FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2007
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-32209
WELLCARE HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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47-0937650
(I.R.S. Employer
Identification No.) |
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8725 Henderson Road, Renaissance One
Tampa, Florida
(Address of principal executive offices)
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33634
(Zip Code) |
(813) 290-6200
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes o No þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act
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Large Accelerated Filer
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Accelerated Filer
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Non-Accelerated Filer o |
Smaller Reporting Company
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(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
As of
February 4, 2009, there were 42,236,285 shares of the registrants common stock, par value $.01
per share, outstanding.
WELLCARE HEALTH PLANS, INC.
TABLE OF CONTENTS
Explanatory Note
As previously disclosed, on October 24, 2007, certain federal and state agencies executed a
search warrant at our headquarters in Tampa, Florida. Our Board of Directors (the Board) formed
a special committee (the Special Committee) comprised of independent directors to, among other
things, investigate independently and otherwise assess the facts and circumstances raised in any
federal or state regulatory or enforcement inquiries (including, without limitation, any matters
relating to accounting and operational issues) and in any private party proceedings, and develop
and recommend remedial measures to the Board for its consideration. The Special Committee and the
Company are cooperating fully with federal and state regulators and enforcement officials in these
matters. The Special Committees review is ongoing and we cannot provide assurances as to when it
will be completed. Based on the issues referred to date to the Special Committee, other than as
described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the 2007
10-K), we currently do not believe that the work of the Special Committee will result in any
material adjustments to the accompanying financial statements.
Upon consideration of certain issues identified in the Special Committee investigation and
after discussions with management and our independent registered public accounting firm, the Audit
Committee of the Board (the Audit Committee) recommended to the Board, and the Board thereafter
concluded, that we should restate our previously issued consolidated financial statements for the years ended
December 31, 2004, 2005 and 2006, including the quarterly periods contained therein, and the
three-month period ended March 31, 2007 and the three- and six-month periods ended June 30, 2007.
This
amended quarterly report on Form 10-Q (the Amended
Form 10-Q) includes restated
information for the three-month periods ended March 31, 2006 and March 31, 2007, as well as for the
year ended December 31, 2006.
We are in the process of preparing our quarterly reports on Form 10-Q for each of the first
three quarters of 2008, all of which are past due. We intend to file our past due 2008 Form 10-Qs
as soon as practical.
References to the Company, WellCare, we, our, and us in this Amended Form 10-Q
refer to WellCare Health Plans, Inc., together, in each case, with our subsidiaries and any
predecessor entities unless the context suggests otherwise.
Other than in connection with the restatement and
investigations, we have not undertaken to
modify or update the disclosure contained in the originally filed quarterly report on Form 10-Q for
the three month period ended March 31, 2007 (the Original Form 10-Q). Accordingly, for
information regarding events related to us and our business that have occurred subsequent to March
31, 2007 and for updated Risk Factors, please review our 2007 10-K filed on January 26, 2009 and other filings we have made with
the U.S. Securities and Exchange Commission (the SEC), which can be accessed at www.sec.gov.
2
Part I FINANCIAL INFORMATION
Item 1. |
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Financial Statements. |
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
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March 31, |
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December 31, |
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2007 |
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2006 |
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(Restated) |
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(Restated) |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
1,344,909 |
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$ |
964,542 |
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Investments |
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151,143 |
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126,422 |
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Premium and other receivables, net |
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119,690 |
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100,561 |
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Other receivables from government partners, net |
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49,527 |
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40,902 |
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Prepaid expenses and other currrent assets, net |
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89,180 |
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87,163 |
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Deferred income taxes |
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37,433 |
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19,901 |
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Total current assets |
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1,791,882 |
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1,339,491 |
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Property, equipment and capitalized software, net |
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62,484 |
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61,258 |
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Goodwill |
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189,470 |
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189,470 |
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Other intangibles, net |
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18,132 |
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18,855 |
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Restricted investment assets |
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60,939 |
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53,382 |
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Other assets |
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1,529 |
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1,842 |
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Total Assets |
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$ |
2,124,436 |
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$ |
1,664,298 |
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Liabilities and Stockholders Equity |
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Current Liabilities: |
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Medical benefits payable |
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$ |
554,635 |
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$ |
460,728 |
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Unearned premiums |
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232,055 |
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3,313 |
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Accounts payable |
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6,982 |
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7,764 |
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Other accrued expenses |
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158,562 |
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194,295 |
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Other payables to government partners |
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83,938 |
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148,606 |
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Taxes payable |
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7,562 |
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1,133 |
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Deferred income taxes |
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1,735 |
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Current portion of long-term debt |
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1,600 |
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1,600 |
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Funds held for the benefit of members |
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304,034 |
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113,652 |
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Other current liabilities |
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418 |
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418 |
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Total current liabilities |
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1,349,786 |
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933,244 |
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Long-term debt |
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153,661 |
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154,021 |
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Deferred income taxes |
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26,587 |
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31,858 |
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Other liabilities |
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16,734 |
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8,116 |
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Total liabilities |
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1,546,768 |
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1,127,239 |
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Commitments and contingencies (see Note 7) |
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Stockholders Equity: |
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Preferred stock, $0.01 par value (20,000,000 authorized, no shares issued or
outstanding) |
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Common stock, $0.01 par value (100,000,000 authorized, 41,164,939 and
40,900,134 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively) |
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412 |
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409 |
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Paid-in capital |
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315,151 |
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297,351 |
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Retained earnings |
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262,038 |
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239,238 |
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Accumulated other comprehensive income |
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67 |
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61 |
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Total stockholders equity |
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577,668 |
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537,059 |
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Total Liabilities and Stockholders Equity |
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$ |
2,124,436 |
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$ |
1,664,298 |
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See notes to unaudited condensed consolidated financial statements.
3
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share data)
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Three Months |
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Ended March 31, |
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2007 |
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2006 |
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(Restated) |
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(Restated) |
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Revenues: |
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Premium |
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$ |
1,288,693 |
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$ |
791,727 |
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Investment and other income |
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17,628 |
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8,164 |
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Total revenues |
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1,306,321 |
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799,891 |
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Expenses: |
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Medical benefits |
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1,095,272 |
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673,369 |
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Selling, general and administrative |
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165,616 |
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97,854 |
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Depreciation and amortization |
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4,566 |
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3,090 |
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Interest |
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3,460 |
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3,384 |
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Total expenses |
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1,268,914 |
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777,697 |
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Income before income taxes |
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37,407 |
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22,194 |
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Income tax expense |
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14,604 |
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8,909 |
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Net income |
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$ |
22,803 |
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$ |
13,285 |
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Net income per common share (see Note 1): |
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Net income per common share basic |
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$ |
0.57 |
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$ |
0.34 |
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Net income per common share diluted |
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$ |
0.55 |
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$ |
0.33 |
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See notes to unaudited condensed consolidated financial statements.
4
WELLCARE HEALTH PLANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
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Three Months Ended |
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Three Months Ended |
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March 31, 2007 |
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March 31, 2006 |
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(Restated) |
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(Restated) |
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Cash from (used in) operating activities: |
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Net income |
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$ |
22,803 |
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$ |
13,285 |
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Adjustments to reconcile net income to net cash provided by
operating activities: |
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Depreciation and amortization expense |
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4,566 |
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3,090 |
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Loss on disposal of fixed asset |
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1,250 |
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Equity-based compensation expense |
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5,619 |
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5,750 |
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Incremental tax benefit received for options exercised |
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(7,117 |
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(1,027 |
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Deferred taxes, net |
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(24,538 |
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(26,359 |
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Changes in operating accounts, net of effect of acquisitions: |
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Premiums and other receivables |
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(19,129 |
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971 |
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Other receivables from government partners |
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(8,625 |
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(107,868 |
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Prepaid expenses and other, net |
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(2,017 |
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1,750 |
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Medical benefits payable |
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93,907 |
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108,096 |
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Unearned premiums |
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228,742 |
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193,384 |
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Accounts payable |
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(782 |
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3,083 |
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Other accrued expenses |
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(35,733 |
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4,536 |
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Other payables to government partners |
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(64,668 |
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2,010 |
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Taxes, net |
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13,546 |
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35,191 |
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Other, net |
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8,974 |
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(12,652 |
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Net cash provided by operations |
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215,548 |
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224,490 |
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Cash from (used in) investing activities: |
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Proceeds from sale and maturities of investments |
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1,106 |
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775 |
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Purchases of investments |
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(25,827 |
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(54,370 |
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Purchases of restricted investments |
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(8,267 |
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(14,851 |
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Proceeds
from sale and maturities of restricted investments |
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710 |
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510 |
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Additions to property, equipment, and capitalized software |
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(5,069 |
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(11,568 |
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Net cash used in investing activities |
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(37,347 |
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(79,504 |
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Cash from (used in) financing activities: |
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Proceeds from common stock issuance, net |
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156 |
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18,830 |
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Proceeds from options exercised |
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6,337 |
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1,711 |
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Incremental tax benefit from options exercised |
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7,117 |
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1,027 |
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Purchase of treasury stock |
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(1,426 |
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Repayments on debt |
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(400 |
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(400 |
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Funds held for the benefit of members, net of disbursements |
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190,382 |
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201,810 |
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Net cash provided by financing activities |
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202,166 |
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222,978 |
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Cash and cash equivalents: |
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Increase during year |
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380,367 |
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367,964 |
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Balance at beginning of year |
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964,542 |
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421,766 |
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Balance at end of year |
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$ |
1,344,909 |
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$ |
789,730 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - |
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Cash paid for taxes |
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$ |
17,040 |
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$ |
240 |
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Cash paid for interest |
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$ |
3,264 |
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$ |
3,295 |
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See notes to unaudited condensed consolidated financial statements
5
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
1. |
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ORGANIZATION AND BASIS OF PRESENTATION |
WellCare Health Plans, Inc., a Delaware corporation (the Company, WellCare, we, our or
us), provides managed care services exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare, including health plans for families, children, the aged, blind
and disabled and prescription drug plans, serving approximately 2,272,000 members nationwide as of
March 31, 2007. The Companys Medicaid plans include plans for individuals who are dually eligible
for both Medicare and Medicaid, beneficiaries of the Temporary Assistance to Needy Families
program (TANF), Supplemental Security Income program (SSI), State Childrens Health Insurance
program (S-CHIP) and the Family Health Plus program (FHP). Through its licensed
subsidiaries, as of March 31, 2007 the Company operated its Medicaid health plans in Connecticut,
Florida, Georgia, Illinois, Missouri, New York and Ohio. The Companys Medicare plans include
stand-alone prescription drug plans (PDP) and Medicare Advantage plans, which include both
Medicare coordinated care (MCC) plans and Medicare private fee-for-service (PFFS) plans. As of
March 31, 2007, the Company offered its MCC plans in Connecticut, Florida, Georgia, Illinois,
Louisiana and New York, and its PDP plans in all 50 states and the District of Columbia and its
PFFS plans in 39 states and the District of Columbia.
Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements should be read
in conjunction with the consolidated financial statements and notes thereto for the fiscal year
ended December 31, 2007 included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2007 (the 2007 10-K), which the Company filed with the U.S. Securities and Exchange
Commission (SEC) on January 26, 2009. In the opinion of the Companys management, the interim
financial statements reflect all normal recurring adjustments that the Company considers necessary
for the fair presentation of the financial position and results of operations and cash flows for
the interim periods presented. The interim financial statements included herein have been prepared
in accordance with accounting principles generally accepted in the United States of America
(GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
certain information and footnote disclosures normally included in financial statements prepared in
accordance with GAAP have been condensed or omitted. Results for the interim periods presented are
not necessarily indicative of results that may be expected for the entire year or any other interim
period.
Net Income per Share
The Company computes basic net income per common share on the basis of the weighted-average
number of unrestricted common shares outstanding. Diluted net income per common share is computed
on the basis of the weighted-average number of unrestricted common shares outstanding plus the
dilutive effect of outstanding restricted shares and stock options using the treasury stock method.
The following table presents the calculation of net income per common share basic and diluted:
6
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
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Three Months Ended |
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March 31, |
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(unaudited) |
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2007 |
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2006 |
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(Restated) |
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(Restated) |
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Numerator: |
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Net income basic and diluted |
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$ |
22,803 |
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$ |
13,285 |
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Denominator: |
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Weighted average common shares outstanding basic |
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40,163,234 |
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38,590,948 |
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Adjustment for unvested restricted common shares |
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401,963 |
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601,269 |
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Dilutive effect of stock options (as determined by
the treasury stock method) |
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1,023,159 |
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767,385 |
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Weighted average common shares outstanding diluted |
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41,588,356 |
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39,959,602 |
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Net income per common share: |
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Net income per common share basic |
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$ |
0.57 |
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$ |
0.34 |
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Net income per common share diluted |
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$ |
0.55 |
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$ |
0.33 |
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Certain options to purchase common stock were not included in the calculation of diluted net
income per common share because their exercise prices were greater than the average market price of
the Companys common stock for the period and, therefore, the effect would be anti-dilutive. For
the three months ended March 31, 2007 and 2006, approximately
434,800 and 185,000 shares with exercise prices ranging
from $85.53 to $89.29, and $41.10 to $42.10 per share, respectively, were excluded from diluted weighted average common shares
outstanding.
