WellCare Reports First Quarter 2018 Results

Published: May 01, 2018

Company Increases Full-Year 2018 Guidance

TAMPA, Fla., May 1, 2018 /PRNewswire/ -- WellCare Health Plans, Inc. (NYSE: WCG) ("WellCare") today reported results for the quarter ended March 31, 2018. As determined under generally accepted accounting principles (GAAP), net income for the first quarter of 2018 was $101.7 million, or $2.25 per diluted share. Adjusted net income for the first quarter of 2018 was $111.8 million, or $2.47 per diluted share.

"We entered 2018 with strong momentum, and our 2018 first quarter results reflect continued strong execution," said Ken Burdick, WellCare's chief executive officer. "All lines of business produced strong earnings results during the quarter. In addition, we are pleased that we were selected to continue serving Medicaid members in Florida, Arizona and Hawaii. As a result of our first quarter performance, we are revising our full-year 2018 adjusted earnings per diluted share guidance to a range of $10.00 to $10.30."

 

    Key Metrics                              1Q18          1Q17
    -----------                              ----          ----

    Earnings per diluted share (EPS) (GAAP)          $2.25         $1.50
    --------------------------------------           -----         -----

    Adjusted EPS(1)                                  $2.47         $1.61
    --------------                                   -----         -----

    Net income margin (GAAP)                          2.2%         1.7%
    -----------------------                            ---           ---

    Adjusted net income margin(1)                     2.5%         1.8%
    ----------------------------                       ---           ---


    Total Premium Revenue (GAAP) ($
     millions)                                    $4,626.3      $3,947.0
    -------------------------------               --------      --------

    Adjusted Premium Revenue(1) ($ millions)      $4,529.5      $3,917.1
    ----------------------------------------      --------      --------


    Segment Premium Revenue ($ millions):
    -------------------------------------

    Medicaid Health Plans (GAAP)                  $2,809.9      $2,584.2
    ---------------------------                   --------      --------

    Adjusted Medicaid Health Plans(1)             $2,713.1      $2,554.3
    --------------------------------              --------      --------

    Medicare Health Plans                         $1,556.5      $1,094.7
    ---------------------                         --------      --------

    Medicare Prescription Drug Plans (PDP)          $259.9        $268.1
    -------------------------------------           ------        ------


    Segment Medical Benefits Ratios (MBR):
    --------------------------------------

    Medicaid Health Plans (GAAP)                     86.3%        89.4%
    ---------------------------                       ----          ----

    Adjusted Medicaid Health Plans(1)                89.4%        90.5%
    --------------------------------                  ----          ----

    Medicare Health Plans                            84.0%        83.0%
    ---------------------                             ----          ----

    Medicare Prescription Drug Plans (PDP)           88.7%        96.9%
    -------------------------------------             ----          ----


    Selling, General and Administrative
     (SG&A) Ratio (GAAP)                              7.7%         7.7%
    -----------------------------------                ---           ---

    Adjusted SG&A Ratio(1)                            7.8%         7.6%
    ---------------------                              ---           ---

    (1)             Refer to the Basis of
                    Presentation for a discussion
                    of these adjusted (non-GAAP)
                    financial measures

Key Highlights

  • GAAP and adjusted total premium revenue of $4.6 billion and $4.5 billion for the first quarter of 2018 increased 17.2 percent and 15.6 percent, respectively, compared with the first quarter of 2017.
  • GAAP and adjusted Medicaid Health Plans premium revenue of $2.8 billion and $2.7 billion for the first quarter of 2018 increased 8.7 percent and 6.2 percent, respectively, compared with the first quarter of 2017.
  • Medicare Health Plans premium revenue of $1.6 billion for the first quarter of 2018 increased 42.2 percent compared with the first quarter of 2017.
  • GAAP and adjusted Medicaid Health Plans MBR for the first quarter of 2018 decreased 310 basis points and 110 basis points, respectively, compared with the first quarter of 2017.
  • GAAP and adjusted net income margin for the first quarter of 2018 increased approximately 50 basis points to 2.2 percent and approximately 70 basis points to 2.5 percent, respectively, compared with the first quarter of 2017.
  • On April 24, 2018, WellCare of Florida, Inc., a subsidiary of WellCare and known as Staywell Health Plan, received a Notice of Agency Decision from the Florida Agency for Health Care Administration that it intends to award Staywell a new five-year contract to provide managed care services to Medicaid-eligible beneficiaries, including Managed Medical Assistance and Long-Term Care in 10 of 11 regions and Serious Mental Illness Specialty Plan services statewide. The new Statewide Medicaid Managed Care program is expected to begin no earlier than October 1, 2018.
  • As previously announced on March 13, 2018, Care1st Arizona, a subsidiary of WellCare, was selected to enter a contract with the state of Arizona's Medicaid program, the Arizona Health Care Cost Containment System (AHCCCS) to coordinate the provision of physical and behavioral services in the Central and North geographic service areas (GSAs). Services under the new contract are expected to begin on October 1, 2018.
  • As of March 31, 2018, unregulated cash and investments were approximately $561.3 million.

