-----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, G9k/7Daw6gXhO6uMFAv7Xph7IBvAazS3nVH4DOKcDWZ8t7bkT7Vuael8yjS7AUDa 0sHLFX56R5Vg4jfkr51s7w== 0000724024-97-000021.txt : 19971113 0000724024-97-000021.hdr.sgml : 19971113 ACCESSION NUMBER: 0000724024-97-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-11453 FILM NUMBER: 97715738 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 1 SEPTEMBER 30, 1997 FORM 10-Q ===================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 1997 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, 1997 -------------------- ---------------- Common Stock, $.10 par value 4,157,861 ============================================================================ 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, 1997 1996 1997 1996 ---------- ---------- ---------- --------- REVENUES: Financial services $2,875 1,786 6,633 5,938 Real estate 178 189 527 527 Investments and other 64 135 300 402 ---------- ---------- ---------- --------- Total revenues 3,116 2,110 7,460 6,867 EXPENSES: Financial service expense 2,528 1,644 6,324 5,410 Real estate 132 131 390 387 General and administrative 425 318 1,206 407 Interest 7 13 12 42 ---------- ---------- ---------- --------- Total expenses 3,092 2,106 7,931 6,247 ---------- ---------- ---------- --------- Operating income/(loss) 24 3 (471) 620 Equity in earnings of unconsolidated affiliate (Note 3) 718 640 1,759 968 ---------- ---------- ---------- --------- Earnings/(loss) from continuing operations before income taxes 742 643 1,288 1,588 Gain on sale of portion of subsidiary 0 0 1,899 0 Income tax expense 251 248 1,097 539 Discontinued operations: Income/(loss) from discontinued operations net of income tax benefit of $0 and $4, and $71 and $5 for the three and nine months in 1997 and 1996, respectively. 0 (8) (138) (9) Loss on disposal of computer software segment, net of income tax benefit of $0 and $0 and $411 and $0 for the three and nine months in 1997 and 1996, respectively. 0 0 (798) 0 Minority interest (5) 0 (5) 0 ---------- ---------- ---------- --------- NET EARNINGS 486 387 1,148 1,040 ========== ========== ========== =========
See accompanying notes to consolidated financial statements - 3 - EARNINGS PER COMMON SHARE:
Primary $0.11 0.09 0.27 0.24 ========== ========== ========== ========= Fully Diluted $0.11 0.09 0.26 0.24 ========== ========== ========== ========= Primary weighted average shares outstanding 4,321 4,301 4,218 4,259 ========== ========== ========== ========= Fully Diluted weighted average shares outstanding 4,384 4,311 4,348 4,329 ========== ========== ========== =========
See accompanying notes to consolidated financial statements - 4 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 1997 1996 ------------- ------------- ASSETS Current Assets: Cash and cash investments $8,572 5,770 Marketable securities (Note 2) 0 29 Trading account securities 791 699 Notes receivable - current 3,447 3,447 Management fees and other receivables 425 512 Receivable from clearing broker 0 279 Deferred income tax receivable 808 650 Prepaid expenses and other 421 239 ------------- ------------- Total current assets 14,464 11,625 Notes receivable, less current portion 299 179 Property and equipment 1,882 1,781 Investment in affiliates 10,664 8,905 Other assets 330 1,226 ------------- ------------- Total Assets $27,639 23,716 ============= ============= See accompanying notes to consolidated financial statements - 5 - AMERICAN PHYSICIANS SERVICE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) September 30, December 31, 1997 1996 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of obligations under capital leases $ ---- 542 Accounts payable - trade 380 382 Payable to clearing broker 272 --- Accrued compensation 263 252 Accrued expenses and other liabilities (Note 5) 4,242 2,144 ----------- ----------- Total current liabilities 5,157 3,320 Net deferred income tax liability 842 766 ----------- ----------- Total liabilities 5,999 4,086 Minority interest 5 ---- Shareholders' Equity: Preferred stock, $1.00 par value, 1,000,000shares authorized ---- ---- Common stock, $0.10 par value, shares authorized 20,000,000; issued 4,157,865 at 9/30/97 and 4,049,195 at 12/31/96 416 405 Additional paid-in capital 5,449 4,614 Unrealized holding losses 0 (11) Retained earnings 15,770 14,622 ----------- ----------- Total shareholders' equity 21,635 19,630 Total Liabilities and Shareholders' Equity $27,639 23,716 =========== =========== 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, 1997 1996 ----------- ----------- Cash flows from operating activities: Cash received from customers $7,525 8,232 Cash paid to suppliers and employees (5,784) (8,885) Change in trading account securities (92) 298 Change in receivable from clearing broker (551) 314 Interest paid (12) (42) Income taxes paid (574) (610) Interest, dividends