Wellcare Health Plan : WellCare Announces Fourth Quarter and Full-Year 2006 Results
02/13/2007| 04:00pm US/Eastern
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WellCare Health Plans, Inc. (NYSE: WCG):
Fourth quarter revenues grew 129% to $1.2 billion year over year
Fourth quarter net income grew 425.5% year over year
Membership grew to 2,258,000; 164% growth year over year
PDP membership grew to 923,000 members
Georgia membership grew to 477,000 members
Medicare Advantage membership grew over 30% year over year
WellCare Health Plans, Inc. (NYSE: WCG) today announced that net income
for the fourth quarter of 2006 increased 425.5% to $57.0 million, or
$1.38 per diluted share, based on 41.2 million weighted average shares
outstanding, compared with net income of $10.8 million, or $0.27 per
diluted share, based on 39.7 million weighted average shares outstanding
for the same period last year. Fourth quarter 2006 revenues increased
129.0% to $1.2 billion compared with $511.5 million for the fourth
quarter of 2005.
?2006 was a transformative year for WellCare,?
said Todd S. Farha, Chairman and Chief Executive Officer. ?We
added over 1.4 million members and doubled our revenue without losing
focus on delivering high service levels to our providers and members. We
look forward to building on our strong 2006 results in 2007 and in
future years.?
Results of Operations for the Fourth Quarter
Total Revenues: Total revenues in the fourth quarter of 2006
increased 129.0% to $1.2 billion compared with $511.5 million for the
same period last year. Fourth quarter 2006 revenue increases were
principally attributable to the Company's
strong growth in membership, primarily due to the addition of the Company's
PDP products and the launch of its Georgia Medicaid health plan.
Medical Benefits Expense: Medical benefits expense for the fourth
quarter of 2006 was $905.2 million, representing 78.4% of premium
revenues, compared with $405.3 million, representing 80.2% of premium
revenues, for the same period last year.
Selling, General and Administrative Expense: Selling, general and
administrative (SG&A) expense for the fourth quarter of 2006 was $166.0
million, representing 14.2% of total revenues, compared with $82.5
million, or 16.1% of total revenues, for the same period last year,
which included costs to prepare for the launch of PDP and Georgia.
Net Income: Net income for the fourth quarter of 2006 was $57.0
million, or $1.38 per diluted share, based on 41.2 million weighted
average shares outstanding, compared with net income of $10.8 million,
or $0.27 per diluted share, based on 39.7 million weighted average
shares outstanding, for the same period last year.
Results of Operations for the Year
Total Revenues: Total revenues for the year ended December 31,
2006 increased $1.9 billion, or 100.2%, to $3.8 billion, compared with
$1.9 billion for the same period last year. 2006 revenue increases were
principally attributable to the Company's
membership growth, including the launch of PDP and Georgia, and mix of
members between product lines.
Medical Benefits Expense: Medical benefits expense for the year
ended December 31, 2006 was $3.0 billion, representing 81.1% of premium
revenues, compared with $1.5 billion, representing 81.2% of premium
revenues, for the same period last year.
Selling, General and Administrative Expense: SG&A expense was
$492.8 million for the year ended December 31, 2006, representing 13.1%
of total revenues, compared with $259.5 million, or 13.8% of total
revenues, for the same period last year.
Net Income: Net income for the year ended December 31, 2006 was
$139.2 million, or $3.43 per diluted share, based on 40.6 million
weighted average shares outstanding, compared with net income of $51.9
million, or $1.32 per diluted share, based on 39.3 million weighted
average shares outstanding, for the same period last year.
Balance Sheet and Cash Flow Highlights
As of December 31, 2006, the Company had cash and cash equivalents of
$964.5 million as well as investments classified as current assets of
$126.4 million, for a total of $1.1 billion in cash and short-term
investments. For the quarter ended December 31, 2006, the Company's
net cash provided by operations was $178.4 million on a GAAP basis,
which does not include adjustments for the timing of receipt of payments
from the Company's government partners. On an
adjusted basis, excluding the cash used by the change in unearned
premiums of $13.2 million, the cash used in the change in other
receivables/payables from government partners of $145.3 million and the
cash provided by the change in premiums receivable of $49.6 million, net
cash provided by operations was $69.5 million, or 1.2 times net income,
for the quarter ended December 31, 2006. Days in claims payable was 47
at the end of the fourth quarter of 2006 compared with 56 at the end of
the third quarter of 2006 and 55 at the end of the fourth quarter of
2005. This decrease is primarily attributable to settlement of CMS
reconciliation issues. The Company previously reserved for these
settlement issues.
