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Company Contact: | Lankford Wade | |
Vice President | ||
HealthSpring, Inc. | ||
(615) 401-4632 |
HealthSpring, Inc. Reports 2006 Fourth Quarter and Full Year Results
Fourth Quarter Net Income of $20.1 Million, or $0.35 per Diluted Share
NASHVILLE, Tenn. (February 21, 2007) — HealthSpring, Inc. (NYSE:HS) today announced its results for the fourth quarter and year ended December 31, 2006. Highlights included:
• | Fourth quarter diluted EPS of $0.35. Full year diluted EPS of $1.44 and pro-forma EPS of $1.50. | |
• | Medicare Advantage membership of 115,132 at December 31, 2006; up 13.7% year over year. |
• | Total revenue in the quarter of $335.7 million; an increase of 36.4% over the 2005 fourth quarter. |
• | Total revenue for the year of $1.3 billion; an increase of 52.8% over 2005. |
• | Medicare Advantage medical loss ratio (MLR) of 79.6% for the quarter and 78.8% for the year. |
• | Net cash provided by operating activities for the year of $167.7 million, or 2.1x net income. |
• | Cash and cash equivalents of $338.4 million at December 31, 2006, including $78.5 million held at unregulated subsidiaries. |
Commenting on 2006 fourth quarter results, Herb Fritch, Chairman, President, and Chief Executive Officer, said, “HealthSpring’s fourth quarter results reflect a solid finish to our first year as a public company. With our investments in the fourth quarter in corporate infrastructure and marketing and a strong balance sheet, we believe we are well positioned for 2007.”
Fourth Quarter Results
($ in thousands)
($ in thousands)
Three Months Ended | ||||||||||||
December 31, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
Premium revenue | $ | 324,930 | $ | 240,012 | 35.4 | % | ||||||
Total revenue | 335,670 | 246,062 | 36.4 | |||||||||
Medical expense | 253,858 | 188,123 | 34.9 | |||||||||
Adjusted SG&A(1) | 48,530 | 35,610 | 36.3 | |||||||||
Adjusted EBITDA(1) | 33,328 | 22,581 | 47.6 | |||||||||
Net income | 20,101 | 7,987 | 151.7 | |||||||||
Net income available to common stockholders(2) | 20,101 | 3,139 | 540.4 |
(1) | See “Supplemental Information” below and the accompanying reconciliation of HealthSpring’s and the Predecessor’s non-GAAP Adjusted Selling, General & Administrative Expense and non-GAAP Adjusted EBITDA to GAAP Selling, General & Administrative Expense and GAAP Net Income, respectively. | |
(2) | Net income available to common stockholders is used in the calculation of earnings per share. |
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Fourth Quarter Operating Highlights
Revenue(1)
• | Medicare Advantage plan membership increased to 115,132. Medicare Advantage (including MA-PD) premiums were $274.7 million for the 2006 fourth quarter, reflecting an increase of 32.3% over the 2005 fourth quarter. The Company received retroactive risk adjustment payments in the 2006 fourth quarter of approximately $5.7 million from the Centers for Medicare and Medicaid Services (CMS). By comparison, retroactive risk adjustment payments from CMS in the quarter ended December 31, 2005 were $1.8 million. | |
• | PDP membership at fourth quarter end was 88,753. PDP premium revenue was $23.8 million for the 2006 fourth quarter. | |
• | Commercial membership was 31,970 at December 31, 2006. Commercial premiums were $26.4 million for the 2006 fourth quarter. Commercial membership as of January 1, 2007 was approximately 16,500 and the Company expects commercial premium revenue to be less than 4% of total revenue in 2007. |
(1) | See supplemental non-GAAP schedule entitled “Medicare Advantage Results” at www.myhealthspring.com under the Investor Relations link for a schedule that conforms the presentation of Medicare premium revenue in the first two quarters of 2006 to the presentation for the third and fourth quarters. The schedule also includes pro-forma adjustments that allocate the CMS risk adjustment payment, received in the third quarter of 2006, over the first two quarters of 2006. |
Medical Expense
• | Medicare Advantage (including MA-PD) MLR was 79.6% for the 2006 fourth quarter, compared with 78.4% for the prior year’s fourth quarter. The increase in MLR was primarily the result of increases in medical cost trends and the inclusion of MA-PD drug costs in the current period. |
