e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 000-30099
Access Plans, Inc.
(Exact name of registrant as specified in its charter)
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OKLAHOMA
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27-1846323 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
900 36th Avenue, Suite 105, Norman, OK 73072
(Address of principal executive offices and zip code)
Registrants telephone number, including area code: (405) 579-8525
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the preceding 12 months (or for such
shorter periods that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a small reporting company.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of August 11, 2011, 19,927,204 shares of the registrants common stock, $.001 par value were
outstanding.
PART I. FINANCIAL INFORMATION
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Item 1. |
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Financial Statements |
Access Plans, Inc.
Condensed Consolidated Balance Sheets
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June 30, 2011 |
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September 30, 2010 |
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(Unaudited) |
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(Audited) |
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Assets |
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Cash and cash equivalents |
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$ |
11,931,056 |
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$ |
5,380,571 |
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Restricted cash |
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213,081 |
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786,871 |
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Accounts receivable, net |
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3,881,976 |
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4,429,885 |
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Advanced agency commissions, net |
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2,027,095 |
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4,619,814 |
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Deferred income taxes |
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691,996 |
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1,010,000 |
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Prepaid expenses |
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24,568 |
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69,987 |
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Total current assets |
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18,769,772 |
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16,297,128 |
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Furniture, fixtures and equipment, net |
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188,432 |
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327,560 |
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Goodwill |
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4,376,339 |
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4,376,339 |
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Intangibles, net |
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2,287,066 |
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3,010,823 |
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Deferred income taxes |
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646,970 |
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736,000 |
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Other assets |
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66,486 |
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103,722 |
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Total assets |
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$ |
26,335,065 |
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$ |
24,851,572 |
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Liabilities and stockholders equity |
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Current liabilities: |
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Accounts payable |
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$ |
1,358,321 |
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$ |
907,586 |
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Accrued commissions |
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481,241 |
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582,729 |
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Unearned commissions |
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2,174,312 |
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4,571,883 |
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Waiver reimbursement liability |
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644,300 |
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846,600 |
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Deferred revenue |
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243,710 |
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857,942 |
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Notes payable |
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352,298 |
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Liability for unrecognized tax benefit |
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166,000 |
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166,000 |
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Other accrued liabilities |
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2,018,393 |
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2,352,486 |
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Total current liabilities |
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7,086,277 |
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10,637,524 |
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Total liabilities |
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7,086,277 |
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10,637,524 |
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Stockholders equity: |
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Common stock, $.001 par value;
100,000,000 shares authorized; 19,927,204
and 19,877,204 shares issued and
outstanding, respectively |
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19,927 |
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19,877 |
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Additional paid-in-capital |
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11,385,598 |
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11,259,020 |
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Accumulated earnings |
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7,843,263 |
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2,935,151 |
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Total stockholders equity |
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19,248,788 |
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14,214,048 |
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Total liabilities and stockholders equity |
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$ |
26,335,065 |
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$ |
24,851,572 |
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See the accompanying notes to the condensed consolidated financial statements.
3
Access Plans, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Net revenues |
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$ |
13,077,323 |
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$ |
14,370,700 |
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$ |
41,134,518 |
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$ |
41,133,914 |
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Direct costs |
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7,288,752 |
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10,129,292 |
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24,224,936 |
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28,389,961 |
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Gross profit |
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5,788,571 |
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4,241,408 |
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16,909,582 |
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12,743,953 |
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Marketing and sales expenses |
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429,510 |
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589,933 |
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1,352,776 |
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1,794,051 |
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General and administrative expenses |
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2,109,219 |
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2,016,780 |
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6,147,452 |
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5,844,889 |
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Depreciation and amortization |
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291,706 |
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292,251 |
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867,218 |
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865,855 |
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Operating income |
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2,958,136 |
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1,342,444 |
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8,542,136 |
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4,239,158 |
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Other income (expense): |
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Other income (expense) |
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(27,000 |
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40,444 |
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Interest income |
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11,606 |
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7,969 |
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29,782 |
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26,570 |
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Interest (expense) |
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(886 |
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(17,683 |
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(47,140 |
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Total other income (expense): |
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10,720 |
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(19,031 |
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12,099 |
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19,874 |
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Income before income taxes |
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2,968,856 |
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1,323,413 |
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8,554,235 |
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4,259,032 |
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Provision for income taxes |
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Current |
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1,279,196 |
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104,498 |
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3,238,822 |
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1,046,028 |
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Deferred tax (benefit) |
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164,153 |
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270,565 |
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407,301 |
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632,850 |
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Total provision for income taxes |
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1,443,349 |
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375,063 |
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3,646,123 |
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1,678,878 |
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Net income |
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$ |
1,525,507 |
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$ |
948,350 |
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$ |
4,908,112 |
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$ |
2,580,154 |
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Per share data: |
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Basic |
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$ |
0.08 |
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$ |
0.05 |
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$ |
0.25 |
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$ |
0.13 |
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Diluted |
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$ |
0.07 |
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$ |
0.05 |
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$ |
0.24 |
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$ |
0.13 |
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Average Shares Outstanding: |
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Basic |
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19,927,204 |
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19,777,204 |
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19,899,365 |
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19,954,014 |
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Diluted |
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20,998,280 |
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20,009,146 |
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20,618,795 |
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20,134,261 |
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See the accompanying notes to the condensed consolidated financial statements.
4
Access Plans, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Nine Months Ended |
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June 30, |
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2011 |
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2010 |
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Cash flows from operating activities |
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Net income |
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$ |
4,908,112 |
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$ |
2,580,154 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Deferred tax expense |
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407,301 |
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632,850 |
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Depreciation and amortization |
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867,218 |
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865,855 |
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Amortization of loan discount to interest expense |
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38,643 |
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Stock-based compensation |
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126,628 |
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8,622 |
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Gain on reduction in related party debt |
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(94,444 |
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Provision for losses on receivables |
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37,156 |
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(11,852 |
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Gain on disposal of assets |
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3,792 |
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Change in operating assets and liabilities: |
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Receivables |
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510,753 |
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(1,320,992 |
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Advanced agency commissions |
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2,592,719 |
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773,398 |
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Prepaid expenses and other assets |
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82,387 |
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115,709 |
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Accounts payable |
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450,735 |
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414,306 |
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Accrued commissions |
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(101,489 |
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(68,372 |
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Unearned commissions |
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(2,397,571 |
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(829,019 |
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Deferred revenue |
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(614,232 |
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(21,626 |
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Claims and other accrued liabilities |
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(536,392 |
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(1,120,910 |
) |
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Net cash provided by operating activities |
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6,337,117 |
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1,962,322 |
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Cash flows from investing activities |
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Decrease in restricted cash |
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573,790 |
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275,219 |
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Purchase of equipment |
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(8,125 |
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(112,910 |
) |
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Net cash provided by investing activities |
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565,665 |
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162,309 |
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Cash flows from financing activities |
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Proceeds from short term debt |
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195,800 |
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Payments of related party term debt |
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(1,030,348 |
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Payments on other debt |
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(352,297 |
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(513,287 |
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Purchase of treasury stock |
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(500,000 |
) |
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Net cash (used in) financing activities |
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(352,297 |
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(1,847,835 |
) |
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Net increase in cash and cash equivalents |
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6,550,485 |
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276,796 |
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Cash and cash equivalents at beginning of period |
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5,380,571 |
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4,108,183 |
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Cash and cash equivalents at end of period |
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$ |
11,931,056 |
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$ |
4,384,979 |
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See the accompanying notes to the condensed consolidated financial statements.
5
ACCESS PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011
(UNAUDITED)
NOTE 1 NATURE OF BUSINESS
Access Plans, Inc. (the Company) develops and distributes consumer membership plans and consumer
driven healthcare programs.
The Companys operations are currently organized under four segments:
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Wholesale Plans Division plan offerings are customized membership marketing plans
primarily offered at rent-to-own retail stores. |
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Retail Plans Division plan offerings are primarily healthcare savings plans. These
plans are not insurance, but allow members access to a variety of healthcare networks to
obtain discounts from usual and customary fees. |
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Insurance Marketing Division markets individual major medical health insurance and
other insurance products through a national network of independent agents. |
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Corporate includes compensation and other expenses for individuals performing
services for administration of overall operations of the Company. |
NOTE 2 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are adequate to make the
information not misleading. It is suggested that these condensed consolidated financial statements
be read in conjunction with the financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K for the year ended September 30, 2010.
All adjustments that, in the opinion of management, are necessary for a fair presentation for the
periods presented have been reflected as required by Regulation S-X, Rule 10-01. All such
adjustments made during the nine months ended June 30, 2011 and 2010 are of a normal, recurring
nature.
RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements
In December 2010, the FASB issued Accounting Standards Update No. 2010-28 (ASU 2010-28),
IntangiblesGoodwill and Other (Topic 350), When to Perform Step 2 of the Goodwill Impairment Test
for Reporting Units with Zero or Negative Carrying Amounts. The amendments in this Update modify
Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts.
For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test
if it is more likely than not that a goodwill impairment exists. In determining whether it is more
likely than not that a goodwill impairment exists, an entity should consider whether there are any
adverse qualitative factors indicating that an impairment may exist. The qualitative factors are
consistent with the existing guidance, which requires that goodwill of a reporting unit be tested
for impairment between annual tests if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying amount. The amendments
in this Update are effective for fiscal years, and interim periods within those years, beginning
after December 15, 2010. ASU 2010-28 was effective for the Company beginning January 1, 2011 and
did not have a material impact on the Companys financial position, results of operations, cash
flows and disclosures.
6
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2010, the FASB issued Accounting Standards Update No. 2010-29 (ASU 2010-29), Business
Combinations (Topic 805) Disclosure of Supplementary Pro Forma Information for Business
Combinations. ASU 2010-29 requires a public entity to disclose pro forma information for business
combinations that occurred in the current reporting period. The disclosures include pro forma
revenue and earnings of the combined business combinations that occurred during the year had been
as of the beginning of the annual reporting period. If comparative financial statements are
presented, the pro forma revenue and earnings of the combined entity for the comparable prior
reporting period should be reported as though the acquisition date for all business combinations
that occurred during the current year had been as of the beginning of the comparable prior annual
reporting period. The amendments in this update are effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2010 effective for the Company beginning
September 30, 2011. The adoption of this accounting standard is not expected to have a material
impact on the Companys financial position, results of operations, cash flows and disclosures.
