FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
4th Quarter Year ended Dec. 31,
------------------ % ------------------ %
2007 2006 Change 2007 2006 Change
-------- -------- ------ -------- -------- ------
Revenues $ 11,520 $ 5,035 129% $ 40,674 $ 22,380 82%
Income
(Loss) $ 385 $ (7,321) ** $(13,155) $ (7,724) **
Income
(Loss)
per
Diluted
Share $ 0.02 $ (0.54) ** $ (0.69) $ (0.51) **
Core
Earnings* $ 707 $ 329 115% $ 1,681 $ 1,416 19%
* Core Earnings comprise pre-tax income before interest and charges
for depreciation, amortization, non-cash stock compensation,
goodwill and other non-cash charges, restructuring charges, and
significant legal/settlement costs related to prior year
activities.
** Not meaningful
IRVING, Texas, April 2, 2008 (PRIME NEWSWIRE) -- Access Plans USA, Inc. (Nasdaq:AUSA), a nationwide distributor of health insurance and non-insurance healthcare programs that provide access to affordable healthcare for the growing number of uninsured and/or underinsured in the United States, reported its financial results for the quarter and twelve months ended December 31, 2007. The $385 thousand of fourth quarter after-tax income represents the company's first quarterly net profit since the third quarter of 2005.
Fourth quarter revenue grew 129% to $11.5 million and twelve-month revenue increased 82% to $40.2 million, primarily as a result of the acquisition of the Insurance Marketing Division operations on January 30, 2007 and the acquisition of Protective Marketing Enterprises, Inc. (PME) on October 1, 2007. Fourth quarter core earnings more than doubled from a year ago to $707 thousand and increased substantially from the $397 thousand reported for the third quarter of 2007. Total core earnings for the year grew 19% to $1.7 million, compared to $1.4 million in 2006.
Net income for the quarter totaled $385 thousand, compared to a loss of $7.3 million in the fourth quarter of 2006. Fourth quarter 2007 net income benefited from inclusion of a $200 thousand tax benefit related to re-determination of prior years' state income tax liability. For the full year, the company reported a net loss of $13.2 million, primarily due to goodwill valuation charges of $12.1 million taken in the second and third quarters and $1.1 million in legal expenses related to activities of the company in prior years.
Net Profit for the Quarter and Core Earnings Growth
"We are pleased to report our company's first quarterly profit since the third quarter of 2005," said Ian R. Stuart, Interim President and Chief Executive Officer of Access Plans USA. "These results reflect the positive impact of our two acquisitions during 2007. The Insurance Marketing Division acquisition provided a valuable new division for the company and a distribution channel for new products that we develop. Additionally, the October PME acquisition brought a block of existing business, an excellent back-office operation, proprietary dental and vision provider networks, and a patient advocacy program that we are incorporating into a number of new products we are bringing to market."
"In addition to GAAP (generally accepted accounting principles) results, we continue to also measure our performance on 'core earnings' because this measure recognizes the underlying operating activity and improvements of the company," Stuart said. "We define 'core earnings' as pre-tax income before charges for depreciation, amortization, non-cash stock compensation, goodwill and other non-cash charges, restructuring charges and significant legal expenses related to prior year company activities. For the year 2007, our core earnings increased each quarter, a reversal of 2006's declining trend, with the most significant increase occurring in the fourth quarter of 2007, reflecting the accretive impact of the PME acquisition. Page 7 of this news release sets forth a reconciliation of non-GAAP financial measures to comparable GAAP measures."
"Ending the year with strong fourth quarter earnings provided positive momentum going into 2008, and, as more fully discussed in the 'Looking Ahead' section of this news release, is an important step forward in our efforts to complete a successful turnaround of Access Plans," Stuart said.
Cash Position
The company ended the year with unrestricted cash and short-term investments of $2.7 million compared to $3.4 million at December 31, 2006. Cash generated from operating activities during the year, which aggregated to $1.8 million, was more than offset by the $2.3 million of cash used in investing and financing activities (principally the purchase of PME, self-funding of certain agent advances and debt repayments).
Results by Operating Division
Consumer Plan Division. This division primarily markets, on a national basis, medical discount cards and other membership programs that provide healthcare related services and benefits.