Recently Adopted Accounting Standards
In June 2006, the Financial Accounting Standards Board (the FASB) issued FASB Interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
a companys financial statements. FIN 48 requires companies to determine whether it is more
likely than not that a tax position will be sustained upon examination by the appropriate taxing
authorities before any part of the benefit can be recorded in the financial statements. It also
provides guidance on the recognition, measurement and classification of income tax uncertainties,
along with any related interest and penalties. Previously recorded income tax benefits that no
longer meet this standard are required to be charged to earnings in the period that such
determination is made. FIN 48 also requires significant additional disclosures. FIN 48 was
effective for fiscal years beginning after December 15, 2006. The Company adopted the new standard
during the first quarter of 2007 as required. There was no cumulative effect of adopting FIN 48
for 2007.
7
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities (FAS 159). FAS 159 permits an
entity to measure certain financial assets and financial liabilities at fair value. Under FAS 159,
entities that elect the fair value option will report unrealized gains and losses in earnings at
each subsequent reporting date. The pronouncement is effective for fiscal years beginning after
November 15, 2007. The Company adopted the new standard during the first quarter of 2008 as
required. The Company has evaluated the impact of FAS 159 and does not expect that the
pronouncement will have a material impact on the Companys consolidated financial statements.
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (FAS 157). FAS 157
defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced
disclosures about fair value measurements. FAS 157 does not require any new fair value
measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007.
The guidance in FAS 157 will be applied prospectively with the exception of: (i) block discounts of
financial instruments, and (ii) certain financial and hybrid instruments measured at initial
recognition under FAS 133, which are to be applied retrospectively as of the beginning of initial
adoption (a limited form of retrospective application). The Company adopted the new standard
during the first quarter of 2008 as required. The Company has evaluated the impact of FAS 157 and
does not expect that the pronouncement will have a material impact on the Companys consolidated
financial statements.
2. |
|
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS |
In October 2007, certain federal and state agencies executed a search warrant at the
headquarters of the Company in Tampa, Florida. Our Board of Directors (the Board) formed a
special committee (the Special Committee) comprised of independent directors to, among other
things, investigate independently and otherwise assess the facts and circumstances raised in any
federal or state regulatory or enforcement inquiries (including, without limitation, any matters
relating to accounting and operational issues) and in any private party proceedings, and develop
and recommend to the Board for its consideration remedial measures. The Special Committee retained
an outside law firm to advise and assist it in the investigation. The Special Committee and the
Company are cooperating fully with regulators and enforcement officials.
Upon consideration of certain issues identified in the Special Committee investigation and as
discussed below, in July 2008, management and the Board determined that we should restate our
previously issued consolidated financial statements for the years ended December 31, 2006, 2005 and
2004, including the quarterly periods contained therein. In addition, in light of the work of the Special Committee, we reassessed our previously
issued unaudited condensed consolidated financial statements for the three-month period ended March
31, 2007 and the three- and six-month periods ended June 30, 2007. Based on such reassessment,
management and the Board determined that we should restate our previously issued unaudited condensed consolidated
financial statements for the three-month period ended March 31, 2007 and the three- and six-month
periods ended June 30, 2007.
The restatements relate to accounting errors identified in connection with our compliance with
the refund requirements under (a) the behavioral health component of our contract with the Florida
Agency for Health Care Administration (AHCA) to provide behavioral health care services for our
Florida Medicaid members (the AHCA contract), (b) our Healthy Kids contract with the Florida
Healthy Kids Corporation pursuant to which we provide health benefits for children whose family
income renders them ineligible for Medicaid, and (c) our Medicaid contract with the Illinois
Department of Health and Family Services to provide health care services to our Illinois Medicaid
members.
In each of the affected Medicaid programs, we receive premiums to be used to provide certain
medical and health benefits. Those premiums are subject to statutory or contractual obligations
that require us to expend a minimum percentage of the premiums on eligible medical expense. To the
extent that we expend less than the minimum percentage of the premiums on eligible medical expense,
we are required to refund all or some portion of the difference between the minimum and our actual
allowable medical expense. With respect to the AHCA and Healthy Kids contracts, we have determined
that we included certain ineligible medical expenses in our premium refund calculations, which
understated the amount of the refunds. In light of the inclusion of ineligible medical expenses in
our refund calculations, we did not record an adequate liability for the refunds, which resulted in
an error in our previously filed financial statements. We also did not record an
adequate liability for the anticipated refund amount with respect to the Illinois Medicaid
program.
Summary
of Restated and Reclassified Items
The following is a reconciliation of the Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Income, and Condensed Consolidated Statements of Cash Flows as
originally reported to balances as restated for the year ended December 31, 2006 and the three
months ended March 31, 2007 and 2006. The adjustments below resulted from (1) the restatement as
described above, (2) the correction of errors that were previously deemed immaterial, both
individually and in the aggregate, to the consolidated financial statements and (3) the adjustment
of the presentation of certain amounts to conform to the 2007 presentation as presented in the
Condensed Consolidated Balance Sheet.
8
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
March 31, 2007 Condensed Balance Sheet Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
March 31, 2007 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,344,909 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,344,909 |
|
Investments |
|
|
151,143 |
|
|
|
|
|
|
|
|
|
|
|
151,143 |
|
Premium receivables, net |
|
|
119,433 |
|
|
|
257 |
(1) |
|
|
|
|
|
|
119,690 |
|
Other receivables from government partners, net |
|
|
49,527 |
|
|
|
|
|
|
|
|
|
|
|
49,527 |
|
Prepaid expenses and other current assets, net |
|
|
76,181 |
|
|
|
12,999 |
(1) |
|
|
|
|
|
|
89,180 |
|
Deferred income taxes |
|
|
31,724 |
|
|
|
5,709 |
(1)(2) |
|
|
|
|
|
|
37,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,772,917 |
|
|
|
18,965 |
|
|
|
|
|
|
|
1,791,882 |
|
Property, equipment and capitalized software, net |
|
|
62,484 |
|
|
|
|
|
|
|
|
|
|
|
62,484 |
|
Goodwill |
|
|
189,470 |
|
|
|
|
|
|
|
|
|
|
|
189,470 |
|
Other intangibles, net |
|
|
18,132 |
|
|
|
|
|
|
|
|
|
|
|
18,132 |
|
Restricted investment assets |
|
|
60,939 |
|
|
|
|
|
|
|
|
|
|
|
60,939 |
|
Other assets |
|
|
1,529 |
|
|
|
|
|
|
|
|
|
|
|
1,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
2,105,471 |
|
|
$ |
18,965 |
|
|
$ |
|
|
|
$ |
2,124,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits payable |
|
$ |
556,947 |
|
|
$ |
2,495 |
(1) |
|
$ |
(4,807 |
)(3) |
|
$ |
554,635 |
|
Unearned premiums |
|
|
232,055 |
|
|
|
|
|
|
|
|
|
|
|
232,055 |
|
Accounts payable |
|
|
6,982 |
|
|
|
|
|
|
|
|
|
|
|
6,982 |
|
Other accrued expenses |
|
|
143,498 |
|
|
|
15,064 |
(1) |
|
|
|
|
|
|
158,562 |
|
Other payables to government partners |
|
|
36,083 |
|
|
|
43,048 |
(4) |
|
|
4,807 |
(3) |
|
|
83,938 |
|
Taxes payable |
|
|
22,298 |
|
|
|
(14,736 |
)(2) |
|
|
|
|
|
|
7,562 |
|
Current portion of long-term debt |
|
|
1,600 |
|
|
|
|
|
|
|
|
|
|
|
1,600 |
|
Funds held for the benefit of members |
|
|
304,034 |
|
|
|
|
|
|
|
|
|
|
|
304,034 |
|
Other current liabilities |
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,303,915 |
|
|
|
45,871 |
|
|
|
|
|
|
|
1,349,786 |
|
Long-term debt |
|
|
153,661 |
|
|
|
|
|
|
|
|
|
|
|
153,661 |
|
Deferred income taxes |
|
|
35,752 |
|
|
|
(9,165 |
)(2)(6) |
|
|
|
|
|
|
26,587 |
|
Other liabilities |
|
|
8,082 |
|
|
|
8,652 |
(6) |
|
|
|
|
|
|
16,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,501,410 |
|
|
|
45,358 |
|
|
|
|
|
|
|
1,546,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 41,164,939 and 40,900,134 shares issued and outstanding at March 31, 2007 and
December 31, 2006, respectively) |
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
412 |
|
Paid-in capital |
|
|
310,053 |
|
|
|
5,098 |
(1) |
|
|
|
|
|
|
315,151 |
|
Retained earnings |
|
|
293,532 |
|
|
|
(31,494 |
)(5) |
|
|
|
|
|
|
262,038 |
|
Accumulated other comprehensive income (loss) |
|
|
64 |
|
|
|
3 |
(1) |
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
604,061 |
|
|
|
(26,393 |
) |
|
|
|
|
|
|
577,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
2,105,471 |
|
|
$ |
18,965 |
|
|
$ |
|
|
|
$ |
2,124,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The adjustments relate to the correction of errors to properly state the balance in
connection with the restatement. Such errors were previously deemed immaterial, both
individually and in the aggregate, to the consolidated financial statements. |
|
|
(2) |
|
The adjustments are the tax-effect of the restatement adjustments recorded in the period ended
March 31, 2007 and explained in the following March 31, 2007 Condensed Consolidated Statement
of Income reconciliation to restated March 31, 2007 balances. |
9
|
|
|
(3) |
|
The reclassification from Medical benefits payable is due to the reclassification of amounts
to Other payables to government partners for recorded liabilities for retrospective premium
refunds that were previously recorded as Medical benefits payable prior to the restatement. |
|
|
(4) |
|
The adjustments to Other payables to government partners is the cumulative effect of the
restatement for retrospective premium refund, of which $4,464 relates to the period ended
March 31, 2007 and is reflected in the three months ended March 31, 2007 Condensed
Consolidated Statement of Income Reconciliation below, of which $19,956 relates to 2006,
$7,475 relates to 2005, and $11,153 relates to 2004. |
|
|
(5) |
|
The adjustment to Retained earnings is the income statement impact of restatement adjustments
recorded during the three month period ended March 31, 2007 and the years ended 2006, 2005 and
2004. |
|
|
(6) |
|
The adjustment of $8,652 to Deferred income taxes and Other liabilities is the result of restatement
adjustments and to record a FIN 48 liability as of
March 31, 2007. Refer to
Note 5 for further analysis. |
Three months ended March 31, 2007 Condensed Consolidated Statement of Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
March 31, 2007 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
$ |
1,221,766 |
|
|
$ |
92 |
(2) |
|
$ |
66,835 |
(4) |
|
$ |
1,288,693 |
|
Investment and other income |
|
|
17,666 |
|
|
|
(38 |
)(1) |
|
|
|
|
|
|
17,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,239,432 |
|
|
|
54 |
|
|
|
66,835 |
|
|
|
1,306,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
1,024,171 |
|
|
|
4,266 |
(1) |
|
|
66,835 |
(4) |
|
|
1,095,272 |
|
Selling, general and administrative |
|
|
166,556 |
|
|
|
(940 |
)(1) |
|
|
|
|
|
|
165,616 |
|
Depreciation and amortization |
|
|
4,566 |
|
|
|
|
|
|
|
|
|
|
|
4,566 |
|
Interest |
|
|
3,460 |
|
|
|
|
|
|
|
|
|
|
|
3,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,198,753 |
|
|
|
3,326 |
|
|
|
66,835 |
|
|
|
1,268,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
40,679 |
|
|
|
(3,272 |
) |
|
|
|
|
|
|
37,407 |
|
Income tax expense |
|
|
15,706 |
|
|
|
(1,102 |
)(3) |
|
|
|
|
|
|
14,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
24,973 |
|
|
$ |
(2,170 |
) |
|
$ |
|
|
|
$ |
22,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share (see Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic |
|
$ |
0.62 |
|
|
$ |
(0.05 |
) |
|
$ |
|
|
|
$ |
0.57 |
|
Net income per common share - diluted |
|
$ |
0.60 |
|
|
$ |
(0.05 |
) |
|
$ |
|
|
|
$ |
0.55 |
|
|
|
|
(1) |
|
The adjustments relate to the correction of errors to
properly state the balance in connection with the
restatement. Such errors were previously deemed immaterial, both
individually and in the aggregate, to the condensed consolidated financial statements. |
|
|
(2) |
|
The adjustment to Premium is primarily related to the $4,464 restatement adjustment for
retrospective premium refunds recorded in addition to the amounts recorded prior to the restatement
and reclassified as noted in (4) below. The adjustment is offset by amounts previously deemed
immaterial that were recorded for the correction of errors in connection with the restatement, see
(1) above. |
|
|
(3) |
|
The adjustment to Income tax expense is the income tax effect of the restatement and other
adjustments reflected above. |
|
|
(4) |
|
