AMERICAN CARESOURCE HOLDINGS, INC. – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations
| Edgar Online, Inc. |
GENERAL
Management's discussion and analysis provides a review of the Company's operating results for the three and six months endedJune 30, 2013 and its financial condition atJune 30, 2013 . The focus of this review is on the underlying business reasons for significant changes and trends affecting the net revenues, operating results and financial condition of the Company. This review should be read in conjunction with the accompanying unaudited consolidated financial statements and the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2012 .
OVERVIEW
American CareSource Holdings, Inc. ("ACS," "Company," the "Registrant," "we," "us," or "our") works to help its clients control healthcare costs by offering cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. The Company markets its services to a number of healthcare companies including third party administrators ("TPAs"), insurance companies, large self-funded organizations, various employer groups and preferred provider organizations ("PPOs"). The Company offers payors this solution by:
• lowering its payors' ancillary care costs through its network of high
quality, cost effective providers that the Company has under contract at
more favorable terms than they could generally obtain on their own;
• providing payors with a comprehensive network of ancillary healthcare
service providers that is tailored to each payor's specific needs and is
available to each payor's members for covered services; • providing payors with claims management, reporting and processing and payment services; • performing network/needs analysis to assess the benefits to payors of adding additional/different service providers to the payor-specific provider networks; and • credentialing network service providers for inclusion in the payor-specific provider networks. The Company has assembled a network of ancillary healthcare service providers that supplement or support the care provided by hospitals and physicians and includes 31 service categories. We have a dedicated provider development function, whose primary responsibility is to contract with providers and strategically grow our network of ancillary service providers.
We secure contracts with ancillary service providers by offering them the following:
• inclusion in a nationwide network that provides exposure to our client
payors and their aggregate member lives;
• an array of administrative and back-office services, such as collections
and appeals;
• increased claims volume through various "soft steerage" mechanisms; and
• advocacy in the claims appeals process.
Payors route healthcare claims to us after service has been performed by participant providers in our network. We process those claims and charge the payor according to its contractual rate for the services according to our contract with the payor. In processing the claim, we are paid directly by the payor or the insurer for the service. We then pay the provider of service according to its independently-negotiated contractual rate. We assume the risk of generating positive margin, the difference between the payment we receive for the service and the amount we are obligated to pay the provider of service. The Company recognizes revenues for ancillary healthcare services when services by providers have been authorized and performed, the claim has been billed to the payor and collections from payors are reasonably assured. Cost of revenues for ancillary healthcare services consist of amounts due to providers for providing ancillary healthcare services, client administration fees paid to our client payors to reimburse them for routing the claims to us for processing, and the Company's related direct labor and overhead of processing billings, collections and payments. The Company is not liable for costs incurred by independent contract service providers until payment is received by it from the payors. The Company recognizes actual or estimated liabilities to independent contract service providers as the related revenues are recognized. 11
--------------------------------------------------------------------------------
Table of Contents
The Company is seeking growth in the number of client payors and service provider relationships it secures by focusing on providing in-network services for its payors and aggressively pursuing additional TPAs, self-insured employers and other direct payors as its primary sales targets. The Company believes this strategy should increase the volume of claims the Company can process in addition to the expansion in the number of lives that are eligible to receive ancillary healthcare benefits. No assurances can be given that the Company can expand its service provider or payor relationships, nor that any such expansion will result in an improvement in the results of operations of the Company. In addition, under the medical loss ratio ("MLR") regulations included in the Affordable Care Act, it is possible that a portion of the fees our existing and prospective payors are contractually required to pay us and that do not qualify as 'incurred claims' may not be included as expenditures for activities that improve healthcare quality. Such a determination may make it more difficult for us to retain existing clients and/or add new clients, because our clients' or prospective clients' MLR may otherwise not meet the specified targets. This may reduce our net revenues and profit margins. See "Recent and pending healthcare reforms could materially adversely affect our revenues, financial position and our results of operations" under "Item 1.A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012 .
