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, 1999 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, 1999
Common stock (no par value) 1,099,287 shares
AMERICAN PUBLIC HOLDINGS, INC.
Unaudited Quarterly Financial Statements
Page
Consolidated Balance Sheets 1
March 31, 1999 and December 31, 1998
Consolidated Statements of Operations 2
Three Months Ended March 31, 1999 and 1998
Changes in Stockholders' Equity 3
Twelve Months Ended December 31, 1998
Three Months Ended March 31, 1999
Consolidated Statements of Cash Flows 4
Three Months Ended March 31, 1999 and 1998
Notes To Consolidated Financial Statements 5
AMERICAN PUBLIC HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
1999 1998
ASSETS ---- ----
Investments:
Available for sale securities - at fair value (amortized cost
of $33,487,553 in 1999 and $34,638,162 in 1998) $34,139,766 $35,780,591
Mortgage loans 664,802 683,649
Investment real estate - net 660,398 673,858
Policy loans 1,423,020 1,419,072
------------ ------------
Total investments 36,887,986 38,557,170
OTHER ASSETS:
Cash and cash equivalents 1,862,249 767,080
Accrued investment income 428,397 545,855
Accounts and notes receivable net of allowance for
uncollectible accounts of $26,000 (1999) and $29,000 (1998) 589,744 464,461
Deferred policy acquisition costs 9,036,857 9,285,999
Property and equipment - net 2,281,320 2,322,711
Real estate acquired in satisfaction of debt 384,216 427,185
Deferred income tax asset 404,428 255,624
Other 42,552 71,839
------------ ------------
TOTAL ASSETS $51,917,749 $52,697,924
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Future policy benefits $32,457,171 $32,743,852
Unpaid claims 1,219,746 1,145,909
Unearned premiums 729,162 735,161
Policyholders' dividend accumulations 421,273 415,214
Accounts payable and other liabilities 1,088,093 1,106,557
------------ ------------
Total liabilities 35,915,445 36,146,693
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 1999 and 1,099,287 shares in 1998 52,347 52,347
Additional paid-in capital 2,066,752 2,066,752
Unrealized gain on available for sale securities, net of
deferred taxes of $130,000 (1999) and $228,000 (1998) 521,770 913,943
Retained earnings 13,361,435 13,518,189
------------ ------------
Total stockholders' equity 16,002,304 16,551,231
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $51,917,749 $52,697,924
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
American Public Holdings, Inc.
Consolidated Statements of Operations - GAAP Basis
For Three Months Ended March 31, 1999 and 1998
Three Months Ended March 31
---------------------------
1999 1998
---- ----
REVENUE:
Premiums $ 7,331,720 $ 7,554,827
Net investment income 651,812 628,758
Realized investment gains (losses) (13,923) 75,568
Other Income 4,216 7,324
------------- -------------
7,973,825 8,266,477
BENEFITS AND EXPENSES:
Benefits and claims 5,473,681 5,273,296
Commissions expense 592,505 612,909
Salaries and benefits 665,428 574,201
Amortization of deferred policy
acquisition costs 833,553 738,202
Insurance taxes, licenses and fees 263,507 227,490
Other operating expenses 331,394 271,983
------------- -------------
8,160,068 7,698,081
------------- -------------
INCOME (LOSS) BEFORE INCOME TAX
PROVISION (BENEFIT) (186,243) 568,396
INCOME TAX PROVISION (BENEFIT) (29,513) 224,918
------------- -------------
NET INCOME (LOSS) $ (156,730) $ 343,478
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Decrease in unrealized gain on
investment securities (490,216) (63,906)
Reclassification of (gains) losses
included in net income 98,043 12,781
------------- -------------
COMPREHENSIVE INCOME (548,903) 292,353
============= =============
NET INCOME (LOSS) PER SHARE $ (0.14) $ 0.31
============= =============
See notes to consolidated financial statements.
American Public Holdings, Inc.
Consolidated Statements of Changes in Stockholders' Equity - GAAP Basis
For Periods Indicated
Accumulated
Common Stock Additional Other Comp- Total
---------------------- Paid-in rehensive Retained Treasury Stockholders'
Shares Amount Capital Income Earnings Stock Equity
---------- ---------- ------------ ------------ ------------- -------- --------------
BALANCE, January 1, 1998 1,111,299 $ 52,919 $ 2,257,800 $ 706,319 $ 12,606,764 $ 0 $ 15,623,802
Change in net unrealized gain
(loss) 207,624 207,624
Stock Retired (12,012) (572) (191,048) (191,620)
Dividends to stockholders (10,347) (10,347)
Net income 921,772 921,772
0
---------- ---------- ------------ ------------- ------------- -------- --------------
BALANCE, DECEMBER 31, 1998 1,099,287 52,347 2,066,752 913,943 13,518,189 0 16,551,231
Change in net unrealized gain
(loss) (392,173) (392,173)
Dividends to stockholders (24) (24)
Net income (loss) (156,730) (156,730)
0
---------- ---------- ------------ ------------- ------------- -------- --------------
BALANCE, MARCH 31, 1999 1,099,287 $ 52,347 $ 2,066,752 $ 521,770 $ 13,361,435 $ 0 $ 16,002,304
========== ========== ============ ============= ============= ======== ==============
<FN>
See notes to consolidated financial statements.
