8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 30, 2009 (April 30, 2009)

HEALTHSPRING, INC.

(Exact name of registrant as specified in charter)

Delaware	001-32739	20-1821898
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

9009 Carothers Parkway
Suite 501
Franklin, Tennessee	37067
(Address of principal executive offices)	(Zip Code)

(615) 291-7000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

     On April 30, 2009, the Company issued a press release announcing its results of operations and financial condition for and as of the quarter ended March 31, 2009. A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit 99.1      Press Release issued by HealthSpring, Inc. dated April 30, 2009.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HEALTHSPRING, INC.
By:	/s/ J. Gentry Barden
	J. Gentry Barden
	Senior Vice President

Date: April 30, 2009

EXHIBIT INDEX

No.	Exhibit
99.1	Press Release issued by HealthSpring, Inc. dated April 30, 2009.

EX-99.1

Exhibit 99.1

Company Contact:  Lankford Wade
Senior Vice President & Treasurer
(615) 236-6200

HealthSpring, Inc. Reports 2009 First Quarter Results

NASHVILLE, Tenn. (April 30, 2009) — HealthSpring, Inc. (NYSE:HS) today announced its results for the quarter ended March 31, 2009. Highlights for the 2009 first quarter included:

• Net income of $20.6 million, or $0.38 per diluted share, compared with $21.1 million, or $0.37 per diluted share, in the 2008 first quarter;

• Premium revenue of $634.6 million, up 17.3% over the 2008 first quarter; and

• Medicare Advantage membership of 175,138, up 14.8% over the 2008 first quarter, and 8.1% compared with year-end 2008, and stand-alone PDP membership of 286,810, up 11.2% over the 2008 first quarter and relatively flat compared with 2008 year-end.

Commenting on 2009 first quarter results, Herb Fritch, Chairman and Chief Executive Officer, said, “The first quarter was a solid beginning to 2009 for HealthSpring, particularly for our Part D and South Florida operations. In addition, we are very encouraged by the strongest open-enrollment period in the history of our Company, particularly as it indicates the relative attractiveness of our various Medicare product offerings.”

First Quarter Results	Three Months Ended
($ in thousands, except per share amounts)	March 31,				Percent
	2009		2008		Change
Premium revenue	$	634,596	$	540,890		17.3	%
Total revenue		646,115		552,709		16.9
Medical expense		529,600		444,182		19.2
Net income		20,612		21,058		(2.1	)
Net income per common share — diluted (1)		0.38		0.37		2.7

(1) Weighted average shares outstanding used in the calculation of net income per common share - diluted, were 54,781,391 and 56,962,521 for the three months ended March 31, 2009 and 2008, respectively.

Operating Highlights

Revenue

• Medicare Advantage premium revenue (including the prescription drug component of HealthSpring’s Medicare Advantage plans, or “MA-PD”) was $541.4 million for the 2009 first quarter, reflecting an increase of 17.9% over the 2008 first quarter. The premium revenue increase is attributable to 4.0% higher premiums per member per month, or “PMPM,” and a 14.8% increase in membership. The 2008 first quarter included $12.0 million of additional premium revenue estimated for 2007 final retroactive risk adjustment settlements with CMS. This adjustment had a favorable impact on net income of $5.3 million, or $0.09 per diluted share, in the year-earlier quarter. The accrual for 2008 final retroactive risk settlements in the 2009 first quarter was not significant.

• Medicare Advantage premiums PMPM were $1,047.24 in the 2009 first quarter, representing an increase of 6.8% compared with the prior year’s quarter, as adjusted to exclude out-of-period retroactive risk adjustments in the prior-year period.

• Stand-alone PDP premium revenue was $92.5 million for the 2009 first quarter, an increase of 16.7% compared with the 2008 first quarter. The higher revenue resulted from an 11.2% increase in membership and a 5.1% increase in PDP premiums PMPM in the current period.

• Investment income decreased $3.3 million, or 67.8%, to $1.6 million for the 2009 first quarter, primarily as a result of a decline in the average yield on invested and cash balances.

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HS Reports First Quarter 2009 Results
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April 30, 2009

Medical Expense

• Medicare Advantage medical loss ratio (“MLR”) was 81.3% for the 2009 first quarter, compared with 80.9% for the prior year’s first quarter, as adjusted to exclude out-of-period retroactive risk adjustments in the prior-year period. As expected, the MLR deterioration for the current period was primarily attributable to increases in medical expense PMPM outpacing PMPM revenue increases, which were partially offset by improvements in the Florida plan’s MLR resulting from reduced utilization and unit costs. Unfavorable MLR results in the Company’s core Medicare Advantage business were also partially offset by MLR improvement in the drug benefit component of MA-PD in the current period.

