WELLCARE HEALTH PLANS TAMPA, Fla., Feb. 9, 2016 /PRNewswire/ -- WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the fourth quarter and full-year 2015. As determined under generally accepted accounting principles (GAAP), net income for the fourth quarter of 2015 was $13.0 million, or $0.29 per diluted share. Adjusted net income for the fourth quarter of 2015 was $26.9 million, or $0.60 per diluted share.
WellCare reported GAAP net income for the full-year 2015 of $118.6 million, or $2.67 per diluted share. Adjusted net income for 2015 was $152.7 million, or $3.44 per diluted share.
"We are pleased with our fourth quarter and full-year 2015 results," said Kenneth A. Burdick, WellCare's chief executive officer. "In 2015, we improved the performance of each of our lines of business, successfully secured our Kentucky and Georgia Medicaid contracts and meaningfully improved our balance sheet. We remain focused on continued operational and financial improvements and believe we are well-positioned for growth opportunities."
Key Metrics Fourth Quarter Full-Year
2015 2015
--- ---- ----
Earnings per Diluted Share (GAAP) $0.29 $2.67
-------------------------------- ----- -----
Adjusted Earnings per Diluted Share* $0.60 $3.44
----------------------------------- ----- -----
Total Premium Revenue (GAAP) ($ millions) $3,493.0 $13,874.8
---------------------------------------- -------- ---------
Adjusted Premium Revenue* ($ millions) $3,405.3 $13,560.9
------------------------------------- -------- ---------
Segment Premium Revenue ($ millions):
-------------------------------------
Medicaid Health Plans (GAAP) $2,346.4 $9,074.3
--------------------------- -------- --------
Adjusted Medicaid Health Plans* $2,258.7 $8,760.4
------------------------------ -------- --------
Medicare Health Plans $961.7 $3,898.8
--------------------- ------ --------
Medicare Prescription Drug Plans (PDP) $184.9 $901.7
------------------------------------- ------ ------
Segment Medical Benefits Ratios (MBR):
--------------------------------------
Medicaid Health Plans (GAAP) 86.3% 86.7%
--------------------------- ---- ----
Adjusted Medicaid Health Plans* 89.6% 89.8%
------------------------------ ---- ----
Medicare Health Plans 88.7% 87.2%
--------------------- ---- ----
Medicare Prescription Drug Plans (PDP) 67.3% 78.7%
------------------------------------- ---- ----
Selling, General and Administrative (SG&A) Ratio (GAAP) 9.8% 8.2%
------------------------------------------------------ --- ---
Adjusted SG&A Ratio* 9.0% 7.9%
------------------- --- ---
*Refer to the basis of
presentation for a discussion
of non-GAAP financial
measures.
Highlights
-- As previously announced on January 12, 2016, WellCare entered into a new
$850 million senior unsecured revolving credit facility, replacing and
terminating the previous senior unsecured credit facility. Upon closing,
through a combination of $100 million in cash and $200 million borrowed
as a revolving loan under the facility, WellCare repaid in full its $300
million term loan that was due in September 2016.
-- Adjusted net income margin for the full-year 2015 was 1.1 percent, an
improvement from 0.7 percent for the full-year 2014.
-- Adjusted premium revenue for the fourth quarter of 2015 increased
slightly to $3.4 billion compared with the fourth quarter of 2014. For
the full-year 2015, adjusted premium revenue increased 6.7 percent to
approximately $13.6 billion compared with the full-year 2014. Both the
quarter-over-quarter and year-over-year increases were driven primarily
by membership growth in the company's Medicaid Health Plans segment.
-- Medicaid Health Plans membership grew to approximately 2.4 million
members at December 31, 2015, an increase of 78,000 members from
December 31, 2014.
-- Adjusted Medicaid Health Plans MBR in the fourth quarter of 2015 was
89.6 percent, an improvement of 210 basis points compared with the
fourth quarter of 2014. For the full-year 2015, the adjusted Medicaid
Health Plans MBR was 89.8 percent, a 70 basis point improvement compared
with the full-year 2014.
-- Medicare Health Plans segment MBR for the full-year 2015 was 87.2
percent, an improvement of 130 basis points compared with the full-year
2014, driven by improved operational execution on initiatives launched
in 2015 and the company's 2015 bid strategy.
-- Medicare PDP MBR improved significantly in 2015 to 78.7 percent compared
with 92.9 percent for the full-year 2014 as a result of the company's
2015 bid strategy, improved pharmacy rebate performance and operational
execution.
