(d) On October 25, 2002, we completed our IPO of 9.0 million common shares at a price of $10 per share. Upon the consummation of the IPO, all outstanding shares of preferred stock were split adjusted (two-for-five reverse stock split) and converted into approximately 23.1 million shares of our common stock. The accretion dividends, with respect to the preferred stock, were converted to approximately 9.1 million shares of our common stock at the IPO price of $10 per share. At December 31, 2005, 2004, 2003, 2002 and 2001 we had approximately 57.6 million, 51.5 million, 46.7 million, 42.4 million and 0.8 million shares of common stock outstanding, respectively. The IPO proceeds, net of the underwriting discount and expenses, of approximately $78.4 million were used to repay indebtedness under our credit facility.
We also receive contingent commissions, which are incremental compensation for achieving specified loss experience and/or account retention and premium volume goals set by the insurance companies for the business we place with them. Contingent commissions are recorded on the earlier of receipt of cash or when we receive data from the insurance companies that allows us to reasonably determine the amount. Contingent commissions and other forms of placement services revenues paid by insurance companies to brokers are under scrutiny by various regulators. Please refer to further discussion below under “Insurance Industry Investigations and Other Developments.” Fee-based revenues are generally billed and recorded as services are rendered.
Our quarterly revenues and Operating Income may be volatile. This is attributable to the following:
We record fees and/or commissions related to benefit enrollment services when earned. We consider the earnings cycle complete when we have substantially completed our obligations under the service contract, we can reasonably estimate the revenue earned and when there is no significant collection risk. At the completion of an enrollment we record an estimate of first year fee and/or commission income less an estimate of policy cancellations. This policy cancellation allowance is based on historical attrition rates by carrier and type of policy. The allowance for policy cancellations on benefit enrollment services is established through a charge to revenue and receivables and was $3.3 million and $2.3 million at December 31, 2005 and 2004, respectively. If our estimate of policy cancellations is too low, we may need to reverse previously recognized enrollment revenues.
In 2005 and 2004, we recorded $1.6 million and $3.3 million, respectively, in expenses related to our margin improvement plan and integration efforts. The increase in Corporate expenses in 2005, as compared to 2004, was primarily attributable to an increase in interest expense of $6.6 million and an increase in incentive compensation of $2.1 million due to better operating performance, somewhat offset by a net decrease in expenses related to insurance industry investigations, Sarbanes-Oxley 404 compliance and corporate move costs of $0.8 million. The increase in Corporate expenses in 2004, as compared to 2003, was primarily attributable to an increase in margin improvement plan expenses of $3.3 million and a net increase in expenses related to insurance industry investigations, Sarbanes-Oxley 404 compliance and the corporate move of $3.2 million, somewhat offset by a decrease in early extinguishment of debt expenses of $4.0 million. As a percentage of total consolidated revenues, net Corporate expenses were 9.5%, 9.5% and 9.8% in 2005, 2004 and 2003, respectively.
Cash and cash equivalents at year-end increased (decreased) $24.4 million, $(42.7) million and $27.1 million in 2005, 2004 and 2003, respectively. Net cash provided by continuing operating activities totaled
The revolving credit facility is available for loans denominated in U.S. dollars and for letters of credit. Borrowings under the revolving credit facility bear interest, at our option, at either a base rate plus an applicable margin ranging from 1.5% to 2.5% per annum or the Eurodollar rate plus an applicable margin ranging from 2.5% to 3.5% per annum, depending on our credit ratings as determined by Standard & Poor’s and Moody’s Investors Service credit rating services at the time of borrowing. Borrowings under the term loan bear interest, at our option, at a base rate plus 2.0% per annum or the Eurodollar rate plus 3.0% per annum. The base rate and the Eurodollar rate are effectively the Prime Rate and the London Interbank Offering Rate, respectively. There is also a commitment fee on the unused portion of the revolving credit facility of 0.5% per annum. The revolving credit facility may be used for acquisition financing and general corporate purposes. At December 31, 2005, availability under the revolving credit facility was $28.8 million, having been reduced $1.2 million for an outstanding letter of credit.