Exhibit 99.1
CONTACTS:
| Investor relations: | Media relations: |
| Gregg Haddad | Amy Knapp |
| 813-865-1284 | 813-290-6208 |
| gregg.haddad@wellcare.com | amy.knapp@wellcare.com |
WELLCARE REPORTS FIRST QUARTER 2010 RESULTS
Tampa, Florida (May 5, 2010) — WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the first quarter ended March 31, 2010. As determined under generally accepted accounting principles (“GAAP”), the Company reported net income of $6.4 million, or $0.15 per diluted share, compared with a net loss of $36.9 million, or $0.89 per diluted share, for the prior year period. Adjusted net income for the first quarter of 2010 was $7.4 million, or $0.17 per diluted share, as compared with $12.3 million, or $0.29 per diluted share, for the same period in 2009.
“WellCare’s first quarter financial and operating results were a solid start to the year,” said Alec Cunningham, WellCare’s chief executive officer. “This month, as WellCare celebrates its 25th anniversary, we are renewing our commitment to serving many of our country’s most vulnerable populations. Our mission has seldom been more important: to enhance our members’ health and quality of life by collaborating with our government clients and providers to deliver quality, cost-effective health care solutions.”
In addition to results determined under GAAP, net income and certain other operating results described in this news release are reported after adjustment for certain selling, general, and administrative (“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 First Quarter
Adjusted net income for the first quarter of 2010 was unfavorable in comparison to the first quarter of 2009 primarily due to the loss of gross margin from the December 31, 2009 withdrawal of the Company’s Medicare Advantage private fee-for-service (“PFFS”) plans, as well as decreased premium revenue from Medicare Advantage coordinated care plans (“CCPs”) and Medicare stand-alone prescription drug plans (“PDPs”). In addition, the Company recorded lower favorable development of prior periods’ medical benefits payable in the first quarter of 2010 versus 2009. These factors were offset in part by a reduction in SG&A expense, as well as improvement in the PDP medical benefits ratio (“MBR”).
Membership as of March 31, 2010, decreased to 2.2 million compared with 2.5 million members as of March 31, 2009. Medicaid segment membership decreased by 23,000 year-over-year to 1.3 million as of March 31, 2010, driven by the withdrawal in mid-2009 from certain Florida counties and programs, but offset in part by growth in Georgia and other states. Medicare Advantage membership decreased year-over-year by 152,000 members. The withdrawal from PFFS plans reduced membership by 111,000 year-over-year. Medicare Advantage CCP membership decreased 41,000 year-over-year, principally due to the impact of the previously disclosed 2009 CMS marketing sanction. PDP membership decreased 95,000 year-over-year, also largely due to the CMS marketing sanction.
Premium revenue for the first quarter 2010 decreased 24% year-over-year to $1.4 billion. The decrease is attributable to the withdrawal of PFFS plans and to the impact of the CMS marketing sanction on Medicare CCP and PDP premium revenue.
WCG Reports First Quarter 2010 Results
Page 2
May 5, 2010
Investment and other income decreased $1 million year-over-year, primarily due to lower average investment and cash balances.
Medical benefits expense was $1.2 billion, a decrease of 25% from the first quarter of 2009. The MBR was 86.1% in the first quarter 2010, compared with 86.7% in 2009. Excluding the impact of premium taxes, the first quarter 2010 MBR was 86.8%, a decrease of 110 basis points from 87.9% in the first quarter of 2009. The decrease was driven by the improved performance of the Company’s Medicaid plans and PDPs, as well as the withdrawal from PFFS plans.
SG&A expense as determined under GAAP was $173 million in the first quarter of 2010, compared with $272 million in the same period in 2009. Adjusted SG&A expense was $172 million in 2010, a decrease of 20% from $215 million in the same period last year. The decrease in adjusted SG&A expense resulted principally from the withdrawal from PFFS plans, as well as gains in operating efficiency. In addition, the elimination of the premium tax associated with the Georgia Medicaid program reduced SG&A expense in 2010 relative to 2009. These favorable variances were offset in part by increased costs for Medicare CCP marketing and infrastructure investments. Adjusted SG&A expense was 12.7% of total revenues in the first quarter of 2010, compared with 12.0% of total re venues in the same period in 2009.