-- Effective January 1, 2016, WellCare successfully transitioned its
pharmacy benefit management (PBM) to CVS Health Corporation.
Consolidated Operations Results
GAAP net income for the fourth quarter of 2015 was $13.0 million, or $0.29 per diluted share, compared with GAAP net income of $7.7 million, or $0.18 per diluted share, for the fourth quarter of 2014.
Adjusted net income for the fourth quarter of 2015 was $26.9 million, or $0.60 per diluted share, compared with adjusted net income of $18.0 million, or $0.41 per diluted share, for the fourth quarter of 2014. The year-over-year improvement in adjusted net income was the result of operational improvement in all three of the company's reportable operating segments.
GAAP total premium revenue for the fourth quarter of 2015 was $3.5 billion compared with GAAP total premium revenue of approximately $3.4 billion for the fourth quarter of 2014.
Adjusted premium revenue for the fourth quarter of 2015 was approximately $3.41 billion compared with adjusted total premium revenue of approximately $3.35 billion for the fourth quarter 2014.
GAAP SG&A expense was $340.9 million in the fourth quarter of 2015 compared with $283.0 million for the same period in 2014. Adjusted SG&A expense was $307.5 million in the fourth quarter of 2015 compared with $274.7 million in the fourth quarter of 2014.
The adjusted SG&A expense ratio was 9.0 percent in the fourth quarter of 2015 compared with 8.2 percent in the fourth quarter of 2014. The 80 basis point increase was primarily driven by continued investments and re-establishment of variable compensation due to improved performance in 2015 compared with 2014.
Medicaid Health Plans Segment Results
Medicaid Health Plans segment membership increased by 78,000, or 3.4 percent year over year, to approximately 2.4 million members as of December 31, 2015. The increase was primarily a result of organic membership growth in Florida, Kentucky and Missouri.
Adjusted Medicaid Health Plans premium revenue was $2.3 billion for the fourth quarter of 2015, an increase of 7.9 percent year over year, and was mainly the result of membership growth.
The adjusted Medicaid Health Plans MBR was 89.6 percent for the fourth quarter of 2015, a decrease of 210 basis points from the fourth quarter of 2014 and 110 basis points sequentially. The year-over-year and sequential decreases were the result of continued operational improvement.
Medicare Health Plans Segment Results
Medicare Health Plans segment membership as of December 31, 2015, was 354,000, a decrease of 63,000 members from December 31, 2014. The decline in membership was primarily the result of the sale of the company's Medicare Supplement business, Sterling Life Insurance Company ("Sterling"), on July 1, 2015, which accounted for approximately 43,000 members of the year-over-year decline, as well as the company's 2015 bid positioning.
Medicare Health Plans premium revenue in the fourth quarter of 2015 decreased 4.8 percent year over year to $961.7 million and was primarily the result of the company's 2015 bid actions.
The Medicare Health Plans MBR in the fourth quarter of 2015 was 88.7 percent, an increase of 220 basis points compared with the fourth quarter of 2014. The increase was primarily the result of the divestiture of Sterling and investments in quality improvement initiatives.
Medicare Prescription Drug Plans (PDP) Segment Results
WellCare's Medicare PDP segment produced substantial improvement in the fourth quarter of 2015 compared with the fourth quarter of 2014. The outcome of the 2015 bid strategy was the primary driver of the year-over-year decreases in membership and premium revenue as reflected below:
-- The company's Medicare PDP segment membership as of December 31, 2015
decreased 367,000 year over year, or 26.4 percent, to approximately 1.0
million members.
-- Premium revenue for the fourth quarter of 2015 was $184.9 million, a
26.7 percent decrease from the fourth quarter of 2014.
The Medicare PDP segment MBR in the fourth quarter of 2015 was 67.3 percent, a significant improvement from 79.8 percent in the fourth quarter of 2014, primarily driven by the company's 2015 bid strategy, improved pharmacy rebate management and continued operational execution.
Operating Cash Flow and Financial Condition
Net cash provided by operating activities was $474.7 million for the three months ended December 31, 2015, compared with net cash provided by operating activities of $119.9 million for the three months ended December 31, 2014.
For the twelve months ended December 31, 2015, net cash provided by operating activities was $712.6 million compared with net cash provided by operating activities of $299.3 million for the twelve months ended December 31, 2014.