and other investment proceeds 164 403 ----------- ----------- Net cash provided by (used in) operating activities 677 (290) Cash flows from investing activities: Proceeds from the sale of marketable securities --- 1,906 Payments for purchase of marketable securities --- (3,331) Payments for purchase property and equipment (292) (121) Funds loaned to others (180) (165) Proceeds from sale of insurance exchange 1,000 --- Proceeds from sale of 20% Insur Serv 2,000 --- Collection of notes receivable 41 49 Other 4 (61) ----------- ----------- Net cash provided by (used in) investing activities 2,573 1,723 Cash flows from financing activities: Repayment of long term obligations (542) (250) Purchase/retire treasury stock (324) (335) Exercise of stock options 418 704 ----------- ----------- Net cash provided by (used in) financing activities (448) 119 ----------- ----------- Net change in cash and cash equivalents $2,802 (1,894) =========== =========== Cash and cash equivalents at beginning of period 5,770 6,798 ----------- ----------- Cash and cash equivalents at end of period $8,572 4,904 =========== =========== 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, 1997 1996 --------- --------- Reconciliation of net earnings to net cash from operating activities: Net earnings $1,148 1,040 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 275 249 Loss from discontinued operations 210 9 Loss on disposal of discontinued operations 1,209 --- Gain on sale of securities --- (78) Undistributed earnings of affiliate (1,759) (968) Change in federal income tax payable (158) (826) Gain on sale of 20% Insurance Services (1,899) --- Gain on sale of insurance exchange (133) --- Minority interest in consolidated earnings (5) --- Change in unrealized holding loss 11 --- Provision for deferred tax asset 76 751 Change in trading securities (92) 298 Change in receivable from clearing broker (551) 314 Change in management fees & other receivables 321 255 Change in prepaids & other current assets (182) (35) Change in other assets 1,158 329 Change in trade payables (2) 97 Change in accrued expenses & other liabilities 1,050 (1,724) --------- --------- Net cash from operating activities $677 (290) ========= ========= See accompanying notes to consolidated financial statements - 8 - AMERICAN PHYSICIANS SERVICE GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1997 (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, 1996 and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position as of September 30, 1997 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, 1996 filed with the Securities Exchange Commission should be read in conjunction with this Quarterly Report on Form 10-Q. There have been no significant changes in the information reported in those notes other than from normal business activities of the Company. Certain reclassifications have been made to amounts presented in prior periods to be consistent with the 1997 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. - 9 - 4. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE At September 30, 1997 the Company owned 15.9% (3,064,000 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 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. In the Form 10-Q dated March 31, 1997, the Company combined the equity in earnings/losses of Prime and Syntera Technologies, Inc. ("Syntera"), a computer systems/software affiliate, into Equity in Earnings of Unconsolidated Affiliates. At May 15, 1997, Syntera and International Software Solutions, Inc. ("ISSI") agreed to terminate the Joint Development Agreement which they had entered into July 1, 1996. Also on this date the Company decided to discontinue product development and marketing efforts. Under the termination agreement, ISSI relinquished its 51% ownership interest in Syntera, making Syntera once again a wholly owned subsidiary of the Company. As such, Syntera is no longer considered an affiliate and therefore, results of its operations are no longer accounted for as equity in earnings of unconsolidated affiliates of the parent company, but rather, they are reported in discontinued operations. 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consists of the following: Sep Dec 1997 1996 ---------- ---------- Taxes payable-other .............................. $ 70,000 74,000 Commissions payable .............................. 336,000 18,000 Deferred income .................................. 1,180,000 339,000 Health insurance and other claims payable ................................. 60,000 87,000 Contractual/legal claims ......................... 1,353,000 1,352,000 Vacation payable ................................. 104,000 77,000 Funds held for others ............................ 50,000 63,000 Syntera disposition costs ....................... 1,058,000 0 Other ............................................ 