(Source: Business Wire)
WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the
third quarter and nine months ended September 30, 2009. As determined
under generally accepted accounting principles ("GAAP"), the Company
reported net income of $28.7 million, or $0.68 per diluted share, for
the third quarter 2009, compared with a net loss of $18.2 million, or
$0.44 per diluted share, for the third quarter 2008. Adjusted net income
for the third quarter 2009 was $34.7 million, or $0.82 per adjusted
diluted earnings per share, as compared with $48.4 million, or $1.15,
for the third quarter 2008.
Adjusted net income for the third quarter 2009 was unfavorable to the
third quarter 2008 principally due to the performance of Medicare
Prescription Drug Plans ("PDPs"), the increase in the Medicaid segment
medical benefits ratio ("MBR") due primarily to premium rate changes
below medical cost trend as well as the addition of the Hawaii program,
and the decrease in investment and other income. Partially offsetting
these unfavorable results were the growth in membership and premium
revenue in the Company's Medicare Advantage and Medicaid plans, and
decreased selling, general, and administrative ("SG&A") expense
resulting mainly from lower sales and marketing costs.
"Our investments in infrastructure are strengthening service to our
members, providers, and government clients," said Heath Schiesser,
WellCare's president and chief executive officer. "Nevertheless, our
financial outlook for 2010 remains challenging, as we face declining
membership in our Medicare segment and continue substantial investments
to improve our capabilities and cost structure."
Operating results described in this news release are adjusted to exclude
certain medical benefits and SG&A expenses for investigation-related
matters that management believes are not indicative of longer-term
business operations. Management believes adjusted amounts provide useful
information for investors. Where applicable, adjusted results are
reconciled to the most directly comparable results determined under
GAAP. In addition, please also refer to the schedules in this news
release that provide supplemental information reconciling historical
results determined under GAAP to historical adjusted results.
Highlights of Operations for the Third Quarter
Membership as of September 30, 2009, decreased to 2.3 million compared
with 2.5 million members as of September 30, 2008. Medicaid segment
membership increased 2% year-over-year to 1.3 million, driven by growth
in several markets and the addition of the Hawaii aged blind, and
disabled ("ABD") program earlier this year. Medicare Advantage
membership of 240,000 on September30, 2009, was unchanged from the
prior year. Medicare stand-alone PDP membership decreased 22%
year-over-year.
Premium revenue for the third quarter 2009 increased 2% year-over-year
to $1.7 billion. The growth is attributable to increased Medicare
Advantage and Medicaid plan premium revenue, offset in part by a
decrease in Medicare PDP premium revenue.
Investment and other income was less than $2 million in the third
quarter 2009, a decrease of 80% year-over-year, primarily due to reduced
market interest rates and, to a lesser extent, lower average investment
and cash balances.
Medical benefits expense of $1.4 billion increased 5% from adjusted
medical benefits expense in the third quarter of 2008. The medical
benefits ratio was 85.2% in the third quarter 2009, compared with an
adjusted 82.9% in 2008. The 230 basis point increase in the MBR was
driven by the performance of the Medicaid segment and Medicare Advantage
private fee-for-service plans.
Adjusted SG&A expense was $186 million, or 11.1% of total revenues,
compared with $206 million, or 12.6% of total revenues, for the same
period last year. The decrease in expense resulted principally from
lower sales and marketing costs, as well as improved operating
efficiencies.
Cash Flow and Financial Condition Highlights
Net cash provided by operating activities as determined under GAAP was
$70 million and $170 million for the nine month periods ended September
30, 2009 and 2008, respectively. Net cash provided by operating
activities, modified for the timing of receipts from and payments to the
Company's government clients, was $142 million for the nine month period
ended September30, 2009, a decrease from $221 million for the same
period in 2008. Please refer to the supplemental information in this
news release for a reconciliation of net cash provided by operations,
modified for the timing of receipts from and payments to the Company's
government clients, to net cash provided by operations as determined
under GAAP.
As of September 30, 2009, unregulated cash and short-term investments
were approximately $93 million.
Days in claims payable were 56 days as of September 30, 2009, compared
with 52 days as of June 30, 2009. Adjusted days in claims payable were
52 days as of September 30, 2008. Please refer to the supplemental
information in this news release for a reconciliation of September 30,
2008, days in claims payable to adjusted days in claims payable.
Financial Outlook
The Company is updating its financial outlook for the year ended
December 31, 2009.
Adjusted net income per share is anticipated to be between $2.90 and
$2.95.