Cash Flow and Financial Condition Highlights
Net cash used in operating activities as determined under GAAP was $171 million and $106 million for the quarters ended March 31, 2010 and 2009, respectively. Net cash used in operating activities, modified for the timing of receipts from and payments to the Company’s government clients, was $109 million for the quarter ended March 31, 2010, compared with net cash provided by operating activities of $54 million for the quarter ended March 31, 2009. The use of cash in the first quarter of 2010 was driven primarily by claims run-out from the Company’s withdrawal of its PFFS plans.
As of March 31, 2010, unregulated cash and short-term investments were approximately $121 million. Unregulated cash and short-term investments were approximately $120 million on December 31, 2009, and $213 million on March 31, 2009.
Days in claims payable were 55 days as of March 31, 2010, compared with 53 days as of December 31, 2009, and 51 days as of March 31, 2009. Excluding the impact of Medicare Advantage PFFS plans, days in claims payable were 50 days as of March 31, 2010, and 49 days as of December 31, 2009 and March 31, 2009.
Financial Outlook
The Company is updating its financial outlook for the year ended December 31, 2010.
| § | Adjusted net income per diluted share is anticipated to be between approximately $2.00 and $2.20, an increase from the previous guidance for adjusted net income per diluted share of approximately $1.90 to $2.15. |
| § | Premium revenue is expected to be between approximately $5.30 and $5.40 billion, an increase from the previous guidance for premium revenue of approximately $5.25 and $5.40 billion. |
| § | The following elements of WellCare’s financial outlook are unchanged from the Company’s previous guidance. |
| | · | The 2010 Medicaid segment MBR is anticipated to be below the 2009 MBR. |
| | · | The 2010 Medicare Advantage segment MBR will decrease relative to the 2009 MBR. |
| | · | The 2010 PDP segment MBR is anticipated to decrease from the 2009 MBR. |
| | · | The adjusted administrative expense ratio is expected to be in the high 12% range. |
WCG Reports First Quarter 2010 Results
Page 3
May 5, 2010
Webcast
A discussion of WellCare’s first quarter 2010 results will be webcast live on Wednesday, May 5, 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 and will be available for 30 days. 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 2.2 million members nationwide as of March 31, 2010. 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 a nd uncertainties include, but are not limited to, WellCare’s current financial outlook for 2010 and progress on top priorities such as improving health care quality and access, ensuring a competitive cost position, and reestablishing prudent, profitable growth.
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 Annual Report on Form 10-K for the year ended December 31, 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 First Quarter 2010 Results
Page 4
May 5, 2010
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; dollars in thousands except per share data)
| | | Three Months Ended March 31, | |
| | | | | | | |
| Revenues: | | | | | | |
Premium | | $ | 1,353,458 | | | $ | 1,791,927 | |
Investment and other income | | | 2,495 | | | | 3,334 | |
Total revenues | | | 1,355,953 | | | | 1,795,261 | |
| | | | | | | | | |
| Expenses: | | | | | | | | |
Medical benefits | | | 1,165,972 | | | | 1,552,998 | |
Selling, general and administrative | | | 173,337 | | | | 271,741 | |
Depreciation and amortization | | | 5,756 | | | | 5,739 | |
Interest | | | 10 | | | | 2,066 | |
Total expenses | | | 1,345,075 | | | | 1,832,544 | |
| | | | | | | | | |
| Income (loss) before income taxes | | | 10,878 | | | | (37,283 | ) |
| Income tax expense (benefit) | | | 4,460 | | | | (350 | ) |
| Net income (loss) | | $ | 6,418 | | | $ | (36,933 | ) |
| | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | |
Basic | | $ | 0.15 | | | $ | (0.89 | ) |
Diluted | | $ | 0.15 | | | $ | (0.89 | ) |
| | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | |
Basic | | | 42,193,662 | | | | 41,680,319 | |
Diluted | | | 42,707,241 | | | | 41,680,319 | |
WCG Reports First Quarter 2010 Results
Page 5
May 5, 2010
WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | | | | | |
| | | (Unaudited) | | | | |
| ASSETS | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 1,027,337 | | | $ | 1,158,131 | |
| Investments | | | 56,818 | | | | 62,722 | |
| Premium and other receivables, net | | | 262,027 | | | | 285,808 | |
| Funds receivable for the benefit of members | | | 43,832 | | | | 77,851 | |
| Taxes recoverable | | | 6,767 | | | | – | |
| Prepaid expenses and other current assets, net | | | 107,064 | | | | 104,079 | |
| Deferred income taxes | | | 21,563 | | | | 28,874 | |
Total current assets | | | 1,525,408 | | | | 1,717,465 | |
| Property, equipment and capitalized software, net | | | 67,077 | | | | 61,785 | |
| Goodwill | | | 111,131 | | | | 111,131 | |
| Other intangible assets, net | | | 12,578 | | | | 12,961 | |
| Long-term investments | | | 45,640 | | | | 51,710 | |
| Restricted investments | | | 130,486 | | | | 130,550 | |
| Deferred tax asset | | | 14,524 | | | | 18,745 | |
| Other assets | | | 10,715 | | | | 14,100 | |
| Total Assets | | $ | 1,917,559 | | | $ | 2,118,447 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current Liabilities: | | | | | | | | |
| Medical benefits payable | | $ | 706,825 | | | $ | 802,515 | |
| Unearned premiums | | | 143 | | | | 90,496 | |
| Accounts payable | | | 6,930 | | | | 5,270 | |
| Other accrued expenses and liabilities | | | 199,729 | | | | 219,691 | |
| Current portion of amounts accrued related to investigation resolution | | | 18,175 | | | | 18,192 | |
| Other payables to government partners | | | 42,694 | | | | 38,147 | |
| Taxes payable | | | – | | | | 4,888 | |
| Other current liabilities | | | 871 | | | | 871 | |
Total current liabilities | | | 975,367 | | | | 1,180,070 | |
| Amounts accrued related to investigation resolution | | | 40,733 | | | | 40,205 | |
| Other liabilities | | | 17,853 | | | | 17,272 | |
| Total liabilities | | | 1,033,953 | | | | 1,237,547 | |
| 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, 42,413,593 and 42,361,207 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively) | | | 424 | | | | 424 | |
| Paid-in capital | | | 421,220 | | | | 425,083 | |
| Retained earnings | | | 464,930 | | | | 458,512 | |
| Accumulated other comprehensive loss | | | (2,968 | ) | | | (3,119 | ) |
Total stockholders’ equity | | | 883,606 | | | | 880,900 | |
| Total Liabilities and Stockholders’ Equity | | $ | 1,917,559 | | | $ | 2,118,447 | |
WCG Reports First Quarter 2010 Results
Page 6
May 5, 2010
WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in thousands)
| | | Three Months Ended March 31, | |
| | | | | | | |
| Cash from (used in) operating activities: | | | | | | |
| Net income (loss) | | $ | 6,418 | | | $ | (36,933 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 5,756 | | | | 5,739 | |
Equity-based compensation expense | | | 1,142 | | | | 9,612 | |
Deferred taxes, net | | | 11,532 | | | | (318 | ) |
Changes in operating accounts: | | | | | | | | |
Premium and other receivables, net | | | 23,781 | | | | (69,876 | ) |
Other receivables from government partners, net | | | – | | | | (50,689 | ) |
Prepaid expenses and other current assets, net | | | (2,985 | ) | | | 4,907 | |
Medical benefits payable | | | (95,690 | ) | | | 113,622 | |
Unearned premiums | | | (90,353 | ) | | | (62,554 | ) |
Accounts payable and other accrued expenses | | | (18,466 | ) | | | (87,028 | ) |
Other payables to government partners | | | 4,547 | | | | 22,912 | |
Amounts accrued related to investigation resolution | | | 511 | | | | 44,800 | |
Taxes, net | | | (14,401 | ) | | | 2,288 | |
Other, net | | | 2,336 | | | | (2,236 | ) |