The reclassification to premium primarily represents the
three months ended March 31, 2007
amounts originally recorded as medical expenses prior to the restatement related to the risk
corridor under the prescription drug program. The reclassification is to reflect such amounts as
reduction to premium. These reclassifications do not impact our
previously reported Net income,
Earnings per share or Net cash provided by operations for the three
months ended March 31, 2007. |
10
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands)
Three Months Ended March 31, 2007 Condensed Consolidated Statement of Cash Flows Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
March 31, 2007 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
Cash from (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
24,973 |
|
|
$ |
(2,170 |
)(1) |
|
$ |
|
|
|
$ |
22,803 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
4,566 |
|
|
|
|
|
|
|
|
|
|
|
4,566 |
|
Equity-based compensation expense |
|
|
10,548 |
|
|
|
(4,929 |
)(2) |
|
|
|
|
|
|
5,619 |
|
Incremental tax benefit received for options
exercises |
|
|
(4,928 |
) |
|
|
(2,189 |
)(2) |
|
|
|
|
|
|
(7,117 |
) |
Deferred taxes, net |
|
|
(15,797 |
) |
|
|
(8,741 |
)(2) |
|
|
|
|
|
|
(24,538 |
) |
Changes in operating accounts, net of effect
of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and other receivables |
|
|
(16,968 |
) |
|
|
(2,161 |
)(2) |
|
|
|
|
|
|
(19,129 |
) |
Other receivables from government partners |
|
|
(8,625 |
) |
|
|
|
|
|
|
|
|
|
|
(8,625 |
) |
Prepaid expenses and other, net |
|
|
11,326 |
|
|
|
(13,343 |
)(2) |
|
|
|
|
|
|
(2,017 |
) |
Medical benefits payable |
|
|
91,366 |
|
|
|
1,403 |
(2) |
|
|
1,138 |
(3) |
|
|
93,907 |
|
Unearned premiums |
|
|
208,249 |
|
|
|
|
|
|
|
20,493 |
(4) |
|
|
228,742 |
|
Accounts payable |
|
|
(1,033 |
) |
|
|
251 |
(2) |
|
|
|
|
|
|
(782 |
) |
Other accrued expenses |
|
|
(28,545 |
) |
|
|
13,305 |
(2) |
|
|
(20,493 |
)(4) |
|
|
(35,733 |
) |
Other payables to government partners |
|
|
(67,993 |
) |
|
|
4,463 |
(3) |
|
|
(1,138 |
)(3) |
|
|
(64,668 |
) |
Taxes, net |
|
|
9,117 |
|
|
|
4,429 |
(2) |
|
|
|
|
|
|
13,546 |
|
Other, net |
|
|
734 |
|
|
|
8,240 |
(2) |
|
|
|
|
|
|
8,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operations |
|
|
216,990 |
|
|
|
(1,442 |
) |
|
|
|
|
|
|
215,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from (used in) investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale and maturities of investments |
|
|
1,106 |
|
|
|
|
|
|
|
|
|
|
|
1,106 |
|
Purchases of investments |
|
|
(25,827 |
) |
|
|
|
|
|
|
|
|
|
|
(25,827 |
) |
Purchases and dispositions of restricted
investments, net |
|
|
(7,557 |
) |
|
|
|
|
|
|
7,557 |
(4) |
|
|
|
|
Purchases of
restricted investments |
|
|
|
|
|
|
|
|
|
|
(8,267 |
)(4) |
|
|
(8,267 |
) |
Proceeds
from sale and maturities of restricted investments |
|
|
|
|
|
|
|
|
|
|
710 |
(4) |
|
|
710 |
|
Additions to property, equipment, and
capitalized software |
|
|
(4,322 |
) |
|
|
(747 |
)(5) |
|
|
|
|
|
|
(5,069 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from (used in) investing
activities |
|
|
(36,600 |
) |
|
|
(747 |
) |
|
|
|
|
|
|
(37,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from (used in) financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock issuance, net |
|
|
156 |
|
|
|
|
|
|
|
|
|
|
|
156 |
|
Proceeds from options exercised |
|
|
6,337 |
|
|
|
|
|
|
|
|
|
|
|
6,337 |
|
Incremental tax benefit from options
exercised |
|
|
4,928 |
|
|
|
2,189 |
(2) |
|
|
|
|
|
|
7,117 |
|
Purchase of treasury stock |
|
|
(1,426 |
) |
|
|
|
|
|
|
|
|
|
|
(1,426 |
) |
Repayments on debt |
|
|
(400 |
) |
|
|
|
|
|
|
|
|
|
|
(400 |
) |
Funds held for the benefit of members, net of
disbursements |
|
|
190,382 |
|
|
|
|
|
|
|
|
|
|
|
190,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
199,977 |
|
|
|
2,189 |
|
|
|
|
|
|
|
202,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase during year |
|
|
380,367 |
|
|
|
|
|
|
|
|
|
|
|
380,367 |
|
Balance at beginning of year |
|
|
964,542 |
|
|
|
|
|
|
|
|
|
|
|
964,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
1,344,909 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,344,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes |
|
$ |
17,040 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
3,264 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The adjustment to Net income represents the period ended
March 31, 2007 effect of the
restatement amounts recorded for the Three Months Ended
March 31, 2007 and included in the March
31,2007 Condensed Consolidated Statement of Income reconciliation. |
|
|
(2) |
|
The adjustments relate to the period-over-period change resulting from the correction of errors
in connection with the restatement, which is explained in the March 31, 2007 Condensed Consolidated
Balance Sheet reconciliation. Such errors were previously deemed immaterial, both individually and
in the aggregate, to the consolidated financial statements. |
|
|
(3) |
|
The adjustment to Other payables to government partners is the effect of the cumulative year
over year change relating to the restatement for retrospective premium refund, for both existing
liabilities and additional liabilities as discussed previously. The reclassification between
Medical benefits payable and Other payables to government partners is due to |
11
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands)
|
|
|
|
|
the reclassification
of existing liabilities as discussed previously and shown in the March 31, 2007 Condensed Balance
Sheet reconciliation. |
|
|
(4) |
|
These reclassifications were recorded to correct the presentation of certain amounts to conform
to the December 31, 2007 presentation as presented in the
Condensed Consolidated Statement of Cash Flows.
These reclassifications do not impact the Companys previously
reported Net cash provided by or
used in operating activities, financing activities or investing activities. |
|
|
(5) |
|
The adjustment to Additions to property and equipment, net resulted from a change in the
determination of non-cash additions to property and equipment. |
12
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
December 31, 2006 Condensed Consolidated Balance Sheet Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
964,542 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
964,542 |
|
Investments |
|
|
126,422 |
|
|
|
|
|
|
|
|
|
|
|
126,422 |
|
Premium and other receivables, net |
|
|
102,465 |
|
|
|
(1,904 |
)(1) |
|
|
|
|
|
|
100,561 |
|
Other receivables from government
partners, net |
|
|
40,902 |
|
|
|
|
|
|
|
|
|
|
|
40,902 |
|
Prepaid expenses and other current
assets, net |
|
|
87,507 |
|
|
|
(344 |
)(1) |
|
|
|
|
|
|
87,163 |
|
Deferred income taxes |
|
|
16,576 |
|
|
|
3,325 |
(1) |
|
|
|
|
|
|
19,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,338,414 |
|
|
|
1,077 |
|
|
|
|
|
|
|
1,339,491 |
|
Property, equipment and capitalized
software, net |
|
|
62,005 |
|
|
|
(747 |
)(1) |
|
|
|
|
|
|
61,258 |
|
Goodwill |
|
|
189,470 |
|
|
|
|
|
|
|
|
|
|
|
189,470 |
|
Other intangibles, net |
|
|
18,855 |
|
|
|
|
|
|
|
|
|
|
|
18,855 |
|
Restricted investment assets |
|
|
53,382 |
|
|
|
|
|
|
|
|
|
|
|
53,382 |
|
Other assets |
|
|
1,839 |
|
|
|
3 |
(1) |
|
|
|
|
|
|
1,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,663,965 |
|
|
$ |
333 |
|
|
$ |
|
|
|
$ |
1,664,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits payable |
|
$ |
465,581 |
|
|
$ |
1,092 |
(1) |
|
$ |
(5,945 |
) (4) |
|
$ |
460,728 |
|
Unearned premiums |
|
|
23,806 |
|
|
|
|
|
|
|
(20,493 |
) (6) |
|
|
3,313 |
|
Accounts payable |
|
|
8,015 |
|
|
|
(251 |
)(1) |
|
|
|
|
|
|
7,764 |
|
Other accrued expenses |
|
|
172,043 |
|
|
|
1,759 |
(1) |
|
|
20,493 |
(6) |
|
|
194,295 |
|
Other payables to government partners |
|
|
104,076 |
|
|
|
38,585 |
(3) |
|
|
5,945 |
(4) |
|
|
148,606 |
|
Taxes payable |
|
|
13,181 |
|
|
|
(12,048 |
)(2) |
|
|
|
|
|
|
1,133 |
|
Deferred income taxes |
|
|
1,735 |
|
|
|
|
|
|
|
|
|
|
|
1,735 |
|
Current portion of long-term debt |
|
|
1,600 |
|
|
|
|
|
|
|
|
|
|
|
1,600 |
|
Funds held for the benefit of members |
|
|
113,652 |
|
|
|
|
|
|
|
|
|
|
|
113,652 |
|
Other current liabilities |
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
904,107 |
|
|
|
29,137 |
|
|
|
|
|
|
|
933,244 |
|
Long-term debt |
|
|
154,021 |
|
|
|
|
|
|
|
|
|
|
|
154,021 |
|
Deferred income taxes |
|
|
34,666 |
|
|
|
(2,808 |
)(1) |
|
|
|
|
|
|
31,858 |
|
Other liabilities |
|
|
8,116 |
|
|
|
|
|
|
|
|
|
|
|
8,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
1,100,910 |
|
|
$ |
26,329 |
|
|
$ |
|
|
|
$ |
1,127,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
409 |
|
|
|
|
|
|
|
|
|
|
|
409 |
|
Paid-in capital |
|
|
294,443 |
|
|
|
2,908 |
(1) |
|
|
|
|
|
|
297,351 |
|
Retained earnings |
|
|
268,559 |
|
|
|
(29,321 |
)(5) |
|
|
|
|
|
|
239,238 |
|
Accumulated other comprehensive income
(loss) |
|
|
(356 |
) |
|
|
417 |
(1) |
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
563,055 |
|
|
|
(25,996 |
) |
|
|
|
|
|
|
537,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
1,663,965 |
|
|
$ |
333 |
|
|
$ |
|
|
|
$ |
1,664,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
|
|
|
(1) |
|
The adjustments relate to the correction of errors to properly state the balance in
connection with the restatement. Such errors were previously deemed immaterial, both
individually and in the aggregate, to the consolidated financial statements. |
|
(2) |
|
The adjustment is the tax-effect of the restatement adjustments recorded in calendar year
2006. |
|
(3) |
|
The adjustments to Other payables to government partners is the cumulative effect of the
restatement for retrospective premium refund, for both existing liabilities in (4) below and
additional liabilities as discussed previously, of which $19,956 relates to 2006, $7,475
relates to 2005, and $11,153 relates to 2004. |
|
(4) |
|
The adjustment to Medical benefits payable is primarily due to the reclassification of
amounts to the Other payables to government partners for existing recorded liabilities related
to the restatement that were previously recorded as Medical benefits payable prior to the
restatement. |
|
(5) |
|
The adjustment to Retained earnings is the income statement impact of restatement adjustments
from 2006, 2005 and 2004. |
|
(6) |
|
The adjustment to Unearned premiums and Other accrued expenses represents the
reclassification recorded to reflect certain liabilities as other liabilities to conform to
the 2007 presentation of such balances. |
Three months ended March 31, 2006 Condensed Consolidated Statement of Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2006 |
|
|
|
|
|
|
|
|
|
|
March 31, 2006 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
$ |
722,221 |
|
|
$ |
(4,832 |
)(2) |
|
$ |
74,338 |
(4) |
|
$ |
791,727 |
|
Investment and other income |
|
|
8,164 |
|
|
|
|
|
|
|
|
|
|
|
8,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
730,385 |
|
|
|
(4,832 |
) |
|
|
74,338 |
|
|
|
799,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
599,084 |
|
|
|
(53 |
)(1) |
|
|
74,338 |
(4) |
|
|
673,369 |
|
Selling, general and administrative |
|
|
97,265 |
|
|
|
589 |
(1) |
|
|
|
|
|
|
97,854 |
|
Depreciation and amortization |
|
|
3,090 |
|
|
|
|
|
|
|
|
|
|
|
3,090 |
|
Interest |
|
|
3,384 |
|
|
|
|
|
|
|
|
|
|
|
3,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
702,823 |
|
|
|
536 |
|
|
|
74,338 |
|
|
|
777,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
27,562 |
|
|
|
(5,368 |
) |
|
|
|
|
|
|
22,194 |
|
Income tax expense |
|
|
10,794 |
|
|
|
(1,885 |
)(3) |
|
|
|
|
|
|
8,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
16,768 |
|
|
$ |
(3,483 |
) |
|
$ |
|
|
|
$ |
13,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share (see Note 1): |
|
$ |
0.43 |
|
|
$ |
(0.09 |
) |
|
$ |
|
|
|
$ |
0.34 |
|
Net income
per common share - basic |
|
$ |
0.42 |
|
|
$ |
(0.09 |
) |
|
$ |
|
|
|
$ |
0.33 |
|
Net income
per common share - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The adjustments relate to the correction of errors to
properly state the balance in connection with the restatement. Such errors were previously deemed immaterial, both
individually and in the aggregate, to the condensed consolidated
financial statements. |
|
(2) |
|
The adjustment to Premium is the Three Months Ended March 31, 2006
impact of the restatement adjustment for retrospective premium refund
amounts recorded in addition to the amounts recorded prior to the restatement
and reclassified as noted in (4) below to reflect such
amounts as reduction to premium. |
|
(3) |
|
The adjustment to Income tax expense is the income tax effect of the
restatement and other adjustments reflected above. |
|
(4) |
|
The reclassification to premium represents the three months
ended March 31, 2006 amounts originally recorded as medical expenses
prior to the restatement related to the risk corridor under the
prescription drug program. The reclassification is to reflect such amounts as reduction to
premium. These reclassifications do not impact our previously reported
net income, earnings per share or net cash provided by operations for
the three months ended March 31, 2006. |
14
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
Three Months Ended March 31, 2006 Condensed Consolidated Statement of Cash Flows Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2006 |
|
|
|
|
|
|
|
|
|
|
March 31, 2006 |
|
|
|
(As
originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As
restated) |
|
Cash from (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
16,768 |
|
|
$ |
(3,483 |
)(3) |
|
$ |
|
|
|
$ |
13,285 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
3,090 |
|
|
|
|
|
|
|
|
|
|
|
3,090 |
|
Loss on disposal of fixed assets |
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
Equity-based compensation expense |