31,000 134,000 ---------- ---------- $4,242,000 2,144,000 ========== ========== - 10 - 6. DISCONTINUED OPERATIONS At May 15, 1997, Syntera and ISSI agreed to terminate the Joint Development Agreement which they had entered into July 1, 1996. Also on this date the Company decided to discontinue product development and marketing efforts. Net assets/(liabilities) of the discontinued computer systems and software segment as of September 30, 1997 consisted of the following: Cash and cash investments .................................. $ 16.0 Trade accounts receivable .................................. 242.8 Other receivables .......................................... 2.7 Prepaid and other current assets ........................... 69.7 Fixed assets, net of depreciation .......................... 123.8 Intercompany receivables ................................... 609.7 Trade accounts payable ..................................... (26.7) Accrued expenses ........................................... (1,113.7) -------- Net liabilities ......................................... $ (75.7) ======== - 11 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Revenues from operations increased $1,007,000 (47.7%) and $594,000 (8.7%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. For the current three month period, financial services and real estate revenues increased while investments and other decreased compared to the same period in 1996. For the current nine months, financial services revenues increased, real estate revenues remained the same and investments and other revenues decreased compared to the same period in 1996. Financial services revenues increased $1,085,000 (60.8%) and $696,000 (11.7%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. The increase in both periods of 1997 was due primarily to greater commission income at the Company's broker/dealer subsidiary, APS Financial Corp. The higher commission income is primarily the result of a greater number of experienced brokers, most of whom joined the Company through the opening of a branch office in Houston, Texas on March 1, 1997. The Houston office currently employs seventeen brokers. Revenues from premium-based insurance management fees were down $41,000 (3.9%) and $158,000 (4.8%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996, due primarily to a lower number of insureds brought about by stiffer competition in the Texas professional liability insurance market which has resulted in lower premium rates. Rather than renew certain insureds at rates which would result in underwriting losses, the Company has elected not to renew these insureds, resulting in a decline in premium volume. Real estate revenues rose $9,000 (8.8%) for the current year three month period and remained the same for the nine month period ended September 30, 1997 compared to the same periods in 1996. The three month increase in 1997 over 1996 was due to rising lease rates. These rising lease rates were offset in the nine month period due to a reclassification of Syntera Technologies, Inc. as a wholly owned subsidiary, whose lease income is now eliminated at consolidation. 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 1997. Investment and other income decreased $91,000 (78.8%) and $103,000 (25.5%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. The decrease in the current quarter was primarily due to reduced interest income arising from a lower investable cash balance. Cash and cash investments was lower due to the purchase of Exsorbet Industries, Inc. common stock which subsequently was converted to a note receivable. (See Item 5). - 12 - The nine month decrease in investment and other income was partially offset by a first quarter 1997 gain from the dissolution of an inactive insurance entity. EXPENSES Total operating expenses increased $992,000 (47.4%) and $1,715,000 (27.6%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. All segments recorded an increase in expenses in both the three and nine month periods of 1997 compared to the same periods in 1996. Financial services expense increased $885,000 (53.8%) and $914,000 (16.9%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. The primary reason for the increase is higher commission expense resulting from the increase in commission revenue at the Company's broker/dealer subsidiary, APS Financial. In addition, general and administrative costs at APS Financial increased in the current quarter as a result of opening the Houston branch office. Year-to-date expenses in 1997 are not dramatically higher than the prior year due to lower legal fees resulting from satisfactory settlements on prior year claims and lower general and administrative fees at the Austin office, a result of cost cutting measures. Expenses at the insurance management subsidiary increased $88,000 (10.0%) and $261,000 (9.9%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996 due primarily to a change in the managing general agency contract whereby certain agents' commissions are recorded at gross in both revenues and expenses rather than netted against one another as was recorded in prior years. In addition, personnel additions in the marketing department increased expenses in the current year. General and administrative expense increased $105,000 (33.0%) and $787,000 (196.0%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. The increase in the current nine month period was due primarily to the fact that prior year expenses were down as a result of reversals of contractual/legal contingency accruals resulting from the Company prevailing in litigation. No such reversals occurred in 1997. In addition, development expenses were incurred in both current year periods associated with a new physician practice management company. These new costs, primarily personnel related, totaled $127,000 and $326,000 for the three and nine month periods ended September 30, 1997, respectively. Interest expense decreased $6,000 (46.2%) and $30,000 (71.0%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. The decrease in both periods in 1997 was due to the early payoff of the note payable for the office space owned by the Company. - 13 - Equity in Earnings of Unconsolidated Affiliates The Company's equity in earnings of Prime Medical Services, Inc. ("Prime") increased $78,000 (12.2%) and $791,000 (81.7%) for the three and nine month periods ended September 30, 1997, respectively, compared to the same periods in 1996. Prior year earnings were adversely affected by two non-recurring write-offs in the second quarter: (1) financing costs associated with Prime's acquisition of Lithotripters, Inc.; and (2) costs associated with a secondary offering. The current quarter increase was due to growth in Prime's lithotripsy operations. As mentioned in Note 4 of the Notes to the Consolidated Financial Statements, the earnings of Syntera Technologies, Inc. are no longer accounted for as Equity in Unconsolidated Affiliates. Since the Company reacquired 100% ownership of Syntera on May 15, 1997, and simultaneously decided to cease product development and marketing efforts, results of operations of Syntera are now reported in Discontinued Operations. GAIN ON SALE OF PORTION OF SUBSIDIARY Effective June 30, 1997, the Company sold twenty percent of the stock of its medical professional liability insurance management subsidiary, APS Insurance Services, Inc. ("Insurance Services") to Florida Physicians Insurance Company ("FPIC"). This strategic alliance was formed in an effort to strengthen and expand both companies' presence in the Texas market for medical professional liability insurance. The gain from this sale represents the sales price of $2,000,000 less closing costs and the Company's basis in the stock sold. MINORITY INTEREST As a result of the abovementioned sale of a portion of Insurance Services, the Company now records twenty percent of the after-tax profit or loss of Insurance Services as minority interest on the condensed consolidated statement of operations as well as the condensed consolidated balance sheet. LIQUIDITY AND CAPITAL RESOURCES Current assets exceeded current liabilities by $9,105,000 and $8,305,000 at September 30, 1997, and December 31, 1996, respectively. The increase was primarily the result of cash received ($1,000,000) after shutting down an insurance exchange earlier in the year. This exchange had been recorded as a long-term asset. - 14 - Capital expenditures through the period ended September 30, 1997 were approximately $292,000. Total capital expenditures are expected to be approximately $325,000 in 1997. Historically, the Company has maintained a strong 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. The ability of the Company to borrow against its investment in the common stock of Prime Medical (market value $42,903,000 at September 30, 1997) gives it significant additional liquidity. ADOPTION OF ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Accounting Standards No. 128, Earnings Per Share ("Statement 128") which replaces Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS, respectively. Statement 128 was issued to simplify the computation of EPS and to make the U.S. standard more compatible with the EPS standards of other countries and that of the International Accounting Standards Committee (IASC). Implementation of Statement 128 is scheduled to begin for fiscal years beginning after December 15, 1997. If the Company had applied Standard 128 for the quarter ended September 30, 1997, the rounded earnings per share calculations for both Basic EPS and Diluted EPS would have been the same as Primary EPS and Fully Diluted EPS, respectively. - 15 - PART II OTHER INFORMATION - 16 - 