<PAGE>
===============================================================================
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 JUNE 30, 1995
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 JULY 31, 1995
------------------- -------------------------------
Common Stock, $.10 par value 3,517,684
===============================================================================
<PAGE>
PART I
FINANCIAL INFORMATION
-2-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
----------- ----------- ---------- -----------
REVENUES:
<S> <C> <C> <C> <C>
Financial services $3,199 2,078 6,029 4,843
Computer systems/software 1,106 1,689 2,379 2,514
Publications 757 (2) 757 (1)
Real estate 167 142 329 267
Investments and other 104 93 522 241
------ ----- ------ ------
Total revenues 5,333 4,000 10,016 7,864
EXPENSES:
Financial service expense 2,658 2,087 5,199 4,593
Computer systems/software 952 1,416 2,059 2,273
Publications 829 70 968 149
Real estate 125 111 248 219
General and administrative 358 295 1,096 537
Interest 20 48 46 94
------ ----- ------ ------
Total expenses 4,942 4,027 9,616 7,865
------ ----- ------ ------
Operating income (loss) 391 (27) 400 (1)
Equity in earnings of unconsolidated
affiliate (Note 3) 303 246 604 419
------ ----- ------ ------
Earnings before income taxes 694 219 1,004 418
Income tax 238 75 346 137
------ ------ ------ ------
NET EARNINGS $ 456 144 658 281
====== ====== ====== ======
EARNINGS PER COMMON SHARE:
Primary $ 0.12 0.04 0.18 0.08
====== ====== ====== ======
Fully Diluted $ 0.12 0.04 0.17 0.08
====== ====== ====== ======
Primary weighted average shares outstanding 3,808 3,481 3,727 3,512
====== ====== ====== ======
Fully Diluted weighted average shares outstanding 3,808 3,481 3,764 3,512
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash investments $ 6,741 3,266
Marketable securities 540 1,491
Trading account securities 1,583 661
Notes receivable - current 90 325
Management fees and other receivables 1,794 2,932
Receivable from clearing broker ---- 491
Deferred income taxes 164 163
Prepaid expenses and other 404 806
------- -------
TOTAL CURRENT ASSETS 11,316 10,135
Notes receivable, less current portion 74 915
Property and equipment 2,058 2,025
Investment in Prime Medical Services, Inc. 6,262 5,658
Other assets 1,300 1,185
------- -------
TOTAL ASSETS $21,010 19,918
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
-4-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under
capital leases $ 285 327
Accounts payable - trade 273 809
Accrued compensation 158 488
Payable to clearing broker 590 ----
Accrued expenses and other liabilities 2,910 2,168
Federal income taxes payable 222 257
------- ------
Total current liabilities 4,438 4,049
Long-term obligations 735 878
------- ------
TOTAL LIABILITIES 5,173 4,927
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 3,517,684
at 6/30/95 and 3,471,684 at 12/31/94 360 347
Additional paid-in capital 4,653 4,469
Unrealized holding gains 35 44
Retained earnings 11,332 10,674
Reciprocal stockholdings (543) (543)
------- ------
TOTAL SHAREHOLDERS' EQUITY 15,837 14,991
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $21,010 19,918
======= ======
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $10,600 7,366
Cash paid to suppliers and employees (9,089) (8,386)
Change in trading account securities (922) (445)
Change in payable to clearing broker 1,081 429
Interest paid (46) (94)
Income taxes paid (382) ---
Interest, dividends and other investment
proceeds 515 135
------- ------
Net cash provided by (used in) operating
activities 1,757 (995)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of marketable securities 937 48
Payments for purchase of marketable securities --- (483)
Proceeds from the sale of fixed assets --- 14
Payments for purchase property and equipment (308) (76)
Collection of notes receivable 1,077 1,021
Proceeds from distribution of partnership --- 146
------- ------
Net cash provided by investing
activities 1,706 670
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term obligations (185) (396)
Decrease in minority interest --- (51)
Exercise of stock options 197 ---
------- ------
Net cash provided by (used in) financing
activities 12 (447)
------- ------
NET CHANGE IN CASH AND CASH EQUIVALENTS $ 3,475 (772)
======= ======
Cash and cash equivalents at beginning of period 3,266 2,544
------- ------
Cash and cash equivalents at end of period $ 6,741 1,772
======= ======
</TABLE>
See accompanying notes to consolidated financial statements
-6-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
Consolidated Statements of Cash Flows, continued
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
-------- -------
<S> <C> <C>
Reconciliation of net earnings to net cash
from operating activities:
Net earnings $ 658 281
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization 204 143
Minority interest in consolidated earnings --- 15
Undistributed earnings of affiliate (604) (419)
Change in federal income tax payable (35) (51)
Provision for deferred tax asset (1) 108
Change in trading securities (922) (445)
Change in payable to clearing broker 1,081 429
Change in management fees & other receivables 1,137 (320)
Change in prepaids & other current assets 402 (90)
Change in other assets (39) (20)
Change in trade payables (536) (309)
Change in accrued expenses & other liabilities 412 (317)
------ ----
Net cash from operating activities $1,757 (995)
====== ====
</TABLE>
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 a decrease to
unrealized holding gains of $9,571, an increase to deferred tax assets of
$15,746 and a decrease to marketable securities of $23,317 for the six months
ended June 30, 1995 compared to December 31, 1994.
