SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the year ended December 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from ________________ to ________________
Commission file number 0-17231
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below: Automobile Protection Corporation Profit Sharing
and 401(k) Plan.
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office: Automobile Protection Corporation, 15
Dunwoody Park Drive, Suite 100, Atlanta, Georgia 30338.
Total pages - 14
1
<PAGE>
AUTOMOBILE PROTECTION CORPORATION
PROFIT SHARING AND 401(k) PLAN
FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 1997
TABLE OF CONTENTS
- ------------------
REPORT OF INDEPENDENT ACCOUNTANTS 3
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits with Fund
Information at December 31, 1997 and 1996 4-5
Statements of Changes in Net Assets Available for Benefits
with Fund Information for the years ended December 31,
1997 and 1996 6-7
Notes to financial statements 8-11
ADDITIONAL INFORMATION
Schedule I: Schedule of Reportable Transactions
for the year ended December 31, 1997 12
Schedule II: Schedule of Assets Held for Investment
Purposes - December 31, 1997 13
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator
of the Automobile Protection Corporation Profit Sharing and 401(k)Plan
In our opinion, the accompanying Statement of Net Assets Available for Benefits
and the related Statement of Changes in Net Assets Available for Benefits
present fairly, in all material respects, the net assets available for benefits
of the Automobile Protection Corporation Profit Sharing and 401(k) Plan at
December 31, 1997, and the changes in net assets available for benefits for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the plan's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
The 1996 financial statements were reviewed by us and we are not aware of any
material modifications that should be made to those statements for them to be in
conformity with generally accepted accounting principles. However, a review is
substantially less in scope than an audit and does not provide a basis for the
expression of an opinion on the financial statements taken as a whole.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken a whole. The additional information included in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. The Fund Information in the Statement of Net Assets Available
for Benefits and the Statement of Changes in Net Assets Available for Benefits
is presented for purposes of additional analysis rather than to present the net
assets available for plan benefits and changes in net assets available for plan
benefits of each fund. Schedules I and II and the Fund Information have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
PRICE WATERHOUSE LLP
Atlanta, Georgia
May 8, 1998
3
<PAGE>
Automobile Protection Corporation
Profit Sharing and 401(k) Plan
Statement of Net Assets Available for Benefits with Fund Information
December 31, 1997
<TABLE>
<CAPTION>
Money Fidelity Advisor Fidelity Advisor Fidelity Advisor Fidelity Advisor
Market Balanced Equity Income Growth Opport. Equity Growth Participant
Fund Fund Fund Fund Fund Loans
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Investments, at market value $17,691 $47,381 $44,638 $278,541 $105,103
(Cost: $17,691; $43,676; $39,491;
$246,174; $95,790; $255,708)
Receivables
Employer's contribution
Participants' contributions 311 675 764 5,392 2,132
Loans to participants $4,447
---------- -------- ----------- ---------- -------- ---------
311 675 764 5,392 2,132 4,447
Unallocated forfeitures
Cash and cash equivalents
---------- -------- ----------- ---------- -------- ---------
Total assets 18,002 48,056 45,402 283,933 107,235 4,447
Liabilities
- -----------
Distributions payable 782 390 7,764 2,649
---------- -------- ----------- ---------- -------- ---------
Net assets available for benefits $18,002 $47,274 $45,012 $276,169 $104,586 $4,447
========== ======== =========== ========== ======== =========
(table continued)
APCO
Common
Stock Total
---------------------
Assets
- ------
Investments, at market value $395,342 $888,696
(Cost: $17,691; $43,676; $39,491;
$246,174; $95,790; $255,708)
Receivables
Employer's contribution 3,812 3,812
Participants' contributions 9,274
Loans to participants 4,447
--------- --------
3,812 17,533
Unallocated forfeitures 3,804 3,804
Cash and cash equivalents 20,510 20,510
--------- --------
Total assets 423,468 930,543
