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United American Healthcare Corporation Announces Fiscal 2006 Fourth Quarter and Year-End Results

Posted on: Thursday, 31 August 2006, 18:00 CDT

DETROIT, Aug. 31 /PRNewswire-FirstCall/ -- United American Healthcare Corporation , a pioneer in health care services for Medicaid recipients, today announced financial results for its fourth quarter and fiscal year ended June 30, 2006.

Revenues declined to $4.8 million for the fourth quarter ended June 30, 2006, compared with revenues of $5.7 million for the fourth quarter of fiscal 2005. Net income for the fourth quarter of fiscal 2006 was $97,000, or $0.01 per fully diluted share, compared with net income of $433,000, or $0.06 per fully diluted share, for the prior year's fourth quarter.

The decline in fourth quarter profitability is largely attributable to a reduction in administrative fees received from the State of Tennessee, doing business as TennCare, pursuant to a contract amendment between the Company's subsidiary, UAHC Health Plan of Tennessee, Inc. (UAHC-TN), and TennCare. Effective July 1, 2005, TennCare implemented a plan to reduce administrative fees and began a modified risk arrangement for the compensation of TennCare's contracted managed care organizations (MCOs), including UAHC-TN. Under the modified risk arrangement, MCOs doing business with TennCare are now at risk of losing up to 10 percent of their administrative fee revenue and are eligible to receive up to 15 percent incentive bonus revenue, based on performance relative to certain benchmarks.

TennCare has notified UAHC-TN that it earned additional revenue of $0.2 million and $0.2 million, respectively, for its performance under the modified risk arrangement for the first and second quarters of fiscal 2006, and the Company has recorded such additional revenue in its fiscal 2006 financial statements. UAHC-TN expects to similarly earn additional revenue of approximately $0.2 million for each of the third and fourth quarters of fiscal 2006, and the Company would record such earnings in fiscal 2007 only upon formal notification thereof from TennCare.

In addition to the earlier mentioned reduction in administrative fees from the State of Tennessee, revenue in the fourth quarter of fiscal 2006 was impacted by TennCare's statewide disenrollment of non-medically needy adults not eligible for Medicaid under TennCare coverage standards. As a result, UAHC-TN lost approximately 12,000 members during fiscal 2006. As of August 14, 2006, UAHC-TN's total enrollment included approximately 113,951 members.

"We are pleased with our performance under the modified risk arrangement, as illustrated by the incentive bonus revenue we earned in fiscal 2006. We remain confident of our ability to continue to operate profitably in both the risk-based and administrative fee compensation models," said William C. Brooks, president, chairman and CEO of United American Healthcare.

For the fiscal year ended June 30, 2006, revenues declined to $18.1 million, compared to revenues of $22.1 million for fiscal 2005. Net income for fiscal 2006 was $1.4 million, or $0.18 per fully diluted share, compared with net income of $5.3 million, or $0.69 per fully diluted share, for fiscal 2005. The year over year decline in profitability is principally due to a decrease in administrative fee revenue and an increase in general and administrative expenses for legal fees associated with ongoing litigation and claims processing costs.

"Although our fiscal 2006 financial performance was adversely affected by several regulatory challenges, the bulk of which have expired or are near conclusion, our unwavering commitment to profitable growth remains intact," said Brooks. "Whereas fiscal 2005 was a period of internal restructuring and strategic planning, fiscal 2006 was a year in which we leveraged our experience, relationships and managed care infrastructure to position the Company for sustained value creation over the long-term."

As of June 30, 2006, United American Healthcare reported cash, cash equivalents and short-term marketable securities of $6.9 million, compared to $13.5 million as of June 30, 2005. The decline in cash and cash equivalents is primarily due to an increase in TennCare statutory deposit requirements and funding of restricted assets. The Company remains debt-free.

"Throughout fiscal 2006, the team at United American embraced a culture of cost efficiency which was an important factor in sustaining our ongoing record of profitability," said Stephen Harris, executive vice president and CFO of United American Healthcare. "Looking ahead to fiscal 2007, our strategy for profitable growth remains largely dependent on our ability to increase the Company's addressable markets beyond Medicaid and Western Tennessee. Accordingly, we continue to consider several attractive opportunities that may leverage our many years of experience, managed care infrastructure and solid balance sheet to our shareholders' benefit."

"Conditional Approval" of Medicare Advantage Application

In a positive development for the Company, UAHC Health Plan of Tennessee (UAHC-TN), has received conditional approval from the Centers for Medicare & Medicaid Services (CMS) to contract as a Medicare Advantage qualified organization beginning in 2007.

UAHC-TN applied for contract approval from CMS on March 20, 2006, indicating its desire to operate a "Special Needs Plan" in Western Tennessee. Subject to receiving final regulatory approval, the contract would allow UAHC- TN to serve members enrolled in both the Tennessee Medicaid and Medicare programs, commonly referred to as "dual-eligibles."

In order to receive final regulatory approval from CMS, UAHC-TN must undergo a series of standard pre-implementation activities, including systems and data testing. The Company anticipates that CMS's final determination on the application is imminent.

