CONTACTS:
| Investor relations: | | Media relations: |
| Gregg Haddad | | Denise Malecki |
| 813-206-3916 | | 813-206-2747 |
| gregg.haddad@wellcare.com | | denise.malecki@wellcare.com |
WELLCARE REPORTS ANNUAL AND FOURTH QUARTER 2011 RESULTS
Tampa, Florida (February 15, 2012) – WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the fourth quarter and year ended December 31, 2011. As determined under generally accepted accounting principles (“GAAP”), net income for the fourth quarter of 2011 was $85.1 million, or $1.96 per diluted share, compared with $26.1 million, or $0.61 per diluted share, for the fourth quarter of 2010. Adjusted net income for the fourth quarter of 2011 was $93.4 million, or $2.15 per diluted share, compared with $30.4 million, or $0.71 per diluted share, for the fourth quarter of 2010.
As determined under GAAP, the Company reported net income for the year 2011 of $264.2 million, or $6.10 per diluted share, compared with a net loss of $53.4 million, or $1.26 per share, for 2010. Adjusted net income for 2011 was $291.4 million, or $6.73 per diluted share, compared with $114.2 million, or $2.67 per diluted share, for 2010.
“In many ways, our achievements during 2011 transformed the Company and positioned us well for the future,” said Alec Cunningham, WellCare’s chief executive officer. “Most importantly, growth across our lines of business means we are helping hundreds of thousands more people to improve their health and quality of life, while also helping our government customers more effectively manage their limited resources.”
WellCare’s 2011 accomplishments are highlighted by accreditations of its Georgia and Missouri health plans by the National Committee for Quality Assurance, or NCQA, as well as broad-based year-over-year improvement across all of the Company’s lines of business in Healthcare Effectiveness Data and Information Set, or HEDIS®, measures. WellCare also maintained a disciplined approach to ensuring a competitive cost structure, reducing its adjusted administrative expense ratio by 60 basis points in 2011. In addition, medical expense management initiatives contributed meaningfully to improvement in the Company’s medical benefits ratio (“MBR”). During the third quarter, the Company completed an upgrade of its core operating system, which is enabling further progress in improving service, productivity, and compliance. Finally, WellCare delivered prudent, profitable growth, highlighted by Medicaid program awards in Kentucky and Hawaii. In addition, membership enrolled in WellCare’s Medicare Advantage dual special needs plans increased over 50%, and Medicare Prescription Drug Plans (“PDPs”) membership grew 27% in 2011.
Highlights of Operations for the Fourth Quarter
Adjusted net income for the fourth quarter of 2011 increased compared with the fourth quarter of 2010, primarily due to the favorable development of medical benefits payable as well as higher premium revenue. In addition, resolution of prior years’ state tax matters contributed to the better-than-anticipated outcome. Results for the fourth quarter of 2011 also were affected by greater-than-expected Kentucky Medicaid membership following the Company’s November launch of the program.
WCG Reports Fourth Quarter and Year 2011 Results
Page 2
February 15, 2012
Membership as of December 31, 2011, increased 15% year over year to 2.6 million, compared with 2.2 million members as of December 31, 2010. PDP segment membership increased 208,000 year over year, or 27%. Medicare Advantage membership increased year over year by 19,000 members, or 16%. Medicaid segment membership increased by 111,000, or 8%, year over year to 1.5 million members as of December 31, 2011.
Premium revenue for the fourth quarter of 2011 increased 18% year over year to $1.6 billion. The increase was driven by growth in PDP segment premium revenue, which increased 26% year over year. In addition, Medicare Advantage segment revenue increased 18% and Medicaid segment revenue increased 17% year over year.
Medical benefits expense for the fourth quarter of 2011 was $1.2 billion, an increase of 13% from the fourth quarter of 2010. The Company MBR was 78.9% in the fourth quarter of 2011, compared with 82.5% in the fourth quarter of 2010. The MBRs of all three segments also decreased year over year. The net impact of the favorable development of medical benefits payable was $66 million in the fourth quarter of 2011, compared with $38 million in the fourth quarter of 2010.
