-----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, QCGg7bbJx7oRXOipd/V8lCtF4i3tIulonOrQdzOoI1BPpCnhd3OS0jzmrFN+VoZk PT9x4PWH+ntjsixYZZ8uFg== 0000724024-96-000013.txt : 19961113 0000724024-96-000013.hdr.sgml : 19961113 ACCESSION NUMBER: 0000724024-96-000013 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96658199 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 QUARTERLY REPORT ===================================================================== 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 SEPTEMBER 30, 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 OCTOBER 31, 1996 -------------------- ---------------- Common Stock, $.10 par value 4,078,871 ============================================================================ 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ---------- --------- ---------- --------- REVENUES: Financial services $1,785 2,655 5,937 8,684 Computer systems/software --- 1,440 1,590 3,819 Real estate 189 167 527 496 Investments and other 135 108 402 630 --------- --------- --------- --------- Total revenues 2,110 4,370 8,457 13,629 EXPENSES: Financial service expense 1,644 2,266 5,410 7,421 Computer systems/software --- 1,208 1,604 3,267 Real estate 130 126 387 375 General and administrative 330 220 407 1,316 Interest 13 18 42 108 --------- --------- --------- --------- Total expenses 2,119 3,838 7,851 12,487 ---------- --------- --------- --------- OPERATING INCOME (LOSS) (9) 532 606 1,142 Equity in earnings of unconsolidated affiliates (Note 4) 640 478 968 1,082 --------- --------- --------- --------- Earnings from continuing operations before income taxes 631 1,010 1,574 2,224 Income tax expense 80 290 186 707 Loss from discontinued operations net of income tax benefit of $0 and $93, and 0$ and $165 for the three and nine months in 1996 and 1995, respectively. --- (182) --- (321) --------- --------- --------- --------- NET EARNINGS 551 538 1,388 1,196 ========= ========= ========= ========= Earnings per common share: PRIMARY $0.13 $0.14 0.32 0.31 ========= ========== ========= ========= FULLY DILUTED $0.13 $0.14 0.32 0.31 ========= ========= ========= ========= Primary weighted average shares outstanding 4,301 3,860 4,259 3,722 ========= ========= ========= ========= Fully Diluted weighted average shares outstanding 4,311 3,925 4,329 3,848 ========= ========= ========= =========
See accompanying notes to consolidated financial statements - 3 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 1996 1995 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash investments $4,904 6,798 Marketable securities (Note 2) 3,424 2,004 Trading account securities 716 1,014 Notes receivable - current 147 223 Management fees and other receivables 276 1,748 Receivable from clearing broker 466 780 Deferred income tax asset/(liability) (585) 159 Prepaid expenses and other 299 312 ----------- ----------- Total current assets 9,647 13,038 Notes receivable, less current portion 193 83 Property and equipment 1,825 2,129 Investment in Prime Medical Services, Inc. 8,386 7,412 Investment in APS Systems, Inc. 755 --- Other assets 1,207 1,078 ----------- ----------- TOTAL ASSETS $22,013 23,740 ============ =========== See accompanying notes to consolidated financial statements - 4 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 1996 1995 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current installments of obligations under capital leases $100 299 Accounts payable - trade 426 353 Accrued compensation 220 861 Accrued expenses and other liabs (Note 5) 2,063 3,501 Federal income taxes payable/(receivable) (616) 558 ----------- ----------- Total current liabilities 2,193 5,572 LONG-TERM OBLIGATIONS 467 574 ----------- ----------- TOTAL LIABILITIES 2,660 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 4,078,871 at 9/30/96 and 3,663,871 at 12/31/95 407 366 Additional paid-in capital 4,858 4,530 Unrealized holding gains 2 ---- Retained earnings 14,087 12,698 ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 19,354 17,594 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,013 23,740 =========== =========== See accompanying notes to consolidated financial statements - 5 - AMERICAN PHYSICIANS SERVICE GROUP, INC. Consolidated Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended September 30, 1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $8,232 14,982 Cash paid to suppliers and employees (8,885) (12,816) Change in trading account securities 298 (143) Change in receivable from to clearing broker 314 351 Interest paid (42) (108) Income taxes paid (610) (444) Interest, dividends and other investment proceeds 402 658 ---------- ---------- Net cash provided by (used in) operating activities (290) 2,479 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of marketable securities 