"During the past year, we've made a concerted effort to broaden the scope of our business as a means of better serving specific segments of our member population, including those members designated as 'dual eligibles' -- low income seniors and people with disabilities who are enrolled in both Medicaid and Medicare," said Brooks. "By centralizing more of our members' healthcare services under a single managed care umbrella, we're aiming to simplify their access to quality medical treatment. As before, we remain committed to executing a cost-effective strategy of disciplined, opportunistic growth, guided by the mandate to create value for our shareholders."

Fiscal 2007 First Quarter Financial Outlook

The following statements are based on the Company's current expectations. These statements are forward-looking, and actual results may differ materially. Except as expressly set forth below, these statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be closed or entered into after June 30, 2006.

UAHC anticipates fiscal 2007 first quarter revenue to be in the range of $3.7 to $4.0 million and net income from continuing operations to be in the range of $0.00 to $0.03 per diluted share.

Fiscal 2006 Fourth Quarter and Year-End Conference Call

United American Healthcare Corporation will host a conference call at 4:30 p.m. Eastern time today to discuss these results and current business trends. To access the live conference call, please dial (866) 277-1184 and provide the conference passcode 38673217. A replay of the call will be available through September 14, 2006. To access the replay, please call (888) 286-8010 and provide the conference passcode 18681785.

About United American Healthcare Corporation

United American Healthcare Corporation (UAHC) is a full-service healthcare management company, pioneering the delivery of healthcare services to Medicaid recipients since 1985. UAHC owns and manages UAHC Health Plan, which is based in Western Tennessee and includes the Memphis market. UAHC provides access to more than 900 primary and specialty care physicians and more than 19 hospitals for the members of UAHC Health Plan. For more information, please visit the Company's web site at http://www.uahc.com/ .

United American Healthcare Corporation Safe Harbor Statement

Forward-looking statements by United American Healthcare Corporation, including those in this announcement, involve known and unknown risks, which may cause actual results and corporate developments to differ materially from those expected. Factors that could cause results and developments to differ materially from expectations include, without limitation, the effects of state and federal regulations, the effects of acquisitions and divestitures, and other risks described from time to time in each of United American Healthcare's SEC reports, including quarterly reports on Form 10-Q, annual reports on Form 10-K, and reports on Form 8-K.

United American Healthcare Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Year ended June 30, 2006 2005 2004 Revenues Fixed administrative fees $16,989 $20,916 $20,391 Medical premiums - 23 532 Interest and other income 1,125 1,140 1,161 Total revenues 18,114 22,079 22,084 Expenses Medical services - 23 532 Marketing, general and administrative 16,472 15,742 14,483 Depreciation and amortization 128 177 227 Interest expense - 8 66 Total expenses 16,600 15,950 15,308 Earnings from continuing operations before income taxes 1,514 6,129 6,776 Income tax expense (benefit) 141 655 (1,095) Earnings from continuing operations 1,373 5,474 7,871 Discontinued operations Loss from discontinued operations - (129) (700) Net earnings $1,373 $5,345 $7,171 Net earnings per common share - basic Earnings from continuing operations 0.18 0.74 1.09 Loss from discontinued operations - (0.02) (0.10) Net earnings per common share $0.18 $0.72 $0.99 Weighted average shares outstanding 7,478 7,425 7,207 Net earnings per common share - diluted Earnings from continuing operations 0.18 0.71 1.08 Loss from discontinued operations - (0.02) (0.10) Net earnings per common share $0.18 $0.69 $0.98 Weighted average shares outstanding 7,628 7,674 7,266 United American Healthcare Corporation and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, 2006 2005 Assets Current assets Cash and cash equivalents $4,316 $9,843 Marketable securities 2,605 3,730 Accounts receivable - State of Tennessee, net 1,463 1,360 Other receivables 384 583 Prepaid expenses and other 265 172 Deferred income taxes 1,950 1,950 Total current assets 10,983 17,638 Property and equipment, net 142 179 Goodwill 3,452 3,452 Marketable securities 7,342 2,380 Restricted assets 2,721 - Other assets 586 586 $25,226 $24,235 Liabilities and Shareholders' Equity Current liabilities Medical claims payable $156 $172 Accounts payable and accrued expenses 1,131 1,096 Accrued compensation and related benefits 732 711 Accrued rent 33 235 Other current liabilities 1,124 1,538 Total current liabilities 3,176 3,752 Total liabilities 3,176 3,752 Shareholders' equity Preferred stock, 5,000,000 shares authorized; none issued - - Common stock, no par, 15,000,000 shares authorized; 7,527,023 and 7,450,235 shares issued and outstanding at June 30, 2006 and June 30, 2005, respectively 12,800 12,476 Retained earnings 9,420 8,047 Accumulated other comprehensive loss net of deferred federal income taxes (170) (40) Total shareholders' equity 22,050 20,483 $25,226 $24,235

United American Healthcare Corporation

CONTACT: Company: Stephen D. Harris, CFO of United American HealthcareCorp., +1-313-393-4571, Investor_relations@uahc.com ; or Investor Relations:Noel R. Ryan III of Lambert, Edwards & Associates, +1-616-233-0500,nryan@lambert-edwards.com

Web site: http://www.uahc.com/

Source: PRNewswire-FirstCall

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