Selling, general and administrative (“SG&A”) expense as determined under GAAP was $206 million in the fourth quarter of 2011, compared with $194 million for the same period in 2010. Adjusted SG&A was $189 million in the fourth quarter of 2011, an increase from $179 million in the same period last year. The year-over-year increase in adjusted SG&A expense was driven primarily by the implementation of the Kentucky Medicaid program, as well as by membership growth. The adjusted administrative expense ratio was 12.0% in the fourth quarter of 2011, compared with 13.4% in same period in 2010.
Cash Flow and Financial Condition Highlights
Net cash provided by operating activities as determined under GAAP was $162 million in the year ended December 31, 2011, compared with $223 million for the year 2010. Net cash provided by operating activities, modified for the timing of receipts from, and payments to, WellCare’s government customers, was $280 million for 2011, compared with $73 million in 2010.
As of December 31, 2011, unregulated cash and investments were approximately $309 million. Unregulated cash and investments were approximately $324 million as of September 30, 2011, and $193 million as of December 31, 2010.
Days in claims payable were 55 days as of December 31, 2011, compared with 58 days as of September 30, 2011, and 62 days as of December 31, 2010.
Financial Outlook
The Company is providing its financial outlook for the year ended December 31, 2012:
| · | Adjusted net income per diluted share is expected to be between approximately $4.40 and $4.60. |
| · | Premium revenue is expected to be between approximately $6.95 and $7.05 billion. |
| · | The 2012 Medicaid, Medicare Advantage, and PDP segments' MBRs each are anticipated to increase relative to the respective 2011 segment MBRs. |
| · | The adjusted administrative expense ratio is expected to be in the range of 10.4% to 10.6%. |
All elements of the Company’s outlook exclude the impact of Medicaid premium taxes.
WCG Reports Fourth Quarter and Year 2011 Results
Page 3
February 15, 2012
Webcast
A discussion of WellCare’s fourth quarter and year 2011 results will be webcast live on Wednesday, February 15, 2012, 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 2.6 million members nationwide as of December 31, 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 and interest 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 Fourth Quarter and Year 2011 Results
Page 4
February 15, 2012
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Dollars in thousands except per share data)
| | | Three Months Ended December 31, | | | | |
| | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
| Premium | | $ | 1,578,119 | | | $ | 1,334,625 | | | $ | 6,021,967 | | | $ | 5,373,816 | |
| Medicaid premium taxes | | | 20,325 | | | | 18,296 | | | | 76,163 | | | | 56,374 | |
| Total premium | | | 1,598,444 | | | | 1,352,921 | | | | 6,098,130 | | | | 5,430,190 | |
| Investment and other income | | | 1,688 | | | | 2,529 | | | | 8,738 | | | | 10,035 | |
| Total revenues | | | 1,600,132 | | | | 1,355,450 | | | | 6,106,868 | | | | 5,440,225 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,245,728 | | | | 1,100,761 | | | | 4,872,071 | | | | 4,536,631 | |
| Selling, general and administrative | | | 205,587 | | | | 194,203 | | | | 718,003 | | | | 895,894 | |
| Medicaid premium taxes | | | 20,325 | | | | 18,296 | | | | 76,163 | | | | 56,374 | |
| Depreciation and amortization | | | 6,632 | | | | 6,176 | | | | 26,454 | | | | 23,946 | |
| Interest | | | 2,687 | | | | 69 | | | | 6,510 | | | | 229 | |
| Total expenses | | | 1,480,959 | | | | 1,319,505 | | | | 5,699,201 | | | | 5,513,074 | |
| Income (loss) from operations | | | 119,173 | | | | 35,945 | | | | 407,667 | | | | (72,849 | ) |
| Gain on repurchase of subordinated notes | | | 10,807 | | | | – | | | | 10,807 | | | | – | |