• PDP MLR was 95.8% for the 2009 first quarter compared with 96.8% in 2008. The improvement in the 2009 PDP MLR was primarily the result of PMPM revenue increases in the current period.

Selling, General & Administrative (SG&A)

• SG&A expense increased $9.4 million and represented 11.2% of total revenue in the 2009 first quarter compared with 11.4% of total revenue in the 2008 first quarter. The improvement in SG&A as a percentage of revenue was primarily the result of premium revenue increases. The dollar increase in the 2009 first quarter was primarily the result of additional personnel and higher sales commissions attributable to the membership growth.

Interest Expense

• Interest expense in the 2009 first quarter decreased $1.1 million compared with the 2008 first quarter as a result of lower interest rates and lower average principal balances.

• The Company’s weighted average effective interest rate (inclusive of the amortization of deferred financing costs) for the three months ended March 31, 2009, was 6.4% compared with 7.2% for the three months ended March 31, 2008.

Balance Sheet Highlights

• At March 31, 2009, the Company’s cash and cash equivalents were $304.9 million, $44.2 million of which was held at unregulated subsidiaries.

• Total debt outstanding was $258.5 million at March 31, 2009, compared with $268.0 million at December 31, 2008, and $292.5 million at March 31, 2008. There were no borrowings outstanding under the Company’s revolving credit facility at March 31, 2009 or 2008.

• For the first quarter of 2009, net cash provided by operating activities was $7.9 million compared with $14.0 million for the first quarter of 2008.

• Days in claims payable totaled 36 at the end of the 2009 first quarter compared with 37 at the end of the 2008 first quarter.

• During the quarter ended March 31, 2009, the Company did not repurchase any shares of its common stock.

Outlook

The Company maintains its previously published operating and financial guidance for 2009, including earnings per share guidance in the range of $2.00 to $2.20.

Conference Call

A live audio webcast of the conference call regarding first quarter results will begin at 10:00 a.m. ET on Thursday, April 30, 2009. The public may access the conference call through HealthSpring’s website, www.healthspring.com, under the Investor Relations tab. The conference call can also be accessed by dialing (913) 312-1474, confirmation number 1266294. 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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HS Reports First Quarter 2009 Results
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April 30, 2009

About HealthSpring

HealthSpring is based in Nashville, Tenn., and is one of the country’s largest coordinated care plans whose primary focus is the Medicare Advantage market. HealthSpring currently owns and operates Medicare Advantage plans in Alabama, Florida, Illinois, Mississippi, Tennessee and Texas and also offers a national stand-alone Medicare prescription drug plan. For more information, visit www.healthspring.com.

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 2009 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. Any projections or other forward-looking information in this release or made orally and related thereto are based on management’s beliefs and assumptions and on information available to HealthSpring at the time the statements were or are made, 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. Information contained herein speaks only as of the date of this release.

The following factors, among others, could cause actual results to differ materially from those in the forward-looking statements: changes in membership enrollment and dis-enrollment patterns; legislative and regulatory actions or changes, including changes in the design of the Medicare program and changes in Medicare funding and premium rates; changes in our members’ utilization of medical services; changes in medical and prescription drug cost trends; the Company’s ability to accurately estimate CMS retroactive risk adjustments to Medicare premiums; the Company’s ability to estimate assets and liabilities with respect to funds provided by CMS and held and administered for the benefit of members; increasing competition from other Medicare plan offerings; the Company’s ability to accurately estimate incurred but not reported medical claims; changes in estimated fair values of goodwill and other intangible assets as a result of, among other things, prolonged declines in the Company’s market capitalization; negotiation of acceptable contracts with physicians, hospitals, and other providers; contractual disputes with providers; increases in costs or liabilities associated with litigation; costs associated with compliance with regulatory mandates and with responding to regulatory audits; management changes; substantial changes in interest rates over a prolonged period; and changes in tax estimates, assets, or liabilities and valuation allowances related thereto. The foregoing list of 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, 2008.