"Retail" membership count at December 31, 2007 totaled 39.7 thousand, up 42% from September 30, 2007, due to the addition of the 14.1 thousand PME members. Year-end membership count also included 49.0 thousand legacy PME "wholesale" members. Wholesale members are customers who are not directly billed - generally individuals who have access to the company's proprietary dental and vision networks via wholesalers who acquire these benefits at less than $1.00 per member per month; in contrast to the average net revenue per retail member per month of $27.
The addition of the PME membership contributed $1.3 million in revenue and $150 thousand of core earnings for the fourth quarter of 2007. The division's total core earnings for the fourth quarter aggregated to $447 thousand, up 35% over both the prior quarter and the prior year quarter, principally as a result of the PME acquisition. Full year 2007 core earnings of $1.4 million approximated the prior year result for the division, with a decline in legacy membership count being offset by the execution of various cost control initiatives and the fourth quarter PME contribution.
The division had total pre-tax GAAP income of $267 thousand for the quarter and a pre-tax GAAP loss of $3.4 million for the year. The loss for the year was comprised of core earnings adjusted for a $3.4 million third quarter goodwill valuation charge to write-off all of the goodwill recorded as of June 30, 2007, plus charges aggregating to $1.4 million attributable to a second quarter impairment charge relating to unsuccessful marketing initiatives, certain legal expenses relating to prior year activities, and recurring intangible asset amortization and depreciation charges.
During the fourth quarter, the Consumer Plan Division focused its efforts on commencing the integration, incubation and merger of the PME back-office operations with the company's legacy Consumer Plan operations. The company has completed the rebranding of its proprietary networks to the Access Dental Network and Access Vision Network and has recently begun to successfully execute new sales opportunities.
Insurance Marketing Division. This division provides wholesale distribution of a broad range of health insurance products through national networks of independent agents. Results prior to January 30, 2007, the date this division was acquired in connection with the merger with Insurance Capital Management USA, Inc. (ICM), are excluded from the Company's reported results.
Major medical insurance policies in-force grew at an annualized rate of 27% during 2007 to 16.4 thousand at December 31, 2007, with much of the growth coming from newer products which have lower commissions and retained margins than some legacy programs. In contrast, Medicare supplement policies in-force (which have lower revenue and margin per policy than the average major medical insurance policy) declined at an annualized rate of 12% to 12.9 thousand at December 31, 2007. The net effect of these changes generated fourth quarter 2007 revenue of $5.6 million, level with the prior quarter, and $20.1 million for the year. Core earnings grew to $444 thousand for the quarter and $1.2 million for the eleven months ended December 31, 2007, driven in part by a more disciplined and focused utilization of resources during the latter half of the year.
The division had total pre-tax GAAP income of $228 thousand for the quarter and a pre-tax GAAP loss of $4.4 million for the eleven months ended December 31, 2007. The loss for those eleven months was comprised of core earnings adjusted for a $4.6 million third quarter goodwill valuation charge, recurring intangible asset amortization and depreciation charges aggregating to $788 thousand and a second quarter impairment charge of $174 thousand attributable to an unsuccessful marketing initiative.
During the fourth quarter the division concentrated on growing the major medical book of business. To that end, during January 2008, the company entered into an agreement with Health Benefits Direct to help develop and promote the Insurint(tm) quoting technology. Insurint is a proprietary, professional-grade web-based agent portal designed to aggregate real-time quotes from multiple health insurance carriers. The user-friendly platform provides the agent with the flexibility to tailor responses to a set of detailed questions about the health of the proposed insured and dependents and to generate an optimized quote. This is expected to lead to a higher percentage of submitted policy applications being issued, thereby enhancing the consumer experience, lowering the insurance carrier's underwriting costs and improving the efficiency of the agent sales process. In addition, we will be adding to the Insurint platform certain limited benefit and supplemental plans, which will be serviced by our Consumer Plan Division.
Regional Healthcare Division. This division comprises an El Paso, Texas-based third party administrator with a proprietary medical network.
Member count at December 31, 2007 totaled 25.6 thousand, (inclusive of 14.5 thousand members that the division now no longer services in 2008, as a result of the previously disclosed loss of two major contracts). The 18% decline in member count from a year ago drove the 9% decrease in revenue from the fourth quarter of 2006 to $1.6 million for the fourth quarter of 2007 and the 11% decrease year to year to $6.7 million for 2007. For the fourth quarter, expense reductions were greater than the corresponding revenue decline, which resulted in core earnings of $374 thousand for the fourth quarter, almost level with the prior year quarter and nearly double the third quarter result. Full year 2007 core earnings aggregated to $1.1 million, down 30% from the prior year result. However, as a result of the aforementioned termination of two major contracts, we expect to incur an operating loss in 2008 in this division.
