Health Net 2006 Annual Report Download - page 67

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Operating Cash Flows
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Net cash from operating activities increased by $86.5 million for the year ended December 31, 2006
compared to the same period in 2005. This increase was primarily due to the following:
• Net increase in net income plus amortization and depreciation of $91 million,
• Decrease in provider dispute payments of $78 million, primarily related to the provider dispute charge
reserve provided for in the fourth quarter of 2004, partially offset by
• Payment of $62 million for physician class action settlement as discussed in “—Litigation, Severance
and Related Benefit Costs and Asset Impairments” above, and
• Net increase of $53 million in amounts receivable, net of $72 million in payables, related to Medicare
Part D business that began on January 1, 2006.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Net cash from operating activities increased by $246.3 million for the year ended December 31, 2005
compared to the same period in 2004 primarily due to the following:
• Net increase in net income plus amortization, depreciation and other net non-cash charges of $180.4
million,
• Net increase in cash flows from amounts receivable/payable under government contracts of $146
million, primarily due to the transition to the TRICARE contract for the North Region, partially offset
by
• Increase in provider dispute payments of $109 million, primarily related to the provider dispute charge
reserve provided for in the fourth quarter of 2004.
Investing Activities
Our cash flow from investing activities is primarily impacted by the sales, maturities and purchases of our
available-for-sale investment securities and restricted investments. Our investment objective is to maintain safety
and preservation of principal by investing in high-quality, investment grade securities while maintaining liquidity
in each portfolio sufficient to meet our cash flow requirements and attaining the highest total return on invested
funds.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Net cash used in investing activities decreased by $59.2 million compared to the year ended December 31,
2005 primarily due to the following:
• Reduction in the net purchase of long-term investments of $262 million during 2006, partially offset by
• Universal Care Acquisition for $74 million in 2006, and
• Cash proceeds received of $79 million from the sale of certain non-real estate fixed assets in a sale/
leaseback transaction with an independent third party in 2005.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Net cash used in investing activities increased for the year ended December 31, 2005 compared to the same
period in 2004, due primarily to an increase in available funds not required for operations that were placed in
long-term investments, offset by the proceeds received in June 2005 in connection with a sale-leaseback
transaction. See Note 12 to the consolidated financial statements for additional information regarding the sale-
leaseback transaction.
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