Exhibit 99.2
Company Contact: | J. Gentry Barden, Esq. | |
Senior Vice President & General Counsel | ||
HealthSpring, Inc. | ||
(615) 401-4531 |
HealthSpring, Inc. Reports 2006 Third Quarter Results;
Increases 2006 GAAP EPS Guidance to $1.36-$1.43
Net Income of $31.1 Million, or $0.54 per Diluted Share
Increases 2006 GAAP EPS Guidance to $1.36-$1.43
NASHVILLE, Tenn. (November 2, 2006) — HealthSpring, Inc. (NYSE:HS) today announced its results for the third quarter and nine months ended September 30, 2006. Highlights for the 2006 third quarter included:
• | Medicare Advantage members of 111,494 at September 30, 2006; up 19.7% year over year and 3.6% over the 2006 second quarter; |
• | 2006 third quarter total revenue of $343.9 million; an increase of 47.5% over the 2005 third quarter and 6.5% over the 2006 second quarter; and |
• | Net income before preferred dividends for the third quarter of $31.1 million, an increase of $22.3 million over the 2005 third quarter, and up $10.0 million over the 2006 second quarter. |
Commenting on 2006 third quarter results, Herb Fritch, Chairman, President, and Chief Executive Officer, said, “HealthSpring’s third quarter results reflect strong financial and operating performance, driven by our model focused on effective and efficient medical management. We also continued to benefit, like others in our industry, from better-than-anticipated margins in our Part D business for the quarter.”
Third Quarter Results
Net income available to common stockholders for the quarter ended September 30, 2006, increased to $31.1 million, or $0.54 per diluted share, compared with $4.1 million, or $0.13 per diluted share, in the 2005 third quarter.
($ in thousands) | ||||||||||||
Three Months Ended | ||||||||||||
September 30, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
Premium revenue | $ | 332,298 | $ | 226,780 | 46.5 | % | ||||||
Total revenue | 343,861 | 233,121 | 47.5 | |||||||||
Medical expense | 256,439 | 179,227 | 43.1 | |||||||||
SG&A | 37,839 | 31,909 | 18.6 | |||||||||
Adjusted EBITDA(1) | 49,676 | 23,715 | 109.5 | |||||||||
Net income before preferred dividends | 31,053 | 8,815 | 252.3 |
(1) See “Supplemental Information” note 1 herein for the reconciliation of HealthSpring’s non-GAAP Adjusted EBITDA to GAAP Net Income. |
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On January 1, 2006, the Company began offering prescription drug benefits in accordance with Medicare Part D, in addition to continuing to provide medical benefits, to its Medicare Advantage plan members. HealthSpring sometimes refers to these plans after January 1, 2006, collectively as Medicare Advantage plans and separately as Medicare Advantage (without prescription drug benefits) and Medicare Advantage (including MA-PD) plans. As of January 1, 2006, the Company also began offering prescription drug benefits on a stand-alone basis in accordance with Medicare Part D. HealthSpring refers to these as “stand-alone PDP” or “PDP” plans. For purposes of reporting membership and financial results, including premium revenue and medical expense, the Company distinguishes between Medicare Advantage (including MA-PD) plans and PDP plans. Prior to this quarter, however, the Company reported financial results by distinguishing between Medicare (without Part D) and Part D. See “Supplemental Information” Note 2 for a table conforming the presentation of Medicare premium revenue in the prior two quarters to the discussion contained herein.
During the quarter ended September 30, 2006, the Company received retroactive risk adjustment payments of approximately $14.4 million from CMS for its Medicare Advantage plans (including MA-PD) through July, which payments are reflected as additional premium revenue in the third quarter. By comparison, retroactive risk adjustment payments reflected as additional premium in the quarter ended September 30, 2005 were $8.2 million. PDP premiums for the third quarter of 2006 include approximately $1.0 million for risk adjustment payments. The September 2006 quarter payments resulted in a favorable after-tax impact on net income of approximately $7.3 million, or $0.13 per share.
The Company’s results include pre-tax income for PDP of $7.2 million for the three-month period ended September 30, 2006. PDP pre-tax income for the nine months ended September 30, 2006, was $8.8 million and includes expenses for non-HealthSpring members, net of expected recoveries related to CMS’s plan-to-plan reconciliation process. PDP benefit costs are proving, as anticipated, to be disproportionately higher in the first half of 2006, compared with the last half of 2006, under the benefit design.