The division had total pre-tax GAAP income of $300 thousand for the quarter and a pre-tax GAAP loss of $3.6 million for the year. The loss for the year was comprised of core earnings adjusted for a $4.1 million second quarter goodwill valuation charge, plus charges aggregating to $610 thousand attributable to certain legal expense relating to prior year activities, and recurring depreciation charges. All of the previously recorded goodwill for this division has now been fully written-off.
During the fourth quarter, the company re-branded this division as Foresight TPA and has begun marketing campaigns, led by Michael Puestow, the division's new CEO hired during August 2007, targeting the generation of new sources of revenue for 2008. One early result of these marketing efforts is the recent endorsement by the El Paso Chamber of Commerce of an insurance product developed by Foresight which provides a unique limited medical benefit program. The product, designed specifically for El Paso Chamber of Commerce members, was developed to address the high numbers of working uninsured.
Looking Ahead
"We are pleased with our return to profitability in the fourth quarter of 2007, and we entered 2008 with optimism on a number of fronts," Stuart said. "We believe that the pursuit of several initiatives to drive sustainable organic earnings growth will strengthen our franchise, notwithstanding that certain start-up marketing costs for these initiatives are likely to result in some volatility in the quarterly earnings trend during 2008. While we expect further growth in our Consumer Plan and Insurance Marketing divisions in the near-term, it is unlikely to be at a level sufficient to fully offset the anticipated operating losses in our Regional Healthcare Division, at least during the first half of 2008," Stuart added. "Accordingly, a repositioning of our Regional Healthcare division, to capitalize on our excellent local proprietary network and our robust claims administration capabilities, is a top priority. Additionally, we are exploring other potential strategic alternatives for the company."
Additional financial information is set forth on the following pages:
* Condensed consolidated statement of operations, cash flow
and balance sheet data
* Reconciliation of GAAP to Non-GAAP (Core Earnings) Financial
Measures
* Supplementary financial data
About Access Plans USA
Access Plans USA provides access to affordable healthcare to individuals and families. Our health insurance products and our non-insurance healthcare discount programs are designed as affordable solutions for the growing number of uninsured and underinsured seeking a way to address rising healthcare costs. We also offer third party claims administration, provider network management, and utilization management services to employers and groups that choose to utilize partially self funded strategies to finance their benefit programs. We are committed to assuring that our clients have access to the healthcare that they need at prices they can afford. For more information on Access Plans USA, Inc. please visit www.accessplansusa.com.
The Access Plans USA, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3487
Disclaimer
Certain statements included in this news release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as "anticipate", "believes", "expects", "may", "will", or "should", or other variations thereon, and by discussions of strategies that involve risks and uncertainties. Access Plans USA, Inc. actual results or industry results may be materially different from any future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include those set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2006 and each of the Quarterly Reports on Form 10-Q filed since such date. The Company undertakes no obligation to update any forward-looking statements or to make any other forward-looking statement, whether as a result of new information, future events, or otherwise.
Access Plans USA, Inc.
Condensed Consolidated Statement of Operations, Cash Flow
and Balance Sheet Data
(Dollars in Thousands, except per share amounts)
For the For the
Quarter Ended Year Ended
December 31, December 31,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
Statement of Operations
Data:
Revenues $ 11,520 $ 5,035 $ 40,674 $ 22,380
Total operating
expenses(1) 11,319 11,934 54,420 29,244
-------- -------- -------- --------
Income (loss) before
income taxes 201 (6,899) (13,746) (6,864)
Provision for income
tax expense/(benefit) (184) 435 (591) (50)
-------- -------- -------- --------
Income (loss) from
continuing operations 385 (7,334) (13,155) (6,814)
Income (loss) from
discontinued
operations -- 13 -- (910)
-------- -------- -------- --------
Net income (loss) $ 385 $ (7,321) $(13,155) $ (7,724)
======== ======== ======== ========
Income (loss) per
share -- basic(2):
Continuing operations $ 0.02 $ (0.54) $ (0.69) $ (0.51)
======== ======== ======== ========
Discontinued
operations $ -- $ 0.00 $ -- $ (0.07)
======== ======== ======== ========
(1) Includes non-cash goodwill valuation charges of $8.0 million in
3Q07 and $4.1 million in 2Q07.
