WellCare Reports Third Quarter 2009 Results
More News related to WCG
- Morning Movers 11/04: MPAC, ABK, GNVC, RHB, IRE, PACR Higher; STEC, CLRT, VG, TRLG, ANSW Lower
- WellCare Health (WCG) Posts Q3 EPS of $0.82, Tops Street; Guides FY09
- WellCare To Resume Medicare Marketing and Sales
- WellCare Reports Third Quarter 2009 Results
- Trading Radar for 11/04: Cisco (CSCO), Comcast (CMCSA), Tyco (TEL), Molson Coors (TAP) Report
More News related to Press Releases
- Canaccord Adams Maintains a 'Buy' on Protalix BioTherapeutics (PLX); Cerezyme Supply on Track, See More Uplyso EAP Uptake
- Bove Says US Banking System, Dollar to Benefit from Dubai Crisis
- Broadpoint.AmTech Says Solar Inventory Getting Healthier into Year-end
- UBS Maintains a Neutral rating on American Eagle Outfitters (AEO); Lowers Estimates Through 2011
- Barclays Reiterates an 'Overweight' on Deere (DE); Adjusts Estimates & PT
TAMPA, Fla.--(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 September 30, 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 September 30, 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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenues:
Premium $ 1,666,031 $ 1,629,306 $ 5,245,809 $ 4,886,699
Investment and other 1,614 8,126 8,375 33,072
income
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 195,303 228,811 681,730 690,330
administrative
Depreciation and 5,851 5,385 17,547 15,763
amortization
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 45,932 (43,468 ) 73,852 (13,746 )
income taxes
Income tax expense 17,272 (25,299 ) 45,120 (8,002 )
(benefit)
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
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
Sept. 30, Dec. 31,
2009 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 34,767 50,000
investigation resolution
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 423 423
at September 30, 2009 and December 31, 2008,
respectively)
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
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
September 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 - (2,162 )
compensation
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 30,249 -
resolution
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 (9,908 ) (13,412 )
software, net
Net cash provided by (used in) investing 72,477 (8,830 )
activities
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 - 2,162
compensation
Payments on debt (152,800 ) (1,200 )
Funds received for the benefits of members, net of (341 ) 7,094
disbursements
Net cash (used in) provided by financing (152,723 ) 6,695
activities
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
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
WELLCARE HEALTH PLANS, INC.
UNAUDITED SEGMENT AND LINE OF BUSINESS INFORMATION
(Dollars in thousands)
Nine Months Ended
Three Months Ended September 30,
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 660,009 632,593 2,142,921 1,794,441
plans
Prescription Drug 191,911 225,678 665,840 839,576
plans
Total Medicare 851,920 858,271 2,808,761 2,634,017
Total premium $ 1,666,031 $ 1,629,306 $ 5,245,809 $ 4,886,699
revenue
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 Three Months Ended
September 30, 2009 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 1,614 - 1,614 8,126 - 8,126
other income
Total revenues 1,667,645 - 1,667,645 1,637,432 - 1,637,432
Expenses:
Medical 1,420,193 - 1,420,193 1,443,742 (92,900 ) (a) 1,350,842
benefits
Selling, (b)
general, and 195,303 (9,463 ) (c) 185,840 228,811 (22,344 ) (b) 206,467
administrative
Depreciation
and 5,851 - 5,851 5,385 - 5,385
amortization
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 45,932 9,463 55,395 (43,468 ) 115,244 71,776
income taxes
Income tax 17,272 3,414 20,686 (25,299 ) 48,633 23,334
expense
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 11.7 % (0.6 %) (b) 11.1 % 14.0 % (1.4 %) (b) 12.6 %
expense ratio
Days in claims 56 days 56 days 49 days 3 days (a) 52 days
payable
(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.