Third quarter results for 2006 include an after-tax charge of $1.0 million, or approximately $0.02 per basic and fully diluted share, for stock compensation expense measured in accordance with FAS 123R.
Operating Highlights
Medicare Revenue
• | Medicare Advantage plan membership increased to 111,494 as of the end of the third quarter, up 19.7% year over year and up 3.6% over the prior quarter. |
• | Medicare Advantage (including MA-PD) premiums were $279.7 million for the 2006 third quarter, reflecting an increase of 43.7% over the 2005 third quarter. Medicare premium revenue for each of the 2006 and 2005 third quarters include retroactive risk adjustment payments received from CMS, as discussed above. For the nine months ended September 30, 2006, Medicare Advantage (including MA-PD) premiums were $773.7 million, reflecting an increase of 55.4% over the same period in 2005. |
• | PDP membership at third quarter end was 88,262. PDP premiums were $22.5 million for the 2006 third quarter and include retroactive risk adjustment payments from CMS, as discussed above. For the nine months ended September 30, 2006, PDP premiums were $77.6 million. |
• | Medicare premiums (including premiums related to Part D) represented 91.0% of total premium revenue and 87.9% of total revenue for the 2006 third quarter. |
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Commercial Revenue
• | Commercial membership was 36,011 at September 30, 2006, compared with membership of 41,937 at the end of the 2005 third quarter. |
• | Commercial premiums were $30.0 million for the 2006 third quarter, reflecting a decrease of 6.6% compared with the 2005 third quarter, primarily attributable to the 14.1% decrease in commercial membership. |
Medical Expense
• | Medicare Advantage (including MA-PD) medical loss ratio, or MLR, was 76.8% for the 2006 third quarter, and was flat compared with the prior year’s third quarter. The MLR decreased by 220 basis points from the 2006 second quarter, primarily as a result of the third quarter risk adjustment payment and the second quarter settlement of disputed contractual claims with a hospital provider. |
• | The MLR for the Company’s PDP was 62.5% for the 2006 third quarter and 84.1% for the nine months ended September 30, 2006. PDP medical expense for the nine months includes prescription drug costs incurred by the Company, primarily in the 2006 first quarter, on behalf of persons who were not members of a HealthSpring plan for which the Company continues to seek recovery pursuant to CMS’s plan-to-plan reconciliation process. |
• | Commercial MLR was 91.9% for the 2006 third quarter and 89.2% for the nine months ended September 30, 2006. |
SG&A
• | SG&A expense in the 2006 third quarter increased by $5.9 million, or 18.6%, over the 2005 third quarter, primarily as a result of growth, implementation of Part D, and public company expenses, including expenses incurred in connection with the recently completed secondary offering of common stock by certain Company stockholders. The 2005 third quarter SG&A expense included $1.7 million of transaction expenses related to the Company’s recapitalization on March 1, 2005. |
• | SG&A expense represented 11.0% of total revenue in the 2006 third quarter compared with 13.7% in the prior-year period and 11.1% in the second quarter of 2006. |
Income Taxes
• | The Company’s effective tax rates for the three- and nine-month periods ended September 30, 2006, were 34.0% and 35.5%, respectively. The tax rate for the third quarter reflects adjustments related primarily to the completion of the 2005 tax return and state tax planning, which adjustments resulted in an increase of $0.02 per share in net income in the quarter. |
• | Prior 2006 periods reflect an effective rate of 37.1%. The Company expects the effective rate for the 2006 full year will approximate 35.5%. |
Balance Sheet Highlights
• | At September 30, 2006, the Company’s cash and cash equivalents were $267.1 million, $62.9 million of which was held at unregulated subsidiaries. This amount includes approximately $60.6 million of advances from CMS for reinsurance payments and low income cost subsidies for which the Company assumes no risk and which is included in funds held for the benefit of members on the Company’s balance sheet. |
• | Net cash provided by operating activities for the nine months ended September 30, 2006, was $82.1 million, or 1.4x net income. |
• | Days in claims payable were 39 at the end of the 2006 third quarter compared with 38 at the end of the second quarter 2006 and 40 at the end of 2005. |
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AHC Transaction Status
The Company and America’s Health Choice Medical Plans, Inc. (“AHC”), a Florida-licensed HMO, mutually have agreed to terminate the previously announced agreement for the Company to acquire the stock of AHC. The Company continues to manage the operations of AHC under the terms of the existing management agreement and the parties are continuing discussions regarding a potential transaction. No assurance can be given, however, that satisfactory terms, including valuation, will be agreed to by the parties or that an AHC acquisition can be completed on such renegotiated terms or at all.
