CONTACTS:
| Investor relations: | | Media relations: | |
| Gregg Haddad | | Amy Knapp | |
| 813-206-3916 | | 813-290-6208 | |
| gregg.haddad@wellcare.com | | amy.knapp@wellcare.com | |
WELLCARE REPORTS SECOND QUARTER 2011 RESULTS
Company Announces New $300 Million Credit Facility to Support Growth
Tampa, Florida (August 3, 2011) — WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the second quarter ended June 30, 2011. As determined under generally accepted accounting principles (“GAAP”), net income for the second quarter of 2011 was $69.6 million, or $1.61 per diluted share, compared with a net loss of $128.9 million, or $3.05 per diluted share, for the second quarter of 2010. The 2010 second quarter net loss arose principally due to $256.5 million of pre-tax charges associated with the previously disclosed government investigations and related litigation. Adjusted net income for the second quarter of 2011 was $76.7 million, or $1.77 per diluted share, compared with $38.6 million, or $0.90 per diluted share for the second quarter of 2010.
“These results, as well as our outlook, highlight the progress we have made on WellCare’s top priorities and in particular demonstrate our focus on delivering prudent, profitable growth,” said Alec Cunningham, WellCare’s chief executive officer. “We will continue to strengthen the alignment of our capabilities with the needs of our government customers, members, and business partners to help ensure we sustain and build on this momentum.”
WellCare’s recent accomplishments are highlighted by second quarter membership growth of 9% year-over-year, which was driven by the Medicare Prescription Drug Plans (“PDP”) and Medicare Advantage segments. In early July, the Kentucky Cabinet for Health and Family Services selected WellCare of Kentucky to serve the state’s new Medicaid program, which is expected to commence in October 2011. On August 1, 2011, WellCare entered into a new $300 million senior secured credit facility which provides liquidity to support growth, as well as additional flexibility in the management of the Company’s capital structure. WellCare also has continued to achieve progress on its health care quality and access initiatives with the recent accreditation of its Missouri plan by the National Committee for Quality Assurance and with broad-based improvement in Healthcare Effectiveness Data and Information Set results across the Company’s lines of business.
Highlights of Operations for the Second Quarter
Adjusted net income for the second quarter of 2011 increased relative to the second quarter of 2010, primarily due to the favorable development of prior years’ medical benefits payable as well as higher premium revenue, offset in part by increased selling, general, and administrative (“SG&A”) expense and increases in the Medicare Advantage and PDP segments’ medical benefits ratios (“MBRs”).
Membership as of June 30, 2011, increased to 2.4 million, compared with 2.2 million members as of June 30, 2010. PDP segment membership increased 209,000 year-over-year, or 28%. Medicare Advantage membership increased year-over-year by 9,000 members, or 8%. Medicaid segment membership decreased by 11,000 year-over-year to 1.3 million members as of June 30, 2011.
WCG Reports Second Quarter 2011 Results
Page 2
August 3, 2011
Premium revenue for the second quarter of 2011 increased 10% year-over-year to $1.5 billion. The increase mainly was due to growth in PDP segment premium revenue, which increased 33% year-over-year. In addition, second quarter 2011 Medicare Advantage segment revenue increased 11%, and Medicaid segment premium revenue increased 4%, both relative to the second quarter of 2010.
Medical benefits expense for the second quarter of 2011 was $1.2 billion, an increase of 5% from the second quarter of 2010. The MBR was 80.7% in the second quarter of 2011, compared with 84.5% in the second quarter of 2010. The decrease principally resulted from favorable development of prior years’ medical benefits payable, predominately in the Medicaid segment, offset in part by increases in the Medicare Advantage and PDP segments’ MBRs.
SG&A expense as determined under GAAP was $165 million in the second quarter of 2011, compared with $395 million for the same period in 2010. Adjusted SG&A was $153 million in the second quarter of 2011, an increase from $139 million in the same period last year. The year-over-year increase in adjusted SG&A expense was driven primarily by technology investments, including those required by regulatory changes, investments in health care quality and medical management, and membership growth. These increases were offset in part by improvements in operating efficiency. The adjusted administrative expense ratio was 10.4% in the second quarter of 2011, unchanged from the same period in 2010.
Credit Facility
On August 1, 2011, WellCare entered into a $300 million senior secured credit facility that can be used for general corporate purposes. The credit agreement includes a $150 million term loan facility as well as a $150 million revolving credit facility. Also on August 1, 2011, the Company borrowed $150 million pursuant to the term loan facility. Both the term loan and revolving credit facility are set to expire in August 2016. The credit agreement contains customary covenants and restrictions. The new credit agreement replaces WellCare’s previous $65 million revolving credit facility, which was never drawn upon.
