We conduct our operations from our headquarters in Tampa, Florida. Our data processing facility is in Middletown, New York. We lease both of these facilities. We believe that our facilities are adequate for our present and anticipated business requirements. In 2002, we moved our Tampa headquarters. We continue to pay rent to HPHI for our former Tampa location until June 2002.
PlanVista cautions you that, while forward-looking statements reflect PlanVista's good faith beliefs, these statements are not guarantees of future performance. In addition, PlanVista disclaims any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. See Forward-Looking Statements.
The Series C Preferred Stock accrue dividends at 10% per annum during the first 12 months from issuance and at a rate of 12% per annum thereafter. Dividends are payable quarterly in additional shares of convertible preferred stock . At any time after 18 months from the date of issuance, the Series C Preferred Stock may be converted into shares of the Company's common stock at an amount determined by formula to equal 51% of the outstanding shares of the Company's common stock . In addition, the Series C Preferred Stockholders are entitled to elect three members to the Company's board of directors. The Certificate of Designation for the Series C Preferred Stock also contains provisions that permits the preferred stockholders to immediately elect one additional member to the Company's board of directors to replace one of the board members elected by the Company's common shareholders if the Company fails to achieve certain minimum cash levels as defined under the Agreement or the Company fails to make its required principal and interest payments in accordance with the terms of the Agreement. The issuance of the Series C Preferred Stock was not put to stockholder approval in reliance on an applicable exception to the shareholder approval policy of the New York Stock Exchange. Stockholders were notified prior to the closing of the transaction of the Company's reliance on such exception. In connection with the issuance of the Series C Preferred Stock, the Senior Lenders entered into a Stockholders Agreement with the Company which provides, among other things, for registration rights in connection with the sale of any shares of Common Stock which are issued upon conversion of the Series C Preferred Stock. The registration rights include demand and incidental registration rights.
Revenues for the year ended December 31, 2001 increased $6.0 million, or 22.3%, to $32.9 million from $26.9 million in 2000. During 2001, the Company added over 500 new accounts and generated revenues on these accounts totaling $6.2 million. Revenues from existing customers were flat in 2001 compared to 2000. Claims volume increased to 2.9 million claims repriced in 2001 compared to 2.1 million claims repriced in 2000, or a 38.1% increase. The percentage increase in revenues in 2001 is less than the percentage increase in claim volume due to the Company repricing a higher percentage of generally lower dollar value physician claims in 2001 compared to 2000, which resulted in a decrease in average revenue per claim.
Other expense for the year ended December 31, 2000 was $1.1 million. Other income for the year ended December 31, 2001 was immaterial. During the second quarter of 2000, we recorded legal, financial advisory, and other fees associated with the termination of our merger agreement with UICI.
Loss on sale of investments for the year ended December 31, 2001 was $2.5 million compared to a gain on sale of investments for the years ended December 31, 2000 of $0.3 million. During the second quarter of 2001, we sold all of our shares of HealthAxis Inc. stock and realized a net pretax loss on the sale of approximately $2.5 million. During the second quarter of 2000, we sold all 109,732 shares of our Caredata.com, Inc. stock.
Loss from discontinued operations, net of taxes and loss on sale of discontinued operations, net of taxes, totaled $0.6 million and $10.1 million, respectively in 2001 compared to loss from discontinued operations, net of taxes and loss on sale of discontinued operations, net of taxes of $58.8 million and $39.3 million, respectively in 2000. During 2000, these operations were adversely impacted by the write-off of $80.3 million of goodwill and contract rights related to the business units sold determined by the selling price of the unemployment compensation and its workers' compensation, Ohio workers' compensation managed care organization and self-funded business units sold in 2000, and the definitive agreement signed in April 2001 to sell our TPA segment and MGU business units. The additional losses in 2001 were incurred based on actual results of operations and the final terms of the sale, which occurred in June 2001.