As of December 31, 2015, unregulated cash and investments were approximately $816.1 million compared with $385.0 million as of September 30, 2015, and $89.5 million as of December 31, 2014. The sequential and year-over-year increases are primarily due to the collection of approximately $845.5 million in Medicare PDP receivables from the Centers for Medicare and Medicaid Services (CMS) related to the 2014 plan year, benefiting both unregulated and regulated cash balances. The company used $100 million of the year-end cash balance to pay off the term loan in January 2016 as previously discussed.
Days in claims payable (DCP) was 47.1 days as of December 31, 2015, compared with 45.6 days as of both September 30, 2015 and December 31, 2014.
Conference Call and Webcast
A discussion of WellCare's fourth quarter 2015 results will be available via a conference call and live webcast today at 9:30 a.m. Eastern time (ET).
The conference call will be webcast live from the company's website and be accessible in the "Events and Presentations" section at ir.wellcare.com. A replay of the webcast will be available approximately one hour following the conclusion of the conference call.
The conference call can also be accessed by pre-registering using the following link: http://dpregister.com/10078581. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call. Participants may pre-register now or at any time prior to the call and will receive simple instructions via email.
For those parties who do not have internet access or are unable to pre-register, the conference call may be accessed by calling:
Domestic participant dial in (toll free): 1-844-492-3724
International participant dial in: 1-412-542-4185
A telephonic replay will be available until midnight Eastern time on Tuesday, February 16, 2016. This replay may be accessed by dialing one of the numbers below and entering the replay access code of 10078581:
Domestic replay (toll free): 1-877-344-7529
International replay: 1-412-317-0088
About WellCare Health Plans, Inc.
Headquartered in Tampa, Fla., WellCare Health Plans, Inc. (NYSE: WCG) focuses exclusively on providing government-sponsored managed care services, primarily through Medicaid, Medicare Advantage and Medicare Prescription Drug Plans, to families, children, seniors and individuals with complex medical needs. The company served approximately 3.8 million members nationwide as of December 31, 2015. 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, WellCare provides certain non-GAAP measurements that management believes are useful in assessing the company's performance. Earnings per share, net income and, as noted below, other specific operating and financial results have been adjusted for the effect of certain expenses related to previously disclosed government investigations and related litigation and resolution costs ("investigation costs"); transitory costs related to the company's decision to change its pharmacy benefit manager (PBM) as of January 1, 2016 ("PBM transitory costs"); certain nonrecurring incurred Iowa-related SG&A expenses relating to readiness costs, certain wind-down costs of WellCare's Iowa operations and certain legal costs ("Iowa SG&A costs"); costs related to the divestiture of Sterling ("Sterling divestiture costs"); the effect of a gain on the divestiture of Sterling and changes to the gain ("Sterling gain"); and, beginning in 2016, amortization expense associated with prior acquisitions ("acquisition-related amortization expenses"). Management believes these items are not indicative of long-term business operations performance.
For 2016, the company is not able to project at the time of this press release the amount of expenses associated with the PBM transitory costs, Iowa SG&A costs, potential changes in the Sterling gain or investigation costs and, therefore, cannot reconcile non-GAAP metrics affected by these items to total projected GAAP metrics.
Following is a description of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release.
Adjusted premium revenue (non-GAAP) = Total premium revenue (GAAP) less Medicaid premium taxes revenue and Medicaid reimbursements of the ACA industry fee. The company's adjusted Medicaid Health Plans segment premium revenue uses this non-GAAP definition of adjusted premium revenue.
MBR (GAAP) = medical benefits expense divided by total premium revenue (GAAP).
Adjusted MBR (non-GAAP) = medical benefits expense divided by adjusted premium revenue. The company's adjusted Medicaid Health Plans segment MBR uses this non-GAAP definition of adjusted MBR.
SG&A expense ratio (GAAP) = SG&A expense (GAAP) divided by total premium revenue (GAAP).
Adjusted SG&A expense (non-GAAP) = SG&A expense (GAAP) less investigation costs, PBM transitory costs, Sterling divestiture costs and Iowa SG&A costs.
Adjusted SG&A ratio (non-GAAP) = adjusted SG&A expense divided by adjusted premium revenue.
2016 adjusted depreciation & amortization = depreciation & amortization expense (GAAP) less acquisition-related amortization expenses.
2015 adjusted income before taxes (non-GAAP) = income before income taxes (GAAP) less investigation costs, PBM transitory costs, Sterling divestiture costs, Iowa SG&A costs and the Sterling gain.
