EXHIBIT 99.1
WellCare Announces Third Quarter Net Income of $16.8 Million,
up 118.5% over Prior Year Quarter
TAMPA, Fla.--(BUSINESS WIRE)--Nov. 4, 2004--WellCare Health Plans,
Inc. (NYSE:WCG):
-- Membership increased to 734,000 as of September 30, 2004,
representing 47.4% growth year-over-year, including 25.7%
organic growth
-- Total revenues increased 43.8% over prior year third quarter
to $374.6 million
-- Executing Medicare expansion strategy, realizing 5% Medicare
membership growth in the quarter
WellCare Health Plans, Inc. today announced net income of $16.8
million, or $0.45 per diluted share, for the quarter ended September
30, 2004, representing an increase of 118.5% in net income over the
same period last year. Total revenues increased 43.8% for the third
quarter to $374.6 million from $260.5 million for the third quarter of
2003. Year-over-year membership increased 47.4% to 734,000 as of
September 30, 2004, representing 25.7% organic growth and 21.7% growth
attributable to the acquisition of Harmony Health Plans in June 2004.
"Delivering quality care to our members with cost-savings for our
government partners drives our success and continued growth. Our
strong performance in the third quarter was a direct result of the
continuing value we add for our Medicaid and Medicare beneficiaries in
the markets we serve," said Todd S. Farha, President and Chief
Executive Officer of WellCare. "During the third quarter, we grew
membership in all five of our state markets, a validation of the
healthy partnerships we are building throughout the communities we
serve."
Results of Operations
Premium Revenue: Premium revenue for the quarter increased $113.8
million, or 44%, to $373.6 million compared with $259.8 million for
the same period last year. The increase was due in part to the
addition of Medicaid members resulting from the acquisition of
Harmony, organic growth in our membership and rate increases on our
products.
Medical Benefits Expense: Medical benefits expense for the quarter
was $296.7 million, representing 79.4% of premium revenues, compared
with $211.4 million, representing 81.4% of premium revenues, for the
third quarter of 2003. The increase in medical benefits expense was
due to organic growth in membership as well as the acquisition of
Harmony. The medical benefits ratio for the quarter declined to 79.4%
from 81.4% primarily as a result of premium rate increases on Medicare
and lower overall utilization of services by our members.
Selling, General and Administrative Expense: Selling, general and
administrative expense was $46.2 million for the quarter, representing
12.3% of total revenues, compared with $29.5 million, or 11.3% of
total revenues, for the third quarter of 2003. The increase in
selling, general and administrative expense was due to investments in
information technology, investments in sales and marketing strategies
and increased spending necessary to support and sustain our membership
growth.
Net Income: Net income for the quarter was $16.8 million, or $0.45
per diluted share, compared with net income of $7.7 million, or $0.32
per pro forma diluted share, for the same period last year. Net income
for the quarter included approximately a $0.02 per share benefit due
to the hurricanes that impacted Florida during the quarter. See the
section entitled "Pro Forma Earnings Per Diluted Share" of this
release for an explanation of earnings per diluted share reported
under GAAP as compared with pro forma earnings per diluted share.
Expansion Update
WellCare Health Plans re-launched its Medicare marketing efforts
in several New York counties, and during the quarter, the Company
received approval from the Centers for Medicare & Medicaid Services
(CMS) to offer services to Medicare beneficiaries in Ulster County,
New York, and three parishes in Louisiana.
Balance Sheet and Cash Flow Highlights
As of September 30, 2004, the Company had cash and cash
equivalents of $265.4 million and investments classified as current
assets of $144.8 million. For the nine-month period ended September
30, 2004, the Company had positive cash flow from operations of $35.1
million on an adjusted basis excluding the change in unearned premiums
of $9.7 million. Cash provided by operations was $25.4 million on a
GAAP basis for the nine-month period, which does not include this
unearned premiums adjustment. The Company believes that excluding
changes in unearned premiums is a better measure of cash flow from
operations, as changes in unearned premiums are strictly a function of
the timing of cash receipts from federal and state agencies at the end
of a period.
Days in claims payable was 55 at the end of the third quarter
compared to 56 at the end of the second quarter of 2004, principally
due to the timing of the claims payment process at quarter end.