Membership and Other Operating Statistics
Total State Membership (excluding PDP)
Dec. 31,
2006
Dec. 31,
2005
Florida
525,000
545,000
Georgia
477,000
-
New York
117,000
95,000
Illinois
98,000
92,000
Indiana
70,000
85,000
Connecticut
39,000
37,000
Missouri
4,000
-
Louisiana
3,000
1,000
Ohio
2,000
-
Total State Membership (excluding PDP)
1,335,000
855,000
Total Membership (including PDP)
Dec. 31,
2006
Dec. 31,
2005
Medicaid Membership
TANF
1,069,000
621,000
SCHIP
95,000
82,000
SSI
51,000
58,000
FHP
30,000
25,000
Total Medicaid Membership
1,245,000
786,000
Medicare Membership
Medicare Advantage
90,000
69,000
PDP
923,000
-
Total Medicare Membership
1,013,000
69,000
Total Membership (including PDP)
2,258,000
855,000
Three Months Ended
Dec. 31,
2006
2005
Medical Benefits Ratio
78.4%
80.2%
SG&A Expense Ratio
14.2%
16.1%
Dec. 31,
2006
Sept. 30,
2006
Dec. 31,
2005
Days in Claims Payable
47
56
55
Growth Initiatives
Medicare Prescription Drug Plans: In January 2006, the Company
commenced offering its national stand-alone prescription drug plans
under Medicare Part D in all 34 PDP regions established by the Centers
for Medicare & Medicaid Services (CMS). As of December 31, 2006, the
Company had approximately 923,000 PDP members.
Georgia Expansion: The Company launched new Medicaid health plans
in Georgia in June 2006 in the Atlanta and Central regions. In September
and October 2006, the four remaining Georgia regions transitioned to
managed care. The Company was the only health plan selected to provide
Medicaid services on a statewide basis in Georgia. As of December 31,
2006, the Company had approximately 476,000 Georgia Medicaid members.
Private Fee-For-Service (PFFS) Plans: In January 2007, the
Company began offering PFFS plans in over 739 counties in 39 states and
Washington, D.C. Current membership in the Company's
PFFS plans is approximately 18,000.
Ohio Expansion: In the fourth quarter of 2006, the Company began
participation in the Ohio northeast region managed care expansion of the
Covered Families and Children and the aged, blind and disabled
population programs. Current membership in the Company's
Ohio plans is approximately 26,000.
Guidance
The Company is increasing its previously issued full-year 2007 guidance
with new expectations of revenues of $4.95 billion and earnings per
diluted share of $4.10 to $4.20, based on 41.8 million weighted average
shares outstanding. In addition, the Company is raising its previously
issued first quarter guidance to:
Revenues of $1.2 billion; and
Earnings per diluted share of $0.53, based on 41.4 million weighted
average shares outstanding.
Conference Call
The live broadcast of WellCare's fourth
quarter and full-year 2006 conference call will begin at 8:30 a.m.
Eastern time on February 14, 2007. 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.
Supplemental Information
The Company reports cash provided by operations on a non-GAAP basis to
exclude cash provided by the change in unearned premiums and cash used
in the change in premiums and other receivables. The Company believes
that excluding changes in unearned premiums, premiums receivable and
other receivables from government partners 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.
About WellCare Health Plans, Inc.
WellCare Health Plans, Inc. provides managed care services exclusively
for government-sponsored healthcare programs, focusing on Medicaid and
Medicare. Headquartered in Tampa, Florida, WellCare offers a variety of
Medicaid and Medicare plans, including health plans for families,
children, the aged, blind and disabled and prescription drug plans,
currently serving over 2,258,000 members nationwide. For more
information about WellCare, please visit the Company's
website at www.wellcare.com.