Liabilities
- -----------
Distributions payable 17,038 28,623
--------- --------
Net assets available for benefits $406,430 $901,920
========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
Automobile Protection Corporation
Profit Sharing and 401(k) Plan
Statement of Net Assets Available for Benefits with Fund Information
December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Money Fidelity Advisor Fidelity Advisor Fidelity Advisor Fidelity Advisor
Market Income & Growth Equity Income Growth Opport. Equity Growth
Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Investments, at market value $4,447 $22,862 $17,433 $79,472 $94,220
(Cost:$4,447; $21,897; $16,713;
$75,734; $91,351; $70,021)
Receivables
Employer's contribution
Participants' contributions 233 855 706 3,084 3,842
--------- ---------- ---------- ------------ -----------
233 855 706 3,084 3,842
Unallocated forfeitures
Cash and cash equivalents
--------- ---------- ---------- ------------ -----------
Total assets 4,680 23,717 18,139 82,556 98,062
Liabilities
- -----------
Distributions payable 1,076 472 14,669 474
--------- ---------- ---------- ------------ -----------
Net assets available for benefits $4,680 $22,641 $17,667 $67,887 $97,588
========= ========== ========== ============ ===========
(continued table)
APCO
Common
Stock Total
-------------------------
Assets
- ------
Investments, at market value $67,422 $285,856
(Cost:$4,447; $21,897; $16,713;
$75,734; $91,351; $70,021)
Receivables
Employer's contribution 129,178 129,178
Participants' contributions 8,720
---------- ----------
129,178 137,898
Unallocated forfeitures 2,259 2,259
Cash and cash equivalents 6,931 6,931
---------- ----------
Total assets 205,790 432,944
Liabilities
- -----------
Distributions payable 16,691
---------- ----------
Net assets available for benefits $205,790 $416,253
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
Automobile Protection Corporation
Profit Sharing and 401(k) Plan
Statement of Changes in Net Assets Available for Benefits with Fund Information
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Money Fidelity Advisor Fidelity Advisor Fidelity Advisor Fidelity Advisor
Market Balanced Equity Income Growth Opport. Equity Growth Participant
Fund Fund Fund Fund Fund Loans
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to
- -------------------------------------
Investment income:
Interest $42 $42
Dividends $514 $1,127 $333 2,829
Net unrealized appreciation in
fair value of investments 2,740 4,427 28,629 6,444
Realized gain on sales of investments 2,989 2,510 14,384 11,421
-------- ---------- ---------- ------------ --------
514 6,856 7,270 45,884 17,907
-------- ---------- ---------- ------------ --------
Contributions:
Employer
Participants 12,769 21,027 20,799 124,221 56,547
Rollovers 216 180 2,101 606 715
Transfers 2,225 55,805
Loan repayments 284 283 $(567)
-------- ---------- ---------- ------------ -------- --------
12,985 21,207 25,125 180,916 57,545 (567)
-------- ---------- ---------- ------------ -------- --------
Total additions 13,499 28,063 32,395 226,800 75,452 (567)
-------- ---------- ---------- ------------ -------- --------
Deductions from net assets attributed to
- ----------------------------------------
Participant distributions (177) (3,226) (5,050) (16,287) (8,453)
Transfers (204) (57,826)
Loan distributions and fees (2,231) (2,175) 5,014
-------- ---------- ---------- ------------ -------- --------
Total deductions (177) (3,430) (5,050) (18,518) (68,454) 5,014
-------- ---------- ---------- ------------ -------- --------
Net increase 13,322 24,633 27,345 208,282 6,998 4,447
Net assets, beginning of year
(unaudited) 4,680 22,641 17,667 67,887 97,588
-------- ---------- ---------- ------------ -------- --------
Net assets, end of year $18,002 $47,274 $45,012 $276,169 $104,586 $4,447
======== ========== ========== ============ ======== ========
(continued table)
APCO
Common
Stock Total
----------------------------
Additions to net assets attributed to
- -------------------------------------
Investment income:
Interest $84
Dividends 4,803
Net unrealized appreciation in
fair value of investments $142,233 184,473
Realized gain on sales of investments 1,423 32,727
--------- -----------
143,656 222,087
--------- -----------
Contributions:
Employer 84,031 84,031
Participants 235,363
Rollovers 3,818
Transfers 58,030
Loan repayments
--------- -----------
84,031 381,242
--------- -----------
Total additions 227,687 603,329