See accompanying notes to consolidated financial statements
-7-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(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, 1994 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of June 30, 1995 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, 1994 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 classifications in 1994 have been reclassified to be consistent with
1995 classifications.
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. Through June 30, 1995 APS Financial has accrued $293,000 in
contingent liabilities to cover potential portfolio deficiencies.
-8-
<PAGE>
4. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE
----------------------------------------------
At June 30, 1995 the Company owned 23% (3,302,000 shares) of the outstanding
common stock of Prime Medical Services, Inc. ("Prime"). The Company has granted
to a third party the right to purchase 237,500 of such shares at $1.25 per share
and expects to exchange these shares for a note payable amounting to $296,875.
These options became exercisable in June, 1995 and expire in June, 1996. 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.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
REVENUES
- --------
Revenues from operations increased $1,333,000 (33.3%) and $2,152,000
(27.4%) for the three and six month periods ended June 30, 1995, respectively,
compared to the same periods in 1994. Financial services, publications, real
estate and investments and other increased during the first three and six months
of 1995 while computer systems and software sales revenues decreased compared
to the same periods in 1994.
Financial services revenues increased $1,121,000 (54.0%) and $1,186,000
(24.5%) for the three and six month periods ended June 30, 1995, respectively,
compared to the same periods in 1994. The 2nd quarter increase was primarily due
to much higher broker/dealer commissions (37.0%), a result of a rally in the
bond market caused by lower interest rates which pushed up bond prices. Revenues
from premium-based insurance management fees were also up (8.2%) for the first
six months of 1995 compared to the same period in 1994, due primarily to the
addition of new large-group clients in the 2nd quarter of 1995.
Computer systems and software sales revenues decreased $583,000 (34.5%) and
$135,000 (5.3%) for the three and six month periods ended June 30, 1995,
respectively, compared to the same periods in 1994. The 2nd quarter decrease was
primarily due to lower hardware sales, which were earned in the 2nd quarter of
1994 primarily from a large contract. Contracts in the 2nd quarter of 1995
contained smaller hardware components.
Publications revenues for the three and six month periods ended June 30,
1995, were $757,000 compared to zero for the same two periods in 1994. This
variance is due to a difference in the distribution dates of the Spanish Yellow
Page Directory. The Company recognizes revenues upon distribution of its
directories. Distribution of the 1993 directory was in late 1993 while
distribution of the 1994 directory was early in 1995; consequently, no revenue
was recognized in 1994.
Real estate revenues rose $25,000 (17.0%) and $62,000 (23.2%) for the three
and six month periods ended June 30, 1995, respectively, compared to the same
periods in 1994. The increase in both periods was due to achieving full
occupancy and also 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 the remainder of the year.
-10-
<PAGE>
Investment and other income increased $11,000 (11.7%) and $281,000 (116.7%)
for the three and six month periods ended June 30, 1995, respectively, compared
to the same periods in 1994. The six month variance is primarily due to
reimbursements received in 1995 for the settlement of the Texas Hospital
Insurance Exchange ("THIE") lawsuit described in the 1994 Form 10-KSB. The
Company has filed a lawsuit against THIE to recover additional costs related to
defending the origianal THIE lawsuit.
Expenses
- --------
Total expenses increased $915,000 (22.7%) and $1,751,000 (22.5%) for the
three and six month periods ended June 30, 1995, respectively, when compared to
the same periods in 1994. All segments of the Company except computer systems
and software sales experienced increases in expenses for the three and six month
periods in 1995.
Financial services expense increased $571,000 (27.3%) and $606,000 (13.2%)
for the three and six month periods. The increase in the 2nd quarter of 1995 was
primarily the result of higher commissions paid in broker/dealer operations
arising from the higher commission revenues. In addition, a large increase in
legal and professional fees, related to potential liabilities from the
settlement of certain litigation described in Section 3 of the Notes to the
Condensed Consolidated Financial Statements, further increased the six month
variance. Efforts to reduce general and administrative expenses within the
broker/dealer subsidiary have resulted in a 18.1% decrease for the six month
period in 1995 compared to 1994. Expenses at the insurance management subsidiary
were up slightly for both the three and six month periods ended June 30, 1995
compared to the same periods in 1994 due primarily to personnel merit raises.
Computer systems/software expense decreased $464,000 (32.8%) and $214,000
(9.4%) for the three and six month periods ended June 30, 1995, respectively,
compared to the same periods in 1994. The decrease is due to lower hardware cost
of sales, resulting directly from the aforementioned decrease in hardware sales
revenue. Partially offsetting the six month decrease was an increase in
personnel costs, a result of staff increases associated with installing and
servicing new contracts.
