WellCare Health Plans 8-K Wellcare Reports Third Quarter 2009 Results

Back to Form 8-K

Exhibit 99.1

CONTACTS:

Investor relations:                                                                                                                                                                          ;                                                         Media relations:

Gregg Haddad                                                                                                                                                                         
60;                                                                Amy Knapp

813-865-1284                                                                                                                                          & #160;                                                                                                  813-290-6208

gregg.haddad@wellcare.com                                                                                                                             & #160;                                                                                  amy.knapp@wellcare.com

WELLCARE REPORTS THIRD QUARTER 2009 RESULTS

Tampa, Florida (November 4, 2009) — 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.

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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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.

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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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.

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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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 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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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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.

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WCG Reports Third Quarter 2009 Results

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November 4, 2009

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 September 30, 2009									Nine Months Ended 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 other income		8,375			–			8,375			33,072			–				33,072
Total revenues		5,254,184			–			5,254,184			4,919,771			–				4,919,771
Expenses:
Medical benefits		4,477,210			–			4,477,210			4,218,254			(92,900	)	(a)		4,125,354
Selling, general, and administrative		681,730			(93,146	) (b) (c)		588,584			690,330			(86,257	)	(b)		604,073
Depreciation and amortization		17,547			–			17,547			15,763			–				15,763
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 income taxes		73,852			93,146			166,998			(13,746	)		179,157				165,411
Income tax expense		45,120			15,120			60,240			(8,002	)		67,959				59,957
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 expense ratio		13.0	%		(1.8	%) (b) (c)		11.2	%		14.0	%		(1.7	%)	(b)		12.3	%
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 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.

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WCG Reports Third Quarter 2009 Results

Page 11

November 4, 2009

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 under GAAP	$	69,542		$	170,009
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 clients	$	141,596		$	220,606

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