2018 Financial Outlook

WellCare is increasing its full-year adjusted EPS guidance to a range of $10.00 to $10.30 from its previous guidance range of $9.55 to $9.85 per diluted share. Refer to the Appendix included in this news release for specific 2018 guidance metrics, related footnotes and basis of presentation.

Consolidated Operations Results

GAAP net income for the first quarter of 2018 was $101.7 million, or $2.25 per diluted share, compared with GAAP net income of $67.3 million, or $1.50 per diluted share, for the first quarter of 2017. Adjusted net income for the first quarter of 2018 was $111.8 million, or $2.47 per diluted share, compared with adjusted net income of $72.0 million, or $1.61 per diluted share, for the first quarter of 2017. The year-over-year increases in GAAP and adjusted net income are primarily the result of improved Medicaid Health Plans and Medicare PDP segment MBRs as well as the acquisition in 2017 of Universal American Corp. ("Universal American"). The year-over-year increases are also due to the effect of the lower federal effective tax rate, which was a result of the Tax Cuts and Jobs Act of 2017, effective January 1, 2018. The increases were partially offset by the return of the ACA Health Insurer Fee (HIF), which is nondeductible for tax purposes.

GAAP net income margin for the first quarter of 2018 was 2.2 percent compared with 1.7 percent for the first quarter of 2017. Adjusted net income margin for the first quarter of 2018 was 2.5 percent compared with 1.8 percent for the first quarter of 2017.

GAAP and adjusted total premium revenue of $4.6 billion and $4.5 billion for the first quarter of 2018 increased 17.2 percent and 15.6 percent, respectively, compared with the first quarter of 2017. The year-over-year increases in GAAP and adjusted total premium revenue were primarily the result of net organic growth and the company's acquisition of Universal American.

GAAP SG&A expense was $355.9 million for the first quarter of 2018 compared with $302.4 million for the first quarter of 2017. Adjusted SG&A expense was $353.1 million for the first quarter of 2018 compared with $298.2 million for the first quarter of 2017. The year-over-year increases in GAAP and adjusted SG&A expense were primarily the result of the company's growth. The GAAP SG&A expense ratio of 7.7 percent in the first quarter of 2018 was flat compared with the first quarter of 2017. The adjusted SG&A expense ratio was 7.8 percent in the first quarter of 2018 compared with 7.6 percent in the first quarter of 2017.

Medicaid Health Plans Segment Results

Medicaid Health Plans membership was 2.7 million as of March 31, 2018, and increased by more than 82,000 members, or 3.1 percent, compared with March 31, 2017. The increase in membership was primarily driven by the addition of new members as a result of the 2017 statewide expansion of the Missouri Medicaid program and the 2017 acquisition of certain assets of Phoenix Health Plans. This increase was partially offset by membership declines in Georgia due to the addition of a fourth managed care organization, effective July 1, 2017. Sequentially, Medicaid membership at March 31, 2018 decreased slightly from December 31, 2017.

GAAP and adjusted Medicaid Health Plans premium revenue was $2.8 billion and $2.7 billion, respectively, for the first quarter of 2018, an increase of 8.7 percent and 6.2 percent, respectively, compared with the first quarter of 2017. The increases in GAAP and adjusted premium revenue were primarily the result of the membership drivers discussed above. In addition, the reinstatement of the ACA HIF in 2018 and associated Medicaid ACA HIF reimbursement also contributed to the year-over-year increase in GAAP Medicaid premium revenue.

The GAAP Medicaid Health Plans MBR was 86.3 percent for the first quarter of 2018 compared with 89.4 percent for the first quarter of 2017. The adjusted Medicaid Health Plans MBR was 89.4 percent for the first quarter of 2018 compared with 90.5 percent for the first quarter of 2017. The decreases in GAAP and adjusted Medicaid Health Plans MBR were primarily the result of continued operational execution. In addition, the reinstatement of the Medicaid ACA HIF reimbursement in 2018 also contributed to the year-over-year decrease in the GAAP Medicaid Health Plan MBR.

Medicare Health Plans Segment Results

Medicare Health Plans membership was 506,000 members as of March 31, 2018 and increased by 150,000 members, or 42.1 percent, compared with March 31, 2017. The increase was a result of the company's 2017 acquisition of Universal American and organic growth.

Medicare Health Plans premium revenue of $1.6 billion for the first quarter of 2018 increased 42.2 percent compared with the first quarter of 2017. The increase was primarily due to the company's 2017 acquisition of Universal American as well as year-over-year organic membership growth.

