EX-99.2 4 dex992.htm UNAUDITED COMBINED FINANCIAL STATEMENTS-FIRSTGUARD, INC.&FIRSTGUARD HEALTH PLAN Unaudited combined financial statements-FirstGuard, Inc.&FirstGuard Health Plan

Exhibit 99.2

 

FirstGuard, Inc. and

FirstGuard Health Plan, Inc.

Index

September 30, 2004

 

     Page(s)

Combined Financial Statements

    

Balance Sheet

   1

Statement of Earnings

   2

Statement of Cash Flows

   3

Notes to Financial Statements

   4

 


 

FirstGuard, Inc. and

FirstGuard Health Plan, Inc.

Combined Balance Sheet (Unaudited)

September 30, 2004

 

Assets

      

Current assets

      

Cash and cash equivalents

   $ 8,345,234

Premium and related receivables, net

     12,680,265

Short-term investments, at amortized cost

     27,857,084

Income taxes receivable

     2,056,024

Deferred income taxes

     249,515

Other current assets

     274,959
    

Total current assets

     51,463,081

Long-term investments, at amortized cost

     10,501,533

Restricted deposits, at amortized cost

     900,000

Property, software and equipment

     392,728
    

Total assets

   $ 63,257,342
    

Liabilities and stockholder’s equity

      

Current liabilities

      

Medical claims liabilities

   $ 25,227,339

Accounts payable and accrued expenses

     2,844,028

Payable to affiliates

     90,663
    

Total current liabilities

     28,162,030

Note payable to affiliate

     2,516,625
    

Total liabilities

     30,678,655
    

Stockholder’s equity

      

Common stock

     3,876,116

Retained earnings

     28,702,571
    

Total stockholder’s equity

     32,578,687
    

Total liabilities and stockholder’s equity

   $ 63,257,342
    

 

The accompanying notes are an integral part of these combined financial statements.

 

1


 

FirstGuard, Inc. and

FirstGuard Health Plan, Inc.

Combined Statement of Earnings (Unaudited)

Nine Months Ended September 30, 2004

 

Revenues

        

Premiums

   $ 179,675,421  
    


Total revenues

     179,675,421  
    


Expenses

        

Medical costs

     151,557,816  

General and administrative expenses

     16,788,107  
    


Total operating expenses

     168,345,923  
    


Earnings from operations

     11,329,498  

Other income (expense)

        

Investment and other income

     1,028,901  

Interest expense

     (57,188 )
    


Earnings before income taxes

     12,301,211  

Income tax expense

     4,286,892  

Minority interest

     (1,640,890 )
    


Net earnings

   $ 6,373,429  
    


 

The accompanying notes are an integral part of these combined financial statements.

 

2


 

FirstGuard, Inc. and

FirstGuard Health Plan, Inc.

Combined Statement of Cash Flows (Unaudited)

Nine Months Ended September 30, 2004

 

Cash flows from operating activities

        

Net earnings

   $ 6,373,429  

Adjustments to reconcile net earnings to net cash provided by operating activities

        

Depreciation expense

     169,941  

Deferred income tax provision

     914,408  

Minority interest

     1,640,890  

Changes in assets and liabilities

        

Premium and related receivables

     (1,260,367 )

Income taxes receivable

     (2,056,024 )

Other current assets

     16,345  

Medical claims liabilities

     (5,091,228 )

Accounts payable and accrued expenses

     337,103  

Unearned revenue

     (341,137 )

Income taxes payable

     (1,088,370 )

Amounts due to affiliates

     (59,682 )

Note payable to affiliate

     57,188  
    


Net cash used in operating activities

     (387,504 )
    


Cash flows from investing activities

        

Purchase of property, software and equipment

     (249,430 )

Proceeds from investments

     6,624,996  

Purchase of investments

     (1,307,321 )

Purchase of minority interest of FirstGuard

        

Kansas Health Plan, Inc.

     (4,641,000 )
    


Net cash provided by investing activities

     427,245  
    


Cash flows from financing activities

        

Net cash provided by financing activities

     —    
    


Net increase in cash and cash equivalents

     39,741  
    


Cash and cash equivalents, beginning of period

     8,305,493  
    


Cash and cash equivalents, end of period

   $ 8,345,234  
    


Income taxes paid

   $ 5,100,000  
    


 

The accompanying notes are an integral part of these combined financial statements.

 

3


 

FirstGuard, Inc. and

FirstGuard Health Plan, Inc.

Notes to Combined Financial Statements (Unaudited)

September 30, 2004

 

1. Organization and Operations

 

FirstGuard, Inc. and FirstGuard Health Plan, Inc. and their subsidiaries (the “Company”) operate two health maintenance organizations (HMOs) to provide health services primarily to low income residents of the States of Kansas and Missouri through the Healthwave – Title XIX and Healthwave – Title XXI programs sponsored by the State of Kansas and the MC+ program sponsored by the State of Missouri. The Company derives all of its premium revenues from the States of Kansas and Missouri.

 

As of December 31, 2003, FirstGuard, Inc. and FirstGuard Health Plan, Inc. were wholly owned subsidiaries of Model Cities Health Corporation of Kansas City d/b/a Swope Parkway Health Center (the “Parent”). On September 23, 2004, the Company completed a reorganization plan, which was initiated during late 2002. As a result of the reorganization, all of the outstanding shares of FirstGuard, Inc. and FirstGuard Health Plan, Inc. were transferred from the Parent to an affiliate, Swope Community Enterprises (“SCE”). Subsequently, on September 28, 2004, SCE announced that it had signed a definitive agreement to sell the Company to Centene Corporation, an unaffiliated company, for approximately $93 million in cash. This transaction closed in December 2004, after regulatory approvals were received.

 

Prior to August 2004, FirstGuard, Inc. owned 80 percent of FirstGuard Health Plan Kansas, Inc., which comprised 100 percent of FirstGuard, Inc.’s premium revenues. The remainder of FirstGuard Health Plan Kansas, Inc. was owned by Heartland Physicians Health Network, Inc. (“HPHN”). During August 2004, FirstGuard Health Plan Kansas, Inc. purchased the minority stockholder’s interest for $4.6 million, subject to additional consideration of $1.95 million that will be paid to HPHN by SCE.

 

On November 22, 2004, with the approval of the Commissioner of the Missouri Department of Insurance, the Company paid the Parent $2,527,934 in full settlement of the outstanding note payable balance, including accrued interest.

 

During 2004, the Missouri Department of Insurance and the Kansas Insurance Department approved total dividend payments of $27,096,331 to the Parent, subject to completion of the sale of the Company to Centene Corporation which occurred in December 2004.

 

2. Basis of Presentation

 

The unaudited interim financial statements herein have been prepared consistent with the accounting policies applied in the annual financial statements with the exception of medical claims liabilities which does not include a provision for moderately adverse conditions. The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements for the latest fiscal year ended December 31, 2003. Accordingly, footnote disclosures, which would substantially duplicate the disclosures contained in the December 31, 2003 audited financial statements, have been omitted from these interim financial statements where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim period presented.

 

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