|
|
6,777 |
|
|
|
(1,027 |
)(4) |
|
|
|
|
|
|
5,750 |
|
Incremental tax benefit received for options exercises |
|
|
(1,027 |
) |
|
|
|
|
|
|
|
|
|
|
(1,027 |
) |
Deferred taxes, net |
|
|
(25,667 |
) |
|
|
(692 |
)(4) |
|
|
|
|
|
|
(26,359 |
) |
Changes in operating accounts, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and other receivables |
|
|
971 |
|
|
|
|
|
|
|
|
|
|
|
971 |
|
Other receivables from government partners |
|
|
(107,868 |
) |
|
|
|
|
|
|
|
|
|
|
(107,868 |
) |
Prepaid expenses and other, net |
|
|
1,750 |
|
|
|
|
|
|
|
|
|
|
|
1,750 |
|
Medical benefits payable |
|
|
105,157 |
|
|
|
|
|
|
|
2,939 |
(2) |
|
|
108,096 |
|
Unearned premiums |
|
|
193,384 |
|
|
|
|
|
|
|
|
|
|
|
193,384 |
|
Accounts payable |
|
|
1,758 |
|
|
|
1,325 |
(4)(1) |
|
|
|
|
|
|
3,083 |
|
Other accrued expenses |
|
|
5,337 |
|
|
|
(801 |
)(4) |
|
|
|
|
|
|
4,536 |
|
Other payables to government partners |
|
|
|
|
|
|
4,949 |
(2) |
|
|
(2,939 |
)(2) |
|
|
2,010 |
|
Taxes, net |
|
|
35,344 |
|
|
|
(153 |
)(4) |
|
|
|
|
|
|
35,191 |
|
Other, net |
|
|
(12,437 |
) |
|
|
(215 |
)(4) |
|
|
|
|
|
|
(12,652 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operations |
|
|
224,587 |
|
|
|
(97 |
) |
|
|
|
|
|
|
224,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from (used in) investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale and maturities of investments |
|
|
775 |
|
|
|
|
|
|
|
|
|
|
|
775 |
|
Purchases of investments |
|
|
(54,370 |
) |
|
|
|
|
|
|
|
|
|
|
(54,370 |
) |
Purchases and dispositions of restricted investments, net |
|
|
(14,341 |
) |
|
|
|
|
|
|
14,341 |
(5) |
|
|
|
|
Purchases of
restricted investments |
|
|
|
|
|
|
|
|
|
|
(14,851 |
)(5) |
|
|
(14,851 |
) |
Proceeds
from sales and maturities of restricted investments |
|
|
|
|
|
|
|
|
|
|
510 |
(5) |
|
|
510 |
|
Additions to property, equipment, and capitalized software |
|
|
(11,665 |
) |
|
|
97 |
(1) |
|
|
|
|
|
|
(11,568 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from (used in) investing activities |
|
|
(79,601 |
) |
|
|
97 |
|
|
|
|
|
|
|
(79,504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from (used in) financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock issuance, net |
|
|
18,830 |
|
|
|
|
|
|
|
|
|
|
|
18,830 |
|
Proceeds from options exercised |
|
|
1,711 |
|
|
|
|
|
|
|
|
|
|
|
1,711 |
|
Incremental tax benefit from options exercised |
|
|
1,027 |
|
|
|
|
|
|
|
|
|
|
|
1,027 |
|
Repayments on debt |
|
|
(400 |
) |
|
|
|
|
|
|
|
|
|
|
(400 |
) |
Funds held for the benefit of members, net of disbursements |
|
|
201,810 |
|
|
|
|
|
|
|
|
|
|
|
201,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
222,978 |
|
|
|
|
|
|
|
|
|
|
|
222,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase during year |
|
|
367,964 |
|
|
|
|
|
|
|
|
|
|
|
367,964 |
|
Balance at beginning of year |
|
|
421,766 |
|
|
|
|
|
|
|
|
|
|
|
421,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
789,730 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
789,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes |
|
$ |
240 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
3,295 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
|
|
|
(1) |
|
The adjustment to Additions to property and equipment, net resulted
from a change in the determination of non-cash additions to property
and equipment previously included in Accounts payable |
|
(2) |
|
The adjustment to Other payables to
government partners is the effect of the cumulative year over year
change relating to the restatement for retrospective premium refund,
for both existing liabilities and additional liabilities as discussed
previously. The reclassification between Medical benefits payable and
Other payables to government partners is due to the reclassification
of existing liabilities as discussed previously and shown in the 2006
Condensed Balance Sheet reconciliation. |
|
(3) |
|
The adjustment to Net income represents the effect of the restatement
amounts recorded for the Three Months Ended March 31, 2006 included in
the Three Months Ended March 31, 2006 Condensed Consolidated Statement
of Income reconciliation. |
|
(4) |
|
The adjustment relates to the year over year change resulting from the
correction of errors in connection with the restatement, which is
explained in the 2006 Condensed Consolidated Balance Sheet
reconciliation. Such errors were previously deemed immaterial, both
individually and in the aggregate, to the consolidated financial
statements. |
|
(5) |
|
These reclassifications were recorded to correct the presentation of certain amounts to conform
to the March 31, 2007 presentation as presented in the Condensed Consolidated Statement of Cash Flows.
These reclassifications do not impact the Companys previously reported net cash provided by or
used in operating activities, financing activities or investing activities. |
The Company has two reportable segments: Medicaid and Medicare. The segments were determined
based upon the type of governmental administration, regulation and funding of the healthcare plans.
Segment performance is evaluated based upon earnings from operations without corporate allocations.
Accounting policies of the segments are consistent with those applied at December 31, 2006.
The Medicaid segment includes operations which provide healthcare services to recipients that
are eligible for state supported programs including Medicaid and childrens health programs. The
Medicare segment includes operations which provide healthcare services and prescription drug
benefits to recipients who are eligible for the federally supported Medicare program.
Asset, liability and equity amounts by segment have not been disclosed, as they are not
reported by segment internally by the Company.
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Ended March 31, |
|
|
2007 |
|
2006 |
|
|
(As Restated) |
|
(As Restated) |
Premium revenue: |
|
|
|
|
|
|
|
|
Medicaid |
|
$ |
633,424 |
|
|
$ |
348,727 |
|
Medicare |
|
|
655,269 |
|
|
|
443,000 |
|
|
|
|
|
|
Total |
|
|
1,288,693 |
|
|
|
791,727 |
|
Medical benefits expense: |
|
|
|
|
|
|
|
|
Medicaid |
|
|
532,413 |
|
|
|
279,223 |
|
Medicare |
|
|
562,859 |
|
|
|
394,146 |
|
|
|
|
|
|
|
Total |
|
|
1,095,272 |
|
|
|
673,369 |
|
Gross margin: |
|
|
|
|
|
|
|
|
Medicaid |
|
|
101,011 |
|
|
|
69,504 |
|
Medicare |
|
|
92,410 |
|
|
|
48,854 |
|
|
|
|
|
|
|
Total |
|
$ |
193,421 |
|
|
$ |
118,358 |
|
|
|
|
|
|
16
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
4. |
|
EQUITY-BASED COMPENSATION |
During the three months ended March 31, 2007 and 2006, the Company recorded $5,619 and $5,750,
respectively, in compensation expense related to our equity based compensation awards. During the
three months ended March 31, 2007, the Company granted options under the 2004 Equity Incentive Plan
for the purchase of 483,178 shares of common stock at a weighted-average exercise price of $84.06
per share and a weighted-average Black-Scholes fair value of $23.87 per share. At March 31, 2007,
options for 3,067,420 shares were outstanding with a weighted-average exercise price of $39.66 per
share. The total intrinsic value of options exercised during the three months ended March 31, 2007
and 2006 determined as of the date of exercise was $16,118 and $4,114, respectively. During the
three months ended March 31, 2007, the Company also granted 192,092 restricted shares under the
2004 Equity Incentive Plan at a weighted-average grant-date fair value of $83.25. At March 31,
2007, 955,742 restricted shares remained unvested. The total fair value of restricted shares
vested during the three months ended March 31, 2007 and 2006 was $2,610 and $694, respectively.
As of March 31, 2007, there was $63,170 of unrecognized compensation costs related to
non-vested equity-based compensation arrangements that is expected to be recognized over a
weighted-average period of 3.8 years.
The Company uses the asset and liability method of accounting for income taxes. As of March
31, 2007, net deferred tax assets were approximately $10,910. In assessing the realizability of
deferred tax assets, management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies. The Company expects the deferred tax
assets to be realized through the generation of future taxable income and the reversal of existing
taxable temporary differences.
The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on
January 1, 2007. There was no cumulative effect of adopting FIN 48 for 2007. The total amount of
unrecognized tax benefits as of the date of adoption was $1,093. The amount of unrecognized tax
benefits as of March 31, 2007 is $9,745.
We classify interest and penalties associated with uncertain income tax positions as income
taxes within our Condensed Consolidated Financial Statements. The FIN 48 liability is recorded in
Other Liabilities. During the quarter ended March 31, 2007, the Company recognized $0 in interest
expense and thus has no accrued interest. No amount was accrued for penalties. As of March 31,
2007, the total amount of unrecognized tax benefits that, if recognized, would affect the effective
tax rate was $1,093.
We currently file income tax returns in the U.S. federal jurisdiction and various states. The
Internal Revenue Service (IRS) is currently completing its exams on the consolidated income tax
returns for the 2004 through 2006 tax years. We are no longer subject to income tax examinations
prior to 2004 in major state jurisdictions. We do not believe any adjustments that may result from
these examinations will be significant.
We believe it is reasonably possible that our liability for unrecognized tax benefits will not
significantly increase or decrease in the next twelve months as a result of audit settlements and
the expiration of statutes of limitations in certain major jurisdictions.
Credit Agreement
The Company and certain of its subsidiaries are parties to a credit agreement, dated as of May
13, 2004, which was subsequently amended on September 1, 2005 and on September 28, 2006 (as
amended, the Credit Agreement).
The credit facilities under the Credit Agreement consist of a senior secured term loan
facility in the amount of $155,300 and a revolving credit facility in the amount of $125,000, of
which $10,000 is available for short-term borrowings on a swingline basis. The term loan and credit
facilities are secured by a pledge of stock of our operating subsidiaries, as well as a pledge of
substantially all of the assets of our non-regulated entities. Interest is payable quarterly,
currently at a rate equal to the sum of a rate based upon the applicable six month LIBOR rate plus a rate equal to 2.50%. The
term loan matures in May 2009, and the revolving credit facility will expire in May 2008. The
Company is a party to this agreement for the purpose of guaranteeing the indebtedness of its
subsidiaries that are parties to the agreement. As of March 31, 2007, the revolving credit facility
has not been utilized.
17
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
The Credit Agreement contains various restrictive covenants which limit, among other things,
the Companys ability to incur indebtedness and liens, enter into business combination transactions
and cause the Companys regulated subsidiaries to declare and pay dividends to it or its
non-regulated subsidiaries. For more information, refer to Note 8.
7. |
|
COMMITMENTS AND CONTINGENCIES |
As previously disclosed, on October 24, 2007, certain federal and state agencies executed a
search warrant at our headquarters in Tampa, Florida. Our Board of Directors (the Board) formed
a special committee (the Special Committee) comprised of independent directors to, among other
things, investigate independently and otherwise assess the facts and circumstances raised in any
federal or state regulatory or enforcement inquiries (including, without limitation, any matters
relating to accounting and operational issues) and in any private party proceedings, and develop
and recommend remedial measures to the Board for its consideration. The Special Committee and the
Company are cooperating fully with federal and state regulators and enforcement officials in these
matters. The Special Committees review is ongoing and we cannot provide assurances as to when it
will be completed. Based on the issues referred to date to the Special Committee, other than as
described in our 2007 10-K, we currently do not believe that the work of the Special Committee will result in any
material adjustments to the accompanying financial statements.
This
amended quarterly report on Form 10-Q should be read in conjunction with the consolidated financial
statements and notes thereto for the fiscal year ended
December 31, 2007 included in the 2007 10-K
filed with the SEC on January 26, 2009.
Debt Default
The Credit Agreement, as discussed in Note 6, contains various restrictive covenants which
limit, among other things, our ability to incur indebtedness and liens, enter into business
combination transactions and cause our regulated subsidiaries to declare and pay dividends to us or
our non-regulated subsidiaries. As a result of the on-going investigation discussed in Note 2, the
Company has been unable to satisfy a number of such obligations, including providing audited
financial statements, annual financial plans, and other information
sought by the lenders under the
Credit Agreement. Consequently, since November, 2007 the Company has been in default under the
terms of the Credit Agreement. The Company continues to make payments as required, and
consequently, there has been no payment default under the terms of the Credit Agreement. As of the
date of this report, the Companys direct financial obligations under the Credit Agreement have not
been accelerated or increased; however, the lenders have the right to do so at any time.