NOTE 3 SIGNIFICANT ACCOUNTING POLICIES
Accounts Receivable and Credit Policies
Accounts receivable are presented net of the allowance for doubtful accounts established to provide
for losses on uncollectible accounts based on managements estimates and historical collection
experience. The allowance for doubtful accounts was $112,411 and $98,929, respectively, at June 30,
2011 and September 30, 2010. The Company recorded bad debt expense of $37,156 and $0, respectively
for the nine months ended June 30, 2011 and 2010.
Advanced Agent Commissions
For the Companys Insurance Marketing Division, the allowance for doubtful recoveries for advanced
agent commissions is determined based primarily upon estimates of the recovery of future
commissions expected to be earned by the insurance agents to whom advances are outstanding and,
where applicable, the agents responsible for the management of those agents.
The allowance for doubtful recoveries reflects significant judgment regarding the estimates used in
the determination of the allowance. Accordingly, subsequent actual results may differ from the
assumptions and estimates utilized for the analysis at June 30, 2011.
Revenue Recognition
Revenue for each of our segments is presented on a gross basis. The Company contracts with its
clients to offer the Companys products to clients consumers at a contractually agreed upon per
member, per month rate, which is the amount of revenue recognized on a monthly basis. The
Companys clients determine their own markup above their contracted rate with us and that amount
has no impact on our revenue.
The Company recognizes revenue when four basic criteria are met:
|
|
|
Persuasive evidence of an arrangement exists; |
|
|
|
Delivery has occurred or services have been rendered; |
|
|
|
The sellers price to the buyer is fixed or determinable; and, |
|
|
|
Collectability is reasonably assured. |
7
The Companys revenue recognition varies based on source.
Wholesale Plans The Wholesale Plans membership offerings are made primarily through Rental
Purchase businesses to their customers as an incremental add-on sale to their rental of durable
household merchandise. These businesses contract with us to provide a package of benefits to their
enrolled customers that we support with member fulfillment and customer service. They pay us a per
enrolled member fee per month.
The Wholesale Plans segment offers benefits that includes reimbursing
the client for certain expenses incurred
in the operation of a particular membership program. Under these arrangements, the Company is
responsible for reimbursing the client when (under the terms of the agreement with its customer)
the client waives rental payments required of the customer under specifically defined and limited
circumstances, including when the customer becomes unemployed for a stated period of time or when
the Companys client provides product service to its customer. These client reimbursements are
expensed as incurred. See Note 9.
The product service costs relate to an element of some of the Companys plan offerings in the
Wholesale Plans division. This product service expense represents costs the Company incurs on the
repair of household merchandise. Plan members that complete their rental purchase term and choose
to continue on a month-to-month membership are entitled to repair or replacement of such
merchandise by the dealer in cases of mechanical failure. The Company reimburses the dealer for
these costs. This element of a members plan terminates 12 months following the members date of
product ownership (12 months following the end of the members rental term) or at any time that the
member does not maintain its month-to-month membership.
Retail Plans The Retail Plans membership offerings are in conjunction with non-Rental Purchases
businesses, direct to consumers via the internet or a multi-level marketing channel. The Companys
clients in this segment include insurance companies, household product retailers, pharmacies,
employer groups, financial organizations and associations. Over half of the revenue of this
segment is derived from membership plans whereby consumers make periodic membership payments
directly to the Company generally on a monthly basis via credit card, debit card or ACH. The
Company recognizes this revenue on a monthly basis. The remainder of revenue within this segment
is derived from membership plan sales whereby the fees are collected by the Companys clients or
where the Company has contractual arrangements to provide administrative services for a membership
offering.
Benefits and costs associated with our Wholesale and Retail Plans membership offerings are as
follows:
|
|
|
Discount Medical In order to deliver our discount medical membership offerings,
the Company contracts with third parties that have established national networks of
service providers which have agreed to provide discounts to the Companys members.
The Company pays the company that organized the network a per member, per month fee
for the Companys members to access the network of providers and the Company expense
these fees on a monthly basis as incurred. The network service provider is
responsible for funding the discounts to the Companys members. |
|
|
|
Insurance For its insurance offerings, the Company contracts with a third party
insurance company to provide the coverage the Companys members have selected.
Multiple insurance products are available and each product has a contractually agreed
upon premium associated with it. The Company pays and expenses the premium for each
members plan on a monthly basis. The third party insurance company is responsible
for providing the coverage. |
|
|
|
Automotive Discounts The automotive service offerings are furnished by a third
party provider whose services are outsourced to independent contractors of the
provider. We pay the third party provider a per member, per month fee for its
services. The third party provider is responsible for funding the services to its
independent contractors. |
|
|
|
Food and Entertainment and Other Miscellaneous Benefits These services are also
furnished by a third party provider who has established a network of 250,000 retail
locations that has agreed to provide discounts to the Companys members. The Company
pays the third party provider a per member, per month fee for the Companys members
to access providers network of retail locations. Each retail location is
responsible for funding the discounts to the Companys members. |
8
Insurance Marketing revenue reflects commissions and fees reported to the Company by insurance
companies for policies sold by the divisions agents. Commissions and fees collected are
recognized as earned on a monthly basis until the time that the underlying contract is reported to
the division as terminated. The Companys commission rates vary by insurance carrier, the type of
policy purchased by the policyholder and the amount of time the policy has been active, with
commission rates typically being higher during the first 12 months of the policy period. Revenue
also includes administrative fees the Company charges and the interest income earned on commissions
advanced to the divisions agents.
Unearned commissions comprise commission advances received from insurance carriers that are not yet
earned or collected. These advances are subject to repayment to the carrier in the event that the
policy lapses before the advanced commissions are earned and collected. Additionally, enrollment
fees received are recorded as deferred revenue and amortized over the expected weighted-average
life of the policies sold, which currently approximates 18 months. Policy acquisition costs,
principally lead and marketing credits, are capitalized and amortized over the same
weighted-average life, to the extent the deferred costs do not exceed the related gross deferred
revenue. Any excess costs are expensed as incurred.
Commission Expense
Commission expense is based on the applicable rates applied to membership revenues billed or
insurance commissions collected, and are recognized as incurred on a monthly basis until the
underlying program member or insurance policy is terminated.
The Insurance Marketing Division advances agent commissions, up to nine months, for certain
insurance programs. The advance commissions to the Companys agents are funded partly by the
insurance carriers represented and partly by the Company. These commissions advanced to agents are
reflected on the balance sheet as advanced agent commissions. Collection of the commissions
advanced (plus accrued interest) is accomplished by withholding amounts earned by the agent on the
policy upon which the advance was made. In the event of early termination of the underlying policy,
this Division seeks to recover the unpaid advance balance by withholding advanced and earned
commissions on other policies sold by the agent. This Division also has the contractual right to
pursue other sources of recovery, including recovery from the agents managing the agent to whom
advances were made.
This allowance requires judgment and is based primarily upon estimates of the recovery of future
commissions expected to be earned by the agents with outstanding balances and, where applicable,
the agents responsible for their management. Advances are written off when determined to be
non-collectible.
The Retail Plans Division advances agents commissions for certain retail plan programs. The
advance commissions to the Companys agents are funded by the Company and are reflected on the
balance sheet as advanced agent commissions. Collection of the commissions advanced is
accomplished by withholding amounts earned by the agent on the memberships upon which the
advance was made. In addition, certain membership persistency levels must be maintained.
Restricted Cash
Restricted cash represents investments with original maturities of one year or less pledged to
obtain bonds for regulatory licenses and processing and collection arrangements for credit card and
automated clearing house payments.
Goodwill and Intangible Assets
Goodwill associated with business acquisitions and combinations represents the excess of the cost
of a business acquired over the net of the amounts assigned to assets acquired, including
identifiable intangible assets and liabilities assumed. U.S. generally accepted accounting
principles specify criteria used in determining whether intangible assets acquired in a business
acquisition or combination must be recognized and reported separately from goodwill. Amounts
assigned to goodwill and other intangible assets are based on independent appraisals or internal
estimates.
Earnings per Share
Basic net earnings (loss) per common share is computed by dividing net earnings (loss)
applicable to common shareholders by the weighted-average number of common shares outstanding
during the period. Diluted net earnings (loss) per common share is determined using the
weighted-average number of common share shares outstanding during the period, adjusted for the
dilutive effect of common stock equivalents, consisting of shares that may be issued upon exercise
of common stock options. In periods where losses are reported, the weighted-average number of
common shares outstanding excludes common stock equivalents, because their inclusion would be
anti-dilutive.
9
Fair Value of Financial Instruments
The carrying amounts reflected in the balance sheets for cash, cash equivalents, restricted cash,
accounts receivable, advanced agency commissions, accounts payable and accrued expenses approximate
the respective fair values due to the short-term maturities of those recorded items. The fair
value of the notes payable approximates the recorded values because the stated rates are similar to
rates currently available to the Company for debt with similar terms and maturities.
NOTE 4 ADVANCED AGENT COMMISSIONS
Advanced agent commissions at June 30, 2011 and September 30, 2010 consist of:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011 |
|
|
September 30, 2010 |
|
Advances funded by: |
|
|
|
|
|
|
|
|
Insurance carriers |
|
$ |
2,174,147 |
|
|
$ |
4,571,883 |
|
Specialty lending corporation |
|
|
|
|
|
|
352,298 |
|
Self-funded |
|
|
1,325,887 |
|
|
|
1,168,572 |
|
|
|
|
|
|
|
|
Sub-total |
|
|
3,500,034 |
|
|
|
6,092,753 |
|
Allowance for doubtful recoveries |
|
|
(1,472,939 |
) |
|
|
(1,472,939 |
) |
|
|
|
|
|
|
|
Advanced agent commissions, net |
|
$ |
2,027,095 |
|
|
$ |
4,619,814 |
|
|
|
|
|
|
|
|
The allowance for doubtful recoveries for advanced agent commissions was determined based primarily
upon estimates of the recovery of future commissions expected to be earned by the agents to whom
advances are outstanding and, where applicable, the agents responsible for the management. The
Company did not recognize any bad debt expense on advanced agent commissions during the nine month
periods ended June 30, 2011 and 2010.
NOTE 5 GOODWILL AND INTANGIBLE ASSETS
The Company accounts for goodwill in accordance with FASB Topic 350, Intangible-Goodwill and Other. The
Company evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in
circumstances suggest that the carrying amount may not be recoverable. Impairment of goodwill is
tested at the reporting unit level by comparing the reporting units carrying amount, including
goodwill, to the fair value of the reporting unit. The fair values of the reporting units are
estimated using discounted projected cash flows. If the carrying amount of the reporting unit
exceeds its fair value, goodwill is considered impaired, and a second step is performed to measure
the amount of impairment loss, if any. The Company evaluates the impairment of goodwill and the
recoverability of other intangible assets as of the end of each fiscal year or whenever events or
changes in circumstances indicate that an intangible assets carrying amount may not be
recoverable. These circumstances include:
|
|
|
a significant decrease in the market value of an asset; |
|
|
|
a significant adverse change in the extent or manner in which an asset is used; or |
|
|
|
an accumulation of costs significantly in excess of the amount originally expected
for the acquisition of an asset. |
The Company did not recognize an impairment expense related to intangible assets during the nine
month periods ended June 30, 2011 and 2010. There were no changes in the carrying amount of
goodwill during the nine month periods ended June 30, 2011 and 2010.