• | The MLR for the Company’s PDP was 45.8% for the 2006 fourth quarter and 73.4% for the year ended December 31, 2006. PDP expenses, as anticipated under the benefit design, were disproportionately higher in the first half of the year, compared with the last half of the year. |
Adjusted SG&A
• | Adjusted SG&A expense represented 14.5% of total revenue in the 2006 fourth quarter and in the same prior-year period. |
• | Adjusted SG&A expense in the 2006 fourth quarter increased $12.9 million, or 36.3%, over the 2005 fourth quarter, primarily as a result of growth in personnel, increases in marketing expenses associated with open enrollment, stock compensation expense, and public company expenses, including costs related to complying with Sarbanes-Oxley Section 404 in 2007. |
• | Adjusted SG&A expense in the fourth quarter of 2006 includes $1.8 million of stock compensation expense measured in accordance with FAS 123R. |
Income Taxes
• | The Company’s effective tax rate for the three-months ended December 31, 2006, was 34.0%. The tax rate for the fourth quarter reflects adjustments related primarily to the completion of the 2005 consolidated tax return and state tax planning. |
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Full Year Results
($ in thousands)
($ in thousands)
Year Ended | ||||||||||||
December 31, | Percent | |||||||||||
2006 | 2005 | Change | ||||||||||
Premium revenue | $ | 1,270,348 | $ | 832,549 | 52.6 | % | ||||||
Total revenue | 1,308,956 | 856,763 | 52.8 | |||||||||
Medical expense | 1,008,526 | 660,179 | 52.8 | |||||||||
Adjusted SG&A(1) | 156,940 | 111,854 | 40.3 | |||||||||
Adjusted EBITDA(1) | 143,799 | 85,012 | 69.2 | |||||||||
Net income | 80,836 | 29,256 | 176.3 | |||||||||
Net income available to common stockholders(2) | 78,815 | 13,649 | 477.4 |
(1) | See “Supplemental Information” below and the accompanying reconciliation of HealthSpring’s and the Predecessor’s non-GAAP Adjusted Selling, General & Administrative Expense and non-GAAP Adjusted EBITDA to GAAP Selling, General & Administrative Expense and GAAP Net Income, respectively. | |
(2) | Net income available to common stockholders is used in the calculation of earnings per share. |
Full Year 2006 Operating Highlights
• | Medicare Advantage (including MA-PD) premiums were $1.05 billion for 2006, reflecting an increase of 48.6% over the prior year. PDP premiums were $101.4 million. |
• | Medicare premiums (including premiums related to Part D) represented 90.5% of total premium revenue and 87.8% of total revenue for 2006. |
• | Fee and investment income for the year was $38.6 million, an increase of $14.4 million, or 59.4%, over 2005. Approximately $4.7 million of this amount ($1.3 million in the fourth quarter of 2006) related to the Company’s management agreement with a health plan in Florida, which was terminated as of December 31, 2006. |
• | Medicare Advantage (including MA-PD) MLR was 78.8% in 2006, a 40-basis-point increase over 78.4% in the prior year. The increase in MLR was primarily the result of the inclusion of MA-PD drug costs in the current year. |
• | PDP MLR was 73.4% in 2006. |
• | Adjusted SG&A increased $45.0 million, or 40.3% compared with the prior year, primarily as the result of membership growth, the implementation of Part D, stock compensation expense resulting from FAS 123R, and public company expenses, including costs related to complying with Sarbanes-Oxley Section 404. Adjusted SG&A was 12.0% of total revenue compared with 13.1% in the prior year. |
Balance Sheet Highlights
• | At December 31, 2006, the Company’s cash and cash equivalents were $338.4 million, $78.5 million of which was held at unregulated subsidiaries. |
• | Days in claims payable were 44 at the end of the 2006 fourth quarter compared with 40 at the end of 2005. Medical claims payable at December 31, 2006 includes amounts payable for Part D claims to CMS under CMS’s state-to-plan reconciliation process and to other health plans under CMS’s plan-to-plan reconciliation process. Similar amounts are not included in claims payable at December 31, 2005 as the Part D program did not exist in 2005. Excluding these amounts, days in claims payable at the end of 2006 would have been 41. |
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2007 Guidance
As previously reported:
• | Membership:The Company estimates that its Medicare Advantage membership (including MA-PD and MA-only) will be in the range of 130,000 to 135,000 by the end of 2007, compared with 115,132 at the end of 2006. Medicare Advantage membership (including MA-PD and MA-only) for January 2007 was 117,615. January 2007 PDP membership approximated 108,000. |
• | Revenue:The Company estimates that 2007 total revenue will be between $1.5 billion and $1.6 billion, with approximately 96% of total revenue for the year attributable to the Medicare business. |
• | Medical Loss Ratios (MLRs): The Company projects Medicare Advantage MLRs will be at or below 80.0% for the full year. PDP MLRs are expected to range between 85.0% and 90.0% for the year. |
• | EPS: The Company estimates earnings per share for 2007, on a fully diluted basis, will be in the range of $1.55 to $1.65, on weighted average shares outstanding of approximately 57.6 million. |
Recapitalization
HealthSpring, Inc. 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 year ended December 31, 2006, with the combined results of the Predecessor for the two months ended February 28, 2005, and for HealthSpring for the ten-month period from March 1, 2005 to December 31, 2005. Per share amounts for the 12-month period ended December 31, 2005, are not comparable with results for the same period in 2006 because the ownership of the Predecessor was composed of member units for the first two months of 2005, and HealthSpring ownership is represented by common stock.
Conference Call
A live audio webcast of the conference call regarding fourth quarter and year-end results, 2007 guidance, and other recent developments, will begin at 9:00 a.m. ET on Thursday, February 22, 2007. 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 (913) 981-5568, confirmation number 1105405. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue for 30 days.
About HealthSpring, Inc.
HealthSpring 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. Effective January 1, 2007, HealthSpring also offers Medicare Part D prescription drug plans on a nationwide basis to persons in all 50 states who are eligible for Medicare. The Company also uses its infrastructure and provider networks in Tennessee and Alabama to offer commercial health plans to employer groups.
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Cautionary Statement Regarding Forward Looking Statements
Statements contained in this release that are not historical fact are forward-looking statements, which the Company intends to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 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. The Company cautions that forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause its 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: membership enrollment and dis-enrollment patterns; changes in utilization; changes in medical and prescription drug cost trends; the Company’s ability to accurately estimate and calculate Part D risk corridor adjustments; CMS retroactive risk adjustments to Medicare rates; marketing expenses related to limited open enrollment; increasing competition and potential confusion in the marketplace regarding other MA, MA-PD, PDP, and PFFS plan offerings; the Company’s ability to accurately estimate incurred but not reported medical claims; contractual disputes with providers; increases in costs or liabilities associated with litigation; legislative and regulatory actions or changes; costs associated with information and data systems conversions and compliance with regulatory mandates; recent management changes; and changes in tax estimates, assets, or liabilities and valuation allowances related thereto. The foregoing list of important factors is not intended to be exhaustive. 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, and in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. Any projections or other forward-looking information in this release are based on limited information currently available to HealthSpring, which is subject to change. Although any such projections and forward-looking information and the factors influencing them will likely change, HealthSpring will not necessarily update the information except as required by law, as HealthSpring will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.
