Exhibit 99.1
Health Net, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share, PMPM and ratio data)
Quarter Ended December 31, 2007 | Year Ended December 31, 2007 | |||||||||||
REVENUES: | ||||||||||||
Health plan services premiums | $ | 2,916,718 | $ | 11,435,314 | ||||||||
Government contracts | 619,423 | 2,501,677 | ||||||||||
Net investment income | 31,630 | 120,176 | ||||||||||
Administrative services fees and other income | 15,482 | 51,104 | ||||||||||
Total revenues | 3,583,253 | 14,108,271 | ||||||||||
EXPENSES: | ||||||||||||
Health plan services | 2,409,332 | 9,762,896 | ||||||||||
Government contracts | 556,648 | 2,307,610 | ||||||||||
General and administrative | 317,099 | A | 1,275,555 | A | ||||||||
Selling | 90,332 | 327,827 | ||||||||||
Depreciation | 8,816 | 30,282 | ||||||||||
Amortization | 4,782 | 12,700 | ||||||||||
Interest | 7,712 | 32,497 | ||||||||||
3,394,721 | A | 13,749,367 | A | |||||||||
Income from operations before income taxes | 188,532 | A | 358,904 | A | ||||||||
Income tax provision | 71,605 | A | 165,207 | A | ||||||||
Net income | $ | 116,927 | A | $ | 193,697 | A | ||||||
Basic earnings per share | $ | 1.06 | A | $ | 1.74 | A | ||||||
Diluted earnings per share | $ | 1.04 | A | $ | 1.70 | A | ||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 110,087 | 111,316 | ||||||||||
Diluted | 112,255 | 113,829 | ||||||||||
Pretax margin | 5.3 | % | A | 2.5 | % | A | ||||||
Health plan services MCR | 82.6 | % | 85.4 | % | ||||||||
Government contracts cost ratio | 89.9 | % | 92.2 | % | ||||||||
G&A expense ratio | 10.8 | % | A | 11.1 | % | A | ||||||
Selling costs ratio | 3.1 | % | 2.9 | % | ||||||||
Days claims payable | 49.9 | 43.9 | ||||||||||
Days claims payable—adjusted | 54.9 | 54.1 | ||||||||||
Effective tax rate | 38.0 | % | A | 46.0 | % | A | ||||||
Health plan services premiums PMPM | $ | 266.88 | $ | 263.54 | ||||||||
Health plan services costs PMPM | $ | 220.45 | $ | 225.00 |
A | Amount updated from earnings release issued on February 5, 2008. |
Health Net, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share, PMPM and ratio data)
Note: | ||||||||||||
This table presents the company’s consolidated operations for the year ended December 31, 2007 and the charges recorded in the consolidated statement of operations for the year ended December 31, 2007. Management believes that the presentation of certain financial information in the attached press release (such as MCR, health care costs and G&A expenses), excluding the charges that were recorded in 2007, all of which is non-GAAP financial information, is important to investors as it excludes one-time items that are not indicative of our core operating results. This non-GAAP financial information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP. |
As Reported Year Ended December 31, 2007 | Impact of Selected Costs Recorded in the Year Ended December 31, 2007 | Excluding Impact of Selected Costs Recorded in the Year Ended December 31, 2007 | ||||||||||||
REVENUES: | ||||||||||||||
Health plan services premiums | $ | 11,435,314 | $ | 11,435,314 | ||||||||||
Government contracts | 2,501,677 | 2,501,677 | ||||||||||||
Net investment income | 120,176 | 120,176 | ||||||||||||
Administrative services fees and other income | 51,104 | 51,104 | ||||||||||||
Total revenues | 14,108,271 | 14,108,271 | ||||||||||||
EXPENSES: | ||||||||||||||
Health plan services | 9,762,896 | $ | 201,449 | 9,561,447 | ||||||||||
Government contracts | 2,307,610 | 2,307,610 | ||||||||||||
General and administrative | 1,275,555 | A | 105,308 | 1,170,247 | ||||||||||
Selling | 327,827 | 327,827 | ||||||||||||
Depreciation | 30,282 | 30,282 | ||||||||||||
Amortization | 12,700 | 12,700 | ||||||||||||
Interest | 32,497 | 32,497 | ||||||||||||
13,749,367 | A | 306,757 | 13,442,610 | |||||||||||
Income from operations before income taxes | 358,904 | A | (306,757 | ) | 665,661 | |||||||||
Income tax provision (benefit) | 165,207 | A | (84,321 | ) | 249,528 | |||||||||
Net income | $ | 193,697 | A | $ | (222,436 | ) | $ | 416,133 | ||||||
Basic earnings per share | $ | 1.74 | A | $ | (2.00 | ) | $ | 3.74 | ||||||
Diluted earnings per share | $ | 1.70 | A | $ | (1.96 | ) | $ | 3.66 | ||||||
Weighted average shares outstanding: | ||||||||||||||
Basic | 111,316 | 111,316 | ||||||||||||
Diluted | 113,829 | 113,829 | ||||||||||||
Pretax margin | 2.5 | % | A | -2.2 | % | 4.7 | % | |||||||
Health plan services MCR | 85.4 | % | 1.8 | % | 83.6 | % | ||||||||
Government contracts cost ratio | 92.2 | % | — | 92.2 | % | |||||||||
G&A expense ratio | 11.1 | % | A | 0.9 | % | 10.2 | % | |||||||
Selling costs ratio | 2.9 | % | — | 2.9 | % | |||||||||
Effective tax rate | 46.0 | % | A | 8.5 | % | 37.5 | % |
A | Amount updated from earnings release issued on February 5, 2008. |
Health Net, Inc.
