of September 30, 2000 six doctors have notified the Company of their intent to exercise options to convert a total of 125,000 shares of FemPartners common stock. If the Company elects to purchase the shares for cash the amount would be approximately $1,670,000. 11 4. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES At September 30, 2000 the Company owned 14.8% (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 Prime's operating and financial policies, primarily through the Board of Directors and senior officers. Two of Prime Medical's seven member board are also members 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 September 30, 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 September 30, 2000 and 1999, the Company's consolidated retained earnings included losses of Uncommon Care totaling $2,654,000 and $1,238,000 respectively. 12 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consists of the following: September 30 December 31 2000 1999 ---- ---- Taxes payable $ 86,000 $ 160,000 Deferred income (Note 7) 300,000 528,000 Contractual/legal claims 370,000 1,409,000 Vacation payable 124,000 116,000 Funds held for others 26,000 402,000 APS Systems disposition costs (discontinued operations) --- 10,000 Other 212,000 298,000 -------- -------- $1,118,000 $ 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 under exchangeable share agreements and employee stock option agreements. A reconciliation of income and weighted average shares outstanding used in the calculation of basic and diluted earnings per share from continuing operations follows: 13 EARNINGS PER SHARE, continued For the Three Months Ended September 30, 2000 ---------------------------------------------- Loss Shares Per Share (Numerator) (Denominator) Amount --------- ----------- ---------- Earnings (loss) from continuing operations $ (85,000) Basic EPS Earnings (loss) available to common stockholders (85,000) 2,707,000 $(0.03) Effect of Dilutive Securities --- 40,000 ------- --------- Diluted EPS Earnings (loss) available to common stockholders and assumed conversions $ (85,000) 2,747,000 $(0.03) ========= ========= ===== For the Three Months Ended September 30, 1999 ---------------------------------------------- (Loss) Shares Per Share (Numerator) (Denominator) Amount ---------- ------------ -------- Earnings (loss) from continuing Operations $(172,000) Basic EPS Earnings (loss) available to Common stockholders (172,000) 2,738,000 $(0.06) Effect of dilutive securities --- 30,000 ------- --------- Diluted EPS Earnings (loss) available to common stockholders and assumed conversions $ (172,000) 2,768,000 $(0.06) ========= ========= ====== 14 EARNINGS PER SHARE, continued For the Nine Months Ended September 30, 2000 --------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ----------- ----------- --------- Earnings from continuing operations $ 392,000 Basic EPS Earnings available to common stockholders 392,000 2,535,000 $ 0.15 Effect of Dilutive Securities --- 212,000 --------- --------- Diluted EPS Earnings available to common stockholders and assumed conversions $ 392,000 2,747,000 $ 0.14 ========== ========== ====== For the Nine Months Ended September 30, 1999 --------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ------------ ------------ --------- Earnings from continuing operations $ 191,000 Basic EPS Earnings available to common stockholders 191,000 3,275,000 $ 0.06 Effect of Dilutive Securities 24,000 --------- Diluted EPS Earnings available to common stockholders and assumed conversions $ 191,000 3,299,000 $ 0.06 ========= ========= ====== Unexercised employee stock options to purchase 1,054,900 and 649,900 shares of the Company's common stock as of September 30, 2000 and 1999, respectively, were not included in the computations of diluted EPS because the effect would be antidilutive. 15 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 nine month periods ended September 30, 2000 and 1999 are shown as follows (in thousands): September 30, ------------------------------------ 2000 1999 Operating Revenues: -------------- ------------- Financial services 7,943 8,168 Insurance services 4,115 3,207 Consulting 1,852 163 Real estate 1,509 632 Corporate 864 3,154 --------- ---------- $16,283 $15,324 =========== =========== Reconciliation to Consolidated Statement of Earnings: Total segment revenues $16,283 $15,324 Less:Intercompany profits (139) (107) Intercompany dividends (688) (1,450) ---------- ----------- Total Revenues $15,456 $13,767 =========== =========== Operating Profit (Loss) Financial services 707 890 Insurance services 268 (220) Consulting 87 1 Real estate 986 106 Corporate (556) 104 -------- --------- Total segments operating profits $ 1,492 $ 881 Reconciliation to consolidated statement of earnings: Total segment operating profits 1,492 881 Less:intercompany dividends (688) (1,450) --------- ---------- Operating income(loss) 804 (569) 16 Equity in earnings (loss) of affiliates (89) 666 --------- --------- Earnings from continuing operations before income taxes and minority interests 715 97 Income tax expense (benefit) 304 (57) Minority interests (19) 37 -------- -------- Earnings from continuing operations 392 191 --------- -------- Net profit from discontinued operations, net of income tax --- 18 ----------- -------- Net earnings $ 392 $ 209 =========== ========== 17 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 $805,000 (20.1%) and $1,689,000 (12.3%) for the three and nine month periods ended September 30, 2000 compared to the same periods in 1999. For the current year three and nine month periods revenues increased at the insurance services, 18 consulting and real estate segments while the investment services and corporate segments revenues decreased when compared to the same periods in 1999. Financial services revenues decreased $171,000 (6.8%) and $225,000 (2.8%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The decrease in the third quarter of 2000 was due to lower commission income at APS Financial Corp., a broker/dealer division of APS Investment Services, Inc. Speculation over further interest rate tightening by the Federal Reserve Board resulted in investor uncertainty leading to a reduction of activity in the bond market. Insurance services revenues from premium-based insurance management fees increased $601,000 (54.7%) and $908,000 (28.3%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The increase in both periods of the current year was due to an increase in commissions earned on a higher volume of new business as well as from a premium increase implemented in July, 2000. The number of new insureds has increased steadily during the past twelve months, raising total premiums written and consequently, the total monthly premiums earned. Consulting revenue increased $373,000 and $1,689,000 for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. Since the Company did not begin consolidating the financial results of APS Consulting until September 1, 1999, no revenues were recorded during the first eight months of 1999. Real estate revenues increased $8,000 (4.7%) and $845,000 (161.0%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The current year nine month increase is primarily the result of gains on the sales of office space formerly leased to the Company's outside tenants. The sales amounted to a total of approximately 8,000 square feet of the 53,000 total square feet owned by the Company and resulted in gains of approximately $770,000. Revenues in the nine month period ending September 30, 2000 were also higher despite the Company's reduced ownership due to an increase in rent charged to the Company's tenants. As of September 30, 2000 the occupancy rate of the building space owned by the Company was 100%. Investment and other income decreased $6,000 (9.1%) and $1,526,000 (90%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The current year nine month decrease was due to the Company recording gains in 1999 totaling $1,635,000 from the exchanges of Prime Medical Services, Inc. (NASDAQ:PMSI) common stock for American Physicians Service Group, Inc. (NASDAQ:AMPH) common stock. No such gains were recorded in 2000. 19 EXPENSES Total operating expenses increased $243,000 (5.4%) and $316,000 (2.2%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. For both the current year three and nine month periods, expenses at the investment services, real estate and corporate segments decreased while expenses at the insurance services and consulting segments increased compared to the same three months in 1999. Financial services expense decreased $98,000 (4.3%) and $11,000 (0.2%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The primary reason for the current year three month decrease is lower commission expense resulting from a decrease in commission revenue at APS Financial, the broker/dealer division of APS Investment Services, Inc. Insurance services expenses at the insurance management subsidiary increased $423,000 (40%) and $420,000 (12.3%) for the three and nine month periods September 30, 2000, respectively, compared to the same periods in 1999. The current period three month increase is due primarily to commission expenses paid to agents being 74% higher than the same three months in 1999. This is the result of the increase in commissioned revenue mentioned above. Consulting expense increased $395,000 and $1,603,000 for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. Since the Company did not acquire APS Consulting until the third quarter of 1999, no expenses were recorded during the first eight months of 1999. Real estate expenses decreased $24,000 (17%) and $37,000 (8.8%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The