Investigation, Restatement, and Other
For more information related to the investigations, restatement, and related matters, refer to
the 2007 10-K filed with the SEC on January 26, 2009.
18
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Forward Looking Statements
The following discussion of our financial condition and results of operations should be read
in conjunction with the accompanying unaudited condensed consolidated interim financial statements
and the notes to those statements appearing elsewhere in this report, our audited consolidated and
combined financial statements and the notes thereto for the year ended December 31, 2006, appearing
in the 2006 Form 10-K.
This Amended Form 10-Q 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 may, will, should, expects, anticipates, intends, plans, believes,
estimates, predicts, potential, continues and similar expressions are forward-looking
statements.
Forward-looking statements involve known and unknown risks and uncertainties that may cause
our actual future results to differ materially from those projected or contemplated in the
forward-looking statements. These risks and uncertainties include, but are not limited to:
|
|
the potential expiration, cancellation or suspension of our state or federal contracts; |
|
|
|
lack of prior operating history, including lack of experience with
network providers and health benefits management, in expansion
markets, including Georgia, Missouri and Ohio; |
|
|
|
our lack of significant operating history in our Medicare PDP and
PFFS programs and potential inability to accurately predict the
number of members in these programs; |
|
|
|
our ability to accurately predict and effectively manage health
benefits, drug costs and other operating expenses, including our
ability to reinsure certain risks related to medical expenses; |
|
|
|
the potential for confusion in the marketplace concerning PDP and
PFFS programs resulting from, among other things, the
proliferation of health care options facing Medicare beneficiaries
and the complexity of the PDP and PFFS offerings, including the
benefit structures and the relative lack of awareness of these
programs among health care providers, pharmacists and patient
advocates; |
|
|
|
our ability to accurately estimate incurred but not reported medical costs; |
|
|
|
risks associated with future changes in healthcare laws, including repeal
or modification of the Medicare Modernization Act of 2003 or any portion
thereof; |
|
|
|
potential reductions in funding for government healthcare
programs, including reductions in funding resulting from the
escalating costs of prescription drugs; |
|
|
|
risks associated with periodic government reimbursement rate
adjustments, the timing of the CMS risk-corridor payments to PDP
providers and the accounting treatment for the PDP programs; |
|
|
|
our ability to develop processes and systems to support our operations and future growth; |
|
|
|
regulatory changes and developments, including potential marketing restrictions or
sanctions and premium recoupment; |
|
|
|
potential fines, penalties or operating restrictions resulting
from regulatory audits, examinations, investigations or other
inquiries; |
|
|
|
risks associated with our acquisition strategy; |
|
|
|
risks associated with our efforts to expand into additional states and counties; |
|
|
|
risks associated with our substantial debt obligations; and |
|
|
|
risks associated with our rapid growth, including our ability to
attract and retain qualified management personnel. |
Additional information concerning these and other important risks and uncertainties can be
found under the headings Forward-Looking Statements and Risk Factors in the 2006 Form 10-K,
which contain discussions of our business and the various factors that may affect it. We
specifically disclaim any obligation to update or revise any forward-looking statements, whether as
a result of new information, future developments or otherwise.
Overview
We provide managed care services exclusively to government-sponsored healthcare programs,
focusing on Medicare and Medicaid. We offer a variety of Medicare and Medicaid plans, including
health plans for families, children, the aged, blind and disabled and prescription drug plans,
currently serving over 2.27 million members nationwide as of March 31, 2007.
19
Medicaid was established under the U.S. Social Security Act of 1965 to provide medical
assistance to low income and disabled persons. It is state operated and implemented, although it is
funded by both the state and federal governments. Our Medicaid plans include plans for individuals
who are dually eligible for both Medicare and Medicaid, and recipients of the Temporary Assistance
to Needy Families (TANF) program, Supplemental Security Income (SSI) program, State
Childrens Health Insurance (S-CHIP) program, and the Family Health Plus (FHP) program. The
TANF program generally provides assistance to low-income families with children and the SSI program
generally provides assistance to low-income aged, blind or disabled individuals. Families who
exceed the income thresholds for Medicaid may be able to qualify for the state S-CHIP and FHP
programs.
Medicare is a federal program that provides eligible persons age 65 and over and some disabled
persons a variety of hospital, medical insurance and prescription drug benefits. Medicare is
administered and funded by the federal Centers for Medicare & Medicaid Services (CMS). Our
Medicare plans include stand-alone prescription drug plans (PDP) and Medicare Advantage (MA)
plans which include both Medicare coordinated care (MCC) plans and Medicare private
fee-for-service (PFFS) plans. Medicare Advantage is Medicares managed care alternative to
original Medicare fee-for-service which individuals enroll into directly through CMS. MCC plans are
plans that are administered through a health maintenance organization and generally require members
to seek health care services from a network of health care providers. PFFS plans are open-access
plans that allow members to be seen by any physician or facility that participates in the Medicare
program.
We believe that our experience in managing healthcare for this broad range of beneficiaries
better positions us to capitalize on growth opportunities across all of these programs. In
addition, unlike many other managed care organizations that attempt to serve the general population
through commercial health plans, we focus exclusively on serving individuals in government
programs. We believe that this focus allows us to better serve our members and providers and to
more efficiently manage our operations. We have centralized core functions, such as claims
processing and medical management, combined with localized marketing and strong provider
relationships. We believe that this approach will allow us to continue effectively growing our
business, both through organic growth and through acquisitions.
Through our licensed subsidiaries, as of March 31, 2007, we operated Medicaid plans in
Florida, New York, Connecticut, Illinois, Missouri, Georgia and Ohio and our MCC plans in Florida,
New York, Connecticut, Illinois, Louisiana and Georgia. We also operated stand-alone Medicare PDP
plans in all 50 states and the District of Columbia and Medicare PFFS plans in 793 counties in 39
states and Washington, D.C.
The following tables summarize our membership by segment and line of business as of March 31,
2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2007 |
|
|
2006 |
|
Medicaid |
|
|
|
|
|
|
|
|
TANF |
|
|
864,000 |
|
|
|
590,000 |
|
S-CHIP |
|
|
206,000 |
|
|
|
89,000 |
|
SSI |
|
|
70,000 |
|
|
|
59,000 |
|
FHP |
|
|
31,000 |
|
|
|
27,000 |
|
|
|
|
|
|
|
|
|
|
|
1,171,000 |
|
|
|
765,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
|
|
|
|
|
|
MA |
|
|
131,000 |
|
|
|
74,000 |
|
PDP |
|
|
970,000 |
|
|
|
703,500 |
|
|
|
|
|
|
|
|
|
|
|
1,101,000 |
|
|
|
777,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,272,000 |
|
|
|
1,542,500 |
|
|
|
|
|
|
|
|
We enter into contracts with government agencies that administer health benefits programs.
These contracts generally are subject to renewal every one to three years. We receive premiums from
state and federal agencies for the members that are assigned to or have selected us to provide
healthcare services under each benefit program. The amount of premiums we receive for each member
is fixed, although it varies according to demographics, including the government program, and the
members geographic location, age and gender, and the premiums are subject to periodic adjustments.
Our largest expense is the cost of medical benefits that we provide, which is based primarily
on our arrangements with healthcare providers. Our profitability depends on our ability to predict
and effectively manage medical benefits expense relative to the fixed premiums we receive. Our
arrangements with providers fall into two broad categories: capitation arrangements, where we pay
the providers a fixed fee per member, and fee-for-service and risk-sharing arrangements, where
20
we assume all or part of the risk of the cost of the healthcare provided. Generally, capitation
payments represent less than 20% of our total medical benefits expense. Other components of medical
benefits expense are variable and require estimation and ongoing cost management.
Estimation of medical benefits expense is our most significant critical accounting estimate.
See Managements Discussion and Analysis of Financial Condition and Results of Operations -
Critical Accounting Policies.
We use a variety of techniques to manage our medical benefits expense, including payment
methods to providers, referral requirements, quality and disease management programs, reinsurance
and member co-payments and premiums for some of our Medicare plans. National healthcare costs have
been increasing at a higher rate than the general inflation rate, however, and relatively small
changes in our medical benefits expense relative to premiums that we receive can create significant
changes in our financial results. Changes in healthcare laws, regulations and practices, levels of
use of healthcare services, competitive pressures, hospital costs, major epidemics, terrorism or
bio-terrorism, new medical technologies and other external factors could reduce our ability to
manage our medical benefits expense effectively.
One of our primary tools for measuring profitability is our medical benefits ratio, the ratio
of our medical benefits expense to the premiums we receive. Changes in the medical benefits ratio
from period to period result from, among other things, changes in Medicaid and Medicare funding,
changes in the mix of Medicaid and Medicare membership, our ability to manage medical costs and
changes in accounting estimates related to incurred but not reported claims. We use medical
benefits ratios both to monitor our management of medical benefits expense and to make various
business decisions, including what healthcare plans to offer, what geographic areas to enter or
exit and the selection of healthcare providers. Although medical benefits ratios play an important
role in our business strategy, we may be willing to enter into provider arrangements that might
produce a less favorable medical benefits ratio if those arrangements, such as capitation or
risk-sharing, would likely lower our exposure to variability in medical costs.
Segments
We have two reportable business segments: Medicaid and Medicare. Medicaid, a
state-administered program, was enacted in 1965 to make federal matching funds available to all
states for the delivery of healthcare benefits to eligible individuals, principally those with
incomes below specified levels who meet other state specified requirements. Medicaid is structured
to allow each state to establish its own eligibility standards, benefits package, payment rates and
program administration under broad federal guidelines. Most states determine threshold Medicaid
eligibility by reference to other federal financial assistance programs, including the TANF and SSI
programs.
TANF provides assistance to low-income families with children. SSI is a federal program that
provides assistance to low-income aged, blind or disabled individuals. However, states can broaden
eligibility criteria.
S-CHIP, developed in 1997, is a federal/state matching program that provides healthcare
coverage to children in low income families not otherwise covered by Medicaid or other insurance
programs. It must be reauthorized by Congress this year. S-CHIP enables a segment of the large
uninsured population in the United States to receive healthcare benefits. States have the option of
administering S-CHIP through their Medicaid programs.
FHP is a New York State program that provides health insurance for certain adults and their
families between the ages of 19 and 64 who do not have health insurance on their own, but have
income too high to qualify for Medicaid.
Medicare is a federal program that provides eligible persons age 65 and over and some disabled
persons a variety of hospital, medical insurance and prescription drug benefits. Most individuals
eligible for Medicare are entitled to receive inpatient hospital care without the payment of any
premium, but are required to pay a premium to the federal government, which is adjusted annually,
to be eligible for physician care and other services.
Under the MA program, managed care plans can contract with CMS to provide health insurance
coverage in exchange for a fixed monthly payment per member based on the geographic area in which
the member resides. The fixed monthly payment per member is subject to periodic adjustments
determined by CMS based upon a number of factors, including retroactive changes in members status
such as Medicaid eligibility, and risk measures based on demographic factors such as age, gender,
county of residence and health status. The weighting of the risk measures in the determination of
the amount of the periodic adjustments to the fixed monthly payments was phased in over time and
first became fully implemented at the beginning of 2007. Individuals who elect to participate in
the MA program are relieved of the obligation to pay some or all of the deductible or coinsurance
amounts required under the original Medicare fee-for-service program, but in the case of MCC plans,
are generally required to use services provided by the MA plans network providers, and may be
21
required to pay a premium to the federal Medicare program unless the MA plan chooses to pay the
premium as part of its benefit package.
As part of the Medicare reform legislation known as the Medicare Prescription Drug,
Improvement and Modernization Act of 2003, beginning in January 2006, Medicare recipients were
provided the opportunity to select a prescription drug plan through Medicare Part D, largely funded
by the federal government. The Medicare Part D benefit is available to Medicare managed care enrollees as well as Medicare fee-for-service enrollees.
MCC plans are required to offer a plan that includes Part D drug benefits, called a MA-PD plan, in
every region in which they operate.
The Medicare Part D benefit, which provides prescription drug benefits, is available to MA
enrollees as well as original Medicare fee-for-service enrollees. MCC plans are required to offer a
Part D drug benefit, whereas PFFS plans have the option of providing a Part D benefit, but are not
required to do so. Most of our PFFS products offer a Part D benefit. MCC plans and PFFS plans that
include a Part D drug benefit are also known as MA-PD plans. Original Medicare fee-for-service
beneficiaries and PFFS enrollees are able to purchase a stand-alone prescription drug plan, called
a PDP plan, from a list of CMS-approved PDP plans such as ours.
We have experienced and continue to expect seasonality and fluctuations in our PDP earnings on
a quarterly basis resulting from the design of our benefits and the interaction of various product
features, such as deductibles, co-payments, the coverage gap, catastrophic coverage, risk corridors
and reinsurance arrangements, all of which will impact our PDP earnings. Our PDP medical costs will
be higher in the first half of the year than in the second half of the year. As a result, our net
income margins are expected to be lower in the first half of the year and to increase in the second
half of the year. During 2006, we purchased a one-year, nonrenewable, aggregate reinsurance policy
for calendar year 2006 to mitigate the risks associated with our launch of our product by
complementing the risk corridor protection and catastrophic coverage provided by CMS under the
Medicare Part D program. The terms of this aggregate reinsurance policy resulted in higher
recoveries in periods of higher medical benefits ratios and lower or no recoveries in periods of
lower medical benefits ratios. The recoveries and net reinsurance impact under this aggregate
reinsurance policy were cumulative over the one-year term of the policy. Our gross profit on our
Medicare segment was favorably impacted by a net reinsurance recovery of approximately $10 million
in the three-month period ended March 31, 2006. In light of the 2007 PDP bid results and our 2006
experience with the PDP product, we did not purchase a similar reinsurance arrangement in 2007.