| Income (loss) before income taxes | | | 129,980 | | | | 35,945 | | | | 418,474 | | | | (72,849 | ) |
| Income tax expense (benefit) | | | 44,919 | | | | 9,808 | | | | 154,228 | | | | (19,449 | ) |
| Net income (loss) | | $ | 85,061 | | | $ | 26,137 | | | $ | 264,246 | | | $ | (53,400 | ) |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.98 | | | $ | 0.62 | | | $ | 6.17 | | | $ | (1.26 | ) |
| Diluted | | $ | 1.96 | | | $ | 0.61 | | | $ | 6.10 | | | $ | (1.26 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 42,985,406 | | | | 42,492,250 | | | | 42,817,466 | | | | 42,365,061 | |
| Diluted | | | 43,461,343 | | | | 42,898,465 | | | | 43,328,756 | | | | 42,365,061 | |
WCG Reports Fourth Quarter and Year 2011 Results
Page 5
February 15, 2012
WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands except per share data)
| | | | |
| | | | | | | |
| ASSETS | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 1,325,098 | | | $ | 1,359,548 | |
| Investments | | | 198,569 | | | | 108,788 | |
| Premium receivables, net | | | 217,509 | | | | 127,796 | |
| Funds receivable for the benefit of members | | | 162,745 | | | | 33,182 | |
| Income taxes receivable | | | 20,655 | | | | 9,973 | |
| Prepaid expenses and other current assets, net | | | 172,986 | | | | 114,492 | |
| Deferred income tax asset | | | 22,332 | | | | 61,392 | |
| Total current assets | | | 2,119,894 | | | | 1,815,171 | |
| Property, equipment and capitalized software, net | | | 98,238 | | | | 76,825 | |
| Goodwill | | | 111,131 | | | | 111,131 | |
| Other intangible assets, net | | | 9,896 | | | | 11,428 | |
| Long-term investments | | | 83,019 | | | | 62,931 | |
| Restricted investments | | | 60,663 | | | | 107,569 | |
| Deferred income tax asset | | | – | | | | 58,340 | |
| Other assets | | | 5,270 | | | | 3,898 | |
| Total Assets | | $ | 2,488,111 | | | $ | 2,247,293 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current Liabilities: | | | | | | | | |
| Medical benefits payable | | $ | 744,821 | | | $ | 742,990 | |
| Unearned premiums | | | 164 | | | | 67,383 | |
| Accounts payable | | | 3,294 | | | | 8,284 | |
| Other accrued expenses and liabilities | | | 215,817 | | | | 199,033 | |
| Current portion of amounts accrued related to investigation resolution | | | 49,557 | | | | 121,406 | |
| Current portion of long-term debt | | | 11,250 | | | | – | |
| Other payables to government partners | | | 98,237 | | | | 46,605 | |
| Total current liabilities | | | 1,123,140 | | | | 1,185,701 | |
| Deferred income tax liability | | | 1,026 | | | | – | |
| Amounts accrued related to investigation resolution | | | 101,705 | | | | 216,136 | |
| Long-term debt | | | 135,000 | | | | – | |
| Other liabilities | | | 10,394 | | | | 13,410 | |
| Total liabilities | | | 1,371,265 | | | | 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, 42,848,798 and 42,541,725 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively) | | | 429 | | | | 425 | |
| Paid-in capital | | | 448,820 | | | | 428,818 | |
| Retained earnings | | | 669,358 | | | | 405,112 | |
| Accumulated other comprehensive loss | | | (1,761 | ) | | | (2,309 | ) |
| Total stockholders’ equity | | | 1,116,846 | | | | 832,046 | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,488,111 | | | $ | 2,247,293 | |
WCG Reports Fourth Quarter and Year 2011 Results
Page 6
February 15, 2012
WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
| | | | |
| | | | | | | |
| Cash from operating activities: | | | | | | |
| Net income (loss) | | $ | 264,246 | | | $ | (53,400 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 26,454 | | | | 23,946 | |
| Equity-based compensation expense | | | 19,530 | | | | 14,801 | |
| Incremental tax benefit from equity-based compensation | | | (2,778 | ) | | | – | |
| Gain on repurchase of subordinated notes | | | (10,807 | ) | | | – | |
| Deferred taxes, net | | | 98,170 | | | | (61,204 | ) |
| Provision for doubtful receivables | | | 11,080 | | | | (6,889 | ) |