OVERVIEW
We have experienced significant revenue declines over the past four years, primarily related to the declines in the business of our two largest clients, both of which are PPOs. Due to a variety of factors affecting the healthcare industry including but not limited to healthcare legislation, the economy, industry consolidation, change in strategic direction and for other reasons, revenue from each of our two largest clients continued to decline resulting in year-over-year quarterly declines in our revenue from those accounts. Because of the significance of the revenue concentration from these two clients (from approximately 98% in 2008 to 32% throughJune 30, 2013 ), the declines of the business of these clients has had a significant negative impact on our operating results and cash position over the past four years, despite our new business development efforts. We expect revenue from one of these clients to discontinue during 2013 and, although we have entered into a new agreement with the other, the agreement does not provide for any minimum level of volume, and we cannot be certain of any level of continued revenue from such relationship. During the period from 2008 to 2013 (excluding the addition of any entities affiliated with either of our two largest clients), we added 38 new clients, which contributed$20.4 million of gross revenue in 2012. Those clients generated$9.4 million of gross revenue in each of the first halves of 2013 and 2012. The Company believes that it has a unique business model and offers a solid value proposition to our clients, as well as our providers, by delivering superior discounts through our network of contracted ancillary healthcare service providers. In addition, we believe that our network has application in areas outside of commercial group health market, where it has traditionally been utilized. In 2013, as mentioned, we anticipate adding new client relationships, but do not believe that the revenue from those accounts will offset the losses from our two significant client relationships and declines from our other legacy accounts. We will continue to opportunistically investigate strategic initiatives that will grow our revenue base, while controlling non-variable costs consistent with our existing revenue streams. Nevertheless, until we can replace a greater amount of the revenue than we have lost from our two largest clients, we will continue to experience operating losses and we will continue to reduce our existing cash reserves for operating and investing activities. 12
--------------------------------------------------------------------------------
Table of Contents
ANALYSIS OF RESULTS OF OPERATIONS
The following table sets forth a comparison of our results of operations for the following periods presented (certain prior year amounts have been reclassified for comparability purposes): Second Quarter Six Months Change Change 2013 2012 $ % 2013 2012 $ % Net revenue$ 6,443 $ 8,215 $ (1,772 ) (21.6 )%$ 14,048 $ 17,616 $ (3,568 ) (20.3 )%
Variable costs:
Provider payments 4,912 6,078 1,166 19.2
10,728 12,873 2,145 16.7
Administrative fees 258 364 106 29.1 588 828 240 29.0
Total variable costs 5,170 6,442 1,272 19.7
11,316 13,701 2,385 17.4
Percent of net revenue 80.2 % 78.4 %
80.6 % 77.8 %
Variable flowthrough 1,273 1,773 (500 ) (28.2 )
2,732 3,915 (1,183 ) (30.2 )
Variable margin 19.8 % 21.6 %
19.4 % 22.2 %
Non-variable costs:
Claims administration 544 564 20 3.5 1,078 1,168 90 7.7 Provider development 134 161 27 16.8 288 409 121 29.6 Sales & marketing 553 552 (1 ) (0.2 ) 1,126 1,147 21 1.8
Finance & administration 1,335 1,087 (248 ) (22.8 )
2,466 2,114 (352 ) (16.7 ) Total non-variable costs 2,566 2,364 (202 ) (8.5 )
4,958 4,838 (120 ) (2.5 )
Percent of net revenue 39.8 % 28.8 %
35.3 % 27.5 %
Loss before depreciation, amortization, and income taxes (1,293 ) (591 ) (702 ) (118.8 )
(2,226 ) (923 ) (1,303 ) (141.2 )
Percent of net revenue (20.1 )% (7.2 )% (15.8 )% (5.2 )% Depreciation and amortization 212 221 9 4.1 423 440 17 3.9 Income tax provision 4 17 13 76.5 11 24 13 54.2 Net loss$ (1,509 ) $ (829 ) $ (680 ) (82.0 )%$ (2,660 ) $ (1,387 ) $ (1,273 ) (91.8 )%
The following discussion compares the historical results of operations on a basis consistent with GAAP for the three and six months ended
Net Revenues The Company's net revenues are generated from ancillary healthcare service claims. Revenue is recognized when we bill our client payors for services performed and collection is reasonably assured. The Company estimates revenues using average historical collection rates. When estimating collectibility, we assess the impact of items such as non-covered benefits, denied claims, deductibles and co-payments. Periodically, revenues and related estimates are adjusted to reflect actual cash collections so that revenues recognized accurately reflect cash collected. There are no assurances that actual cash collections will meet or exceed estimated cash collections. 13
--------------------------------------------------------------------------------
Table of Contents
There can be variations in revenue from period-to-period due to the demand for various ancillary service specialties by our clients' members. The variations can impact revenue, revenue per claim, collectibility and margins after payments made to the ancillary service providers. While we focus on attaining the most advantageous contractual rates possible with our clients and ancillary service providers, we have minimal control over the mix of ancillary service specialties billed and the ancillary service providers that are utilized.