Cash Flow and Financial Condition Highlights
Net cash used in operating activities as determined under GAAP was $31 million and $245 million for the six months ended June 30, 2011 and 2010, respectively. Net cash provided by operating activities, modified for the timing of receipts from, and payments to, WellCare’s government customers, was $45 million for the first half of 2011, compared with the net use of cash of $121 million over the same six month period in 2010.
As of June 30, 2011, unregulated cash and investments were approximately $188 million. Unregulated cash and investments were approximately $130 million as of March 31, 2011, and $160 million on June 30, 2010.
Days in claims payable were 56 days as of June 30, 2011, compared with 57 days as of March 31, 2011, and 54 days as of June 30, 2010.
Financial Outlook
WellCare is updating its financial outlook for the year ended December 31, 2011. The following elements of WellCare’s financial outlook have changed:
| · | Adjusted net income per diluted share now is expected to be between approximately $4.60 and $4.80, an increase from the previous guidance for adjusted net income per diluted share of between approximately $3.35 and $3.65. The increase is driven by favorable development during the first half of 2011 of prior years’ medical benefits payable, as well as an improved operating outlook. |
WCG Reports Second Quarter 2011 Results
Page 3
August 3, 2011
| · | Premium revenue is expected to be between approximately $6.0 and $6.1 billion. The previous guidance was for premium revenue to be between $5.8 and $5.9 billion. The increase results primarily from the expected premium revenue from the new Kentucky Medicaid program. |
The following elements of WellCare’s financial outlook are unchanged:
| · | The adjusted administrative expense ratio is expected to be in the range of 10.7% to 10.9%. |
| · | The 2011 Medicaid segment MBR is anticipated to be below the 2010 MBR. |
| · | The 2011 Medicare Advantage and PDP segments’ MBRs each are anticipated to increase relative to the respective 2010 segment MBRs. |
All elements of the Company’s outlook exclude the impact of Medicaid premium taxes.
Webcast
A discussion of WellCare’s second quarter 2011 results will be webcast live on Wednesday, August 3, 2011, 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 2.4 million members nationwide as of June 30, 2011. For more information about WellCare, please visit the Company’s website at www.wellcare.com.
Basis of Presentation
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 SG&A expenses related to previously disclosed government investigations and related litigation and associated resolution costs 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.
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. The Company’s 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 progress on top priorities such as improving health care quality and access, ensuring a competitive cost position, and delivering 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, 2010, and other subsequent 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 Second Quarter 2011 Results
Page 4
August 3, 2011
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Dollars in thousands except per share data)
| | | Three Months Ended June 30, | | | | |
| | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
| Premium | | $ | 1,467,239 | | | $ | 1,328,553 | | | $ | 2,920,791 | | | $ | 2,672,267 | |
| Medicaid premium taxes | | | 18,105 | | | | 9,384 | | | | 36,969 | | | | 19,128 | |
Total premium | | | 1,485,344 | | | | 1,337,937 | | | | 2,957,760 | | | | 2,691,395 | |
| Investment and other income | | | 2,291 | | | | 2,712 | | | | 4,617 | | | | 5,207 | |
Total revenues | | | 1,487,635 | | | | 1,340,649 | | | | 2,962,377 | | | | 2,696,602 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,184,294 | | | | 1,122,791 | | | | 2,429,335 | | | | 2,288,763 | |
| Selling, general and administrative | | | 164,767 | | | | 395,386 | | | | 334,010 | | | | 558,979 | |
| Medicaid premium taxes | | | 18,105 | | | | 9,384 | | | | 36,969 | | | | 19,128 | |
| Depreciation and amortization | | | 6,896 | | | | 5,891 | | | | 13,370 | | | | 11,647 | |
| Interest | | | 98 | | | | 33 | | | | 175 | | | | 43 | |
Total expenses | | | 1,374,160 | | | | 1,533,485 | | | | 2,813,859 | | | | 2,878,560 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before income taxes | | | 113,475 | | | | (192,836 | ) | | | 148,518 | | | | (181,958 | ) |
