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| UAHC > SEC Filings for UAHC > Form 10-Q on 8-May-2009 | All Recent SEC Filings |
8-May-2009
Quarterly Report
on November 1, 2008, after which UAHC-TN continues to perform its remaining
contractual obligations through its TennCare contract expiration date of
June 30, 2009. However, revenue under this contract was only earned through
October 31, 2008. Revenue under this contract represented 40% and 59% of the
Company's total revenue for the nine months ended March 31, 2009 and 2008,
respectively. Total net loss related to this contract discontinuance is
estimated to range between $4.6 million and $6.6 million, which includes claim
processing costs, employee severance and retention payments, and other corporate
general administrative expenses beginning November 2008 through June 2009.
Through the third quarter of fiscal 2009, the Company incurred approximately
$3.8 million of such estimated costs. The Company has subleased its leased
Tennessee facility to a third party effective April 2009 and ending December 31,
2010. As of December 31, 2008, the Company recorded a liability of $0.1 million
related to the remaining lease obligation. As a result of the impending contract
termination, the Company also sold fixed assets and recognized a loss on
disposal of $0.1 million during the second quarter of fiscal 2009. The
discontinuance of the TennCare contract has had and will continue to have a
material adverse impact on the Company's operations and financial statements. As
of March 31, 2009, there were no TennCare enrollees in UAHC-TN.
On October 10, 2006, UAHC-TN entered into a contract with the Centers for
Medicare & Medicaid Services ("CMS") to act as a Medicare Advantage qualified
organization. The contract authorizes UAHC-TN to serve members enrolled in both
the Tennessee Medicaid and Medicare programs, commonly referred to as
"dual-eligibles," specifically to offer a Special Needs Plan to its eligible
members in Shelby County, Tennessee (including the City of Memphis), and to
operate a Voluntary Medicare Prescription Drug Plan, both beginning January 1,
2007. The contract term is through December 31, 2009. As of May 1, 2009 there
were approximately 647 enrollees in UAHC-TN's Medicare Advantage Special Needs
Plan (our "MA-SNP").
The total number of employees of the Company at March 31, 2009 was 25 compared
to 122 at March 31, 2008. The impending expiration of the TennCare contract has
resulted in a substantial decrease in the total number of employees, and
management expects a further substantial decrease by the contract's June 30,
2009 expiration date.
Total fixed administrative fees related to TennCare's ASO program (as described
under the heading "Liquidity and Capital Resources" below) decreased by
$3.6 million (100%) to $0 for the three months ended March 31, 2009 compared to
the three months ended March 31, 2008. The decrease is due to all enrollees
being transferred to other managed care organizations on November 1, 2008.
There were no variable administrative fees resulting from modified risk
arrangement ("MRA") revenue, incentive bonus revenue based on performance
relative to benchmarks, for the three months ended March 31, 2009. Variable
administrative fees resulting from MRA revenue were $1.4 million for the three
months ended March 31, 2008. The $1.4 million MRA revenue received in fiscal
2008 relates to the third quarter of fiscal 2006.
Our MA-SNP medical premiums revenue was $2.6 million for the three months ended
March 31, 2009 compared to $2.9 million for the three months ended March 31,
2008. The decrease of $0.3 million (10%) is attributable to the decrease in our
MA-SNP enrollees.
Our MA-SNP per member per month ("PMPM") premium rate for the three months ended
March 31, 2009 was $1,236 compared to $1,232 for the three months ended
March 31, 2008.
Total expenses decreased $4.7 million (45%) to $5.8 million for the three months
ended March 31, 2009 as compared to $10.5 million for the three months ended
March 31, 2008. The decrease in total expenses was primarily the result of a
decrease in marketing, general and administrative expenses.
Medical expenses for our MA-SNP increased $0.1 million (4%) to $2.6 million for
the three months ended March 31, 2009 compared to $2.5 million for the three
months ended March 31, 2008. The ratio of such medical expenses to medical
premiums revenue for our MA-SNP, expressed as a percentage - the medical loss
ratio ("MLR") - was 95.0% for the three months ended March 31, 2009 compared to
87.5% for the three months ended March 31, 2008.
Marketing, general and administrative expenses decreased $1.4 million (31%) to
$3.1 million for the three months ended March 31, 2009 from $4.5 million for the
three months ended March 31, 2008. The decrease was principally due to
reductions in labor costs, adminstrative costs and professional services
expenses resulting from the impending TennCare contract expiration partially
offset by severance and related expenses.
Income tax benefit was ($0.04) million for the three months ended March 31, 2009
compared to income tax expense of $1.5 million for the three months ended
March 31, 2008. The Company's effective tax rate for the three months ended
March 31, 2009 differs from the statutory rate of 34%. This difference is
primarily related to the change in the deferred tax valuation allowance.
Depreciation and amortization expense was $0.03 million for the three months
ended March 31, 2009, a decrease from $0.05 million for the three months ended
March 31, 2008.
Loss before income taxes was $3.1 million for the quarter ended March 31, 2009
compared to loss before income taxes of $2.3 million for the quarter ended
March 31, 2008.