1,906 991 Payments for purchase of marketable securities (3,331) --- Proceeds from the sale of property and equipment --- 4 Payments for purchase property and equipment (121) (406) Funds loaned to others (165) --- Collection of notes receivable 49 1,105 Other (61) --- ---------- ---------- Net cash provided by investing activities (1,723) 1,694 CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long term obligations (250) (340) Purchase/retire treasury stock (335) --- Exercise of stock options 704 304 ---------- ---------- Net cash provided by (used in) financing activities 119 (36) ---------- ---------- NET CHANGE IN CASH AND CASH EQUIVALENTS ($1,894) 4,137 ========== ========== CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,798 3,266 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,904 7,403 ========== ========== See accompanying notes to consolidated financial statements - 6 - AMERICAN PHYSICIANS SERVICE GROUP, INC. Consolidated Statements of Cash Flows, continued (In thousands) Nine Months Ended September 30, 1996 1995 --------- ---------- Reconciliation of net earnings to net cash from operating activities: NET EARNINGS $1,388 1,196 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 249 299 Gain on sale of securities (78) (34) Gain on sale of fixed assets --- (4) Undistributed earnings of affiliate (968) (1,082) Change in federal income tax payable (1,174) 210 Provision for deferred tax asset 751 (111) Change in trading securities 298 (143) Change in receivable from clearing broker 314 351 Change in management fees & other receivables 255 1,253 Change in prepaids & other current assets (35) 453 Change in other assets 329 37 Change in trade payables 97 (585) Change in accrued expenses & other liabilities (1,715) 639 -------- --------- NET CASH FROM OPERATING ACTIVITIES ($290) 2,479 ======== ========= 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 shareholders' equity, per Statement of Financial Accounting Standards #115. The effect of this resulted in an increase to unrealized holding gains of $2, no change to deferred tax assets and an increase to marketable securities of $2 for the nine months ended September 30, 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 September 30, 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 September 30, 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 AFFILIATES At July 1, 1996 the Company's computer systems and software subsidiary, APS Systems, Inc. ("Systems"), formed an alliance with International Software Solutions, Inc. ("ISSI"). Since the Company's share of the new alliance is 49%, it no longer consolidates the computer systems and software segment but rather, accounts for the earnings/losses on the equity basis. The financial statement line item in this quarterly report combines the equity in earnings of Systems and Prime Medical Services, Inc., described below. At September 30, 1996 the Company owned 16% (3,064,000 shares) of the outstanding common stock of Prime Medical Services, Inc. ("Prime"). This percentage ownership was decreased from 18% in the first quarter of 1996, due to the issuance of common stock as part of an acquisition made by Prime during the second quarter. 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. 1996 earnings/(loss) from the two affiliates are broken out as follows: 3 Months 9 Months -------- -------- Prime (In thousands) 645.4 973.7 Systems (In thousands) (5.9) (5.9) 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consists of the following: September Dec 1996 1995 -------- -------- Taxes payable-other .................................. 64,000 150,000 Commissions payable .................................. -- 38,000 Deferred income ...................................... 654,000 434,000 Health insurance and other claims payable ............ (26,000) 73,000 Contractual/legal claims .............................1,305,000 2,360,000 Vacation payable ..................................... 76,000 127,000 Funds held for others ................................ 18,000 51,000 Interest payable ..................................... 4,000 5,000 Other ................................................ (32,000) 263,000 ------- --------- $ 2,063,000 3,501,000 ========== ========= - 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Revenues from operations decreased $2,265,000 (51.7%) and $5,173,000 (38.0%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. Financial services, computer systems and investments and other decreased while real estate increased for the three and nine month periods of 1996 compared to the same periods in 1995. Financial services revenues decreased $870,000 (32.8%) and $2,011,000 (27.1%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The decrease for the nine month period in 1996 was the result of lower broker/dealer commissions due primarily to unfavorable bond market conditions. The first six months of 1996 were characterized by steady bond yield increases which translates to lower bond prices. The conditions were reversed for the same six months in 1995 as bond yields decreased resulting in increasing bond prices. Commissions were down during the third quarter due, in part, to the loss of an experienced, high volume broker who left the Company in January, 1996. The loss of this broker, combined with the loss of another high volume broker in April 1995, has contributed to a reduction in revenues which the Company has not yet been able to replace. The broker/dealer subsidiary has recently hired two brokers as well as a high yield analyst and an additional trader. It is hoped that these staff additions, which provide additional expertise and proprietary research qualities, will help grow revenues and make it easier to recruit proven, experienced brokers to the firm. Revenues from premium-based insurance management fees were down $122,000 (10.3%) and $142,000 (4.1%) for the three and nine month periods of 1996, respectively, compared to the same periods in 1995. The third quarter, 1996 decrease was due to a lower number of renewals of individual insured doctors resulting from stiffer premium price competition. Computer systems and software sales revenues are no longer consolidated due to the merger of APS Systems, Inc. ("Systems") with International Software Solutions, Inc. ("ISSI") on July 1, 1996. The merger left the Company with a 49% equity interest in the new alliance. Since the Company now accounts for the earnings/losses of the new alliance as a single line item on the earnings statement, "Equity in earnings of unconsolidated affiliates", revenues were zero for the third quarter of 1996 compared to $1,440,000 in the third quarter of 1995. Revenues for the nine months ended September 30, 1996 remained at $1,590,000 compared to $3,819,000 for the first nine months of 1995. - 10 - Real estate revenues rose $22,000 (13.4%) and $32,000 (6.4%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The increase in revenue was primarily 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 increased $27,000 (25.0%) but decreased $228,000 (36.2%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The third quarter increase was primarily due to interest earned on a higher investable cash balance. The nine month 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. EXPENSES Total expenses decreased $1,719,000 (44.8%) and $4,637,000 (37.1%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. Financial services and computer systems decreased while real estate and general and administrative increased for the third quarter of 1996. For the nine month period in 1996, real estate expenses showed an increase while expenses associated with financial services, computer systems and general and administrative decreased when compared to 1995. Financial services expense decreased $622,000 (27.4%) and $2,011,000 (27.1%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The decrease was primarily the result of lower commissions paid in broker/dealer operations arising from the lower commission revenues. Reduced legal and professional as well as lower general and administrative expenses arising from certain cost cutting measures within the broker/dealer subsidiary have also contributed to the decrease. Expenses at the insurance management subsidiary were up $39,000 (4.5%) for the third quarter of 1996 while the nine month comparison shows an increase of $68,000 (3.0%) in 1996. Increases in both periods was due to personnel merit raises as well as executive search fees. Computer systems/software expense decreased $1,208,000 and $1,664,000 for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. As stated above, the financials of APS Systems, Inc. are no longer consolidated with those of the Company beginning July 1, 1996. As a result, expenses in the third quarter of 1996 were zero compared to $1,208,000 in the same period in 1995. Real estate expense increased $4,000 (3.3%) and $13,000 (3.4%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The increase was primarily due to higher condo association fees. - 11 - General and administrative expense increased $110,000 (50.0%) but decreased $909,000 (69.1%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The third quarter 1996 increase was due to a reclassification of previously accrued expenses out of general and administrative in September, 1995 and into discontinued operations. The nine month decrease was due to accruals made in 1995 for certain contingent liabilities associated with ongoing litigation. Not only were such accruals not necessary in 1996 but some contractual/legal