| Income tax expense (benefit) | | | 43,875 | | | | (63,965 | ) | | | 57,588 | | | | (59,505 | ) |
| Net income (loss) | | $ | 69,600 | | | $ | (128,871 | ) | | $ | 90,930 | | | $ | (122,453 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.63 | | | $ | (3.05 | ) | | $ | 2.13 | | | $ | (2.90 | ) |
| Diluted | | $ | 1.61 | | | $ | (3.05 | ) | | $ | 2.11 | | | $ | (2.90 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 42,752,235 | | | | 42,308,856 | | | | 42,686,323 | | | | 42,252,018 | |
| Diluted | | | 43,293,926 | | | | 42,308,856 | | | | 43,155,051 | | | | 42,252,018 | |
WCG Reports Second Quarter 2011 Results
Page 5
August 3, 2011
WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands except per share data)
| | | | | | | |
| ASSETS | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 1,255,995 | | | $ | 1,359,548 | |
| Investments | | | 201,589 | | | | 108,788 | |
| Premium receivables, net | | | 209,826 | | | | 127,796 | |
| Funds receivable for the benefit of members | | | 10,114 | | | | 33,182 | |
| Income taxes receivable | | | – | | | | 9,973 | |
| Prepaid expenses and other current assets, net | | | 127,030 | | | | 114,492 | |
| Deferred income tax asset | | | 41,627 | | | | 61,392 | |
Total current assets | | | 1,846,181 | | | | 1,815,171 | |
| Property, equipment and capitalized software, net | | | 78,247 | | | | 76,825 | |
| Goodwill | | | 111,131 | | | | 111,131 | |
| Other intangible assets, net | | | 10,662 | | | | 11,428 | |
| Long-term investments | | | 91,717 | | | | 62,931 | |
| Restricted investments | | | 68,653 | | | | 107,569 | |
| Deferred income tax asset | | | 52,817 | | | | 58,340 | |
| Other assets | | | 3,555 | | | | 3,898 | |
| Total Assets | | $ | 2,262,963 | | | $ | 2,247,293 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current Liabilities: | | | | | | | | |
| Medical benefits payable | | $ | 723,671 | | | $ | 742,990 | |
| Unearned premiums | | | 66,194 | | | | 67,383 | |
| Accounts payable | | | 6,575 | | | | 8,284 | |
| Other accrued expenses and liabilities | | | 154,359 | | | | 199,033 | |
| Current portion of amounts accrued related to investigation resolution | | | 49,023 | | | | 121,406 | |
| Note payable related to investigation resolution | | | 35,000 | | | | – | |
| Other payables to government partners | | | 53,140 | | | | 46,605 | |
| Income taxes payable | | | 20,708 | | | | – | |
Total current liabilities | | | 1,108,670 | | | | 1,185,701 | |
| Amounts accrued related to investigation resolution | | | 207,222 | | | | 216,136 | |
| Other liabilities | | | 11,112 | | | | 13,410 | |
Total liabilities | | | 1,327,004 | | | | 1,415,247 | |
| 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, 42,675,763 and 42,541,725 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively) | | | 427 | | | | 425 | |
| Paid-in capital | | | 441,285 | | | | 428,818 | |
| Retained earnings | | | 496,042 | | | | 405,112 | |
| Accumulated other comprehensive loss | | | (1,795 | ) | | | (2,309 | ) |
Total stockholders’ equity | | | 935,959 | | | | 832,046 | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,262,963 | | | $ | 2,247,293 | |
WCG Reports Second Quarter 2011 Results
Page 6
August 3, 2011
WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
| | | | |
| | | | | | | |
| Cash provided by (used in) operating activities: | | | | | | |
| Net income (loss) | | $ | 90,930 | | | $ | (122,453 | ) |
| Adjustments to reconcile net income (loss) to net cash used in | | | | | | | | |
| operating activities: | | | | | | | | |
| Depreciation and amortization | | | 13,370 | | | | 11,647 | |
| Equity-based compensation expense | | | 9,875 | | | | 2,479 | |
| Incremental tax benefit from equity-based compensation | | | (1,137 | ) | | | – | |
| Deferred taxes, net | | | 25,288 | | | | (62,913 | ) |
| Changes in operating accounts: | | | | | | | | |
| Premium receivables, net | | | (82,030 | ) | | | (30,551 | ) |
| Prepaid expenses and other current assets, net | | | (12,538 | ) | | | (2,147 | ) |
| Medical benefits payable | | | (19,319 | ) | | | (142,366 | ) |
| Unearned premiums | | | (1,189 | ) | | | (90,382 | ) |
| Accounts payable and other accrued expenses | | | (42,045 | ) | | | (43,703 | ) |
| Other payables to government partners | | | 6,535 | | | | (2,195 | ) |
