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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 MARCH 31, 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 APRIL 30, 1996
-------------------- ----------------
Common Stock, $.10 par value 4,002,204
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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.
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AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
March 31,
1996 1995
-------- ----------
Revenues:
Financial services $2,330 2,830
Computer systems/software 847 1,273
Real estate 169 162
Investments and other 110 418
-------- --------
Total revenue 3,456 4,683
Expenses:
Financial services 2,006 2,541
Computer systems/software 877 1,107
Real estate 128 123
General and administrative 263 738
Interest 16 26
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Total expenses 3,289 4,535
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Operating income 168 148
Equity in earnings of unconsolidated
affiliate (Note 4) 400 301
------- --------
Earnings from continuing operations
before income taxes 567 449
Income tax expense 172 155
Loss from discontinued operations net
of income tax benefit of $0 and $47 in
1996 and 1995, respectively --- (92)
------- --------
Net earnings $395 202
======= ========
Earnings per common share:
Primary $0.09 0.06
======== ========
Fully Diluted $0.09 0.06
======== ========
Primary weighted average shares outstanding 4,264 3,580
======== ========
Fully Diluted weighted average shares
outstanding 4,316 3,601
======== ========
See accompanying notes to consolidated financial statements
- 3 -
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AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
March 31, December 31,
1996 1995
--------- -----------
ASSETS
Current Assets:
Cash and cash investments $8,021 6,798
Marketable securities (Note 2) 462 2,004
Trading account securities 289 1,014
Notes receivable - current 202 223
Management fees and other receivables 1,493 1,748
Receivable from clearing broker 1,454 780
Deferred income taxes (71) 159
Prepaid expenses and other 401 312
--------- ---------
Total current assets 12,251 13,038
Notes receivable, less current portion 83 83
Property and equipment 2,077 2,129
Investment in Prime Medical Services, Inc. 7,811 7,412
Other assets 1,064 1,078
--------- ---------
Total Assets $23,286 23,740
========= =========
See accompanying notes to consolidated financial statements
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AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
March 31, December 31,
--------- ------------
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of obligations
under capital leases $268 299
Accounts payable - trade 372 353
Accrued compensation 178 861
Accrued expenses and other liabs (Note 5) 3,525 3,501
Federal income taxes payable (460) 558
------- --------
Total current liabilities 3,884 5,572
Long-term obligations 539 574
------- --------
Total liabilities 4,423 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
4,002,204 at 3/31/96 and 3,663,871
at 12/31/95 400 366
Additional paid-in capital 5,346 4,530
Unrealized holding gains 23 0
Retained earnings 13,094 12,698
------- --------
Total shareholders' equity 18,863 17,594
Total Liabilities and Shareholders' Equity $23,286 23,740
======= ========
See accompanying notes to consolidated financial statements
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<PAGE>
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $3,603 5,268
Cash paid to suppliers and employees (3,913) (5,089)
Change in trading account securities 725 (992)
Change in receivable from to clearing broker (674) 923
Interest paid (16) (26)
Income taxes paid (598) (253)
Interest, dividends and other investment
proceeds 111 416
--------- --------
Net cash provided by (used in)
operating activities (762) 247
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of marketable securities 1,577 885
Payments for purchase property and equipment (38) (122)
Collection of notes receivable 21 229
Other 16 ---
--------- --------
Net cash provided by investing
activities 1,576 992
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term obligations (67) (120)
Exercise of stock options 476 75
--------- --------
Net cash provided by (used in) financing
activities 409 (45)
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS $1,223 1,194
========= ========
Cash and cash equivalents at beginning of period 6,798 3,266
--------- --------
Cash and cash equivalents at end of period $8,021 4,460
========= ========
</TABLE>
See accompanying notes to consolidated financial statements
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AMERICAN PHYSICIANS SERVICE GROUP, INC.
Consolidated Statements of Cash Flows, continued
(In thousands)
Three Months Ended
March 31,
1996 1995
---------- -----------
Reconciliation of net earnings to net cash from
operating activities:
Net earnings $395 202
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 88 94
Undistributed earnings of affiliate (399) (301)
Change in federal income tax payable (643) (318)
Provision for deferred tax asset 218 43
Change in trading securities 725 (992)
Change in receivable from clearing broker (674) 923
Change in management fees & other receivables 256 1,104
Change in prepaids & other current assets (88) (126)
Change in trade payables 19 (354)
Change in accrued expenses & other liabilities (659) (28)
---------- -----------
Net cash from operating activities ($762) 247
========== ===========
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 an increase to
unrealized holding gains of $23, a decrease to deferred tax assets of $12 and an
increase to marketable securities of $35 for the three months ended March 31,
1996 compared to December 31, 1995.
See accompanying notes to consolidated financial statements
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AMERICAN PHYSICIANS SERVICE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 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.
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4. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE
At March 31, 1996 the Company owned 19% (3,064,000 shares) of the outstanding
common stock of Prime Medical Services, Inc. ("Prime"). This percentage
ownership was decreased from 21% in late March, 1996, due to the exercise of
stock warrants and stock options. 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.
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following:
1996 1995
---------- ----------
Taxes payable-other .............................. $ 92,000 150,000
Commissions payable .............................. 9,000 38,000
Deferred income .................................. 595,000 434,000
Health insurance and other claims payable ........ 15,000 73,000
Contractual/legal claims ......................... 2,360,000 2,360,000
Vacation payable ................................. 125,000 127,000
Funds held for others ............................ 28,000 51,000
Interest payable ................................. 4,000 5,000
Other ............................................ 297,000 263,000
---------- ----------
$3,525,000 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 $1,226,000 (26.2%) for the three
period ended March 31, 1996, respectively, compared to the same period in 1995.