Statements contained in this release which are not historical fact
may be forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 (the ?Exchange
Act?).The Company intends such
statements to be covered by the safe harbor provisions for
forward-looking statements contained in Section 21E of the Exchange Act.Statements that are predictive in nature, that depend upon or refer
to future events or conditions, or that include words such as ?may,??will,??should,??expects,??anticipates,??intends,??plans,??believes,??estimates,??predicts,??potential,??continues? and
similar expressions are forward-looking statements.Forward-looking
statements involve known and unknown risks and uncertainties that may
cause the Company'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 the Company's state or
federal contracts; the Company's lack of
prior operating history, including lack of experience with network
providers and health benefits management in expansion markets, including
Georgia, Missouri and Ohio; the Company's
lack of prior operating history in its Medicare PDP and PFFS plans and
potential inability to accurately predict the number of members in these
plans; the Company's ability to accurately
predict and effectively manage health benefits and other operating
expenses, including the Company's ability to
reinsure certain risks related to medical expenses; the potential for
confusion in the marketplace concerning PDP and PFFS programs resulting
from, among other things, the proliferation of health care options
facing Medicare beneficiaries and the complexity of the PDP and PFFS
offerings, including the benefit structures and the relative lack of
awareness of these programs among health care providers, pharmacists and
patient advocates; the Company's ability to
accurately estimate incurred but not reported medical costs; risks
associated with future changes in healthcare laws, including repeal or
modification of the Medicare Modernization Act of 2003 or any portion
thereof; potential reductions in funding for government healthcare
programs, including reductions in funding resulting from the escalating
costs of prescription drugs; risks associated with periodic government
reimbursement rate adjustments, the timing of the CMS risk-corridor
payments to PDP providers and the accounting treatment for the PDP
program; the Company's ability to develop
processes and systems to support its operations and future growth;
regulatory changes and developments, including potential marketing
restrictions, sanctions, governmental investigations or premium
recoupments; potential fines, penalties or operating restrictions
resulting from regulatory audits, examinations, investigations or other
inquiries; risks associated with the Company's
acquisition strategy; risks associated with the Company's
efforts to expand into additional states and counties; risks associated
with the Company's substantial debt
obligations; risks associated with the volatility of the Company's
common stock; and risks associated with the Company's
rapid growth, including the Company's ability
to attract and retain qualified management personnel.Additional
information concerning these and other important risks and uncertainties
can be found under the headings ?Forward-Looking
Statements? and ?Risk
Factors? in the Company's
2005 Annual Report on Form 10-K, as amended, filed with the Securities
and Exchange Commission in February 2006, and in the Company's
periodic reports filed from time to time with the Securities and
Exchange Commission, which contain discussions of the Company's
business and the various factors that may affect it.The Company
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
(In thousands, except share and per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2006
2005
2006
2005
Revenues:
Premium
$ 1,154,134
$ 505,541
$ 3,713,045
$ 1,862,497
Investment and other income
17,036
5,986
49,881
17,042
Total revenues
1,171,170
511,527
3,762,926
1,879,539
Expenses:
Medical benefits
905,236
405,268
3,012,163
1,512,109
Selling, general and administrative
166,042
82,476
492,808
259,491
Depreciation and amortization
4,429
2,828
17,170
9,204
Interest
3,405
3,161
14,087
13,562
Total expenses
1,079,112
493,733
3,536,228
1,794,366
Income before income taxes
92,058
17,794
226,698
85,173
Income tax expense
35,096
6,955
87,511
33,245
Net income
$ 56,962
$ 10,839
$ 139,187
$ 51,928
Net income per share:
Basic
$ 1.43
$ 0.28
$ 3.54
$ 1.38
Diluted
$ 1.38
$ 0.27
$ 3.43
$ 1.32
Weighted average common shares outstanding:
Basic
39,874,802
38,172,945
39,335,313
37,714,286
Diluted
41,208,639
39,746,587
40,621,471
39,293,344
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31,
December 31,
2006
2005
ASSETS
Current Assets:
Cash and cash equivalents
$ 964,542
$ 421,766
Investments
126,422
94,160
Premiums, net
102,465
47,567
Other receivables from government partners
40,902
-
Prepaid expenses and other current assets
87,507
19,036
Income taxes receivable
-
11,575
Deferred income taxes
16,576
11,353
Total current assets
1,338,414
605,457
Property , equipment, and capitalized software, net
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