Premium revenue is expected to be between $6.80 and $6.85 billion.
The Medicaid segment MBR is anticipated to be higher in 2009 than the
2008 adjusted MBR, primarily as a result of rate changes below medical
cost trend.
The Medicare segment MBR also is expected to increase in 2009 from the
2008 adjusted MBR, driven by higher MBRs for Medicare Advantage
private fee-for-service plans and Medicare PDPs.
The adjusted administrative expense ratio is expected to decrease
year-over-year.
Investment and other income is expected to be significantly below 2008.
Webcast
A discussion of WellCare's third quarter 2009 results will be webcast
live on Wednesday, November 4, 2009, beginning at 8:30 a.m. Eastern
Time. A replay will be available beginning approximately one hour
following the conclusion of the live broadcast. The webcast is available
via the Company's web site at www.wellcare.com
and at www.earnings.com.
About WellCare Health Plans, Inc.
WellCare Health Plans, Inc. provides managed care services exclusively
for government-sponsored health care programs, focusing on Medicaid and
Medicare. Headquartered in Tampa, Florida, WellCare offers a variety of
health plans for families, children, and the aged, blind, and disabled,
as well as prescription drug plans. The Company served approximately 2.3
million members nationwide as of September 30, 2009. For more
information about WellCare, please visit the Company's website at www.wellcare.com.
Cautionary Statement Regarding Forward-Looking Statements
This news release contains "forward-looking" statements that are made
pursuant to the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. Statements that are predictive in nature,
that depend upon or refer to future events or conditions, or that
include words such as "expects," "anticipates," "intends," "plans,"
"believes," "estimates," and similar expressions are forward-looking
statements. Forward-looking statements involve known and unknown risks
and uncertainties that may cause WellCare's actual future results to
differ materially from those projected or contemplated in the
forward-looking statements. These risks and uncertainties include, but
are not limited to, WellCare's current projected financial outlook for
2009 and progress toward key initiatives such as increased reliability
of the Company's data and reporting and the management of costs.
Additional information concerning these and other important risks and
uncertainties can be found under the captions "Cautionary Statement
Regarding Forward-Looking Statements" and "Risk Factors" in the
Company's 2008 Annual Report on Form 10-K, as amended, Form 10-Q for the
period ended June 30, 2009, and other filings made with the U.S.
Securities and Exchange Commission, which contain discussions of
WellCare's business and the various factors that may affect it. WellCare
undertakes no duty to update these forward-looking statements to reflect
any future events, developments, or otherwise.
WELLCARE HEALTH PLANS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data)
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Revenues:
Premium $ 1,666,031 $ 1,629,306 $ 5,245,809 $ 4,886,699
Investment and other income 1,614 8,126 8,375 33,072
Total revenues 1,667,645 1,637,432 5,254,184 4,919,771
Expenses:
Medical benefits 1,420,193 1,443,742 4,477,210 4,218,254
Selling, general and administrative 195,303 228,811 681,730 690,330
Depreciation and amortization 5,851 5,385 17,547 15,763
Interest 366 2,962 3,845 9,170
Total expenses 1,621,713 1,680,900 5,180,332 4,933,517
Income (loss) before income taxes 45,932 (43,468 ) 73,852 (13,746 )
Income tax expense (benefit) 17,272 (25,299 ) 45,120 (8,002 )
Net income (loss) $ 28,660 $ (18,169 ) $ 28,732 $ (5,744 )
Net income (loss) per common share:
Basic $ 0.68 $ (0.44 ) $ 0.69 $ (0.14 )
Diluted $ 0.68 $ (0.44 ) $ 0.68 $ (0.14 )
Weighted average common shares outstanding:
Basic 41,849,749 41,538,055 41,771,713 41,321,526
Diluted 42,280,035 41,538,055 42,007,302 41,321,526
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WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share data)
Sept. 30, 2009 Dec. 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents $ 1,171,218 $ 1,181,922
Investments 59,356 70,112
Premium and other receivables, net 205,414 215,525
Other receivables from government partners, net 40,898 825
Funds receivable for the benefit of members 86,883 86,542
Prepaid expenses and other current assets, net 114,189 129,490
Deferred income taxes 15,596 20,154
Total current assets 1,693,554 1,704,570
Property, equipment and capitalized software, net 60,098 66,588
Goodwill 111,131 111,131
Other intangible assets, net 13,344 14,493
Long term investments 53,301 54,972
Restricted investments 131,321 199,339
Deferred tax asset 21,105 23,263
Other assets 20,939 29,105
Total Assets $ 2,104,793 $ 2,203,461
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Medical benefits payable $ 857,887 $ 766,179
Unearned premiums 20,708 81,197
Accounts payable 7,157 5,138
Other accrued expenses and liabilities 221,856 288,340