The following table set forth a comparison of our net revenues and billed claims for the following periods presented ended
Net Revenue
Billed Claims Volume
Second Quarter Change Second Quarter Change (in thousands) 2013 2012 $ % 2013 2012 Claims % Legacy clients: Material Client (38 )%
Relationship
8 (3 ) HealthMarkets, Inc. 881 633 248 39 7 9 (2 ) (22 ) MultiPlan, Inc. (formerly Viant, Inc.) 375 682 (307 ) (45 ) 1 4 (3 ) (75 ) Other legacy clients 1,110 1,188 (78 ) (7 ) 5 5 - - Sub-total 3,804 5,553 (1,749 ) (31 ) 18 26 (8 ) (31 ) Clients (13 ) implemented in 2010 - 2013 2,705 2,723 (18 ) (1 ) 14 16 (2 ) Total gross revenue$ 6,509 $ 8,276 $ (1,767 ) (21 )% 32 42 (10 ) (24 )% Provision for refunds (66 ) (61 ) (5 ) 8 - - - nm Net Revenue$ 6,443 $ 8,215 $ (1,772 ) (22 )% 32 42 (10 ) (24 )% Net Revenue Billed Claims Volume Six Months Change Six Months Change (in thousands) 2013 2012 $ % 2013 2012 Claims % Legacy clients: Material Client (45 )% Relationship$ 3,795 $ 5,953 $ (2,158 ) (36 )% 11 20 (9 ) HealthMarkets, Inc. 1,537 1,283 254 20 14 18 (4 ) (22 ) MultiPlan, Inc. (formerly Viant, Inc.) 679 1,706 (1,027 ) (60 ) 2 9 (7 ) (78 ) Other legacy clients 2,400 2,238 162 7 9 9 - - Sub-total 8,411 11,180 (2,769 ) (25 ) 36 56 (20 ) (36 ) Clients (10 ) implemented in 2010 - 2013 5,744 6,546 (802 ) (12 ) 27 30 (3 ) Total gross revenue$ 14,155 $ 17,726 $ (3,571 ) (20 )% 63 86 (23 ) (27 )% Provision for refunds (107 ) (110 ) 3 (3 ) - - - nm Net Revenue$ 14,048 $ 17,616 $ (3,568 ) (20 )% 63 86 (23 ) (27 )%
In addition, the following table sets forth a comparison of processed and billed claims for the following periods presented ended
Second Quarter Six Months Change Change (in thousands) 2013 2012 Claims % 2013 2012 Claims % Processed 39 53 (14 ) (26 )% 78 108 (30 ) (28 )% Billed 32 42 (10 ) (24 ) 63 86 (23 ) (27 ) 14
--------------------------------------------------------------------------------
Table of Contents
Following is a discussion of the changes in net revenue generated by significant client/client groupings for the three and six months ended
Material Client Relationship
The decline in billed claims volume from our relationship with one of our material clients for the three and six months ended
• The client continues to suffer attrition in its client base, as it continues to re-focus its business strategy resulting in declines in claims volume.
• The client lost several significant employer groups which accounted for
approximately
and six months ended
from these employer groups was generated during the six months endedJune 30, 2013 .
• Laboratory service claims generated from the client declined 65% and 76%
for the three and six months ended
count resulted in estimated declines in revenue of approximately
and$176,000 for the three and six months endedJune 30, 2013 .
• Under our new agreement executed on
flexibility to utilize ancillary care providers with which it is directly
contracted or that are accessible through other provider networks.
The performance of the client account during the remainder of 2013 will be affected by attrition in its own client base, its internal strategic initiatives and the actual utilization of our network of ancillary healthcare providers over other networks the client has access to. Despite the new agreement the Company and this client entered into onDecember 31, 2012 , we cannot be certain of any level of continued volume from this client.
