<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 March 31, 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 April 28, 1995
------------------- --------------
Common Stock, $.10 par value 3,571,684
================================================================================
<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
March 31,
1995 1994
-------- --------
<S> <C> <C>
Revenues:
Financial services $2,830 2,765
Computer systems/software 1,273 825
Publications 0 1
Real estate 162 125
Investments and other 418 148
-------- --------
Total revenue 4,683 3,864
Expenses:
Financial services 2,541 2,505
Computer systems/software 1,107 857
Publications 139 79
Real estate 123 109
General and administrative 738 242
Interest 26 46
-------- --------
Total expenses 4,674 3,838
-------- --------
Operating income 9 26
Equity in earnings of unconsolidated
affiliate 301 173
-------- --------
Earnings before income taxes 310 199
Income tax expense 108 62
-------- --------
Net earnings $202 137
======== ========
Earnings per common share:
Primary $0.06 0.04
======== ========
Fully Diluted $0.06 0.04
======== ========
Primary weighted average shares outstanding 3,580 3,540
======== ========
Fully Diluted weighted average shares outstanding 3,601 3,540
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
- 3 -
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
March 31, December 31,
1995 1994
--------- ------------
[S] [C] [C]
ASSETS
Current Assets:
Cash and cash investments $4,460 3,266
Marketable securities 598 1,491
Trading account securities 1,653 661
Notes receivable - current 310 325
Management fees and other receivables 1,826 2,932
Receivable from clearing broker -- 491
Deferred income taxes 120 163
Prepaid expenses and other 931 806
--------- --------
Total current assets 9,898 10,135
Notes receivable, less current portion 695 915
Property and equipment 2,064 2,025
Investment in Prime Medical Services, Inc. 5,959 5,658
Other assets 1,184 1,185
--------- --------
Total Assets $19,800 19,918
========= ========
See accompanying notes to consolidated financial statements
- 4 -
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under
capital leases $279 327
Accounts payable - trade 406 809
Accrued compensation 118 488
Payable to clearing broker 432 ----
Accrued expenses and other liabilities 2,557 2,168
Federal income taxes payable (61) 257
--------- ------------
Total current liabilities 3,731 4,049
Long-term obligations 806 878
--------- ------------
Total liabilities 4,537 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 3,521,684
at 3/31/95 and 3,471,684 at 12/31/94 352 347
Additional paid-in capital 4,539 4,469
Unrealized holding gains 39 44
Retained earnings 10,876 10,674
Reciprocal stockholdings (543) (543)
--------- ------------
Total shareholders' equity 15,263 14,991
Total Liabilities and Shareholders' Equity $19,800 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>
Three Months Ended
March 31,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $5,268 4,067
Cash paid to suppliers and employees (5,089) (4,384)
Change in trading account securities (992) (1,430)
Change in payable to clearing broker 923 1,373
Interest paid (26) (46)
Income taxes paid (253) ---
Interest, dividends and other investment
proceeds 416 149
-------- --------
Net cash provided by (used in) operating
activities 247 (271)
Cash flows from investing activities:
Proceeds from the sale of marketable securities 885 ---
Payments for purchase of marketable securities --- (484)
Proceeds from the sale of fixed assets --- 14
Payments for purchase property and equipment (122) (38)
Collection of notes receivable 229 985
-------- --------
Net cash provided by investing
activities 992 477
Cash flows from financing activities:
Repayment of long term obligations (120) (226)
Increase in minority interest --- 27
Exercise of Stock Options 75 ---
-------- --------
Net cash used in financing
activities (45) (199)
-------- --------
Net change in cash and cash equivalents $1,194 7
======== ========
Cash and cash equivalents at beginning of period 3,266 2,544
-------- --------
Cash and cash equivalents at end of period $4,460 2,551
======== ========
</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>
Three Months Ended
March 31,
1995 1994
-------- --------
<S> <C> <C>
Reconciliation of net earnings to net cash
from operating activities:
Net earnings $202 137
Adjustments to reconcile net earnings to
net cash from operating activities:
Depreciation and amortization 94 90
Minority interest in consolidated earnings --- 15
Undistributed earnings of affiliate (301) (173)
Change in federal income tax payable (318) (94)
Provision for deferred tax asset 43 108
Change in trading securities (992) (1,430)
Change in payable to clearing broker 923 1,373
Change in management fees & other receivables 1,104 336
Change in prepaids & other current assets (126) 2
Change in other assets (1) (35)
Change in trade payables (354) (311)
Change in accrued expenses & other liabilities (27) (289)
-------- --------
Net cash from operating activities $247 (271)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
- 7 -
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 March 31, 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.
-8-
<PAGE>
3. Equity in Earnings of Unconsolidated Affiliate
----------------------------------------------
At March 31, 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 from Prime amounting to
$296,875. These options become 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 $819,000 (21.2%) for the three months
ended March 31, 1995, compared to the same period in 1994. Financial services,
computer systems and software sales, real estate and investments & other
increased during the first quarter of 1995 while publications revenues remained
the same compared to the same period in 1994.
Financial services revenues increased $64,000 (2.3%) for the three months
ended March 31, 1995, compared to the same period in 1994. This increase was
primarily due to slightly higher broker/dealer commissions, a result of the
recent stabilization of interest rates bringing investors slowly back into the
bond market. Revenues from premium-based insurance management fees were
virtually the same in the first quarter of 1995, compared to the same period in
1994.