Goodwill allocated to each reportable segment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
September 30 |
|
|
|
2011 |
|
|
2010 |
|
Wholesale Plans |
|
$ |
455,000 |
|
|
$ |
455,000 |
|
Retail Plans |
|
|
2,816,027 |
|
|
|
2,816,027 |
|
Insurance Marketing |
|
|
1,105,312 |
|
|
|
1,105,312 |
|
|
|
|
|
|
|
|
Total |
|
$ |
4,376,339 |
|
|
$ |
4,376,339 |
|
|
|
|
|
|
|
|
10
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful |
|
|
June 30, 2011 |
|
|
September 30, 2010 |
|
|
|
Life |
|
|
Gross |
|
|
Accumulated |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
(Years) |
|
|
Amount |
|
|
Amortization |
|
|
Net |
|
|
Amortization |
|
|
Net |
|
Alliance HealthCard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists |
|
|
5 |
|
|
$ |
2,500,000 |
|
|
$ |
(2,166,684 |
) |
|
|
333,316 |
|
|
$ |
(1,791,677 |
) |
|
$ |
708,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Access Plans USA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-force books
of business |
|
|
5 |
|
|
|
1,200,000 |
|
|
|
(540,000 |
) |
|
|
660,000 |
|
|
|
(360,000 |
) |
|
|
840,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency relationships |
|
|
8 |
|
|
|
1,500,000 |
|
|
|
(421,875 |
) |
|
|
1,078,125 |
|
|
|
(281,250 |
) |
|
|
1,218,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proprietary programs |
|
|
8 |
|
|
|
300,000 |
|
|
|
(84,375 |
) |
|
|
215,625 |
|
|
|
(56,250 |
) |
|
|
243,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
5,500,000 |
|
|
$ |
(3,213,930 |
) |
|
$ |
2,287,066 |
|
|
$ |
(2,489,177 |
) |
|
$ |
3,010,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for each of the nine month periods ended June 30, 2011 and 2010 was
$724,753.
NOTE 6 SUPPLEMENTAL CASH FLOWS INFORMATION
Cash payments for interest and income taxes for the nine months ended June 30, 2011 and 2010 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Interest expense paid |
|
$ |
8,064 |
|
|
$ |
54,818 |
|
Income taxes paid |
|
$ |
3,666,024 |
|
|
$ |
1,637,323 |
|
NOTE 7 OTHER BORROWINGS
During March 2008, Access Plans USA, Inc. obtained an installment loan of $1,605,000 from
Commission Funding Group (CFG), a specialty lending corporation, requiring monthly interest and
principal installments. The CFG loan was paid in full in March 2011.
Principal and interest payments on this loan were $302,744 and $8,064, respectively, for the nine
months ended June 30, 2011.
In January 2010, Americas Healthcare/Rx Plan Agency (AHCP) obtained a $195,800 loan from Loyal
American Life Insurance Company (Loyal). This loan was paid in full in December 2010. The loan
represents AHCPs unsecured obligations or advances from Loyal. Principal payments made on this
loan were $49,554 for the nine months ended June 30, 2011.
11
NOTE 8 INCOME TAXES
Components of income tax expense for the nine months ended June 30, 2011 and 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
Current income tax expense |
|
|
|
|
|
|
|
|
Federal |
|
$ |
2,843,404 |
|
|
$ |
1,106,053 |
|
State |
|
|
395,418 |
|
|
|
(60,026 |
) |
|
|
|
|
|
|
|
Total current income tax expense |
|
|
3,238,822 |
|
|
|
1,046,028 |
|
|
|
|
|
|
|
|
Deferred income tax (benefit) |
|
|
|
|
|
|
|
|
Federal |
|
|
395,868 |
|
|
|
566,960 |
|
State |
|
|
11,433 |
|
|
|
65,890 |
|
|
|
|
|
|
|
|
Total deferred income tax (benefit) |
|
|
407,301 |
|
|
|
632,850 |
|
|
|
|
|
|
|
|
Net income tax expense |
|
$ |
3,646,123 |
|
|
$ |
1,678,878 |
|
|
|
|
|
|
|
|
NOTE 9 WAIVER REIMBURSEMENTS LIABILITY
The Company has entered into contractual arrangements to administer
membership programs for its clients in the rental purchase industry that may include reimbursing the client for certain expenses incurred in the operation of a
particular membership program. Under these arrangements, the Company is responsible for
reimbursing the client when (under the terms of the agreement with the clients customer) the
client waives rental payments required of the clients customer under specifically defined and
limited circumstances, including the situation when the customer becomes unemployed for a stated
time period or when the Companys client provides product service to its customer.
The life of the contracts subject to our reimbursement of clients for the waiver of rental
payments and product service commitments is generally one week. The Wholesale Plans division
clients in the rental purchase industry enter into agreements with their customers for the rental
of merchandise that have a term equivalent to their scheduled payment period and for the majority
of agreements that period is one week. The agreement is renewed weekly by the customer by making
its scheduled weekly payment. The average length of a customer relationship under such an
agreements lasts for four months as approximately 75% of the customers return the rented item
within the four months, 17% exercise early purchase options and 8% rent for the full term and
become owners. The customer may return the merchandise and terminate the rental agreement at any
time without any future obligation.
Product service expense represents costs the Company incurs on the repair of household
merchandise. Plan members that complete their rental purchase term and choose to continue their
membership on a month-to-month basis are entitled to repair or replacement of such merchandise by
the dealer in cases of mechanical failure. The Company reimburses the dealer for those costs.
This element of a members plan terminates 12 months following their date of product ownership
(12 months following the end of the members rental term) or at any time that the member does not
maintain its month-to-month membership.
The Companys policy is to reserve the necessary funds in order to meet the anticipated
reimbursement obligation owed to the Companys clients in the event the Companys reimbursement
obligations require payment in the future. The Companys obligations for these reimbursements do
not have any kind of a tail that extends beyond Companys clients payment obligations following
termination of the contractual arrangement or agreement with either the Companys client or the
clients customer. The Companys estimated incurred-but-not-reported-reimbursements obligation
consists of the following:
|
|
|
|
|
Balance at September 30, 2010 |
|
$ |
846,600 |
|
Claims paid,
10/1/10 06/30/11 |
|
|
(2,593,623 |
) |
Claims
accrued, 10/1/10 06/30/11 |
|
|
2,391,323 |
|
|
|
|
|
Balance at June 30, 2011 |
|
$ |
644,300 |
|
|
|
|
|
NOTE 10 RELATED PARTY TRANSACTIONS
The Company occupies its corporate offices and Wholesale Plans Division in Norman, Oklahoma under
a lease that expires September 30, 2011. The total leased space is approximately 6,523 square
feet. The lease agreement is with Southwest Brokers, Inc., a company owned by Brett Wimberley, one
of the Companys Directors, President and Chief Financial Officer. This lease was executed on May
1, 2005, amended on August 1, 2006 and August 1, 2008, September 30, 2009, and September 30, 2010.
In the event the Company is required to move from the current Norman, Oklahoma office facilities,
the terms and cost of occupancy may be substantially different than those under which the office
space is currently occupied and the rental rate may be substantially greater.
12
The Companys rent expense associated with this related party transaction was approximately
$74,239 and $72,058 for the nine month periods ending June 30, 2011 and 2010, respectively.
NOTE 11 SEGMENT REPORTING
The Company operates in four reportable business segments; a) Wholesale Plans; b) Retail Plans; c)
Insurance Marketing; and d) Corporate (holding company).
Reportable business segment information follows.
The following tables set forth revenue, gross margin and operating income by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
($ in thousands) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
2011 |
|
|
2010 |
|
|
% Change |
|
Net revenues by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
6,424 |
|
|
$ |
5,764 |
|
|
|
11 |
% |
|
$ |
18,795 |
|
|
$ |
16,539 |
|
|
|
14 |
% |
Retail Plans (a) |
|
|
4,332 |
|
|
|
4,883 |
|
|
|
(11 |
%) |
|
|
13,182 |
|
|
|
12,893 |
|
|
|
2 |
% |
Insurance Marketing |
|
|
3,815 |
|
|
|
5,017 |
|
|
|
(24 |
%) |
|
|
13,509 |
|
|
|
15,441 |
|
|
|
(13 |
%) |
Corporate (holding company) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany Eliminations |
|
|
(1,494 |
) |
|
|
(1,293 |
) |
|
|
(16 |
%) |
|
|
(4,351 |
) |
|
|
(3,739 |
) |
|
|
(16 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,077 |
|
|
$ |
14,371 |
|
|
|
(9 |
%) |
|
$ |
41,135 |
|
|
$ |
41,134 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
2,393 |
|
|
$ |
1,826 |
|
|
|
31 |
% |
|
$ |
6,982 |
|
|
|
4,078 |
|
|
|
71 |
% |
Retail Plans (a) |
|
|
2,747 |
|
|
|
1,685 |
|
|
|
63 |
% |
|
|
7,782 |
|
|
|
6,025 |
|
|
|
29 |
% |
Insurance Marketing |
|
|
649 |
|
|
|
730 |
|
|
|
(11 |
%) |
|
|
2,146 |
|
|
|
2,641 |
|
|
|
(19 |
%) |
Corporate (holding company) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,789 |
|
|
$ |
4,421 |
|
|
|
31 |
% |
|
$ |
16,910 |
|
|
|
12,744 |
|
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income by
segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
1,942 |
|
|
$ |
1,364 |
|
|
|
42 |
% |
|
$ |
5,596 |
|
|
|
2,584 |
|
|
|
117 |
% |
Retail Plans (a) |
|
|
1,800 |
|
|
|
443 |
|
|
|
306 |
% |
|
|
4,783 |
|
|
|
2,589 |
|
|
|
85 |
% |
Insurance Marketing |
|
|
13 |
|
|
|
(49 |
) |
|
|
127 |
% |
|
|
122 |
|
|
|
275 |
|
|
|
(56 |
%) |
Corporate (holding company) |
|
|
(797 |
) |
|
|
(416 |
) |
|
|
(92 |
%) |
|
|
(1,959 |
) |
|
|
(1,209 |
) |
|
|
(62 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,958 |
|
|
$ |
1,342 |
|
|
|
120 |
% |
|
$ |
8,542 |
|
|
|
4,239 |
|
|
|
102 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Gross of intercompany eliminations |
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
Segment assets |
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
28,723 |
|
|
$ |
18,998 |
|
Retail Plans |
|
|
32,652 |
|
|
|
26,369 |
|
Insurance Marketing |
|
|
6,154 |
|
|
|
8,499 |
|
Corporate |
|
|
(41,194 |
) |
|
|
(29,014 |
) |
Intercompany Eliminations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
26,335 |
|
|
$ |
24,852 |
|
|
|
|
|
|
|
|
13
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Except as otherwise indicated, the first personal plural pronoun in the nominative case form we
and its objective case form us, its possessive and the intensive case forms our and ourselves
and its reflexive form ourselves in this report refer collectively to Access Plans, Inc. and its
subsidiaries and its executive officers and directors.