HealthMarkets, Inc is a holding company headquartered inNorth Richland Hills, Texas . HealthMarkets' subsidiary insurance companies,The Chesapeake Life Insurance Company , Mid-West National Life Insurance Company ofTennessee , andThe MEGA Life and Health Insurance Company , offer supplemental insurance and selected life insurance products through independent agents. We secured an agreement with this client in 2009 and have historically presented revenue and billed claims volume within the other legacy clients' group. The 39% and 20% increase in net revenue from this client during the three and six months endedJune 30, 2013 , respectively, is the result of claims billed for specialties which generate higher revenue per claim relative to other specialties. Additionally, collections in excess of our initial estimate contributed to this increase as well. A change in patient and specialty mix, as well as benefit plan design changes, is not a factor controlled by us. The 22% decline in this client's billed claims volume during both the three and six months endedJune 30, 2013 was due to a decline in claims billed for laboratory services, which generate lower revenue per claim relative to other specialties.
The decline in net revenue and billed claims volume from our relationship withMultiPlan, Inc. ("MultiPlan") is due to the acquisition byMultiPlan ofViant Holdings, Inc. As part of that transition,MultiPlan moved its payors and employer groups to its existing networks. While we did not receive a formal termination notice fromMultiPlan , the transition was completed as ofDecember 31, 2012 . The expectation is that all claims volume and related revenue from the client will discontinue in 2013. Thus, we have no assurances of future collections; therefore we will recognize revenue only to the extent of cash collections on outstanding claims.
Other Legacy Clients
Our other legacy clients consist of 11 various relationships with PPOs, insurance companies and direct payors that were contracted between 2005 and 2009. Most of the accounts have matured and there are only limited opportunities for growth. Through our account management group, we maintain contact with these clients to determine if opportunities exist to serve the accounts and generate incremental revenue. 15
--------------------------------------------------------------------------------
Table of Contents
For the three months endedJune 30, 2013 , revenue for this client group decreased 7%, while billed claims volume remained steady. The revenue from two of our clients within this group was negatively impacted as a result of a shift in the mix of ancillary specialties billed during the second quarter of 2013 as compared to the same prior year quarter. These two clients experienced a substantial decrease in billings, and related revenue, for specialties, such as infusion services and durable medical equipment, when compared to the same prior year period. This decrease was partially offset by a third client account, which experienced an increase in overall billings as a result of the client adding new employer groups that previously were not using our network of ancillary service providers. During the six months endedJune 30, 2013 , revenue for this client group increased 7% primarily as a result of the client, discussed above, which added new employer groups in 2013 as compared to 2012. Billed claims volume for this client group remained relatively unchanged during the six months of 2013 compared to the same period in 2012. While there are limited opportunities for growth in these accounts, revenue is impacted most significantly by the mix of specialties utilized and those specialties' associated collection rates, and the clients' ability to maintain its own book of business.