Personnel expense for the year ended December 31, 2000 increased $0.1 million, or 1.2%, to $8.3 million from $8.2 million in 1999. Personnel expense as a percentage of revenue was 30.8% in 2000 compared to 43.8% in
Benefit for income taxes was $3.3 million and $0.7 million in 2000 and 1999, respectively. The benefit was recognized based on the Company's effective tax rate during each year presented.
Loss from discontinued operations, net of taxes and loss on sale of discontinued operations, net of taxes, totaled $58.8 million and $39.3 million, respectively in 2000. Gain from discontinued operations, net of taxes in 1999 totaled $1.1 million. Loss from discontinued operations, net of taxes in 2000 represented the operating results of the businesses sold by the Company in 2001 and 2000. These operations were adversely impacted by the write-off of $80.3 million of goodwill and contract rights related to the business units sold determined by the selling price of the unemployment compensation and its workers' compensation, Ohio workers' compensation managed care organization and self-funded business units sold in 2000 and the definitive agreement signed in April 2001 to sell our TPA segment and MGU business units.
During 2000, we recorded an extraordinary loss of $1.0 million, net of taxes, related to our credit facility. This loss represented $1.5 million of pretax non-interest fees and expenses connected with the prior facility, which were previously subject to amortization over five years. No such gains or losses were recognized during 1999.
In June 2001, Ronald Davi, former principal of NPPN prior to its acquisition by the Company, drew in full on a letter of credit in his favor in the amount of $2.0 million. Such amount is included in the obligations owed to our lending group at December 31, 2001.
On July 2, 2001, the Company executed the Third Amendment and Limited Waiver to the Credit Agreement (the "Third Amendment") with its bank group and certain other parties. The Third Amendment provided for, among other things, (a) permission for the Company to issue Common Stock to certain funds managed by DePrince, Race and Zollo, Inc. for $3.3 million, (b) permission for the Company to use those funds to satisfy certain post-closing obligations to HPHI in connection with the sale of the TPA and MGU Businesses, (c) the postponement of certain scheduled payments of principal until August 31, 2001, (d) a 100 basis point increase in the interest rate, and (e) the delivery of 75,000 shares of Common Stock to the bank group in consideration for their consent to the Third Amendment.
As of December 31, 2001, PlanVista had additional notes totaling approximately $11.0 million related to a 1993 acquisition, a 1998 acquisition, and equipment purchases related to the HealthPlan Holdings transaction. As described below, the $5.0 million note related to the HealthPlan Holdings transaction converted to 813,273 shares of the Company's common stock. The number of shares of common stock issued in satisfaction of this note was based on the average closing price of the Company' common stock for the 10 days immediately prior to the conversion.
As of December 31, 2001, the Company was in default of notes aggregating $4.0 million payable to CENTRA. These obligations related to a 1998 acquisition by the Company. The default was caused by the failure by PlanVista to make interest payments due under such notes. On April 12, 2002 the Company restructured these notes. Under the restructured terms, notes totaling $4.3 million accrue interest at compound rate of 12% per annum, accruing monthly. Interest is payable on shares of common stock determined on the average trading price over the last ten (10) trading days of the quarter. Additionally, the Holder has the right to request interest to be paid in cash if there is available excess cash flow for such payments as permitted by the Senior Credit Agreement. These notes mature on December 1, 2004. Interest and principal are due in full at maturity . At any time after April 12, 2002, CENTRA may convert some or all of the notes to shares of the Company's common stock, based on the lesser of $0.25 plus the closing price of the Company's common stock on April 12, 2002, or the average trading price of the common stock for the ten day period immediately preceding the date the note is converted. This note is subordinated to the term loan with the Company's lenders.
On June 18, 2001, we completed the sale of our TPA and MGU business units to HPHI. The TPA business included the small group business operations and its associated data processing facilities based in Tampa, Florida, as well as the Taft-Hartley businesses that operated under the names ABPA and SNA, based in El Monte, California and Las Vegas, Nevada, respectively. The MGU business was the Philadelphia based Montgomery Management Corporation.