WELLCARE HEALTH PLANS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION (Continued)
Reconciliation of GAAP Statements of Operations to Adjusted Statements of Operations
(Dollars in thousands except per share data)
Nine Months Ended Nine Months Ended
September 30, 2009 September 30, 2008
GAAP Adjustments Adjusted GAAP Adjustments Adjusted
Revenues:
Premium $ $ - $ $ $ - $
5,245,809 5,245,809 4,886,699 4,886,699
Investment and 8,375 - 8,375 33,072 - 33,072
other income
Total revenues 5,254,184 - 5,254,184 4,919,771 - 4,919,771
Expenses:
Medical 4,477,210 - 4,477,210 4,218,254 (92,900) (a) 4,125,354
benefits
Selling, (b)
general, and 681,730 (93,146) 588,584 690,330 (86,257) (b) 604,073
administrative (c)
Depreciation
and 17,547 - 17,547 15,763 - 15,763
amortization
Interest 3,845 - 3,845 9,170 - 9,170
Total expenses 5,180,332 (93,146) 5,087,186 4,933,517 (179,157) 4,754,360
Income before 73,852 93,146 166,998 (13,746) 179,157 165,411
income taxes
Income tax 45,120 15,120 60,240 (8,002) 67,959 59,957
expense
Net income $ 28,732 $ 78,026 $ 106,758 $ (5,744) $ 111,198 $ 105,454
Weighted
average shares
outstanding:
Basic 41,771,713 - 41,771,713 41,321,526 - 41,321,526
Diluted 42,007,302 - 42,007,303 41,321,526 775,443 42,096,969
Net income per
share:
Basic $ 0.69 $ 1.87 $ 2.56 $ (0.14) $ 2.69 $ 2.55
Diluted $ 0.68 $ 1.86 $ 2.54 $ (0.14) $ 2.65 $ 2.51
Medical
benefits
ratio:
Medicaid 85.8% 85.8% 85.2% (1.7%) (a) 83.5%
Medicare 84.9% 84.9% 87.3% (2.1%) (a) 85.2%
Aggregate 85.3% 85.3% 86.3% (1.9%) (a) 84.4%
Administrative (b)
expense ratio 13.0% (1.8%) 11.2% 14.0% (1.7%) (b) 12.3%
(c)
Days in claims 56 days 56 days 49 days 3 days (a) 52 days
payable
(a) Medical benefits expense and days in claims payable: Medical benefits expense for
the nine 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 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 $32.9 million and $85.4 million before income taxes,
respectively, in the nine month periods 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 $60.2 million before and after
income taxes in the nine month period ended September 30, 2009.
Premium taxes were $80.1 million and $68.1 million, respectively, for the nine month
periods ended September 30, 2009 and 2008.
WELLCARE HEALTH PLANS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Reconciliation of GAAP Net Cash Provided By Operating Activities
To Net Cash Provided By Operating Activities Modified
for the Timing of Receipts from and Payments to Government Clients
(Dollars in thousands)
The Company reports cash provided by operating activities on a non-GAAP basis to
exclude the changes in unearned premiums, premiums and other receivables, and
other receivables to and payables from government partners. The Company believes
that excluding changes in unearned premiums, premiums and other receivables, and
other receivables to and payables from government partners is useful measure of
cash flow, as these changes are a function of the timing of cash receipts from
and payments to federal and state agencies at the end of a period.
Nine Months Ended
September 30,
2009 2008
Net cash provided by operating activities, as reported $ 69,542 $ 170,009
under GAAP
Modifications to eliminate changes in:
Premium and other receivables, net (10,111 ) (73,073 )
Other receivables from government partners 40,073 3,361
Unearned premiums 60,489 19,325
Other payables to government partners (18,397 ) 100,984
Net cash provided by operating activities, modified for
the timing of receipts from and payments to government $ 141,596 $ 220,606
clients
Source: WellCare Health Plans, Inc.
Related Categories
Press ReleasesStocks Mentioned
-0.83Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