--------- -----------
Deductions from net assets attributed to
- ----------------------------------------
Participant distributions (26,339) (59,532)
Transfers (58,030)
Loan distributions and fees (708) (100)
--------- -----------
Total deductions (27,047) (117,662)
--------- -----------
Net increase 200,640 485,667
Net assets, beginning of year (unaudited) 205,790 416,253
--------- -----------
Net assets, end of year $406,430 $901,920
========= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
Automobile Protection Corporation
Profit Sharing and 401(k) Plan
Statement of Changes in Net Assets Available for Benefits with Fund Information
For the year ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Money Fidelity Advisor Fidelity Advisor Fidelity Advisor Fidelity Advisor
Market Income & Growth Equity Income Growth Opport. Equity Growth
Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to
- -------------------------------------
Investment Income:
Dividends $100 $422 $129 $1,106 $354
Net unrealized appreciation (depreciation)
in fair value of investments 965 720 3,738 2,869
Realized gain on sales of investments 145 437 2,949 2,496
-------- ---------- -------- ----------- ---------
100 1,532 1,286 7,793 5,719
-------- ---------- -------- ----------- ---------
Contributions:
Employer
Participants 4,972 22,592 16,853 76,814 94,904
Company Profit Sharing
Rollovers 3,536 228
-------- ---------- -------- ----------- ---------
8,508 22,592 16,853 76,814 95,132
-------- ---------- -------- ----------- ---------
Total additions 8,608 24,124 18,139 84,607 100,851
-------- ---------- -------- ----------- ---------
Deductions from net assets attributed to
- ----------------------------------------
Participant distributions (3,928) (1,483) (472) (16,720) (3,263)
-------- ---------- -------- ----------- ---------
Total deductions (3,928) (1,483) (472) (16,720) (3,263)
-------- ---------- -------- ----------- ---------
Net increase 4,680 22,641 17,667 67,887 97,588
-------- ---------- -------- ----------- ---------
Net assets, end of year $4,680 $22,641 $17,667 $67,887 $97,588
======== ========== ======== =========== =========
(continued table)
APCO
Common
Stock Total
-------------------------
Additions to net assets attributed to
- -------------------------------------
Investment Income:
Dividends $2,111
Net unrealized appreciation (depreciation)
in fair value of investments $(2,599) 5,693
Realized gain on sales of investments 7,817 13,844
--------- ---------
5,218 21,648
--------- ---------
Contributions:
Employer 81,516 81,516
Participants 216,135
Company Profit Sharing 120,000 120,000
Rollovers 3,764
--------- ---------
201,516 421,415
--------- ---------
Total additions 206,734 443,063
--------- ---------
Deductions from net assets attributed to
- ----------------------------------------
Participant distributions (944) (26,810)
--------- ---------
Total deductions (944) (26,810)
--------- ---------
Net increase 205,790 416,253
--------- ---------
Net assets, end of year $205,790 $416,253
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
7
<PAGE>
AUTOMOBILE PROTECTION CORPORATION
PROFIT SHARING AND 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. DESCRIPTION OF THE PLAN AND BENEFITS
The following description of the Automobile Protection Corporation Profit
Sharing and 401(k) Plan (the "Plan") provides general information. Participants
should refer to the Plan document for a more complete description of the Plan's
provisions.
General
The Automobile Protection Corporation Profit Sharing and 401(k) Plan is a
voluntary salary reduction and profit-sharing plan formed on January 1, 1996 for
all eligible employees ("Participants") of Automobile Protection Corporation
(the "Employer" or "Company"), which covers all eligible employees and is
subject to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
Eligibility for participation
All employees of the Company who have attained the age of twenty-one (21) years
and who have six (6) months of service with the Company are eligible to
participate in the salary reduction component of the Plan. Participants may
enter the Plan on the first day of each month during the year, provided they
have met the Plan's age and service requirements. Participants are also eligible
to participate in the profit sharing component of the Plan if they have met the
above eligibility requirements, and additionally, have 500 hours of service and
are employed on the last day of the Plan year.