In connection with the issuance of these shares, the Company entered into a Registration Rights Agreement in favor of HPHI for the registration of such shares and any shares issuable under the terms of the note. Because the registration statement we filed with the Securities and Exchange Commission covering such shares has not been declared effective, pursuant to the terms of the Registration Rights Agreement, HPHI had the right to redeem for cash a number of the shares covered by such registration statement equal to one hundred thousand dollars ($100,000.00) divided by the average closing price of the Company's Common Stock on the New York Stock Exchange during the ten (10) trading days immediately preceding the last trading day prior to October 1, 2001. Pursuant to the Registration Rights Agreement, HPHI made demand for redemption after the Company failed to get the required registration statement effective. The Company, however, is not permitted to redeem the shares at this time under the terms of the Credit Agreement with its lenders. As a result, under the terms of the Registration Rights Agreement, the Company was required to issue 100,000 shares of the Company's Common Stock, 98,345 of which was issued in 2001, and the remainder on January 2, 2002, the value of which was charged to loss on sale of discontinued operations. Such issuances were in lieu of HPHI's right to redemption. In addition to these issuances, if the shares were not registered pursuant to an effective registration statement by December 31, 2001, then upon such date and each fifteenth day thereafter until such shares become registered , the Company is required to deliver to HPHI 10,000 shares of its Common Stock according to the terms of the Registration Rights Agreement. The total issuable shares as a result of such issuances are limited to 100,000. As of April 1, 2002, the Company has issued 70,000 shares of common stock, the value of which will be reflected as interest expense.
We are currently in discussions with Sun Capital Partners to finalize any purchase price adjustments associated with this sale. These adjustments relate primarily to the amount of accrued liabilities and trade accounts receivable reserves, and the classification of investments at the transaction date. In the event we are unable to resolve these matters directly with Sun Capital, we will seek to resolve them through binding arbitration as provided for in the purchase agreement. Sun Capital Partners believes it is due approximately $1.7 million from the Company related to the transaction, while the Company believes it is due approximately $4.5 million from Sun Capital. We believe the resolution of this matter will not have a material adverse effect on the financial condition, results of operations and cash flows of the Company.
In April 2001, we sold all of our shares of HealthAxis Inc. stock and used the proceeds of $0.9 million to reduce outstanding debt under our Credit Agreement. We spent $0.6 million for capital expenditures during the nine months ended June 30, 2001, including expenditures related to discontinued operations.
We believe that all consolidated operating and financing obligations for the next twelve months will be met from internally generated cash flow from operations and available cash. Based on available information, management believes it will be able to maintain compliance with the terms of its restructured credit facility, including the financial covenants for the foreseeable future. Our ability to fund our operations, make scheduled payments of interest and principal on our indebtedness, and maintain compliance with the terms of its restructured credit facility, including its financial covenants, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. If we are unable to generate sufficient cash flows from operations to meet our financial obligations and achieve the restructure debt covenants as required under the restructured credit facility, there may be a material adverse effect on our business, financial condition and results of operations, and a significant adverse effect on the market value of our common stock. Management is continuing to explore strategic alternatives to reduce its obligations, recapitalize the Company, and provide additional liquidity. There can be no assurances that the Company will be successful in these endeavors.
The preparation of our consolidated financial statements requires that we adopt and follow certain accounting policies. Certain amounts presented in the consolidated financial statements have been determined in
We have included below a discussion of the accounting policies that we believe are affected by the more significant judgments and estimates used in the preparation of our consolidated financial statements, how we apply such policies and how results differing from our estimates and assumptions would affect the amounts presented in our financial statements. Other accounting policies also have a significant effect on our consolidated financial statements, and some of these policies also require the use of estimates and assumptions. Note 3 to the Consolidated Financial Statements discusses our significant accounting policies.