Current portion of amounts accrued related to investigation resolution 34,767 50,000
Other payables to government partners 26,497 8,100
Taxes payable 6,737 12,187
Debt -- 152,741
Other current liabilities 869 674
Total current liabilities 1,176,478 1,364,556
Amounts accrued related to investigation resolution 45,482 --
Other liabilities 23,879 33,076
Total liabilities 1,245,839 1,397,632
Commitments and contingencies -- --
Stockholders' Equity:
Preferred stock, $0.01 par value (20,000,000 authorized, no shares issued or outstanding) -- --
Common stock, $0.01 par value (100,000,000 authorized, 42,336,016 and 42,261,345 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively) 423 423
Paid-in capital 413,214 390,526
Retained earnings 447,373 418,641
Accumulated other comprehensive loss (2,056) (3,761)
Total stockholders' equity 858,954 805,829
Total Liabilities and Stockholders' Equity $ 2,104,793 $ 2,203,461
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WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Nine Months EndedSeptember 30,
2009 2008
Cash from (used in) operating activities:
Net income (loss) $ 28,732 $ (5,744 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 17,547 15,764
Equity-based compensation expense 29,776 28,309
Incremental tax benefit from stock-based compensation -- (2,162 )
Deferred taxes, net 197 (4,095 )
Changes in operating accounts:
Premium and other receivables, net 10,111 73,073
Other receivables from government partners, net (40,073 ) (3,361 )
Prepaid expenses and other, net 15,301 (12,102 )
Medical benefits payable 91,708 231,430
Unearned premiums (60,489 ) (19,325 )
Accounts payable 2,019 922
Other accrued expenses (66,484 ) 15,641
Other payables to government partners 18,397 (100,984 )
Amounts accrued related to investigation resolution 30,249 --
Taxes, net (5,450 ) (10,583 )
Other, net (1,999 ) (36,774 )
Net cash provided by operating activities 69,542 170,009
Cash from (used in) investing activities:
Purchases of investments (19,295 ) (157,947 )
Proceeds from sales and maturities of investments 34,012 273,156
Purchases of restricted investments (64,039 ) (119,572 )
Proceeds from maturities of restricted investments 131,707 8,945
Additions to property, equipment and capitalized software, net (9,908 ) (13,412 )
Net cash provided by (used in) investing activities 72,477 (8,830 )
Cash from (used in) financing activities:
Proceeds from option exercises and other 418 1,039
Purchase of treasury stock -- (2,400 )
Incremental tax benefit received from stock-based compensation -- 2,162
Payments on debt (152,800 ) (1,200 )
Funds received for the benefits of members, net of disbursements (341 ) 7,094
Net cash (used in) provided by financing activities (152,723 ) 6,695
Cash and cash equivalents:
(Decrease) increase during the period (10,704 ) 167,874
Balance at beginning of year 1,181,922 1,008,409
Balance at end of period $ 1,171,218 $ 1,176,283
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for taxes $ 58,489 $ 44,223
Cash paid for interest $ 2,642 $ 8,001
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WELLCARE HEALTH PLANS, INC. MEMBERSHIP STATISTICS
As of September 30,
2009 2008
Membership by Program
Medicaid Membership
TANF 1,072,000 1,031,000
S-CHIP 158,000 180,000
SSI and ABD 78,000 64,000
FHP 14,000 26,000
Total Medicaid Membership 1,322,000 1,301,000
Medicare Membership
Medicare Advantage 240,000 240,000
Prescription Drug Plan (stand-alone) 768,000 989,000
Total Medicare Membership 1,008,000 1,229,000
Total Membership 2,330,000 2,530,000
Medicaid Membership by State
Florida 412,000 484,000
Georgia 527,000 463,000
Other states 383,000 354,000
Total Medicaid Membership 1,322,000 1,301,000
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WELLCARE HEALTH PLANS, INC. UNAUDITED SEGMENT AND LINE OF BUSINESS INFORMATION (Dollars in thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Premium revenue:
Medicaid:
Florida $ 210,272 $ 247,441 $ 700,830 $ 734,430
Georgia 345,640 311,915 999,487 906,778
Other states 258,199 211,679 736,731 611,474
Total Medicaid 814,111 771,035 2,437,048 2,252,682
Medicare:
Medicare Advantage plans 660,009 632,593 2,142,921 1,794,441
Prescription Drug plans 191,911 225,678 665,840 839,576
Total Medicare 851,920 858,271 2,808,761 2,634,017
Total premium revenue $ 1,666,031 $ 1,629,306 $ 5,245,809 $ 4,886,699
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WELLCARE HEALTH PLANS, INC. UNAUDITED SUPPLEMENTAL INFORMATION Reconciliation of GAAP Statements of Operations to Adjusted Statements of Operations (Dollars in thousands except per share data)
The Company reports adjusted operating results on a non-GAAP basis to exclude certain expenses that management believes are not indicative of future business trends and operations.Management believes these adjusted amounts provide additional, useful information for investors.Following are statements of operations and related measures for the three months and nine months ended September 30, 2009 and 2008, as determined under GAAP, reconciled to the adjusted statements of operations and related measures for each of the same periods.
