WELLCARE REPORTS SECOND QUARTER 2012 RESULTS
Tampa, Florida (August 3, 2012) – WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the second quarter and six months ended June 30, 2012. As determined under generally accepted accounting principles (“GAAP”), net income for the second quarter of 2012 was $46.4 million, or $1.06 per diluted share, compared with $69.6 million, or $1.61 per diluted share, for the second quarter of 2011. Adjusted net income for the second quarter of 2012 was $54.5 million, or $1.24 per diluted share, compared with $76.7 million, or $1.77 per diluted share, for the second quarter of 2011.
“Our second quarter results exhibited strong operating performance across many parts of our business, as well as the importance of our diversified approach to government programs,” said Alec Cunningham, WellCare’s chief executive officer. “We are continuing to invest in our quality, service, and growth initiatives and anticipate benefits from these investments during the remainder of 2012.”
Highlights of Recent Accomplishments
| · | Premium revenue in the second quarter of 2012 increased 22% year over year, driven by 31% growth in Medicaid and 25% growth in Medicare Advantage. |
| · | The adjusted administrative expense ratio was 8.2% in the second quarter of 2012, a decrease of 100 basis points year over year, demonstrating sustained progress in the Company’s focus on ensuring a competitive cost structure. |
| · | The Company’s Medicare Prescription Drug Plans (“PDPs”) segment delivered a strong first half performance, resulting in a 61% year over year increase in gross margin despite a 1% decrease in premium revenue. |
| · | WellCare implemented a number of medical expense management initiatives for the Kentucky Medicaid program, targeting continued improvement in the performance of the program during the second half of 2012. |
| · | Florida Healthy Kids, the state’s Children’s Health Insurance Program (“CHIP”), selected WellCare to serve 65 of Florida’s 67 counties, more than any other health plan. The program is expected to be effective October 2012. |
| · | WellCare agreed to acquire certain assets of Arcadian Health’s Arizona Medicare Advantage plans in Mohave and Yavapai Counties, which currently have approximately 5,000 members, subject to regulatory approvals. The transaction is expected to close December 31, 2012. |
| · | The Company’s ‘Ohana Health Plan successfully launched its participation in Hawaii’s QUEST Medicaid program, serving for the first time Temporary Assistance for Needy Families (“TANF”) and CHIP members across the islands. |
WCG Reports Second Quarter 2012 Results
Page 2
August 3, 2012
| · | WellCare expanded its New York Medicaid managed long-term care service area by five counties, and entered the Florida Long-Term Care Community Diversion Pilot Project in two counties. |
Second Quarter Operations
Adjusted net income for the second quarter of 2012 decreased compared with the second quarter of 2011 mainly due to favorable development of prior years’ medical benefits payable of $0.95 in net income per diluted share that was included in second quarter 2011 results. The increase in the Medicaid segment medical benefits ratio (“MBR”), driven by the Kentucky program, also contributed to the year over year reduction in second quarter adjusted net income. These factors were offset in part by higher premium revenue in our Medicaid and Medicare Advantage segments, the decrease in the Medicare Prescription Drug Plans segment MBR, and the decrease in our adjusted administrative expense ratio.
Membership as of June 30, 2012, increased 7% to nearly 2.6 million, compared with 2.4 million members as of June 30, 2011. Medicaid segment membership increased by 201,000, or 15%, year over year, to 1.5 million members. Medicare Advantage segment membership increased by 34,000 year over year, or 27%. PDP segment membership decreased 64,000 year over year, or 7%.
Premium revenue for the second quarter of 2012 increased 22% year over year to $1.8 billion. The increase was driven by 31% growth in Medicaid segment premium revenue as well as 25% growth in Medicare Advantage segment premium revenue, partially offset by a 7% decrease in PDP segment revenue.
Medical benefits expense for the second quarter of 2012 was $1.5 billion, an increase of 29% from the second quarter of 2011. The Company MBR was 86.4% in the second quarter of 2012, compared with 81.9% in the second quarter of 2011. The Medicaid segment and Medicare Advantage segment MBRs increased year over year, while the PDP segment MBR decreased. For the second quarter of 2012, prior periods’ development of medical benefits payable did not have a significant impact on the Company MBR. In the second quarter of 2011, WellCare recognized net favorable development of prior periods’ medical benefits payable that reduced the Company MBR by 460 basis points.
