Exhibit 99.1
WellCare Second Quarter Net Income Grows 58.4%
TAMPA, Fla.--(BUSINESS WIRE)--Aug. 3, 2005--WellCare Health Plans,
Inc. (NYSE:WCG):
-- Membership increased to 808,000, representing 16% organic
growth year-over-year
-- Second quarter revenues increased to $453.7 million,
representing 41% growth year-over-year
-- Medicare membership growth of 10% in the second quarter and
28% in the first six months
-- Medical benefits ratio declined to 81.3% for the second
quarter
-- Net income grew 58.4% year-over-year to $14.2 million
-- WellCare is the sole health plan awarded contracts in all six
Georgia regions
WellCare Health Plans, Inc. (NYSE: WCG) today announced that net
income for the second quarter of 2005 increased 58.4% to $14.2
million, or $0.36 per diluted share, based on 38.9 million weighted
average shares outstanding, compared with $8.9 million, or $0.28 per
adjusted diluted share, in the prior year period. The reported
earnings per share includes $0.02 per share of expenses incurred by
the Company relating to its Medicare Prescription Drug Plan (PDP)
expansion opportunity. Total revenues for the second quarter of 2005
increased 41% to $453.7 million compared with $321.4 million for the
second quarter of 2004.
"Our excellent financial results are driven by our strong organic
growth and our effective management of costs and utilization," stated
Todd S. Farha, President and Chief Executive Officer of WellCare. "We
are leveraging our unique position in both the Medicaid and Medicare
markets to continue our rapid growth. We continue to successfully
execute our Medicare expansion strategy, driving industry-leading
growth. We are also very pleased to have won contracts in all six
regions of the state of Georgia for participation in the Healthy
Families program."
Results of Operations for the Second Quarter
Total Revenue: Total revenue for the second quarter of 2005
increased $132.3 million, or 41%, to $453.7 million compared with
$321.4 million for the same period last year, principally attributable
to the Company's organic membership growth and the acquisition of
Harmony Health Plans in June 2004.
Medical Benefits Expense: Medical benefits expense for the second
quarter of 2005 was $365.8 million, representing 81.3% of premium
revenues, compared with $263.8 million, representing 82.2% of premium
revenues for the same period last year.
Selling, General and Administrative Expense: Selling, general and
administrative expense was $59.1 million for the second quarter of
2005, representing 13.0% of total revenues, compared with $39.1
million, or 12.2% of total revenues, for the same period last year.
The Company continues its investment in Medicare expansion and
technology as well as general spending necessary to support its growth
strategy, including its investment in the Georgia and PDP
opportunities. On an adjusted basis to exclude expenses related to the
PDP business, the SG&A ratio was 12.8% for the quarter.
Net Income: Net income for the second quarter of 2005 was $14.2
million, or $0.36 per diluted share, based on 38.9 million weighted
average shares outstanding, compared with $8.9 million, or $0.28 per
adjusted diluted share, for the same period last year. Reported
earnings per share for the second quarter of 2005 includes $0.02 per
share of expenses related to the Company's PDP business.
Results of Operations for the Six Months
Total Revenue: Total revenue for the first half of 2005 increased
$249.3 million, or 40%, to $872.6 million, compared with $623.3
million for the first half of 2004, principally attributable to the
Company's organic membership growth of approximately 16% and the
Harmony acquisition.
Medical Benefits Expense: Medical benefits expense for the six
months ended June 30, 2005, was $710.7 million, representing 82.1% of
premium revenues, compared with $515.2 million, representing 82.8% of
premium revenues for the same period last year.
Selling, General and Administrative Expense: Selling, general and
administrative expense was $110.3 million for the first half of 2005,
representing 12.6% of total revenues, compared with $75.9 million, or
12.2% of total revenues, for the same period last year. On an adjusted
basis to exclude expenses related to the PDP business, the SG&A ratio
was 12.5% for the first half of 2005.
Net Income: Net income for the six months ended June 30, 2005, was
$24.8 million, or $0.64 per diluted share, based on 38.9 million
weighted average shares outstanding, compared with $14.8 million, or
$0.44 per adjusted diluted share, for the same period last year.
Reported earnings per share for the first half of 2005 includes $0.02
per share of expenses related to the Company's PDP business.
Balance Sheet and Cash Flow Highlights
As of June 30, 2005, the Company had cash and cash equivalents of
$253.5 million as well as investments classified as current assets of
$178.1 million. For the six months ended June 30, 2005, the Company's
net cash used in operations was $20.8 million on a GAAP basis, which
does not include adjustments for the timing of receipt of premiums
from our government partners. On an adjusted basis, excluding the
change in unearned premiums of $63.2 million and the change in
premiums receivable of $12.1 million, cash provided by operations was
$54.5 million. The Company believes that excluding changes in unearned
premiums and premiums receivable is a better measure of cash flow from
operations, as these changes 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 53 at the end of the second quarter of
2005 compared with 54 at the end of the first quarter of 2005.