contingencies accrued in the second and fourth quarters of 1995 were reversed due primarily to positive investment returns as well as the Company's prevailing in litigation. Interest expense decreased $5,000 (27.2%) and $66,000 (61.1%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The decrease in both periods 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. In addition, the principal due on the note payable at the real estate subsidiary was lower at September 30, 1996 resulting in 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 nine months of 1995, the publications segment recognized $757,000 in revenues and incurred $1,243,000 in expenses. The resulting $486,000 loss was recognized net of tax on the Company's Statement of Operations. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES The Company's equity in the earnings of Prime Medical Services, Inc. ("Prime") increased $162,000 but decreased $114,000 (10.6%) for the three and nine month periods ended September 30, 1996, respectively, compared to the same periods in 1995. The increase in the third quarter of 1996 was due the additional earnings generated from the April 26, 1996 acquisition by Prime of Lithotripters, Inc. The nine month decrease in 1996 compared to the prior year was due to two non-recurring write-offs: (1) financing costs associated with their acquisition of Lithotripters Inc. on April 26, 1996; and (2), costs associated with a secondary offering. Without these non-recurring expenses, Prime's contribution would have increased the Company's pretax earnings by approximately $601,000, or $0.14 per share in the nine month period ending September 30, 1996. On July 15, 1996 the Company withdrew its offer to sell 2.5 million shares of Prime Medical Services, Inc. ("Prime") (NASDAQ:PMSI) common stock that was a part of a public offering by Prime and certain other stockholders of Prime. This withdrawal reversed a June 5, 1996 announcement that these shares of Prime common stock would become available for sale as part of a public offering. As a result of the withdrawal of the offering, Prime retains the status of an unconsolidated affiliate of the Company. - 12 - Effective July 1, 1996 the Company formed a strategic alliance with privately-owned International Software Solutions, Inc. ("ISSI") for the purpose of developing client-oriented software products for the healthcare industry. Under the agreement, ISSI will develop approximately three million dollars worth of new products for the Company's computer software subsidiary, APS Systems, Inc. ISSI will receive a 51% equity interest in the newly formed joined venture called QMED Systems, Inc. (formerly APS Systems, Inc.) for its investment. As a consequence of ISSI's new majority ownership in QMED Systems, Inc., beginning July 1, 1996, the Company no longer consolidates the revenues, expenses and balance sheet items into its financial data. Rather, the earnings/losses of QMED Systems, Inc. are reported as a single line item on the earnings statement, "Equity in earnings/loss of unconsolidated affiliate". As of September 30, 1996, QMED Systems, Inc. showed a loss of $12,000 and the Company booked its 49% share as a $5,900 loss. Liquidity and Capital Resources Current assets exceeded current liabilities by $7,454,000 and $7,466,000 at September 30, 1996, and December 31, 1995, respectively. During the second quarter, the Company closed a $2,000,000 revolving line of credit it had established with a bank. In the more than two years since the line of credit was established no funds were advanced to the Company. Since cash reserves have always been more than adequate to meet its liquidity requirements, the Company closed the account as a cost reduction measure. Capital expenditures through the quarter ended September 30, 1996 were approximately $121,000 and total capital expenditures are expected to be approximately $200,000 in 1996. Management believes that its working capital position together with funds generated from operations will provide sufficient resources to meet all present and reasonably foreseeable and capital needs. - 13 - PART II OTHER INFORMATION -14- 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 September 30, 1996 the Company purchased 1,200,000 shares of Exsorbet Industries, Inc. (NASDAQ:EXSO) common stock at $2.75 per share for a total investment of $3,300,000. Exsorbet is a diverse, environmental and technical services company. The Company classifies this purchase as marketable securities available for sale and accounts for the investment at fair value, with unrealized holding gains and losses excluded from earnings and reported as a separate component of shareholders' equity, per Statement of Financial Accounting Standards pronouncement #115. Following additional due diligence, the