-----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, TFfdT9brVB10lETSTol3e68T7af5oxH9pgKVmdL/3XzLdxmfc2TV6MAqD3Zoxo3i FIU6p6DuiSIomB4Zm+UBsw== 0000724024-96-000005.txt : 19960508 0000724024-96-000005.hdr.sgml : 19960508 ACCESSION NUMBER: 0000724024-96-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960507 SROS: NASD 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11453 FILM NUMBER: 96557044 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 10QSB 1 FORM 10-QSB ======================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 1996 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, 1996 -------------------- ---------------- Common Stock, $.10 par value 4,002,204 ============================================================================ PART I FINANCIAL INFORMATION -2- AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data) Three Months Ended March 31, 1996 1995 -------- ---------- Revenues: Financial services $2,330 2,830 Computer systems/software 847 1,273 Real estate 169 162 Investments and other 110 418 -------- -------- Total revenue 3,456 4,683 Expenses: Financial services 2,006 2,541 Computer systems/software 877 1,107 Real estate 128 123 General and administrative 263 738 Interest 16 26 ------- -------- Total expenses 3,289 4,535 ------- -------- Operating income 168 148 Equity in earnings of unconsolidated affiliate (Note 4) 400 301 ------- -------- Earnings from continuing operations before income taxes 567 449 Income tax expense 66 155 Loss from discontinued operations net of income tax benefit of $0 and $47 in 1996 and 1995, respectively --- (92) ------- -------- Net earnings $501 202 ======= ======== Earnings per common share: Primary $0.12 0.06 ======== ======== Fully Diluted $0.12 0.06 ======== ======== Primary weighted average shares outstanding 4,264 3,580 ======== ======== Fully Diluted weighted average shares outstanding 4,316 3,601 ======== ======== See accompanying notes to consolidated financial statements - 3 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) March 31, December 31, 1996 1995 --------- ----------- ASSETS Current Assets: Cash and cash investments $8,021 6,798 Marketable securities (Note 2) 462 2,004 Trading account securities 289 1,014 Notes receivable - current 202 223 Management fees and other receivables 1,493 1,748 Receivable from clearing broker 1,454 780 Deferred income taxes (71) 159 Prepaid expenses and other 401 312 --------- --------- Total current assets 12,251 13,038 Notes receivable, less current portion 83 83 Property and equipment 2,077 2,129 Investment in Prime Medical Services, Inc. 7,811 7,412 Other assets 1,064 1,078 --------- --------- Total Assets $23,286 23,740 ========= ========= See accompanying notes to consolidated financial statements - 4 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) March 31, December 31, --------- ------------ 1996 1995 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of obligations under capital leases $268 299 Accounts payable - trade 372 353 Accrued compensation 178 861 Accrued expenses and other liabs (Note 5) 3,525 3,501 Federal income taxes payable (191) 558 ------- -------- Total current liabilities 4,153 5,572 Long-term obligations 539 574 ------- -------- Total liabilities 4,692 6,146 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 4,002,204 at 3/31/96 and 3,663,871 at 12/31/95 400 366 Additional paid-in capital 4,972 4,530 Unrealized holding gains 23 0 Retained earnings 13,199 12,698 ------- -------- Total shareholders' equity 18,594 17,594 Total Liabilities and Shareholders' Equity $23,286 23,740 ======= ======== See accompanying notes to consolidated financial statements - 5 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Three Months Ended March 31, 1996 1995 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $3,603 5,268 Cash paid to suppliers and employees (3,913) (5,089) Change in trading account securities 725 (992) Change in receivable from to clearing broker (674) 923 Interest paid (16) (26) Income taxes paid (598) (253) Interest, dividends and other investment proceeds 111 416 --------- -------- Net cash provided by (used in) operating activities (762) 247 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of marketable securities 1,577 885 Payments for purchase property and equipment (38) (122) Collection of notes receivable 21 229 Other 16 --- --------- -------- Net cash provided by investing activities 1,576 992 CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long term obligations (67) (120) Exercise of stock options 476 75 --------- -------- Net cash provided by (used in) financing activities 409 (45) --------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS $1,223 1,194 ========= ======== Cash and cash equivalents at beginning of period 6,798 3,266 --------- -------- Cash and cash equivalents at end of period $8,021 4,460 ========= ========
See accompanying notes to consolidated financial statements - 6 - AMERICAN PHYSICIANS SERVICE GROUP, INC. Consolidated Statements of Cash Flows, continued (In thousands) Three Months Ended March 31, 1996 1995 ---------- ----------- Reconciliation of net earnings to net cash from operating activities: Net earnings $501 202 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 88 94 Undistributed earnings of affiliate (399) (301) Change in federal income tax payable (749) (318) Provision for deferred tax asset 218 43 Change in trading securities 725 (992) Change in receivable from clearing broker (674) 923 Change in management fees & other receivables 256 1,104 Change in prepaids & other current assets (88) (126) Change in trade payables 19 (354) Change in accrued expenses & other liabilities (659) (28) ---------- ----------- Net cash from operating activities ($762) 247 ========== =========== Summary of non-cash transactions: At January 1, 1994, the Company began recording marketable securities at fair value, with unrealized holding gains and losses (net of tax) reported as a separate component of shareholder's equity, per Statement of Financial Accounting Standards #115. The effect of this resulted in an increase