SG&A expense as determined under GAAP was $159 million in the second quarter of 2012, compared with $147 million for the same period in 2011. Adjusted SG&A was $147 million in the second quarter of 2012, an increase of 9% from $135 million for the same period last year. The increase was driven primarily by the Kentucky Medicaid program launched in November 2011, as well as the Company’s growth and service initiatives. The adjusted administrative expense ratio was 8.2% in the second quarter of 2012, compared with 9.2% for the same period in 2011.
WCG Reports Second Quarter 2012 Results
Page 3
August 3, 2012
Cash Flow and Financial Condition
Net cash used in operating activities as determined under GAAP was $194 million for the six months ended June 30, 2012, compared with $31 million for the six months ended June 30, 2011. As previously disclosed, WellCare has experienced temporary premium payment delays by the Georgia Medicaid program. These delays have had an adverse effect on WellCare’s operating cash flow for the six months ended June 30, 2012. Modified for the timing of receipts from, and payments to, WellCare’s government customers, net cash used in operating activities was $47 million for the first half of 2012, compared with net cash provided by operating activities of $45 million for the first half of 2011.
As of June 30, 2012, unregulated cash and investments were approximately $168 million. Unregulated cash and investments have decreased primarily from temporary funding of the Company’s Georgia health plan due to premium payment delays by the Georgia Medicaid program.
Days in claims payable were 38 days as of June 30, 2012, compared with 43 days as of March 31, 2012, and 55 days as of June 30, 2011.
Financial Outlook
WellCare is updating its financial outlook for the year ended December 31, 2012. The following elements of WellCare’s financial outlook have changed:
| · | Adjusted net income per diluted share is expected to be between approximately $5.25 and $5.45. The previous guidance was for adjusted net income per diluted share to be between approximately $5.20 and $5.40. |
| · | Premium revenue is expected to be approximately $7.1 billion. Previous guidance was for premium revenue to be between approximately $7.0 and $7.1 billion. |
| · | The 2012 PDP segment MBR is anticipated to decrease relative to the 2011 PDP segment MBR. The prior guidance was for the PDP segment MBR to increase year over year. |
The following elements of WellCare’s financial outlook are unchanged:
| · | The 2012 Medicaid and Medicare Advantage 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 8.7% to 8.9%. |
All elements of the Company’s outlook exclude the impact of Medicaid premium taxes.
Webcast
A discussion of WellCare’s second quarter 2012 results will be webcast live on Friday, August 3, 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.
WCG Reports Second Quarter 2012 Results
Page 4
August 3, 2012
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, Fla., 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 June 30, 2012. 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 resolution costs that management believes are not indicative of long-term business operations. Please refer to the schedule in this news release that provides 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. For example, statements regarding the Company’s financial outlook, further improvements in the Kentucky Medicaid program, and the timing of the closing of the acquisition of the plans in Mohave and Yavapai counties contain 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, WellCare’s ability to effectively manage growth, WellCare’s ability to address operational challenges relating to new business, WellCare’s ability to effectively execute and integrate acquisitions, and WellCare’s ability to estimate and manage medical benefits effectively.
Additional information concerning these and other important risks and uncertainties can be found under the captions “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2012, 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 2012 Results
Page 5
August 3, 2012
WELLCARE HEALTH PLANS, INC.