Supplemental Information

Membership

	March 31,		Dec. 31,		Percent			March 31,		Percent
	2009		2008		Change			2008		Change
Medicare Advantage Membership:
Tennessee		53,833		49,933		7.8	%		49,174		9.5	%
Texas		48,456		43,889		10.4			38,357		26.3
Florida		29,978		27,568		8.7			26,681		12.4
Alabama		29,385		29,022		1.3			28,045		4.8
Illinois		10,067		9,245		8.9			8,735		15.2
Mississippi		3,419		2,425		41.0			1,535		122.7
Total		175,138		162,082		8.1	%		152,527		14.8	%
PDP Membership:		286,810		282,429		1.6	%		258,012		11.2	%

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HS Reports First Quarter 2009 Results
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April 30, 2009

HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet Information
(in thousands)
(Unaudited)

	March 31,			December 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	304,863		$	282,240
Accounts receivable, net		102,725			74,398
Investment securities available for sale		3,705			3,259
Investment securities held to maturity		31,796			24,750
Funds due for the benefit of members		38,801			40,212
Deferred income taxes		5,093			4,198
Prepaid expenses and other		8,060			6,560
Total current assets		495,043			435,617
Investment securities available for sale		28,015			30,463
Investment securities held to maturity		24,595			20,086
Property and equipment, net		26,786			26,842
Goodwill		590,016			590,016
Intangible assets, net		216,514			221,227
Restricted investments		12,150			11,648
Risk corridor receivable from CMS		13,003			—
Other		13,102			8,878
Total assets	$	1,419,224		$	1,344,777
Liabilities and Stockholders’ Equity
Current liabilities:
Medical claims liability	$	211,818		$	190,144
Accounts payable, accrued expenses and other		38,501			35,050
Risk corridor payable to CMS		2,108			1,419
Current portion of long-term debt		28,724			32,277
Total current liabilities		281,151			258,890
Deferred income taxes		87,861			89,615
Long-term debt, less current portion		229,792			235,736
Funds held for the benefit of members		35,524			—
Other long-term liabilities		10,210			9,658
Total liabilities		644,538			593,899
Stockholders’ equity:
Common stock		580			578
Additional paid in capital		507,324			504,367
Retained earnings		315,782			295,170
Accumulated other comprehensive loss, net		(1,667	)		(1,955	)
Treasury stock		(47,333	)		(47,282	)
Total stockholders’ equity		774,686			750,878
Total liabilities and stockholders’ equity	$	1,419,224		$	1,344,777

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HS Reports First Quarter 2009 Results
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April 30, 2009

HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Statement of Income Information
(in thousands, except share data)
(Unaudited)

	Three Months Ended
	March 31,
	2009			2008
Revenue:
Premium revenue	$	634,596		$	540,890
Management and other fees		9,969			7,008
Investment income		1,550			4,811
Total revenue		646,115			552,709
Operating expenses:
Medical expense		529,600			444,182
Selling, general and administrative		72,250			62,899
Depreciation and amortization		7,524			7,248
Interest expense		4,281			5,404
Total operating expenses		613,655			519,733
Income before income taxes		32,460			32,976
Income taxes		(11,848	)		(11,918	)
Net income	$	20,612		$	21,058
Net Income per common share:
Basic	$	0.38		$	0.37
Diluted	$	0.38		$	0.37
Weighted average common shares outstanding:
Basic		54,481,835			56,861,343
Diluted		54,781,391			56,962,521

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HS Reports First Quarter 2009 Results
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April 30, 2009

HealthSpring, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flow Information
(in thousands)
(Unaudited)

	Three Months Ended
	March 31,
	2009			2008
Cash flows from operating activities:
Net income	$	20,612		$	21,058
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,524			7,248
Amortization of deferred financing cost		616			598
Equity in earnings of unconsolidated affiliate		(51	)		(101	)
Stock-based compensation		2,904			2,356
Deferred tax benefit		(2,769	)		(1,808	)
Increase (decrease) in cash due to:
Accounts receivable		(33,116	)		(40,584	)
Prepaid expenses and other current assets		(1,437	)		294
Medical claims liability		21,674			29,755
Accounts payable, accrued expenses and other current liabilities		3,451			10,713
Risk corridor payable to/ receivable from CMS		(12,314	)		(14,482	)
Other		766			(1,037	)
Net cash provided by operating activities		7,860			14,010
Cash flows from investing activities:
Purchases of property and equipment		(2,819	)		(1,866	)
Purchases of investment securities		(18,247	)		(1,207	)
Maturities of investment securities		8,888			28,526
Purchases of restricted investments		(6,583	)		(4,310	)
Maturities of restricted investments		6,081			3,951
Net cash (used in) provided by investing activities		(12,680	)		25,094
Cash flows from financing activities:
Funds received for the benefit of members		159,711			123,094
Funds withdrawn for the benefit of members		(122,777	)		(101,558	)
Payments on long-term debt		(9,497	)		(3,750	)
Proceeds from stock option exercises		6			14
Purchase of treasury stock		—			(20,648	)
Net cash provided by (used in) financing activities		27,443			(2,848	)
Net increase in cash and cash equivalents		22,623			36,256
Cash and cash equivalents at beginning of period		282,240			324,090
Cash and cash equivalents at end of period	$	304,863		$	360,346

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