Revised 2006 Guidance
• | Membership: The Company is revising its estimates for Medicare Advantage membership at 2006 year end to be in the range of 112,000 to 115,000. The Company revises its estimate for PDP membership at the end of the year to be approximately 88,000 lives. Commercial lives are projected to be 28,000 to 30,000 at year-end. |
• | Revenue: The Company maintains its estimate that 2006 total revenue will be between $1.25 billion and $1.35 billion, with approximately 90% of total premium revenue for the year attributable to Medicare premiums. |
• | MLRs: The Company continues to estimate that Medicare Advantage (including MA-PD) MLR will be below 79.0% for the full year. PDP MLR is now expected to be between 80% and 82% for the full year. Commercial MLR now is projected to be between 89% and 91% for the year. |
• | EPS: The Company is increasing its estimate of GAAP earnings per share for 2006 to be in the range of $1.36 to $1.43. This estimate does not take into account any management fees from America’s Health Choice in the 2006 fourth quarter. On a non-GAAP pro-forma basis (assuming the IPO took place on January 1, 2006), the 2006 EPS range would be $1.42 to $1.49 after adjusting for the elimination of pre-IPO items, including preferred dividends, minority interest, interest expense, and tax expense, and adding incremental FAS 123R compensation expense. See “Supplemental Information” Note 1 herein. |
Recapitalization
HealthSpring, Inc. (“HealthSpring” or the “Company”) completed a recapitalization on March 1, 2005, which was accounted for as a purchase, of NewQuest, LLC (its “Predecessor”), resulting in the Predecessor becoming a wholly owned subsidiary of HealthSpring. The information included in this release compares results for HealthSpring for the nine-month period ended September 30, 2006, with the combined results of the Predecessor for the two months ended February 28, 2005, and for HealthSpring for the seven-month period from March 1, 2005 to September 30, 2005. Per share amounts for the nine-month period ended September 30, 2005, are not comparable with results for the same period in 2006 because the ownership of the Predecessor was composed of member units, and HealthSpring ownership is represented by common stock.
HealthSpring, Inc. (“HealthSpring” or the “Company”) completed a recapitalization on March 1, 2005, which was accounted for as a purchase, of NewQuest, LLC (its “Predecessor”), resulting in the Predecessor becoming a wholly owned subsidiary of HealthSpring. The information included in this release compares results for HealthSpring for the nine-month period ended September 30, 2006, with the combined results of the Predecessor for the two months ended February 28, 2005, and for HealthSpring for the seven-month period from March 1, 2005 to September 30, 2005. Per share amounts for the nine-month period ended September 30, 2005, are not comparable with results for the same period in 2006 because the ownership of the Predecessor was composed of member units, and HealthSpring ownership is represented by common stock.
Conference Call
A live audio webcast of the conference call regarding third quarter results will begin at 9:00 a.m. ET on Friday November 3, 2006. The public may access the conference call through HealthSpring’s website,www.myhealthspring.com, under the Investor Relations tab. The conference call can also be accessed by dialing (719) 457-2625, confirmation number 4534942. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue for 30 days.
A live audio webcast of the conference call regarding third quarter results will begin at 9:00 a.m. ET on Friday November 3, 2006. The public may access the conference call through HealthSpring’s website,www.myhealthspring.com, under the Investor Relations tab. The conference call can also be accessed by dialing (719) 457-2625, confirmation number 4534942. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue for 30 days.
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About HealthSpring, Inc.
HealthSpring, Inc. is one of the largest managed care organizations in the United States whose primary focus is the Medicare Advantage market. The Company currently owns and operates Medicare Advantage and stand-alone Medicare prescription drug plans in Tennessee, Texas, Alabama, Illinois, and Mississippi. In addition, the Company uses its infrastructure and provider networks in Tennessee and Alabama to offer commercial health plans to employer groups.
HealthSpring, Inc. is one of the largest managed care organizations in the United States whose primary focus is the Medicare Advantage market. The Company currently owns and operates Medicare Advantage and stand-alone Medicare prescription drug plans in Tennessee, Texas, Alabama, Illinois, and Mississippi. In addition, the Company uses its infrastructure and provider networks in Tennessee and Alabama to offer commercial health plans to employer groups.