Membership and Other Operating Statistics:
June 30, June 30,
2005 2004
-------- --------
Florida 538,000 510,000
Indiana 82,000 35,000
New York 80,000 63,000
Illinois 73,000 59,000
Connecticut 34,000 28,000
Louisiana 1,000 -
-------- --------
Total 808,000 695,000
======== ========
June 30, June 30,
2005 2004
-------- --------
TANF 589,000 491,000
S-CHIP 80,000 96,000
SSI 60,000 54,000
FHP 20,000 12,000
Medicare 59,000 42,000
-------- --------
Total 808,000 695,000
======== ========
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Medical Benefits Ratio 81.3% 82.2% 82.1% 82.8%
SG&A Expense Ratio 13.0% 12.2% 12.6% 12.2%
Adjusted SG&A Expense Ratio
(excluding PDP expenses) 12.8% 12.2% 12.5% 12.2%
June 30, March 31,
2005 2005
-------- --------
Days in Claims Payable 53 54
Growth Initiatives
Georgia: The Company was recently awarded contracts in all six
regions of Georgia's Healthy Families program. Georgia will transition
approximately 1.1 million Medicaid and S-CHIP beneficiaries to several
managed care plans beginning in January 2006. The Company also
recently received approval from the Centers for Medicare & Medicaid
Services (CMS) to offer Medicare services to beneficiaries in Fulton
and Dekalb counties.
Medicare Expansion: The Company is now actively marketing Medicare
Advantage products in 45 counties in six states with a total of 4.7
million eligibles. In addition to the 20 counties added so far in
2005, the Company has applications on file with CMS for expansion into
five additional counties to offer Medicare services. If all of these
applications are approved, the Company will be active in 50 counties
representing five million Medicare eligibles.
Prescription Drug Plan: The Company has received conditional
approval from CMS to offer stand-alone prescription drug plans in all
34 regions under Part D of the Medicare Prescription Drug Improvement
and Modernization Act of 2003. During the quarter, the Company
incurred expenses of approximately $0.02 per share related to the PDP
opportunity. Future PDP-related expenses, specifically those in the
fourth quarter of this year, will depend largely on how many Medicare
beneficiaries are auto-assigned into the Company's PDP plans and the
level of interest in those plans.
Guidance
The Company is raising its guidance due to the continued strong
performance of its business. For calendar year 2005, the Company now
expects revenues of $1.82 to $1.84 billion. On a pro forma basis,
excluding the $0.02 per share in expenses incurred during the second
quarter for our PDP opportunity and future 2005 expenses related to
the Georgia and PDP opportunities, the Company expects net income for
calendar year 2005 in the range of $63 to $64 million and pro forma
earnings per fully diluted share of $1.61 to $1.63, assuming 39.2
million weighted average shares outstanding. WellCare also announced
that it expects third quarter revenues of $470 to $480 million and on
a pro forma basis, excluding expenses related to the Georgia and PDP
opportunities, net income to be in the range of $18.25 to $18.75
million and earnings per share to be in the range of $0.47 to $0.48,
based on 39.0 million shares outstanding. The Company expects to
report its earnings per share on a pro forma basis excluding expenses
incurred for the Georgia and PDP opportunities and will report each of
these investments separately.
The Company expects to spend $8 to $10 million on the Georgia
implementation in the second half of this year, with spending more
heavily weighted in the fourth quarter. The Company expects to incur
approximately one-third of these expenses in the third quarter, with
the remainder expected in the fourth quarter of this year.
Due to the uncertainties associated with the PDP opportunity,
described above, the Company is not issuing guidance at this time with
respect to the expenses expected to be incurred related to the PDP
business in the second half of 2005. The Company will issue guidance
with respect to the PDP opportunity at a future time.
Adjusted Earnings Per Diluted Share
Adjusted 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 initial public offering.
Adjusted earnings per diluted share is reconciled to GAAP net income
per common unit in the accompanying condensed consolidated statements
of income. Because adjusted 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 second quarter conference call
will begin at 8:30 a.m. Eastern time on August 4, 2005. A 30-day
online replay will be available beginning approximately one hour
following the conclusion of the live broadcast. A link to the live
broadcast and online replay can be found on the Company's website at
www.wellcare.com, under the Investor Relations section, or at
www.earnings.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 approximately 808,000 members in Florida, New York,
Connecticut, Illinois, Indiana, Louisiana and Georgia. 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 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; the potential denial by the Centers for Medicare & Medicaid
Services of WellCare's expansion or prescription drug plan
applications; WellCare's lack of prior operating history, including
lack of experience with network providers and health benefits
management, in expansion markets or in the prescription drug plan
business; 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 periodic government premium rate adjustments;
regulatory changes or developments, including potential marketing
restrictions or sanctions and premium recoupment; potential fines,
penalties or operating restrictions resulting from regulatory audits,
examinations, investigations, or other inquiries; 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 captions "Cautionary Statement Regarding Forward-Looking
Statements" and "Risk Factors" in the Company's Registration Statement
on Form S-1 originally filed with the Securities and Exchange
Commission on June 2005, as amended, which contains discussions of the
Company's business and the various factors that may affect it.