We generate our revenue and related accounts receivable from services provided to healthcare payers, such as self-insured employers, medical insurance carriers, health maintenance organizations (sometimes called HMOs), third party administrators and other entities that pay claims on behalf of health plans, and participating health care services providers which include individual providers and provider networks.
Through the end of 2001, we evaluated goodwill for impairment based on undiscounted projected future cash flows and determined that no adjustment was necessary. However, if future actual results do not meet our
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development or normal operations of a long-lived asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management does not believe SFAS No. 143 will have a significant effect on the financial position, results of operations or liquidity of the Company.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes and amends SFAS No. 121 and relevant portions of SFAS No. 30. SFAS No. 144 is required to be adopted on January 1, 2002. We do not expect the adoption of SFAS No. 144 to have a significant effect on the financial position, results of operations, or liquidity of the Company.
financial covenants in the agreements, or if the convertible preferred stock is not redeemed within 18 months from its issuance, it can be converted into a minimum of 51% of the then outstanding common stock of the Company. The conversion of the convertible preferred stock to common stock will significantly dilute the ownership percentage of the Company's current common stockholders. Additionally, failure to comply with the term loan's financial covenants is an event of default and would permit the lenders to immediately require the Company to repay the term loan. This may have a material adverse effect on our business, operating results and financial condition and could require the Company to seek protection under available bankruptcy laws.
We have contingent obligations from the sale of our TPA and MGU businesses.
In connection with our sale of our TPA businesses and our MGU business, we incurred indemnity obligations for representations and warranties and for liabilities arising prior to the sale of these businesses. While we believe that we have accrued adequate reserves for all estimated liabilities, there may be unknown liabilities for which no reserves have been established and, if these liabilities were to occur, we might have to reorganize or liquidate under the bankruptcy laws in order to discharge them. Additionally, the reserves for expected liabilities established may not be adequate to handle these obligations.
Outstanding registration rights, convertible note may depress stock price or be dilutive.
We may not be able to fund expansion, develop or enhance our products or services, or respond to competitive pressures if we lack adequate funds. This could hurt our business. We do not currently have an available line of credit with a lender and we manage our business from existing cash flow. We may need to raise additional funds in order to fund more rapid expansion, including acquisitions, to develop new or enhanced services, or to respond to competitive pressures. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our stockholders will be diluted. Any new securities could have rights, preferences and privileges senior to those of the common stock.
increase. In addition, legislative reform may intensify competition in the markets served by us. Many of our current and potential competitors are significantly larger and have greater financial and marketing resources than we do. We cannot assure you that we will continue to maintain our existing clients or our past level of operating performance. We also cannot assure you that we will be successful with any new products or in any new geographical markets we may enter.
We have made significant investments in the development and maintenance of our proprietary software systems and data. We rely largely on our own security systems, confidentiality procedures and employee nondisclosure agreements to maintain the confidentiality and security of our proprietary information. If third parties gain unauthorized access to our information systems, or if computer viruses attack our data or software, or if anyone misappropriates our proprietary information, this may have a material adverse effect on our business and results of operations.
We will have difficulty predicting future revenues because we are implementing a new business strategy. We will also have difficulty in accurately forecasting revenues from sales of our services because we don't know the
PlanVista is highly dependent on its senior management, particularly chief executive officer Phillip S. Dingle and chief operating officer Jeffrey L. Markle. The loss of members of our senior management team could harm us and our prospects significantly.
Consolidation in the healthcare industry may give our customers greater bargaining power and lead us to reduce our prices.
Many of our products and services are geared for the developing internet and electronic healthcare information markets.