SELECTED DATA FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; dollars in thousands except per share data)
| | | Three Months Ended June 30, | | | | |
| | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
| Premium | | $ | 1,789,116 | | | $ | 1,467,239 | | | $ | 3,557,287 | | | $ | 2,920,791 | |
| Medicaid premium taxes | | | 20,091 | | | | 18,105 | | | | 40,467 | | | | 36,969 | |
| Total premium revenues | | | 1,809,207 | | | | 1,485,344 | | | | 3,597,754 | | | | 2,957,760 | |
| Investment and other income | | | 1,968 | | | | 2,291 | | | | 4,754 | | | | 4,617 | |
| Total revenues | | | 1,811,175 | | | | 1,487,635 | | | | 3,602,508 | | | | 2,962,377 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,546,164 | | | | 1,202,006 | | | | 3,067,955 | | | | 2,465,324 | |
| Selling, general and administrative | | | 159,008 | | | | 147,055 | | | | 320,696 | | | | 298,021 | |
| Medicaid premium taxes | | | 20,091 | | | | 18,105 | | | | 40,467 | | | | 36,969 | |
| Depreciation and amortization | | | 7,541 | | | | 6,896 | | | | 14,511 | | | | 13,370 | |
| Interest | | | 997 | | | | 98 | | | | 2,147 | | | | 175 | |
| Total expenses | | | 1,733,801 | | | | 1,374,160 | | | | 3,445,776 | | | | 2,813,859 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 77,374 | | | | 113,475 | | | | 156,732 | | | | 148,518 | |
| Income tax expense | | | 30,932 | | | | 43,875 | | | | 59,058 | | | | 57,588 | |
| Net income | | $ | 46,442 | | | $ | 69,600 | | | $ | 97,674 | | | $ | 90,930 | |
| | | | | | | | | | | | | | | | | |
| Net income per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.08 | | | $ | 1.63 | | | $ | 2.27 | | | $ | 2.13 | |
| Diluted | | $ | 1.06 | | | $ | 1.61 | | | $ | 2.23 | | | $ | 2.11 | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 43,092,737 | | | | 42,752,235 | | | | 43,030,006 | | | | 42,686,323 | |
| Diluted | | | 43,775,312 | | | | 43,293,926 | | | | 43,713,391 | | | | 43,155,051 | |
WCG Reports Second Quarter 2012 Results
Page 6
August 3, 2012
WELLCARE HEALTH PLANS, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in thousands except share data)
| | | | | | | |
| ASSETS | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 1,150,246 | | | $ | 1,325,098 | |
| Investments | | | 250,618 | | | | 198,569 | |
| Premiums receivable, net | | | 606,642 | | | | 217,509 | |
| Pharmacy rebates receivable, net | | | 133,924 | | | | 109,933 | |
| Funds receivable for the benefit of members | | | 50,484 | | | | 162,745 | |
| Income taxes receivable | | | 9,184 | | | | 20,655 | |
| Prepaid expenses and other current assets, net | | | 47,391 | | | | 63,053 | |
| Deferred income tax asset | | | 48,244 | | | | 22,332 | |
| Total current assets | | | 2,296,733 | | | | 2,119,894 | |
| Property, equipment and capitalized software, net | | | 117,746 | | | | 98,238 | |
| Goodwill | | | 111,131 | | | | 111,131 | |
| Other intangible assets, net | | | 8,859 | | | | 9,896 | |
| Long-term investments | | | 88,018 | | | | 83,019 | |
| Restricted investments | | | 66,233 | | | | 60,663 | |
| Other assets | | | 2,230 | | | | 5,270 | |
| Total Assets | | $ | 2,690,950 | | | $ | 2,488,111 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current Liabilities: | | | | | | | | |
| Medical benefits payable | | $ | 654,096 | | | $ | 744,821 | |
| Unearned premiums | | | 240,704 | | | | 164 | |
| Accounts payable | | | 12,692 | | | | 3,294 | |
| Other accrued expenses and liabilities | | | 183,737 | | | | 215,817 | |
| Current portion of amount payable related to investigation resolution | | | 36,728 | | | | 49,557 | |
| Current portion of long-term debt | | | 15,000 | | | | 11,250 | |
| Other payables to government partners | | | 98,830 | | | | 98,237 | |
| Total current liabilities | | | 1,241,787 | | | | 1,123,140 | |
| Deferred income tax liability | | | 15,404 | | | | 1,026 | |
| Amount payable related to investigation resolution | | | 67,116 | | | | 101,705 | |
| Long-term debt | | | 127,500 | | | | 135,000 | |
| Other liabilities | | | 7,646 | | | | 10,394 | |