Growth Opportunities
We continually identify markets for potential acquisitions or expansion that would increase
our membership and broaden our geographic presence. These potential acquisitions or expansion
efforts are at various stages of internal consideration, and we may enter into letters of intent,
transactions or other arrangements supporting our growth strategy at any time. However, we cannot
predict when or whether such transactions or other arrangements will actually occur, and we may not
be successful in completing potential acquisitions.
Critical Accounting Policies
In the ordinary course of business, we make a number of estimates and assumptions relating to
the reporting of our results of operations and financial condition in conformity with accounting
principles generally accepted in the United States of America. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable under the
circumstances. Actual results could differ significantly from those estimates under different
assumptions and conditions. We believe that the accounting policies discussed below are those that
are most important to the presentation of our financial condition and results and require
managements most difficult, subjective and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
Revenue recognition. Our Medicaid contracts with state governments are generally multi-year
contracts subject to annual renewal provisions. Our MA and PDP contracts with CMS generally have
terms of one year. We generally receive premiums in advance of providing services, and recognize
premium revenue during the period in which we are obligated to provide services to our members.
Premiums are billed monthly for coverage in the following month and are recognized as revenue in
the month for which insurance coverage is provided. We estimate, on an ongoing basis, the amount of
member billings that may not be fully collectible based on historical trends and other factors. An
allowance is established for the estimated amount that may not be collectible. This allowance has
not been significant to premium revenue. The payment we receive monthly from CMS for our PDP
program generally represents our bid amount for providing prescription drug insurance coverage. We
recognize premium revenue for providing this insurance coverage ratably over the term of our annual
contract. However, our CMS payment is subject to (i) risk corridor adjustments and (ii) subsidies
in order for us and CMS to share the risk associated with financing the ultimate costs of the Part
D benefit. The amount of revenue payable to a plan by CMS is subject to adjustment, positive or
negative, based upon the application of risk corridors that compare a plans
22
revenues targeted in their bids (target amount) to actual prescription drug costs. Variances exceeding certain
thresholds may result in CMS making additional payments to us or require us to refund to CMS a
portion of the premiums we received. Actual prescription drug costs subject to risk sharing with
CMS are limited to the costs that are, or would have been, incurred under the CMS defined
standard benefit plan (allowable risk corridor costs). We estimate and recognize an adjustment
to premium revenues related to the risk corridor payment adjustment based upon pharmacy claims
experience to date as if the annual contract were to terminate at the end of each reporting period.
Accordingly, this estimate provides no consideration to future pharmacy claims experience. Premiums
collected in advance are deferred and reported as unearned premiums in the
accompanying Consolidated Balance Sheets, any amounts that have not been received by the end
of the period remain on the balance sheet classified as premium receivables.
Premium payments that we receive are based upon eligibility lists produced by the government.
From time to time, states require us to reimburse them for premiums that we received from the
states based on an eligibility list that a state later discovers contains individuals who were not
eligible for any government-sponsored program or are eligible for a different premium category or a
different program. We record adjustments to revenues based on member retroactivity. These
adjustments reflect changes in the number of and eligibility status of enrollees subsequent to when
revenue was billed. We estimate the amount of outstanding retroactivity each period and adjust
premium revenue accordingly, if appropriate. The estimates of retroactivity adjustments are based
on historical trends, premiums billed, the volume of member and contract renewal activity and other
information. Our government contracts establish monthly rates per member, but may have additional
amounts due to us based on items such as age, working status or specific health issues of the
member. For example, CMS has implemented a risk adjustment model which apportions premiums paid to
all Medicare plans according to the health status of each beneficiary enrolled.
The CMS risk adjustment model pays more for Medicare members with predictably higher costs.
Under this risk adjustment methodology, diagnosis data from inpatient and ambulatory treatment
settings are used to calculate the risk adjusted premium payment to us. We collect, capture and
submit the necessary diagnosis data to CMS within prescribed deadlines. We estimate risk adjustment
revenues based upon the diagnosis data submitted to CMS and ultimately accepted by CMS.
CMS transitioned to the risk adjustment model while the old demographic model was being phased
out. The demographic model based the monthly premiums paid to Medicare plans on factors such as
age, gender and disability status. The monthly premium amount for each member was separately
determined under both the risk adjustment and demographic model, and these separate payment amounts
were blended according to a transition schedule. 2007 is the first year in which risk adjusted
payment for health plans is fully phased in. The PDP payment methodology is based 100% on the risk
adjustment model which began in 2006. As a result of this process and the phasing in of the risk
adjustment model, our CMS monthly premium payments per member may change materially, either
favorably or unfavorably.
Estimating medical benefits expense and medical benefits payable. The cost of medical benefits
is recognized in the period in which services are provided and includes an estimate of the cost of
medical benefits that have been incurred but not yet reported. We contract with various healthcare
providers for the provision of certain medical care services to our members and generally
compensate those providers on a fee-for-service or capitated basis or pursuant to certain
risk-sharing arrangements. Capitation represents fixed payments generally on a
per-member-per-month, or PMPM, basis to participating physicians and other medical specialists as
compensation for providing comprehensive healthcare services. By the terms of our capitation
agreements, capitation payments we make to capitated providers alleviate any further obligation we
have to pay the capitated provider for the actual medical expenses of the member.
Medical benefits expense has two main components: direct medical expenses and
medically-related administrative costs. Direct medical expenses include amounts paid to hospitals,
physicians and providers of ancillary services, such as laboratory and pharmacy. Medically-related
administrative costs include items such as case and disease management, utilization review
services, quality assurance and on-call nurses.
Medical benefits payable represents amounts for claims fully adjudicated awaiting payment
disbursement and estimates for incurred, but not yet reported claims.
We have used a consistent methodology for estimating our medical benefits expense and medical
benefits payable. Our policy is to record managements best estimate of medical benefits payable.
Monthly, we estimate ultimate benefits payable based upon historical experience and other available
information as well as assumptions about emerging trends, which vary by business segment. The
process for preparing the estimate utilizes standard actuarial methodologies based on historical
data. These standard actuarial methodologies include, among other factors, contractual
requirements, historic utilization trends, the interval between the date services are rendered and
the date claims are paid, denied claims activity, disputed claims activity, benefits changes,
expected health care cost inflation, seasonality patterns and changes in
23
membership. In developing the estimate, we apply different estimation methods depending on the month for which incurred
claims are being estimated. For the more recent months, which constitute the majority of the amount
of the medical benefits payable, we estimate our claims incurred by applying observed trend factors
to the PMPM costs for prior months, which costs have been estimated using completion factors, in
order to estimate the PMPM costs for the most recent months. We validate our estimates of the most
recent PMPM costs by comparing the most recent months utilization levels to the utilization levels
in older months, actuarial techniques that incorporate a historical analysis of claim payments,
including trends in cost of care provided and timeliness of submission and processing of claims.
Also included in medical benefits payable are estimates for provider settlements due to
clarification of contract terms, out-of-network reimbursement, claims payment differences as well
as amounts due to contracted providers under risk-sharing arrangements.
Many aspects of the managed care business are not predictable with consistency. These aspects
include the incidences of illness or disease state (such as cardiac heart failure cases, cases of
upper respiratory illness, the length and severity of the flu season, diabetes, the number of
full-term versus premature births and the number of neonatal intensive care babies). Therefore, we
must rely upon our historical experience, as continually monitored, to reflect the ever-changing
mix, needs and growth of our membership in our trend assumptions. Among the factors considered by
management are changes in the level of benefits provided to members, seasonal variations in
utilization, identified industry trends and changes in provider reimbursement arrangements,
including changes in the percentage of reimbursements made on a capitation as opposed to a
fee-for-service basis. These considerations are aggregated in the trend in medical benefits
expense. Other external factors such as government-mandated benefits or other regulatory changes,
catastrophes and epidemics may impact medical cost trends. Other internal factors such as system
conversions and claims processing interruptions may impact our ability to accurately predict
estimates of historical completion factors or medical cost trends. Medical cost trends potentially
are more volatile than other segments of the economy. Management is required to use considerable
judgment in the selection of medical benefits expense trends and other actuarial model inputs.
We record reserves for estimated referral claims related to healthcare providers under
contract with us who are financially troubled or insolvent and who may not be able to honor their
obligations for the costs of medical services provided by other providers. In these instances, we
may be required to honor these obligations for legal or business reasons. Based on our current
assessment of providers under contract with us, such losses have not been and are not expected to
be significant.
Changes in estimates of medical benefits payable are primarily the result of obtaining more
complete claims information that directly correlates with the claims and provider reimbursement
trends. Volatility in members needs for medical services, provider claims submissions and our
payment processes result in identifiable patterns emerging several months after the causes of
deviations from assumed trends occur. Since our estimates are based upon PMPM claims experience,
changes cannot typically be explained by any single factor, but are the result of a number of
interrelated variables, all influencing the resulting experienced medical cost trend. Deviations,
whether positive or negative, between actual experience and estimates used to establish the
liability are recorded in the period known.
Goodwill and intangible assets. We obtained goodwill and intangible assets as a result of the
acquisitions of our subsidiaries. Goodwill represents the excess of the cost over the fair market
value of net assets acquired. Intangible assets include provider networks, membership contracts,
trademarks, noncompete agreements, government contracts, licenses and permits. Our intangible
assets are amortized over their estimated useful lives ranging from one to 26 years.
We evaluate whether events or circumstances have occurred that may affect the estimated useful
life or the recoverability of the remaining balance of goodwill and other identifiable intangible
assets. We must make assumptions and estimates, such as the discount factor, in determining the
estimated fair values. While we believe these assumptions and estimates are appropriate, other
assumptions and estimates could be applied and might produce significantly different results.
We review goodwill and intangible assets for impairment at least annually, or more frequently
if events or changes in circumstances occur that may affect the estimated useful life or the
recoverability of the remaining balance of goodwill or intangible assets. Events or changes in
circumstances would include significant changes in membership, state funding, medical contracts and
provider networks. We have selected the third quarter of each fiscal year for our annual impairment
test, which generally coincides with the finalization of state and federal contract negotiations
and our initial budgeting process.
24
Results of Operations
The following table sets forth the condensed consolidated statements of income data, expressed
as a percentage of total revenues for each period indicated. The historical results are not
necessarily indicative of results to be expected for any future period.
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended March 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Restated) |
|
|
(Restated) |
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
Premium |
|
|
98.7 |
% |
|
|
99.0 |
% |
Investment and other income |
|
|
1.3 |
% |
|
|
1.0 |
% |
|
|
|
|
|
|
|
Total revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Medical benefits |
|
|
83.8 |
% |
|
|
84.2 |
% |
Selling, general and administrative |
|
|
12.7 |
% |
|
|
12.2 |
% |
Depreciation and amortization |
|
|
0.3 |
% |
|
|
0.4 |
% |
Interest |
|
|
0.3 |
% |
|
|
0.4 |
% |
|
|
|
|
|
|
|
Total expenses |
|
|
97.1 |
% |
|
|
97.2 |
% |
|
|
|
|
|
|
|
Income before income taxes |
|
|
2.9 |
% |
|
|
2.8 |
% |
Income tax expense |
|
|
1.1 |
% |
|
|
1.1 |
% |
|
|
|
|
|
|
|
Net income |
|
|
1.8 |
% |
|
|
1.7 |
% |
|
|
|
|
|
|
|
One of our primary management tools for measuring profitability is our medical benefits ratio
(MBR), which represents our medical benefits expense as a percentage of premium revenue. Changes
in the MBR from period to period result from, among other things, changes in Medicaid and Medicare
funding, changes in the mix of Medicaid and Medicare membership, our ability to manage medical
costs and changes in accounting estimates related to incurred but not reported claims. We use MBRs
both to monitor our management of medical benefits expense and to make various business decisions,
including what healthcare plans to offer, what geographic areas to enter or exit and the selection
of healthcare providers. Although MBRs play an important role in our business strategy, we may be
willing to enter into provider arrangements that might produce a less favorable MBR if those
arrangements, such as capitation or risk-sharing, would likely lower our exposure to variability in
medical costs.
Three Month Period Ended March 31, 2007 as Restated Compared to the Three Month Period Ended March
31, 2006 as Restated
Premium revenue. Premium revenues for the three months ended March 31, 2007 increased $497.0
million, or 62.8%, to $1,288.7 million from $791.7 million for the same period in the prior year.
The increase is primarily attributable to the addition of members from membership growth in both
our Medicaid and Medicare segments, including members related to the launch of our PFFS product in
2007. Total membership grew by approximately 729,500 members, or 47.3%, from 1,542,500 as of March
31, 2006 to 2,272,000 as of March 31, 2007.
The Medicaid segment premium revenue for the three months ended March 31, 2007 increased
$284.7 million, or 81.6%, to $633.4 million from $348.7 million for the same period in the prior
year. The increase in Medicaid segment revenue is due to growth in membership, primarily due to
the Georgia launch, which was not effective until June 1, 2006, coupled with increases in premium
rates in certain markets. Aggregate membership in our Medicaid segment grew by approximately
406,000 members, or 53.1%, from 765,000 as of March 31, 2006 to 1,171,000 as of March 31, 2007.
