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 ANNUAL AND FOURTH QUARTER 2009 RESULTS
Tampa, Florida (February 18, 2010) — WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the year and fourth quarter ended December 31, 2009. As determined under generally accepted accounting principles (“GAAP”), the Company reported net income of $39.9 million, or $0.95 per diluted share, for the year 2009, compared with a net loss of $36.8 million, or $0.89 per diluted share, for the year 2008. Adjusted net income for the year 2009 was $126.6 million, or $3.00 per diluted share, as compared with $133.2 million, or $3.17 per diluted share, for the year 2008.
Adjusted net income for 2009 was unfavorable to 2008 primarily due to the increase in the Medicaid segment medical benefits ratio (“MBR”) as a result of premium rate changes below medical cost trend and the addition of the Company’s Hawaii aged, blind, and disabled (“ABD”) program; the performance of Medicare Prescription Drug Plans (“PDPs”) and Medicare Advantage private fee-for-service plans; and significantly lower investment and other income. Partially offsetting these unfavorable results were the performance of Medicare Advantage coordinated care plans; growth in membership and premium revenue in the Company’s Medicaid plans; and decreased selling, general, and administrative (“SG&A”) expense resulting mainly from lower sales and marketing costs and improved operating efficiencies.
“We accomplished a number of important objectives during 2009,” said Alec Cunningham, WellCare’s chief executive officer. “From a financial perspective, 2010 will be a challenging year, as we absorb the impact of last year’s private fee-for-service plans withdrawal and the CMS marketing sanction. Nevertheless, we are focused on our three longer-term priorities of improved health care quality and access, a competitive cost structure, and profitable growth through serving our members, government clients, and providers effectively.”
In addition to results determined under GAAP, net income and certain other operating results described in this news release have been adjusted for certain medical benefits and SG&A expenses, primarily related to previously disclosed government investigations, that management believes are not indicative of long-term business operations. Please refer to the schedules in this news release that provide supplemental information reconciling results determined under GAAP to adjusted results.
Highlights of Operations for the Fourth Quarter
As determined under GAAP, the Company reported net income of $11.1 million, or $0.26 per diluted share, for the fourth quarter 2009, compared with a net loss of $31.1 million, or $0.75 per diluted share, for the fourth quarter 2008. Adjusted net income for the fourth quarter 2009 was $20.0 million, or $0.47 per diluted share, as compared with $27.8 million, or $0.66 per diluted share, for the fourth quarter 2008.
WCG Reports Annual and Fourth Quarter 2009 Results
Page 2
February 18, 2010
Adjusted net income for the fourth quarter 2009 was unfavorable to the fourth quarter 2008 primarily due to the increase in the Medicaid segment MBR as a result of premium rate changes below medical cost trend and the addition of the Hawaii ABD program, as well as the performance of Medicare PDPs and Medicare Advantage private fee-for-service plans. Partially offsetting those factors were decreased SG&A expense, resulting mainly from lower sales and marketing costs, and the growth in membership and premium revenue in the Company’s Medicaid plans.
Membership as of December 31, 2009, decreased to 2.3 million compared with 2.5 million members as of December 31, 2008. Medicaid segment membership increased 3.8% year-over-year to 1.3 million, driven by growth in several markets and the February 2009 addition of the Hawaii ABD program. Year-over-year, Medicare Advantage membership decreased 8.5%, principally as a result of the CMS marketing sanction. Medicare stand-alone PDP membership decreased 24.2% compared with December 31, 2008, due largely to 2009 bid results and, less significantly, the CMS sanction.
Premium revenue for the fourth quarter 2009 increased 1.6% year-over-year to $1.6 billion. The growth is attributable to increased Medicaid plan premium revenue, offset in part by the decreases in Medicare Advantage and Medicare PDP premium revenue.
Investment and other income was $3 million in the fourth quarter 2009, a decrease of 56.0% 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 5.6% from medical benefits expense in the fourth quarter of 2008. The MBR was 85.4% in the fourth quarter 2009, compared with 82.2% in 2008. The 320 basis point increase in the MBR was driven by the performance of the Medicaid segment, Medicare Advantage private fee-for-service plans, and Medicare PDPs.