(2) Basic income (loss) per share approximates fully diluted income
(loss) per share.
For the For the
Quarter Ended Year Ended
December 31, December 31,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
Statement of Cash
Flow Data:
Net cash provided
(used) by:
Operating activities $ 812 $ (1,142) $ 1,823 $ 725
Investing activities (1,588) (1,017) (1,442) (3,263)
Financing activities (19) (51) (902) (241)
-------- -------- -------- --------
Net decrease
in cash $ (795) $ (2,210) $ (521) $ (2,779)
======== ======== ======== ========
December 31,
--------------------
Balance Sheet Data: 2007 2006
-------- --------
Cash $ 2,711 $ 3,232
Unrestricted short-term
investments -- 200
Total debt 1,255 --
Working capital 1,076 3,996
Goodwill and other
intangible assets 9,449 7,471
Shareholders' equity 11,257 13,392
Access Plans USA, Inc.
Reconciliation of GAAP to Non-GAAP (Core Earnings) Financial Measures
(Dollars in Thousands)
2007 2006
----------------------------------------- --------
4Q 3Q 2Q 1Q 4Q
-------- -------- -------- -------- --------
Pre-tax
earnings/(loss)
- GAAP
Consumer
Plan $ 267 $ (3,179) $ (640) $ 156 $ (3,063)
Insurance
Marketing 228 (4,452) (107) (40) --
Regional
Healthcare 300 (44) (4,086) 265 (3,303)
Corporate (594) (546) (597) (677) (533)
-------- -------- -------- -------- --------
Consolidated
Total $ 201 $ (8,221) $ (5,430) $ (296) $ (6,899)
-------- -------- -------- -------- --------
Reconciling
items - add
back:
a) Goodwill
valuation
charges:
Consumer
Plan -- 3,377 -- -- 2,800
Insurance
Marketing -- 4,600 -- -- --
Regional
Healthcare -- -- 4,092 -- 3,640
b) Other
impairment
charges
relating to
unsuccessful
marketing
initiatives:
Consumer
Plan 28 -- 522 -- --
Insurance
Marketing -- -- 174 -- --
c) Intangible asset
amortization:
Consumer
Plan 46 -- -- -- --
Insurance
Marketing 209 209 209 140 --
Regional
Healthcare -- -- -- -- 35
d) Depreciation
charges
Consumer
Plan 53 36 27 75 75
Insurance
Marketing 7 6 5 3 --
Regional
Healthcare 25 25 26 27 31
Corporate 2 1 1 2 3
e) Non-cash
stock
compensation
expense
Corporate 34 52 59 259 131
f) Restructuring
charge:
Consumer
Plan -- -- -- -- 449
g) Legal and
settlement
costs:
Consumer
Plan 53 93 406 37 64
Regional
Healthcare 49 219 239 -- --
Pre-tax core
earnings -
non-GAAP:
Consumer Plan $ 447 $ 327 $ 315 $ 268 $ 325
Insurance
Marketing 444 363 281 103 --
Regional
Healthcare 374 200 271 292 403
Corporate (558) (493) (537) (416) (399)
-------- -------- -------- -------- --------
$ 707 $ 397 $ 330 $ 247 $ 329
======== ======== ======== ======== ========
Year ended
December 31,
-------------------
2007 2006
-------- --------
Pre-tax earnings/(loss) - GAAP
Consumer Plan $ (3,396) $ (2,814)
Insurance Marketing (4,371) --
Regional Healthcare (3,565) (2,221)
Corporate (2,414) (1,829)
-------- --------
Consolidated Total $(13,746) $ (6,864)
-------- --------
Reconciling items - add back:
a) Goodwill valuation charges:
Consumer Plan 3,377 2,800
Insurance Marketing 4,600 --
Regional Healthcare 4,092 3,640
b) Other impairment charges relating to
unsuccessful marketing initiatives:
Consumer Plan 550 --
Insurance Marketing 174 --
c) Intangible asset amortization:
Consumer Plan 46 --
Insurance Marketing 767 --
Regional Healthcare -- 105
d) Depreciation charges
Consumer Plan 191 651
Insurance Marketing 21 --
Regional Healthcare 103 105
Corporate 6 --
e) Non-cash stock compensation expense
Corporate 404 231
f) Restructuring charge:
Consumer Plan -- 449
g) Legal and settlement costs:
Consumer Plan 589 299
Regional Healthcare 507 --
Pre-tax core earnings - non-GAAP:
Consumer Plan $ 1,357 $ 1,385
Insurance Marketing 1,191 --
Regional Healthcare 1,137 1,629
Corporate (2,004) (1,598)
-------- --------
$ 1,681 $ 1,416
======== ========
Access Plans USA, Inc.