| Total liabilities | | | 1,459,453 | | | | 1,371,265 | |
| 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, 43,099,721 and 42,848,798 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively) | | | 431 | | | | 429 | |
| Paid-in capital | | | 465,003 | | | | 448,820 | |
| Retained earnings | | | 767,032 | | | | 669,358 | |
| Accumulated other comprehensive loss | | | (969 | ) | | | (1,761 | ) |
| Total stockholders’ equity | | | 1,231,497 | | | | 1,116,846 | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,690,950 | | | $ | 2,488,111 | |
WCG Reports Second Quarter 2012 Results
Page 7
August 3, 2012
WELLCARE HEALTH PLANS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; dollars in thousands)
| | | | |
| | | | | | | |
| Cash used in operating activities: | | | | | | |
| Net income | | $ | 97,674 | | | $ | 90,930 | |
Adjustments to reconcile net income to net cash used in operating activities: | | | | | | | | |
| Depreciation and amortization | | | 14,511 | | | | 13,370 | |
| Equity-based compensation expense | | | 9,541 | | | | 9,875 | |
| Incremental tax benefit from equity-based compensation | | | (2,628 | ) | | | (1,137 | ) |
| Deferred taxes, net | | | (11,998 | ) | | | 25,288 | |
| Provision for doubtful receivables | | | 8,398 | | | | 5,540 | |
| Changes in operating accounts: | | | | | | | | |
| Premiums receivable, net | | | (396,042 | ) | | | (87,570 | ) |
| Pharmacy rebates receivable, net | | | (23,991 | ) | | | (24,747 | ) |
| Prepaid expenses and other current assets, net | | | 14,173 | | | | 12,209 | |
| Medical benefits payable | | | (90,725 | ) | | | (19,319 | ) |
| Unearned premiums | | | 240,540 | | | | (1,189 | ) |
| Accounts payable and other accrued expenses | | | (20,088 | ) | | | (42,045 | ) |
| Other payables to government partners | | | 593 | | | | 6,535 | |
| Amounts payable related to investigation resolution | | | (47,418 | ) | | | (46,296 | ) |
| Income taxes receivable/payable, net | | | 13,654 | | | | 29,540 | |
| Other, net | | | 222 | | | | (2,278 | ) |
| Net cash used in operating activities | | | (193,584 | ) | | | (31,294 | ) |
| | | | | | | | | |
| Cash used in investing activities: | | | | | | | | |
| Purchases of investments | | | (237,376 | ) | | | (286,184 | ) |
| Proceeds from sale and maturities of investments | | | 181,597 | | | | 165,617 | |
| Purchases of restricted investments | | | (19,815 | ) | | | (15,789 | ) |
| Proceeds from maturities of restricted investments | | | 14,232 | | | | 54,520 | |
| Additions to property, equipment and capitalized software, net | | | (34,592 | ) | | | (17,186 | ) |
| Net cash used in investing activities | | | (95,954 | ) | | | (99,022 | ) |
| | | | | | | | | |
| Cash provided by financing activities: | | | | | | | | |
| Proceeds from option exercises and other | | | 8,481 | | | | 4,509 | |
| Incremental tax benefit from equity-based compensation | | | 2,628 | | | | 1,137 | |
| Purchase of treasury stock | | | (4,019 | ) | | | (774 | ) |
| Payments on debt | | | (3,750 | ) | | | – | |
| Payments on capital leases | | | (915 | ) | | | (1,177 | ) |
| Funds received for the benefit of members | | | 112,261 | | | | 23,068 | |
| Net cash provided by financing activities | | | 114,686 | | | | 26,763 | |
| | | | | | | | | |
| Decrease in cash and cash equivalents | | | (174,852 | ) | | | (103,553 | ) |
| Balance at beginning of year | | | 1,325,098 | | | | 1,359,548 | |
| Balance at end of current period | | $ | 1,150,246 | | | $ | 1,255,995 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for taxes | | $ | 73,298 | | | $ | 3,710 | |
| Cash paid for interest | | $ | 1,935 | | | $ | 173 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF NON CASH TRANSACTIONS: | | | | | | | | |
| Non-cash additions to property, equipment, and capitalized software | | $ | 1,000 | | | $ | 1,121 | |
| Issuance of note payable related to investigation resolution | | $ | – | | | $ | 35,000 | |
WCG Reports Second Quarter 2012 Results
Page 8
August 3, 2012
WELLCARE HEALTH PLANS, INC.