SG&A expense as determined under GAAP was $211 million, a 13.1% decrease from $243 million in the fourth quarter of 2008. Adjusted SG&A expense was $199 million in the fourth quarter of 2009, or 12.2% of total revenues, compared with $226 million, or 14.1% of total revenues, for the same period last year. The decrease in adjusted SG&A 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 $58 million and $296 million for the years ended December 31, 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 $93 million and $280 million for the years ended December 31, 2009 and 2008, respectively.
As of December 31, 2009, unregulated cash and short-term investments were approximately $120 million.
Days in claims payable were 53 days as of December 31, 2009, compared with 56 days as of September 30, 2009, and 54 days as of December 31, 2008.
WCG Reports Annual and Fourth Quarter 2009 Results
Page 3
February 18, 2010
Financial Outlook
The Company is providing its financial outlook for the year ended December 31, 2010.
| | § | Adjusted net income per diluted share is anticipated to be between $1.90 and $2.15. |
| | § | Premium revenue is expected to be between $5.25 and $5.40 billion. |
| | § | The Medicaid segment MBR is anticipated to be lower in 2010 than the 2009 MBR. |
| | § | The 2010 Medicare segment MBR also is expected to decrease from the 2009 MBR, driven by the withdrawal from Medicare Advantage private fee-for-service plans. |
| | § | The adjusted administrative expense ratio is expected to increase year-over-year. |
Webcast
A discussion of WellCare’s annual and fourth quarter 2009 results will be webcast live on Thursday, February 18, 2010, 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 targeted to 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 December 31, 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. Our financial outlook contains 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 2010 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 September 30, 2009, and other filings by WellCare 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.
WCG Reports Annual and Fourth Quarter 2009 Results
Page 4
February 18, 2010
WELLCARE HEALTH PLANS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
| | | Three Months Ended December 31, | | | | |
| | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
Premium | | $ | 1,621,443 | | | $ | 1,596,371 | | | $ | 6,867,252 | | | $ | 6,483,070 | |
Investment and other income | | | 2,537 | | | | 5,765 | | | | 10,912 | | | | 38,837 | |
Total revenues | | | 1,623,980 | | | | 1,602,136 | | | | 6,878,164 | | | | 6,521,907 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
Medical benefits | | | 1,385,247 | | | | 1,311,962 | | | | 5,862,457 | | | | 5,530,216 | |
Selling, general and administrative | | | 211,210 | | | | 243,088 | | | | 892,940 | | | | 933,418 | |
Depreciation and amortization | | | 5,789 | | | | 5,561 | | | | 23,336 | | | | 21,324 | |
Interest | | | 2,566 | | | | 2,610 | | | | 6,411 | | | | 11,780 | |
Goodwill impairment | | | – | | | | 78,339 | | | | – | | | | 78,339 | |
Total expenses | | | 1,604,812 | | | | 1,641,560 | | | | 6,785,144 | | | | 6,575,077 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before income taxes | | | 19,168 | | | | (39,424 | ) | | | 93,020 | | | | (53,170 | ) |
| Income tax expense (benefit) | | | 8,029 | | | | (8,335 | ) | | | 53,149 | | | | (16,337 | ) |
| Net income (loss) | | $ | 11,139 | | | $ | (31,089 | ) | | $ | 39,871 | | | $ | (36,833 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.27 | | | $ | (0.75 | ) | | $ | 0.95 | | | $ | (0.89 | ) |
Diluted | | $ | 0.26 | | | $ | (0.75 | ) | | $ | 0.95 | | | $ | (0.89 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 41,977,007 | | | | 41,614,728 | | | | 41,823,497 | | | | 41,396,116 | |
Diluted | | | 42,758,030 | | | | 41,614,728 | | | | 42,150,777 | | | | 41,396,116 | |
WCG Reports Annual and Fourth Quarter 2009 Results
Page 5
February 18, 2010
WELLCARE HEALTH PLANS, INC. CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | | | | | |
| ASSETS | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 1,158,131 | | | $ | 1,181,922 | |
| Investments | | | 62,722 | | | | 70,112 | |
| Premium and other receivables, net | | | 285,808 | | | | 215,525 | |
| Other receivables from government partners, net | | | – | | | | 825 | |
| Funds receivable for the benefit of members | | | 77,851 | | | | 86,542 | |
| Prepaid expenses and other current assets, net | | | 104,079 | | | | 129,490 | |
| Deferred income taxes | | | 28,874 | | | | 20,154 | |
Total current assets | | | 1,717,465 | | | | 1,704,570 | |
| Property, equipment and capitalized software, net | | | 61,785 | | | | 66,588 | |
| Goodwill | | | 111,131 | | | | 111,131 | |
| Other intangible assets, net | | | 12,961 | | | | 14,493 | |
| Long term investments | | | 51,710 | | | | 54,972 | |
| Restricted investments | | | 130,550 | | | | 199,339 | |
| Deferred tax asset | | | 18,745 | | | | 23,263 | |
| Other assets | | | 14,100 | | | | 29,105 | |
| Total Assets | | $ | 2,118,447 | | | $ | 2,203,461 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current Liabilities: | | | | | | | | |
| Medical benefits payable | | $ | 802,515 | | | $ | 766,179 | |
| Unearned premiums | | | 90,496 | | | | 81,197 | |
| Accounts payable | | | 5,270 | | | | 5,138 | |
| Other accrued expenses and liabilities | | | 219,691 | | | | 288,340 | |
| Current portion of amounts accrued related to investigation resolution | | | 18,192 | | | | 50,000 | |
| Other payables to government partners | | | 38,147 | | | | 8,100 | |
| Taxes payable | | | 4,888 | | | | 12,187 | |
| Debt | | | – | | | | 152,741 | |
| Other current liabilities | | | 871 | | | | 674 | |
Total current liabilities | | | 1,180,070 | | | | 1,364,556 | |
| Amounts accrued related to investigation resolution | | | 40,205 | | | | – | |
| Other liabilities | | | 17,272 | | | | 33,076 | |
| Total liabilities | | | 1,237,547 | | | | 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, 42,361,207 and 42,261,345 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively) | | | 424 | | | | 423 | |
| Paid-in capital | | | 425,083 | | | | 390,526 | |
| Retained earnings | | | 458,512 | | | | 418,641 | |
| Accumulated other comprehensive loss | | | (3,119 | ) | | | (3,761 | ) |
Total stockholders’ equity | | | 880,900 | | | | 805,829 | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,118,447 | | | $ | 2,203,461 | |
WCG Reports Annual and Fourth Quarter 2009 Results
Page 6
February 18, 2010
WELLCARE HEALTH PLANS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
| | | | |
| | | | | | | |
| Cash from (used in) operating activities: | | | | | | |
| Net income (loss) | | $ | 39,871 | | | $ | (36,833 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 23,336 | | | | 21,324 | |
| Goodwill impairment | | | – | | | | 78,339 | |
Equity-based compensation expense | | | 44,149 | | | | 38,614 | |
| Incremental tax benefit received from option exercises | | | – | | | | (3,686 | ) |
Deferred taxes, net | | | (4,202 | ) | | | (49,402 | ) |
| Provision for doubtful receivables | | | 1,945 | | | | 27,313 | |
Changes in operating accounts: | | | | | | | | |
Premium and other receivables, net | | | (74,014 | ) | | | 70,513 | |
Other receivables from government partners, net | | | (564 | ) | | | (4,780 | ) |
Prepaid expenses and other current assets, net | | | 28,586 | | | | (16,663 | ) |
Medical benefits payable | | | 36,336 | | | | 228,033 | |
Unearned premiums | | | 9,299 | | | | 61,359 | |
Accounts payable and other accrued expenses | | | (69,440 | ) | | | (38,617 | ) |
Other payables to government partners | | | 30,047 | | | | (110,913 | ) |
Amounts accrued related to investigation resolution | | | 8,397 | | | | 50,000 | |
Taxes, net | | | (15,645 | ) | | | 20,179 | |
Other, net | | | (176 | ) | | | (38,513 | ) |
Net cash provided by operating activities | | | 57,925 | | | | 296,427 | |
| Cash from (used in) investing activities: | | | | | | | | |
| Purchases of investments | | | (16,115 | ) | | | (135,607 | ) |
