UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2003 |
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Or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from _________________ to ________________ | ||
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| Commission File Number: 000-25273 | ||
| INSURANCE MANAGEMENT SOLUTIONS GROUP, INC | ||
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| (Exact name of registrant as specified in its charter) | ||
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| Florida |
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59-3422536 |
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| (State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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| 801 94th Avenue North, St. Petersburg, Florida |
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33702 |
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| (Address of Principal Executive Offices) |
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(Zip Code) |
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| (727) 803-2040 | ||
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| 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 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.
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No o |
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
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No x |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:
| Class: Common Stock, $.01 par value |
Outstanding as of May 10, 2003: 12,246,063 |
TABLE OF CONTENTS
The statements contained in this report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company’s expectations, hopes, beliefs, intentions, or strategies regarding the future. Forward-looking statements include statements regarding, among other things: (i) the ability to retain material customers; (ii) the Company’s intention to consummate the merger contemplated by the Agreement and Plan of Merger, dated April 9, 2003, among the Company, Fiserv Inc. and certain of its direct and indirect subsidiaries; (iii) trends affecting the Company’s financial condition or results of operations; (iv) the Company’s operating strategies; (v) changes in the business and/or financial condition of the Company’s clients; (vi) the ability of Bankers Insurance Group, Inc. (including its subsidiaries, “BIG”) to pay outstanding amounts owed the Company; (vii) potential increases in the Company’s costs; (viii) the impact of general economic conditions on the demand for the Company’s services; (ix) changes in existing service agreements; (x) the ability to obtain new customers and retain existing customers; (xi) the outcome of certain litigation involving the Company; (xii) the outcome of certain administrative proceedings involving BIG; and (xiii) the ability to implement expense reductions. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. All forward-looking statements included in this document are based on information available to the Company on the date hereof and the Company assumes no obligation to update any such forward-looking statement. Prospective investors should also consult the risks described from time to time in the Company’s Reports on Forms 8-K, 10-Q and 10-K and Annual Reports to Shareholders.
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INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
AND SUBSIDIARIES
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December 31, |
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March 31, |
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(unaudited) |
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| ASSETS |
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| CURRENT ASSETS |
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| Cash and cash equivalents |
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$ |
13,109,540 |
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$ |
18,155,923 |
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| Accounts receivable, net |
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1,015,450 |
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1,595,864 |
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| Due from affiliates |
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4,892,216 |
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5,751,867 |
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| Note and interest receivable – affiliate |
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6,660,259 |
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— |
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| Prepaid expenses and other assets |
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893,444 |
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665,098 |
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| Income taxes recoverable |
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1,473,895 |
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2,229,740 |
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| Total current assets |
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28,044,804 |
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28,398,492 |
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| PROPERTY AND EQUIPMENT, net |
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2,277,716 |
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1,859,497 |
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| OTHER ASSETS |
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| Goodwill |
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2,250,409 |
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2,250,409 |
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| Deferred tax assets |
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478,714 |
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272,114 |
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| Capitalized software costs, net |
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125,896 |
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88,601 |
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| Other, net |
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1,813,883 |
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1,683,611 |
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| Total assets |
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$ |
34,991,422 |
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$ |
34,552,724 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| CURRENT LIABILITIES |
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| Accounts payable, trade |
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$ |
625,863 |
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$ |
589,752 |
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| Employee related accrued expenses |
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1,125,545 |
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1,290,871 |
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| Other accrued expenses |
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1,840,267 |
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2,200,315 |
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| Total current liabilities |
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3,591,675 |
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4,080,938 |
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| COMMITMENTS AND CONTINGENCIES |
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— |
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— |
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| SHAREHOLDERS’ EQUITY |
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| Preferred Stock. $.01 par value; 20,000,000 shares authorized, no shares issued and outstanding |
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— |
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| Common Stock, $.01 par value; 100,000,000 shares authorized, 12,246,063 shares issued and outstanding at December 31, 2002 and March 31, 2003, respectively |
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122,460 |
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122,460 |
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| Additional paid-in capital |
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26,407,405 |
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26,407,405 |
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| Retained earnings |
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4,869,882 |
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3,941,921 |
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| Total shareholders’ equity |
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31,399,747 |
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30,471,786 |
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| Total liabilities and shareholders’ equity |
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$ |
34,991,422 |
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$ |
34,552,724 |
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The accompanying notes are an integral part of these consolidated statements.
