Humana 2007 Annual Report Download - page 43

diluted common share, for the year ended December 31, 2007. In addition, a gain in the first quarter of
2006 of $51.7 million pretax, or $0.19 per diluted common share, from the sale of a venture capital
investment also impacted year over year comparisons.
• Cash flows from operations decreased $462.4 million to $1,224.3 million for the year ended
December 31, 2007 compared to $1,686.7 million for the year ended December 31, 2006. Our operating
cash flows were unfavorably impacted by the Part D provisions of our Medicare contracts, primarily the
2007 payment of the $725.5 million risk corridor payable to CMS associated with the 2006 contract
year, partially offset by improvement in operating earnings.
• In September 2007, we received approval from CMS to resume marketing of individual Medicare PFFS
plans. This announcement ended the June 15, 2007 voluntary suspension agreed to in conjunction with
other industry participants.
• In October 2007, we were awarded the Department of Veterans Affairs first specialty network
demonstration project, known as Project HERO (Healthcare Effectiveness through Resource
Optimization), to support healthcare delivery to veterans.
• Currently, we are anticipating a formal request for proposal, or RFP, for the TRICARE contracts.
We intend for the discussion of our financial condition and results of operations that follows to assist in the
understanding of our financial statements and related changes in certain key items in those financial statements
from year to year, and the primary factors that accounted for those changes, as well as how certain critical
accounting principles and estimates impact our financial statements.
Recent Acquisitions
On November 30, 2007, our Commercial segment acquired KMG America Corporation, or KMG, for cash
consideration of $156.3 million including direct transaction costs, plus the assumption of $36.1 million of long-
term debt. KMG provides long-duration insurance benefits including supplemental health and life benefit plans.
On October 1, 2007, our Commercial segment acquired CompBenefits Corporation, or CompBenefits, for cash
consideration of $369.1 million including direct transaction costs. CompBenefits provides dental and vision
insurance benefits. These acquisitions, which were financed through a combination of cash and borrowings under
our credit agreement, expand our commercial product offerings allowing for significant cross-selling
opportunities with our medical insurance products.
On March 1, 2007, our Government segment acquired DefenseWeb Technologies, Inc., or DefenseWeb, a
company responsible for delivering customized software solutions for the Department of Defense, for cash
consideration of $27.0 million.
On May 1, 2006, our Commercial segment acquired CHA Service Company, or CHA Health, a health plan
serving employer groups in Kentucky, for cash consideration of $67.5 million.
On December 20, 2005, our Commercial segment acquired Corphealth, Inc., a behavioral health care
management company, for cash consideration of approximately $54.0 million. This acquisition allowed Humana
to integrate coverage of medical and behavior health benefits.
On February 16, 2005, we acquired CarePlus Health Plans of Florida, or CarePlus, as well as its affiliated 10
medical centers and pharmacy company for approximately $444.9 million in cash, adding approximately 50,400
Medicare Advantage members in Miami-Dade, Broward and Palm Beach counties. This acquisition enhanced our
Medicare market position in South Florida.
Certain of these transactions are more fully described in Note 3 to the consolidated financial statements
included in Item 8.—Financial Statements and Supplementary Data.
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