| Amounts accrued related to investigation resolution | | | (46,296 | ) | | | 246,621 | |
| Income taxes, net | | | 29,540 | | | | (455 | ) |
| Other, net | | | (2,278 | ) | | | (8,196 | ) |
| Net cash used in operating activities | | | (31,294 | ) | | | (244,614 | ) |
| Cash provided by (used in) investing activities: | | | | | | | | |
| Purchases of investments | | | (286,184 | ) | | | (2,049 | ) |
| Proceeds from sale and maturities of investments | | | 165,617 | | | | 30,603 | |
| Purchases of restricted investments | | | (15,789 | ) | | | (6,777 | ) |
| Proceeds from maturities of restricted investments | | | 54,520 | | | | 5,729 | |
| Additions to property, equipment and capitalized software, net | | | (17,186 | ) | | | (6,872 | ) |
| Net cash (used in) provided by investing activities | | | (99,022 | ) | | | 20,634 | |
| Cash provided by (used in) financing activities: | | | | | | | | |
| Proceeds from option exercises and other | | | 4,509 | | | | 989 | |
| Incremental tax benefit from equity-based compensation | | | 1,137 | | | | – | |
| Purchase of treasury stock | | | (774 | ) | | | (3,291 | ) |
| Payments on capital leases | | | (1,177 | ) | | | (138 | ) |
| Funds received for the benefit of members | | | 23,068 | | | | 48,553 | |
| Net cash provided by financing activities | | | 26,763 | | | | 46,113 | |
| Cash and cash equivalents: | | | | | | | | |
| Decrease during period | | | (103,553 | ) | | | (177,867 | ) |
| Balance at beginning of year | | | 1,359,548 | | | | 1,158,131 | |
| Balance at end of period | | $ | 1,255,995 | | | $ | 980,264 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for taxes | | $ | 3,710 | | | $ | 10,725 | |
| Cash paid for interest | | $ | 173 | | | $ | – | |
| Equipment acquired through capital leases | | $ | – | | | $ | 8,411 | |
| Issuance of note payable related to investigation resolution | | $ | 35,000 | | | $ | – | |
WCG Reports Second Quarter 2011 Results
Page 7
August 3, 2011
WELLCARE HEALTH PLANS, INC.
MEMBERSHIP STATISTICS
| | | | |
| | | | | | | |
| Membership by Program | | | | | | |
| Medicaid Membership | | | | | | |
| TANF | | | 1,064,000 | | | | 1,071,000 | |
| S-CHIP | | | 164,000 | | | | 168,000 | |
| SSI and ABD | | | 79,000 | | | | 78,000 | |
| FHP | | | 10,000 | | | | 11,000 | |
Total Medicaid Membership | | | 1,317,000 | | | | 1,328,000 | |
| | | | | | | | | |
| Medicare Membership | | | | | | | | |
| Medicare Advantage | | | 124,000 | | | | 115,000 | |
| Prescription Drug Plan (stand-alone) | | | 950,000 | | | | 741,000 | |
Total Medicare Membership | | | 1,074,000 | | | | 856,000 | |
Total Membership | | | 2,391,000 | | | | 2,184,000 | |
| | | | | | | | | |
| Medicaid Membership by State | | | | | | | | |
| Florida | | | 404,000 | | | | 420,000 | |
| Georgia | | | 559,000 | | | | 537,000 | |
| Other states | | | 354,000 | | | | 371,000 | |
Total Medicaid Membership | | | 1,317,000 | | | | 1,328,000 | |
WCG Reports Second Quarter 2011 Results
Page 8
August 3, 2011
WELLCARE HEALTH PLANS, INC.
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
| | | Three Months Ended June 30, | | | | |
| | | | | | | | | | | | | |
| Premium revenue: | | | | | | | | | | | | |
| Medicaid: | | | | | | | | | | | | |
| Florida | | $ | 219,136 | | | $ | 222,427 | | | $ | 440,801 | | | $ | 446,245 | |
| Georgia | | | 344,702 | | | | 328,659 | | | | 697,814 | | | | 653,817 | |
| Other states | | | 261,442 | | | | 240,228 | | | | 523,644 | | | | 490,541 | |
| Medicaid premium taxes | | | 18,105 | | | | 9,384 | | | | 36,969 | | | | 19,128 | |
| Total Medicaid | | | 843,385 | | | | 800,698 | | | | 1,699,228 | | | | 1,609,731 | |
| | | | | | | | | | | | | | | | | |
| Medicare: | | | | | | | | | | | | | | | | |
| Medicare Advantage plans | | | 365,773 | | | | 329,945 | | | | 720,418 | | | | 681,028 | |
| Prescription Drug plans | | | 276,186 | | | | 207,294 | | | | 538,114 | | | | 400,636 | |
| Total Medicare | | | 641,959 | | | | 537,239 | | | | 1,258,532 | | | | 1,081,664 | |
| Total Premium Revenue | | $ | 1,485,344 | | | $ | 1,337,937 | | | $ | 2,957,760 | | | $ | 2,691,395 | |
WCG Reports Second Quarter 2011 Results
Page 9
August 3, 2011
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. The following are statements of operations and related measures for the second quarter ended June 30, 2011 and 2010, as determined under GAAP, reconciled to the Adjusted Statements of Operations and related measures for each of the same periods.