Net cash used in operating activities | | | (170,544 | ) | | | (105,754 | ) |
| Cash from (used in) investing activities: | | | | | | | | |
| Purchases of investments | | | (117 | ) | | | (18,756 | ) |
| Proceeds from sales and maturities of investments | | | 12,322 | | | | 19,051 | |
| Purchases of restricted investments | | | (289 | ) | | | (17,088 | ) |
| Proceeds from maturities of restricted investments | | | 368 | | | | 39,390 | |
| Additions to property, equipment and capitalized software, net | | | (4,235 | ) | | | (5,141 | ) |
Net cash (used in) provided by investing activities | | | (8,049 | ) | | | 17,456 | |
| Cash from (used in) financing activities: | | | | | | | | |
| Proceeds from option exercises and other | | | 770 | | | | – | |
| Purchase of treasury stock | | | (3,030 | ) | | | (1,432 | ) |
| Payments on debt | | | – | | | | (400 | ) |
| Payments on capital leases | | | (58 | ) | | | – | |
| Funds received for the benefit of members | | | 34,019 | | | | 42,788 | |
Net cash provided by financing activities | | | 31,701 | | | | 40,956 | |
| Cash and cash equivalents: | | | | | | | | |
| Decrease during the period | | | (130,794 | ) | | | (47,342 | ) |
| Balance at beginning of year | | | 1,158,131 | | | | 1,181,922 | |
| Balance at end of year | | $ | 1,027,337 | | | $ | 1,134,580 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for taxes | | $ | 8,161 | | | $ | 903 | |
| Cash paid for interest | | $ | 7 | | | $ | 1,790 | |
Property, equipment and capitalized software acquired through capital leases | | $ | 8,411 | | | $ | – | |
WCG Reports First Quarter 2010 Results
Page 7
May 5, 2010
WELLCARE HEALTH PLANS, INC.
MEMBERSHIP STATISTICS
| | | | |
| | | | | | | |
| Membership by Program | | | | | | |
| Medicaid Membership | | | | | | |
TANF | | | 1,076,000 | | | | 1,080,000 | |
S-CHIP | | | 166,000 | | | | 164,000 | |
SSI and ABD | | | 78,000 | | | | 92,000 | |
FHP | | | 12,000 | | | | 19,000 | |
Total Medicaid Membership | | | 1,332,000 | | | | 1,355,000 | |
| | | | | | | | | |
| Medicare Membership | | | | | | | | |
Medicare Advantage | | | 118,000 | | | | 270,000 | |
Prescription Drug Plan (stand-alone) | | | 736,000 | | | | 831,000 | |
Total Medicare Membership | | | 854,000 | | | | 1,101,000 | |
Total Membership | | | 2,186,000 | | | | 2,456,000 | |
| Medicaid Membership by State | | | | | | |
| Florida | | | 422,000 | | | | 490,000 | |
| Georgia | | | 537,000 | | | | 496,000 | |
| Other states | | | 373,000 | | | | 369,000 | |
Total Medicaid Membership | | | 1,332,000 | | | | 1,355,000 | |
WCG Reports First Quarter 2010 Results
Page 8
May 5, 2010
WELLCARE HEALTH PLANS, INC.
SEGMENT INFORMATION
(Unaudited; dollars in thousands)
| | | Three Months Ended March 31, | |
| | | | | | | |
| Premium revenue: | | | | | | |
| Medicaid: | | | | | | |
Florida | | $ | 223,818 | | | $ | 258,387 | |
Georgia | | | 325,081 | | | | 324,924 | |
Other states | | | 260,134 | | | | 225,867 | |
Total Medicaid | | | 809,033 | | | | 809,178 | |
| | | | | | | | | |
| Medicare: | | | | | | | | |
Medicare Advantage plans | | | 351,083 | | | | 733,099 | |
Prescription Drug plans | | | 193,342 | | | | 249,650 | |
Total | | | 544,425 | | | | 982,749 | |
| Total premium revenue | | $ | 1,353,458 | | | $ | 1,791,927 | |
The Company has reassessed its segment reporting practices, and beginning with the quarter ended March 31, 2010, the Company is reporting three operating segments: Medicaid, Medicare Advantage, and PDPs. The Medicare Advantage and PDP segments previously were reported by the Company as its Medicare segment. Results for the year 2009 have been reclassified to reflect the new segment reporting. PFFS plans, which are no longer offered effective January 1, 2010, are reported in the Medicare Advantage segment. The following table provides premium revenue and medical benefits expense information for the Medicare Advantage and PDP segments for the quarters ended March 31, June 30, September 30, and December 31, 2009.