Financial services, computer systems and investments and other decreased while
real estate increased during the first quarter of 1996 compared to the same
period in 1995.
Financial services revenues decreased $500,000 (17.7%) for the three
period ended March 31, 1996 compared to the same period in 1995. The decrease in
1996 was due to lower broker/dealer commissions which were down primarily due to
the loss of an experienced, high volume broker who left the Company in April,
1995. In addition, bond market conditions were much more favorable during the
first three months of 1995 as yields decreased steadily in 1995 compared to
steady bond yield increases during the first quarter of 1996. Rising yields
translate to lower bond prices which explains the relatively unfavorable market.
Revenues from premium-based insurance management fees were up $93,000
(8.8%) for the first three months of 1996 compared to the same period in 1995,
due primarily to new client doctor groups as well as to premium rate increases.
Computer systems and software sales revenues decreased $425,000 (33.4%)
for the three month period ended March 31, 1996 compared to the same period in
1995. The first quarter decrease was primarily due to the fact that revenues
were recognized in early 1995 from ongoing contracts. These contracts were
substantially completed by the end of 1995. With no new contracts being signed
in 1996, revenues declined. Partially offsetting this decrease was much higher
consulting fees generated in the first quarter of 1996 compared to the same
period in 1995.
Real estate revenues rose $12,000 (11.8%) for the three month period
ended March 31, 1996 compared to the same period in 1995. The increase in
revenue was 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 decreased $309,000 (70.8%) for the three
month period ended March 31, 1996 compared to the same period in 1995. This
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.
- 10 -
<PAGE>
EXPENSES
Total expenses decreased $1,375,000 (29.6%) for the three month period
ended March 31, 1996 compared to the same period in 1995. Financial services,
computer systems and investment & other decreased while real estate services
showed an increase for the three month period.
Financial services expense decreased $535,000 (21.1%) for the three
month period ended March 31, 1996 compared to the same period in 1995. The
decrease was primarily the result of lower commissions paid in broker/dealer
operations arising from the lower commission revenues. Reduced general and
administrative expenses within the broker/dealer subsidiary have also
contributed to the decrease. Expenses at the insurance management subsidiary
increased $30,000 (3.7%) for the three month period ended March 31, 1996
compared to the same period in 1995 due to personnel merit increases.
Computer systems/software expense decreased $230,000 (20.8%) for the
three month period ended March 31, 1996 compared to the same period in 1995. The
first quarter, 1996, decrease is due to lower hardware and software license
costs of sales, resulting directly from the aforementioned decrease in new
client sales revenue.
Real estate expense increased $5,000 (3.7%) for the three month period
ended March 31, 1996 compared to the same period in 1995. The increase was
primarily due to higher condo association fees.
General and administrative expense decreased $478,000 (64.8%)
for the three month period ended March 31, 1996 compared to the same period in
1995. The decrease was due primarily to accruals made in 1995 for certain
contingent liabilities associated with ongoing litigation. No such accruals were
necessary in 1996.
Interest expense decreased $10,000 (38.1%) for the three month period
ended March 31, 1996 compared to the same period in 1995. The decrease 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.
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 three months of 1995, the
publications segment incurred $139,000 in expenses.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Current assets exceeded current liabilities by $8,367,000 and
$7,466,000 at March 31, 1996, and December 31, 1995, respectively. The increase
is primarily attributable to cash from financiang activities as well as changes
in federal income taxes payable resulting from tax credits received from the
exercise of non-qualified stock options.
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, 1996.
Capital expenditures through the quarter ended March 31, 1996 were
approximately $38,000 and total capital expenditures are expected to be
approximately $300,000 in 1996.
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.
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<PAGE>
PART II
OTHER INFORMATION
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<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 April 26, 1996, the Company's unconsolidated affiliate, Prime Medical
Services, Inc., ("Prime") acquired Lithotripters, Inc., of Fayetteville, North
Carolina. The combination of the two entities, effective May 1, 1996, will
create the nation's largest lithotripsy company. The purchase price was $88
million, comprised of $70 million in cash and 1,636,000 common shares of Prime
Medical. This issuance of Prime shares has further diluted the Company's
interest in Prime from 19.4% to 17.5%. 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 March 31, 1996
and 1995.
(b) Current reports on Form 8-K.
No current reports on Form 8-K were filed during the quarter
ended March 31, 1996.
- 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: February 4, 1997 By: /s/ William H. Hayes
------------------------
William H. Hayes, Vice President
and Chief Financial Officer
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<PAGE>
EXHIBIT 11
AMERICAN PHYSICIANS SERVICE GROUP, INC.
COMPUTATION OF NET INCOME PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 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 ................. $ 395 395
Average number of shares outstanding .................. 3,947 3,947
Average stock option shares ........................... 317 369
------ ------
Shares for earnings calculation ................... 4,264 4,316
Net income per share .................................. $ 0.09 0.09
====== ======
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
====== ======
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 the
March 31, 1996 Form 10-QSB/A 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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,021
<SECURITIES> 751
<RECEIVABLES> 3,149
<ALLOWANCES> 0
<INVENTORY> 31
<CURRENT-ASSETS> 12,251
<PP&E> 5,356
<DEPRECIATION> 3,279
<TOTAL-ASSETS> 23,286
<CURRENT-LIABILITIES> 3,884
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 19,002
<TOTAL-LIABILITY-AND-EQUITY> 23,286
<SALES> 3,347
<TOTAL-REVENUES> 3,456
<CGS> 254
<TOTAL-COSTS> 2,861
<OTHER-EXPENSES> 158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 567
<INCOME-TAX> 172
<INCOME-CONTINUING> 395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 395
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