MEMBERSHIP STATISTICS
(Unaudited)
| | | | |
| | | | | | | |
| Membership by Program | | | | | | |
| Medicaid Membership | | | | | | |
| TANF | | | 1,257,000 | | | | 1,064,000 | |
| CHIP | | | 172,000 | | | | 164,000 | |
| SSI and ABD | | | 69,000 | | | | 79,000 | |
| FHP | | | 20,000 | | | | 10,000 | |
| Total Medicaid Membership | | | 1,518,000 | | | | 1,317,000 | |
| | | | | | | | | |
| Medicare Membership | | | | | | | | |
| Medicare Advantage | | | 158,000 | | | | 124,000 | |
| Prescription Drug Plan | | | 886,000 | | | | 950,000 | |
| Total Medicare Membership | | | 1,044,000 | | | | 1,074,000 | |
| Total Membership | | | 2,562,000 | | | | 2,391,000 | |
| | | | | | | | | |
| Medicaid Membership by State | | | | | | | | |
| Georgia | | | 569,000 | | | | 559,000 | |
| Florida | | | 436,000 | | | | 404,000 | |
| Other states | | | 513,000 | | | | 354,000 | |
| Total Medicaid Membership | | | 1,518,000 | | | | 1,317,000 | |
WCG Reports Second Quarter 2012 Results
Page 9
August 3, 2012
WELLCARE HEALTH PLANS, INC.
SEGMENT INFORMATION
(Unaudited; dollars in thousands)
| | | Three Months Ended June 30, | | | | |
| | | | | | | | | | | | | |
| Premium revenue: | | | | | | | | | | | | |
| Medicaid: | | | | | | | | | | | | |
| Georgia | | $ | 371,065 | | | $ | 344,702 | | | $ | 742,064 | | | $ | 697,814 | |
| Florida | | | 241,765 | | | | 219,136 | | | | 470,219 | | | | 440,801 | |
| Other states | | | 464,508 | | | | 261,442 | | | | 919,331 | | | | 523,644 | |
| Medicaid premium taxes | | | 20,091 | | | | 18,105 | | | | 40,467 | | | | 36,969 | |
| Total Medicaid | | | 1,097,429 | | | | 843,385 | | | | 2,172,081 | | | | 1,699,228 | |
| | | | | | | | | | | | | | | | | |
| Medicare: | | | | | | | | | | | | | | | | |
| Medicare Advantage plans | | | 455,519 | | | | 365,773 | | | | 893,749 | | | | 720,418 | |
| Prescription Drug plans | | | 256,259 | | | | 276,186 | | | | 531,924 | | | | 538,114 | |
| Total Medicare | | | 711,778 | | | | 641,959 | | | | 1,425,673 | | | | 1,258,532 | |
| Total Premium Revenue | | $ | 1,809,207 | | | $ | 1,485,344 | | | $ | 3,597,754 | | | $ | 2,957,760 | |
| | | | | | | | | | | | | | | | | |
| Medical benefits ratios: | | | | | | | | | | | | | | | | |
| Medicaid | | | 89.2 | % | | | 79.9 | % | | | 87.5 | % | | | 82.8 | % |
| Medicare Advantage | | | 83.3 | % | | | 82.8 | % | | | 81.1 | % | | | 81.1 | % |
| Prescription Drug Plans | | | 80.4 | % | | | 86.8 | % | | | 90.0 | % | | | 93.8 | % |
| Aggregate | | | 86.4 | % | | | 81.9 | % | | | 86.2 | % | | | 84.4 | % |
WCG Reports Second Quarter 2012 Results
Page 10
August 3, 2012
WELLCARE HEALTH PLANS, INC.
SUPPLEMENTAL INFORMATION
Reconciliation of GAAP Selected Data from Consolidated Statements of Comprehensive Income
to Adjusted Selected Data from Consolidated Statements of Comprehensive Income
(Unaudited; 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 selected data from the Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2012 and 2011, as determined under GAAP, reconciled to adjusted selected data from the Consolidated Statements of Comprehensive Income for the same periods.