Clients implemented in 2010 - 2013
The 13 clients implemented in 2010 consist of 12 TPAs and one PPO, and are the results of the initial stages of our focus on TPAs and direct payors. The accounts generated approximately$5.9 ,$11.9 , and$12.4 million of annual revenue in 2010, 2011 and 2012, respectively. Through our account management group, we work with these clients to determine ways in which we can bring value to the relationships and to add our network to incremental employer groups in order to maximize our revenue opportunity. The 13% and 10% decline in billed claims volume for this client group for the three and six months endedJune 30, 2013 , respectively, is attributable to a decline in volume from our only PPO client within this group due to a shift in specialty billed mix, (which impacted several of our other clients within this group) and the utilization of a major carrier network. While our account management group is working closely with the PPO client to ensure they are receiving the maximum benefit from our network of ancillary healthcare service providers, a change in patient and specialty mix, as well as benefit plan design changes, is not a factor controlled by us. During the three months endedJune 30, 2013 , revenue for this client group, as a whole, was relatively flat as compared to the same prior year period. Revenue for this client group decreased 12%, or$802,000 , during the six months endedJune 30, 2013 , as compared to the same prior year period. The decrease in revenue for this client group is due to a shift in specialty billed mix, mentioned above, which impacted several of the clients we implemented in 2010. When compared to the first half of 2012, we experienced significantly less billings and related revenue for specialties such as dialysis, durable medical equipment, surgery center and lab. We continue our strategy to pursue TPAs and direct payors. The following table details the change in revenue generated from different client types (includes all Company clients) for the periods endedJune 30 ,: Second Quarter 2013 2012 Change ($ in thousands) Count Revenue % of revenue Count Revenue % of revenue $ % TPAs * 27$ 3,610 55.5 % 25$ 3,730 45.1 %$ (120 ) (3 )% PPOs 11 1,960 30.1 11 3,939 47.6 (1,979 ) (50 )
Direct/Insurance Companies 2 892 13.7 3 594 7.2 298 50 Other 3 47 0.7 1 13 0.1 34 nm Gross revenue, before provision for refunds$ 6,509 100.0 % $
8,276 100.0 %
* This group includes a TPA controlled by our most significant client. The TPA generated revenue of approximately
16
-------------------------------------------------------------------------------- Table of Contents Six Months 2013 2012 Change ($ in thousands) Count Revenue % of revenue Count Revenue % of revenue $ % TPAs * 27
Direct/Insurance
Companies 2 1,560 11.0 3 1,298 7.3 262 20 Other 3 120 0.9 1 13 0.1 107 nm Gross revenue, before provision for refunds$ 14,155 100.0 % $
17,726 100.0 %
* This group includes a TPA controlled by our most significant client. The TPA generated revenue of approximately
Variable Costs Variable costs are comprised of payments to our providers and administrative fees paid to our clients for converting claims to electronic data interchange and routing them to both the Company for processing and to their payors for payment. Payments to providers are the most significant variable cost and it consists of our payments for ancillary care services in accordance with contracts negotiated separately with providers for specific ancillary services.
The following table sets forth a comparison of the variable cost components of our cost of revenues, for the periods presented ended June 30,:
Second Quarter Change ($ in thousands) 2013 % of net revenue 2012 % of net revenue $ % Provider payments$ 4,912 76.2 %$ 6,078 74.0 %$ (1,166 ) (19 )% Administrative fees 258 4.0 364 4.4 (106 ) (29 ) Total variable costs$ 5,170 80.2 %$ 6,442 78.4 %$ (1,272 ) (20 )% Six Months Change ($ in thousands) 2013 % of net revenue 2012 % of net revenue $ % Provider payments$ 10,728 76.4 %$ 12,873 73.1 %$ (2,145 ) (17 )% Administrative fees 588 4.2 828 4.7 (240 ) (29 ) Total variable costs$ 11,316 80.6 %$ 13,701 77.8 %$ (2,385 ) (17 )% Provider payments The 19% and 17% decrease in provider payments for the second quarter and first half of 2013 is consistent with the decline in revenue as discussed above. The increase in provider payments as a percentage of net revenues compared to the same prior year period is primarily due to the combination of the mix of clients that utilized our network of ancillary service providers and the mix of ancillary service categories utilized. The mix of clients and service categories shifted from those that historically contribute higher margins relative to other clients and categories. Administrative fees Administrative fees paid to clients as a percent of net revenues were 4.0% and 4.4% for the three months endedJune 30, 2013 and 2012. Additionally, administrative fees paid to clients during the six months endedJune 30, 2013 decreased to 4.2% compared to 4.7% in the same prior year period. The decrease is due to a change in mix from clients with higher administrative fees to clients with lower administrative fees. 17
--------------------------------------------------------------------------------
Table of Contents
Non-variable Costs
Non-variable costs are those that are not contingent on claims activity and are fixed in nature, but can be adjusted. They are comprised of such expenses as salaries and benefits, professional fees, consulting costs, non-cash equity compensation costs and travel and entertainment expenses. A significant driver of these costs are headcount, as payroll, commissions and related benefits (including non-cash equity compensation) accounted for approximately 57% of our non-variable cost structure during the six months endedJune 30, 2013 . Our headcount of full-time employees ("FTE's") was 50 and 55 atJune 30, 2013 and 2012, respectively. In the fourth quarter of 2012, two key departments were created: strategic development (classified as sales and marketing) and performance management (classified as finance and administration). Both groups were staffed solely from existing headcount. The prior year amounts have been reclassified within the consolidated statement of operations to conform to the current year presentation. In addition, the Company continually monitors and adjusts the alignment of the organizational structure in an effort to optimize performance and maximize output.