Cautionary Statement Regarding Forward Looking Statements
Statements contained in this release that are not historical fact may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Statements that are predictive in nature, that depend on or refer to future events or conditions, or that include words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions are forward-looking statements. Such statements include statements regarding future operating and earnings guidance; amounts recoverable under CMS’s plan-to-plan reconciliation process; full year effective tax rates; and whether the Company can renegotiate satisfactory terms for the acquisition of AHC. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
Statements contained in this release that are not historical fact may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends such statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Statements that are predictive in nature, that depend on or refer to future events or conditions, or that include words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions are forward-looking statements. Such statements include statements regarding future operating and earnings guidance; amounts recoverable under CMS’s plan-to-plan reconciliation process; full year effective tax rates; and whether the Company can renegotiate satisfactory terms for the acquisition of AHC. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
The following important factors could cause actual results to differ materially from those in the forward-looking statements: changes in utilization patterns; changes in medical cost trends; methods for calculating Part D risk corridor adjustments; additional retroactive risk adjustments by CMS; marketing expenses related to limited open enrollment; contractual disputes with providers; regulatory actions or changes; changes in tax estimates, assets, or liabilities and valuation allowances related thereto; the continuation of the management agreement with AHC; expenses relating to the termination or renegotiation of the AHC acquisition; and the participation by other plans in CMS’s plan-to-plan reconciliation process. Additional information concerning these and other important risks and uncertainties can be found under the headings “Special Note Regarding Forward-Looking Statements” and “Item 1A. — Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006, and in the Company’s Registration Statement on Form S-1, which was declared effective by the Securities and Exchange Commission on October 2, 2006. Except as required by law, the Company assumes no obligation to update any forward-looking statement publicly, or to update the reasons actual results could differ materially from those predicted in any forward-looking statement, even if new information becomes available in the future.
Supplemental Information
1. Non-GAAP Measures
The Company believes that the non-GAAP measures used in this release, when presented in conjunction with comparable GAAP measures, are useful to both management and investors in analyzing financial and business trends regarding the Company’s ongoing business and operating performance. These non-GAAP measures should be considered in addition to, but not as a substitute for, items prepared in accordance with GAAP.
The Company believes that the non-GAAP measures used in this release, when presented in conjunction with comparable GAAP measures, are useful to both management and investors in analyzing financial and business trends regarding the Company’s ongoing business and operating performance. These non-GAAP measures should be considered in addition to, but not as a substitute for, items prepared in accordance with GAAP.
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This press release includes a presentation of the following non-GAAP financial measures:
The Company uses Adjusted EBITDA, or adjusted earnings before interest, taxes, depreciation, amortization, transaction expenses, and minority interest, to assess business performance among its health plans and related management companies. Although some excluded items may recur, management believes that this measure provides a more useful comparison of its business performance from period to period.
The following tables provide a reconciliation of Adjusted EBITDA as used in this release to net income before preferred dividends calculated in accordance with GAAP (in thousands).