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 October 31, 1996, the Company invested $3,300,000 in common stock of Exsorbet Industries, Inc. ("Exsorbet") (NASDAQ:EXSO) with a put option. Exsorbet is a diversified environmental and technical services company. On November 26, 1996, the Company exercised its put in exchange for a note receivable from Exsorbet. The note is secured by the shares that were subject to the put plus all the stock and substantially all of the assets of a wholly owned subsidiary of Exsorbet. According to documents which Exsorbet has filed with the Securities and Exchange Commission, Exsorbet has limited liquidity, which has not allowed payment of the Company's note. Exsorbet has sought but has not been able to procure additional financing. On November 13, 1997, the Company announced that it has reached an agreement with Consolidated Eco-Systems, Inc. ("Consolidated ECO", formerly Exsorbet) to restructure the terms of the $3,300,000 note due October 1, 1997. In exchange for additional collateral and certain covenants, APS has agreed to roll all interest due into the note and has extended the terms of the note for two years. Repayment terms are geared to track Consolidated ECO's improving cash flow and will include payments of $40,000 from January 1, 1998 through September 30, 1998, at which time payments become $85,000. The remaining note balance is due October 1, 1999. No interest has been accrued on this note and, consequently, there will be no income effect from converting the interest to additional debt. On April 4, 1997, the Company formed an alliance with FPIC Insurance Group, Inc. and its subsidiary, Florida Physicians Insurance Company, Inc. ("FPIC") (NASDAQ:FPIC) in a plan to strengthen and expand its presence in the Texas market for medical professional liability insurance. With the subsequent approval on June 30, 1997 by the Texas Department of Insurance, FPIC has purchased a 20% interest in the Company's subsidiary, APS Insurance Services, Inc. for two million dollars. FPIC also has an option to purchase an additional 35% within two years. - 17 - During the third quarter of 1997, the Company formed a physician practice management company. The company, APS Practice Management, Inc., will specialize in the management of OB/GYN practices. The Company capitalized the new practice management company with $5 million from cash on-hand. The initial asset acquisitions and management contracts will be completed in the fourth quarter, 1997. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 11 Computation of Net Income Per Share at September 30, 1997 and 1996. (b) CURRENT REPORTS ON FORM 8-K. No current reports on Form 8-K were filed during the quarter ended September 30, 1997. - 18 - 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 13, 1997 By: /s/ William H. Hayes -------------------------------------- William H. Hayes, Vice President and Chief Financial Officer - 19 - EX-11 2 EXHIBIT 11 : EPS CALCULATION (3 & 9 MOS) EXHIBIT 11 AMERICAN PHYSICIANS SERVICE GROUP, INC. COMPUTATION OF NET INCOME PER SHARE FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (In thousands, except earnings per share) Primary Fully Diluted Earnings Earnings Per Share Per Share ---------- ---------- 1997 Net Income applicable to common stock $486 486 Average number of shares outstanding 4,171 4,171 Average stock option shares 150 213 ----------- ---------- Shares for earnings calculation 4,321 4,384 Net income per share $0.11 0.11 =========== ========== 1996 Net Income applicable to common stock $387 387 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 $0.09 0.09 =========== ========== 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. - 20 - EXHIBIT 11 AMERICAN PHYSICIANS SERVICE GROUP, INC. COMPUTATION OF NET INCOME PER SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (In thousands, except earnings per share) Primary Fully Diluted Earnings Earnings Per Share Per Share ---------- ---------- 1997 Net Income applicable to common stock $1,148 1,148 Average number of shares outstanding 4,088 4,088 Average stock option shares 130 260 ----------- ---------- Shares for earnings calculation 4,218 4,348 Net income per share $0.27 0.26 =========== ========== 1996 Net Income applicable to common stock $1,040 1,040 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 $0.24 0.24 =========== ========== 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. - 21 - EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS DEC-31-1997 DEC-31-1997 JUL-01-1997 JAN-01-1997 SEP-30-1997 SEP-30-1997 8,572 8,572 0 0 4,127 4,127 257 257 14 14 14,464 14,464 5,585 5,585 3,703 3,703 27,639 27,639 5,157 5,157 0 0 0 0 0 0 416 416 21,219 20,219 27,639 27,639 0 0 3,116 7,460 0 0 2,831 7,463 254 456 0 0 7 12 742 1,288 251 1,097 491 191 0 (936) 0 0 0 0 486 1,148 0.11 0.27 0.11 0.26
-----END PRIVACY-ENHANCED MESSAGE-----