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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.
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 useful comparison of its business performance from period to period.
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 useful comparison of its business performance from period to period.
The following table provides a reconciliation of Adjusted EBITDA as used in this release to net income calculated in accordance with GAAP:
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(in thousands) | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Net income | $ | 20,101 | $ | 7,987 | $ | 80,836 | $ | 29,256 | ||||||||
Plus: income tax expense | 10,362 | 5,005 | 43,811 | 19,772 | ||||||||||||
Plus: interest expense | 119 | 4,320 | 8,695 | 14,511 | ||||||||||||
Plus: depreciation and amortization | 2,746 | 2,208 | 10,154 | 7,305 | ||||||||||||
33,328 | 19,520 | 143,496 | 70,844 | |||||||||||||
Plus: transaction expenses (a) | — | 2,300 | — | 10,941 | ||||||||||||
Plus: minority interest | — | 761 | 303 | 3,227 | ||||||||||||
Adjusted EBITDA | $ | 33,328 | $ | 22,581 | $ | 143,799 | $ | 85,012 | ||||||||
(a) | Transaction expenses in 2005 represent costs of $6.9 million that were expensed during the two-month period ended February 28, 2005 related to the recapitalization and $4.0 million of recapitalization-related transaction costs that were expensed during the ten-month period ended December 31, 2005 ($2.3 million of which relates to the fourth quarter of 2005). |
For purposes of this release, the Company has calculated “Adjusted SG&A” to eliminate from SG&A calculated in accordance with GAAP transaction expenses in 2005 associated with the recapitalization (see note (a) to the table above).
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(in thousands) | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Selling, general and administrative (SG&A) expense, as reported | $ | 48,530 | $ | 37,910 | $ | 156,940 | $ | 122,795 | ||||||||
Less: transaction expenses (a) | — | 2,300 | — | 10,941 | ||||||||||||
Adjusted SG&A expense | $ | 48,530 | $ | 35,610 | $ | 156,940 | $ | 111,854 | ||||||||
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The following table adjusts GAAP net income available to common stockholders for the year ended December 31, 2006 to give pro-forma effect to the IPO as if it occurred on January 1, 2006:
(in thousands, except share data) | ||||
Net income available to common stockholders (GAAP) | $ | 78,815 | ||
Adjustments: | ||||
Preferred dividends | 2,021 | |||
Minority interest | 303 | |||
Interest expense (after tax) | 5,346 | |||
Incremental FAS 123(R) expense (after tax) | (239 | ) | ||
Pro-forma net income | $ | 86,246 | ||
Weighted average shares outstanding assuming a January 1, 2006 IPO | 57,344 | (1) | ||
Non-GAAP pro-forma EPS | $ | 1.50 | (2) | |
(1) | Diluted shares outstanding on a GAAP-basis for the year ended December 31, 2006 were 54,720,373. | |
(2) | EPS on a GAAP basis for the year ended December 31, 2006 was $1.44 (basic and diluted). |
2. Reconciliation of Medical Claims Payable
The following table provides a reconciliation of changes in the medical claims liability for HealthSpring for the year ended December 31, 2006, the combined ten-month period ended December 31, 2005 and the Predecessor for the two-month period ended February 28, 2005, and the year ended December 31, 2004:
(Unaudited) | ||||||||||||
Year Ended December 31, | ||||||||||||
($ in thousands) | 2006 | 2005 | 2004 | |||||||||