The Medicare Health Plans MBR for the first quarter of 2018 was 84.0 percent compared with 83.0 percent for the first quarter of 2017. The year-over-year increase was primarily due to the acquisition of Universal American and the company's 2018 bid strategy.

Medicare Prescription Drug Plans (PDP) Segment Results

Medicare PDP membership was approximately 1.1 million as of March 31, 2018, and decreased by approximately 26,000 members, or 2.4 percent, compared with March 31, 2017. The decrease was primarily a result of the company's 2018 bid positioning.

Medicare PDP premium revenue of $259.9 million for the first quarter of 2018 decreased by 3.1 percent compared with the first quarter of 2017. The decrease was primarily due to the company's 2018 bid positioning.

The Medicare PDP segment MBR for the first quarter of 2017 was 88.7 percent compared with 96.9 percent for the first quarter of 2017. The year-over-year decrease was primarily the result of continued operational execution and the company's 2018 bid strategy.

Operating Cash Flow and Financial Condition

Net cash generated by operating activities was $445.7 million for the three months ended March 31, 2018, compared with net cash generated by operating activities of $361.9 million for the three months ended March 31, 2017.

As of March 31, 2018, unregulated cash and investments were approximately $561.3 million compared with $1.9 billion as of March 31, 2017. Sequentially, unregulated cash and investment decreased $55.7 million from $617.0 million as of December 31, 2017.

Days in claims payable (DCP) was 50.2 days as of March 31, 2018 compared with 46.2 days as of March 31, 2017 and 51.9 days as of December 31, 2017.

Conference Call and Webcast

A discussion of WellCare's first quarter 2018 results will be available via a conference call and live webcast today at 8:30 a.m. EDT.

The conference call will be webcast live from the company's website and will be available at the following link: https://services.choruscall.com/links/wcg180501.html. The webcast should be accessed a few minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company's website at http://ir.wellcare.com/Event.

The conference call can also be accessed by pre-registering using the following link: http://dpregister.com/10118518. 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 number (toll-free): 1-844-492-3724
International participant dial-in number: 1-412-542-4185

A telephonic replay will be available until midnight EDT on Tuesday, May 8, 2018. This replay may be accessed by dialing either of the numbers below and entering the replay access code 10118518:

Domestic replay (toll-free) number: 1-877-344-7529
International replay number: 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 4.3 million members nationwide as of March 31, 2018. For more information about WellCare, please visit the company's website at www.wellcare.com.

Basis of Presentation

Discontinued Operations

In 2016, Universal American, a subsidiary of WellCare, completed the sale of its life insurance business while retaining ownership of the life insurance subsidiary. Universal American entered into a 100% quota-share reinsurance treaty with the buyer, which, among other treaties, resulted in the reinsurance of all of the life insurance policies underwritten by the retained subsidiary. Accordingly, the discontinued business did not materially affect WellCare's results of operations for the three months ended March 31, 2018 and 2017, respectively. For additional information, refer to Note 19-Discontinued Operations within the Consolidated Financial Statements included in the company's Annual Report on Form 10-K for the period ended December 31, 2017.

Non-GAAP Financial Measures

In addition to results determined under GAAP, WellCare provides certain non-GAAP financial measures that management believes are useful in assessing the company's performance. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. The company has provided a reconciliation of the historical non-GAAP financial measures with the most directly comparable financial measure calculated in accordance with GAAP.

Earnings per share, net income and, as noted below, other specific operating and financial measures have been adjusted for the effect of certain expenses, and as appropriate, the related tax effect, related to previously disclosed government investigations and related litigation and resolution costs ("investigation costs"); amortization expense associated with acquisitions ("acquisition-related amortization expenses"); and certain one-time transaction and integration costs related to the acquisition of Universal American ("transaction and integration costs").

Although the excluded items may recur, WellCare believes that by providing non-GAAP measures exclusive of these items, it facilitates period-over-period comparisons and provides additional clarity about events and trends affecting its core operating performance, as well as providing comparability to competitor results. The investigation costs are related to a discrete incident which management does not expect to reoccur. WellCare has adjusted for acquisition-related amortization expenses as these transactions do not directly relate to the servicing of products for our customers and are not directly related to the core performance of its business operations. The transaction and integrations costs are related to a specific 2017 event, which does not reflect the underlying ongoing performance of the business.

In addition, because reimbursements for Medicaid premium tax and the ACA HIF are both included in the premium rates or reimbursement established in certain Medicaid contracts and also recognized separately as a component of expense, the company excludes these reimbursements from premium revenue when calculating key ratios as the company believes that these components are not indicative of operating performance.

The company is not able to project at the time of this news release the amount of expenses associated with investigation costs, transaction and integration costs and, therefore, cannot reconcile projected non-GAAP measures affected by these items to projected GAAP measures.

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 HIF. 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 and transaction and integration costs.

