Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from Kevin Ellich – RBC Capital Markets.
Kevin Ellich – RBC Capital Markets
Fran, maybe I can start with you. Looking at the cash flow and the CapEx and what you expect to recover, would it be safe to net that out and say that free cash flow for the quarter was about $2.9 million?
Fran Murphy
Our net CapEx for the quarter was about $10 million. That $5 million represents kind of a balance that rolls forward, and it does have an impact on the quarter, but it’s not a direct reduction from that net $10 million.
Bruce Mackey
It’s more of a question of timing of when the project is completed.
Kevin Ellich – RBC Capital Markets
Do you have any expectation for the timing of when you expect to get that $5.3 million?
Bruce Mackey
The majority will come in the fourth quarter, and then it will tail off a little bit after that. That’s usually the way it’s worked in the past.
Kevin Ellich – RBC Capital Markets
I was wondering if you guys could talk about what you’re seeing on the health insurance reserves. Who did you guys switch to on October 1st? I think Fran said the savings was going to be $2.5 million annually. That’s pretty significant, and what’s driving up the higher insurance reserves? Are people using healthcare services more?
Bruce Mackey
I’ll start Kevin, and maybe switch over to Fran if he’s got any thoughts. We switched from Blue Cross Blue Shield to United, and it was a pretty big switch for us. We’ve been with Blue Cross Blue Shield since 2002, I believe, so it’s been quite sometime, and United really came through with a very favorable contract for us as well as the claims management piece which we think we need to do a better job with that third party. What we’re seeing is an increased utilization in the claims. Last quarter, we talked a little bit about the percentages, but they’re still the same this year when you look at a year over year basis. Our claims percentage is up significantly, and we really haven’t increased the headcount that much, so we’re just seeing a vast increase in the claims count, and working with our benefits consultant, Mercer, which part of the MMC Group to help us manage those costs, and they helped us out with our United contract renewal. They do point a little bit to the economy and the fact that if people have health insurance and they have a job, they can make the co-pays, etc. They will utilize those benefits because they’re at a little bit of a fear of losing those benefits, so we’ve seen some data from other companies as well, not necessarily fully in this industry, although I think one other company in the senior living industry did say the same thing last quarter, but you see it in other industries as well.
- To read the full transcript on Seeking Alpha, click here »