Overview
Our operations are currently organized under four segments:
|
|
|
Wholesale Plans Division plan offerings are customized membership marketing plans
primarily offered at rent-to-own retail stores. |
|
|
|
Retail Plans Division plan offerings are primarily healthcare savings plans. These
plans are not insurance, but allow members access to a variety of healthcare networks to
obtain discounts from usual and customary fees. |
|
|
|
Insurance Marketing Division markets individual major medical health insurance and
other insurance products through a national network of independent agents. |
|
|
|
Corporate includes compensation and other expenses for individuals performing
services for administration of overall management and operations of the Company. |
Wholesale Plans
The Wholesale Plans Division provides our clients with customized membership marketing plans that
leverage their brand names, customer relationships and typically their payment mechanism, plus
offer benefits that appeal to their customers. The value provided by the plans to our clients,
includes increased customer attraction and retention, plus incremental fee income with limited
risk or capital cost.
Our plans are primarily offered at rent-to-own retail stores. Nationwide there are approximately
8,600 locations serving approximately 4.1 million households at any given time during the year
according to the Association of Progressive Rental Organizations (APRO). It is estimated that
the two largest rent-to-own industry participants account for approximately 4,800 of the total
number of stores, and the majority of the remainder of the industry consists of companies each
with fewer than 50 stores. The industry has been consolidating and is expected to continue,
resulting in an increased concentration of stores in the two largest rent-to-own industry
participants.
The rent-to-own industry serves a highly diverse customer base. According to the APRO,
approximately 83% of rent-to-own customers have household incomes between $15,000 and $50,000 per
year. The rent-to-own industry serves a wide variety of customers by allowing them to obtain
merchandise that they might otherwise be unable to obtain due to insufficient cash resources or a
lack of access to credit. APRO also estimates that 96% of customers have high school diplomas.
We currently deliver membership plans to over 220 companies, including retail purchase dealers,
insurance companies, financial institutions, retail merchants, and consumer finance companies. At
June 30, 2011, our wholesale plans were offered at approximately 4,910 locations. Of the
locations at June 30, 2011, 2,849 locations were Rent-A-Center owned locations operated under
their brand, Rent-A-Center, Inc., a Nasdaq (symbol RCII) traded company. Rent-A-Center, Inc. is
the largest rent-to-own company in the United States, Puerto Rico and Canada. Our revenue
attributable to the contractual arrangements with Rent-A-Center was approximately $3.4 million
(26% of total revenue) and $9.8 million (24% of total revenue) during the three and nine months
ended June 30, 2011, respectively, compared to $3.1 million (21% of total revenue) and $8.8
million (21% of total revenue) during the three and nine months ended June 30, 2010, respectively.
Revenue attributable to our Wholesale Plans Division accounted for $6.4 million (49% of total
revenue) and $18.8 million (46% of total revenue) during the three and nine months ended June 30,
2011, respectively, compared to $5.8 million (40% of total revenue) and $16.5 million (40% of
total revenue) during the three and nine months ended June 30, 2010, respectively. Our growth in
wholesale plans revenue is dependent in significant part on an increase in the number of
rent-to-own locations at which our plans are offered and the sales efforts of those locations.
Although we have contracts with Rent-A-Center and other rent-to-own companies, loss of which,
especially Rent-A-Center would or may have a significant impact on our revenues, profitability and
our ability to negotiate discounts with our vendors.
14
Retail Plans
Our Retail Plans Division offerings include healthcare savings plans, auto related discount plans
and association memberships that are not insurance, but may provide insurance features and
benefits. These membership savings plans allow members access to a variety of healthcare, auto
related and retail merchant networks to obtain discounts from usual and customary fees or charges.
Additionally, we offer wellness programs, prescription drug and dental discount programs, medical
discount cards, and limited benefit insurance plans. Our members pay healthcare providers the
discounted rate at the time services are provided to them. These plans are designed to serve the
markets in which individuals either have no health insurance or limited healthcare benefits.
Revenue attributable to our Retail Plans Division was approximately $4.3 million (33% of total
revenue) and $13.2 million (32% of total revenue) during the three and nine months ended June 30,
2011, respectively compared to $4.9 million (34% of total revenue) and $12.9 million (31% of total
revenue) during the three and nine months ended June 30, 2010, respectively.
This division is comprised of the membership business of Alliance Healthcard, The Capella Group,
Inc. (Capella) and Protective Marketing Enterprises, Inc. (PME). Capella is asubsidiary of
Access Plans USA. PME is a subsidiary of Alliance HealthCard and also owns and manages
proprietary networks of dental and vision providers that provide services at negotiated rates to
certain members of our plans and other plans that have contracted with us for access to our
networks.
Through our healthcare savings plans, we believe customers save an average of 35% on their medical
costs and between 10% and 50% on services through other discount medical providers. These
discounts for services that do not require the use of a medical preferred provider organization
(PPO) are more difficult to track because our members pay a discounted rate at point of service.
Some of our Retail Plans clients choose to include our benefits with their own membership plan
offering. In these instances, the client bears the cost of marketing and fulfillment, and we
provide customer service. These offerings are designed to enhance our clients existing offering
and improve their product value relative to their competition and in some instances to improve
their customer retention. While these plans provide lower periodic member fees, we incur limited
implementation costs and receive higher revenue participation rates. Other target distribution
channels for this division include retailers, insurance companies, network marketing
organizations, independent insurance agencies and agents, consumer direct sales call centers, and
financial institutions.
In order to deliver our membership offerings, we contract with a number of different vendors to
provide various products and services to our members. The majority of these vendor relationships
involve the vendor providing our members access to their network or providers or their locations
and our members obtain a discount at the time of service. We have vendor relationships with
medical networks, automotive service companies, insurance companies, travel related entities and
food and entertainment consumer discount providers. Our vendors value the relationship with us
because we deliver many customers to them without incremental capital cost or risk on their part
and these relationships are governed by multi-year agreements and aggregated volume scaling.
Insurance Marketing
Our Insurance Marketing Division offers and sells individual major medical health insurance
products and related benefit plans, including specialty insurance products, primarily through a
national network of independent agents.
Americas Healthcare/Rx Plan Agency (AHCP) is the centerpiece of the Insurance Marketing Division.
AHCP distributes major medical, short-term medical, critical illness and related health insurance
products to small businesses, self-employed and other individuals and families through a network
of approximately 7,500 independent agents. Our primary carriers that we represent include Golden
Rule Insurance Company, World Insurance Company, Aetna and Colorado Bankers.
We support our agents and recruit new agents via access to proprietary and private label products,
leads for new sales, commission advance programs, incentive programs, including an annual
convention, web-based technology, and back-office support. More specifically, our agent support
and recruiting tools include:
|
|
|
e-Agent Center provides agents with access to real-time rate quoting, on-line
licensing and contracting, insurance application submission, access to brochures and other
marketing materials. |
|
|
|
Lead Distribution we utilize an electronic system to connect agents with an on-line
lead ordering and delivery system. Leads are also provided in certain situations as
incentives to sell certain policies. |
15
|
|
|
Incentive programs to assist with agent motivation and recruitment, we provide paid
annual convention trips and periodic sales contests. |
|
|
|
Agent advances with the major medical products we represent, agents are entitled to
three to nine months of advance commissions either funded by AHCP or our insurance carrier
partner. Our ability to grow this segment depends, in part, on our continued access to
working capital to fund these advances. |
|
|
|
Home office support this includes agent and product training, marketing materials
and agent communication. The training programs include both on-site and in-house schools,
DVDs and webcasts covering product knowledge and sales techniques as well as market
conduct and regulatory compliance issues. In addition, our support includes development
and distribution of a wide variety of marketing materials including flyers, brochures,
email blasts and letters. We also promote and inform our agents on important news and
updates via a weekly newsletter. |
Our strategy for the Insurance Marketing Division is to:
|
|
|
Continue working with insurance carriers in the development of proprietary products
for our agents to represent and offer; |
|
|
|
Expand the number of carriers that we represent for more product choice for customers
and expanded geographic representation; and |
|
|
|
Enhance our e-agent platforms in order to better serve our existing agents and improve
attraction to new agents to sell plans we represent. |
The revenue of our Insurance Marketing Division is primarily from earned sales commissions paid by
the insurance companies this Division represents. These sales commissions are generally a
percentage of premium revenue. Revenue attributable to our Insurance Marketing Division was
approximately $3.8 million (29% of total revenue) and $13.5 million (33% of total revenue) during
the three and nine months ended June 30, 2011, respectively, compared to $5.0 million (35% of
total revenue) and $15.4 million (38% of total revenue) during the three and nine months ended
June 30, 2010, respectively. We estimate we had 24,568 and 25,200 policies in force as of June
30, 2011 and September 30, 2010, respectively.
The Health Care and Education Affordability Reconciliation Act of 2010 (Health Care Reform Act)
was enacted on March 30, 2010. Beginning in August 2010 insurers were required to implement a
number of changes related to major medical insurance policies. These changes include, but are not
limited to changes to required coverage, elimination of most preexisting condition exclusions, and
a minimum loss ratio of 80%. The minimum loss ratio requires health insurance companies to
maintain premium levels so that 80% of premiums is utilized for claims on medical services and
related expenses (85% for group health). The law requires certain people to purchase health
insurance and will set up subsidies to assist certain people in purchasing health insurance and
allows certain people to obtain insurance from the federal government. The Health Care Reform Act
has had an impact on the products we offer and has changed the number of customers or potential
customers for our products. As a result of the minimum loss ratio requirement in the Health Care
Reform Act, commissions on the sale of individual major medical insurance policies were reduced in
January 2011. This resulted in a reduction in our revenue related to the sale of major medical
policies. Because most of our commission revenue is ultimately paid to our agents the reduction in
revenue has not caused a reduction in our gross margin in the same proportion. The reduction in
commission may cause our agents to stop selling health insurance and cause them to sell other
insurance products to make up for the loss of these commissions.