Membership and Other Operating Statistics
Sept. 30, Sept. 30,
2004 2003
---------- ----------
Florida 527,000 427,000
New York 66,000 50,000
Connecticut 33,000 21,000
Illinois 63,000 --
Indiana 45,000 --
---------- ----------
Total 734,000 498,000
========== ==========
Sept. 30, Sept. 30,
2004 2003
---------- ----------
TANF 524,000 355,000
SSI 57,000 50,000
SCHIP 95,000 43,000
FHP 14,000 6,000
Medicare 44,000 42,000
Commercial -- 2,000
---------- ----------
Total 734,000 498,000
========== ==========
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
--------------------- ---------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Medical Benefits Ratio 79.4% 81.4% 81.6% 83.0%
Selling, General and
Administrative
Expense Ratio 12.3% 11.3% 12.2% 11.4%
Sept. 30, June 30,
2004 2004
---------- ----------
Days in Claims Payable 55 56
Guidance
The Company is raising its revenue guidance for full year 2004 to
the range of $1.37 to $1.38 billion from previous guidance of $1.33 to
$1.35 billion and is raising net income guidance to the range of $1.27
to $1.28 per diluted share. For 2005, the Company is raising its net
income guidance from $55 to $58 million to $57 to $60 million, based
on anticipated revenues of $1.70 billion, and earnings per diluted
share of $1.50 to $1.58 assuming 38 million average shares
outstanding.
In closing, Mr. Farha added, "Since becoming a public company in
July of this year, we have made steady progress, demonstrating the
effectiveness of our operations and the increasing demand for our
services. We have achieved solid growth through our ability to
increase membership organically, complemented by our disciplined
acquisition strategy. In addition, we are executing on our strategy of
leveraging our Medicaid operations to expand our Medicare business.
Our strong performance in 2004 gives us a high degree of confidence
about the remainder of the year and our ability to continue our strong
momentum in 2005."
Pro Forma Earnings Per Diluted Share
Pro forma earnings per diluted share, a non-GAAP financial
measure, is calculated giving effect to the Company's change in
capital structure effected in connection with its recent initial
public offering. Pro forma earnings per diluted share is reconciled to
GAAP net income per common unit in the accompanying condensed
consolidated statements of income. Because pro forma earnings per
share is not a measurement determined in accordance with accounting
principles generally accepted in the United States of America and is
thus susceptible to varying calculations, it may not be comparable to
other similarly titled measures of other companies.
Conference Call
The live broadcast of WellCare's conference call will begin at
5:30 p.m. Eastern time on November 4, 2004. A 30-day online replay
will be available beginning approximately one hour following the
conclusion of the live broadcast. A link to these events can be found
on the Company's website at www.wellcare.com, under the Investor
Relations section, or at www.fulldisclosure.com.
About WellCare Health Plans, Inc.
WellCare Health Plans, Inc. provides managed care services
targeted exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. Headquartered in Tampa, Florida,
WellCare serves 734,000 members in Florida, New York, Connecticut,
Illinois, Indiana and Louisiana. For more information about WellCare,
please visit the Company's website at www.wellcare.com.
Cautionary Statement Regarding Forward-Looking Statements
This 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, including
statements related to WellCare's expected 2004 and 2005 financial
results, are 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, the potential
expiration, cancellation or suspension of WellCare's state or federal
contracts; WellCare's ability to accurately predict and effectively
manage health benefits and other operating expenses; WellCare's
ability to accurately estimate incurred but not reported medical
costs; risks associated with future changes in healthcare laws;
potential reductions in funding for government healthcare programs;
risks associated with WellCare's acquisition strategy; risks
associated with WellCare's substantial debt obligations; and risks
associated with WellCare's business operations, including its ability
to attract and retain qualified management personnel. Additional
information concerning these and other important risks and
uncertainties can be found under the heading "Risk Factors" in the
prospectus from WellCare's initial public offering, as filed with the
Securities and Exchange Commission on July 1, 2004. WellCare
specifically disclaims any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future developments or otherwise.
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, dollars in thousands, except per share and unit data)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
--------------------- ---------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Revenues:
Premium $373,625 $259,825 $995,615 $763,683
Investment and
other income 1,019 722 2,296 2,578
---------- ---------- ---------- ----------
Total revenues 374,644 260,547 997,911 766,261
Expenses:
Medical benefits 296,737 211,421 811,956 633,552
Selling, general
and administrative 46,164 29,548 122,076 87,120
Depreciation and
amortization 1,916 1,798 5,601 6,294
Interest 2,915 2,067 7,026 6,451
---------- ---------- --------- ----------
Total expenses 347,732 244,834 946,659 733,417
---------- ---------- --------- ----------
Income before
income taxes 26,912 15,713 51,252 32,844
Income tax expense 10,119 8,026 19,701 15,221
---------- ---------- --------- ----------
Net income $16,793 7,687 $31,551 17,623
========== =========
Class A common unit yield (1,511) (4,437)
---------- ----------
Net income attributable
to common units $6,176 $13,186
========== ==========
Net income per share:
Basic $0.48 $1.18
Diluted $0.45 $1.07
Net income attributable
per common unit:
Basic $0.23 $0.49
Diluted $0.21 $0.46
Pro forma net income
attributable per share (1):
Basic $0.35 $0.81
Diluted $0.32 $0.76
Pro forma weighted average
common shares outstanding (1):
Basic 21,937,038 21,723,594
Diluted 24,165,898 23,279,451
(1) Pro forma net income attributable per share is calculated as net
income divided by pro forma weighted average common shares
outstanding and reflects the pro forma effects of automatic
conversion of all outstanding common units into shares of the
Company's common stock effective upon the closing of the
Company's initial public offering, but does not include any
common stock issued in conjunction with the initial public
offering. The Company's historical capital structure is not
indicative of its current structure due to the automatic
conversion of all units into common stock and issuance of new
common stock concurrent with the closing of the Company's initial
public offering. Accordingly, historical basic and diluted net
income attributable per common unit should not be used as an
indicator of the future earnings per common share.