(combined) | ||||||||||||
Balance at beginning of period | $ | 82,645 | $ | 53,187 | $ | 47,729 | ||||||
Incurred related to: | ||||||||||||
Current period | 1,017,100 | 665,407 | 467,289 | |||||||||
Prior period | (8,574 | ) | (5,228 | ) | (3,914 | ) | ||||||
Total incurred | 1,008,526 | 660,179 | 463,375 | |||||||||
Paid related to: | ||||||||||||
Current period | 894,684 | 582,944 | 415,136 | |||||||||
Prior period | 73,709 | 47,777 | 42,781 | |||||||||
Total paid | 968,393 | 630,721 | 457,917 | |||||||||
Balance at the end of the period | $ | 122,778 | $ | 82,645 | $ | 53,187 | ||||||
Current-year medical claims paid as a percent of current-year incurred medical claims | 88.0 | % | 87.6 | % | 88.8 | % | ||||||
Prior-period reserve development as a percent of prior-year medical claims | 1.3 | % | 1.1 | % | 1.3 | % | ||||||
Prior-year reserve development in the current period as a percent of prior-year medical claims liability | 10.4 | % | 9.8 | % | 8.2 | % |
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HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
Condensed Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
December 31, | ||||||||
2006 | 2005 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 338,443 | $ | 110,085 | ||||
Accounts receivable, net of allowance for doubtful accounts | 17,588 | 7,248 | ||||||
Investment securities available for sale | 7,874 | 8,646 | ||||||
Current portion of investment securities held to maturity | 10,566 | 14,313 | ||||||
Deferred income tax asset | 3,644 | 5,778 | ||||||
Prepaid expenses and other assets | 4,047 | 3,148 | ||||||
Total current assets | 382,162 | 149,218 | ||||||
Investment securities held to maturity, less current portion | 19,560 | 22,993 | ||||||
Property and equipment, net | 8,831 | 4,287 | ||||||
Goodwill | 341,619 | 315,057 | ||||||
Intangible assets, net | 81,175 | 87,675 | ||||||
Investment in and receivable from unconsolidated affiliate | 1,301 | 1,469 | ||||||
Deferred financing fee | 802 | 5,487 | ||||||
Restricted investments | 7,195 | 5,652 | ||||||
Total assets | $ | 842,645 | $ | 591,838 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Medical claims liability | $ | 122,778 | $ | 82,645 | ||||
Current portion of long-term debt | — | 16,500 | ||||||
Accounts payable and accrued expenses | 25,149 | 17,408 | ||||||
Funds held for the benefit of members | 62,125 | — | ||||||
Risk corridor payable to CMS | 27,587 | — | ||||||
Other current liabilities | 899 | 727 | ||||||
Total current liabilities | 238,538 | 117,280 | ||||||
Long-term debt, less current portion | — | 172,026 | ||||||
Deferred tax liability | 28,444 | 29,782 | ||||||
Other long-term liabilities | 381 | 316 | ||||||
Total liabilities | 267,363 | 319,404 | ||||||
Minority Interest | — | 11,890 | ||||||
Stockholders’ Equity: | ||||||||
Preferred stock | — | 2 | ||||||
Common stock | 573 | 322 | ||||||
Additional paid-in capital | 485,004 | 249,317 | ||||||
Retained earnings | 89,758 | 10,943 | ||||||
Treasury Stock | (53 | ) | (40 | ) | ||||
Total stockholders’ equity | 575,282 | 260,544 | ||||||
Total liabilities and stockholders’ equity | $ | 842,645 | $ | 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 | Year Ended | |||||||||||||||
Decemer 31, 2006 | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(Combined)(1) | ||||||||||||||||
Revenue: | ||||||||||||||||
Premium: | ||||||||||||||||
Medicare | $ | 298,549 | $ | 207,701 | $ | 1,149,844 | $ | 705,677 | ||||||||
Commercial | 26,381 | 32,311 | 120,504 | 126,872 | ||||||||||||