Following is a discussion of the changes in non-variable costs and related drivers:
Claims administration
Our claims administration function consists of our operations and information technology groups. Our operations group is responsible for all aspects of claims management and processing, including billing, quality assurance and collection efforts. In addition, our operations group is responsible for credentialing contracted ancillary service providers. Our information technology group is responsible for maintaining and enhancing the technological capabilities and applications of the claims management process. Consistent with the decline in claims volume, the costs related to the claims administration function decreased 4% during the three months endedJune 30, 2013 primarily due to a decrease in outsourced claims processing costs of$18,000 . During the six months endedJune 30, 2013 the costs related to the claims administration function decreased 8% partially due to a decrease in outsourced claims processing costs of$37,000 . Additionally, a decrease in headcount by two FTE's, through natural attrition, within the information technology group contributed to the reduction in costs year-over-year.
Our provider development function is responsible for developing our network of ancillary healthcare service providers, which includes contracting with providers to be included in the network and maintaining a relationship with existing providers, all for the purpose of enhancing our ancillary service provider network for our client payors. We customize networks for our clients, thus as new client contracts are secured, our recruiting activities will increase.
The 17% and 30% decrease in costs related to the provider development function during the three and six months ended
Sales and Marketing
Our sales and marketing function consists of our sales and account management groups, as well as the strategic development group. Our sales group is primarily responsible for securing new client contracts, while our account management group maintains our existing client relationships, as well as attempts to generate incremental growth from those relationships. The strategic development group is responsible for executing the strategic objectives as dictated by the Board of Directors and executive management. There was a 2% decrease in costs related to sales and marketing during the six months endedJune 30, 2013 as compared to the same prior year period. 18
--------------------------------------------------------------------------------
Table of Contents
Finance and Administration
Our finance and administration function consists primarily of human resources, finance and accounting, and performance measurement as well as our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer.
For the three months ended
The costs related to the finance and administration function increased 17% for the six months endedJune 30, 2013 as compared to the same prior year period, respectively, as a result of the severance charge discussed above and an increase of$119,000 in professional fees related to investigating various strategic initiatives, legal consultation regarding employment issues and legal review of various client contracts.
Selling, General and Administrative Expenses
Following is a table showing the components of selling, general and administrative ("SG&A") expenses as presented per the Statement of Operations for the period presented ending June 30,:
Second Quarter Six Months Change Change ($ in thousands) 2013 2012 $ % 2013 2012 $ % Sales and marketing$ 553 $ 552 $ (1 ) - %$ 1,126 $ 1,147 $ 21 2 % Finance and administration 1,335 1,087 (248 ) (23 ) 2,466 2,114 (352 ) (17 ) Selling, general and administrative expenses$ 1,888 $ 1,639 $ (249 ) (15 )%$ 3,592 $ 3,261 $ (331 ) (10 )% Percentage of total 29.3 % 20.0 % 25.6 % 18.5 % net revenues SG&A expenses as a percentage of total net revenues increased during the three and six months endedJune 30, 2013 compared to the same prior year period, due primarily to the decline in net revenues compared to the same prior year period. 19
--------------------------------------------------------------------------------
Table of Contents
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements. These condensed consolidated financial statements have been prepared following the requirements of accounting principles generally accepted inthe United States ("GAAP") for interim periods and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, provider cost recognition, the resulting contribution margins, potential impairment of intangible assets and stock-based compensation expense. As these are condensed consolidated financial statements, you should also read expanded information about our critical accounting policies and estimates provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Critical Accounting Policies," included in our Annual Report on Form 10-K for the year endedDecember 31, 2012 . There have been no material changes to our critical accounting policies and estimates from the information provided in our Form 10-K for the year endedDecember 31, 2012 .
