AMERICAN PUBLIC HOLDINGS, INC.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarter ended March 31, 1998 Commission File Number 0-22479
AMERICAN PUBLIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Mississippi 64-0874171
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Registrant's telephone number: (601) 936-6600 ext. 201
No Change
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for shorter period that the registrant was required to
file such report), 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 registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1998
-----------------------------
Common stock (no par value) 1,099,287 shares
AMERICAN PUBLIC HOLDINGS, INC.
Unaudited Quarterly Financial Statements
Page
Consolidated Balance Sheets 1
March 31, 1998 and December 31, 1997
Consolidated Statements of Operations 2
Three Months Ended March 31, 1998 and 1997
Changes in Stockholders' Equity 3
Twelve Months Ended December 31, 1997
Three Months Ended March 31, 1998
Consolidated Statements of Cash Flows 4
Three Months Ended March 31, 1998 and 1997
Notes To Consolidated Financial Statements 5
American Public Holdings, Inc.
Consolidated Balance Sheets
As of March 31, 1998 and December 31, 1997
1998 1997
---- ----
ASSETS
Investments:
Available for sale securities - at fair value (amortized cost
of $33,483,150 in 1998 and $33,743,287 in 1997) $ 34,302,143 $34,626,186
Mortgage loans 913,951 989,859
Investment real estate - net 714,240 727,700
Policy loans 1,486,047 1,490,154
------------- -----------
Total investments 37,416,381 37,833,899
OTHER ASSETS:
Cash and cash equivalents 1,030,088 608,434
Accrued investment income 379,222 440,614
Accounts and notes receivable net of allowance for
uncollectible accounts of $39,000 (1998) and $41,000 (1997) 541,273 455,848
Deferred policy acquisition costs 9,830,134 9,798,294
Property and equipment - net 2,267,048 2,193,163
Real estate acquired in satisfaction of debt 486,750 504,660
Deferred income tax asset 225,958 399,160
Other 112,575 112,703
------------- -----------
TOTAL ASSETS $ 52,289,429 $52,346,775
============= ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES:
Future policy benefits $ 33,249,914 $33,393,109
Unpaid claims 1,137,551 1,086,795
Unearned premiums 865,100 843,021
Policyholders' dividend accumulations 408,514 406,456
Accounts payable and other liabilities 906,079 993,592
------------- -----------
Total liabilities 36,567,158 36,722,973
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized 25,000,000 shares
Common stock, $1 stated value, authorized
50,000,000 shares, issued and outstanding 1,099,287 shares in 1998
and 1,111,299 shares in 1997 52,347 52,919
Additional paid-in capital 2,066,752 2,257,800
Unrealized gain on available for sale securities, net of
deferred taxes of $164,000 (1998) and $177,000 (1997) 655,194 706,319
Retained earnings 12,947,978 12,606,764
---------- ----------
Total stockholders' equity 15,722,271 15,623,802
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $52,289,429 $52,346,775
<FN>
=========== ===========
See notes to consolidated financial statements.
</FN>
American Public Holdings, Inc.
Consolidated Statements of Operations - GAAP Basis
For Three Months Ended March 31, 1998 and 1997
Three Months Ended March 31
---------------------------
1998 1997
---- ----
REVENUE:
Premiums $ 7,554,827 $ 6,750,791
Net investment income 628,758 634,702
Realized investment gains (losses) 75,568 (12,521)
Other Income 7,324 17,437
------------- -------------
8,266,477 7,390,409
BENEFITS AND EXPENSES:
Benefits and claims 5,273,296 4,797,367
Commissions expense 612,909 564,289
Salaries and benefits 574,021 634,901
Amortization of deferred policy acquisition costs 738,202 884,841
Insurance taxes, licenses and fees 227,490 310,273
Other operating expenses 271,983 204,363
------------- -------------
7,698,081 7,396,034
------------- -------------
INCOME (LOSS) BEFORE INCOME TAX
PROVISION (BENEFIT) 568,396 (5,625)
INCOME TAX PROVISION (BENEFIT) 224,918 12,292
------------- -------------
NET INCOME (LOSS) $ 343,478 $ (17,917)
============= =============
NET INCOME (LOSS) PER SHARE $ 0.31 $ (0.02)
<FN>
============= =============
See notes to consolidated financial statements.
</FN>
American Public Holdings, Inc.