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share and unit data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Premium $450,188 $320,740 $866,054 $621,990
Investment and
other income 3,488 691 6,503 1,277
--------- --------- --------- ---------
Total revenues 453,676 321,431 872,557 623,267
Expenses:
Medical benefits 365,804 263,784 710,730 515,219
Selling, general
and administrative 59,093 39,121 110,341 75,912
Depreciation and
amortization 2,048 2,026 4,090 3,685
Interest 3,566 1,846 6,771 4,111
--------- --------- --------- ---------
Total expenses 430,511 306,777 831,932 598,927
--------- --------- --------- ---------
Income before income taxes 23,165 14,654 40,625 24,340
Income tax expense 9,011 5,718 15,831 9,582
--------- --------- --------- ---------
Net income $14,154 8,936 $24,794 14,758
-======== =========
Class A common unit yield (1,601) (3,172)
--------- ---------
Net income attributable
to common units $7,335 $11,586
========= =========
Net income per share:
Basic $0.38 $0.66
Diluted $0.36 $0.64
Net income attributable
per common unit:
Basic $0.26 $0.42
Diluted $0.23 $0.36
Adjusted net income
attributable per common
share (1):
Basic $0.32 $0.51
Diluted $0.28 $0.44
Adjusted weighted
average common shares
outstanding (1):
Basic 37,573,264 22,668,819 37,412,929 22,561,532
Diluted 38,856,827 26,228,603 38,874,120 26,214,381
(1) Adjusted net income attributable per share is calculated as net
income divided by adjusted 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, the conversion of the
Class A Common Unit Yield into common stock, and issuance of new
common stock concurrent with the closing of the Company's initial
public offering and secondary 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, in thousands, except share data)
June 30, Dec. 31,
2005 2004
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $253,495 $397,627
Investments 178,090 75,515
Premiums and other receivables, net 64,241 52,170
Prepaid expenses and other current assets 4,138 6,119
Income taxes receivable 10,917 1,615
Deferred income taxes 10,744 15,362
--------- ---------
Total current assets 521,625 548,408
Property and equipment, net 22,408 12,587
Goodwill 185,779 180,848
Other intangibles, net 22,974 25,441
Restricted investment assets 35,805 31,473
Other assets 136 279
--------- ---------
TOTAL ASSETS $788,727 $799,036
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Medical benefits payable $212,327 $190,595
Unearned premiums 233 63,449
Accounts payable and accrued expenses 39,895 35,520
Current portion of long-term debt 1,600 1,600
--------- ---------
Total current liabilities 254,055 291,164
Notes payable to related party 25,000 25,000
Long-term debt 156,181 156,901
Deferred income taxes 16,665 14,818
Other liabilities 1,622 2,522
--------- ---------
Total liabilities 453,523 490,405
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, 39,161,067 and 38,590,655 shares
issued and outstanding at June 30, 2005
and December 31, 2004, respectively) 392 386
Paid-in capital 232,560 230,804
Retained earnings 102,237 77,444
Accumulated other comprehensive
income (expense) 15 (3)
--------- ---------
Total stockholders' equity 335,204 308,631
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $788,727 $799,036
========= =========
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
June 30,
2005 2004
--------- ---------
Cash from operating activities:
Net income $24,794 $14,758
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization expense 4,090 3,685
Realized gains on investments 18 (2)
Equity-based compensation expense 1,171 1,322
Accreted interest 80 298
Deferred taxes, net 6,465 373
Provision for doubtful receivables -- 1,547
Net gain on loan prepayment -- (2,697)
Changes in operating accounts, net of
effect of acquisition:
Premiums and other receivables (12,071) (2,809)
Prepaid expenses and other current assets 2,084 (6,538)
Medical benefits payable 21,732 7,240
Unearned premiums (63,216) (49,489)
Accounts payable and accrued expenses 4,250 2,822
Accrued interest (812) (609)
Taxes payable (9,302) 1,516
Other liabilities (53) --
-------- ---------
Net cash used in operating activities (20,770) (28,583)
-------- ---------
Cash from investing activities:
Purchase of business (4,931) (36,542)
Proceeds from sale and maturities
of investments, net 25,719 48
Purchases of investments (128,294) (5,327)
Purchases and depositions of
restricted investments (4,332) (4,886)
Additions to property
and equipment, net (11,496) (1,274)
-------- ---------
Net cash used in investing activities (123,334) (47,981)
-------- ---------
Cash from financing activities:
Contribution of capital -- 95
Proceeds from options exercised 772 --
Proceeds from debt issuance, net -- 159,200
Payments on debt (800) (104,792)
--------- ---------
Net cash (used in) provided
by financing activities (28) 54,503
-------- ---------
Net decrease in cash and cash equivalents (144,132) (22,061)
Cash and cash equivalents
at beginning of period 397,627 237,321
-------- ---------
Cash and cash equivalents
at end of period $253,495 $215,260
======== =========
Supplemental disclosures
of cash flow information:
Cash paid for taxes $18,671 $4,601
======== =========
Cash paid for interest $6,841 $6,021
======== =========
CONTACT: WellCare Health Plans Inc.
Thad Waugh, 813-865-1284
thad.waugh@wellcare.com