| | | Three Months Ended June 30, 2011 | | | | Three Months Ended June 30, 2010 |
| | | | | | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| Premium | $ | 1,467,239 | | $ | – | | | $ | 1,467,239 | | | $ | 1,328,553 | | $ | – | | | $ | 1,328,553 |
| Medicaid premium taxes | | | | | | | | | | | | | | | | | | | | |
| Total premium | | 1,485,344 | | | – | | | | 1,485,344 | | | | 1,337,937 | | | – | | | | 1,337,937 |
| Investment and other income | | | | | | | | | | | | | | | | | | | | |
| Total revenues | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | 1,184,294 | | | – | | | | 1,184,294 | | | | 1,122,791 | | | – | | | | 1,122,791 |
| Selling, general, and administrative | | 164,767 | | | (12,109) | (a) (b) | | | 152,658 | | | | 395,386 | | | (256,456) | (a) (b) | | | 138,930 |
| Medicaid premium taxes | | 18,105 | | | – | | | | 18,105 | | | | 9,384 | | | – | | | | 9,384 |
| Depreciation and amortization | | 6,896 | | | – | | | | 6,896 | | | | 5,891 | | | – | | | | 5,891 |
| Interest | | | | | | | | | | | | | | | | | | | | |
| Total expenses | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Income (loss) before income taxes | | 113,475 | | | 12,109 | | | | 125,584 | | | | (192,836) | | | 256,456 | | | | 63,620 |
| Income tax expense (benefit) | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | $ | | | $ | | | | $ | | | | $ | | | $ | | | | $ | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares: | | | | | | | | | | | | | | | | | | | | |
| Basic | | 42,752,235 | | | – | | | | 42,752,235 | | | | 42,308,856 | | | – | | | | 42,308,856 |
| Diluted | | 43,293,926 | | | – | | | | 43,293,926 | | | | 42,308,856 | | | 461,131 | | | | 42,769,987 |
| | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | |
| Basic | $ | 1.63 | | $ | 0.16 | | | $ | 1.79 | | | $ | (3.05) | | $ | 3.96 | | | $ | 0.91 |
| Diluted | $ | 1.61 | | $ | 0.16 | | | $ | 1.77 | | | $ | (3.05) | | $ | 3.95 | | | $ | 0.90 |
| | | | | | | | | | | | | | | | | | | | | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | 78.5% | | | | | | | 78.5% | | | | 87.0% | | | | | | | 87.0% |
| Medicare Advantage | | 81.5% | | | | | | | 81.5% | | | | 78.4% | | | | | | | 78.4% |
| Prescription Drug Plans | | 86.4% | | | | | | | 86.4% | | | | 84.8% | | | | | | | 84.8% |
| Aggregate | | 80.7% | | | | | | | 80.7% | | | | 84.5% | | | | | | | 84.5% |
| | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | 11.2% | | | -0.8% | (a) (b) | | | 10.4% | | | | 29.7% | | | -19.3% | (a) (b) | | | 10.4% |
| | | | | | | | | | | | | | | | | | | | | |
| Days in claims payable | | 56 | | | | | | | 56 | | | | 54 | | | | | | | 54 |
| (a) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government and Company investigations amounted to $7.9 million and $7.8 million, respectively, in the quarters ended June 30, 2011 and 2010. |
| (b) | Liability for investigation resolution: Based on the status of the government investigations, the Company recorded expense of $4.2 million and $248.7 million, respectively, in the quarters ended June 30, 2011 and 2010. |
WCG Reports Second Quarter 2011 Results
Page 10
August 3, 2011
| | 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) |
| | | Six Months Ended June 30, 2011 | | | | Six Months Ended June 30, 2010 |
| | | | | | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| Premium | $ | 2,920,791 | | $ | – | | | $ | 2,920,791 | | | $ | 2,672,267 | | $ | – | | | $ | 2,672,267 |
| Medicaid premium taxes | | | | | | | | | | | | | | | | | | | | |
| Total premium | | 2,957,760 | | | – | | | | 2,957,760 | | | | 2,691,395 | | | – | | | | 2,691,395 |
| Investment and other income | | | | | | | | | | | | | | | | | | | | |