| Proceeds from sales and maturities of investments | | | 27,466 | | | | 260,413 | |
| Purchases of restricted investments | | | (65,299 | ) | | | (120,116 | ) |
| Proceeds from maturities of restricted investments | | | 133,665 | | | | 10,274 | |
| Additions to property, equipment and capitalized software, net | | | (16,078 | ) | | | (19,559 | ) |
| Funds received for the benefit of members | | | – | | | | (86,542 | ) |
Net cash provided by (used in) investing activities | | | 63,639 | | | | (91,137 | ) |
| Cash from (used in) financing activities: | | | | | | | | |
| Proceeds from option exercises and other | | | 1,167 | | | | 1,039 | |
| Purchase of treasury stock | | | (2,413 | ) | | | (2,720 | ) |
| Incremental tax benefit from option exercises | | | – | | | | 3,686 | |
| Payments on debt | | | (152,800 | ) | | | (2,000 | ) |
| Funds held for the benefit of members | | | 8,691 | | | | (31,782 | ) |
Net cash used in financing activities | | | (145,355 | ) | | | (31,777 | ) |
| Cash and cash equivalents: | | | | | | | | |
| (Decrease) increase during the period | | | (23,791 | ) | | | 173,513 | |
| Balance at beginning of year | | | 1,181,922 | | | | 1,008,409 | |
| Balance at end of year | | $ | 1,158,131 | | | $ | 1,181,922 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for taxes | | $ | 80,621 | | | $ | 53,911 | |
| Cash paid for interest | | $ | 2,642 | | | $ | 10,150 | |
| Non-cash additions to property, equipment and capitalized software | | $ | 923 | | | $ | 2,084 | |
WCG Reports Annual and Fourth Quarter 2009 Results
Page 7
February 18, 2010
WELLCARE HEALTH PLANS, INC.
MEMBERSHIP STATISTICS
| | | | |
| | | | | | | |
| Membership by Program | | | | | | �� |
| Medicaid Membership | | | | | | |
TANF | | | 1,094,000 | | | | 1,039,000 | |
S-CHIP | | | 163,000 | | | | 164,000 | |
SSI and ABD | | | 79,000 | | | | 75,000 | |
FHP | | | 13,000 | | | | 22,000 | |
Total Medicaid Membership | | | 1,349,000 | | | | 1,300,000 | |
| | | | | | | | | |
| Medicare Membership | | | | | | | | |
Medicare Advantage | | | 225,000 | | | | 246,000 | |
Prescription Drug Plan (stand-alone) | | | 747,000 | | | | 986,000 | |
Total Medicare Membership | | | 972,000 | | | | 1,232,000 | |
Total Membership | | | 2,321,000 | | | | 2,532,000 | |
| Medicaid Membership by State | | | | | | |
| Florida | | | 425,000 | | | | 473,000 | |
| Georgia | | | 546,000 | | | | 483,000 | |
| Other states | | | 378,000 | | | | 344,000 | |
Total Medicaid Membership | | | 1,349,000 | | | | 1,300,000 | |
WCG Reports Annual and Fourth Quarter 2009 Results
Page 8
February 18, 2010
WELLCARE HEALTH PLANS, INC.
UNAUDITED SEGMENT AND LINE OF BUSINESS INFORMATION
(Dollars in thousands)
| | | Three Months Ended December 31, | | | | |
| | | | | | | | | | | | | |
| Premium revenue: | | | | | | | | | | | | |
| Medicaid: | | | | | | | | | | | | |
Florida | | $ | 216,207 | | | $ | 244,796 | | | $ | 916,689 | | | $ | 978,709 | |
Georgia | | | 330,650 | | | | 320,162 | | | | 1,330,137 | | | | 1,226,940 | |
Other states | | | 272,826 | | | | 173,410 | | | | 1,009,905 | | | | 785,400 | |
Total Medicaid | | | 819,683 | | | | 738,368 | | | | 3,256,731 | | | | 2,991,049 | |
| | | | | | | | | | | | | | | | | |
| Medicare: | | | | | | | | | | | | | | | | |
Medicare Advantage plans | | | 632,521 | | | | 641,786 | | | | 2,775,442 | | | | 2,436,226 | |
Prescription Drug plans | | | 169,239 | | | | 216,217 | | | | 835,079 | | | | 1,055,795 | |
Total Medicare | | | 801,760 | | | | 858,003 | | | | 3,610,521 | | | | 3,492,021 | |
| Total premium revenue | | $ | 1,621,443 | | | $ | 1,596,371 | | | $ | 6,867,252 | | | $ | 6,483,070 | |
WCG Reports Annual and Fourth Quarter 2009 Results
Page 9
February 18, 2010
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 longer-term business trends and operations. Following are statements of operations and related measures for the fourth quarters and years ended December 31, 2009 and 2008, as determined under GAAP, reconciled to the adjusted statements of operations and related measures for each of the same periods.