cause for the decline in expenses in both the three and nine month periods of 2000 was primarily due to lower depreciation resulting from some assets becoming fully depreciated since the first nine months of 1999. In addition, the sale of office space during the second quarter of 2000 lowered depreciation by $9,000 (32.0%) and building maintenance fees by $4,000. General and administrative expense decreased $488,000 (61%) and $1,771,000 (61%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The 2nd quarter of 1999 contained charges to bad bebt expense resulting from a write-down of a note receivable ($996,000) as well as a separate charge to bad debt expense ($343,000) pertaining to receivables from Syntera HealthCare, Inc. (now FemPartners, Inc.). No such bad debt write-offs occurred in 2000. Interest expense increased $36,000 (45.0%) and $101,000 (59.4%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. The primary cause of the current year rise is additional draws taken by the Company on its line of credit increasing the balance due the bank at September 30, 2000 by $1,735,000 compared to the year-ago total. 20 EQUITY IN EARNINGS/(LOSS) OF UNCONSOLIDATED AFFILIATES The Company's equity in earnings of Prime Medical Services, Inc. ("Prime") decreased $173,000 (28.5%) and $389,000 (21.9%) for the three and nine month periods ended September 30, 2000, respectively, compared to the same periods in 1999. Depreciation and amortization expense increased $1.1 million (38.0%) during the current three month period compared to the same three month period in 1999 as a result of acquisitions of refractive surgery centers. For the nine month period, Prime recorded $1.1 million of non-recurring income in 1999 which caused net earnings after non-recurring items to be lower in 2000. In addition, the Company holds a smaller percentage ownership in Prime resulting from the common stock exchanges to acquire treasury shares that occurred in the third quarter of 1999. As a result of these exchanges, the Company's percentage ownership of Prime dropped from an average of 15.3% during the first nine months of 1999 to an average of 14.5% during the first nine months of 2000. During the first nine months of 2000 and 1999, the Company recorded losses from its equity investment in Uncommon Care of $(1,477,000) and $(1,110,000), respectively. 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. MINORITY INTEREST Minority interest represents the outside ownership interests in subsidiaries of the Company: a twenty percent interest of Insurance Services owned is 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), is owned by key individuals within APS Asset Management. 21 LIQUIDITY AND CAPITAL RESOURCES Current assets exceeded current liabilities by $2,429,000 and $1,036,000 at September 30, 2000, and December 31, 1999, respectively. The primary cause of the rise in working capital is cash received from the sale of office space formerly leased by the Company's outside tenants. Capital expenditures through the nine month period ended September 30, 2000 were approximately $99,000. 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 $7,500,000 revolving line of credit with Bank of America. 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 $4,810,000 was owed under this credit line as of September 30, 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 In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No.133, Accounting for Derivative Instruments and Hedging Activities as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, in September 2000. The Company is required to implement these standards effective with our 2001 fiscal year (after deferral by SFAS No. 137). SFAS No. 133 and 138 address the accounting for derivative instruments, including certain instruments embedded in other contracts, and for hedging activities. Under these statements, the Company will be required to recognize all derivative instruments as either assets or liabilities and measure those at fair value. The Company does not engage in hedging activities or hold any derivative instruments and does not believe that these statements will have a material effect on our financial condition or results of operations. 22 PART II OTHER INFORMATION 23 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 24 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 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS DEC-31-2000 DEC-31-2000 JUL-01-2000 JAN-01-2000 SEP-30-2000 SEP-30-2000 2,994 2,994 117 117 1,315 1,315 20 20 0 0 6,075 6,075 3,770 3,770 2,287 2,287 28,687 28,687 3,646 3,646 0 0 0 0 0 0 278 278 18,200 18,200 28,687 28,687 0 0 4,806 15,456 106 422 4,775 14,652 186 601 0 192 116 271 (86) 715 (23) 304 (85) 392 0 0 0 0 0 0 (85) 392 (0.03) 0.15 (0.03) 0.14
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