In response, we are endeavoring to expand the portfolio of health related insurance products that
we provide to our agents. We expect these new and expanded products will furnish our agents a
means to mitigate the possible financial impact that resulted from the Health Care Reform Act.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles (GAAP) requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. Actual results may differ from
those estimates and the differences may be material to our financial statements. Certain
significant estimates are required in the evaluation of goodwill for impairment and intangible
assets for amortization, allowances for doubtful recoveries of advanced agent commissions, deferred
income taxes, accounts receivable and the waiver reimbursements liability. Actual results could
differ from those estimates and the differences could be material.
16
Goodwill and Intangible Assets
Goodwill in business acquisitions represents the excess of the cost of a business acquired over the
net of the amounts assigned to assets acquired, including identifiable intangible assets and
liabilities assumed. GAAP specifies criteria to be used in determining whether intangible assets
acquired in a business combination must be recognized and reported separately from goodwill.
Amounts assigned to goodwill and other intangible assets are based on independent appraisals or
internal estimates.
Intangible assets, other than goodwill, acquired on April 1, 2009 as part of Access Plans USA
acquisition were valued at $3,000,000 and are being amortized over the estimated useful life of
those assets. The related amortization expense was $348,750 for each of the nine month periods
ended June 30, 2011 and 2010.
Customer lists acquired in acquisitions are capitalized and amortized over the estimated useful
lives of the customer lists. Customer lists acquired in 2007 were valued at $2,500,000 and are being amortized over 60 months,
the estimated useful life of the lists. The related amortization expense was $375,003 for each of
the nine month periods ended June 30, 2011 and 2010.
Stock Based Compensation
We measure stock based compensation expense using the modified prospective method. Under the
modified prospective method, stock-based compensation cost is measured at the award date based on
the fair value of the award and, when applicable, is recognized as expense on a straight-line basis
over the requisite service or vesting period.
Revenue Recognition
We recognize revenue when four basic criteria are met:
|
|
|
Persuasive evidence of an arrangement exists; |
|
|
|
Delivery has occurred or services have been rendered; |
|
|
|
The sellers price to the buyer is fixed or determinable; and, |
|
|
|
Collectability is reasonably assured. |
Our revenue recognition varies based on the revenue source.
Wholesale Plans The Wholesale Plans membership offerings are made primarily through Rental
Purchase businesses to their customers as an incremental add-on sale to their rental of durable
household merchandise. These businesses contract with us to provide a package of benefits to their
enrolled customers that we support with member fulfillment and customer service. They pay us a per
enrolled member fee per month.
Retail Plans The Retail Plans membership offerings are in conjunction with non-Rental
Purchases businesses, direct to consumers via the internet or a multi-level marketing channel. The
Companys clients in this segment include insurance companies, household product retailers,
pharmacies, employer groups, financial organizations and associations. Over half of the revenue of
this segment is derived from membership plans whereby consumers make periodic membership payments
directly to the Company generally on a monthly basis via credit card, debit card or ACH. The
Company recognizes this revenue on a monthly basis. The remainder of revenue within this segment
is derived from membership plan sales whereby the fees are collected by the Companys clients or
where the Company has contractual arrangements to provide administrative services for a membership
offering.
Benefits and costs associated with our Wholesale and Retail Plans membership offerings are as
follows:
|
|
|
Discount Medical In order to deliver our discount medical membership offerings,
the Company contracts with third parties that have established national networks of
service providers which have agreed to provide discounts to the Companys members.
The Company pays the company that organized the network a per member, per month fee
for the Companys members to access the network of providers and the Company expense
these fees on a monthly basis as incurred. The network service provider is
responsible for funding the discounts to the Companys members. |
17
|
|
|
Insurance For its insurance offerings, the Company contracts with a third
party insurance company to provide the coverage the Companys members have selected.
Multiple insurance products are available and each product has a contractually agreed
upon premium associated with it. The Company pays and expenses the premium for each
members plan on a monthly basis. The third party insurance company is responsible
for providing the coverage. |
|
|
|
Automotive Discounts The automotive service offerings are furnished by a third
party provider whose services are outsourced to independent contractors of the
provider. We pay the third party provider a per member, per month fee for its
services. The third party provider is responsible for funding the services to its
independent contractors. |
|
|
|
Food and Entertainment and Other Miscellaneous Benefits These services are also
furnished by a third party provider who has established a network of 250,000 retail
locations that has agreed to provide discounts to the Companys members. The Company
pays the third party provider a per member, per month fee for the Companys members
to access providers network of retail locations. Each retail location is
responsible for funding the discounts to the Companys members. |
The Wholesale Plans segment also includes reimbursement of the client for certain expenses incurred
in the operation of a particular membership program. Under these arrangements, the Company is
responsible for reimbursing the client when (under the terms of the agreement with its customer)
the client waives rental payments required of the customer under specifically defined and limited
circumstances, including when the customer becomes unemployed for a stated period of time or when
the Companys client provides product service to its customer. These client reimbursements are
expensed as incurred. See Note 9.
The product service costs relate to an element of some of the Companys plan offerings in the
Wholesale Plans division. This product service expense represents costs the Company incurs on the
repair of household merchandise. Plan members that complete their rental purchase term and choose
to continue on a month-to-month membership are entitled to repair or replacement of such
merchandise by the dealer in cases of mechanical failure. The Company reimburses the dealer for
these costs. This element of a members plan terminates 12 months following the members date of
product ownership (12 months following the end of the members rental term) or at any time that the
member does not maintain its month-to-month membership.
Insurance Marketing revenue reflects commissions and fees reported to the Company by insurance
companies for policies sold by the divisions agents. Commissions and fees collected are
recognized as earned on a monthly basis until the time that the underlying contract is reported to
the division as terminated. The Companys commission rates vary by insurance carrier, the type of
policy purchased by the policyholder and the amount of time the policy has been active, with
commission rates typically being higher during the first 12 months of the policy period. Revenue
also includes administrative fees the Company charges and the interest income earned on commissions
advanced to the divisions agents.
Our Insurance Marketing Division (IMD) has full latitude to select the carriers and the products
that it markets via its sub-agents. IMD identifies a need and finds a carrier who has an existing
product that fills this need. IMD negotiates contracts with carriers and with associations to
represent their products and within the contractual terms has the ability to discontinue product
and/or carrier representation at its discretion. IMD provides recommendations in product design and
the carrier has the ultimate responsibility for establishing the product specifications. IMD
identifies and implements ongoing customer service activities with both customers and insurance
agents.
IMD is the primary obligor in regard to the commission with the insurance agents. IMD holds the
Master General Agent Agreement with each carrier, contracting agents to market the carriers
products. The agents are contracted directly to IMD and the carrier has no direct obligation to
pay the agent. IMD also receives advanced commissions from certain carriers that IMD has full
repayment responsibility. The carriers have no recourse from the agent for these advances as there
is no direct contractual relationship between the carrier and the agent.
Unearned commissions comprise commission advances received from insurance carriers but not yet
earned or collected. These advances are subject to repayment back to the carrier in the event that
the policy lapses before the advanced commissions are earned and collected. Additionally,
enrollment fees received are recorded as deferred revenue and amortized over the expected
weighted-average life of the policies sold which currently approximates 18 months. Policy
acquisition costs, principally lead and marketing credits, are capitalized and amortized over the
same weighted-average life, to the extent these deferred costs do not exceed the related gross
deferred revenue. Any excess costs are expensed as incurred.
18
Commission Expense
Commission expense is based on the applicable rates applied to membership revenues billed or
insurance commissions collected, and are recognized as incurred on a monthly basis until the
underlying program member or insurance policy is terminated.
The Insurance Marketing Division advances agent commissions, up to nine months, for certain
insurance programs. The advance commissions to our agents are funded partly by the insurance
carriers we represent and partly by us. These commissions advanced to agents are reflected on our
balance sheet as advanced agent commissions. Collection of the commissions advanced (plus accrued
interest and fees) is accomplished by withholding amounts earned by the agent on the policy upon
which the advance was made. In the event of early termination of the underlying policy, the
division seeks to recover the unpaid advance balance by withholding advanced and earned commissions
on other policies sold by the agent. This division also has the contractual right to pursue other
sources of recovery, including recovery from the agents managing the agent to whom advances were
made.
Advanced agent commissions are reviewed and an allowance is provided for those balances where
recovery is considered doubtful. This allowance requires judgment and is based primarily upon
estimates of the recovery of future commissions expected to be earned by the agents with
outstanding balances and, where applicable, the agents responsible for their management. Advances
are written off when determined to be non-collectible.
The Retail Plans Division advances agent commissions for certain retail plan programs. The advance
commissions to our agents are funded by us and are reflected on the balance sheet as advanced agent
commissions. Collection of the commissions advanced is accomplished by predetermined sales quotas
that must be attained prior to the payment of additional commissions. In the event of early
termination of the program, the division recovers the unpaid advance balance by withholding amounts
earned by the agent on the memberships upon which the advance was made. In addition, certain
membership persistency levels must be maintained.
Recent Accounting Pronouncements
In December 2010, Financial Accounting Standards Board (the FASB) issued Accounting Standards
Update No. 2010-28 (ASU 2010-28), IntangiblesGoodwill and Other (Topic 350), When to Perform Step
2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (ASU
2010-28). ASU 2010-28 modify Step 1 of the goodwill impairment test for reporting units with zero
or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of
the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In
determining whether it is more likely than not that goodwill impairment exists, an entity should
consider whether there are any adverse qualitative factors indicating that impairment may exist.
The qualitative factors are consistent with the existing guidance, which requires that goodwill of
a reporting unit be tested for impairment between annual tests if an event occurs or circumstances
change that would more likely than not reduce the fair value of a reporting unit below its carrying
amount. ASU 2010-28 became effective for the Company on January 1, 2011 and did not have a material
impact on our financial position, results of operations, cash flows and disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2010, the FASB issued Accounting Standards Update No. 2010-29 (ASU 2010-29), Business
Combinations (Topic 805) Disclosure of Supplementary Pro Forma Information for Business
Combinations. ASU 2010-29 requires a public entity to disclose pro forma information for business
combinations that occurred in the current reporting period. The disclosures include pro forma
revenue and earnings of the combined business combinations that occurred during the year had been
as of the beginning of the annual reporting period. If comparative financial statements are
presented, the pro forma revenue and earnings of the combined entity for the comparable prior
reporting period should be reported as though the acquisition date for all business combinations
that occurred during the current year had been as of the beginning of the comparable prior annual
reporting period. The amendments in this update are effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2010 and will become effective for us on
September 30, 2011. The adoption of this accounting standard is not expected to have a material
impact on our financial position, results of operations, cash flows and disclosures.