| | | Quarter Ended December 31, 2009 | | | Quarter Ended December 31, 2008 | |
| | | | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| Premium | | $ | 1,621,443 | | | $ | – | | | | $ | 1,621,443 | | | $ | 1,596,371 | | | $ | – | | | | $ | 1,596,371 | |
| Investment and other income | | | 2,537 | | | | – | | | | | 2,537 | | | | 5,765 | | | | – | | | | | 5,765 | |
Total revenues | | | 1,623,980 | | | | – | | | | | 1,623,980 | | | | 1,602,136 | | | | – | | | | | 1,602,136 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,385,247 | | | | – | | | | | 1,385,247 | | | | 1,311,962 | | | | – | | | | | 1,311,962 | |
| Selling, general, and administrative | | | 211,210 | | | | (11,815 | (a) ) (b) | | | 199,395 | | | | 243,088 | | | | (16,692 | (a) ) (b) | | | 226,396 | |
| Depreciation and amortization | | | 5,789 | | | | – | | | | | 5,789 | | | | 5,561 | | | | – | | | | | 5,561 | |
| Interest | | | 2,566 | | | | – | | | | | 2,566 | | | | 2,610 | | | | – | | | | | 2,610 | |
| Goodwill impairment | | | – | | | | – | | | | | – | | | | 78,339 | | | | (78,339 | ) (c) | | | | – | |
Total expenses | | | 1,604,812 | | | | (11,815 | ) | | | | 1,592,997 | | | | 1,641,560 | | | | (95,031 | ) | | | | 1,546,529 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 19,168 | | | | 11,815 | | | | | 30,983 | | | | (39,424 | ) | | | 95,031 | | | | | 55,607 | |
| Income tax expense (benefit) | | | 8,029 | | | | 2,989 | | | | | 11,018 | | | | (8,335 | ) | | | 36,112 | | | | | 27,777 | |
| Net income (loss) | | $ | 11,139 | | | $ | 8,826 | | | | $ | 19,965 | | | $ | (31,089 | ) | | $ | 58,919 | | | | $ | 27,830 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 41,977,007 | | | | – | | | | | 41,977,007 | | | | 41,614,728 | | | | – | | | | | 41,614,728 | |
Diluted | | | 42,758,030 | | | | – | | | | | 42,758,030 | | | | 41,614,728 | | | | 281,894 | | | | | 41,896,622 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.27 | | | $ | 0.21 | | | | $ | 0.48 | | | $ | (0.75 | ) | | $ | 1.42 | | | | $ | 0.67 | |
| Diluted | | $ | 0.26 | | | $ | 0.21 | | | | $ | 0.47 | | | $ | (0.75 | ) | | $ | 1.41 | | | | $ | 0.66 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 87.7 | % | | | | | | | | 87.7 | % | | | 83.7 | % | | | | | | | | 83.7 | % |
| Medicare | | | 83.1 | % | | | | | | | | 83.1 | % | | | 80.9 | % | | | | | | | | 80.9 | % |
| Aggregate | | | 85.4 | % | | | | | | | | 85.4 | % | | | 82.2 | % | | | | | | | | 82.2 | % |
| Administrative expense ratio | | | 13.0 | % | | | (0.7% | (a) ) (b) | | | 12.3 | % | | | 15.2 | % | | | (1.1% | (a) ) (b) | | | 14.1 | % |
| Days in claims payable | | 53 days | | | | | | | 53 days | | 54 days | | | | | | | 54 days |
| (a) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government and Company investigations amounted to approximately $11.8 million and $16.7 million before income taxes, respectively, in the quarters ended December 31, 2009 and 2008. |
| (b) | Liability for investigation resolution: Based on the status of the government investigations, the Company recorded an expense of $0.4 million before income taxes in the quarter ended December 31, 2009. |
| (c) | Goodwill impairment: As of December 31, 2008, the Company concluded that Goodwill associated with its Medicare reporting unit was impaired. To reflect the impairment, in 2008 the Company recorded expense of approximately $78.3 million before income taxes. |
Premium taxes were $10.9 million and $22.1 million for the quarters ended December 31, 2009 and 2008, respectively.