Medicare segment premium revenue for the three months ended March 31, 2007 increased $212.3
million, or 47.9%, to $655.3 million from $443.0 million for the same period in the prior year.
Growth in our Medicare segment premium revenue was primarily driven by growth in our MCC and PDP
products, and the launch of our PFFS product in 2007. Membership within the Medicare segment grew
by approximately 323,500 members, or 41.6%, from 777,500 as of March 31, 2006 to 1,101,000 as of
March 31, 2007. Our MCC membership grew by approximately 25,000 members, or 33.8% to 99,000
members from 74,000 members as of March 31, 2006.
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, |
|
|
|
2007 |
|
|
2006 |
|
|
% Change |
|
Membership |
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid |
|
|
1,171,000 |
|
|
|
765,000 |
|
|
|
53.1 |
% |
Medicare |
|
|
1,101,000 |
|
|
|
777,500 |
|
|
|
41.6 |
% |
|
|
|
|
|
|
|
|
|
|
Total Membership |
|
|
2,272,000 |
|
|
|
1,542,500 |
|
|
|
47.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
|
|
|
% of Premium |
|
|
|
|
|
|
% of Premium |
|
|
|
2007 |
|
|
revenues |
|
|
2006 |
|
|
revenues |
|
|
|
(As Restated) |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid |
|
$ |
633.4 |
|
|
|
49.2 |
% |
|
$ |
348.7 |
|
|
|
44.0 |
% |
Medicare |
|
|
655.3 |
|
|
|
50.8 |
% |
|
|
443.0 |
|
|
|
56.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
$ |
1,288.7 |
|
|
|
100.0 |
% |
|
$ |
791.7 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment and other income. Investment and other income for the three months ended March 31,
2007 increased $9.5 million, or 115.9%, to $17.7 million from $8.2 million for the same period in
the prior year. The increase was due primarily to the investment of excess cash generated by
operations and a higher interest rate environment.
Medical benefits expense. Medical benefits expense for the three months ended March 31, 2007
increased $421.9 million, or 62.7%, to $1,095.3 million from $673.4 million for the same period in
the prior year. The increase in medical benefits expense was due to growth in membership
principally in PDP, PFFS and Georgia. The MBR was 85.0% and 85.1% for the three months ended March
31, 2007 and 2006, respectively.
The Medicaid segment medical benefits expense for the three months ended March 31, 2007
increased $253.2 million, or 90.7%, to $532.4 million from $279.2 million for the same period in
the prior year. The increase was primarily due to our membership growth, principally in Georgia,
which accounted for $208.8 million of the change when comparing the three-month periods. The
Medicaid MBR for the three months ended March 31, 2007 was 84.1% compared to 80.1% for the same
period in the prior year. This increase resulted from changes in the healthcare utilization
pattern of our members and the demographic mix of our members.
The Medicare segment medical benefits expense for the three months ended March 31, 2007
increased $168.8 million, or 42.8%, to $562.9 million, from $394.1 million for the same period in
the prior year. The increase was primarily due to an increase in PDP and PFFS membership and
associated product costs, which accounted for a majority of the increase when comparing the
three-month periods. The Medicare MBR for the three months ended March 31, 2007 was 85.9% compared
to 89.0% for the same period in the prior year, primarily because of the performance of our PDP and
our Medicare Advantage products. High PDP membership retention and the absence of a formulary
transition period resulted in better formulary compliance and increased generic fill rates in 2007,
which lowered overall medical expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2007 |
|
|
MBR |
|
|
2006 |
|
|
MBR |
|
|
|
(As Restated) |
|
Medical Benefit Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid |
|
$ |
532.4 |
|
|
|
84.1 |
% |
|
$ |
279.2 |
|
|
|
80.1 |
% |
Medicare |
|
|
562.9 |
|
|
|
85.9 |
% |
|
|
394.1 |
|
|
|
89.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses |
|
$ |
1,095.3 |
|
|
|
|
|
|
$ |
673.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense. Selling, general and administrative (SG&A)
expense for the three months ended March 31, 2007 increased $67.7 million, or 69.2%, to $165.6
million from $97.9 million for the same period in the prior year. Our SG&A expense to revenue
ratio was 12.7% for the three months ended March 31, 2007 compared to 12.2% for the same period in
the prior year. The increase in SG&A expense was primarily due to increased spending necessary to
support and sustain our membership growth along with commissions paid in the current quarter
related to initial PFFS membership efforts.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2007 |
|
|
2006 |
|
|
% Change |
|
|
|
(As Restated) |
|
Selling, general and
administrative expenses (SG&A) |
|
|
|
|
|
|
|
|
|
|
|
|
SG&A |
|
$ |
165.6 |
|
|
$ |
97.9 |
|
|
|
69.2 |
% |
SG&A expense to total revenue ratio |
|
|
12.7 |
% |
|
|
12.2 |
% |
|
|
|
|
Interest expense. Interest expense was $3.5 million and $3.4 million for the three months
ended March 31, 2007 and 2006, respectively. The increase primarily relates to the higher interest
rate environment for the three months ended March 31, 2007,
partially offset by a $25.0 million
reduction in the outstanding debt balance as a result of the third quarter 2006 repayment of a note
due to a related party.
Income tax expense. Income tax expense for the three months ended March 31, 2007 was $14.6
million compared to $8.9 million for the same period in the prior year, with an effective tax rate
of 39.0% and 40.1% at March 31, 2007 and 2006, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2007 |
|
|
2006 |
|
|
% Change |
|
|
|
(As Restated) |
|
Income Tax Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
$ |
14.6 |
|
|
$ |
8.9 |
|
|
|
63.9 |
% |
Effective tax rate |
|
|
39.0 |
% |
|
|
40.1 |
% |
|
|
|
|
Net income. Net income for the three months ended March 31, 2007 was $22.8 million, compared
to $13.3 million for the same period in the prior year, representing an increase of 71.6%. The
increase in net income when comparing the three month periods ended March 31, 2007 and 2006 is
primarily due to the increase in revenues with relatively stable medical benefits ratios, slightly
off-set by a rise in administrative expenses.
Liquidity and Capital Resources
We manage our cash and investments in a manner that allows us to meet our short-term,
long-term and regulatory requirements. We monitor and forecast our capital resources to ensure
that we maintain the financial flexibility we need to take advantage of viable business
opportunities. As of March 31, 2007 and 2006, cash and cash equivalents were $1,344.9 million and
$789.7 million, respectively. We also had short-term investments of $151.1 million and $147.8
million at March 31, 2007 and 2006, respectively.
Our regulated subsidiaries are financed principally through internally generated funds. We
generate cash mainly from premium revenue, and we generally receive premium revenue in advance of
payment of claims for related healthcare services. Our primary use of cash is the payment of
expenses related to medical benefits and administrative costs. Our investment policies are designed
primarily to provide liquidity and preserve capital. The states in which we operate prescribe the
types of instruments in which our regulated subsidiaries may invest their funds. As of March 31,
2007 and 2006, a substantial portion of our cash was invested in certificates of deposit and a
portfolio of highly liquid money market securities with a weighted average maturity of 317 days and
123 days, respectively. The average portfolio yield for the three-month periods ended March 31,
2007 and 2006 was approximately 3.8% and 3.5%, respectively.
Our non-regulated businesses also generate positive cash flows that are used for corporate
purposes. As of March 31, 2007, free cash in our non-regulated
businesses was $123.0 million. We
generally invest cash generated from our non-regulated entities in certificates of deposit and
government municipal bonds. The factors that we consider in making these investment decisions
include term to maturity, rate of return and ratings for municipal bonds.
We expect our future funding for working capital needs, capital expenditures, long-term debt
repayments, and other financing activities will continue to be provided from these resources. From
time to time, we may need to raise additional capital or draw on our revolving credit facility to
fund planned geographic and product expansion or acquire healthcare businesses. As of March 31,
2007, we had not utilized our revolving credit facility.
Each of our existing and anticipated sources of cash are impacted by operational and financial
risks that influence the overall amount of cash generated and the capital available to us. For a
further discussion of risks that can impact our liquidity, see the risk factor discussion included
in our 2006 and 2007 Form 10-K.
27
Overview of Cash Flow Activities
For the three-month periods ended March 31, 2007 and 2006 our cash flows are summarized as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated)
|
|
Net cash provided by operations |
|
$ |
215,548 |
|
|
$ |
224,490 |
|
Net cash used in investing activities |
|
|
(37,347 |
) |
|
|
(79,504 |
) |
Net cash provided by financing activities |
|
|
202,166 |
|
|
|
222,978 |
|
Cash Provided By Operations: As we generally receive premiums in advance of payments of
claims for healthcare services, we maintain balances of cash and cash equivalents pending payment
of claims. During the first quarter of 2007, cash provided from operations consisted primarily of
$22.8 million of net income from operations, an increase in medical benefits payable of $93.9
million, an increase in unearned premiums of $228.7 million, partially off-set by a decrease in
other accrued expenses of $35.7 million and a decrease of $64.7 million in other payables to
government partners.
Cash Used in Investing Activities: During the first quarter of 2007, investing activities
consisted primarily of the investment of excess cash generated by operations totaling approximately
$25.8 million in various short term investment instruments and
$8.3 million in restricted
investment assets. An additional $5.1 million was invested in capitalized assets, which included
expansion costs related to expansion of our Tampa facilities, and investments in technology needed
to sustain our membership growth.
Cash From Financing Activities: Included in financing activities are funds held for the
benefit of others, which increased approximately $190.4 million as of March 31, 2007. These PDP
member subsidies represent pass-through payments from government partners and are not accounted for
in the Companys results of operations since they represent pass-through payments from our
government partners to fund deductibles, co-payments and other member benefits for certain of our
members. An additional $6.3 million was received for options exercised.
We
have a senior secured term loan facility of approximately $155.0 million and a revolving
credit facility in the amount of $125.0 million, of which $10.0 million is available for short-term
borrowings on a swing-line basis. The term loan matures in May 2009, and the revolving credit
facility will expire in May 2008. As of March 31, 2007, the revolving credit facility had not been
utilized. As of March 31, 2007, our outstanding term loan interest rate was 7.875%.
Our senior debt is rated BB- by Standard & Poors and Ba3 by Moodys at March 31, 2007.
Off-Balance Sheet Arrangements
As of March 31, 2007, we did not have any off-balance sheet arrangements that are required to
be disclosed under Item 303(a)(4) of SEC Regulation S-K.
Item 3. |
|
Quantitative and Qualitative Disclosures about Market Risk. |
As
of March 31, 2007, we had cash and cash equivalents of $1,344.9 million, investments
classified as current assets of $151.1 million, and restricted investments on deposit for licensure
of $60.9 million. The short-term investments classified as current assets consist of highly liquid
securities with maturities between three and twelve months and longer term bonds with floating
interest rates that are considered available for sale. Long-term restricted assets consist of cash
and cash equivalents deposited or pledged to state agencies in accordance with state rules and
regulations. These restricted assets are classified as long term regardless of the contractual
maturity date due to the long-term nature of the states requirements. The investments classified
as long-term are subject to interest rate risk and will decrease in value if market rates increase.
Because of their short-term pricing nature, however, we would not expect the value of these
investments to decline significantly as a result of a sudden change in market interest rates.
Assuming a hypothetical and immediate 1% increase in market interest rates at March 31, 2007, the
fair value of our fixed income investments would decrease by less than $1.0 million. Similarly, a
1% decrease in market interest rates at March 31, 2007 would result in an increase of the fair
value of our investments of less than $1.6 million.
Item 4. |
|
Controls and Procedures. |
Special Committee Investigation and Restatement
Upon consideration of certain issues identified in the Special Committee investigation
discussed in the Explanatory Note and our 2007 10-K, and after discussions with management and our independent registered public accounting firm, the Audit Committee recommended
to the Board, and the Board thereafter concluded, that we should
restate our previously issued audited consolidated
financial statements for the years ended December 31, 2004, 2005
and 2006, including each of the quarterly periods contained therein, and our previously issued unaudited condensed consolidated
financial statements for the three months ended March 31, 2007
and June 30, 2007.
28
The restatements relate to accounting errors identified in connection with our compliance with
the refund requirements under (a) the behavioral health component of our contract with AHCA to
provide behavioral health care services for our Florida Medicaid members, (b) our Healthy Kids
contract with the Florida Healthy Kids Corporation pursuant to which we provide health benefits for
children whose family income renders them ineligible for Medicaid, and (c) our Medicaid contract
with the Illinois Department of Health and Family Services to provide health care services to our
Illinois Medicaid members.
For a discussion of the restatement impact to periods covered in this Amended Form 10-Q, refer
to Note 2 to the Condensed Consolidated Financial Statements.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Amended Form 10-Q and in light of the Special
Committee investigation and restatement of the Companys financial statements, management, under
the leadership and with the participation of the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), undertook to re-evaluate the conclusion in our Original Form 10-Q that
our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) were effective as of March 31, 2007. Based on that
re-evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not
effective as of March 31, 2007 because of the material weaknesses in our internal control over
financial reporting, which is an integral component of our disclosure controls and procedures, as
described below.
