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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB/A
[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
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<PAGE>
PART I
FINANCIAL INFORMATION
The Company has restated income tax expense in the accompanying financial state-
ments. As prescribed in Financial Accounting Standards No. 109, Accountinng for
Income Taxes and clarified in Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, which the Company adopted in 1996,
the tax benefit arising from the exercise of certain stock options has been re-
corded directly as a component of Shareholders' Equity. The benefit had origin-
ally been recorded as a credit to income tax expense. The change affects the
Company's reported net income, but has no impact on earnings before income
taxes or cash flows and has only a timing affect between quarters on total
shareholders' equity.
-2-
<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
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 244 290 534 707
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 387 538 1,040 1,196
========= ========= ========= =========
Earnings per common share:
PRIMARY $0.09 $0.14 0.24 0.31
========= ========== ========= =========
FULLY DILUTED $0.09 $0.14 0.24 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
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
- 3 -
<PAGE>
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 -
<PAGE>
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) (892) 558
----------- -----------
Total current liabilities 1,917 5,572
LONG-TERM OBLIGATIONS 467 574
----------- -----------
TOTAL LIABILITIES 2,384 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 5,482 4,530
Unrealized holding gains 2 ----
Retained earnings 13,738 12,698
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 19,629 17,594
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,013 23,740
=========== ===========
See accompanying notes to consolidated financial statements
- 5 -
<PAGE>
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 -
<PAGE>
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 $1,040 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 (827) 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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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 $7,730,000 and
$7,466,000 at September 30, 1996, and December 31, 1995, respectively. The
increase is due to lower federal income taxes payable resulting from tax credits
received from the exercise of non-qualified stock options.
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 -
<PAGE>
PART II
OTHER INFORMATION
-14-
<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 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 -
<PAGE>
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 -
<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: February 4, 1997 By: /s/ William H. Hayes
----------------------------
William H. Hayes, Vice President
and Chief Financial Officer
- 17 -
<PAGE>
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 $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
=========== ==========
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 -
<PAGE>
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 $1,040 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
========= ==========
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 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 FORM 10-QSB/A AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-31-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 4,904 4,904
<SECURITIES> 4,140 4,140
<RECEIVABLES> 889 889
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,647 9,647
<PP&E> 4,264 4,264
<DEPRECIATION> 2,439 2,439
<TOTAL-ASSETS> 22,013 22,013
<CURRENT-LIABILITIES> 1,917 1,917
<BONDS> 0 0
0 0
0 0
<COMMON> 407 407
<OTHER-SE> 19,689 16,689
<TOTAL-LIABILITY-AND-EQUITY> 22,013 22,013
<SALES> 0 0
<TOTAL-REVENUES> 2,110 8,457
<CGS> 0 365
<TOTAL-COSTS> 2,056 7,364
<OTHER-EXPENSES> 90 121
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13 42
<INCOME-PRETAX> 631 1,574
<INCOME-TAX> 244 534
<INCOME-CONTINUING> 387 1,040
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 387 1,040
<EPS-PRIMARY> 0.09 0.24
<EPS-DILUTED> 0.09 0.24
</TABLE>
