Comprehensive Care Continues Outstanding Performance with Profitable Third Quarter

Earnings data for the first three quarters of 2012 versus 2011

Comprehensive Care earnings data for the first three quarters of 2012 (pink) versus 2011 (blue). Numbers in thousands of dollars.

For the third consecutive quarter, Comprehensive Care (CHCR – $0.12) has delivered a solid net profit. Thanks to a cost containment program, a focus on profitable contracts and a amended contract with a major Puerto Rican client, the Company earned more than $1 million in the third quarter, ended September 30, 2012, versus a loss of over $2 million in the comparable quarter last year.

Revenues for the third quarter reached $16.7 million, compared with $17.2 million in the third quarter of 2011, a decrease of 2.5%. This is a similar trend as in the first two quarters of 2012, slightly lower revenues combined with much higher earnings.

Third Quarter and Nine Months Results

Net sales for the nine months ended September 30, 2012 were $52.8 million, compared to $54.0 million in the same period in 2011, a decrease of 2%. Net income for the nine months ended September 30, 2012 was $2.7 million, or $.04 per diluted share, compared to a loss of $6.5 in the comparable period last year.

 
Nine Months Ended
September 30
Nine Months Ended
September 30
Amounts in $000’s
2012
2011
2012
2011
Revenues
16,753
17,200
52,767
54,039
Cost of Revenues
13,060
17,121
43,469
52,444
S, G & A Expenses
2,043
1,979
4,784
6,122
Depreciation and Amortization
53
207
209
641
Income (Loss) From Operations
1,597
(2,107)
4,305
(5,168)
Interest Expense
437
444
1,465
1,346
Other Non-Operating Income (Loss)
6
18
107
Income Tax Expense
129
(1)
134
72
Net Income (Loss)
1,037
(2,550)
2,724
(6,479)
Earnings (Loss) Per Share
0.01
(0.04)
0.04
(0.12)
Most important income statement data for the second quarter and nine months ending September 30, 2012 and September 30, 2011. Source: Company Filings

CompCare’s bottom line benefited from a cost containment program, which was initiated early 2012. The measures included salary reductions for mid-level staff and senior management, as well as the layoff of 26 employees. As a result, general and administrative expense decreased by 21.9%, or approximately $1.3 million, to $4.8 million for the nine months ended September 30, 2012, as compared to $6.1 million in the nine months ended September 30, 2011.

CompCare’s results also benefited from a contract amendment with a major Puerto Rican client earlier this year. In March, 2012, the contract term with this client was extended to December 31, 2012 and the contract rate for pharmacy management services was increased by approximately 11% effective retroactively to January 1, 2012, equating to an annual revenue increase of $3.7 million.

In addition, in June of 2012 the Company resolved a contract interpretation dispute with the same health plan. As a result, the Company received a $2.2 million, retroactive, positive cash adjustment to pharmacy prescriptions, which were originally charged to the Company. Moreover, the amendment shifted the financial responsibility for a significant number of prescriptions that were previously being charged to the Company to the client for the remainder of the contract.

Segmented Financial Results

Similar to the previous two quarters, revenues of at-risk behavioral contracts are down, while revenues of at-risk pharmacy contracts are up.

Amounts in $000’s
09/30/12
09/30/11
At-Risk Behavioral Contracts
5,984
8,127
Administrative Services Only (ASO) Contracts
806
687
At-Risk Pharmacy Contracts
9,963
8,386
Total
16,753
17,200
Comprehensive Care’s revenues segregated per service category for the quarters ending September 30, 2012 and September 30, 2011. Source: Company Filings

Revenues from at-risk behavioral contracts decreased by 26.4%, or approximately $2.1 million, to $6.0 million for the three months ended September 30, 2012, compared to $8.1 million for the three months ended September 30, 2011. The decrease was primarily attributable to the loss of customers in Missouri, Texas and Wisconsin during the fourth quarter of 2011 and first quarter of 2012 that had accounted for $1.7 million of revenue for the three months ended September 30, 2011 and the loss of contracts in Louisiana and Michigan during the third quarter of 2012 that had accounted for $1.5 million of revenue for the three months ended September 30, 2011. This decrease was offset by approximately $1.1 million in additional revenues in 2012 from new and previously existing customers. It’s important to note that the Company actually lost money on several of these terminated contracts.

Revenues from ASO contracts increased by 17.2%, or approximately $0.1 million, to $0.8 million for the three months ended September 30, 2012, due primarily to additional revenue from the expansion of business of previously existing ASO customers.

At-risk pharmacy revenues increased to $10.0 million for the three months ended September 30, 2012. Up approximately $1.6 million, or 18.8%, compared with revenues of approximately $8.4 million for the three months ended September 30, 2011. This is primarily attributable to a 6.7% increase in memberships and a 11% contract rate increase effective January 1, 2012 for the Company’s major customer in Puerto Rico.

Conclusion

It’s clear that the pharmacy side of the business is where the money is made.

In order for CompCare to substantially increase its revenues and earnings, it has developed a new Pharmacy Management Program in alliance with PBMs, which allows health plans and self-insured clients access to the lowest possible prices for both branded and generic drugs. The Program effectively reigns-in the rising costs of drugs and is offered on a capitated full-risk basis, whereby CompCare guarantees its client substantial savings. The Company is looking to realize profits from this program starting in Q1 of next year.

Comprehensive Care offers tremendous potential with its Pharmacy Management Program. Additionally, the Company is already profitable. It earned 4 cents per diluted share during the first nine months of the year, while its shares are currently trading at… 12 cents!


For important disclosures, please read our disclaimer.

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