2016 adjusted income before taxes (non-GAAP) = income before income taxes (GAAP) less investigation costs, PBM transitory costs, Sterling divestiture costs, Iowa SG&A costs, acquisition-related amortization expenses, and the Sterling gain.
Adjusted income tax expense (non-GAAP) = income tax associated with the applicable adjusted income before taxes, based on the applicable effective income tax rate.
Adjusted effective income tax rate (non-GAAP) = adjusted income tax expense divided by adjusted income before taxes.
Adjusted net income (non-GAAP) = adjusted income before taxes less adjusted income tax expense.
Adjusted net income margin (non-GAAP) = adjusted net income divided by adjusted premium revenue.
Adjusted earnings per diluted share (non-GAAP) = Adjusted net income divided by weighted average common shares outstanding on a fully diluted basis.
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, the pending Medicaid contract with Georgia DCH and the protests and related appeal of Iowa's Medicaid managed care program bid awards, 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, the outcome of any protests and litigation related to the Medicaid awards, the approval of the Medicaid contracts by CMS, any changes to the programs or contracts, WellCare's ability to address operational challenges related to new business, including, but not limited to, WellCare's ability to meet the requirements of readiness reviews, 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 estimate and manage growth, WellCare's ability to effectively execute and integrate acquisitions, potential reductions in Medicaid and Medicare revenue, WellCare's ability to estimate and manage medical benefits expense effectively, including through its vendors, its ability to negotiate actuarially sound rates, especially in new programs with limited experience, and WellCare's ability to comply with the terms of the Corporate Integrity Agreement. Given the risks and uncertainties inherent in forward-looking statements, any of WellCare's forward-looking statements could be incorrect and investors are cautioned not to place undue reliance on any of our forward-looking statements.
Additional information concerning these and other important risks and uncertainties can be found in the company's filings with the U.S. Securities and Exchange Commission ("SEC"), included 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, 2014, and the company's Quarterly Report on Form 10-Q for the period ended September 30, 2015, and other filings by WellCare with the SEC, which contain discussions of WellCare's business and the various factors that may affect it. Subsequent events and developments may cause actual results to differ, perhaps materially, from WellCare's forward-looking statements. WellCare's forward-looking statements speak only as of the date on which the statements are made. WellCare undertakes no duty, and expressly disclaims any obligation, to update these forward-looking statements to reflect any future events, developments or otherwise.
2016 Guidance Table
Guidance Metric 2016 Guidance
as of February 9, 2016*
--- ----------------------
Segment premium revenue:
------------------------
Adjusted Medicaid Health Plans(1) $8.75B to $8.90B
-------------------------------- ----------------
Medicare Health Plans $3.85B to $3.95B
--------------------- ----------------
Medicare PDP $900M to $975M
------------ --------------
Adjusted premium revenue(1) $13.5B to $13.825B
-------------------------- ------------------
Medicaid ACA industry fee reimbursement $229M to $237M
--------------------------------------- --------------
Investment & other income $12M to $16M
------------------------- ------------
Segment MBR:
------------
Adjusted Medicaid Health Plans(1) 89.0% to 90.0%
-------------------------------- -------------
Medicare Health Plans 85.25% to 86.50%
--------------------- ---------------
Medicare PDP 81.0% to 83.0%
------------ -------------
Adjusted SG&A ratio(2)(6) 7.7% to 7.9%
------------------------ -----------
ACA industry fee expense $223M to $233M
------------------------ --------------
Adjusted depreciation & amortization(3) $72M to $75M
-------------------------------------- ------------
Interest expense $58M to $62M
---------------- ------------
Adjusted effective income tax rate(4)(6) 56.0% to 58.0%
--------------------------------------- -------------
Adjusted earnings per diluted share(5)(6) $4.35 to $4.60
---------------------------------------- --------------
*No change from the 2016 guidance issued on
January 12, 2016; refer to the basis of
presentation for a discussion of non-GAAP
financial measures.
(1) Excludes an estimated $105.0 million
to $110.0 million in Medicaid
premium taxes and an estimated
$229.0 million to $237.0 million for
Medicaid ACA industry fee
reimbursement.
(2) Excludes the following items: an
estimated $1.0 million to $2.0
million in Sterling divestiture
costs; estimated Medicaid premium
taxes and Medicaid ACA industry fee
reimbursement; Iowa SG&A costs, PBM
transitory costs and investigation
costs.
(3) Excludes an estimated $10.1 million
of acquisition-related amortization
expenses.