19
Results of Operations
Introduction
We are a provider of consumer membership plans and, healthcare savings membership plans and a
marketer of individual major medical health insurance products. Through working with our
wholesale and retail clients, we design and build membership plans that contain benefits
aggregated from our vendors that appeal to our clients customers. For our major medical health
insurance products, we offer and sell these products through a national network of independent
agents.
The following table sets forth selected results of our operations for the three and nine months
ended June 30, 2011 and 2010. We operate in four reportable business segments: Wholesale Plans,
Retail Plans, Insurance Marketing and Corporate. The Wholesale Plans operating segment includes
the operations of our customized membership marketing plans primarily offered at rent-to-own retail
stores. The Retail Plans operating segment includes the operations from our healthcare and
membership savings plans designed to serve those markets other than the rent to own market. The
Insurance Marketing operating segment offers and sells individual major medical health insurance
products and related benefit plans. This operating segment includes compensation and other expenses
for individuals performing services for administration of our overall operations at the holding
company level.
20
The following information was derived and taken from our unaudited financial statements appearing
elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
($ in thousands) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
2011 |
|
|
2010 |
|
|
% Change |
|
Net revenues |
|
$ |
13,077 |
|
|
$ |
14,371 |
|
|
|
(9 |
%) |
|
$ |
41,135 |
|
|
$ |
41,134 |
|
|
|
0 |
% |
Direct costs |
|
|
7,289 |
|
|
|
10,129 |
|
|
|
(28 |
%) |
|
|
24,225 |
|
|
|
28,390 |
|
|
|
(15 |
%) |
Operating expenses |
|
|
2,830 |
|
|
|
2,900 |
|
|
|
(2 |
%) |
|
|
8,368 |
|
|
|
8,505 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
2,958 |
|
|
|
1,342 |
|
|
|
120 |
% |
|
|
8,542 |
|
|
|
4,239 |
|
|
|
102 |
% |
Net other income
(expense) |
|
|
11 |
|
|
|
(19 |
) |
|
|
158 |
% |
|
|
12 |
|
|
|
20 |
|
|
|
(40 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes |
|
|
2,969 |
|
|
|
1,323 |
|
|
|
124 |
% |
|
|
8,554 |
|
|
|
4,259 |
|
|
|
101 |
% |
Income taxes, net |
|
|
1,443 |
|
|
|
375 |
|
|
|
285 |
% |
|
|
3,646 |
|
|
|
1,679 |
|
|
|
117 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,526 |
|
|
$ |
948 |
|
|
|
61 |
% |
|
$ |
4,908 |
|
|
$ |
2,580 |
|
|
|
90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables set forth revenue, gross margin and operating income by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
($ in thousands) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
2011 |
|
|
2010 |
|
|
% Change |
|
Net revenues by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
6,424 |
|
|
$ |
5,764 |
|
|
|
11 |
% |
|
$ |
18,795 |
|
|
$ |
16,539 |
|
|
|
14 |
% |
Retail Plans (a) |
|
|
4,332 |
|
|
|
4,883 |
|
|
|
(11 |
%) |
|
|
13,182 |
|
|
|
12,893 |
|
|
|
2 |
% |
Insurance Marketing |
|
|
3,815 |
|
|
|
5,017 |
|
|
|
(24 |
%) |
|
|
13,509 |
|
|
|
15,441 |
|
|
|
(13 |
%) |
Corporate (holding company) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany Eliminations |
|
|
(1,494 |
) |
|
|
(1,293 |
) |
|
|
(16 |
%) |
|
|
(4,351 |
) |
|
|
(3,739 |
) |
|
|
(16 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,077 |
|
|
$ |
14,371 |
|
|
|
(9 |
%) |
|
$ |
41,135 |
|
|
$ |
41,134 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin by segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
2,393 |
|
|
$ |
1,826 |
|
|
|
31 |
% |
|
$ |
6,982 |
|
|
|
4,078 |
|
|
|
71 |
% |
Retail Plans (a) |
|
|
2,747 |
|
|
|
1,685 |
|
|
|
63 |
% |
|
|
7,782 |
|
|
|
6,025 |
|
|
|
29 |
% |
Insurance Marketing |
|
|
649 |
|
|
|
730 |
|
|
|
(11 |
%) |
|
|
2,146 |
|
|
|
2,641 |
|
|
|
(19 |
%) |
Corporate (holding company) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,789 |
|
|
$ |
4,421 |
|
|
|
31 |
% |
|
$ |
16,910 |
|
|
|
12,744 |
|
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income by
segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Plans |
|
$ |
1,942 |
|
|
$ |
1,364 |
|
|
|
42 |
% |
|
$ |
5,596 |
|
|
|
2,584 |
|
|
|
117 |
% |
Retail Plans (a) |
|
|
1,800 |
|
|
|
443 |
|
|
|
306 |
% |
|
|
4,783 |
|
|
|
2,589 |
|
|
|
85 |
% |
Insurance Marketing |
|
|
13 |
|
|
|
(49 |
) |
|
|
127 |
% |
|
|
122 |
|
|
|
275 |
|
|
|
(56 |
%) |
Corporate (holding company) |
|
|
(797 |
) |
|
|
(416 |
) |
|
|
(92 |
%) |
|
|
(1,959 |
) |
|
|
(1,209 |
) |
|
|
(62 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,958 |
|
|
$ |
1,342 |
|
|
|
120 |
% |
|
$ |
8,542 |
|
|
|
4,239 |
|
|
|
102 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Gross of intercompany eliminations |
21
Discussion of Three Months Ended June 30, 2011 and 2010
Net revenues decreased $1.3 million (a 9% decrease) during the three months ended June 30, 2011
(the 2011 3rd quarter), compared with the three months ended June 30, 2010 (the 2010
3rd quarter) to $13.1 million from $14.4 million in 2010. The decrease in net revenues
was primarily due to:
|
|
|
Growth in our Wholesale Plans Division of approximately $0.7 million attributable
to additional rent-to-own locations offering our plans and an increase in member
acceptance rates among existing clients; (see the Segment Discussion Analysis below
for additional information); |
|
|
|
A decrease in our Retail Plans Division of approximately $0.6 million
attributable to lower volumes of new member enrollments for a small portion of our existing clients (see
the Segment Discussion Analysis below for additional information); |
|
|
|
Our Insurance Marketing Division experienced a decrease of $1.2 million
attributable to the minimum loss ratio requirement in the Health Care Reform Act which
reduced our commissions on individual major medical insurance policies effective in
January 2011 and two of our contracted insurance carriers that ceased sales of new major
medical insurance policies (see the Segment Discussion Analysis below for additional
information); and |
|
|
|
Other decreases of $0.2 million. |
Direct costs decreased $2.8 million (a 28% decrease) during the 2011 3rd quarter
compared with the 2010 3rd quarter to $7.3 million from $10.1 million in 2010. The
decrease in direct costs was primarily due to:
|
|
|
Our Wholesale Plans Division direct costs decreased $0.1 million primarily attributable to a
decline in our product service expense (see the Segment Discussion Analysis below for
additional information); |
|
|
|
Our Retail Plans Division direct costs decreased $1.6 million with $1.8 million attributable
to reduced amounts of advanced commissions as a result of lower volumes of new member enrollments (see the Segment Discussion Analysis below for additional
information); and |
|
|
|
Our Insurance Marketing Division experienced a decrease in direct costs of $1.1
million attributable to lower revenues (see the Segment Discussion Analysis below for
additional information). |
Operating expenses decreased $0.1 million (a 2% decrease) during the 2011 3rd quarter to
$2.8 million from $2.9 million in the 2010 3rd quarter. The decrease was attributable
to a decline in outside billing and customer service expenses and compensation expense due to a
decline in personnel. See the Segment Discussion Analysis below for additional information.
Provision for income taxes, net increased by $1.0 million during the 2011 3rd quarter to
$1.4 million from $0.4 million in the 2010 3rd quarter. The increase was attributable
to an increase in pretax income.
Net income increased $0.6 million (a 61% increase) to approximately $1.5 million during the 2011
3rd quarter compared to $0.9 million during the 2010 3rd quarter.
22
Segment Discussion Analysis
Wholesale Plans Division
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
($ in thousands except member data) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
6,424 |
|
|
$ |
5,764 |
|
|
|
11 |
% |
Direct costs |
|
|
4,031 |
|
|
|
3,939 |
|
|
|
2 |
% |
Operating expenses |
|
|
451 |
|
|
|
462 |
|
|
|
(2 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
1,942 |
|
|
$ |
1,363 |
|
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
Direct costs |
|
|
63 |
% |
|
|
68 |
% |
|
|
(5 |
%) |
Operating expenses |
|
|
7 |
% |
|
|
8 |
% |
|
|
(1 |
%) |
Operating income |
|
|
30 |
% |
|
|
24 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Member count at June 30, |
|
|
651,563 |
|
|
|
626,155 |
|
|
|
4 |
% |
Net revenues increased $0.6 million (an 11% increase) during the 2011 3rd quarter to
$6.4 million from $5.8 million during the 2010 3rd quarter. The increase in net
revenues was related to the increase in the number of new rent-to-own locations offering our
membership plans plus membership growth from existing locations.
Direct costs increased $0.1 million (a 2% increase) during the 2011 3rd quarter to $4.0
million from $3.9 million during the 2010 3rd quarter. This increase was primarily
attributable to revenue growth and lower product service expense resulting from lower repair and
replacement costs of consumer electronics.
We enter into contractual arrangements to administer membership programs for clients
in the rent-to-own industry. For approximately 3,100 (78%) of rent-to-own locations the
administration duties may include reimbursing the client for certain expenses it incurs in the
operation of the program. Those expenses were related to product service expenses and the clients
waiver of rental payments under defined circumstances including circumstances when the clients
customer becomes unemployed for a stated period of time. It is our policy to reserve the necessary
funds in order to reimburse our clients as those obligations become due in the future.
Operating expenses remained unchanged at $0.5 million during the 2011 and 2010 third quarters.
Operating income increased $0.5 million (a 42% increase) during the 2011 3rd quarter to
$1.9 million from $1.4 million during the 2010 3rd quarter.