Total premium revenue | 324,930 | 240,012 | 1,270,348 | 832,549 | ||||||||||||
Management and fee revenue | 6,692 | 4,937 | 26,688 | 20,416 | ||||||||||||
Investment income | 4,048 | 1,113 | 11,920 | 3,798 | ||||||||||||
Total revenue | 335,670 | 246,062 | 1,308,956 | 856,763 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Medical Expense: | ||||||||||||||||
Medicare | 229,645 | 162,777 | 900,358 | 553,084 | ||||||||||||
Commercial | 24,213 | 25,346 | 108,168 | 107,095 | ||||||||||||
Total medical expenses | 253,858 | 188,123 | 1,008,526 | 660,179 | ||||||||||||
Selling, general and administrative | 48,530 | 37,910 | 156,940 | 122,795 | ||||||||||||
Depreciation and amortization | 2,746 | 2,208 | 10,154 | 7,305 | ||||||||||||
Interest | 119 | 4,320 | 8,695 | 14,511 | ||||||||||||
Total operating expenses | 305,253 | 232,561 | 1,184,315 | 804,790 | ||||||||||||
Income before equity in earnings of unconsolidated affiliate, minority interest and income taxes | 30,417 | 13,501 | 124,641 | 51,973 | ||||||||||||
Equity in earnings of unconsolidated affiliate | 46 | 252 | 309 | 282 | ||||||||||||
Income before minority interest and income taxes | 30,463 | 13,753 | 124,950 | 52,255 | ||||||||||||
Minority interest | — | (761 | ) | (303 | ) | (3,227 | ) | |||||||||
Income before income taxes | 30,463 | 12,992 | 124,647 | 49,028 | ||||||||||||
Income taxes | (10,362 | ) | (5,005 | ) | (43,811 | ) | (19,772 | ) | ||||||||
Net income | 20,101 | 7,987 | 80,836 | 29,256 | ||||||||||||
Preferred dividends | — | (4,848 | ) | (2,021 | ) | (15,607 | ) | |||||||||
Net income available to common stockholders and members | $ | 20,101 | $ | 3,139 | $ | 78,815 | $ | 13,649 | ||||||||
Net Income per common share: | ||||||||||||||||
Basic | $ | 0.35 | $ | 0.10 | $ | 1.44 | — | |||||||||
Diluted | $ | 0.35 | $ | 0.10 | $ | 1.44 | — | |||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 57,217,796 | 32,283,969 | 54,617,744 | — | ||||||||||||
Diluted | 57,320,186 | 32,283,969 | 54,720,373 | — | ||||||||||||
(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 December 31, 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 11. |
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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 | ||||||||||||
Twelve-Month | Ten-Month | Two-Month | ||||||||||
Period Ended | Period ended | Period ended | ||||||||||
Dec. 31, 2006 | Dec. 31, 2005 | February 28, 2005 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 80,836 | $ | 26,550 | $ | 2,706 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 10,154 | 6,990 | 315 | |||||||||
Amortization of deferred financing cost | 242 | 879 | — | |||||||||
Amortization of accrued loss on assumed lease | — | — | (97 | ) | ||||||||
Equity in earnings of unconsolidated affiliate | (309 | ) | (282 | ) | — | |||||||
Minority interest | 303 | 1,979 | 1,248 | |||||||||
PIK interest | 116 | 901 | — | |||||||||
Stock-based compensation | 5,687 | 377 | — | |||||||||
Deferred tax benefit | 687 | (1,060 | ) | 93 | ||||||||
Write off of deferred financing cost | 5,375 | — | — | |||||||||
Increase (decrease) in cash and cash equivalents due to changes in: | ||||||||||||
Accounts receivable | (10,340 | ) | 8,368 | (2,470 | ) | |||||||
Prepaid expenses and other current assets | (899 | ) | (3,266 | ) | 1,240 | |||||||
Medical claims liability | 40,133 | 23,629 | 5,829 | |||||||||
Accounts payable, accrued expenses and other current liabilities | 8,214 | (7,460 | ) | 6,202 | ||||||||
Risk corridor payable to CMS | 27,587 | |||||||||||
Other long-term liabilities | 174 | (335 | ) | 11 | ||||||||