Contributions
Participants may elect to have the Employer make a salary reduction contribution
of up to 15% of their compensation to the Plan, subject to the maximum amount
permitted by the Internal Revenue Code and in certain cases, the maximum is
limited by statutory non-discrimination rules. The Plan provides for the
Employer to make a discretionary matching contribution on behalf of each
Participant. For 1997 and 1996, the Employer matched the first 6% of each
Participants' contribution at the rate of 50%, with its common stock, which is
publicly traded on the NASDAQ Stock Market under the symbol "APCO". The Plan
also allows rollover contributions from other qualified retirement plans. In
addition, the Plan provides for the Employer to make discretionary profit
sharing contributions. The Employer made a discretionary profit sharing
contribution of $120,000 (unaudited) in 1996, but no such contribution in 1997.
Investments
The Plan permits Participants to allocate their contributions among four equity
capital growth and income mutual funds and a daily money market fund offered by
Fidelity Investments. Investment options may be changed at any time during the
year by the Participant. Participants may also change their salary deferral
elections with each payroll during the year. Additionally, the Company currently
makes a discretionary matching contribution in the form of its common stock,
which is purchased in the open market. Participants may not currently direct the
investment of their contributions into the common stock of the Company.
8
<PAGE>
Assets accumulated through Participant salary reduction contributions or
rollovers are invested in one or more of the following investment options:
Daily Money Market Fund - The investment strategy of this fund is to obtain a
high level of current income as is consistent with the preservation of capital
and liquidity. The fund invests only in U.S. dollar-denominated money market
securities of domestic and foreign issuers rated in the highest rating category
by at least two nationally recognized rating services, U.S. Government
securities, and repurchase agreements. The fund may also enter into reverse
repurchase agreements.
Fidelity Advisor Balanced Fund (formerly Fidelity Advisor Income and Growth
Fund) - The investment strategy of this fund is to utilize a balanced approach
to provide the best possible total return from income-producing securities.
Investments include U.S. Treasury issues, corporate bonds, foreign investments,
convertible securities, and stocks.
Fidelity Advisor Equity Income Fund - The investment strategy of this fund is to
invest in stocks that have above-average dividends, are undervalued (which may
give them more upward and less downward potential), and have increasing
dividends.
Fidelity Advisor Growth Opportunity Fund - The investment strategy of this fund
is to seek growth through a core investment in traditional growth stocks of
companies with above-average growth in sales or earnings, plus other
opportunities such as special situations, debt securities and cyclical stocks.
Fidelity Advisor Equity Growth Fund - The investment strategy of this fund is to
seek to achieve capital appreciation by investing primarily in growth stocks
that demonstrate the potential for above average earnings or sales growth. The
fund invests in the securities of smaller, lesser known companies, as well as
medium and larger sized companies. An active management style is designed to
capitalize on market opportunities and to secure gains.
Administrative Expenses
Administrative expenses of the Plan are paid by the Company. Participants in the
Plan pay no administrative expenses.
Vesting
Participants vest immediately in their own contributions and allocated earnings
thereon. Employer matching contributions and earnings thereon vest at the rate
of 20% per year. Participants become fully vested in Employer matching
contributions and earnings thereon upon completion of five years of service or
in the event of death, disability or normal retirement. Forfeited amounts reduce
future Employer contributions to the Plan.
Withdrawals
A Participant may withdraw their salary reduction and rollover contributions in
the case of a financial hardship, subject to a minimum of $500. Withdrawals are
taxable in the year received by the Participant and may be subject to a penalty
tax. A Participant may not make elective deferrals or other contributions for a
period of 12 months following the hardship withdrawal.
9
<PAGE>
Distributions
Upon a Participant's termination of employment with the Company, the Participant
is entitled to receive a distribution of their vested account balance. If the
vested amount is less than $3,500, then the balance will be distributed
automatically in a lump sum. If the vested account exceeds $3,500, the
Participant may elect to receive a distribution at any time in the form of a
lump sum payment. If the Participant does not elect to receive a distribution,
the vested balance will be distributed after the Company's normal retirement age
(65). If the Participant dies prior to receiving their entire vested account
balance, the balance will be paid to the Participant's beneficiary or estate.