| Total revenues | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | 2,429,335 | | | – | | | | 2,429,335 | | | | 2,288,763 | | | – | | | | 2,288,763 |
| Selling, general, and administrative | | 334,010 | | | (22,856) | (a) (b) | | | 311,154 | | | | 558,979 | | | (257,724) | (a) (b) | | | 301,255 |
| Medicaid premium taxes | | 36,969 | | | – | | | | 36,969 | | | | 19,128 | | | – | | | | 19,128 |
| Depreciation and amortization | | 13,370 | | | – | | | | 13,370 | | | | 11,647 | | | – | | | | 11,647 |
| Interest | | | | | | | | | | | | | | | | | | | | |
| Total expenses | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Income (loss) before income taxes | | 148,518 | | | 22,856 | | | | 171,374 | | | | (181,958) | | | 257,724 | | | | 75,766 |
| Income tax expense (benefit) | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | $ | | | $ | | | | $ | | | | $ | | | $ | | | | $ | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares: | | | | | | | | | | | | | | | | | | | | |
| Basic | | 42,686,323 | | | – | | | | 42,686,323 | | | | 42,252,018 | | | – | | | | 42,252,018 |
| Diluted | | 43,155,051 | | | – | | | | 43,155,051 | | | | 42,252,018 | | | 507,320 | | | | 42,759,338 |
| | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | |
| Basic | $ | 2.13 | | $ | 0.33 | | | $ | 2.46 | | | $ | (2.90) | | $ | 3.99 | | | $ | 1.09 |
| Diluted | $ | 2.11 | | $ | 0.32 | | | $ | 2.43 | | | $ | (2.90) | | $ | 3.97 | | | $ | 1.07 |
| | | | | | | | | | | | | | | | | | | | | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | | | | | |
| Medicaid | | 81.3% | | | | | | | 81.3% | | | | 87.4% | | | | | | | 87.4% |
| Medicare Advantage | | 79.8% | | | | | | | 79.8% | | | | 78.6% | | | | | | | 78.6% |
| Prescription Drug Plans | | 93.4% | | | | | | | 93.4% | | | | 90.8% | | | | | | | 90.8% |
| Aggregate | | 83.2% | | | | | | | 83.2% | | | | 85.6% | | | | | | | 85.6% |
| | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | 11.4% | | | -0.8% | (a) (b) | | | 10.6% | | | | 20.9% | | | -9.6% | (a) (b) | | | 11.3% |
| (a) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government and Company investigations amounted to $16.7 million and $8.6 million, respectively, in the six months ended June 30, 2011 and 2010. |
| (b) | Liability for investigation resolution: Based on the status of the government investigations, the Company recorded expense of $6.2 million and $249.1 million, respectively, in the six months ended June 30, 2011 and 2010. |
WCG Reports Second Quarter 2011 Results
Page 11
August 3, 2011
| | WELLCARE HEALTH PLANS, INC. |
UNAUDITED SUPPLEMENTAL INFORMATION
Reconciliation of GAAP Net Cash Used in Operating Activities
to Net Cash Provided by (Used in) Operating Activities
Modified for the Timing of Receipts from, and Payments to, Government Customers
(Dollars in thousands)
The Company reports cash provided by, or used in, operating activities on a non-GAAP basis to exclude the changes in premium receivables, unearned premiums, and other receivables from, and payables to, government customers. The Company believes that operating 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 government agencies at the end of a period.
| | | | |
| | | | | | | |
| Net cash used in operating activities, as reported under GAAP | | $ | (31,294 | ) | | $ | (244,614 | ) |
| Modifications to eliminate changes in: | | | | | | | | |
Premium receivables, net | | | 82,030 | | | | 30,551 | |
Unearned premiums | | | 1,189 | | | | 90,382 | |
Other payables to government partners | | | (6,535 | ) | | | 2,195 | |
| Net cash provided by (used in) operating activities, modified for the timing of receipts from, and payments to, government customers | | $ | 45,390 | | | $ | (121,486 | ) |
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