Three Months Ended | ||||||||
September 30, | ||||||||
2006 | 2005 | |||||||
Net income before preferred dividends | $ | 31,053 | $ | 8,815 | ||||
Plus: income tax expense | 15,963 | 5,823 | ||||||
Plus: interest expense | 119 | 4,376 | ||||||
Plus: depreciation and amortization | 2,541 | 2,207 | ||||||
EBITDA | 49,676 | 21,221 | ||||||
Plus: transaction expenses | — | 1,700 | (a) | |||||
Plus: minority interest | — | 794 | ||||||
Adjusted EBITDA | $ | 49,676 | $ | 23,715 | ||||
(a) | Represents additional transaction expenses during the third quarter of 2005 related to the Company’s recapitalization transaction in March 2005. |
The following table adjusts projected GAAP EPS to projected pro-forma EPS, giving pro-forma effect to the IPO as if it had occurred on January 1, 2006 (in thousands, except per share data):
GAAP | Pro-forma | |||
Net income available to common stockholders | $74,600 - $78,200 | $74,600 - $78,200 | ||
Adjustments: | ||||
Preferred dividends | 2,021 | |||
Minority interest (after tax) | 190 | |||
Pre-IPO interest expense (after tax) | 5,214 | |||
Incremental FAS 123R expense (after tax) | (231) | |||
Pro-forma net income | $81,794 - $85,394 | |||
Weighted average shares outstanding for year | 54,700 | 57,400 | ||
EPS | $1.36 - $1.43 | $1.42 - $1.49 |
2. Medicare Premium Revenue
($ in millions)
For the Quarter Ended | ||||||||||||
March 31, | June 30, | Sept. 30, | ||||||||||
2006 | 2006 | 2006 | ||||||||||
Medicare Advantage (not including MA-PD) | $ | 220.8 | $ | 230.7 | $ | 253.5 | ||||||
MA-PD | 18.8 | 23.7 | 26.3 | |||||||||
Total Medicare Advantage | 239.6 | 254.4 | 279.8 | |||||||||
PDP | 27.1 | 27.9 | 22.5 | |||||||||
Total | $ | 266.7 | $ | 282.3 | $ | 302.3 | ||||||
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HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Information
September 30, 2006 and December 31, 2005
(in thousands)
(Unaudited)
Condensed Consolidated Balance Sheet Information
September 30, 2006 and December 31, 2005
(in thousands)
(Unaudited)
September 30, | December 31, | |||||||
2006 | 2005 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 267,061 | $ | 110,085 | ||||
Accounts receivable, net of allowance for doubtful accounts | 29,464 | 7,248 | ||||||
Investment securities available for sale | 8,138 | 8,646 | ||||||
Current portion of investment securities held to maturity | 12,065 | 14,313 | ||||||
Deferred income tax asset | 5,809 | 5,778 | ||||||
Prepaid expenses and other assets | 2,922 | 3,148 | ||||||
Total current assets | 325,459 | 149,218 | ||||||
Investment securities held to maturity, less current portion | 21,767 | 22,993 | ||||||
Property and equipment, net | 6,075 | 4,287 | ||||||
Goodwill | 341,619 | 315,057 | ||||||
Intangible assets, net | 83,059 | 87,675 | ||||||
Investment in and receivable from unconsolidated affiliate | 1,384 | 1,469 | ||||||
Deferred financing fee | 849 | 5,487 | ||||||
Restricted investments | 7,210 | 5,652 | ||||||
Total assets | $ | 787,422 | $ | 591,838 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Medical claims liability | $ | 107,375 | $ | 82,645 | ||||
Current portion of long-term debt | — | 16,500 | ||||||
Accounts payable and accrued expenses | 19,538 | 17,408 | ||||||
Deferred revenue | 202 | 365 | ||||||
Funds held for the benefit of members | 76,793 | — | ||||||
Other current liabilities | 870 | 362 | ||||||
Total current liabilities | 204,778 | 117,280 | ||||||
Long-term debt, less current portion | — | 172,026 | ||||||
Deferred tax liability | 29,097 | 29,782 | ||||||
Other long-term liabilities | 283 | 316 | ||||||
Total liabilities | 234,158 | 319,404 | ||||||
Minority Interest | — | 11,890 | ||||||
Stockholders’ Equity: | ||||||||
Preferred stock | — | 2 | ||||||
Common stock | 573 | 322 | ||||||
Additional paid in capital | 483,087 | 249,317 | ||||||
Retained earnings | 69,657 | 10,943 | ||||||
Treasury Stock | (53 | ) | (40 | ) | ||||
Total stockholders’ equity | 553,264 | 260,544 | ||||||
Total liabilities and stockholders’ equity | $ | 787,422 | $ | 591,838 | ||||
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HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Statement of Income Information