Loans
The Plan provides for Participants to borrow up to 50% of their vested account
balance, subject to a minimum of $1,000. During 1997, loans aggregating $5,014
were made to Participants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements for the Plan are prepared using the accrual basis of
accounting. Investments in common stock and government securities are stated at
year-end quoted market values. Cash equivalents, which consist primarily of
highly liquid money market instruments, are stated at cost which approximates
market value.
Participant and Company contributions are recorded in the period during which
the Company makes payroll deductions from the Plan participants'earnings.
Distributions to participants are recorded when paid.
Purchases and sales of investments including gains or losses are recorded on the
trade date. Income from interest and dividends is recorded as earned.
3. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan's management to use estimates and
assumptions that affect the accompanying financial statements and disclosures.
Actual results could differ from these estimates.
4. PLAN TERMINATION PROVISIONS
The Employer expects the Plan to be permanent; however, the Employer may amend,
modify, suspend or terminate the Plan at any time by action of its Board of
Directors. Should the Company terminate the Plan, each Participant's account
balance would become fully vested.
10
<PAGE>
5. INCOME TAX STATUS
The Plan received a favorable determination letter dated February 11, 1997 from
the Internal Revenue Service which indicates that the Plan is entitled to an
exemption under Section 501(a) of the Internal Revenue Code, as it meets the
requirements of Section 401 of the Internal Revenue Code. Management believes
that the Plan is designed and is being operated in accordance with applicable
requirements of the Internal Revenue Code.
The Plan failed certain non-discrimination (ADP/ACP) tests for the years ended
December 31, 1997 and 1996. Consequently, the Plan made refunds to certain
Participants aggregating $28,621 and $16,692 (unaudited), respectively,
subsequent to each year end, which amounts have been accrued as a liability in
the financial statements.
6. RELATED PARTY TRANSACTIONS
At December 31, 1997 and 1996, the Plan held 59,112 and 45,087 (unaudited)
shares of APCO common stock, which represented 0.5% and 0.4% of the Company's
issued and outstanding common stock at that date, respectively.
11
<PAGE>
AUTOMOBILE PROTECTION CORPORATION
PROFIT SHARING AND 401(k) PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
SCHEDULE I
<TABLE>
<CAPTION>
Cost Current Value
Description Purchases, Selling of asset of Asset on Net
Identity of issue of investment at cost Price sold Sale date Gain
- ----------------- ------------- ---------- ------- -------- ------------- ----
<S> <C> <C> <C> <C> <C>
Fidelity Advisor Funds:
Money Market Cash equivalent $ 13,421 $ 177 $ 177 $ 177 $ -
Balanced Mutual fund 25,648 3,869 880 3,869 2,989
Equity Income Mutual fund 27,910 5,131 2,621 5,131 2,510
Growth Opportunity Mutual fund 195,999 25,558 11,174 25,558 14,384
Equity Growth Mutual fund 70,717 66,279 54,858 66,279 11,421
APCO common stock * Common stock 78,074 6,149 4,726 6,149 1,423
</TABLE>
* Represents a party-in-interest to the Plan.
The accompanying notes are an integral part of this schedule.
12
<PAGE>
AUTOMOBILE PROTECTION CORPORATION
PROFIT SHARING AND 401(k) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
SCHEDULE II
<TABLE>
<CAPTION>
Description Units/ Current
Identity of issue of investment Shares Cost Value
- ----------------- ------------- ------ ---- -------
<S> <C> <C> <C>
Fidelity Advisor Funds:
Money Market Cash equivalent 17,691 $ 17,691 $ 17,691
Balanced Mutual fund 2,603 43,676 47,381
Equity Income Mutual fund 1,733 39,491 44,638
Growth Opportunity Mutual fund 6,562 246,174 278,541
Equity Growth Mutual fund 2,273 95,790 105,103
APCO common stock * Common stock 59,112 255,708 395,342
--------- ----------
$698,530 $888,696
========= ==========
</TABLE>
* Represents a party-in-interest to the Plan.
The accompanying notes are an integral part of this schedule.
13
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Automobile Protection Corporation Profit Sharing and 401(k) Plan
By: /s/ Anthony R. Levinson June 17, 1998
Chief Financial Officer of Automobile Protection
Corporation (as administrator of the Automobile
Protection Corporation Profit Sharing and 401(k)
Plan)
14