23
Retail Plans Operating Segment
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
($ in thousands except member data) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues (a) |
|
$ |
4,332 |
|
|
$ |
4,883 |
|
|
|
(11 |
%) |
Direct costs |
|
|
1,585 |
|
|
|
3,197 |
|
|
|
(50 |
%) |
Operating expenses |
|
|
947 |
|
|
|
1,243 |
|
|
|
(24 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating income (a) |
|
$ |
1,800 |
|
|
$ |
443 |
|
|
|
306 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
Direct costs |
|
|
37 |
% |
|
|
65 |
% |
|
|
(28 |
%) |
Operating expenses |
|
|
22 |
% |
|
|
25 |
% |
|
|
(3 |
%) |
Operating income |
|
|
42 |
% |
|
|
9 |
% |
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Member count at June 30, |
|
|
1,690,892 |
|
|
|
1,561,345 |
|
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Gross of intercompany eliminations |
Net revenues decreased $0.6 million (an 11% decrease) during the 2011 3rd quarter to
$4.3 million from $4.9 million during the 2010 3rd quarter. The decrease in net
revenues was due to lower volumes of new member enrollments related to a small portion of our existing clients.
Direct costs decreased $1.6 million (a 50% decrease) during the 2011 3rd quarter to $1.6
million from $3.2 million during the 2010 3rd quarter. The decrease in direct costs was
primarily attributable to:
|
|
|
a decrease in advanced commission expense of $1.2 million as a result of lower volumes of new member enrollments; and |
|
|
|
a decrease of $0.4 million for network & fulfillment expenses also related to lower volumes of new member enrollments. |
Operating expenses decreased $0.3 million (a 24% decrease) to $0.9 million during the 2011
3rd quarter from $1.2 million during the 2010 3rd quarter. The decrease in
operating expenses was primarily attributable to outside billing and customer service expenses for new business that began in the 2010 3rd quarter.
Operating income increased $1.4 million (a 306% increase) to $1.8 million during the 2011
3rd quarter from $0.4 million in the 2010 3rd quarter.
24
Insurance Marketing Operating Segment
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
($ in thousands except agent and policy data) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
3,815 |
|
|
$ |
5,017 |
|
|
|
(24 |
%) |
Direct costs |
|
|
3,166 |
|
|
|
4,286 |
|
|
|
(26 |
%) |
Operating expenses |
|
|
636 |
|
|
|
780 |
|
|
|
(18 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
13 |
|
|
$ |
(49 |
) |
|
|
127 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
Direct costs |
|
|
83 |
% |
|
|
85 |
% |
|
|
(2 |
%) |
Operating expenses |
|
|
17 |
% |
|
|
16 |
% |
|
|
1 |
% |
Operating income (loss) |
|
|
0 |
% |
|
|
(1 |
%) |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Agents |
|
|
7,500 |
|
|
|
7,757 |
|
|
|
(3 |
%) |
Number of In-force Policies |
|
|
24,568 |
|
|
|
24,899 |
|
|
|
(1 |
%) |
Net revenues decreased $1.2 million (a 24% decrease) during the 2011 3rd quarter to $3.8
million from $5.0 million during the 2010 3rd quarter. The decrease in net revenues was
attributable to the minimum loss ratio requirement of the Health Care Reform Act that became
effective in January 2011 which reduced our commissions on individual major medical insurance
policies and a decline in net revenue due to two of our contracted insurance carriers discontinuing
the sale of new major medical insurance policies.
Direct costs decreased $1.1 million (a 26% decrease) during the 2011 3rd quarter to $3.2
million from $4.3 million during the 2010 3rd quarter. The decrease in direct costs was
attributable to the decline in net revenues.
Operating expenses decreased $0.2 million (an 18% decrease) to $0.6 million during the 2011
3rd quarter from $0.8 million during the 2010 3rd quarter. The decrease in
operating expenses was attributable to a decrease in compensation expense and outsourced data
services during the 2011 3rd quarter.
Operating income increased to $0.013 million during the 2011 3rd quarter from a loss of
$0.049 million during the 2010 3rd quarter.
Corporate Operating Segment
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
($ in thousands) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
Direct costs |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
799 |
|
|
|
416 |
|
|
|
92 |
% |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
(799 |
) |
|
$ |
(416 |
) |
|
|
(92 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating expenses increased $0.4 million (a 92% increase) to $0.8 million during the 2011
3rd quarter from $0.4 million during the 2010 3rd quarter. The increase was
attributable to the reclassification of expenses from the Retail Plans Division of
approximately $0.1 million consisting of legal and consulting expense. The remaining $0.3 million
was attributable
to an increase in compensation expense for existing employees primarily due to anticipated fiscal
year end incentive plan compensation.
25
Discussion of Nine Months Ended June 30, 2011 and 2010
Net revenues remained unchanged at $41.1 million during the nine months ended June 30, 2011 and
2010. However, there were changes within each operating segment as described below:
|
|
|
Growth in our Wholesale Plans Division of approximately $2.3 million attributable
to new rent-to-own locations and growth in our existing contracts (see the Segment
Discussion Analysis below for additional information); |
|
|
|
Growth in our existing Retail Plans Division of approximately $0.3 million (see
the Segment Discussion Analysis below for additional information); |
|
|
|
Our Insurance Marketing Division experienced a decrease of $1.9 million
attributable to the minimum loss ratio requirement in the Health Care Reform Act that
became effective in January 2011 and a decline in net revenue due to two of our
contracted insurance carriers that ceased sales of new major medical insurance policies
(see the Segment Discussion Analysis below for additional information); and |
|
|
|
Other decreases of $0.7 million related to intercompany revenues. |
Direct costs decreased $4.2 million (a 15% decrease) during the 2011 period to $24.2 million from
$28.4 million in the 2010 period. The increase in direct costs was attributable to the following:
|
|
|
Our Wholesale Plans Division experienced a decrease of $0.7 million
primarily related to our clients product service and waiver of rental payment expenses
(see the Segment Discussion Analysis below for additional information); |
|
|
|
A decrease of $1.5 million in our existing Retail Plans Division due to a decline
in advanced commission expense as a result of lower volumes of new member enrollments (see Segment Discussion Analysis below for
additional information); |
|
|
|
Our Insurance Marketing Division experienced a decrease in direct costs of $1.4
million attributable to lower revenues (see the Segment Discussion Analysis below for
additional information);and |
|
|
|
Other decreases of $0.6 million. |
Operating expenses decreased $0.1 million (a 2% decrease) during the 2011 period to $8.4 million
from $8.5 million in the 2010 period. The decrease in operating expenses was attributable to a
decrease in compensation expense due to a reduction of employees primarily in our Insurance
Marketing Division (see the Segment Discussion Analysis below for additional information.)
Net other income had a slight decline of $.008 million during the 2011 period.
Provision for income taxes, net increased by $1.9 million during the 2011 period to $3.6 million
from $1.7 million in the 2010 period due to growth in net income before taxes and the 2010 income
taxes having been reduced by tax refunds of $.5 million.
Net income was approximately $5.0 million during the 2011 period compared to $2.6 million during
the 2010 period (a 90% increase).
26
Wholesale Plans Division
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, |
|
($ in thousands except member data) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
18,795 |
|
|
$ |
16,539 |
|
|
|
14 |
% |
Direct costs (a) |
|
|
11,813 |
|
|
|
12,461 |
|
|
|
(5 |
%) |
Operating expenses |
|
|
1,386 |
|
|
|
1,493 |
|
|
|
(7 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
5,596 |
|
|
$ |
2,585 |
|
|
|
116 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
Direct costs |
|
|
63 |
% |
|
|
75 |
% |
|
|
(12 |
%) |
Operating expenses |
|
|
7 |
% |
|
|
9 |
% |
|
|
(2 |
%) |
Operating income |
|
|
30 |
% |
|
|
16 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Member count |
|
|
651,563 |
|
|
|
626,155 |
|
|
|
4 |
% |
|
|
|
(a) |
|
Gross of intercompany eliminations |
Net revenues increased $2.3 million (a 14% increase) during the 2011 period to $18.8 million from
$16.5 million during the 2010 period. The increase in net revenues related to the increase in the
number of new rent-to-own locations offering our membership plans plus membership growth from
previously existing locations.
Direct costs decreased $0.7 million (a 5% decrease) during the 2011 period to $11.8 million from
$12.5 million during the 2010 period. The decrease was primarily attributable to our clients
product service and waiver of rental payment expenses. We entered into contractual arrangements to
administer certain membership programs for clients, primarily in the rent-to-own industry. For
approximately 3,100 (78%) of the rent-to-own locations the administration duties include
reimbursing the client for certain expenses it incurs in the operation of the program. Those
expenses are primarily related to product service expenses and the clients waiver of rental
payments under defined circumstances when their customer becomes unemployed for a stated period of
time. It is our policy to reserve the necessary funds in order to reimburse our clients as those
obligations become due in the future.
Operating expenses decreased 7% to $1.4 million during the 2011 period when compared to the 2010
period. The decrease was the result of a reclassification of compensation expense to the Corporate
operating segment during the 2011 period.
Operating income increased $3.0 million (a 116% increase) during the 2011 period to $5.6 million
from $2.6 million in the 2010 period.
27
Retail Plans Operating Segment
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, |
|
($ in thousands except member data) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues (a) |
|
$ |
13,182 |
|
|
$ |
12,893 |
|
|
|
2 |
% |
Direct costs |
|
|
5,400 |
|
|
|
6,868 |
|
|
|
(21 |
%) |
Operating expenses |
|
|
2,999 |
|
|
|
3,436 |
|
|
|
(13 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
4,783 |
|
|
$ |
2,589 |
|
|
|
85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
Direct costs |
|
|
41 |
% |
|
|
53 |
% |
|
|
(12 |
%) |
Operating expenses |
|
|
23 |
% |
|
|
27 |
% |
|
|
(4 |
%) |
Operating income |
|
|
36 |
% |
|
|
20 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Member count |
|
|
1,690,892 |
|
|
|
1,561,345 |
|
|
|
8 |
% |
|
|
|
(a) |
|
Gross of intercompany eliminations |
Net revenues increased $0.3 million (a 2% increase) during the 2011 period to $13.2 million from
$12.9 million during the 2010 period. The increase in net revenues was attributable to new member enrollments for approximately 65% of our client base.
Direct costs decreased $1.5 million (a 21% decrease) during the 2011 period to $5.4 million
from $6.9 million during the 2010 period. The decrease in direct costs was primarily attributable to a decrease in
advanced commission expense of $1.6 million as a result of lower
volumes of new member enrollments.