WCG Reports Annual and Fourth Quarter 2009 Results
Page 10
February 18, 2010
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)
| | | Year Ended December 31, 2009 | | | Year Ended December 31, 2008 | |
| | | | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | | |
| Premium | | $ | 6,867,252 | | | $ | – | | | $ | 6,867,252 | | | $ | 6,483,070 | | | $ | – | | | $ | 6,483,070 | |
| Investment and other income | | | 10,912 | | | | – | | | | 10,912 | | | | 38,837 | | | | – | | | | 38,837 | |
Total revenues | | | 6,878,164 | | | | – | | | | 6,878,164 | | | | 6,521,907 | | | | – | | | | 6,521,907 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 5,862,457 | | | | – | | | | 5,862,457 | | | | 5,530,216 | | | | (92,900 | ) (a) | | | 5,437,316 | |
| Selling, general, and administrative | | | 892,940 | | | | (104,961 | (b) ) (c) | | | 787,979 | | | | 933,418 | | | | (102,949 | ) (b) | | | 830,469 | |
| Depreciation and amortization | | | 23,336 | | | | – | | | | 23,336 | | | | 21,324 | | | | – | | | | 21,324 | |
| Interest | | | 6,411 | | | | – | | | | 6,411 | | | | 11,780 | | | | – | | | | 11,780 | |
| Goodwill impairment | | | – | | | | – | | | | – | | | | 78,339 | | | | (78,339 | ) (d) | | | – | |
Total expenses | | | 6,785,144 | | | | (104,961 | ) | | | 6,680,183 | | | | 6,575,077 | | | | (274,188 | ) | | | 6,300,889 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 93,020 | | | | 104,961 | | | | 197,981 | | | | (53,170 | ) | | | 274,188 | | | | 221,018 | |
| Income tax expense (benefit) | | | 53,149 | | | | 18,281 | | | | 71,430 | | | | (16,337 | ) | | | 104,191 | | | | 87,854 | |
| Net income (loss) | | $ | 39,871 | | | $ | 86,680 | | | $ | 126,551 | | | $ | (36,833 | ) | | $ | 169,997 | | | $ | 133,164 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 41,823,497 | | | | – | | | | 41,823,497 | | | | 41,396,116 | | | | – | | | | 41,396,116 | |
Diluted | | | 42,150,177 | | | | – | | | | 42,150,177 | | | | 41,396,116 | | | | 638,863 | | | | 42,034,979 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.95 | | | $ | 2.08 | | | $ | 3.03 | | | $ | (0.89 | ) | | $ | 4.11 | | | $ | 3.22 | |
| Diluted | | $ | 0.95 | | | $ | 2.05 | | | $ | 3.00 | | | $ | (0.89 | ) | | $ | 4.06 | | | $ | 3.17 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 86.3 | % | | | | | | | 86.3 | % | | | 84.8 | % | | | (1.3 | %) (a) | | | 83.5 | % |
| Medicare | | | 84.5 | % | | | | | | | 84.5 | % | | | 85.7 | % | | | (1.5 | %) (a) | | | 84.2 | % |
| Aggregate | | | 85.4 | % | | | | | | | 85.4 | % | | | 85.3 | % | | | (1.4 | %) (a) | | | 83.9 | % |
| Administrative expense ratio | | | 13.0 | % | | | (1.5 | (b) %) (c) | | | 11.5 | % | | | 14.3 | % | | | (1.6 | %) (b) | | | 12.7 | % |
| Days in claims payable | | �� 53 days | | | | | | 53 days | | 54 days | | | | | 54 days |
| (a) | Medical benefits expense: Medical benefits expense for the year ended December 31, 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 year ended December 31, 2008, would have decreased by $92.9 million. |
| (b) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government and Company investigations amounted to approximately $44.3 million and $103.0 million before income taxes, respectively, in the years ended December 31, 2009 and 2008. |
| (c) | Liability for investigation resolution: Based on the status of the government investigations, the Company recorded an expense of $59.8 million before and after income taxes, and an expense of $0.9 million before income taxes, in the year ended December 31, 2009. |
| (d) | Goodwill impairment: As of December 31, 2008, the Company concluded that goodwill associated with its Medicare reporting unit was impaired. To reflect the impairment, in 2008 the Company recorded expense of approximately $78.3 million before income taxes. |
Premium taxes were $91.0 million and $90.2 million for the years ended December 31, 2009 and 2008, respectively.