Adjusted SG&A ratio (non-GAAP) = adjusted SG&A expense divided by adjusted premium revenue.

Adjusted depreciation & amortization (non-GAAP) = depreciation & amortization expense (GAAP) less acquisition-related amortization expenses.

Adjusted income before taxes (non-GAAP) = income before income taxes (GAAP) less investigation costs, acquisition-related amortization expenses, and transaction and integration costs.

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.

Net income margin (GAAP) = net income (GAAP) divided by total premium revenue (GAAP).

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," "will," "anticipates," "intends," "plans," "believes," "estimates," and similar expressions are forward-looking statements. For example, statements regarding the company's financial outlook and the terms of the new Medicaid programs, 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 integrating care management, advocating for our members, building advanced relationships with providers and government partners, 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, WellCare's ability to improve healthcare quality and access, the appropriation and payment by state governments of Medicaid premiums receivable, the outcome of any protests and litigation related to Medicaid awards, the approval of Medicaid contracts by CMS, any changes to the programs or contracts, WellCare's ability to address operational challenges related to new business, and WellCare's ability to meet the requirements of readiness reviews. 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, 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, 2017, 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.

2018 Financial Outlook

WellCare is increasing its full-year 2018 adjusted EPS guidance to a range of $10.00 to $10.30 from its previous guidance range of $9.55 to $9.85.

                                                                       2018 Guidance            2018 Guidance
                                                                     as of May 1, 2018      as of February 6, 2018
                                                     Guidance Metric
                                                     ---------------

    Segment premium revenue:
    ------------------------

    GAAP Medicaid Health Plans                                             $11.3B to $11.6B         $11.3B to $11.6B
    --------------------------                                             ----------------         ----------------

    Adjusted Medicaid Health Plans(1)                                      $10.9B to $11.2B         $10.9B to $11.2B
    --------------------------------                                       ----------------         ----------------

    Medicare Health Plans                                                   $6.15B to $6.3B          $6.15B to $6.3B
    ---------------------                                                   ---------------          ---------------

    Medicare PDP                                                             $875M to $925M           $875M to $925M
    ------------                                                             --------------           --------------

    Total GAAP premium revenue                                             $18.3B to $18.8B         $18.3B to $18.8B
    --------------------------                                             ----------------         ----------------

    Total adjusted premium revenue(1)                                  $17.925B to $18.425B     $17.925B to $18.425B
    --------------------------------                                   --------------------     --------------------


    Medicaid ACA industry fee reimbursement                                  $250M to $260M           $250M to $260M
    ---------------------------------------                                  --------------           --------------

    Investment & other income*                                                 $72M to $78M             $63M to $73M
    -------------------------                                                  ------------             ------------


    Segment MBR:
    ------------

    GAAP Medicaid Health Plans                                               85.5% to 86.0%          85.5% to 86.2%
    --------------------------                                                -------------            -------------

    Adjusted Medicaid Health Plans(1)                                        88.4% to 89.0%          88.4% to 89.2%
    --------------------------------                                          -------------            -------------

    Medicare Health Plans                                                    84.6% to 85.4%          84.6% to 85.6%
    ---------------------                                                     -------------            -------------

    Medicare PDP                                                             79.5% to 81.0%          80.0% to 82.0%
    ------------                                                              -------------            -------------


    Adjusted SG&A ratio(2)(6)                                                  8.1% to 8.3%            8.1% to 8.3%
    ------------------------                                                    -----------              -----------

    ACA industry fee expense                                                 $319M to $329M           $319M to $329M
    ------------------------                                                 --------------           --------------

    GAAP depreciation and amortization (D&A) expense                         $136M to $144M           $136M to $144M
    ------------------------------------------------                         --------------           --------------

    Adjusted D&A expense(3)                                                   $94M to $102M            $94M to $102M
    ----------------------                                                    -------------            -------------

    Interest expense                                                           $69M to $72M             $69M to $72M
    ----------------                                                           ------------             ------------

    Adjusted effective income tax rate(4)(6)                                 34.5% to 36.0%          34.5% to 36.0%
    ---------------------------------------                                   -------------            -------------


    Adjusted EPS(5)(6)                                                     $10.00 to $10.30           $9.55 to $9.85
    -----------------                                                      ----------------           --------------

    *                Investment & other income primarily
                     includes investment income, specialty
                     pharmacy business sold to nonmembers
                     and equity in earnings (losses) in
                     unconsolidated subsidiaries. The
                     company presents equity in earnings
                     (losses) in unconsolidated
                     subsidiaries as a separate line item
                     in its statement of comprehensive
                     income as required under GAAP.

    (1)              Excludes an estimated $125.0 million to
                     $130.0 million in Medicaid premium
                     taxes and $250.0 million to $260.0
                     million in Medicaid reimbursements of
                     the ACA HIF.