1
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
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Three Months Ended March 31 |
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2002 |
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2003 |
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| REVENUES |
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| Outsourcing services – affiliated |
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$ |
7,090,233 |
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$ |
843,615 |
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| Outsourcing services |
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1,377,779 |
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3,973,258 |
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| Total revenues |
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8,468,012 |
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4,816,873 |
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| EXPENSES |
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| Cost of outsourcing services |
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7,650,792 |
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4,226,747 |
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| Selling, general and administrative |
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1,739,671 |
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1,740,890 |
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| Management services from Parent |
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122,846 |
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| Depreciation and amortization |
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648,964 |
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594,695 |
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| Total expenses |
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10,162,273 |
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6,562,332 |
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| OPERATING INCOME/(LOSS) |
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(1,694,261 |
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(1,745,459 |
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| OTHER INCOME/(EXPENSE): |
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| Interest income |
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144,416 |
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260,398 |
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| Total other income/(expense) |
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144,416 |
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260,398 |
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| INCOME/(LOSS) FROM OPERATIONS BEFORE INCOME TAXES |
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(1,549,845 |
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(1,485,061 |
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| PROVISION/(BENEFIT) FOR INCOME TAXES |
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(578,800 |
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(557,100 |
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| NET INCOME/(LOSS) |
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$ |
(971,045 |
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$ |
(927,961 |
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| NET INCOME/(LOSS) PER COMMON SHARE |
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$ |
(.08 |
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$ |
(.08 |
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| Weighted average common shares outstanding |
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12,276,063 |
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12,246,063 |
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The accompanying notes are an integral part of these consolidated statements.
2
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
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Common |
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Additional |
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Retained |
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Total |
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| Balance at December 31, 2001 |
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$ |
122,760 |
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$ |
26,394,438 |
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$ |
7,892,381 |
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$ |
34,409,579 |
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| Compensation expense related to stock options issued to non-employees |
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— |
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110,167 |
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— |
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110,167 |
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| Purchase and retirement of 30,000 shares of Common Stock |
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(300 |
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(97,200 |
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— |
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(97,500 |
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| Net Loss |
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— |
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— |
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(3,022,499 |
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(3,022,499 |
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| Balance at December 31, 2002 |
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$ |
122,460 |
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$ |
26,407,405 |
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$ |
4,869,882 |
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$ |
31,399,747 |
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| Net Loss (unaudited) |
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— |
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— |
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(927,961 |
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(927,961 |
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| Balance at March 31, 2003 (unaudited) |
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$ |
122,460 |
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$ |
26,407,405 |
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$ |
3,941,921 |
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$ |
30,471,786 |
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The accompanying notes are an integral part of these consolidated statements.
3
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31, |
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2002 |
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2003 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income/(loss) |
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$ |
(971,045 |
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$ |
(927,961 |
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| Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |
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| Depreciation and amortization expense |
648,963 |
594,695 |
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| Compensation expense related to non-employee stock options |
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45,000 |
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— |
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| Deferred income taxes, net |
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(2,300 |
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206,600 |
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| Changes in assets and liabilities: |
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| Accounts receivable, trade |
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189,070 |
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(580,414 |
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| Accounts receivable, trade--affiliate |
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836,282 |
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(859,651 |
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| Income taxes recoverable |
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(538,759 |
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(755,845 |
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| Prepaid expenses and other current assets |
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(186,344 |
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228,346 |
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| Accounts payable, trade |
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(363,886 |
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(36,111 |
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| Employee related accrued expenses |
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199,541 |
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165,326 |
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| Other accrued expenses |
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(388,618 |
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360,048 |
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| Income taxes payable |
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(1,418,415 |
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— |
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| Net cash provided by/(used in) operating activities |
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(1,950,511 |
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(1,604,967 |
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Purchases of property and equipment |
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(161,328 |
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(8,909 |
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| Payment of notes receivable – affiliated |
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— |
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6,660,259 |
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| Net cash used in investing activities |
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(161,328 |
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6,651,350 |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Net cash used in financing activities |
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— |
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— |
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| INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
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(2,111,839 |
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5,046,383 |
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| CASH AND CASH EQUIVALENTS, beginning of period |
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20,095,808 |
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13,109,540 |
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| CASH AND CASH EQUIVALENTS, end of period |
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$ |
17,983,969 |
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$ |
18,155,923 |
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The accompanying notes are an integral part of these consolidated statements.
4
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
Insurance Management Solutions Group, Inc. (together with its subsidiaries, the “Company”) is a holding company that was incorporated in the State of Florida in December 1996 by its parent, Bankers Insurance Group, Inc. (“BIG”). Historically, the Company has operated in two principal business segments: providing outsourcing services to the property and casualty insurance industry, with an emphasis on flood insurance; and providing flood zone determinations primarily to insurance companies and financial institutions. The Company