Publications expense increased $759,000 (1,083.7%) and $819,000 (550.6%)
for the three and six month periods ended June 30, 1995, respectively, compared
to the same periods in 1994. The delay in distributing the 1994 directory until
April, 1995 caused both revenues and expenses to be recognized in the 2nd
quarter of 1995. Expenses from the prior directory were recognized in the 4th
quarter of 1993 since that directory was distributed in December 1993. This
timing difference is the reason for the large expense variance.
-11-
<PAGE>
Real estate expense increased $14,000 (12.9%) and $29,000 (12.7%) for the
three and six month periods ended June 30, 1995, respectively, compared to the
same periods in 1994. The increase in both periods is primarily attributable to
higher utilities as well as to higher property taxes, caused by appreciation in
the taxable value of the building operated by the Company.
General and administrative expense increased $63,000 (21.6%) and $559,000
(104.6%) during for the three and six month periods ended June 30, 1995,
respectively, compared to the same periods in 1994. The increase for the six
month period was due primarily to accruals made for certain contingent
liabilities associated with ongoing litigation.
Interest expense decreased $28,000 (58.3%) and $48,000 (51.1%) for the
three and six month periods ended June 30, 1995, respectively, compared to the
same periods in 1994. Both period decreases were due to a lower volume of
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.
Liquidity and Capital Resources
- -------------------------------
Current assets exceeded current liabilities by $6,931,000 and $6,086,000 at
June 30, 1995, and December 31, 1994, respectively. The increase is primarily
attributable to cash receipt of a long term note receivable as well as
reimbursement received for certain litigation related expenses.
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 June 30, 1995.
Capital expenditures through the quarter ended June 30, 1995 were
approximately $308,000 and total capital expenditures are expected to be
approximately $375,000 in 1995.
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-
<PAGE>
PART II
OTHER INFORMATION
-13-
<PAGE>
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 August 3, 1995, the Company's unconsolidated affiliate, Prime Medical
Services, Inc., ("Prime") acquired a 32.5% interest in a lithotripter facility
located in Sherman Oaks, California. The lithotripter facility generates
approximately $2.4 million in annual revenues and is Prime's first entry into
the California lithotripter marketplace. This acquisition also represents an
expansion in managed care for Prime as it provides services to approximately 50
managed care providers.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
11 Computation of Net Income Per Share at June 30, 1995
and 1994.
27 Financial Data Schedule
(b) Current reports on Form 8-K.
No current reports on Form 8-K were filed during the quarter ended
June 30, 1995.
-14-
<PAGE>
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: August 11, 1995 By: /s/ William H. Hayes
---------------------------------------
William H. Hayes, Vice President
and Chief Financial Officer
-15-
<PAGE>
EXHIBIT 11
AMERICAN PHYSICIANS SERVICE GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(In thousands, except earnings per share) Primary Fully Diluted
Earnings Earnings
Per Share Per Share
--------- --------------
1995
Net Income applicable to common stock $ 456 456
Average number of shares outstanding 3,423 3,423
Average stock option shares 385 385
------ ------
Shares for earnings calculation 3,808 3,808
Net income per share $ 0.12 0.12
====== =====
1994
Net Income applicable to common stock $ 144 144
Average number of shares outstanding 3,296 3,296
Average stock option shares 185 185
------ ------
Shares for earnings calculation 3,481 3,481
Net income per share $ 0.04 0.04
====== =====
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.
<PAGE>
EXHIBIT 11
AMERICAN PHYSICIANS SERVICE GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(In thousands, except earnings per share) Primary Fully Diluted
Earnings Earnings
Per Share Per Share
--------- -------------
1995
Net Income applicable to common stock $ 658 658
Average number of shares outstanding 3,384 3,384
Average stock option shares 343 380
------ ------
Shares for earnings calculation 3,727 3,764
Net income per share $ 0.18 0.17
====== ======
1994
Net Income applicable to common stock $ 281 281
Average number of shares outstanding 3,296 3,296
Average stock option shares 216 216
------ ------
Shares for earnings calculation 3,512 3,512
Net income per share $ 0.08 0.08
====== ======
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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
JUNE 30, 1995 FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1995 JAN-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 0 6,741
<SECURITIES> 0 2,123
<RECEIVABLES> 0 1,884
<ALLOWANCES> 0 0
<INVENTORY> 0 38
<CURRENT-ASSETS> 0 11,316
<PP&E> 0 5,098
<DEPRECIATION> 0 3,040
<TOTAL-ASSETS> 0 21,010
<CURRENT-LIABILITIES> 0 4,438
<BONDS> 0 0
<COMMON> 0 360
0 0
0 0
<OTHER-SE> 0 15,470
<TOTAL-LIABILITY-AND-EQUITY> 0 21,010
<SALES> 5,147 9,345
<TOTAL-REVENUES> 5,333 10,016
<CGS> 301 773
<TOTAL-COSTS> 3,699 7,159
<OTHER-EXPENSES> 922 1,638
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 20 46
<INCOME-PRETAX> 694 1,004
<INCOME-TAX> 238 346
<INCOME-CONTINUING> 456 658
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 456 658
<EPS-PRIMARY> 0.12 0.18
<EPS-DILUTED> 0.12 0.17
</TABLE>