(4) Excludes the estimated income tax
effect associated with the
investigation costs, PBM transitory
costs, Sterling divestiture costs,
Iowa SG&A costs, acquisition-
related amortization expenses, and
the Sterling gain.
(5) The company estimates adjusted
earnings per diluted share guidance
by adjusting net income for the
estimated net of tax effect of
investigation costs, PBM transitory
costs, Sterling divestiture costs,
Iowa SG&A costs, acquisition-
related amortization expenses, and
the Sterling gain.
(6) WellCare is not able to project
amounts associated with the
investigation costs, PBM transitory
costs, Iowa SG&A costs, or changes
to the Sterling gain and, therefore,
cannot reconcile these metrics to
total projected GAAP metrics.
WELLCARE HEALTH PLANS, INC.
MEMBERSHIP INFORMATION
(Unaudited)
Change from
-----------
September 30, 2015 December 31, 2014
------------------ -----------------
December 31, September 30, December 31, Change % Change %
2015 2015 2014 Change Change
---- ---- ---- ------ ------
Medicaid Health Plans Membership by State:
Florida 781,000 788,000 722,000 (7,000) (0.9)% 59,000 8.2%
Georgia 585,000 591,000 604,000 (6,000) (1.0)% (19,000) (3.1)%
Kentucky 440,000 436,000 420,000 4,000 0.9% 20,000 4.8%
Illinois 168,000 173,000 161,000 (5,000) (2.9)% 7,000 4.3%
New York 122,000 120,000 116,000 2,000 1.7% 6,000 5.2%
Other states 292,000 291,000 287,000 1,000 0.3% 5,000 1.7%
Total Medicaid Health Plans Membership (1) 2,388,000 2,399,000 2,310,000 (11,000) (0.5)% 78,000 3.4%
========= ========= ========= ======= ===== ====== ===
Medicaid Health Plans Membership by Program:
TANF 1,988,000 1,986,000 1,863,000 2,000 0.1% 125,000 6.7%
SSI, ABD, Duals and LTC 274,000 274,000 263,000 - 0.0% 11,000 4.2%
CHIP and other 126,000 139,000 184,000 (13,000) (9.4)% (58,000) (31.5)%
Total Medicaid Health Plans Membership (1) 2,388,000 2,399,000 2,310,000 (11,000) (0.5)% 78,000 3.4%
========= ========= ========= ======= ===== ====== ===
Medicare Health Plans:
Medicare Advantage by State:
Florida 107,000 108,000 104,000 (1,000) (0.9)% 3,000 2.9%
New York 46,000 47,000 52,000 (1,000) (2.1)% (6,000) (11.5)%
Georgia 36,000 35,000 31,000 1,000 2.9% 5,000 16.1%
Texas 36,000 35,000 29,000 1,000 2.9% 7,000 24.1%
California 32,000 33,000 61,000 (1,000) (3.0)% (29,000) (47.5)%
Mississippi 18,000 18,000 17,000 - 0.0% 1,000 5.9%
Other states 79,000 79,000 80,000 - 0.0% (1,000) (1.3)%
------ ------ ------
Total Medicare Advantage Health Plans 354,000 355,000 374,000 (1,000) (0.3)% (20,000) (5.3)%
Medicare Supplement Insurance - - 43,000 - 0.0% (43,000) (100.0)%
--- --- ------
Total Medicare Health Plans (1) 354,000 355,000 417,000 (1,000) (0.3)% (63,000) (15.1)%
Medicare Prescription Drug Plans 1,025,000 1,032,000 1,392,000 (7,000) (0.7)% (367,000) (26.4)%
Total Membership 3,767,000 3,786,000 4,119,000 (19,000) (0.5)% (352,000) (8.5)%
========= ========= ========= ======= ===== ======== =====
(1) Medicaid Health Plans and Medicare
Health Plans membership includes
members who are dually-eligible
for both Medicaid and Medicare.
The dually-eligible membership
for December 31, 2015 and
September 30, 2015 was 43,000 and
for December 31, 2014 was 32,000.
WellCare Health Plans, Inc.
