We also distribute and administer high cost specialty infusion therapies to patients principally requiring immunological blood products, parenteral nutrition products, and infused antibiotic therapies. We strive to maximize therapy outcomes through strict adherence to the clinical guidelines or protocols for a particular prescription therapy while at the same time managing the costs of such therapies on behalf of a Plan Sponsor or patient. Unlike the other specialty programs, infusion patients have their therapies administered intravenously by IV certified nurses.
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates, and different assumptions or conditions may yield different estimates. The following discussion highlights what we believe to be the critical accounting estimates and judgments made in the preparation of our consolidated financial statements.
In the fourth quarter of 2005 we evaluated goodwill for impairment and recorded a charge as described above. As part of goodwill impairment testing, we further determined that certain intangible assets associated with customer lists were no longer recoverable from future cash flows. This resulted in a $0.8 million intangible impairment charge in fourth quarter 2005.
Revenue. Total reported revenue for the year ended December 31, 2004 increased $41.7 million, or 7.1%, to $630.5 million from $588.8 million for the same period in 2003. This increase was concentrated in the Specialty Services segment, up $58.2 million, due to the acquisition of Natural Living, Inc. in February 2004, which added $48.0 million in revenue, and was partially offset by $13.7 million in revenue decline from Synagis®. The PBM Services segment revenue was down $16.5 million caused by the loss of $67.8 million of TennCare® revenues, mostly offset by new contract growth and utilization increases.
Pro forma combined cost of revenue increased $138.7 million, or 14.6%, to $1,087.9 million for the year ended December 31, 2004 from $949.2 million for the year ended December 31, 2003. This is commensurate with the increase in revenues experienced in 2004.
Benefit from and Provision for Income Taxes. The reported provision for income taxes was $4.5 million for 2004 and $6.1 million for 2003. The effective tax rate was 38.8% in 2004 compared to 40.0% in 2003. The 2004 tax rate was positively impacted by state tax planning effectuated in 2004. At December 31, 2004, we had remaining NOLs of $16.7 million which begin expiring in 2017.
The year ended December 31, 2005 includes $6.5 million of goodwill and intangible impairment and $4.6 million of merger related expenses (see Note 4 of Notes to the Financial Statements) in the Specialty Services segment.
Ineffective processes and controls to ensure timely application of customer payments to customer accounts receivable; and
We have revised the system and manual controls in our community pharmacies to provide greater assurance that cancelled orders and other non-standard prescription transactions do not result in overstatement of revenue. We have expanded our system control reporting to identify and screen any such exception transactions coming from our pharmacy systems, and have re-trained personnel that are responsible for performing the manual controls necessary to assure that these exception transactions do not result in the misstatement of revenue. We will monitor adherence to these system and manual controls.
Agreement and Plan of Merger by and Among MIM Corporation, CMP Acquisition Corp., Continental Managed Pharmacy Services, Inc. and Principal Shareholders dated as of January 27, 1998
Amendment to Employment Agreement effective as of December 31, 2001 by and between the Company and Richard H. Friedman
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 31, 2006.
Certification of Gregory H. Keane pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
On March 12, 2005 the Company acquired all of the issued and outstanding stock of Chronimed Inc. (“Chronimed”) in a stock-for-stock transaction. The acquisition resulted in an organization that is able to offer broader disease coverage, focused therapy management, expansive national retail and mail distribution capabilities and a pharmacy benefit management (“PBM”) platform. The Company believes that the acquisition of Chronimed resulted in an organization with increased scale, enhanced financial capacity and a diversified customer portfolio.
Leasehold improvements and leased assets are amortized using a straight-line basis over the related lease term or estimated useful life of the assets, whichever is less. The cost and related accumulated depreciation of assets sold or retired are removed from the accounts with the gain or loss, if applicable, recorded in the statement of operations. Maintenance and repair costs are expensed as incurred.