Our executive, administrative and operating offices are located in approximately 19,000 square feet of leased office space in Darien, Illinois under a lease that expires on December 31, 2013. We also own a 43,000 square foot office building in Evergreen, Colorado, that previously housed a call center that was closed on January 31, 2006. This building is currently under contract for sale, with an expected closing date of April 30, 2007.
The historical statement of operations data and balance sheet data in the table below is derived from our financial statements, which are included elsewhere in this annual report. This data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the financial statements, related notes, and other financial information included elsewhere in this annual report. The historical results presented below are not necessarily indicative of the results to be expected for any future period.
The following tables set forth unaudited quarterly statements of operations data for 2006 and 2005. The information for each of these quarters has been prepared on substantially the same basis as the audited financial statements included elsewhere in this annual report, and, in our opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations for these periods. Historical results are not necessarily indicative of the results to be expected in the future, and results of interim periods are not necessarily indicative of results for the entire year.
The timing between when we submit a consumer’s application for insurance to the insurance company and when we generate revenues has varied over time. The type of insurance product and the insurance company’s backlog are the primary factors that impact the length of time between submitted applications and revenue recognition. Over the past three years, the time between application submission and revenue recognition has averaged approximately four months. Any changes in the amount of time between submitted application and revenue recognition, which will be influenced by many factors not under our control, will create fluctuations in our operating results and could affect our business, operating results and financial condition.
We recorded goodwill in the amount of $6.9 million in connection with our May 2004 acquisition of certain assets of Life Quotes, Inc. While goodwill is not amortized, it is subject to periodic reviews for impairment (at least annually, or more frequently if impairment indicators arise). As discussed earlier, the Company recorded an impairment charge against earnings in the fourth quarter of 2005 amounting to $3.75 million. There was no impairment charge in 2006.
We had no income tax credit for 2006 and 2005 due to valuation allowances provided against net deferred tax assets.
Life insurance commissions increased $1.2 million, or 9%. Sales of life insurance by telephone increased $3.2 million, primarily due to the May 2004 acquisition of Life Quotes, Inc., which provided us
Operations. Operations expenses increased 11% to $7.3 million in 2005 from $6.5 million in 2004. The 2005 expenses include a full year of operating the Life Quotes division, while 2004 expenses only include that operation subsequent to the May 2004 acquisition.
Interest income increased due to a larger average portfolio of invested assets and higher interest rates in 2005. There was no debt in 2005.
Cash used by operating activities was approximately $814,000 in 2006, while cash provided by operating activities was approximately $171,000 in 2005 and $503,000 in 2004, as shown in our statements of cash flows included elsewhere in this annual report. The decrease in cash flow in 2006, compared to the amounts provided in 2005 and 2004, was primarily the result of an increase in the net loss after adjustment for non-cash expenses, such as depreciation, amortization and impairment charges.
Cash provided by investment activities in 2006 totaled $1.4 million, and resulted from the proceeds of investment maturities and sales exceeding the amount reinvested. Cash used for investing activities in 2005 totaled $759,000, consisting of the purchase of fixed income investments in excess of investment maturities of $503,000, and the purchase of fixed assets of $256,000. Cash used for investing activities in 2004 totaled $12.5 million, consisting primarily of the acquisition of Life Quotes. Fixed maturity securities were sold, generating $11.9 million, to help fund the $18.7 million acquisition. The purchase of securities in excess of maturities used $5.5 million of cash.