Nevertheless, based on a number of factors, including the efforts discussed below to remediate
the material weaknesses in internal control over financial reporting, and the performance of
additional procedures by management designed to ensure the reliability of our financial reporting,
we believe that the consolidated financial statements included in this Amended Form 10-Q fairly
present, in all material respects, our financial position, results of operations and cash flows as
of the dates, and for the periods, presented, in conformity with GAAP.
Material Weaknesses in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement
of the annual or interim financial statements will not be prevented or detected on a timely basis.
In connection with the restatements described above, management undertook to assess the
effectiveness of our internal control over financial reporting as of March 31, 2007, based on
criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, we determined that
(a) former senior management set an inappropriate tone in connection with the Companys efforts to
comply with the regulatory requirements related to the AHCA and Healthy Kids contracts that led to
a deficiency in the design in our internal controls, and therefore a material weakness existed in a
portion of the control environment and control activities components of our internal controls, and
(b) former senior managements failure to ensure effective communications regarding the AHCA and
Healthy Kids contracts with, among others, our Board and certain regulators resulted in a material
weakness in the information and communication system.
Based on the evaluation discussed above, Management has identified the following material
weaknesses in WellCares internal controls over financial reporting as of March 31, 2007:
Control Environment and Control Activities
We identified a material weakness in a portion of the control environment and control
activities components of our internal controls. We have determined that certain former members of
senior management set an inappropriate tone in connection with our efforts to comply with the
regulatory requirements related to the AHCA contract and Healthy Kids contract that led to a
deficiency in the design of our internal controls. Specifically, there was inadequate control over
financial reporting as of March 31, 2007 with respect to interpreting and complying with regulatory
guidance and other contracted terms when calculating, submitting and reserving for estimated
self-reported retrospective settlements with a state agency with which certain of our subsidiaries
were contracted to provide Medicaid services.
29
Information and Communication
We have determined that certain former members of senior management failed to ensure effective
communications with, among others, our Board and certain regulators regarding the AHCA contract and
Healthy Kids contract, and therefore a material weakness existed in a portion of the information
and communication system. Specifically, there was a lack of communication regarding the Companys
interpretation of and compliance with regulatory guidance and other contracted terms pertaining to
self-reported retrospective settlements as well as with regard to inquiries from a state agency
pertaining to the retrospective settlement process.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2007 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Remedial Measures
As described more fully in Part II Item 9A Controls
and Procedures of our 2007 10-K,
filed on January 26, 2009, in connection with the restatement and the material weaknesses described
above, our Board of Directors, various Board committees and our new senior management team are
developing and implementing new processes and procedures governing our internal control over
financial reporting. We believe that these measures will remediate the material weaknesses we have
identified as of March 31, 2007 and strengthen our internal control over financial reporting and
disclosure controls and procedures. Under the direction of the Audit Committee, management will
continue to review and revise as warranted the overall design and operation of our internal control
environment, as well as policies and procedures to improve the overall effectiveness of our
internal control over financial reporting. As we continue to evaluate and work to improve our
internal control over financial reporting, we may determine to take additional measures to address
control deficiencies or determine to modify, or in appropriate circumstances not to complete,
certain of the remedial measures described above.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and
internal controls will prevent all errors and fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of
two or more people or by management override of the controls.
The design of any system of control also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, a control may become
inadequate because of changes in conditions or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
Part II OTHER INFORMATION
Item 1. |
|
Legal Proceedings. |
For information regarding pending legal proceedings, see Part I Item III Legal
Proceedings of our 2007 10-K. As of the date hereof, there have been no material developments in
the pending legal proceedings disclosed in our 2007 10-K.
Under Part I Item 1A Risk Factors of our 2007 10-K, we set forth risk factors related
to (i) our failure to file timely periodic reports with the SEC and certain regulatory filings with
state agencies; (ii) our internal control over financial reporting; (iii) the pending government
investigations and litigation; (iv) our business; (v) our financial condition; (vi) being a
regulated entity, and (vii) our common stock. You should carefully consider the risk factors set
forth in our 2007 10-K. As of the date hereof, there have been no material changes to the risk
factors disclosed in our 2007 10-K.
30
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds. |
In connection with our initial public offering of our common stock, the SEC declared our
Registration Statement on Form S-1 (No. 333-112829), filed under the Securities Act of 1933,
effective on June 30, 2004.
Upon the completion of our initial public offering, we invested the net proceeds from the
offering in short-term, interest-bearing, investment-grade securities. As of March 31, 2007, we
have used approximately $48.1 million of our offering proceeds in the original amount of $157.5
million. Of the proceeds used, $24.0 million was used to pay-off the related party note that we
issued as part of the consideration for the acquisition of the WellCare group of companies and the
remaining $24.1 million was used to fund other expansion opportunities, including the required
statutory capital for our new markets.
Item 3. |
|
Defaults upon Senior Securities. |
As of March 31, 2007, we did not have any defaults upon senior securities. However, as
previously disclosed and described in our 2007 10-K, our senior secured credit facility with
Wachovia Bank, as Administrative Agent, and a syndicate of lenders, which has a term loan facility
with an outstanding balance of approximately $152.8 million as of December 31, 2008, is currently
in default and subject to acceleration by the lenders and, absent acceleration by the lenders, will
become due and payable on May 13, 2009. Although we are not in payment default, we are in default
of a number of covenants contained in the credit agreement (including our failure to provide the
lenders with audited financial statements, our 2008 budget and other requested reports and
information), some of which cannot be cured prior to maturity of the senior secured credit facility
(such as our entry into intercompany loan transactions that were not effected in compliance with
the credit agreement). As of the date hereof, our payment obligations under the credit agreement
have not been accelerated and the rate of interest has not been increased. However, we cannot
provide any assurance that such obligations will not be accelerated or the rate of interest
increased in the future or that the lenders will not exercise other remedies for default. For more
information, refer to 2007 10-K filed with the SEC on January 26, 2009.
Item 4. |
|
Submission of Matters to a Vote of Security Holders. |
None.
Item 5. |
|
Other Information. |
None.
31
Exhibit List
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCORPORATED BY REFERENCE |
Exhibit |
|
|
|
|
|
|
Filing Date |
|
Exhibit |
Number |
|
|
Description |
|
Form |
|
with SEC |
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
2.1 |
|
|
Agreement and Plan of Merger, dated as of February 12,
2004, between WellCare Holdings, LLC and WellCare Group,
Inc. |
|
S-1/A |
|
June 8, 2004 |
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
Amended and Restated Certificate of Incorporation |
|
10-Q |
|
August 13, 2004 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated Bylaws of WellCare Health Plans, Inc. |
|
10-Q |
|
August 13, 2004 |
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
Specimen common stock certificate |
|
S-1/A |
|
June 29, 2004 |
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
Amendment number 1 to Medicaid Advantage Model Contract
No. C021236 between the New York State Department of
Health and WellCare of New York, Inc. |
|
8-K |
|
January 12, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.2 |
|
|
Amendment number 1 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. (CFC) |
|
8-K |
|
January 12, 2007 |
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.3 |
|
|
Amendment number 2 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. |
|
8-K |
|
January 12, 2007 |
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
10.4 |
|
|
Amendment number 1 to the Medical Services Agreement
between the Florida Healthy Kids Corporation and
HealthEase of Florida, Inc. and WellCare of Florida, Inc.
(f/k/a Well Care HMO, Inc.) d/b/a Staywell Health Plan of
Florida |
|
8-K |
|
January 12, 2007 |
|
10.4 |
|
|
|
|
|
|
|
|
|
|
|
|
10.5 |
|
|
Amendment number 3 to Medicaid Managed Care and Family
Health Plus Model Contract, between the New York State
Department of Health and WellCare of New York, Inc. |
|
8-K |
|
February 1, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.6 |
|
|
Amendment number 1 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. (ABD) |
|
8-K |
|
February 21, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.7 |
|
|
Amendment number 2 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. (ABD). |
|
8-K |
|
March 6, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.8 |
|
|
Amendment number 2 to the Medicaid Managed Care Eastern
Region contract between the State of Missouri Office of
Administration Division of Purchasing and Materials
Management and Harmony Health Plan of Illinois, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.9 |
|
|
Amendment number 3 to the Medicaid Managed Care Eastern
Region contract between the State of Missouri Office of
Administration Division of Purchasing and Materials
Management and Harmony Health Plan of Illinois, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.10 |
|
|
Amendment to Medicaid Advantage Care Contract between the
City of New York Department of Health and Mental Hygiene
and WellCare of New York, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
10.11 |
|
|
Amendment number 2 to Medicaid Advantage Contract No.
C021236 between the New York State Department of Health
and WellCare of New York, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.4 |
|
|
|
|
|
|
|
|
|
|
|
|
10.12 |
|
|
Amendment number 2 to AHCA Contract No. FAR001, between
the State of Florida, Agency for Health Care
Administration and HealthEase Health Plan of Florida,
Inc. |
|
10-Q |
|
May 9, 2007 |
|
10.12 |
|
|
|
|
|
|
|
|
|
|
|
|
10.13 |
|
|
Amendment number 2 to AHCA Contract No. FAR009, between
the State of Florida, Agency for Health Care
Administration and WellCare of Florida, Inc. d/b/a
Staywell Health Plan of Florida. |
|
10-Q |
|
May 9, 2007 |
|
10.13 |
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCORPORATED BY REFERENCE |
Exhibit |
|
|
|
|
|
|
Filing Date |
|
Exhibit |
Number |
|
|
Description |
|
Form |
|
with SEC |
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification of President and Chief Executive Officer
pursuant to Section 302 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
Certification of President and Chief Executive Officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
33
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in
Tampa, Florida on February 6, 2009.
|
|
|
|
|
|
WELLCARE HEALTH PLANS, INC.
|
|
|
By: |
/s/ Heath Schiesser
|
|
|
|
Heath Schiesser |
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
By: |
/s/ Thomas L. Tran
|
|
|
|
Thomas L. Tran |
|
|
|
Senior Vice President and Chief Financial Officer |
|
34
Exhibit Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCORPORATED BY REFERENCE |
Exhibit |
|
|
|
|
|
|
Filing Date |
|
Exhibit |
Number |
|
|
Description |
|
Form |
|
with SEC |
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
2.1 |
|
|
Agreement and Plan of Merger, dated as of February 12,
2004, between WellCare Holdings, LLC and WellCare Group,
Inc. |
|
S-1/A |
|
June 8, 2004 |
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
Amended and Restated Certificate of Incorporation |
|
10-Q |
|
August 13, 2004 |
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated Bylaws of WellCare Health Plans, Inc. |
|
10-Q |
|
August 13, 2004 |
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
Specimen common stock certificate |
|
S-1/A |
|
June 29, 2004 |
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
Amendment number 1 to Medicaid Advantage Model Contract
No. C021236 between the New York State Department of
Health and WellCare of New York, Inc. |
|
8-K |
|
January 12, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.2 |
|
|
Amendment number 1 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. (CFC) |
|
8-K |
|
January 12, 2007 |
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.3 |
|
|
Amendment number 2 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. |
|
8-K |
|
January 12, 2007 |
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
10.4 |
|
|
Amendment number 1 to the Medical Services Agreement
between the Florida Healthy Kids Corporation and
HealthEase of Florida, Inc. and WellCare of Florida, Inc.
(f/k/a Well Care HMO, Inc.) d/b/a Staywell Health Plan of
Florida |
|
8-K |
|
January 12, 2007 |
|
10.4 |
|
|
|
|
|
|
|
|
|
|
|
|
10.5 |
|
|
Amendment number 3 to Medicaid Managed Care and Family
Health Plus Model Contract, between the New York State
Department of Health and WellCare of New York, Inc. |
|
8-K |
|
February 1, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.6 |
|
|
Amendment number 1 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. (ABD) |
|
8-K |
|
February 21, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.7 |
|
|
Amendment number 2 to the 2007 Northeast Regional
Provider Agreement, between the Ohio Department of Job
and Family Services and WellCare of Ohio, Inc. (ABD). |
|
8-K |
|
March 6, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.8 |
|
|
Amendment number 2 to the Medicaid Managed Care Eastern
Region contract between the State of Missouri Office of
Administration Division of Purchasing and Materials
Management and Harmony Health Plan of Illinois, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.9 |
|
|
Amendment number 3 to the Medicaid Managed Care Eastern
Region contract between the State of Missouri Office of
Administration Division of Purchasing and Materials
Management and Harmony Health Plan of Illinois, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.10 |
|
|
Amendment to Medicaid Advantage Care Contract between the
City of New York Department of Health and Mental Hygiene
and WellCare of New York, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
10.11 |
|
|
Amendment number 2 to Medicaid Advantage Contract No.
C021236 between the New York State Department of Health
and WellCare of New York, Inc. |
|
8-K |
|
March 30, 2007 |
|
10.4 |
|
|
|
|
|
|
|
|
|
|
|
|
10.12 |
|
|
Amendment number 2 to AHCA Contract No. FAR001, between
the State of Florida, Agency for Health Care
Administration and HealthEase Health Plan of Florida,
Inc. |
|
10-Q |
|
May 9, 2007 |
|
10.12 |
|
|
|
|
|
|
|
|
|
|
|
|
10.13 |
|
|
Amendment number 2 to AHCA Contract No. FAR009, between
the State of Florida, Agency for Health Care
Administration and WellCare of Florida, Inc. d/b/a
Staywell Health Plan of Florida. |
|
10-Q |
|
May 9, 2007 |
|
10.13 |
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification of President and Chief Executive Officer
pursuant to Section 302 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
Certification of President and Chief Executive Officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|