| Changes in operating accounts: | | | | | | | | |
| Premium receivables, net | | | (96,770 | ) | | | 158,124 | |
| Prepaid expenses and other current assets, net | | | (62,016 | ) | | | (3,634 | ) |
| Medical benefits payable | | | 1,831 | | | | (59,525 | ) |
| Unearned premiums | | | (67,219 | ) | | | (23,113 | ) |
| Accounts payable and other accrued expenses | | | 14,018 | | | | 752 | |
| Other payables to government partners | | | 51,632 | | | | 8,458 | |
| Amounts accrued related to investigation resolution | | | (73,780 | ) | | | 256,207 | |
| Income taxes receivable/payable, net | | | (12,809 | ) | | | (21,134 | ) |
| Other, net | | | 1,217 | | | | (10,332 | ) |
| Net cash provided by operating activities | | | 161,999 | | | | 223,057 | |
| Cash used in investing activities: | | | | | | | | |
| Purchases of investments | | | (386,186 | ) | | | (219,961 | ) |
| Proceeds from sale and maturities of investments | | | 277,486 | | | | 163,993 | |
| Purchases of restricted investments | | | (34,828 | ) | | | (21,820 | ) |
| Proceeds from maturities of restricted investments | | | 81,524 | | | | 44,800 | |
| Additions to property, equipment and capitalized software, net | | | (49,576 | ) | | | (27,516 | ) |
| Net cash used in investing activities | | | (111,580 | ) | | | (60,504 | ) |
| Cash (used in) provided by financing activities: | | | | | | | | |
| Proceeds from option exercises and other | | | 6,287 | | | | 1,443 | |
| Incremental tax benefit from equity-based compensation | | | 2,778 | | | | – | |
| Purchase of treasury stock | | | (3,684 | ) | | | (6,237 | ) |
| Proceeds from debt, net of issuance costs | | | 147,473 | | | | – | |
| Repurchase of subordinated notes | | | (101,693 | ) | | | – | |
| Payments on debt | | | (3,750 | ) | | | – | |
| Payments on capital leases | | | (2,717 | ) | | | (1,011 | ) |
| Funds received for the benefit of members | | | (129,563 | ) | | | 44,669 | |
| Net cash (used in) provided by financing activities | | | (84,869 | ) | | | 38,864 | |
| Cash and cash equivalents: | | | | | | | | |
| (Decrease) increase during period | | | (34,450 | ) | | | 201,417 | |
| Balance at beginning of year | | | 1,359,548 | | | | 1,158,131 | |
| Balance at end of year | | $ | 1,325,098 | | | $ | 1,359,548 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for taxes | | $ | 69,846 | | | $ | 75,962 | |
| Cash paid for interest | | $ | 5,920 | | | $ | 228 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS: | | | | | | | | |
| Non-cash issuance of subordinated notes | | $ | 112,500 | | | $ | – | |
| Non-cash additions to property, equipment and capitalized software | | $ | 2,449 | | | $ | 2,354 | |
| Equipment acquired through capital leases | | $ | – | | | $ | 8,868 | |
WCG Reports Fourth Quarter and Year 2011 Results
Page 7
February 15, 2012
WELLCARE HEALTH PLANS, INC.
MEMBERSHIP STATISTICS
(Unaudited)
| | | | |
| | | | | | | |
| Membership by Program | | | | | | |
| Medicaid Membership | | | | | | |
| TANF | | | 1,159,000 | | | | 1,085,000 | |
| CHIP | | | 162,000 | | | | 168,000 | |
| SSI and ABD | | | 115,000 | | | | 77,000 | |
| FHP | | | 15,000 | | | | 10,000 | |
| Total Medicaid Membership | | | 1,451,000 | | | | 1,340,000 | |
| | | | | | | | | |
| Medicare Membership | | | | | | | | |
| Medicare Advantage | | | 135,000 | | | | 116,000 | |
| Prescription Drug Plan (stand-alone) | | | 976,000 | | | | 768,000 | |
| Total Medicare Membership | | | 1,111,000 | | | | 884,000 | |
Total Membership | | | 2,562,000 | | | | 2,224,000 | |
| | | | | | | | | |
| Medicaid Membership by State | | | | | | | | |
| Florida | | | 404,000 | | | | 415,000 | |
| Georgia | | | 562,000 | | | | 566,000 | |
| Other states | | | 485,000 | | | | 359,000 | |
| Total Medicaid Membership | | | 1,451,000 | | | | 1,340,000 | |
WCG Reports Fourth Quarter and Year 2011 Results
Page 8
February 15, 2012
WELLCARE HEALTH PLANS, INC.