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands, except share and unit data)
Sept. 30, Dec. 31,
2004 2003
--------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $265,425 $237,321
Investments 144,820 33,778
Premiums and other receivables 50,312 12,792
Prepaid expenses and other current assets 7,151 3,663
Deferred income taxes 15,397 12,036
--------- ----------
Total current assets 483,105 299,590
Property and equipment, net 7,841 4,717
Goodwill 189,807 158,725
Other intangibles, net 17,962 12,403
Restricted investment assets 30,403 21,392
Other assets 368 280
--------- ----------
TOTAL ASSETS $729,486 $497,107
========= ==========
LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY
Current Liabilities:
Medical benefits payable $177,486 $148,297
Unearned premiums 66,693 76,248
Accounts payable and accrued expenses 33,721 29,830
Income taxes payable 11,535 143
Deferred income taxes 3,166 1,252
Current portion of notes payable to related party -- 48,170
Current portion of long-term debt 1,600 --
--------- ----------
Total current liabilities 294,201 303,940
Note payable to related party 25,000 71,568
Long-term debt 157,261 16,017
Accrued interest 1,184 1,782
Deferred income taxes 6,128 3,971
Other liabilities 250 252
--------- ----------
Total liabilities 484,024 397,530
Commitments and contingencies
Stockholders' and Members' Equity:
Preferred Units, no par value
(no units issued or outstanding) -- --
Class A Common Units, no par value
(23,507,839 units issued and outstanding) -- --
Class B Common Units, no par value
(no units issued and outstanding) -- --
Class C Common Units, no par value
(4,842,508 units issued and outstanding) -- --
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, 37,069,090
shares issued and outstanding) 371 --
Paid-in capital 185,352 71,382
Retained earnings 59,745 28,194
Accumulated other comprehensive income (6) 1
--------- ----------
Total stockholders' and members' equity 245,462 99,577
--------- ----------
TOTAL LIABILITIES AND MEMBERS' EQUITY $729,486 $497,107
========= ==========
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
Sept. 30,
--------------------
2004 2003
--------- ----------
Cash from operating activities:
Net income $31,551 $17,623
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 5,601 6,294
Realized gains on investments (2) --
Equity-based compensation expense 1,713 --
Accreted interest 338 602
Provision for doubtful receivables 1,789 4,360
Net gain on loan prepayment (2,697) --
Changes in operating accounts,
net of effect of acquisition:
Premiums and other receivables (22,144) 3,086
Prepaid expenses and other current assets (7,714) (4,365)
Deferred income tax asset (2,256) 1,944
Medical benefits payable 11,029 25,825
Unearned premiums (9,657) (22,968)
Accounts payable and other accrued expenses 1,119 (4,070)
Accrued interest (598) (1,046)
Taxes payable and deferred tax liability 17,539 (3,881)
Other, net (168) (339)
--------- ----------
Net cash provided by operations 25,443 23,065
--------- ----------
Cash from investing activities:
Purchase of business (36,542) --
Proceeds from sale and
maturities of investments 8,728 3,387
Purchases of investments (119,776) (14,689)
Purchases and depositions
of restricted investments (8,435) (674)
Additions to property and equipment, net (4,471) (2,692)
--------- ----------
Net cash used in investing activities (160,496) (14,668)
--------- ----------
Cash from financing activities:
Contribution of capital 95 486
Proceeds from debt issuance, net 159,200 14,568
Payments on debt (108,433) (28,660)
Proceeds from initial public offering, net 112,295 --
--------- ----------
Net cash provided by (used in)
financing activities 163,157 (13,606)
--------- ----------
Net increase (decrease) in cash
and cash equivalents 28,104 (5,209)
Cash and cash equivalents at beginning of period 237,321 146,784
--------- ----------
Cash and cash equivalents at end of period $265,425 $141,575
========= ==========
Supplemental disclosures of cash flow information:
Cash paid for taxes $4,925 $7,722
========= ==========
Cash paid for interest $8,691 $6,116
========= ==========
CONTACT: WellCare Health Plans, Inc., Tampa
Investor Relations:
Jeffrey Potter, 813-290-6313
Jeff.Potter@wellcare.com