Consolidated Balance Sheet
(Amounts in thousands, except ratio data)
December 31, 2007 | ||||||
ASSETS | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ | 1,007,017 | ||||
Investments—available for sale | 1,557,278 | |||||
Premiums receivable, net | 264,691 | |||||
Amounts receivable under government contracts | 189,976 | |||||
Incurred but not reported (IBNR) health care costs receivable | ||||||
under TRICARE North contract | 266,767 | |||||
Other receivables | 72,518 | |||||
Deferred taxes | 132,818 | |||||
Other assets | 210,039 | |||||
Total current assets | 3,701,104 | |||||
Property and equipment, net | 178,758 | |||||
Goodwill, net | 751,949 | |||||
Other intangible assets, net | 109,386 | |||||
Deferred taxes | 47,765 | |||||
Other noncurrent assets | 144,093 | |||||
Total Assets | $ | 4,933,055 | ||||
Income tax provision | ||||||
Current Liabilities | ||||||
Reserves for claims and other settlements | $ | 1,300,432 | ||||
Health care and other costs payable under government contracts | 69,014 | |||||
IBNR health care costs payable under TRICARE North contract | 266,767 | |||||
Unearned premiums | 176,981 | |||||
Loans payable | 35,000 | |||||
Accounts payable and other liabilities | 463,823 | A | ||||
Total current liabilities | 2,312,017 | A | ||||
Senior notes payable | 398,071 | |||||
Loans payable | 112,363 | |||||
Other noncurrent liabilities | 235,022 | |||||
Total Liabilities | 3,057,473 | A | ||||
Stockholders’ Equity | ||||||
Common stock and additional paid-in capital | 1,151,395 | |||||
Treasury common stock, at cost | (1,123,750 | ) | ||||
Retained earnings | 1,849,097 | A | ||||
Accumulated other comprehensive loss | (1,160 | ) | ||||
Total Stockholders’ Equity | 1,875,582 | A | ||||
Total Liabilities and Stockholders’ Equity | $ | 4,933,055 | ||||
Debt-to-Total Capital Ratio | 22.5 | % |
A | Amount updated from earnings release issued on February 5, 2008. |
Health Net, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Quarter Ended December 31, 2007 | Year Ended December 31, 2007 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 116,927 | A | $ | 193,697 | A | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Amortization and depreciation | 13,598 | 42,982 | ||||||||||
Share-based compensation expense | 6,457 | 24,298 | ||||||||||
Other changes | (3,498 | ) | (7,955 | ) | ||||||||
Changes in assets and liabilities, net of the effects of dispositions/acquisitions: | ||||||||||||
Premiums receivable and unearned premiums | 24,037 | (74,184 | ) | |||||||||
Other receivables, deferred taxes and other assets | 38,884 | 45,154 | ||||||||||
Amounts receivable/payable under government contracts | 1,213 | 26,223 | ||||||||||
Reserves for claims and other settlements | (12,672 | ) | 251,636 | |||||||||
Accounts payable and other liabilities | 72,021 | A | 103,631 | A | ||||||||
Net cash provided by operating activities | 256,967 | 605,482 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Income tax provision | 242,421 | 807,649 | ||||||||||
Maturities of investments | 65,606 | 213,833 | ||||||||||
Purchases of investments | (397,611 | ) | (1,180,854 | ) | ||||||||
Proceeds from sale of property and equipment | — | 96,748 | ||||||||||
Purchases of property and equipment | (17,342 | ) | (64,850 | ) | ||||||||
Cash paid for acquisition of assets and businesses | — | (80,277 | ) | |||||||||
Purchases and Sales of restricted investments and other | 7,127 | (22,444 | ) | |||||||||
Net cash used in investing activities | (99,799 | ) | (230,195 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Proceeds from exercise of stock options and employee stock purchases | 2,525 | 72,622 | ||||||||||
Repurchases of common stock | (27,052 | ) | (232,220 | ) | ||||||||
Excess tax benefits from share-based compensation | 487 | 17,987 | ||||||||||
Borrowings under financing arrangements | 175,000 | 668,535 | ||||||||||
Repayment of borrowings under financing arrangements | — | (600,000 | ) | |||||||||
Net cash provided by (used in) financing activities | 150,960 | (73,076 | ) | |||||||||
Net increase in cash and cash equivalents | 308,128 | 302,211 | ||||||||||
Cash and cash equivalents, beginning of period | 698,889 | 704,806 | ||||||||||
Cash and cash equivalents, end of period | $ | 1,007,017 | $ | 1,007,017 | ||||||||
A | Amount updated from earnings release issued on February 5, 2008. |