Supplementary Financial Information (Dollars in Thousands)
2007 2006
------------------------------------- -------
4Q 3Q 2Q 1Q 4Q
------- ------- ------- ------- -------
Consumer Plan
Division
Member count - at
quarter-end (1)
Retail 39,737 27,902 28,965 30,649 31,826
Wholesale 49,019 n/a n/a n/a n/a
Revenues (1) $ 4,273 $ 3,140 $ 3,269 $ 3,122 $ 3,262
Core Earnings 447 327 315 268 325
Operating margin 10.5% 10.4% 9.6% 8.6% 10.0%
======= ======= ======= ======= =======
Insurance Marketing
Division (2)
Policies in-force
at quarter-end:
Major medical
policies 16,449 15,317 14,353 13,665 n/a
Medicare
supplement
policies 12,873 13,305 13,549 14,107 n/a
Revenues $ 5,640 $ 5,675 $ 5,403 $ 3,416 n/a
Core Earnings 444 363 281 103 n/a
Operating margin 7.9% 6.4% 5.2% 3.0% n/a
======= ======= ======= ======= =======
Regional Healthcare
Division
Member count at
quarter end 25,612 28,215 29,666 31,005 31,277
Revenues $ 1,602 $ 1,619 $ 1,709 $ 1,770 $ 1,763
Core Earnings 374 200 271 292 403
Operating margin 23.3% 12.4% 15.9% 16.5% 22.9%
======= ======= ======= ======= =======
Total Revenues
Consumer Plan $ 4,273 $ 3,140 $ 3,269 $ 3,122 $ 3,262
Insurance Marketing 5,640 5,675 5,403 3,416 n/a
Regional Healthcare 1,602 1,619 1,709 1,770 1,763
Corporate 4 5 9 18 10
------- ------- ------- ------- -------
Consolidated total $11,519 $10,439 $10,390 $ 8,326 $ 5,035
======= ======= ======= ======= =======
Total Core Earnings
Consumer Plan $ 447 $ 327 $ 315 $ 268 $ 325
Insurance Marketing 444 363 281 103 n/a
Regional Healthcare 374 200 271 292 403
Corporate (558) (493) (537) (416) (399)
------- ------- ------- ------- -------
Consolidated total $ 707 $ 397 $ 330 $ 247 $ 329
======= ======= ======= ======= =======
Year ended
December 31,
-----------------
2007 2006
------- -------
Consumer Plan Division
Member count - at quarter-end (1)
Retail 39,737 31,826
Wholesale 49,019 n/a
Revenues (1) $13,804 $14,773
Core Earnings 1,357 1,385
Operating margin 9.8% 9.4%
======= =======
Insurance Marketing Division (2)
Policies in-force at quarter-end:
Major medical policies 16,449 n/a
Medicare supplement policies 12,873 n/a
Revenues $20,134 n/a
Core Earnings 1,191 n/a
Operating margin 5.9% n/a
======= =======
Regional Healthcare Division
Member count at quarter end 25,612 31,277
Revenues $ 6,700 $ 7,525
Core Earnings 1,137 1,629
Operating margin 17.0% 21.6%
======= =======
Total Revenues
Consumer Plan $13,804 $14,773
Insurance Marketing 20,134 n/a
Regional Healthcare 6,700 7,525
Corporate 36 82
------- -------
Consolidated total $40,674 $22,380
======= =======
Total Core Earnings
Consumer Plan $ 1,357 $ 1,385
Insurance Marketing 1,191 n/a
Regional Healthcare 1,137 1,629
Corporate (2,004) (1,598)
------- -------
Consolidated total $ 1,681 $ 1,416
======= =======
(1) Protective Marketing Enterprises (PME) was acquired October 1,
2007. Accordingly, results for fiscal 3Q07 and prior exclude PME
results and members. PME membership includes "retail plan"
members and "wholesale plan" members who have purchased access to
the proprietary PME dental and vision networks at an average
revenue of about $25.00 and $1.00 per member per month,
respectively.
(2) The Insurance Marketing division was acquired January 30, 2007.
Accordingly, results for January 2007 and for fiscal 2006 have
been excluded from the above data.