WCG Reports Annual and Fourth Quarter 2009 Results
Page 11
February 18, 2010
WELLCARE HEALTH PLANS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Reconciliation of GAAP Medical Benefits Ratios and Administrative Expense Ratio
to Medical Benefits Ratios and Administrative Expense Ratio Modified to Exclude Premium Taxes
The Company reports MBRs and administrative expense ratios on a non-GAAP basis to exclude premium taxes paid primarily on Medicaid managed care premium revenue. The Company believes that MBRs and administrative expense ratios excluding premium taxes are useful measures for investors, as premium taxes are recorded as both revenue of and expense to the Company, and therefore do not affect the Company’s net income.
| | | | | | Adjustments (see pages 9 and 10) | | | | | | | | | | |
| | | | |
| | | Quarter Ended December 31, 2009 | |
| Medical benefits ratio: | | | | | | | | | | | | | | | |
| Medicaid | | | 87.7 | % | | | | | | 87.7 | % | | | 1.2 | % | | | 88.9 | % |
| Medicare | | | 83.1 | % | | | | | | 83.1 | % | | | | | | | 83.1 | % |
| Aggregate | | | 85.4 | % | | | | | | 85.4 | % | | | 0.6 | % | | | 86.0 | % |
| | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 13.0 | % | | | (0.7 | %) | | | 12.3 | % | | | (0.6 | %) | | | 11.7 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended December 31, 2008 | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 83.7 | % | | | | | | | 83.7 | % | | | 2.6 | % | | | 86.3 | % |
| Medicare | | | 80.9 | % | | | | | | | 80.9 | % | | | | | | | 80.9 | % |
| Aggregate | | | 82.2 | % | | | | | | | 82.2 | % | | | 1.1 | % | | | 83.3 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 15.2 | % | | | (1.1 | %) | | | 14.1 | % | | | (1.2 | %) | | | 12.9 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2009 | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 86.3 | % | | | | | | | 86.3 | % | | | 2.5 | % | | | 88.8 | % |
| Medicare | | | 84.5 | % | | | | | | | 84.5 | % | | | | | | | 84.5 | % |
| Aggregate | | | 85.4 | % | | | | | | | 85.4 | % | | | 1.1 | % | | | 86.5 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 13.0 | % | | | (1.5 | %) | | | 11.5 | % | | | (1.2 | %) | | | 10.3 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2008 | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 84.8 | % | | | (1.3 | %) | | | 83.5 | % | | | 2.6 | % | | | 86.1 | % |
| Medicare | | | 85.7 | % | | | (1.5 | %) | | | 84.2 | % | | | | | | | 84.2 | % |
| Aggregate | | | 85.3 | % | | | (1.4 | %) | | | 83.9 | % | | | 1.2 | % | | | 85.1 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 14.3 | % | | | (1.6 | %) | | | 12.7 | % | | | (1.2 | %) | | | 11.5 | % |
WCG Reports Annual and Fourth Quarter 2009 Results
Page 12
February 18, 2010
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 cash flow excluding these changes is a useful measure for investors, as the excluded changes are a function of the timing of cash receipts from and payments to federal and state agencies at the end of a period.
| | | | |
| | | | | | | |
| Net cash provided by operating activities, as reported under GAAP | | $ | 57,925 | | | $ | 296,427 | |
| Modifications to eliminate changes in: | | | | | | | | |
| Premium and other receivables, net | | | 74,014 | | | | (70,513 | ) |
| Other receivables from government partners, net | | | 564 | | | | 4,780 | |
| Unearned premiums | | | (9,299 | ) | | | (61,359 | ) |
| Other payables to government partners | | | (30,047 | ) | | | 110,913 | |
| Net cash provided by operating activities, modified for the timing of receipts from and payments to government clients | | $ | 93,157 | | | $ | 280,248 | |
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