The difficulty of securely transmitting confidential information over the Internet has been a significant barrier to conducting e-commerce and engaging in sensitive communications over the Internet. Our strategy relies in part on the use of the Internet to transmit confidential information. We believe that any well-publicized compromise of Internet security may deter people from using the Internet to conduct transactions that involve transmitting confidential healthcare information. It is also possible that third parties could penetrate our network security or otherwise misappropriate patient information and other data. If this happens, our operations could be interrupted, and we could be subject to liability. We may have to devote significant financial and other resources to protect
against security breaches or to alleviate problems caused by breaches. We could face financial loss, litigation and other liabilities to the extent that our activities or the activities of third-party contractors involve the storage and transmission of confidential information like patient records or credit information. In addition, we could incur additional expenses if new regulations regarding the use of personal information are introduced.
The terms of our customer contracts provide no guarantee of long-term relations or payments.
Termination of network contracts would impair our ability to service our clients.
We may be subject to litigation due to the volatility of our stock price.
The market price for our common stock may continue to fluctuate widely in response to factors such as the following:
. failure to meet our product development and sales milestones; . demand for our common stock; . technological innovations by competitors or in competing technologies; . new product announcements by us or by our competitors; . timeliness in introduction of new products; . announcements by us or our competitors of significant contracts, acquisitions, partnerships, joint ventures or capital commitments; . failure to successfully implement our new business strategy; . revenues and operating results failing to meet the expectations of securities analysts or investors in any quarter; . announcements by third parties of significant claims or proceedings against PlanVista; . disclosure of unsuccessful results in our efforts to expand our ability to manufacture, market, sell and distribute PlanVista's products or in our ability to enhance PlanVista's existing products, or develop new products; . changes in financial estimates by securities analysts; . investor perception of our industry or its prospects; or . general technology or economic trends.
Many of these factors are beyond our control. In addition, the stock market has in the past experienced price and volume fluctuations that have particularly affected companies in the health care and managed care markets resulting in changes in the market price of the stock of many companies which may not have been directly related to the operating performance of those companies.
Our existing stockholders have significant voting control over matters requiring stockholder approval.
Our executive officers, directors, key employees and their affiliates beneficially own, in the aggregate, approximately 40.7% of our outstanding common stock. Our existing 5% or greater stockholders beneficially own, in the aggregate, approximately 52.8% of our outstanding common stock. Additionally, as described above, our lenders received $29.0 million of convertible preferred stock that can trigger voting rights with respect to a minimum of 51% of the then outstanding shares of our common stock upon the occurrence of certain events. The convertible preferred stock holders have the right to elect three members to our board of directors. As a result, these stockholders are able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which may have the effect of delaying or preventing a third party from acquiring control of us.
Because of anti-takeover provisions under Delaware law and in our Certificate of Incorporation, takeovers may be more difficult, possibly preventing you from obtaining optimal share price.
. unpredictability of operating results and future revenues; . unproven market acceptance of our new products; . client concentration; . dependence on payers, provider networks, strategic relationships and technology solutions; . industry consolidation and vertical integration; . increased competition; and . general economic and market conditions.
We may not be successful in addressing any or all of these risks. Any failure to address these risks could have a material adverse effect on our business, operating results and financial condition.
We sold several units of our TPA business in 2000, including our unemployment compensation and workers' compensation units, our Ohio workers' compensation managed care organization unit, and our self-funded business unit. We sold the balance of our TPA segment as well as our MGU business in June 2001. Revenue from these discontinued operations was $210.8 million in 1998, $202.9 million in 1999 and $158.4 million in 2000, which significantly exceeded revenue from continuing operations in each of those years. Accordingly, our operating history is not indicative of our future performance under our new business strategy. In implementing this business strategy, and consistent with the completed divestitures, we are significantly changing the focus of our business away from a TPA claim processing operation to our network claims repricing service. This change in focus also means that our sales and implementation practices are now characterized by an in-house sales force, as opposed to the outsourced sales force associated with the divested units, and we have significantly reduced the size of our management and support operations. While the network business has historically operated as an independent part of a larger business, this change in focus will require it to operate with less support than previously available and this may impact its performance. We are also facing new risks and challenges, including a lack of meaningful historical financial data upon which to plan future budgets and other risks described in this prospectus.