Consolidated Statements of Changes in Stockholders' Equity - GAAP Basis
For Periods Indicated
Unrealized
Common Stock Additional Gain on Total
---------------------- Paid-in Available For Retained Treasury Stockholder
Shares Amount Capital Sale Securities Earnings Stock Equity
------ ------ ------- --------------- -------- --------- -----------
BALANCE, DECEMBER 31, 1996 1,202,250 $ 57,250 $ 2,232,750 $ 251,408 $14,609,589 $(10,144,09) $16,136,588
Change in net unrealized gain(loss) 454,911 454,911
Stock issued 1,575 75 25,050 25,125
Treasury stock retired (92,526) (4,406) (1,010,003) 1,014,409 0
Dividends to stockholders (250,171) (250,171)
Net loss (742,651) (742,651)
----------------------- ----------------------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1997 1,111,299 52,919 2,257,800 706,319 12,606,764 0 15,623,802
Change in net unrealized gain(loss) (51,125) (51,125)
Stock retired (12,012) (572) (191,048) (191,620)
Dividends to stockholders (2,264) (2,264)
Net income 343,478 343,478
--------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 1998 1,099,287 $ 52,347 $ 2,066,752 $ 655,194 $12,947,978 $ 0 $15,722,271
========= =========== =========== =========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
American Public Holdings, Inc.
Consolidated Statements of Cash Flows
For The Three Months Ended March 31, 1998 and March 31, 1997
March March
1998 1997
----- -----
OPERATING ACTIVITIES:
Net income (loss) $ 343,478 $ (17,917)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Realized loss (gain) of sale of assets (75,568) 12,521
Depreciation 83,458 89,892
Amortization of deferred policy acquisition costs 738,202 884,841
Deferred income tax expense (benefit) 185,983 (30,780)
Decrease (increase) in receivables (24,033) 128,947
Decrease (increase) in other assets 128 253
Policy acquisition costs deferred (770,042) (514,369)
Increase (decrease) in liability for future policy benefits (143,195) 86,042
Decrease in unpaid claims, accounts pay
and other liabilities (36,757) (75,797)
Increase in unearned premiums and
policyholders' dividend accumulations 24,137 28,114
----------- ----------
Net cash provided by operating activities 325,791 591,747
INVESTING ACTIVITIES:
Proceeds from sale of real estate 16,908 18,331
Purchase of fixed maturity and short-term investments (3,298,827) (4,830,000)
Mortgage and policy loan repayments 80,015 55,942
Proceeds from maturities and calls of fixed-maturity
and short-term investments 3,635,534 3,631,118
Property and equipment purchased (143,883) (97,818)
----------- ----------
Net cash provided by (used in) investing activities 289,747 (1,222,427)
FINANCING ACTIVITIES:
Dividends paid to shareholders (2,264) (57)
Payments to retire common stock (191,620) 0
----------- ----------
Net cash used in financing activities (193,884) (57)
----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 421,654 (630,737)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 608,434 602,470
----------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,030,088 $ (28,267)
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION-
Income taxes paid (refunded) $ 0 $ 0
=========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
AMERICAN PUBLIC HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED AND THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements include those of American Public
Holdings, Inc., and its wholly owned subsidiary, American Public Life
Insurance Company (APL), and APL's wholly owned subsidiary, DentaCare
Marketing and Administration, Inc. All significant inter-company balances
and transactions have been eliminated.
These interim financial statements have been prepared on the basis of
accounting principles used in the annual financial statements ended December
31, 1997, and must be read in conjunction with the 1997 statements. In the
opinion of management, the accompanying interim unaudited consolidated
financial statements contain all adjustments necessary for a fair statement
of consolidated financial position and results of operations of the Company
for the interim periods.
2. STOCKHOLDERS' EQUITY
In January 1998 the Company acquired and retired 12,012 shares of common
stock, which were purchased from a former director and past president of the
Company.
In February 1998 the Board of Directors approved a 21 for 1 stock split-up of
the Company's common stock payable on March 31, 1998. The split did not
change the value of paid-in capital and is reflected in the accompanying
financial statements as though the split had occurred at the beginning of the
earliest year presented.
3. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share are based on net income (loss) and the
weighted average number of shares outstanding during each interim period.
The number of shares used in computing the earnings per share was 1,100,088
for the quarter ended March 31, 1998 and 1,109,724 for the quarter ended
March 31, 1997.