to unrealized holding gains of $23, a decrease to deferred tax assets of $12 and an increase to marketable securities of $35 for the three months ended March 31, 1996 compared to December 31, 1995. See accompanying notes to consolidated financial statements - 7 - AMERICAN PHYSICIANS SERVICE GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 (Unaudited) 1. GENERAL The accompanying unaudited consolidated financial statements have been prepared in conformity with the accounting principles stated in the audited financial statements for the year ended December 31, 1995 and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position as of March 31, 1996 and the results of operations for the periods presented. These statements have not been audited or reviewed 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-KSB for the year ended December 31, 1995 filed with the Securities Exchange Commission should be read in conjunction with this Quarterly Report on Form 10-QSB. 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 1996 presentation. 2. MARKETABLE SECURITIES Marketable securities include equity securities and investments in bonds that are intended to be held less than one year. At January 1, 1994, the Company began recording these securities at fair value, with unrealized holding gains and losses reported as a separate component of shareholders' equity, per SFAS-115. 3. CONTINGENCIES In conjunction with a settlement agreement, the Company's broker/dealer subsidiary, APS Financial, has guaranteed the future yield of a customer's investment portfolio beginning in November 1994 for up to a five and one-half year period. Management believes that the Company's financial statements adequately provide for any loss that might occur under this agreement; however, as defined in AICPA Statement of Position 94-6, it is reasonably possible that the Company's estimate of loss could change over the remaining term of the agreement. Management is unable to determine the range of potential adjustment since it is based on securities markets, which are beyond its ability to control. - 8 - 4. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE At March 31, 1996 the Company owned 19% (3,064,000 shares) of the outstanding common stock of Prime Medical Services, Inc. ("Prime"). This percentage ownership was decreased from 21% in late March, 1996, due to the exercise of stock warrants and stock options. The Company records its pro-rata share of Prime's results on the equity basis. Prime is in the business of providing lithotripsy 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. 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consists of the following: 1996 1995 ---------- ---------- Taxes payable-other .............................. $ 92,000 150,000 Commissions payable .............................. 9,000 38,000 Deferred income .................................. 595,000 434,000 Health insurance and other claims payable ........ 15,000 73,000 Contractual/legal claims ......................... 2,360,000 2,360,000 Vacation payable ................................. 125,000 127,000 Funds held for others ............................ 28,000 51,000 Interest payable ................................. 4,000 5,000 Other ............................................ 297,000 263,000 ---------- ---------- $3,525,000 3,501,000 ========== ========== - 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Revenues from operations decreased $1,226,000 (26.2%) for the three period ended March 31, 1996, respectively, compared to the same period in 1995. Financial services, computer systems and investments and other decreased while real estate increased during the first quarter of 1996 compared to the same period in 1995. Financial services revenues decreased $500,000 (17.7%) for the three period ended March 31, 1996 compared to the same period in 1995. The decrease in 1996 was due to lower broker/dealer commissions which were down primarily due to the loss of an experienced, high volume broker who left the Company in April, 1995. In addition, bond market conditions were much more favorable during the first three months of 1995 as yields decreased steadily in 1995 compared to steady bond yield increases during the first quarter of 1996. Rising yields translate to lower bond prices which explains the relatively unfavorable market. Revenues from premium-based insurance management fees were up $93,000 (8.8%) for the first three months of 1996 compared to the same period in 1995, due primarily to new client doctor groups as well as to premium rate increases. Computer systems and software sales revenues decreased $425,000 (33.4%) for the three month period ended March 31, 1996 compared to the same period in 1995. The first quarter decrease was primarily due to the fact that revenues were recognized in early 1995 from ongoing contracts. These contracts were substantially completed by the end of 1995. With no new contracts being signed in 1996, revenues declined. Partially offsetting this decrease was much higher consulting fees generated in the first quarter of 1996 compared to the same period in 1995. Real estate revenues rose $12,000 (11.8%) for the three month period ended March 31, 1996 compared to the same period in 1995. The increase in revenue was due to rising lease rates. Given the current economic good health of the Austin real estate market, it is reasonable to expect rental and occupancy rates to remain favorable throughout 1996. Investment and other income decreased $309,000 (70.8%) for the three month period ended March 31, 1996 compared to the same period in 1995. This decrease was primarily due to reimbursements received in February, 1995 for the settlement of prior litigation. A final reimbursement payment was received in November, 1995. No such revenues were received in 1996. - 10 - EXPENSES Total expenses decreased $1,375,000 (29.6%) for the three month period ended March 31, 1996 compared to the same period in 1995. Financial services, computer systems and investment & other decreased while real estate services showed an increase for the three month