| | | Three Months Ended June 30, 2012 | | | Three Months Ended June 30, 2011 | |
| | | | | | Adjustments | | | | | | | | Adjustments | | | |
| Revenues: | | | | | | | | | | | | | | | | | | |
| Premium | | $ | 1,789,116 | | | $ | – | | | $ | 1,789,116 | | | $ | 1,467,239 | | | $ | – | | | $ | 1,467,239 | |
| Medicaid premium taxes | | | 20,091 | | | | – | | | | 20,091 | | | | 18,105 | | | | – | | | | 18,105 | |
| Total premium revenues | | | 1,809,207 | | | | – | | | | 1,809,207 | | | | 1,485,344 | | | | – | | | | 1,485,344 | |
| Investment and other income | | | 1,968 | | | | – | | | | 1,968 | | | | 2,291 | | | | – | | | | 2,291 | |
| Total revenues | | | 1,811,175 | | | | – | | | | 1,811,175 | | | | 1,487,635 | | | | – | | | | 1,487,635 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 1,546,164 | | | | – | | | | 1,546,164 | | | | 1,202,006 | | | | – | | | | 1,202,006 | |
| Selling, general, and administrative | | | 159,008 | | | | (12,504 | ) | (a) (b) | | 146,504 | | | | 147,055 | | | | (12,109 | ) | (a) (b) | | 134,946 | |
| Medicaid premium taxes | | | 20,091 | | | | – | | | | 20,091 | | | | 18,105 | | | | – | | | | 18,105 | |
| Depreciation and amortization | | | 7,541 | | | | – | | | | 7,541 | | | | 6,896 | | | | – | | | | 6,896 | |
| Interest | | | 997 | | | | – | | | | 997 | | | | 98 | | | | – | | | | 98 | |
| Total expenses | | | 1,733,801 | | | | (12,504 | ) | | | 1,721,297 | | | | 1,374,160 | | | | (12,109 | ) | | | 1,362,051 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 77,374 | | | | 12,504 | | | | 89,878 | | | | 113,475 | | | | 12,109 | | | | 125,584 | |
| Income tax expense | | | 30,932 | | | | 4,473 | | | | 35,405 | | | | 43,875 | | | | 5,038 | | | | 48,913 | |
| Net income | | $ | 46,442 | | | $ | 8,031 | | | $ | 54,473 | | | $ | 69,600 | | | $ | 7,071 | | | $ | 76,671 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 43,092,737 | | | | – | | | | 43,092,737 | | | | 42,752,235 | | | | – | | | | 42,752,235 | |
| Diluted | | | 43,775,312 | | | | – | | | | 43,775,312 | | | | 43,293,926 | | | | – | | | | 43,293,926 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income per share: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 1.08 | | | $ | 0.18 | | | $ | 1.26 | | | $ | 1.63 | | | $ | 0.16 | | | $ | 1.79 | |
| Diluted | | $ | 1.06 | | | $ | 0.18 | | | $ | 1.24 | | | $ | 1.61 | | | $ | 0.16 | | | $ | 1.77 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 8.9 | % | | | (0.7 | %) | (a) (b) | | 8.2 | % | | | 10.0 | % | | | (0.8 | %) | (a) (b) | | 9.2 | % |
| (a) | Investigation-related legal, accounting, and other costs: Administrative expenses associated with the government investigations and related litigation amounted to $11.7 million and $7.9 million, respectively, in the three months ended June 30, 2012 and 2011. |
| (b) | Liability for government investigation-related litigation resolution: Based on the status of these matters, the Company recorded expense of $0.8 million and $4.2 million, respectively, in the three months ended June 30, 2012 and 2011. |
WCG Reports Second Quarter 2012 Results
Page 11
August 3, 2012
WELLCARE HEALTH PLANS, INC.