(in thousands, except share data)
(Unaudited)
Condensed Consolidated Statement of Income Information
(in thousands, except share data)
(Unaudited)
Three-Month Period Ended | Nine-Month Period Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(Combined) (1) | ||||||||||||||||
Revenue: | ||||||||||||||||
Premium: | ||||||||||||||||
Medicare | $ | 302,261 | $ | 194,630 | $ | 851,295 | $ | 497,976 | ||||||||
Commercial | 30,037 | 32,150 | 94,123 | 94,561 | ||||||||||||
Total premium revenue | 332,298 | 226,780 | 945,418 | 592,537 | ||||||||||||
Management and fee revenue | 8,249 | 5,156 | 19,995 | 15,479 | ||||||||||||
Investment income | 3,314 | 1,185 | 7,872 | 2,685 | ||||||||||||
Total revenue | 343,861 | 233,121 | 973,285 | 610,701 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Medical Expense: | ||||||||||||||||
Medicare | 228,829 | 149,369 | 670,713 | 390,307 | ||||||||||||
Commercial | 27,610 | 29,858 | 83,955 | 81,749 | ||||||||||||
Total medical expenses | 256,439 | 179,227 | 754,668 | 472,056 | ||||||||||||
Selling, general and administrative | 37,839 | 31,909 | 108,410 | 84,885 | ||||||||||||
Depreciation and amortization | 2,541 | 2,207 | 7,408 | 5,097 | ||||||||||||
Interest | 119 | 4,376 | 8,576 | 10,192 | ||||||||||||
Total operating expenses | 296,938 | 217,719 | 879,062 | 572,230 | ||||||||||||
Income before equity in earnings of unconsolidated affiliate, minority interest and income taxes | 46,923 | 15,402 | 94,223 | 38,471 | ||||||||||||
Equity in earnings of unconsolidated affiliate | 93 | 30 | 264 | 30 | ||||||||||||
Income before minority interest and income taxes | 47,016 | 15,432 | 94,487 | 38,501 | ||||||||||||
Minority interest | — | (794 | ) | (303 | ) | (2,466 | ) | |||||||||
Income before income taxes | 47,016 | 14,638 | 94,184 | 36,035 | ||||||||||||
Income taxes | (15,963 | ) | (5,823 | ) | (33,449 | ) | (14,767 | ) | ||||||||
Net income | 31,053 | 8,815 | 60,735 | 21,268 | ||||||||||||
Preferred dividends | — | (4,702 | ) | (2,021 | ) | (10,759 | ) | |||||||||
Net income available to common stockholders and members | $ | 31,053 | $ | 4,113 | $ | 58,714 | $ | 10,509 | ||||||||
Net Income per common share: | ||||||||||||||||
Basic | $ | 0.54 | $ | 0.13 | $ | 1.09 | — | |||||||||
Diluted | $ | 0.54 | $ | 0.13 | $ | 1.09 | — | |||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 57,218,805 | 32,283,969 | 53,741,536 | — | ||||||||||||
Diluted | 57,319,221 | 32,283,969 | 53,840,646 | — | ||||||||||||
(1) | - Includes the combined results of operations of the Predecessor from January 1, 2005 through February 28, 2005, and of the Company from March 1, 2005 through September 30, 2005. The Company has included this non-GAAP financial measure because it believes that it permits a more meaningful comparison of the Company’s operating performance between the periods presented. See “Condensed Consolidated Statement of Income Information” herein on page 10. |
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HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flow Information
(in thousands)
(Unaudited)
Condensed Consolidated Statement of Cash Flow Information
(in thousands)
(Unaudited)
Predecessor | ||||||||||||
Nine-Month | Seven-Month | Two-Month | ||||||||||
Period Ended | Period ended | Period ended | ||||||||||
Sept. 30, 2006 | Sept. 30, 2005 | February 28, 2005 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 60,735 | $ | 18,562 | $ | 2,706 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 7,408 | 4,782 | 315 | |||||||||
Amortization of deferred financing cost | 195 | 605 | — | |||||||||
Amortization of accrued loss on assumed lease | — | — | (97 | ) | ||||||||
Equity in earnings of unconsolidated affiliate | (264 | ) | (30 | ) | — | |||||||
Minority Interest | 303 | 1,218 | 1,248 | |||||||||
PIK Interest | 116 | 628 | — | |||||||||
Stock-based compensation | 3,772 | 288 | — | |||||||||
Deferred tax benefit | (717 | ) | (3,447 | ) | 93 | |||||||
Write off of deferred financing cost | 5,375 | — | — | |||||||||
Increase (decrease) in cash and cash equivalents due changes in: | ||||||||||||