    (2)              Excludes estimated Medicaid premium
                     taxes; Medicaid reimbursements of the
                     ACA HIF; investigation costs; and
                     transaction and integration costs.

    (3)              Excludes an estimated $40.0 million to
                     $45.0 million in acquisition-related
                     amortization expenses.

    (4)              Excludes the estimated income tax
                     effect associated with the
                     investigation costs, acquisition-
                     related amortization expenses, and
                     transaction and integration costs.

    (5)              The company estimates adjusted earnings
                     per diluted share guidance by
                     adjusting net income for the estimated
                     net-of-tax effect of investigation
                     costs, acquisition-related
                     amortization expense, and transaction
                     and integration costs.

    (6)              WellCare is not able to estimate
                     amounts associated with investigation
                     costs and acquisition-related
                     transaction and integration costs
                     expected to be incurred in 2018 and,
                     therefore, cannot reconcile these
                     metrics to total projected GAAP
                     metrics.

 

 

                                                                                                                                                    WELLCARE HEALTH PLANS, INC.

                                                                                                                                                      MEMBERSHIP INFORMATION

                                                                                                                                                            (Unaudited)

                                                                                                                                                                                                                          Change from

                                                                                                                                                                                                 December 31, 2017                            March 31, 2017

                                                                                                              March 31,                December 31,                 March 31,                  Change                     %                     Change                   %
                                                                                                                    2018                        2017                       2017                                            Change                                        Change
                                                                                                                    ----                        ----                       ----                                            ------                                        ------

    Medicaid Health Plans

    Membership by State:

    Florida                                                                                                      744,000                                   751,000                                776,000                              (7,000)                           (0.9)%                             (32,000)   (4.1)%

    Georgia                                                                                                      515,000                                   513,000                                579,000                                2,000                              0.4%                             (64,000)  (11.1)%

    Kentucky                                                                                                     459,000                                   448,000                                446,000                               11,000                              2.5%                               13,000      2.9%

    Missouri                                                                                                     281,000                                   286,000                                123,000                              (5,000)                           (1.7)%                              158,000    128.5%

    Arizona                                                                                                      147,000                                   153,000                                116,000                              (6,000)                           (3.9)%                               31,000     26.7%

    New York                                                                                                     149,000                                   146,000                                141,000                                3,000                              2.1%                                8,000      5.7%

    Other states                                                                                                 410,000                                   426,000                                442,000                             (16,000)                           (3.8)%                             (32,000)   (7.2)%

    Total Medicaid Health Plans Membership (1)                                                                 2,705,000                                 2,723,000                              2,623,000                             (18,000)                           (0.7)%                               82,000      3.1%
                                                                                                               =========                                 =========                              =========                              =======                             =====                                ======       ===


    Medicaid Health Plans

    Membership by Program:

    TANF                                                                                                       2,254,000                                 2,278,000                              2,176,000                             (24,000)                           (1.1)%                               78,000      3.6%

    SSI, ABD, Duals and LTC                                                                                      301,000                                   301,000                                297,000                                    -                                -   %                            4,000      1.3%

    CHIP and other                                                                                               150,000                                   144,000                                150,000                                6,000                              4.2%                                    -        -   %
                                                                                                                 -------                                                                         -------

    Total Medicaid Health Plans Membership (1)                                                                 2,705,000                                 2,723,000                              2,623,000                             (18,000)                           (0.7)%                               82,000      3.1%
                                                                                                               =========                                 =========                              =========                              =======                             =====                                ======       ===


    Medicare Health Plans:

    Medicare Advantage by State:

    Texas                                                                                                        104,000                                   105,000                                 34,000                              (1,000)                           (1.0)%                               70,000    205.9%

    Florida                                                                                                       97,000                                   101,000                                 99,000                              (4,000)                           (4.0)%                              (2,000)   (2.0)%

    New York                                                                                                      88,000                                    89,000                                 44,000                              (1,000)                           (1.1)%                               44,000    100.0%

    Georgia                                                                                                       49,000                                    47,000                                 44,000                                2,000                              4.3%                                5,000     11.4%

    Other states                                                                                                 168,000                                   154,000                                135,000                               14,000                              9.1%                               33,000     24.4%
                                                                                                                 -------                                   -------                                -------

    Total Medicare Health Plans (1)                                                                              506,000                                   496,000                                356,000                               10,000                              2.0%                              150,000     42.1%


    Medicare Prescription Drug Plans                                                                           1,073,000                                 1,152,000                              1,099,000                             (79,000)                           (6.9)%                             (26,000)   (2.4)%


    Total Membership                                                                                           4,284,000                                 4,371,000                              4,078,000                             (87,000)                           (2.0)%                              206,000      5.1%
                                                                                                               =========                                 =========                              =========                              =======                             =====                               =======       ===


    (1) Medicaid Health Plans and Medicare Health Plans membership includes members who are dually-eligible and participate in both our Medicaid and Medicare programs. The dually-eligible membership was 51,000 and 52,000 at March 31, 2018 and December 31, 2017, respectively, and 47,000 at March 31, 2017.