SUPPLEMENTAL INFORMATION (Continued)
Reconciliation of GAAP Selected Data from Consolidated Statements of Comprehensive Income
to Adjusted Selected Data from Consolidated Statements of Comprehensive Income (Continued)
(Unaudited; dollars in thousands except per share data)
| | | Six Months Ended June 30, 2012 | | | Six Months Ended June 30, 2011 | |
| | | | | | Adjustments | | | | | | | | Adjustments | | | |
| Revenues: | | | | | | | | | | | | | | | | | | |
| Premium | | $ | 3,557,287 | | | $ | – | | | $ | 3,557,287 | | | $ | 2,920,791 | | | $ | – | | | $ | 2,920,791 | |
| Medicaid premium taxes | | | 40,467 | | | | – | | | | 40,467 | | | | 36,969 | | | | – | | | | 36,969 | |
| Total premium revenues | | | 3,597,754 | | | | – | | | | 3,597,754 | | | | 2,957,760 | | | | – | | | | 2,957,760 | |
| Investment and other income | | | 4,754 | | | | – | | | | 4,754 | | | | 4,617 | | | | – | | | | 4,617 | |
| Total revenues | | | 3,602,508 | | | | – | | | | 3,602,508 | | | | 2,962,377 | | | | – | | | | 2,962,377 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
| Medical benefits | | | 3,067,955 | | | | – | | | | 3,067,955 | | | | 2,465,324 | | | | – | | | | 2,465,324 | |
| Selling, general, and administrative | | | 320,696 | | | | (25,255 | ) | (a) (b) | | 295,441 | | | | 298,021 | | | | (22,856 | ) | (a) (b) | | 275,165 | |
| Medicaid premium taxes | | | 40,467 | | | | – | | | | 40,467 | | | | 36,969 | | | | – | | | | 36,969 | |
| Depreciation and amortization | | | 14,511 | | | | – | | | | 14,511 | | | | 13,370 | | | | – | | | | 13,370 | |
| Interest | | | 2,147 | | | | – | | | | 2,147 | | | | 175 | | | | – | | | | 175 | |
| Total expenses | | | 3,445,776 | | | | (25,255 | ) | | | 3,420,521 | | | | 2,813,859 | | | | (22,856 | ) | | | 2,791,003 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 156,732 | | | | 25,255 | | | | 181,987 | | | | 148,518 | | | | 22,856 | | | | 171,374 | |
| Income tax expense | | | 59,058 | | | | 11,120 | | | | 70,178 | | | | 57,588 | | | | 8,922 | | | | 66,510 | |
| Net income | | $ | 97,674 | | | $ | 14,135 | | | $ | 111,809 | | | $ | 90,930 | | | $ | 13,934 | | | $ | 104,864 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 43,030,006 | | | | – | | | | 43,030,006 | | | | 42,686,323 | | | | – | | | | 42,686,323 | |
| Diluted | | | 43,713,391 | | | | – | | | | 43,713,391 | | | | 43,155,051 | | | | – | | | | 43,155,051 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income per share: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | 2.27 | | | $ | 0.33 | | | $ | 2.60 | | | $ | 2.13 | | | $ | 0.33 | | | $ | 2.46 | |
| Diluted | | $ | 2.23 | | | $ | 0.33 | | | $ | 2.56 | | | $ | 2.11 | | | $ | 0.32 | | | $ | 2.43 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Administrative expense ratio | | | 9.0 | % | | | (0.7 | %) | (a) (b) | | 8.3 | % | | | 10.2 | % | | | (0.8 | %) | (a) (b) | | 9.4 | % |
| (a) | Investigation-related legal, accounting, and other costs: Administrative expenses associated with the government investigations and related litigation amounted to $23.1 million and $16.7 million, respectively, in the six months ended June 30, 2012 and 2011. |
| (b) | Liability for government investigation-related litigation resolution: Based on the status of these matters, the Company recorded expense of $2.2 million and $6.2 million, respectively, in the six months ended June 30, 2012 and 2011. |
WCG Reports Second Quarter 2012 Results
Page 12
August 3, 2012
WELLCARE HEALTH PLANS, INC.
SUPPLEMENTAL INFORMATION (Continued)
Reconciliation of GAAP Net Used in Operating Activities
to Net Cash Used in or Provided by Operating Activities,
Modified for the Timing of Receipts from, and Payments to, Government Customers
(Unaudited; dollars in thousands)
The Company reports cash used in or provided by operating activities on a non-GAAP basis modified to exclude the changes in premium receivables, unearned premiums, and other receivables from, and payables to, government customers. The Company believes that cash used in or provided by operating activities modified to exclude 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 each period.
| | | | |
| | | | | | | |
| | | | | | | |
| Net cash used in operating activities, as reported under GAAP | | $ | (193,584 | ) | | $ | (31,294 | ) |
| Modifications to eliminate changes in: | | | | | | | | |
| Premiums receivable | | | 396,042 | | | | 87,570 | |
| Provision for doubtful receivables | | | (8,398 | ) | | | (5,540 | ) |
| Unearned premiums | | | (240,540 | ) | | | 1,189 | |
| Other payables to government partners | | | (593 | ) | | | (6,535 | ) |
| Net cash (used in) provided by operating activities, modified for the timing of receipts from and payments to government clients | | $ | (47,073 | ) | | $ | 45,390 | |