Accounts receivable | (22,216 | ) | 8,345 | (2,470 | ) | |||||||
Prepaid expenses and other current assets | 226 | 519 | 1,240 | |||||||||
Medical claims liability | 24,730 | 10,007 | 5,829 | |||||||||
Accounts payable, accrued expenses and other current liabilities | 2,638 | (9,895 | ) | 6,202 | ||||||||
Other long-term liabilities | (33 | ) | — | 11 | ||||||||
Deferred revenue | (163 | ) | 67,609 | (113 | ) | |||||||
Net cash provided by operating activities | 82,105 | 99,191 | 14,964 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (3,559 | ) | (2,024 | ) | (149 | ) | ||||||
Purchase of investment securities | (8,334 | ) | (17,861 | ) | (5,942 | ) | ||||||
Sale / maturity of investment securities | 12,279 | 11,813 | 836 | |||||||||
Purchase of restricted investments | (1,558 | ) | (134 | ) | (214 | ) | ||||||
Distributions from affiliates | 226 | — | — | |||||||||
Purchase of minority interest | — | (44,358 | ) | — | ||||||||
Acquisition, net of cash acquired | — | (218,467 | ) | — | ||||||||
Net cash used in investing activities | (946 | ) | (271,031 | ) | (5,469 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Payments on borrowings | (188,642 | ) | (13,608 | ) | (117 | ) | ||||||
Proceeds from issuance of common stock and preferred stock | 188,611 | 139,977 | — | |||||||||
Funds received for the benefit of members | 76,793 | — | — | |||||||||
Purchase of treasury stock | (13 | ) | — | — | ||||||||
Deferred financing cost | (932 | ) | (6,366 | ) | — | |||||||
Proceeds from issuance of notes payable | — | 200,000 | — | |||||||||
Proceeds from sale of units in consolidated subsidiary | — | 7,875 | — | |||||||||
Distribution to minority stockholders | — | — | (1,771 | ) | ||||||||
Cash advanced in recapitalization | — | (5,630 | ) | 1,000 | ||||||||
Net cash provided by (used in) financing activities | 75,817 | 322,248 | (888 | ) | ||||||||
Net increase in cash and cash equivalents | 156,976 | 150,408 | 8,607 | |||||||||
Cash and cash equivalents at beginning of period | 110,085 | — | 67,834 | |||||||||
Cash and cash equivalents at end of period | $ | 267,061 | $ | 150,408 | $ | 76,441 | ||||||
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HS Reports Third Quarter Results
Page 10
November 2, 2006
Page 10
November 2, 2006
HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Statement of Income Information
(in thousands)
(Unaudited)
Condensed Consolidated Statement of Income Information
(in thousands)
(Unaudited)
Predecessor | HealthSpring, Inc. | Combined | |||||||||||
Period from | Period from | Nine Months | |||||||||||
January 1, 2005 to | March 1, 2005 to | Ended | |||||||||||
February 28, 2005 | Sept. 30, 2005 | Sept. 30, 2005 | |||||||||||
Revenue: | |||||||||||||
Premium: | |||||||||||||
Medicare premiums | $ | 94,764 | $ | 403,212 | $ | 497,976 | |||||||
Commercial premiums | 20,704 | 73,857 | 94,561 | ||||||||||
Premium revenue | 115,468 | 477,069 | 592,537 | ||||||||||
Management fee revenue | 3,461 | 12,018 | 15,479 | ||||||||||
Investment income | 461 | 2,224 | 2,685 | ||||||||||
Total revenue | 119,390 | 491,311 | 610,701 | ||||||||||
Operating Expenses: | |||||||||||||
Medical expenses | 90,843 | 381,213 | 472,056 | ||||||||||
Selling, general and administrative | 21,608 | 63,277 | 84,885 | ||||||||||
Depreciation and amortization | 315 | 4,782 | 5,097 | ||||||||||
Interest | 42 | 10,150 | 10,192 | ||||||||||
Total operating expenses | 112,808 | 459,422 | 572,230 | ||||||||||
Income before equity in earnings of unconsolidated affiliate, minority interest and income taxes | 6,582 | 31,889 | 38,471 | ||||||||||
Equity in earnings of unconsolidated affiliate | — | 30 | 30 | ||||||||||
Income before minority interest and income taxes | 6,582 | 31,919 | 38,501 | ||||||||||
Minority interest | (1,248 | ) | (1,218 | ) | (2,466 | ) | |||||||
Income before income taxes | 5,334 | 30,701 | 36,035 | ||||||||||
Income taxes | (2,628 | ) | (12,139 | ) | (14,767 | ) | |||||||
Net income | 2,706 | 18,562 | 21,268 | ||||||||||
Preferred dividends | — | (10,759 | ) | (10,759 | ) | ||||||||
Net income available to members and common stockholders | $ | 2,706 | $ | 7,803 | $ | 10,509 | |||||||
-END-