4. COMMITMENTS AND CONTINGENCIES
The Company is required to participate in certain guaranty funds and
involuntary pools of insurance and is therefore exposed to undeterminable
future assessments resulting from the insolvency of other insurers.
The Company is involved in litigation incurred in the normal course of
business. Management of the Company, based upon the advise of legal counsel,
is of the opinion that the Company's ultimate liability, if any, which may
result from the litigation will not have a material adverse effect on the
consolidated financial condition or results of operations of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
Financial Condition - March 31, 1998 Compared to December 31, 1997
Total stockholders' equity increased by $98,469 or .63% from $15,623,802 at
December 31, 1997, to $15,722,271 at March 31, 1998. This increase was due to
net income of $343,478 for the first quarter, less a decrease of $51,125 on
unrealized gain on available for sale securities. Additionally, the Company
acquired and retired 12,012 shares of common stock, which were from the past
president of the Company.
In February 1998 the Board of Directors approved a 21 for 1 stock split-up of
the Company's common stock payable on March 31, 1998. The split did not change
the value of paid-in capital and is reflected in the accompanying financial
statements as though the split had occurred at the beginning of the earliest
year presented.
Total assets decreased by $57,346 or .11% at March 31 1998 compared to
December 31, 1997. Securities decreased by $324,043 (net of a market value
adjustment of $819,000) or .94% as the result of several bond calls during the
quarter, which resulted in an increase in cash on hand at the end of the
quarter. Deferred policy acquisition costs increased by $31,840 or .32% due to
increased writings of ordinary life insurance during the quarter. Deferred
income tax asset decreased $173,202 or 43.4% due to decreases in GAAP policy
reserves.
Total liabilities decreased by $155,815 or .42% at March 31, 1998 compared to
December 31, 1997. Future policy benefits and unpaid claims decreased $92,439
or .3 % because of the accelerated policy terminations due to implementations of
rate increases on unlimited benefit cancer policies.
Results of Operations- First Quarter 1998 Compared to First Quarter 1997
The Company experienced a net gain in the first quarter of 1998 of $343,478
compared to net loss of $17,917 in the first quarter of 1997, primarily due to
an increase of $804,036 in premium income. The impact of the increase in
premiums was offset by a $475,929 increase in benefits and claims. Operating
expenses remained level compared to expenditures for the same period last year.
Insurance taxes licenses and fees decreased $82,783 due to the cost of the
ongoing triennial examination being conducted by the Mississippi Department of
Insurance in the prior year. Revenue increased by 11.85% from $7,390,409 in the
first quarter of 1997 to $8,266,477 in the first quarter of 1998. The increase
was due to an 11.9% increase in premiums. The increase in premiums is the
result of increased sales of group insurance, but this increase has been
impacted by the decrease in cancer premiums due to policy lapses caused by rate
increases and low sales of limited chemotherapy cancer products. Net investment
income decreased as a result of recent bond calls, which resulted in lower
yields on the reinvestment of the called proceeds.
Benefits and expenses increased by $302,047 in the first quarter of 1998
compared to the first quarter of 1997, a 4.1% increase. This increase was due
to a $475,929 increase in benefits and claims. Benefits and claims increased
because of increased claims exposure from new sales of group supplemental
products such as group dental. Commissions expense increased because of the
increase in premium income. Amortization of deferred policy acquisition costs
(DPAC) decreased due to decreases in prior years in the amount of costs
deferred, resulting primarily from an increase in group insurance relative to
guaranteed renewable insurance. Insurance taxes licenses and fees decreased due
to the costs related to a triennial examination in the prior year. Other
operating expenses have remained relatively level as a result of cost cutting
measures implemented by management.
AMERICAN PUBLIC HOLDINGS, INC.
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material changes to the legal proceedings described in the
Company's Annual Report on Form 10-K (File Number 0-22479).
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company was held on April 28 1998. The following
nominees were elected to serve as directors with all of the 827,007 shares
present at the meeting voting in favor of the nominees:
Warren I. Hammett
F. Harrell Josey
Frank K. Junkin, Jr.
David A. New, Sr.
David A. New, Jr.
Jerry C. Stovall
Paul H. Watson, Jr.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27: Financial data schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1998.
AMERICAN PUBLIC HOLDINGS, INC.
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 PUBLIC HOLDINGS, INC.
(Registrant)
DATE: May 13, 1998
/s/ Jerry C. Stovall, President
and Chief Executive Officer
DATE: May 13, 1998
/s/ William F. Weems
Chief Accounting Officer