Three Months Ended September 30, 2009 Three Months Ended September 30, 2008
GAAP Adjustments Adjusted GAAP Adjustments Adjusted
Revenues:
Premium $ 1,666,031 $ -- $ 1,666,031 $ 1,629,306 $ -- $ 1,629,306
Investment and other income 1,614 -- 1,614 8,126 -- 8,126
Total revenues 1,667,645 -- 1,667,645 1,637,432 -- 1,637,432
Expenses:
Medical benefits 1,420,193 -- 1,420,193 1,443,742 (92,900 ) (a) 1,350,842
Selling, general, and administrative 195,303 (9,463 ) (b)(c) 185,840 228,811 (22,344 ) (b) 206,467
Depreciation and amortization 5,851 -- 5,851 5,385 -- 5,385
Interest 366 -- 366 2,962 -- 2,962
Total expenses 1,621,713 (9,463 ) 1,612,250 1,680,900 (115,244 ) 1,565,656
Income before income taxes 45,932 9,463 55,395 (43,468 ) 115,244 71,776
Income tax expense 17,272 3,414 20,686 (25,299 ) 48,633 23,334
Net income $ 28,660 $ 6,049 $ 34,709 $ (18,169 ) $ 66,611 $ 48,442
Weighted average shares outstanding:
Basic 41,849,749 -- 41,849,749 41,538,055 -- 41,538,055
Diluted 42,280,035 -- 42,280,035 41,538,055 648,091 42,186,146
Net income per share:
Basic $ 0.68 $ 0.15 $ 0.83 $ (0.44 ) $ 1.61 $ 1.17
Diluted $ 0.68 $ 0.14 $ 0.82 $ (0.44 ) $ 1.59 $ 1.15
Medical benefits ratio:
Medicaid 87.2 % 87.2 % 89.1 % (5.1 %) (a) 84.0 %
Medicare 83.3 % 83.3 % 88.2 % (6.2 %) (a) 82.0 %
Aggregate 85.2 % 85.2 % 88.6 % (5.7 %) (a) 82.9 %
Administrative expense ratio 11.7 % (0.6 %) (b) 11.1 % 14.0 % (1.4 %) (b) 12.6 %
Days in claims payable 56 days 56 days 49 days 3 days (a) 52 days
(a) Medical benefits expense and days in claims payable:Medical benefits expense for the three months ended September 30, 2008, was affected unfavorably by approximately $92.9 million before income taxes as a result of the Company's ability to review substantially complete claims information that became available between the date of the original actuarially determined estimate and the filing date of the annual report on Form 10-K for the year ended December 31, 2007 (the "2007 10-K").Had WellCare filed its 2007 10-K timely and not been able to observe substantially complete claims information, medical benefits expense for the three months ended September 30, 2008, would have decreased by $92.9 million.The adjustment also results in three additional days in claims payable as of that date.Therefore, adjusted days in claims payable is 52 days as of September 30, 2008.
(b) Investigation-related legal, accounting, employee retention, and other costs:Administrative expenses associated with the government and Company investigations amounted to approximately $9.0 million and $22.3 million before income taxes, respectively, in the quarters ended September 30, 2009 and 2008.
(c) Liability for investigation resolution:Based on the status of the government investigations, the Company recorded an expense of $0.5 million before and after income taxes in the quarter ended September 30, 2009.
Premium taxes were $26.8 million and $23.0 million, respectively, for the three month periods ended September 30, 2009 and 2008. A service of YellowBrix, Inc.
