Exhibit 99.2
Leon Medical Centers Health Plans, Inc.
Balance Sheets
Balance Sheets
(Unaudited) | ||||||||
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 88,856,801 | $ | 47,375,813 | ||||
Premium receivable from CMS | 6,293,595 | 783,726 | ||||||
Due from related parties | 421,140 | — | ||||||
Reinsurance claims and other receivables | 219,741 | 206,288 | ||||||
Deferred income taxes | 85,320 | 854,984 | ||||||
Prepaid expenses and other current assets | 300,882 | 369,107 | ||||||
Total current assets | 96,177,479 | 49,589,918 | ||||||
Depreciable property | 2,026,590 | 2,361,235 | ||||||
Cash deposit with Florida Department of Financial Services | 378,243 | 369,602 | ||||||
Total assets | $ | 98,582,312 | $ | 52,320,755 | ||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 918,529 | $ | 984,017 | ||||
Current income taxes | 13,232,162 | 5,889,620 | ||||||
Unearned premium | 33,944,816 | — | ||||||
Aggregate health policy reserve | 5,074,321 | 2,439,706 | ||||||
Liability for amounts held under uninsured plans | 3,780,529 | 3,274,635 | ||||||
Due to related parties | — | 3,697,188 | ||||||
Medical claims payable | 20,186,107 | 17,733,433 | ||||||
Current maturities of obligations under capital leases | 312,725 | 359,121 | ||||||
Total current liabilities | 77,449,189 | 34,377,720 | ||||||
Long-term liabilities | ||||||||
Obligations under capital leases, net of current maturities | 40,372 | 170,499 | ||||||
Deferred tax liability | 322,104 | 252,381 | ||||||
Total liabilities | 77,811,665 | 34,800,600 | ||||||
Shareholders’ equity | ||||||||
Common Stock | 3 | 3 | ||||||
Additional paid in capital | 9,008,319 | 9,008,319 | ||||||
Retained earnings | 11,762,325 | 8,511,833 | ||||||
Total shareholders’ equity | 20,770,647 | 17,520,155 | ||||||
Total liabilities and shareholders’ equity | $ | 98,582,312 | $ | 52,320,755 | ||||
See Notes to Financial Statements
Leon Medical Centers Health Plans
Statements of Operations(Unaudited)
Statements of Operations(Unaudited)
For the three months ended June 30, 2007 and June 30, 2006
2007 | 2006 | |||||||
Revenue | ||||||||
Premiums earned from Centers for Medicare & Medicaid Services | $ | 84,160,567 | $ | 67,180,756 | ||||
Costs and expenses | ||||||||
Direct costs of healthcare services provided | 67,539,756 | 60,292,553 | ||||||
Marketing, advertising and selling expenses | 657,323 | 622,975 | ||||||
General and administrative expenses | 3,960,300 | 2,853,058 | ||||||
Depreciation and amortization | 167,964 | 187,392 | ||||||
Interest expense | 6,889 | 9,835 | ||||||
Total costs and expenses | 72,332,232 | 63,965,813 | ||||||
Interest income | 725,766 | 572,422 | ||||||
Income from operations | 12,554,101 | 3,787,365 | ||||||
Income tax provision | 4,724,108 | 1,425,185 | ||||||
Net income | $ | 7,829,993 | $ | 2,362,180 | ||||
See Notes to Financial Statements
Leon Medical Centers Health Plans
Statements of Operations(Unaudited)
For the six months ended June 30, 2007 and June 30, 2006
Statements of Operations(Unaudited)
For the six months ended June 30, 2007 and June 30, 2006
2007 | 2006 | |||||||
Revenue | ||||||||
Premiums earned from CMS | $ | 159,989,980 | $ | 131,533,254 | ||||
Costs and expenses | ||||||||
Direct costs of healthcare services provided | 130,097,859 | 115,828,588 | ||||||
Marketing, advertising and selling expenses | 1,775,173 | 1,319,033 | ||||||
General and administrative expenses | 7,510,000 | 5,622,356 | ||||||
Depreciation and amortization | 335,908 | 336,733 | ||||||
Interest expense | 15,270 | 22,404 | ||||||
Total costs and expenses | 139,734,210 | 123,129,114 | ||||||
Interest income | 1,487,328 | 1,024,595 | ||||||
Income from operations | 21,743,098 | 9,428,735 | ||||||
Income tax provision | 8,181,929 | 3,548,033 | ||||||
Net income | $ | 13,561,169 | $ | 5,880,702 | ||||
See Notes to Financial Statements
Leon Medical Centers Health Plans
Statements of Cash Flows(Unaudited)
Statements of Cash Flows(Unaudited)
For the six months ended June 30, 2007 and 2006