| | | | |
| | | | | | | | | | | | | |
| Premium revenue: | | | | | | | | | | | | |
Medicare Advantage segment | | $ | 733,099 | | | $ | 749,813 | | | $ | 660,009 | | | $ | 632,521 | |
Prescription Drug Plans segment | | | 249,650 | | | | 224,279 | | | | 191,911 | | | | 169,239 | |
Total | | $ | 982,749 | | | $ | 974,092 | | | $ | 851,920 | | | $ | 801,760 | |
| | | | | | | | | | | | | | | | | |
| Medical benefits expense: | | | | | | | | | | | | | | | | |
Medicare Advantage segment | | | 611,730 | | | | 600,258 | | | | 550,130 | | | | 537,260 | |
Prescription Drug Plans segment | | | 251,486 | | | | 211,945 | | | | 159,753 | | | | 129,284 | |
Total | | $ | 863,216 | | | $ | 812,203 | | | $ | 709,883 | | | $ | 666,544 | |
WCG Reports First Quarter 2010 Results
Page 9
May 5, 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 first quarters ended March 31, 2010 and 2009, as determined under GAAP, reconciled to the adjusted statements of operations and related measures for each of the same periods.
| | | Quarter Ended March 31, 2010 | | Quarter Ended March 31, 2009 |
| | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| Premium | | $ | 1,353,458 | | | $ | – | | | | $ | 1,353,458 | | | $ | 1,791,927 | | | $ | – | | | | $ | 1,791,927 | |
| Investment and other income | | | 2,495 | | | | – | | | | | 2,495 | | | | 3,334 | | | | – | | | | | 3,334 | |
Total revenues | | | 1,355,953 | | | | – | | | | | 1,355,953 | | | | 1,795,261 | | | | – | | | | | 1,795,261 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,165,972 | | | | – | | | | | 1,165,972 | | | | 1,552,998 | | | | – | | | | | 1,552,998 | |
| Selling, general, and administrative | | | 173,337 | | | | (1,267 | ) | (a) (b) | | | 172,070 | | | | 271,521 | | | | (56,300 | ) | (a) (b) | | | 215,221 | |
| Depreciation and amortization | | | 5,756 | | | | – | | | | | 5,756 | | | | 5,739 | | | | – | | | | | 5,739 | |
| Interest | | | 10 | | | | – | | | | | 10 | | | | 2,286 | | | | – | | | | | 2,286 | |
Total expenses | | | 1,345,075 | | | | (1,267 | ) | | | | 1,343,808 | | | | 1,832,544 | | | | (56,300 | ) | | | | 1,776,244 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 10,878 | | | | 1,267 | | | | | 12,145 | | | | (37,283 | ) | | | 56,300 | | | | | 19,017 | |
| Income tax expense (benefit) | | | 4,460 | | | | 321 | | | | | 4,781 | | | | (350 | ) | | | 7,097 | | | | | 6,747 | |
| Net income (loss) | | $ | 6,418 | | | $ | 946 | | | | $ | 7,364 | | | $ | (36,933 | ) | | $ | 49,203 | | | | $ | 12,270 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 42,193,662 | | | | – | | | | | 42,193,662 | | | | 41,680,319 | | | | – | | | | | 41,680,319 | |
Diluted | | | 42,707,241 | | | | – | | | | | 42,707,241 | | | | 41,680,319 | | | | 194,529 | | | | | 41,874,848 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.15 | | | $ | 0.02 | | | | $ | 0.17 | | | $ | (0.89 | ) | | $ | 1.18 | | | | $ | 0.29 | |
| Diluted | | $ | 0.15 | | | $ | 0.02 | | | | $ | 0.17 | | | $ | (0.89 | ) | | $ | 1.18 | | | | $ | 0.29 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 86.7 | % | | | | | | | | 86.7 | % | | | 85.2 | % | | | | | | | | 85.2 | % |
| Medicare Advantage | | | 78.7 | % | | | | | | | | 78.7 | % | | | 83.4 | % | | | | | | | | 83.4 | % |
| Prescription Drug Plans | | | 97.2 | % | | | | | | | | 97.2 | % | | | 100.7 | % | | | | | | | | 100.7 | % |
| Aggregate | | | 86.1 | % | | | | | | | | 86.1 | % | | | 86.7 | % | | | | | | | | 86.7 | % |
| Administrative expense ratio | | | 12.8 | % | | | (0.1 | %) | (a) (b) | | | 12.7 | % | | | 15.1 | % | | | (3.1 | %) | (a)(b) | | | 12.0 | % |
| Days in claims payable | | 55 days | | | | | | | 55 days | | 51 days | | | | | | | 51 days |
| (a) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government and Company investigations amounted to $0.9 million and $11.5 million before income taxes, respectively, in the quarters ended March 31, 2010 and 2009. |
| (b) | Liability for investigation resolution: Based on the status of the government investigations, the Company recorded expense before and after income taxes of $0.4 million and $44.8 million, respectively, in the quarters ended March 31, 2010 and 2009. |
WCG Reports First Quarter 2010 Results
Page 10
May 5, 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.