 

 

                                                    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
                                                               March 31,

                                                        2018                     2017
                                                        ----                     ----

    Revenues:

    Premium                                                     $4,529.5                            $3,917.1

    Medicaid premium taxes                              32.1                                  29.9

    ACA industry fee
     reimbursement                                      64.7                                     -
                                                        ----                                   ---

    Total premium                                    4,626.3                               3,947.0

    Investment and other income                         19.9                                   7.2
                                                        ----                                   ---

    Total revenues                                   4,646.2                               3,954.2


    Expenses:

    Medical benefits                                 3,962.0                               3,478.6

    Selling, general and
     administrative                                    355.9                                 302.4

    ACA industry fee                                    81.5                                     -

    Medicaid premium taxes                              32.1                                  29.9

    Depreciation and
     amortization                                       36.4                                  23.9

    Interest                                            17.1                                  16.2

    Total expenses                                   4,485.0                               3,851.0
                                                     -------                               -------

    Income before income taxes
     and equity in losses of
     unconsolidated
     subsidiaries                                      161.2                                 103.2

    Equity in losses of
     unconsolidated
     subsidiaries                                      (2.7)                                    -

    Income before income taxes                         158.5                                 103.2

    Income tax expense                                  56.8                                  35.9
                                                        ----                                  ----

    Net income                                                    $101.7                               $67.3
                                                                  ======                               =====



    Earnings per common share:

    Basic                                                          $2.28                               $1.52

    Diluted                                                        $2.25                               $1.50


    Weighted average common shares outstanding:

    Basic                                         44,605,892                            44,365,987

    Diluted                                       45,196,127                            44,826,663

 

 

 

                                                WellCare Health Plans, Inc.

                                                Consolidated Balance Sheets

                                    (Unaudited; dollars in millions except share data)


                                                  March 31, 2018                  December 31, 2017
                                                  --------------                  -----------------

    Assets

    Current Assets:

    Cash and cash equivalents                                       $4,824.1                          $4,198.6

    Short-term investments                                 708.6                                469.5

    Premiums receivable, net                               638.9                                453.4

    Pharmacy rebates
     receivable, net                                       380.6                                335.0

    Receivables from government
     partners                                               81.2                                 44.2

    Funds receivable for the
     benefit of members                                     28.8                                 27.5

    Deferred ACA industry fee                              244.6                                    -

    Prepaid expenses and other
     current assets, net                                   270.4                                291.0

    Total current assets                                 7,177.2                              5,819.2


    Property, equipment and
     capitalized software, net                             317.1                                319.5

    Goodwill                                               661.8                                660.7

    Other intangible assets,
     net                                                   357.3                                367.9

    Long-term investments                                  725.8                                766.2

    Restricted cash, cash
     equivalents and
     investments                                           213.3                                211.0

    Other assets                                             4.4                                  4.9

    Assets of discontinued
     operations  (a)                                       214.5                                215.2

    Total Assets                                                    $9,671.4                          $8,364.6
                                                                    ========                          ========


    Liabilities and Stockholders' Equity

    Current Liabilities:

    Medical benefits payable                                        $2,210.3                          $2,146.3

    Unearned premiums                                      592.9                                 65.9

    ACA industry fee liability                             326.1                                    -

    Accounts payable and
     accrued expenses                                      550.1                                788.1

    Funds payable for the
     benefit of members                                  1,612.2                              1,075.9

    Other payables to
     government partners                                   388.2                                367.0

    Total current liabilities                            5,679.8                              4,443.2


    Deferred income tax
     liability                                              71.5                                 93.4

    Long-term debt                                       1,183.0                              1,182.4

    Other liabilities                                       20.2                                 13.7

    Liabilities of discontinued
     operations (a)                                        214.5                                215.2
                                                           -----                                -----

    Total liabilities                                    7,169.0                              5,947.9


    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, 44,753,235 and
     44,522,988 shares issued
     and outstanding at March
     31, 2018 and December 31,
     2017, respectively)                                     0.4                                  0.4

    Paid-in capital                                        583.4                                591.5

    Retained earnings                                    1,929.2                              1,827.5

    Accumulated other
     comprehensive loss                                   (10.6)                               (2.7)
                                                           -----                                 ----

    Total Stockholders' Equity                           2,502.4                              2,416.7

    Total Liabilities and
     Stockholders' Equity                                           $9,671.4                          $8,364.6
                                                                    ========                          ========


    (a) Refer to the basis of presentation for a discussion of discontinued operations.

 

 

                                        WellCare Health Plans, Inc.