2007 | 2006 | |||||||
Operating activities | ||||||||
Net cash inflow / (outflow) from operating activities | 51,969,449 | 31,687,289 | ||||||
Investing activity | ||||||||
Cash inflow / (outflow) for purchase of computer equipment | (1,261 | ) | (124,091 | ) | ||||
Financing activities | ||||||||
Cash inflow / (outflow) for shareholder distributions | (10,310,677 | ) | — | |||||
Cash inflow / (outflow) for capital contributions | — | 2,000,000 | ||||||
Cash inflow / (outflow) for repayment of capital lease financing | (176,523 | ) | (169,962 | ) | ||||
Net cash inflow / (outflow) for financing activities | (10,487,200 | ) | 1,830,038 | |||||
Net cash inflow / (outflow) from all activities | 41,480,988 | 33,393,236 | ||||||
Cash and cash equivalents, beginning of year | 47,375,813 | 34,313,475 | ||||||
Cash and cash equivalents, end of year | $ | 88,856,801 | $ | 67,706,711 | ||||
See Notes to Financial Statements
Leon Medical Centers Health Plans
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
1. The accompanying financial statements are unaudited and should be read in conjunction with the financial statements and notes thereto of Leon Medical Centers Health Plans, Inc. (“Plan”) as of and for the year ending December 31, 2006. The accompanying unaudited financial statements reflect the Plan’s financial position as of June 30, 2007, the Plan’s results of operations for the three and six months ended June 30, 2007 and 2006, and the Plan’s cash flows for the six months ended June 30, 2007 and 2006. Certain 2006 amounts have been reclassified in these condensed financial statements to conform to the 2007 presentation.
Certain information and footnote disclosures normally included in complete financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations applicable to interim financial statements. The results of operations for the 2007 interim periods are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2007.
The preparation of the condensed financial statements requires management of the Plan to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
At June 30, 2007, the Plan had 25,597 members all of whom are recipients of Medicare benefits.
Premium receivables from CMS at June 30, 2007 consist primarily of amounts related to retroactive risk adjustments with CMS for the 2007 Medicare plan year. These premium adjustments were recognized in the financial statements during the three months ended June 30, 2007 based on CMS notification received by the Plan in July of 2007. The Plan collected these amounts in July 2007.
Unearned premium consists of premium payments received by the Plan for covered lives for which the services will be rendered and revenue recognized in future months.
2. The Plan is required to report its financial condition and its results of operations in conformity with the accounting practices prescribed or permitted by the State of Florida Office of Insurance Regulation and the National Association of Insurance Commissioners.
The following are certain financial statistics as determined under this statutory basis of accounting as of June 30, 2007 and for the period then ended:
Statutory capital and unassigned surplus | $ | 18,084,655 | ||
Statutory net income | $ | 13,731,894 | ||
Statutory minimum surplus | $ | 7,783,121 |
3. On October 1, 2007, all of the outstanding capital stock of the Plan was acquired by HealthSpring, Inc. (HealthSpring) pursuant to the terms of the Stock Purchase Agreement, dated as of August 9, 2007 (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, the Plan was acquired by HealthSpring for $355.0 million in cash and 2,666,667 shares of HealthSpring common stock, $.01 par value per share, which share consideration has been deposited in escrow and will be released to the former stockholders of the Plan if Leon Medical Centers, Inc. completes the construction of two additional medical centers in accordance with the timetable set forth in the purchase agreement between the Plan and HealthSpring.