Net loss was $3.0 million, or ($0.35) per basic share, for the quarter ended
March 31, 2009, compared to net loss of $3.8 million, or ($0.43) per basic
share, for the quarter ended March 31, 2008. The decrease is primarily due to
the decrease in overall revenue resulting from the impending expiration of the
TennCare contract.
For the Nine Months Ended March 31, 2009 Compared to the Nine Months Ended
March 31, 2008
Total revenue decreased $7.5 million (35%) to $14.0 million for the nine months
ended March 31, 2009, compared to $21.5 million for the nine months ended
March 31, 2008. The decrease was principally due to the decrease in TennCare
revenue primarily due to the transfer of UAHC-TN's TennCare enrollees to other
managed care organizations on November 1, 2008 and the impending discontinuance
of its managed care services as a TennCare contractor.
Fixed administrative fees related to TennCare's ASO program were $4.6 million
for the nine months ended March 31, 2009, compared to $11.0 million for the nine
months ended March 31, 2008. The $6.4 million (58%) decrease is due all
enrollees being transferred to other managed care organizations on November 1,
2008.
Variable administrative fees resulting from MRA revenue were $0.9 million for
the nine months ended March 31, 2009, compared to $1.7 million for the nine
months ended March 31, 2008. The $0.9 million MRA revenue received in fiscal
2009 relates to fiscal 2008. The $1.7 million MRA revenue received in fiscal
2008 relates to the third quarter of fiscal 2006.
Our MA-SNP medical premiums revenue was $7.9 million for the nine months ended
March 31, 2009 compared to $7.7 million for the nine months ended March 31,
2008. The increase of $0.2 million is attributable to the receipt of retroactive
payments during the nine months ended March 31, 2009.
Our MA-SNP per member per month ("PMPM") premium rate for the nine months ended
March 31, 2009 was $1,153 compared to $1,196 for the nine months ended March 31,
2008.
Total expenses decreased $5.2 million (22%) to $18.1 million for the nine months
ended March 31, 2009 as compared to $23.3 million for the nine months ended
March 31, 2008. The decrease is primarily due to a decrease in marketing,
general and administrative expenses.
Medical expenses for our MA-SNP were $7.4 million for the nine months ended
March 31, 2009, compared to $7.0 million for the nine months ended March 31,
2008. The ratio of such medical expenses to medical premiums revenue for our MA
-SNP, expressed as a percentage - the medical loss ratio ("MLR") - was 94.6% for
the nine months ended March 31, 2009 compared to 90.4% for the nine months ended
March 31, 2008.
Marketing, general and administrative expenses decreased $2.3 million (18%) to
$10.4 million for the nine months ended March 31, 2009 from $12.8 million for
the nine months ended March 31, 2008. The decrease was principally due to
reductions in labor
costs, administrative costs and professional services expenses resulting from
the impending TennCare contract expiration partially offset by severance and
related expenses.
Depreciation and amortization expense was $0.1 million for the nine months ended
March 31, 2009, compared to $0.1 million for the nine months ended March 31,
2008.
Income tax expense was $0.04 million for the nine months ended March 31, 2009
compared to $1.6 million for the nine months ended March 31, 2008. The Company's
effective tax rate for the nine months ended March 31, 2009 is (1%) and differs
from the statutory rate of 34%. This difference is primarily related to the
change in the deferred tax valuation allowance and state income taxes.
Loss before income taxes was $4.2 million for the nine months ended March 31,
2009 compared to a loss before income taxes of $1.8 million for the nine months
ended March 31, 2008.
Net loss was $4.2 million, or ($0.48) per basic share, for the nine months ended
March 31, 2009, compared to net loss of $3.4 million, or ($0.40) per basic
share, for the nine months ended March 31, 2008. The decrease is primarily due
to the decrease in overall revenue resulting from the impending expiration of
the TennCare contract.
principally due to a decrease in cash flow from operating activities as a result
of the impending expiration of the TennCare contract, which offset cash provided
by financing activities. (See Note 5 to our Unaudited Condensed Consolidated
Financial Statements in Part I, Item 1.)
Accounts receivable from the State of Tennessee decreased $1.0 million at
March 31, 2009 compared to June 30, 2008, primarily due to the impending
expiration of the TennCare contract. (See Note 5 to our Unaudited Condensed
Consolidated Financial Statements in Part I, Item 1.)
Property, plant and equipment decreased by $0.3 million at March 31, 2009
compared to June 30, 2008, due to the disposal of fixed assets associated with
the sublease of the Tennessee facility and the recording depreciation of
$0.1 million.
The Company's subsidiary, UAHC-TN, had a required minimum net worth requirement
using statutory accounting practices of $7.1 million at March 31, 2009. UAHC-TN
had excess statutory net worth of approximately $3.4 million at March 31, 2009.
As described in Note 5 to our Unaudited Condensed Consolidated Financial
Statements in Part I, Item 1, on April 22, 2008, we learned that UAHC-TN will
cease providing managed care services as a TennCare contractor when its present
TennCare contract expires. The discontinuance of the TennCare contract has had
and will continue to have a material adverse impact on the Company's operations
and financial statments.
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