                                   Consolidated Statements of Cash Flows

                                      (Unaudited; dollars in millions)


                                                 For the Three Months Ended
                                                          March 31,

                                                   2018                     2017
                                                   ----                     ----

    Cash flows from operating
     activities:

    Net income                                               $101.7                          $67.3

    Adjustments to reconcile net
     income to cash flows from
     operating activities:

    Depreciation
     and
     amortization                                  36.4                              23.9

    Stock-based
     compensation
     expense                                       12.1                               9.6

    Deferred
     taxes, net                                  (19.5)                           (25.8)

    Other, net                                      5.1                               4.3

    Changes in operating accounts,
     net of effects from
     acquisitions:

    Premiums
     receivable,
     net                                        (187.9)                          (120.8)

    Pharmacy
     rebates
     receivable,
     net                                         (45.6)                              5.6

    Medical
     benefits
     payable                                       64.0                              97.7

    Unearned
     premiums                                     527.0                             431.8

    Other
     payables to
     government
     partners                                    (15.8)                           (12.0)

    Accrued
     liabilities
     and other,
     net                                         (31.8)                          (119.7)
                                                  -----                            ------

    Net cash
     provided by
     operating
     activities                                   445.7                             361.9


    Cash flow from investing
     activities:

    Purchases of
     investments                                (387.9)                          (434.8)

    Proceeds
     from sales
     and
     maturities
     of
     investments                                  171.5                              29.3

    Additions to
     property,
     equipment
     and
     capitalized
     software,
     net                                         (24.2)                           (23.8)
                                                  -----                             -----

    Net cash
     used in
     investing
     activities                                 (240.6)                          (429.3)


    Cash flows from financing
     activities:

    Proceeds
     from
     issuance of
     debt, net
     of
     financing
     costs paid                                       -                          1,182.2

    Payments on
     debt                                             -                          (100.0)

    Repurchase
     and
     retirement
     of shares
     to satisfy
     employee
     tax
     withholding
     requirements                                (20.2)                           (13.4)

    Funds
     received
     for the
     benefit of
     members,
     net                                          416.2                             567.4

    Other, net                                     21.4                            (18.2)
                                                   ----                             -----

    Net cash
     provided by
     financing
     activities                                   417.4                           1,618.0


    Increase in
     cash, cash
     equivalents
     and
     restricted
     cash and
     cash
     equivalents                                  622.5                           1,550.6

    Balance at
     beginning
     of period                                  4,263.0                           4,121.3
                                                -------                           -------

    Balance at
     end of
     period                                                $4,885.5                       $5,671.9
                                                           ========                       ========


    SUPPLEMENTAL DISCLOSURES OF
     CASH FLOW INFORMATION:

      Cash paid
       for taxes                                               $2.0                          $63.9


      Cash paid
       for
       interest                                               $32.1                           $1.3
                                                              -----                           ----


    SUPPLEMENTAL DISCLOSURES OF
     NON-CASH TRANSACTIONS:

    Non-cash
     additions
     to
     property,
     equipment,
     and
     capitalized
     software                                                  $3.0                           $3.3
                                                               ====                           ====

 

 

                                               WELLCARE HEALTH PLANS, INC.

                                                 SUPPLEMENTAL INFORMATION

                                               SELECTED SEGMENT INFORMATION

                                             (Unaudited; dollars in millions)


                                                       For the Three Months Ended
                                                             March 31,

                                                        2018                      2017
                                                        ----                      ----

    Medicaid Health Plans
     Segment:

    Premium
     Revenue
     (GAAP)                                                     $2,809.9                           $2,584.2

    Medicaid
     premium
     taxes                                            (32.1)                               (29.9)

    ACA
     industry
     fee
     reimbursement                                    (64.7)                                    -
                                                       -----                                   ---

    Adjusted
     premium
     revenue
     (a)                                             2,713.1                               2,554.3


    Medical
     benefits
     expense                                         2,424.4                               2,310.6


    Medical
     benefits
     ratio
     (GAAP)                                            86.3%                                89.4%

    Adjusted
     medical
     benefits
     ratio(a)                                          89.4%                                90.5%



    Medicare Health Plans
     Segment (GAAP):

    Premium
     revenue                                                    $1,556.5                           $1,094.7

    Medical
     benefits
     expense                                         1,307.1                                 908.2

    Medical
     benefits
     ratio                                             84.0%                                83.0%



    Prescription Drug Plans
     Segment (GAAP):

    Premium
     revenue                                                      $259.9                             $268.1

    Medical
     benefits
     expense                                           230.5                                 259.8

    Medical
     benefits
     ratio                                             88.7%                                96.9%



    Total Company:

    Premium
     Revenue
     (GAAP)                                                     $4,626.3                           $3,947.0

    Medicaid
     premium
     taxes                                            (32.1)                               (29.9)

    ACA
     industry
     fee
     reimbursement                                    (64.7)                                    -
                                                       -----                                   ---

    Adjusted
     premium
     revenue
     (a)                                             4,529.5                               3,917.1


    Medical
     benefits
     expense                                         3,962.0                               3,478.6


    Medical
     benefits
     ratio
     (GAAP)                                            85.6%                                88.1%

    Adjusted
     medical
     benefits
     ratio(a)                                          87.5%                                88.8%


    (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 revenue effect of Medicaid premium taxes
     and ACA industry fee reimbursement from premiums. The Adjusted SG&A expense ratio also excludes the effect of investigation costs and Universal American-related transaction and
     integration costs.


