(1) Total assets increased to approximately $35,521 in 2008 from approximately $12,285 in 2007, which is the result of the amendment of its fully-insured customer contracts to be non-cancelable by the Company.
Self-Insured ASO Fees-Self-insured ASO fees increased approximately $313,000, or 42.8%, from approximately $731,000 in 2006 to approximately $1,044,000 in 2007. These increases are primarily attributable to the 34.9% increase in self-insured HMO membership and a significant increase in the average self-insured ASO fee rates. We provide administrative and claims processing services, benefit plan design, and access to our Dental Care Plus provider network for an administrative fee, generally to self-insured groups. Our ASO fee revenue is recognized monthly when earned and is normally based on annual contracts with the self-insured groups.
recording the $464,000 provider withhold payment authorized by the Board. Safeguarding the financial condition and liquidity of the Company is a material factor considered in the provider withhold payment practices adopted by the Board.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) changes the accounting for business combinations, including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for preacquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition-related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS No. 141(R) applies prospectively to 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, 2008, except for certain tax adjustments for prior business combinations. Currently, the adoption of SFAS No. 141(R) will not have a material impact on the Company’s consolidated financial position or results of operations.
The Company’s products consist primarily of dental HMO, PPO and indemnity plans, with dental HMO products constituting 93% of its total revenues. All of the Company’s products are marketed to employer groups. The Company’s business model allows it to offer dental benefit products including broad networks of participating dentists while at the same time promoting the use of private practice fee-for-service dentistry, a primary interest of the Company’s participating dentists. The dental benefit products the Company offers currently vary depending on geographic market.
Effective January 1, 2007 the Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”. FIN 48 is an interpretation of Statement of Financial Accounting Standard (“SFAS”) No. 109, “Accounting for Income Taxes”. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
flows. This statement encourages but does not require comparative disclosures for earlier periods upon initial adoption. The effective date of SFAS 161 is the Company’s fiscal year beginning on or after January 1, 2009. The adoption of SFAS No. 161 will not have a material impact on the Company’s disclosures.
Intangible assets amounting to approximately $568,000 were recorded as a result of the acquisition of Adenta, Inc in 2005. Such intangibles were related to an acquired contract, memberships, a provider network and goodwill. Identifiable and amortizable intangible assets amounted to $450,000. Amortization expense for 2008, 2007 and 2006 was approximately $15,000, $15,000, and $196,000 respectively. The provider network intangible asset of approximately $90,000 at December 31, 2008 is being amortized over a period of 20 years, a period during which the Company expects that all of these providers will have retired from the network. The membership intangible asset was amortized with an accelerated amortization in the first year due to the planned loss of the Adenta individual membership during the transition. The remaining membership intangible asset of approximately $83,000 at December 31, 2008 is being amortized over its 11 year useful life in accordance with the Company’s expectation for the membership retention. The weighted-average amortization period for these intangible assets is approximately 9 years.
In 2006, DCP Holding Company entered into an annually renewable agreement with a commercial bank for a $500,000 working capital line of credit. Interest is payable based on the prime borrowing rate and was 3.25% and 7.25% at December 31, 2008 and 2007, respectively. The Company did not have any interest expense for the line of credit in 2008 or 2007 and paid $158 in 2006.
On August 13, 2008 the Company entered into an additional annually renewable agreement with a commercial bank for a $1,000,000 working capital line of credit. Interest is payable based on the prime borrowing rate that was 3.25% as of December 31, 2008. The Company did not incur any interest expense in the 2008 period related to this line of credit.