SEGMENT INFORMATION
(Unaudited; Dollars in thousands)
| | | Three Months Ended December 31, | | | | |
| | | | | | | | | | | | | |
| Premium revenue: | | | | | | | | | | | | |
| Medicaid: | | | | | | | | | | | | |
| Florida | | $ | 215,888 | | | $ | 220,052 | | | $ | 881,081 | | | $ | 889,705 | |
| Georgia | | | 364,697 | | | | 352,847 | | | | 1,449,263 | | | | 1,357,354 | |
| Other states | | | 381,764 | | | | 252,932 | | | | 1,175,104 | | | | 1,005,318 | |
| Medicaid premium taxes | | | 20,325 | | | | 18,296 | | | | 76,163 | | | | 56,374 | |
| Total Medicaid | | | 982,674 | | | | 844,127 | | | | 3,581,611 | | | | 3,308,751 | |
| | | | | | | | | | | | | | | | | |
| Medicare: | | | | | | | | | | | | | | | | |
| Medicare Advantage plans | | | 382,735 | | | | 323,723 | | | | 1,479,750 | | | | 1,336,089 | |
| Prescription Drug plans | | | 233,035 | | | | 185,071 | | | | 1,036,769 | | | | 785,350 | |
| Total Medicare | | | 615,770 | | | | 508,794 | | | | 2,516,519 | | | | 2,121,439 | |
| Total Premium Revenue | | $ | 1,598,444 | | | $ | 1,352,921 | | | $ | 6,098,130 | | | $ | 5,430,190 | |
| | | | | | | | | | | | | | | | | |
| Medical benefits ratio: | | | | | | | | | | | | | | | | |
| Medicaid | | | 82.1% | | | | 86.5% | | | | 80.9% | | | | 87.5% | |
| Medicare Advantage | | | 78.6% | | | | 79.8% | | | | 79.8% | | | | 78.9% | |
| Prescription Drug Plans | | | 66.4% | | | | 69.4% | | | | 82.4% | | | | 80.9% | |
| Aggregate | | | 78.9% | | | | 82.5% | | | | 80.9% | | | | 84.4% | |
WCG Reports Fourth Quarter and Year 2011 Results
Page 9
February 15, 2012
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 fourth quarter and year ended December 31, 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 December 31, 2011 | | Three Months Ended December 31, 2010 | |
| | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | |
| Premium | | $ | 1,578,119 | | $ | – | | | | $ | 1,578,119 | | $ | 1,334,625 | | $ | – | | | | $ | 1,334,625 | |
| Medicaid premium taxes | | | 20,325 | | | – | | | | | 20,325 | | | 18,296 | | | – | | | | | 18,296 | |
| Total premium | | | 1,598,444 | | | – | | | | | 1,598,444 | | | 1,352,921 | | | – | | | | | 1,352,921 | |
| Investment and other income | | | 1,688 | | | – | | | | | 1,688 | | | 2,529 | | | – | | | | | 2,529 | |
| Total revenues | | | 1,600,132 | | | – | | | | | 1,600,132 | | | 1,355,450 | | | – | | | | | 1,355,450 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,245,728 | | | – | | | | | 1,245,728 | | | 1,100,761 | | | – | | | | | 1,100,761 | |
| Selling, general, and administrative | | | 205,587 | | | (16,337 | ) | (a) (b) | | | 189,250 | | | 194,203 | | | (15,557 | ) | (a) (b) | | | 178,646 | |
| Medicaid premium taxes | | | 20,325 | | | – | | | | | 20,325 | | | 18,296 | | | – | | | | | 18,296 | |
| Depreciation and amortization | | | 6,632 | | | – | | | | | 6,632 | | | 6,176 | | | – | | | | | 6,176 | |
| Interest | | | 2,687 | | | (1,441 | ) | (c) | | | 1,246 | | | 69 | | | – | | | | | 69 | |
| Total expenses | | | 1,480,959 | | | (17,778 | ) | | | | 1,463,181 | | | 1,319,505 | | | (15,557 | ) | | | | 1,303,948 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Income from operations | | | 119,173 | | | 17,778 | | | | | 136,951 | | | 35,945 | | | 15,557 | | | | | 51,502 | |
| Gain on repurchase of subordinated notes | | | 10,807 | | | (10,807 | ) | (d) | | | – | | | – | | | – | | | | | – | |
| Income before income taxes | | | 129,980 | | | 6,971 | | | | | 136,951 | | | 35,945 | | | 15,557 | | | | | 51,502 | |