                                                                                                                                                For the Three Months Ended
                                                                                                                                                         March 31,

                                                                                                                                                   2018                      2017
                                                                                                                                                   ----                      ----

    Company premium revenue:

    As determined under GAAP                                                                                              $4,626.3                                           $3,947.0

    Medicaid premium taxes                                                                                      (32.1)                               (29.9)

    ACA industry fee reimbursement                                                                              (64.7)                                    -
                                                                                                                 -----                                   ---

    Adjusted premium revenue(a)                                                                                           $4,529.5                                           $3,917.1
                                                                                                                          ========                                           ========


    SG&A Expense:

    As determined under GAAP                                                                                                $355.9                                             $302.4

    Adjustments:

    Investigation costs                                                                                          (0.1)                                (3.1)

    Transaction and integration costs                                                                            (2.7)                                (1.1)

    Adjusted SG&A Expense(a)                                                                                                $353.1                                             $298.2
                                                                                                                            ======                                             ======


    SG&A expense ratio:

    As determined under GAAP                                                                                      7.7%                                 7.7%

    Effect of Medicaid premium taxes                                                                              0.1%                                 0.1%

    Effect of ACA industry fee reimbursement                                                                      0.1%                                    -   %

    Effect of SG&A expense adjustments above(a)                                                                 (0.1)%                               (0.2)%

    Adjusted SG&A expense ratio(a)                                                                                7.8%                                 7.6%
                                                                                                                   ===                                   ===


    (a) Refer to the basis of presentation for a discussion of non-GAAP financial measures.

 

 

                                                                                                                                                                  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.  The following table presents applicable financial information, as determined under GAAP, reconciled to the adjusted financial information for the same periods. Refer
     to the basis of presentation for a discussion of non-GAAP financial measures.


                                                                                                                          For the Three Months Ended                                              For the Three Months Ended
                                                                                                                                March 31, 2018                                                          March 31, 2017

                                                                                                           GAAP                 Adjustments                Adjusted                 GAAP                     Adjustments              Adjusted
                                                                                                                                                          (Non-GAAP)                                                                 (Non-GAAP)
                                                                                                                                                          ---------                                                                  ---------


    Selling, general, and administrative expense                                                                      $355.9                                             $(2.8)                (a)                           $353.1                                           $302.4                                          $(4.2)                (a)                         $298.2

    Depreciation and amortization                                                                                      $36.4                                            $(10.5)                                               $25.9                                            $23.9                                          $(3.2)                                             $20.7

    Income tax expense                                                                                                 $56.8                                               $3.2                 (b)                            $60.0                                            $35.9                                            $2.7                 (b)                          $38.6

    Effective tax rate                                                                                       35.8%                               (0.9)%                (b)            34.9%                                  34.8%                                  0.1%             (b)              34.9%

    Net income                                                                                                        $101.7                                              $10.1                                               $111.8                                            $67.3                                            $4.7                                              $72.0

    Net income margin                                                                                         2.2%                                 0.3%                                2.5%                                   1.7%                                  0.1%                               1.8%


    Earnings per share:

    Basic                                                                                                              $2.28                                              $0.23                                                $2.51                                            $1.52                                           $0.10                                              $1.62

    Diluted                                                                                                            $2.25                                              $0.22                                                $2.47                                            $1.50                                           $0.11                                              $1.61




    (a) Comprised of investigation costs and Universal American-related transaction and integration costs, as disclosed in the "Reconciliation of Selling, General and Administrative Expense Ratios" table.


    (b) Based on the effective income tax rates applicable to adjusted (non-GAAP) results, the company estimated the effect on income tax expense and the effective tax rate associated with the non-GAAP adjustments. Refer to the basis of presentation for a discussion of non-GAAP financial measures.

 

 

 

 

CONTACT: Investor: Angie McCabe, Tel: 813-206-6958, angie.mccabe@wellcare.com; Media: Chris Curran, Tel: 813-206-5428, chris.curran@wellcare.com

View original content with multimedia:http://www.prnewswire.com/news-releases/wellcare-reports-first-quarter-2018-results-300639540.html

SOURCE WellCare Health Plans, Inc.

Back to news