Selected Data From Consolidated Statements of Comprehensive Income
(Unaudited; dollars in millions except share and per share data)
For the Three Months Ended For the Year Ended
December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Revenues:
Premium $3,405.3 $3,354.3 $13,560.9 $12,714.4
Medicaid premium taxes 27.8 19.5 94.7 76.5
ACA industry fee reimbursement 59.9 30.7 219.2 124.6
Total premium 3,493.0 3,404.5 13,874.8 12,915.5
Investment and other income 3.8 10.3 15.4 44.4
--- ---- ---- ----
Total revenues 3,496.8 3,414.8 13,890.2 12,959.9
Expenses:
Medical benefits 3,001.8 2,994.4 11,978.5 11,455.2
Selling, general and administrative 340.9 283.0 1,132.9 1,018.8
ACA industry fee 56.8 34.4 227.3 137.7
Medicaid premium taxes 27.8 19.5 94.7 76.5
Depreciation and amortization 19.5 16.0 72.6 59.9
Interest 15.2 11.4 54.2 39.4
Impairment and other charges - - - 24.1
--- --- --- ----
Total expenses 3,462.0 3,358.7 13,560.2 12,811.6
------- ------- -------- --------
Income from operations 34.8 56.1 330.0 148.3
Gain on divestiture of business 1.5 - 6.1 -
Bargain purchase gain - (2.1) - 29.5
Income before income taxes 36.3 54.0 336.1 177.8
Income tax expense 23.3 46.3 217.5 114.1
---- ---- ----- -----
Net income $13.0 $7.7 $118.6 $63.7
===== ==== ====== =====
Earnings per common share:
Basic $0.29 $0.18 $2.69 $1.45
Diluted $0.29 $0.18 $2.67 $1.44
Weighted average common shares outstanding:
Basic 44,109,559 43,902,192 44,057,579 43,864,367
Diluted 44,477,506 44,222,272 44,391,032 44,163,601
WellCare Health Plans, Inc.
Consolidated Balance Sheets
(Unaudited; dollars in millions except share data)
December 31, December 31,
2015 2014
---- ----
Assets
Current Assets:
Cash and cash equivalents $2,407.0 $1,313.5
Short-term investments 204.4 172.8
Premiums receivable, net 603.9 609.0
Pharmacy rebates receivable, net 252.5 358.9
Receivables from government partners - 83.0
Funds receivable for the benefit of members 577.6 781.5
Income taxes receivable 50.6 -
Prepaid expenses and other current assets, net 137.7 170.5
Deferred income tax asset 34.8 37.1
---- ----
Total current assets 4,268.5 3,526.3
Property, equipment and capitalized software, net 244.8 187.1
Goodwill 263.2 263.2
Other intangible assets, net 80.0 101.0
Long-term investments 131.8 257.3
Restricted investments 196.0 150.3
Other assets 9.3 9.8
--- ---
Total Assets $5,193.6 $4,495.0
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Medical benefits payable $1,536.0 $1,483.8
Unearned premiums 27.7 86.9
Accounts payable and accrued expenses 405.2 313.6
Current portion of long-term debt 300.0 -
Current portion of amount payable related to investigation resolution - 35.2
Income taxes payable - 1.9
Other payables to government partners 172.7 14.3
----- ----
Total current liabilities 2,441.6 1,935.7
Deferred income tax liability 87.4 48.4
Long-term debt 912.1 900.0
Other liabilities 24.2 15.0
---- ----
Total liabilities 3,465.3 2,899.1
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, 44,113,328 and 43,914,106 shares issued and outstanding at December 31, 2015
and December 31, 2014, respectively) 0.4 0.4
Paid-in capital 518.4 503.0
Retained earnings 1,211.7 1,093.1
Accumulated other comprehensive loss (2.2) (0.6)
---- ----
Total Stockholders' Equity 1,728.3 1,595.9
------- -------
Total Liabilities and Stockholders' Equity $5,193.6 $4,495.0
======== ========
WellCare Health Plans, Inc.