period. Financial services expense decreased $535,000 (21.1%) for the three month period ended March 31, 1996 compared to the same period in 1995. The decrease was primarily the result of lower commissions paid in broker/dealer operations arising from the lower commission revenues. Reduced general and administrative expenses within the broker/dealer subsidiary have also contributed to the decrease. Expenses at the insurance management subsidiary increased $30,000 (3.7%) for the three month period ended March 31, 1996 compared to the same period in 1995 due to personnel merit increases. Computer systems/software expense decreased $230,000 (20.8%) for the three month period ended March 31, 1996 compared to the same period in 1995. The first quarter, 1996, decrease is due to lower hardware and software license costs of sales, resulting directly from the aforementioned decrease in new client sales revenue. Real estate expense increased $5,000 (3.7%) for the three month period ended March 31, 1996 compared to the same period in 1995. The increase was primarily due to higher condo association fees. General and administrative expense decreased $478,000 (64.8%) for the three month period ended March 31, 1996 compared to the same period in 1995. The decrease was due primarily to accruals made in 1995 for certain contingent liabilities associated with ongoing litigation. No such accruals were necessary in 1996. Interest expense decreased $10,000 (38.1%) for the three month period ended March 31, 1996 compared to the same period in 1995. The decrease was due to a lower volume of margined securities held in inventory at the broker/dealer subsidiary for resale to clients. A lower inventory requires a lower level of securities purchased on margin which corresponds to lower interest charged. DISCONTINUED OPERATIONS Publications expense was eliminated in 1996 due to the sale, in October, 1995, of APS Communications Corporation, a publisher of Spanish language directories of U.S. businesses. The Company is involved in no other publications-related ventures. In the first three months of 1995, the publications segment incurred $139,000 in expenses. - 11 - LIQUIDITY AND CAPITAL RESOURCES Current assets exceeded current liabilities by $8,098,000 and $7,466,000 at March 31, 1996, and December 31, 1995, respectively. The increase is primarily attributable to cash from financiang activities as well as changes in deferred taxes. To further its ability to meet its liquidity requirements, the Company has established a $2,000,000 revolving line of credit with a bank. The loan is renewable annually and bears interest at the bank's prime rate. The loan is secured by accounts receivable and is guaranteed by APS Facilities Management, Inc. and APS Systems, Inc., two subsidiaries of the Company. The Company plans to use this line of credit to supplement its working capital. No funds were advanced under this line at March 31, 1996. Capital expenditures through the quarter ended March 31, 1996 were approximately $38,000 and total capital expenditures are expected to be approximately $300,000 in 1996. Management believes that its working capital position together with funds generated from operations and from available lines of credit will provide sufficient resources to meet all present and reasonably foreseeable and capital needs. - 12 - PART II OTHER INFORMATION -13- 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 5. OTHER INFORMATION On April 26, 1996, the Company's unconsolidated affiliate, Prime Medical Services, Inc., ("Prime") acquired Lithotripters, Inc., of Fayetteville, North Carolina. The combination of the two entities, effective May 1, 1996, will create the nation's largest lithotripsy company. The purchase price was $88 million, comprised of $70 million in cash and 1,636,000 common shares of Prime Medical. This issuance of Prime shares has further diluted the Company's interest in Prime from 19.4% to 17.5%. The Company feels that increased earnings at Prime, resulting from the acquisition of Lithotripters, Inc., will offset this dilution of ownership. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11 Computation of Net Income Per Share at March 31, 1996 and 1995. (b) Current reports on Form 8-K. No current reports on Form 8-K were filed during the quarter ended March 31, 1996. - 14 - 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: May 8, 1996 By: /s/ William H. Hayes ------------------------ William H. Hayes, Vice President and Chief Financial Officer - 15 - EX-11 2 COMP OF EPS EXHIBIT 11 AMERICAN PHYSICIANS SERVICE GROUP, INC. COMPUTATION OF NET INCOME PER SHARE FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (In thousands, except earnings per share) Primary Fully Diluted Earnings Earnings Per Share Per Share ---------- ----------- 1996 - ---- Net Income applicable to common stock ................. $ 501 501 Average number of shares outstanding .................. 3,947 3,947 Average stock option shares ........................... 317 369 ------ ------ Shares for earnings calculation ................... 4,264 4,316 Net income per share .................................. $ 0.12 0.12 ====== ====== 1995 - ---- Net Income applicable to common stock ................. $ 202 202 Average number of shares outstanding .................. 3,250 3,250 Average stock option shares ........................... 330 351 ----- ------ Shares for earnings calculation ................... 3,580 3,601 Net income per share .................................. $ 0.06 0.06 ====== ====== NOTE: Primary and fully diluted income per share were computed by dividing net income by the average number of shares outstanding plus the common stock equivalents which, would arise from the exercise of dilutive stock options. - 16 - EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the March 31, 1996 Form 10-QSB and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1996 MAR-31-1996 8,021 751 3,149 0 31 12,251 5,356 3,279 23,286 4,153 0 0 0 400 18,194 23,286 3,347 3,456 254 2,861 158 0 16 567 66 501 0 0 0 501 0.12 0.12
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