| Income tax expense (benefit) | | | 44,919 | | | (1,372 | ) | | | | 43,547 | | | 9,808 | | | 11,287 | | | | | 21,095 | |
| Net income | | $ | 85,061 | | $ | 8,343 | | | | $ | 93,404 | | $ | 26,137 | | $ | 4,270 | | | | $ | 30,407 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares: | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 42,985,406 | | | – | | | | | 42,985,406 | | | 42,492,250 | | | – | | | | | 42,492,250 | |
| Diluted | | | 43,461,343 | | | – | | | | | 43,461,343 | | | 42,898,465 | | | – | | | | | 42,898,465 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net income per share: | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.98 | | $ | 0.19 | | | | $ | 2.17 | | $ | 0.62 | | $ | 0.10 | | | | $ | 0.72 | |
| Diluted | | $ | 1.96 | | $ | 0.19 | | | | $ | 2.15 | | $ | 0.61 | | $ | 0.10 | | | | $ | 0.71 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 13.0 | % | | -1.0 | % | (a) (b) | | | 12.0 | % | | 14.5 | % | | -1.1 | % | (a) (b) | | | 13.4 | % |
| (a) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government investigations and related litigation amounted to $15.4 million and, net of D&O insurance recoveries, $9.1 million, respectively, in the quarters ended December 31, 2011 and 2010. |
| (b) | Liability for government investigation resolution and related litigation: Based on the status of these matters, the Company recorded expense of $0.9 million and $6.5 million, respectively, in the quarters ended December 31, 2011 and 2010. |
| (c) | Investigation and related litigation interest expense: The Company’s tradable unsecured subordinated notes that were issued in connection with the final resolution of the securities class action settlement incurred $1.4 million of interest expense in the quarter ended December 31, 2011. |
| (d) | Gain on repurchase of subordinated notes: In December 2011, the Company repurchased all of its outstanding tradable unsecured subordinated notes at a purchase price equal to 90% of the principal amount, which resulted in a gain of $10.8 million in the quarter ended December 31, 2011. |
WCG Reports Fourth Quarter and Year 2011 Results
Page 10
February 15, 2012
| | 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) |
| | | Year Ended December 31, 2011 | | Year Ended December 31, 2010 | |
| | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | | | |
| Premium | | $ | 6,021,967 | | $ | – | | | | $ | 6,021,967 | | $ | 5,373,816 | | $ | – | | | | $ | 5,373,816 | |
| Medicaid premium taxes | | | 76,163 | | | – | | | | | 76,163 | | | 56,374 | | | – | | | | | 56,374 | |
| Total premium | | | 6,098,130 | | | | | | | | 6,098,130 | | | 5,430,190 | | | | | | | | 5,430,190 | |
| Investment and other income | | | 8,738 | | | – | | | | | 8,738 | | | 10,035 | | | – | | | | | 10,035 | |
| Total revenues | | | 6,106,868 | | | – | | | | | 6,106,868 | | | 5,440,225 | | | – | | | | | 5,440,225 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 4,872,071 | | | – | | | | | 4,872,071 | | | 4,536,631 | | | – | | | | | 4,536,631 | |
| Selling, general, and administrative | | | 718,003 | | | (47,007 | ) | (a) (b) | | | 670,996 | | | 895,894 | | | (265,938 | ) | (a) (b) | | | 629,956 | |
| Medicaid premium taxes | | | 76,163 | | | – | | | | | 76,163 | | | 56,374 | | | – | | | | | 56,374 | |
| Depreciation and amortization | | | 26,454 | | | – | | | | | 26,454 | | | 23,946 | | | – | | | | | 23,946 | |
| Interest | | | 6,510 | | | (4,254 | ) | (c) | | | 2,256 | | | 229 | | | – | | | | | 229 | |