Consolidated Statements of Cash Flows
(Unaudited; dollars in millions)
For the Year Ended
December 31,
2015 2014
---- ----
Cash flows from operating activities:
Net income $118.6 $63.7
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization 72.6 59.9
Stock-based compensation expense 20.2 15.7
Gain on divestiture of business (6.1) -
Bargain purchase gain - (29.5)
Incremental tax benefit from stock-based compensation (1.9) (0.6)
Deferred taxes, net 44.6 (6.8)
Provision for doubtful receivables 14.6 15.2
Other, net 19.5 24.1
Changes in operating accounts, net of effects from acquisitions and divestitures:
Premiums receivable, net (8.5) (46.2)
Pharmacy rebates receivable, net 106.4 (161.2)
Medical benefits payable 68.6 423.4
Unearned premiums (55.6) 82.4
Other receivables/payables to government partners 241.7 (106.0)
Amount payable related to investigation resolution (35.2) (35.1)
Accrued liabilities and other, net 113.1 0.3
Net cash provided by operating activities 712.6 299.3
Cash flow from investing activities:
Acquisitions and acquisition-related settlements, net of cash acquired (17.2) 48.0
Purchases of investments (165.7) (416.7)
Proceeds from sales and maturities of investments 195.7 367.9
Additions to property, equipment and capitalized software, net (137.0) (74.8)
------ -----
Net cash used in investing activities (124.2) (75.6)
Cash flows from financing activities:
Proceeds from issuance of debt, net of financing costs paid 308.9 298.6
Proceeds from exercises of stock options 0.3 0.5
Incremental tax benefit from stock-based compensation 1.9 0.6
Repurchase and retirement of shares to satisfy employee tax withholding requirements (7.0) (3.1)
Payments on capital leases (0.1) (1.4)
Funds received (paid) for the benefit of members, net 201.1 (687.9)
Net cash provided by (used in) financing activities 505.1 (392.7)
Increase (decrease) in cash and cash equivalents 1,093.5 (169.0)
Balance at beginning of period 1,313.5 1,482.5
------- -------
Balance at end of period $2,407.0 $1,313.5
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for taxes $217.9 $100.9
====== ======
Cash paid for interest $51.9 $36.9
===== =====
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Non-cash additions to property, equipment, and capitalized software $6.1 $11.7
==== =====
WELLCARE HEALTH PLANS, INC.
SUPPLEMENTAL INFORMATION
SELECTED SEGMENT INFORMATION
(Unaudited; dollars in millions)
For the Three Months Ended For the Year Ended
December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Medicaid Health Plans Segment:
Adjusted premium revenue by state(a)
Kentucky $633.5 $608.5 $2,526.9 $2,257.5
Florida 597.2 528.9 2,253.8 1,718.1
Georgia 389.3 421.9 1,550.3 1,588.6
Other states 638.7 533.1 2,429.4 2,008.6
Adjusted premium revenue(a) 2,258.7 2,092.4 8,760.4 7,572.8
Medicaid premium taxes 27.8 19.5 94.7 76.5
ACA industry fee reimbursement 59.9 30.7 219.2 124.6
Premium revenue (GAAP) 2,346.4 2,142.6 9,074.3 7,773.9
Medical benefits expense 2,024.6 1,919.5 7,866.8 6,853.1
Medical benefits ratio (GAAP) 86.3% 89.6% 86.7% 88.2%
Adjusted medical benefits ratio (a) 89.6% 91.7% 89.8% 90.5%
Medicare Health Plans Segment:
Premium revenue $961.7 $1,009.7 $3,898.8 $3,963.2
Medical benefits expense 852.9 873.5 3,401.7 3,506.9
Medical benefits ratio 88.7% 86.5% 87.2% 88.5%
Prescription Drug Plans Segment:
Premium revenue $184.9 $252.2 $901.7 $1,178.4
Medical benefits expense 124.3 201.4 710.0 1,095.2
Medical benefits ratio 67.3% 79.8% 78.7% 92.9%
Total Company:
Adjusted premium revenue(a) $3,405.3 $3,354.3 $13,560.9 $12,714.4
Medicaid premium taxes 27.8 19.5 94.7 76.5
ACA industry fee reimbursement 59.9 30.7 219.2 124.6
Premium revenue (GAAP) 3,493.0 3,404.5 13,874.8 12,915.5
Medical benefits expense 3,001.8 2,994.4 11,978.5 11,455.2
Medical benefits ratio (GAAP) 85.9% 88.0% 86.3% 88.7%
Adjusted medical benefits ratio (a) 88.2% 89.3% 88.3% 90.1%
(a) Refer to the basis of presentation for a discussion of non-GAAP financial measures.
WELLCARE HEALTH PLANS, INC.
SUPPLEMENTAL INFORMATION (Continued)
Reconciliation of Selling, General and Administrative Expense Ratios
(Unaudited; dollars in millions)
The Company reports its selling, general and administrative ("SG&A") expense ratio on an adjusted or non-GAAP basis modified to exclude the effect of Medicaid premium taxes and ACA industry fee reimbursement from revenue. The Adjusted SG&A expense ratio also
excludes the effect of investigation, Sterling divestiture, PBM transitory and Iowa SG&A costs.