Deferred revenue | (301 | ) | (131 | ) | (113 | ) | ||||||
Net cash provided by operating activities | 167,659 | 57,139 | 14,964 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (7,177 | ) | (2,653 | ) | (149 | ) | ||||||
Purchase of investment securities | (10,368 | ) | (16,313 | ) | (5,942 | ) | ||||||
Sale/maturity of investment securities | 18,283 | 12,524 | 836 | |||||||||
Purchase of restricted investments | (1,543 | ) | (119 | ) | (214 | ) | ||||||
Distributions from affiliates | 355 | — | — | |||||||||
Purchase of minority interest | — | (44,358 | ) | — | ||||||||
Acquisition, net of cash acquired | — | (219,958 | ) | — | ||||||||
Net cash used in investing activities | (450 | ) | (270,877 | ) | (5,469 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Payments on borrowings | (188,642 | ) | (17,733 | ) | (117 | ) | ||||||
Proceeds from issuance of common stock and preferred stock | 188,611 | 140,087 | — | |||||||||
Funds received for the benefit of members | 62,125 | — | — | |||||||||
Purchase of treasury stock | (13 | ) | (40 | ) | — | |||||||
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 | — | — | 1,000 | |||||||||
Net cash provided by (used in) financing activities | 61,149 | 323,823 | (888 | ) | ||||||||
Net increase in cash and cash equivalents | 228,358 | 110,085 | 8,607 | |||||||||
Cash and cash equivalents at beginning of period | 110,085 | — | 67,834 | |||||||||
Cash and cash equivalents at end of period | $ | 338,443 | $ | 110,085 | $ | 76,441 | ||||||
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HS Reports Fourth Quarter and Full Year Results
Page 11
February 21, 2007
Page 11
February 21, 2007
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(1) | |||||||||||
Period from | Period from | Twelve | |||||||||||
January 1, 2005 to | March 1, 2005 to | Months Ended | |||||||||||
February 28, 2005 | Dec. 31, 2005 | Dec. 31, 2005 | |||||||||||
Revenue: | |||||||||||||
Premium: | |||||||||||||
Medicare | $ | 94,764 | $ | 610,913 | $ | 705,677 | |||||||
Commercial | 20,704 | 106,168 | 126,872 | ||||||||||
Total premium revenue | 115,468 | 717,081 | 832,549 | ||||||||||
Management and fee revenue | 3,461 | 16,955 | 20,416 | ||||||||||
Investment income | 461 | 3,337 | 3,798 | ||||||||||
Total revenue | 119,390 | 737,373 | 856,763 | ||||||||||
Operating Expenses: | |||||||||||||
Medical expense | 90,843 | 569,336 | 660,179 | ||||||||||
Selling, general and administrative | 21,608 | 101,187 | 122,795 | ||||||||||
Depreciation and amortization | 315 | 6,990 | 7,305 | ||||||||||
Interest | 42 | 14,469 | 14,511 | ||||||||||
Total operating expenses | 112,808 | 691,982 | 804,790 | ||||||||||
Income before equity in earnings of unconsolidated affiliate, minority interest and income taxes | 6,582 | 45,391 | 51,973 | ||||||||||
Equity in earnings of unconsolidated affiliate | — | 282 | 282 | ||||||||||
Income before minority interest and income taxes | 6,582 | 45,673 | 52,255 | ||||||||||
Minority interest | (1,248 | ) | (1,979 | ) | (3,227 | ) | |||||||
Income before income taxes | 5,334 | 43,694 | 49,028 | ||||||||||
Income taxes | (2,628 | ) | (17,144 | ) | (19,772 | ) | |||||||
Net income | 2,706 | 26,550 | 29,256 | ||||||||||
Preferred dividends | — | (15,607 | ) | (15,607 | ) | ||||||||
Net income available to common stockholders and members | $ | 2,706 | $ | 10,943 | $ | 13,649 | |||||||
(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 December 31, 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. |
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