Company may exercise a stock put in which Exsorbet has agreed to repurchase the 1,200,000 shares at $2.75 per share in exchange for a note receivable to be repaid on or before October 1, 1997. The Company has also received options and warrants to purchase an additional 2,100,000 shares at $2.75 through November 30, 1996. Effective July 1, 1996 the Company formed a strategic alliance with privately-owned International Software Solutions, Inc. ("ISSI") for the purpose of developing client-oriented software products for the healthcare industry. Under the agreement, ISSI will develop approximately three million dollars worth of new products for the Company's computer software subsidiary, APS Systems, Inc. The Company will contribute approximately one million dollars of capital into the new venture. ISSI's involvement will accelerate both the enhancement of existing software products and the development of new software products incorporating open architecture, client/server technology, graphical user interfaces and other features to satisfy the growing needs of the healthcare industry. ISSI will receive a 51% equity interest in the newly formed alliance for its investment. As a consequence of ISSI's new majority ownership in Systems, beginning July 1, 1996, the Company no longer consolidates the revenues, expenses and balance sheet items into its financial data. Rather, the earnings/losses of Systems are reported as a single line item on the earnings statement, "Equity in earnings/loss of unconsolidated affiliates". - 15 - On July 15, 1996 the Company withdrew its offer to sell 2.5 million shares of Prime Medical Services, Inc. ("Prime") (NASDAQ:PMSI) common stock that was a part of a public offering by Prime and certain other stockholders of Prime. This withdrawal reversed a June 5, 1996 announcement that these shares of Prime common stock would become available for sale as part of a public offering. As a result of the withdrawal of the offering, Prime retains the status of an unconsolidated affiliate of the Company. On April 26, 1996 Prime Medical Services, Inc. acquired Lithotripters, Inc., of Fayetteville, North Carolina. The combination of the two entities, effective May 1, 1996, created the nation's largest lithotripsy company. The purchase price was $85 million, comprised of $70 million in cash and 1,636,000 common shares of Prime Medical. This issuance of Prime shares has contributed to a further dilution of the Company's interest in Prime from 19.4% to 16.1%. 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 September 30, 1996 and 1995. (b) CURRENT REPORTS ON FORM 8-K. No current reports on Form 8-K were filed during the quarter ended September 30, 1996. - 16 - 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: November 11, 1996 By: /s/ William H. Hayes ---------------------------- William H. Hayes, Vice President and Chief Financial Officer - 17 - EX-11 2 EXHIBIT 11 : EPS CALCULATION (3 AND 9 MOS) EXHIBIT 11 AMERICAN PHYSICIANS SERVICE GROUP, INC. COMPUTATION OF NET INCOME PER SHARE FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 $551 551 Average number of shares outstanding 4,072 4,072 Average stock option shares 229 239 ----------- ---------- Shares for earnings calculation 4,301 4,311 Net income per share $0.13 0.13 =========== ========== 1995 Net Income applicable to common stock $538 538 Average number of shares outstanding 3,423 3,423 Average stock option shares 385 385 ----------- ---------- Shares for earnings calculation 3,860 3,925 Net income per share $0.14 0.14 =========== ========== 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. - 18 - EXHIBIT 11 AMERICAN PHYSICIANS SERVICE GROUP, INC. COMPUTATION OF NET INCOME PER SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 $1,388 1,388 Average number of shares outstanding 4,013 4,013 Average stock option shares 246 316 --------- ---------- Shares for earnings calculation 4,259 4,329 Net income per share $0.33 0.32 ========= ========== 1995 Net Income applicable to common stock $1,196 1,196 Average number of shares outstanding 3,384 3,384 Average stock option shares 343 380 -------- ---------- Shares for earnings calculation 3,722 3,848 Net income per share $0.32 0.31 ======== ========== 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. - 19 - EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1996 FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS DEC-31-1996 DEC-31-1996 JUL-31-1996 JAN-01-1996 SEP-30-1996 SEP-30-1996 4,904 4,904 4,140 4,140 889 889 0 0 0 0 9,647 9,647 4,264 4,264 2,439 2,439 22,013 22,013 2,193 2,193 0 0 0 0 0 0 407 407 18,947 18,947 22,013 22,013 0 0 2,110 8,457 0 365 2,056 7,364 90 121 0 0 13 42 631 1,574 80 186 551 1,388 0 0 0 0 0 0 551 1,388 0.13 0.32 0.13 0.32
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