For the Three Months Ended For the Year Ended
December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Company premium revenue:
As determined under GAAP $3,493.0 $3,404.5 $13,874.8 $12,915.5
Medicaid premium taxes (27.8) (19.5) (94.7) (76.5)
ACA industry fee reimbursement (59.9) (30.7) (219.2) (124.6)
Adjusted premium revenue (a) $3,405.3 $3,354.3 $13,560.9 $12,714.4
======== ======== ========= =========
SG&A Expense:
As determined under GAAP $340.9 $283.0 $1,132.9 $1,018.8
Adjustments:
Investigation costs (7.1) (8.3) (30.4) (37.6)
Sterling divestiture costs - - (2.0) -
PBM transitory costs (14.4) - (18.1) -
Iowa SG&A costs (11.9) - (11.9) -
Adjusted SG&A expense (a) $307.5 $274.7 $1,070.5 $981.2
====== ====== ======== ======
SG&A expense ratio:
As determined under GAAP 9.8% 8.3% 8.2% 7.9%
Effect of Medicaid premium taxes 0.1% 0.1% 0.1% 0.0%
Effect of ACA industry fee reimbursement 0.1% 0.1% 0.1% 0.1%
Effect of SG&A expense adjustments (b) (1.0)% (0.3)% (0.5)% (0.3)%
Adjusted SG&A expense ratio (a) 9.0% 8.2% 7.9% 7.7%
=== === === ===
(a) Refer to the basis of presentation for a discussion of non-GAAP financial measures.
(b) Adjusted to exclude the effect of investigation, Sterling divestiture, PBM transitory and Iowa SG&A costs.
WELLCARE HEALTH PLANS, INC.
SUPPLEMENTAL INFORMATION (Continued)
Reconciliation of Certain GAAP Financial Information
(Unaudited; dollars in millions, except per share data)
The Company reports adjusted operating results on a non-GAAP basis to exclude certain expenses and other items that management believes are not indicative of longer-term business trends and operations. Following is certain financial information, as determined under GAAP, reconciled to the adjusted financial information for the same periods.
For the Three Months Ended For the Three Months Ended
December 31, 2015 December 31, 2014
----------------- -----------------
GAAP Adjustments Adjusted GAAP Adjustments Adjusted
(Non-GAAP)
---------
(Non-GAAP)
---------
Selling, general, and administrative expense $340.9 $(33.4) (a) $307.5 $283.0 $(8.3) (a) $274.7
Gain on divestiture of business $1.5 $(1.5) (b) $ - $ - $ - $ -
Income tax expense $23.3 $18.0 (c) $41.3 $46.3 $(2.0) (c) $44.3
Net income $13.0 $13.9 $26.9 $7.7 $10.3 $18.0
Effective tax rate 64.2% (3.6%) (c) 60.6% 85.7% (14.6%) (c) 71.1%
Earnings per share:
Basic $0.29 $0.32 $0.61 $0.18 $0.23 $0.41
Diluted $0.29 $0.31 $0.60 $0.18 $0.23 $0.41
For the Year Ended For the Year Ended
December 31, 2015 December 31, 2014
----------------- -----------------
GAAP Adjustments Adjusted GAAP Adjustments Adjusted
(Non-GAAP)
---------
(Non-GAAP)
---------
Selling, general, and administrative expense $1,132.9 $(62.4) (a) $1,070.5 $1,018.8 $(37.6) (a) $981.2
Gain on divestiture of business $6.1 $(6.1) (b) $ - $ - $ - $ -
Income tax expense $217.5 $22.2 (c) $239.7 $114.1 $10.4 (c) $124.5
Net income $118.6 $34.1 $152.7 $63.7 $27.2 $90.9
Effective tax rate 64.7% (3.6%) (c) 61.1% 64.2% (6.4%) (c) 57.8%
Earnings per share:
Basic $2.69 $0.78 $3.47 $1.45 $0.62 $2.07
Diluted $2.67 $0.77 $3.44 $1.44 $0.62 $2.06
(a) Comprised of investigation costs,
Sterling divestiture costs, PBM
transitory costs and Iowa SG&A
costs, as disclosed in the
"Reconciliation of Selling,
General and Administrative Expense
Ratios" table.
(b) Pre-tax gain recorded during the
three months and year ended
December 31, 2015 resulting from
the divestiture of Sterling.
(c) The company estimated the effect on
income tax expense and the
effective tax rate associated with
the investigation costs, PBM
transitory costs, Sterling
divestiture costs, Iowa SG&A costs
and Sterling gain. These estimates
are based on the effective income
tax rates applicable to adjusted
(non-GAAP) results.
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SOURCE WellCare Health Plans, Inc.