| Total expenses | | | 5,699,201 | | | (51,261 | ) | | | | 5,647,940 | | | 5,513,074 | | | (265,938 | ) | | | | 5,247,136 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Income (loss) from operations | | | 407,667 | | | 51,261 | | | | | 458,928 | | | (72,849 | ) | | 265,938 | | | | | 193,089 | |
| Gain on repurchase of subordinated notes | | | 10,807 | | | (10,807 | ) | (d) | | | – | | | – | | | – | | | | | – | |
| Income (loss) before income taxes | | | 418,474 | | | 40,454 | | | | | 458,928 | | | (72,849 | ) | | 265,938 | | | | | 193,089 | |
| Income tax expense (benefit) | | | 154,228 | | | 13,279 | | | | | 167,507 | | | (19,449 | ) | | 98,325 | | | | | 78,876 | |
| Net income (loss) | | $ | 264,246 | | $ | 27,175 | | | | $ | 291,421 | | $ | (53,400 | ) | $ | 167,613 | | | | $ | 114,213 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares: | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 42,817,466 | | | – | | | | | 42,817,466 | | | 42,365,061 | | | – | | | | | 42,365,061 | |
| Diluted | | | 43,328,756 | | | – | | | | | 43,328,756 | | | 42,365,061 | | | 428,989 | | | | | 42,794,050 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 6.17 | | $ | 0.64 | | | | $ | 6.81 | | $ | (1.26 | ) | $ | 3.96 | | | | $ | 2.70 | |
| Diluted | | $ | 6.10 | | $ | 0.63 | | | | $ | 6.73 | | $ | (1.26 | ) | $ | 3.93 | | | | $ | 2.67 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 11.9 | % | | -0.8 | % | (a) (b) | | | 11.1 | % | | 16.6 | % | | -4.9 | % | (a) (b) | | | 11.7 | % |
| (a) | Investigation-related legal, accounting, employee retention, and other costs: Administrative expenses associated with the government investigations and related litigation amounted to $39.3 million and, net of D&O insurance recoveries, $7.2 million, respectively, in the year ended December 31, 2011 and 2010. |
| (b) | Liability for government investigation resolution and related litigation: Based on the status of these matters, the Company recorded expense of $7.7 million and $258.7 million, respectively, in the year ended December 31, 2011 and 2010. |
| (c) | Investigation and related litigation interest expense: The Company’s tradable unsecured subordinated notes that were issued in connection with the final resolution of the securities class action settlement incurred $4.3 million of interest expense in the year ended December 31, 2011. |
| (d) | Gain on repurchase of subordinated notes: In December 2011, the Company repurchased all of its outstanding tradable unsecured subordinated notes at a purchase price equal to 90% of the principal amount, which resulted in a gain of $10.8 million in the year ended December 31, 2011. |
WCG Reports Fourth Quarter and Year 2011 Results
Page 11
February 15, 2012
| | 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 Customers
(Dollars in thousands)
The Company reports cash provided by 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 cash provided by operating activities 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 provided by operating activities, as reported under GAAP | | $ | 161,999 | | | $ | 223,057 | |
| Modifications to eliminate changes in: | | | | | | | | |
| Premium receivables, net | | | 96,770 | | | | (158,124 | ) |
| Other receivables from government partners, net | | | 5,181 | | | | (6,728 | ) |
| Unearned premiums | | | 67,219 | | | | 23,113 | |
| Other payables to government partners | | | (51,632 | ) | | | (8,458 | ) |
Net cash provided by operating activities, modified for the timing of receipts from and payments to government customers | | $ | 279,537 | | | $ | 72,860 | |
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