In April, 1995, 1994's top producing broker in the Company's broker/dealer
subsidiary, accounting for 40% and 9%, respectively, of 1994's and 1993's gross
commissions, terminated his employment to pursue an equity interest with
another firm. The Company is uncertain whether several experienced brokers,
hired in late 1994, together with the additional experienced brokers being
sought will offset any financial impact this loss may cause.
Computer systems and software sales revenues increased $448,000 (54.3%)
for the three months ended March 31, 1995, compared to the same period in 1994.
The increase was primarily due to new contracts for hardware and software
begun in the latter half of 1994 and continuing in 1995. In addition, hardware
upgrades by existing clients increased the positive revenue variance of this
quarter compared to the first quarter of 1994.
There were no Publications revenues for the three months ended March 31,
1995. In April, 1995, revenue of approximately $752,000 will be recognized for
the 1994 Spanish Yellow Page Directory. The Company recognizes revenues upon
distribution of its directories. Expenses related to marketing and production
of the directory remain in work in progress and will be charged to expense in
April upon distribution of the directory. Additional expenses for printing and
distribution will also be charged in April. There will be no material financial
impact resulting from publication of the directory.
-10-
<PAGE>
Real estate revenues rose $38,000 (30.2%) for the three months ended March
31, 1995, compared to the same period in 1994. The increase 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.
Investment and other income increased $270,000 (182.5%) for the three
months ended March 31, 1995, compared to the same period in 1994. The variance
is primarily due to reimbursements received in 1995 for the release and
settlement of the THIE lawsuit described in the 1994 Form 10-KSB. Negotiations
as to the final amount of the costs the Company can recover in defending this
lawsuit continue.
Expenses
--------
Total expenses increased $856,000 (22.6%) for the three month period ended
March 31, 1995, when compared to the same period in 1994. All segments of the
Company experienced increases for the three month period in 1995.
Financial services expense increased $35,000 (1.4%) for the three month
period ended March 31, 1995, compared to the same period in 1994. A majority of
this increase was the result of higher commissions paid in broker/dealer
operations arising from the higher commission revenues generated in the current
period. Partially offsetting this increase was a decrease in total expenses at
the medical malpractice management company. This decrease was primarily caused
by lower legal fees incurred in 1995 resulting from settlement of the THIE
lawsuit.
Computer systems/software expense increased $251,000 (29.2%) for the three
month period ended March 31, 1995, compared to the same period in 1994. The
increase is due to cost of sales connected with the new contracts which
increased directly with the increase in revenues. In addition, staff increases
associated with installing and servicing these new contracts resulted in higher
personnel costs.
Publications expense increased $60,000 (76.7%) for the three month period
ended March 31, 1995, compared to the same period in 1994. The delay in
distributing the 1994 directory until April, 1995 has caused a timing
difference in the way expenses are placed in work in progress compared to the
first quarter of 1994. Marketing costs such as sales salaries and advertising,
which would normally be placed in work in progress for the 1995 directory, are
instead being expensed since the sale of the new directory has not yet
commenced.
-11-
<PAGE>
Real estate expense increased $15,000 (13.4%) for the three month period
ended March 31, 1995, compared to the same period in 1994. The increase is
primarily attributable to higher interest expense, caused by higher interest
rates on a variable rate loan, as well as to higher property taxes, caused by
appreciation in the taxable value of the building used as corporate
headquarters for the Company.
General and administrative expense increased $496,000 (205.0%) during the
three month period ending March 31, 1995, compared to the same period in 1994.
This increase was due primarily to accruals made for certain contingent
liabilities associated with ongoing litigation.
Liquidity and Capital Resources
-------------------------------
Current assets exceeded current liabilities by $6,167,000 and $6,086,000
at March 31, 1995, and December 31, 1994, respectively. The increase is
primarily attributable to 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 March 31, 1995.
Capital expenditures through the quarter ended March 31, 1995 were
approximately $122,000 and total capital expenditures are expected to be
approximately $350,000 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 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
11 Computation of Net Income Per Share at March 31, 1995
and 1994.
(b) Current reports on Form 8-K.
No current reports on Form 8-K were filed during the quarter ended
March 31, 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: April 28, 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 MARCH 31, 1995 AND 1994
<TABLE>
<CAPTION>
(In thousands, except earnings per share) Primary Fully Diluted
Earnings Earnings
Per Share Per Share
------------- -------------
<S> <C> <C>
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
------------- -------------
1994
Net Income applicable to common stock $137 137
Average number of shares outstanding 3,295 3,295
Average stock option shares 245 245
------------- -------------
Shares for earnings calculation 3,540 3,540
Net income per share $0.04 0.04
------------- -------------
</TABLE>
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 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1995 FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,460
<SECURITIES> 2,251
<RECEIVABLES> 2,136
<ALLOWANCES> 0
<INVENTORY> 26
<CURRENT-ASSETS> 9,898
<PP&E> 5,019
<DEPRECIATION> 2,955
<TOTAL-ASSETS> 19,800
<CURRENT-LIABILITIES> 3,731
<BONDS> 0
<COMMON> 352
0
0
<OTHER-SE> 14,911
<TOTAL-LIABILITY-AND-EQUITY> 19,800
<SALES> 4,198
<TOTAL-REVENUES> 4,683
<CGS> 472
<TOTAL-COSTS> 3,460
<OTHER-EXPENSES> 716
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 310
<INCOME-TAX> 108
<INCOME-CONTINUING> 202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