Operating expenses decreased $0.4 million (a 13% decrease) to $3.0 million during the 2011 period
from $3.4 million during the 2010 period. The decrease was attributable to:
|
|
|
A decrease in compensation expense of $0.2 million resulting from the transfer of
employees to other operating segments and the elimination of two positions; and |
|
|
|
A decrease in outside billing and administration expenses of $0.2 million for an
existing client whose revenue declined during the 2011 period. |
Operating income increased $2.2 million (an 85% increase) to $4.8 million during the 2011 period
from $2.6 million in the 2010 period.
28
Insurance Marketing Operating Segment
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, |
|
($ in thousands except agent and insurance data) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
13,509 |
|
|
$ |
15,441 |
|
|
|
(13 |
%) |
Direct costs |
|
|
11,363 |
|
|
|
12,799 |
|
|
|
(11 |
%) |
Operating expenses |
|
|
2,024 |
|
|
|
2,367 |
|
|
|
(14 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
122 |
|
|
$ |
275 |
|
|
|
(56 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
Direct costs |
|
|
84 |
% |
|
|
83 |
% |
|
|
1 |
% |
Operating expenses |
|
|
15 |
% |
|
|
15 |
% |
|
|
|
|
Operating income |
|
|
1 |
% |
|
|
2 |
% |
|
|
(1 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of agents |
|
|
7,500 |
|
|
|
7,757 |
|
|
|
(3 |
%) |
Number of in-force policies |
|
|
24,568 |
|
|
|
24,899 |
|
|
|
(1 |
%) |
Net revenues decreased $1.9 million (a 13% decrease) during the 2011 period to $13.5 million from
$15.4 million during the 2010 period. The decrease was attributable to the minimum loss ratio
requirement in the Health Care Reform Act that became effective in January 2011 which reduced our
commissions on individual major medical insurance policies and a decline in net revenue due to two
of our contracted insurance carriers discontinuing the sale of new major medical insurance
policies.
Direct costs decreased $1.4 million (an 11% decrease) during the 2011 period to $11.4 million from
$12.8 million during the 2010 period. The decrease in direct costs was attributable to the
decrease in net revenues.
Operating expenses decreased $0.4 million (a 14% decrease) to $2.0 million during the 2011 period
from $2.4 million during the 2010 period. The decrease in operating expenses was attributable to a
decrease in compensation expense and outsourced data services during the during the 2011 period.
Operating income decreased $0.2 million (a 56% decrease) to $0.1 million during the 2011 period
from $0.3 million during the 2010 period.
29
Corporate Operating Segment
Selected Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30, |
|
($ in thousands) |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Results of operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
Direct costs |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
1,959 |
|
|
|
1,209 |
|
|
|
62 |
% |
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
(1,959 |
) |
|
$ |
(1,209 |
) |
|
|
(62 |
%) |
|
|
|
|
|
|
|
|
|
|
Operating expenses increased $0.8 million (a 62% increase) to $2.0 million during the 2011 period
from $1.2 million during the 2010 period. The increase was attributable to:
|
|
|
Reclassification of expenses from the Retail Plans Division of
approximately $0.3 million consisting of accounting, compensation and public company
expenses; |
|
|
|
An increase in stock compensation expense for employees and outside board of directors
of $0.1 million; |
|
|
|
An increase in compensation expense of $0.3 million related to anticipated fiscal year
end incentive plan compensation and salary increases for existing employees; and |
|
|
|
An increase in consulting and legal expenses of $0.1 million relating to a previously announced initiative to explore strategic alternatives for the company. |
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
LIQUIDITY AND CAPITAL RESOURCES
We had unrestricted cash of $11.9 million and $5.4 million at June 30, 2011 and September 30,
2010, respectively. Our working capital was $11.8 million at June 30, 2011 compared to $5.7
million at September 30, 2010. The improvement in working capital of $6.1 million was due to the following:
|
|
|
Cash, net of restricted cash increased $5.9 million attributable to net income
and a decrease in restricted cash; |
|
|
|
Advanced agency commissions decreased $2.6 million which was offset by a
decrease of $2.4 million for unearned commissions. The change was attributable to a
reduction of commission payments and shortened advancing periods to our agents in our
Insurance Marketing Division; |
|
|
|
Accounts receivable decreased $0.5 million primarily due to the revenue decline
in our Insurance Marketing Division; |
|
|
|
Accounts payable increased $0.5 million primarily due to revenue growth in our
Wholesale Plans Division |
|
|
|
Other accrued liabilities decreased $0.3 million attributable to income taxes
payable; |
|
|
|
Deferred revenue decreased $0.6 million due to the termination of a contract
during the 3rd quarter of 2011. |
|
|
|
Notes payable decreased $0.4 million due to the full repayment of the CFG and
Loyal loans in March 2011 and December 2010, respectively (see Note 7. Other Borrowings
to the financial statements appearing above); |
|
|
|
Other increases of $0.1 million. |
30
Cash provided by operating activities was $6.3 million for the nine months ended June 30, 2011
compared to $2.0 million for the same period in 2010. The increase of $4.3 million was
attributable to:
|
|
|
An increase in net income of $2.3 million; |
|
|
|
An increase in the change of accounts receivable of $1.8 million as a result lower revenues for our
Insurance Marketing Division during the nine months ended June 30, 2011; |
|
|
|
An increase in the change of advanced agency commissions of $1.8 million
attributable to a reduction of commission payments to and shortened commission
advancing periods of our agents in our Insurance Marketing Division; |
|
|
|
A decrease in the change of unearned commissions of $1.6 million also due to a reduction of commissions payments to and
shortened commission advancing periods of our agents in our Insurance Marketing Division; |
|
|
|
Claims and other accrued liabilities decreased $0.6 million primarily
attributable to income taxes payable of $0.5 million; |
|
|
|
A decrease in deferred revenue of $0.6 million due to termination of an account
during the 3rd quarter of 2011. |
Cash provided by investing activities increased by $0.4 million to $0.6 million for the nine
months ended June 30, 2011 from $0.2 million for the same 2010 period. The increase of $0.4
million was primarily attributable to a decrease in restricted cash resulting from the settlement
of the States General legal proceedings in the 2010 period.
Cash used in financing activities decreased $1.4 million to $0.4 million for the nine months ended
June 30, 2011 from $1.8 million for the same 2010 period. The decrease of $1.4 million was
attributable to:
|
|
|
Payments of related-party debt of $1.0 million during the 2010 period; |
|
|
|
Acquisition of treasury stock of $0.5 million during the 2010 period; |
|
|
|
Increase in other short-term debt of $0.2 million during the 2010
period; and |
|
|
|
Payments on other debt decreased $0.1 million during the 2011 period. |
We anticipate that our cash on hand, together with cash flow from operations, will be sufficient
for the next 12 months and beyond to finance operations and make capital investments in the ordinary
course of business.
IMPACT OF INFLATION
Inflation has not had a material effect on us to date. However, the effects of inflation on
future operating results will depend in part, on our ability to increase prices or lower
expenses, or both, in amounts that offset inflationary cost increases.
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
During the nine months ended June 30, 2011 we did not have any risks associated with market risk
sensitive instruments or portfolio securities.
31
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer and other members of our management are
responsible primarily for establishing and maintaining disclosure controls and procedures designed
to ensure that information required to be disclosed in our reports filed or submitted under the
Securities and Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the U.S
Securities and Exchange Commission. These controls and procedures are designed to ensure that
information required to be disclosed in our reports filed or submitted under the Exchange Act is
accumulated and communicated to our management, including our principal executive and principal
financial officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. During the three months ended June 30, 2011, we
recognized that our disclosure controls and procedures were materially deficient and ineffective
respecting the compliance of our officers and directors in the timely reporting of their incentive
compensation awards under Section 16 of the Securities Exchange Act of 1934, as amended. During the
three months ended June 30, 2011, we took corrective and effective measures and implemented
additional procedures to assure the accuracy of the Section 16 disclosures respecting the Section
16 reporting obligations of our officers and directors and their awards of incentive compensation.
After giving effect to the corrective measures and implemented additional procedures, based on
their evaluations, our Principal Executive Officer and Principal Financial Officer concluded that,
as of June 30, 2011, our disclosure controls and procedures were effective.
Furthermore, our Chief Executive Officer and Chief Financial Officer are responsible for the design
and supervision of our internal controls over financial reporting that are then effected by and
through our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles.
Managements Assessment of Internal Control Over Financial Reporting
Our management, under the supervision and with the participation of our Chief Executive Officer and
Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2011. Additionally, our Chief
Executive Officer and Chief Financial Officer concluded that the design and operation of our
internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the
Exchange Act) were effective as of June 30, 2011 in all material respects based on the criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Our Chief Executive Officer and Chief Financial Officer have concluded that the consolidated
financial statements included in this report fairly present, in all material respects, our
financial condition, results of operations and cash flows for the periods presented in accordance
with U. S. generally accepted accounting principles.
During the period covered by this report, there have been no changes in our internal control over
financial reporting that have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.
PART II. OTHER INFORMATION
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS. |
Since our 2011 Quarterly Report for the quarter ended March 31, 2011 on Form 10-Q there have been
no new material legal proceedings commenced, and there have been no material developments in legal
proceedings previously reported. The following legal proceedings all involves the subsidiaries of
Access Plans USA, Inc. which was acquired by us in a merger on April 1, 2009.
Our risk factors are disclosed in its Annual Report on Form 10K for the year ended September 30,
2010 and there has not been a material change in to previously disclosed risk factors.
32
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OR PROCEEDS. |
There are no items to report under this item.
|
|
|
ITEM 3. |
|
DEFAULTS UPON SENIOR SECURITIES. |
There are no items to report under this item.
|
|
|
ITEM 5. |
|
OTHER INFORMATION. |
There are no items to report under this item.
|
|
|
|
31.1 |
|
|
Certification Pursuant to Rule 13a-14(a) under the Securities Exchange act of 1934,
as amended |
|
|
|
|
31.2 |
|
|
Certification Pursuant to Rule 13a-14(a) under the Securities Exchange act of 1934, as
amended. |
|
|
|
|
32.1 |
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
|
32.2 |
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 |
33
SIGNATURES
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 hereunto duly authorized.
|
|
|
|
|
|
Access Plans, Inc.
|
|
August 15, 2011 |
By: |
/s/ Danny Wright
|
|
|
|
Danny Wright |
|
|
|
Chief Executive Officer
(Principal Executive Officer) |
|
|
August 15, 2011 |
By: |
/s/ Brett Wimberley
|
|
|
|
Brett Wimberley |
|
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
34