</FN>
American Public Holdings, Inc.
Consolidated Statements of Cash Flows
For The Three Months Ended March 31, 1999 and March 31, 1998
March March
1999 1998
----- -----
OPERATING ACTIVITIES:
Net income (loss) $ (156,730) $ 343,478
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Realized loss (gain) of sale of assets 13,923 (75,568)
Depreciation 99,140 83,458
Amortization of deferred policy acquisition costs 833,553 738,202
Deferred income tax expense (benefit) (50,761) 185,983
Decrease (increase) in receivables (7,825) (24,033)
Decrease (increase) in other assets 29,287 128
Policy acquisition costs deferred (584,411) (770,042)
Increase (decrease) in liability for future policy
benefits (286,681) (143,195)
Increase (decrease) in other liabilities 55,433 (12,620)
----------- ----------
Net cash provided by operating activities (55,072) 325,791
INVESTING ACTIVITIES:
Proceeds from sale of real estate 24,256 16,908
Purchase of fixed maturity and short-term investments (13,212,289) (3,298,827)
Mortgage and policy loan repayments 14,899 80,015
Proceeds from maturities and calls of fixed-maturity
and short-term investments 14,367,688 3,635,534
Property and equipment purchased (44,289) (143,883)
----------- -----------
Net cash used in investing activities 1,150,265 289,747
FINANCING ACTIVITIES:
Dividends paid to shareholders (24) (2,264)
Payments to retire common stock (191,620)
----------- -----------
Net cash used in financing activities (24) (193,884)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,095,169 421,654
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 767,080 608,434
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,862,249 $ 1,030,088
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION-
Income taxes paid (refunded) $ 0 $ 0
=========== ===========
See notes to consolidated financial statements.
AMERICAN PUBLIC HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED AND THREE MONTHS ENDED MARCH 31. 1999 AND 1998
(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, 1998, and must be read in conjunction with the 1998
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
the Company.
In February 1998 the Board of Directors approved a 20 for 1 stock split-up
effected in the form of a stock dividend 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 1,099,287
for the quarter ended March 31, 1999 and 1,109,724 for the quarter ended
March 31, 1998.
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, 1999 AND 1998
Financial Condition - March 31, 1999 Compared to December 31, 1998
Total stockholders' equity decreased by $548,927 or 3.31% from $16,551,231
at December 31, 1998, to $16,002,304 at March 31, 1999. This decrease was due
to a net loss of $156,730 for the first quarter and a decrease in the unrealized
gain on investment securities.
Total assets decreased by $780,175 or 1.48% at March 31, 1999 compared to
December 31, 1998. Securities decreased by $1,640,825 (net of a market value
adjustment of $490,216) or 4.59% as the result of collections of principal
payments on mortgage backed securities, which had not been reinvested by the end
of the quarter. Deferred policy acquisition costs decreased by $249,142 or
2.68% due to fewer writings of ordinary life insurance during the quarter. Total
liabilities decreased $231,248 at March 31, 1999 compared to December 31, 1998.
Future policy benefits and unpaid claims decreased $212,844 or .63 % because of
the accelerated policy terminations due to implementation of rate increases on
unlimited benefit cancer policies. Accounts payable and other liabilities
decreased $18,464 as a result of payment of year end premium tax liabilities.
Results of Operations- First Quarter 1999 Compared to First Quarter 1998
The Company experienced a net loss in the first quarter of 1999 of $156,730
compared to net gain of $343,478 in the first quarter of 1998, primarily due to
an decrease of $223,107 in premium income and an increase of $200,385 in
benefits and claims.
Revenue decreased by 3.54% from $8,266,477 in the first quarter of 1998 to
$7,973,825 in the first quarter of 1999. The decrease was due to an 2.95%
decrease in premiums. The decrease in premiums is the result of policy lapses
caused by rate increases and relatively flat sales during the fourth quarter
of 1998 and the first quarter of 1999 as compared to the same periods in
previous year. Net investment income increased as a result of additional
revenue from reinvesting cash flow from the prior year.
Benefits and expenses increased by $461,987 in the first quarter of 1999
compared to the first quarter of 1998, a 6.0% increase. This increase was due
to a $200,385 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 decreased because of the
decrease in sales. Amortization of deferred policy acquisition costs (DPAC)
increased due to an increase in lapses of cancer policies. Salaries and benefits
and other operating expenses have increased due to additional staffing added
during the fourth quarter of 1998. Additionally, the Company invested in a new
logo, and a regional advertising campaign designed for the recruitment on new
agents. Taxes, licenses and fees have increased over the prior year as a result
of higher payroll taxes.
The decrease in unrealized gain in investment securities of $490,216 was
due to market factors, which affected the value of the Company's investment
portfolio generally.
AMERICAN PUBLIC HOLDINGS, INC.
PART II: OTHER INFORMATION
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, 1999.
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 17, 1999 BY:
----------------------------------
Joseph C. Hartley, Jr., Secretary
DATE: May 17, 1999 BY:
----------------------------------
William F. Weems
Chief Accounting Officer