FINANCIAL CONDITION AND LIQUIDITY
As ofJune 30, 2013 the Company had working capital of$6.7 million compared to$9.0 million atDecember 31, 2012 . Our cash and cash equivalents balance decreased to$7.8 million as ofJune 30, 2013 compared to$10.7 million atDecember 31, 2012 . We continued to experience a decline in claims volume and related revenue, resulting in a net loss during the six months endedJune 30, 2013 , which expended cash despite our cost containment measures. Additionally, the decline in our cash balance is also attributable to the timing of payments to providers duringJanuary 2013 related to cash received from payors inDecember 2012 . The payments made totaled$1.2 million . The table below reconciles the loss before income taxes to the net decrease in cash for the six months endedJune 30, 2013 . Six months ended June 30, 2013 Loss before income taxes $ (2,649 ) Depreciation and amortization 423 Non-cash stock-based compensation expense
153
Payment of annual premiums for property and casualty insurance, net of amounts amortized
(147 ) Capital expenditures (primarily software development costs)
(187 ) Other working capital changes (460 ) Decrease in cash for the six months endedJune 30, 2013 $
(2,867 )
We believe our current cash balance of$7.8 million as ofJune 30, 2013 will be sufficient to meet our anticipated cash needs for working capital, capital expenditures and other activities through the foreseeable future, but our continuing losses will continue to reduce our available cash. We have reduced our non-variable cost structure to preserve our existing cash balances for investments in the business model and/or other strategic initiatives. However, we will need to increase our client base significantly or identify alternative business opportunities in order to stop the reduction in our available cash. If we are unable to do so, we might be required to access additional capital either through debt or equity markets. If additional financing is required, there cannot be assurances that we would be successful in obtaining sufficient capital financing on commercially reasonable terms or at all, or, if we did obtain capital financing, that it would not be dilutive to current shareholders. We do not have any lines of credit, credit facilities or outstanding bank indebtedness as ofJune 30, 2013 .
INFLATION
Inflation did not have a significant impact on the Company's costs during the quarter ended
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements as of
20
--------------------------------------------------------------------------------
Table of Contents
| Wordcount: | 5576 |
SEBRING SOFTWARE, INC. – 10-Q – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Advisor News
- Millennials are inheriting billions and they want to know what to do with it
- What Trump Accounts reveal about time and long-term wealth
- Wellmark still worries over lowered projections of Iowa tax hike
- Wellmark still worries over lowered projections of Iowa tax hike
- Could tech be the key to closing the retirement saving gap?
More Advisor NewsAnnuity News
- How to elevate annuity discussions during tax season
- Life Insurance and Annuity Providers Score High Marks from Financial Pros, but Lag on User Friendliness, JD Power Finds
- An Application for the Trademark “TACTICAL WEIGHTING” Has Been Filed by Great-West Life & Annuity Insurance Company: Great-West Life & Annuity Insurance Company
- Annexus and Americo Announce Strategic Partnership with Launch of Americo Benchmark Flex Fixed Indexed Annuity Suite
- Rethinking whether annuities are too late for older retirees
More Annuity NewsHealth/Employee Benefits News
- Governor signs education package on reading, math, teacher benefits
- Findings from Belmont University College of Pharmacy Provide New Insights into Managed Care and Specialty Pharmacy (Comparing rates of primary medication nonadherence and turnaround time among patients at a health system specialty pharmacy …): Drugs and Therapies – Managed Care and Specialty Pharmacy
- Study Data from Ohio State University Update Knowledge of Managed Care (Preventive Care Utilization, Employer-sponsored Benefits, and Influences On Utilization By Healthcare Occupational Groups): Managed Care
- Recent Findings from Cornell University Provides New Insights into Managed Care (The Law of Large Umbrellas: Away From Risk Reduction In Health Insurance): Managed Care
- New Findings on Cancer from University of Texas Arlington Summarized (Systematic Review of Health Insurance and Survival Among Adolescent and Young Adult Cancer Patients): Cancer
More Health/Employee Benefits NewsLife Insurance News
- Kansas City Life: Q4 Earnings Snapshot
- Gulf Guaranty Life Insurance Company Trademark Application for “OPTIBEN” Filed: Gulf Guaranty Life Insurance Company
- Marv Feldman, life insurance icon and 2011 JNR Award winner, passes away at 80
- Continental General Partners with Reframe Financial to Bring the Next Evolution of Reframe LifeStage to Market
- ASK THE LAWYER: Your beneficiary designations are probably wrong
More Life Insurance News