| | | | | | | | | | | |
| | | | |
| | | Quarter Ended March 31,2010 |
| Medical benefits ratio: | | | | | | | | | | | | | | | |
| Medicaid | | | 86.7 | % | | | | | | 86.7 | % | | | 1.1 | % | | | 87.8 | % |
| Medicare Advantage | | | 78.7 | % | | | | | | 78.7 | % | | | | | | | 78.7 | % |
Prescription Drug Plans (stand-alone) | | | 97.2 | % | | | | | | 97.2 | % | | | | | | | 97.2 | % |
| Aggregate | | | 86.1 | % | | | | | | 86.1 | % | | | 0.7 | % | | | 86.8 | % |
| | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 12.8 | % | | | (0.1 | %) | | | 12.7 | % | | | (0.6 | %) | | | 12.1 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended March 31, 2009 |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | | 85.2 | % | | | | | | | 85.2 | % | | | 2.7 | % | | | 87.9 | % |
| Medicare Advantage | | | 83.4 | % | | | | | | | 83.4 | % | | | | | | | 83.4 | % |
Prescription Drug Plans (stand-alone) | | | 100.7 | % | | | | | | | 100.7 | % | | | | | | | 100.7 | % |
| Aggregate | | | 86.7 | % | | | | | | | 86.7 | % | | | 1.2 | % | | | 87.9 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 15.1 | % | | | (3.1 | %) | | | 12.0 | % | | | (1.2 | %) | | | 10.8 | % |
Premium taxes were $9.7 million and $24.5 million, respectively, in the quarters ended March 31, 2010 and 2009.
WCG Reports First Quarter 2010 Results
Page 11
May 5, 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.
| | | Three Months Ended March 31, |
| | | | | |
| Net cash used in operating activities, as reported under GAAP | | $ | (170,544 | ) | | $ | (105,754 | ) |
| Modifications to eliminate changes in: | | | | | | | | |
| Premium and other receivables, net | | | (23,781 | ) | | | 69,876 | |
| Other receivables from government partners, net | | | – | | | | 50,689 | |
| Unearned premiums | | | 90,353 | | | | 62,554 | |
| Other payables to government partners | | | (4,547 | ) | | | (22,912 | ) |
| Net cash used in operating activities, modified for the timing of receipts from and payments to government clients | | $ | (108,519 | ) | | $ | 54,453 | |
Reconciliation of GAAP Days in Claims Payable to Days in Claims Payable Modified
to Eliminate the Impact of Medicare Advantage Private Fee-for-Service Plans
The Company reports days in claims payable on a non-GAAP basis to exclude the impact of Medicare Advantage private fee-for-service plans. The Company believes that days in claims payable excluding the impact of PFFS plans is a useful measure for investors, because the Company withdrew these plans on December 31, 2009 and as a result the impact of the plans on historical operations is not necessarily indicative of the Company’s future long-term business operations. Days in claims payable is equal to the medical benefits payable at the end of a quarter divided by average medical benefits expense per calendar day for the quarter.
| | | |
| | | | | | | | | | | |
| Days in claims payable, as reported under GAAP | | | 51 | | | | 52 | | | | 56 | | | | 53 | | | | 55 | |
| Modification to eliminate impact of PFFS plans | | | (2 | ) | | | (2 | ) | | | (4 | ) | | | (4 | ) | | | (5 | ) |
| Days in claims payable, modified to eliminate the impact of PFFS plans | | | 49 | | | | 50 | | | | 52 | | | | 49 | | | | 50 | |
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