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 June 30, 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
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47-0937650 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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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
1
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 and six-month periods ended June 30, 2006, June 30, 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 and six-month period ended June 30, 2007 (the Original Form 10-Q). Accordingly, for information
regarding events related to us and our business that have occurred
subsequent to June 30, 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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June 30, 2007 |
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December 31, 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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$ |
1,475,048 |
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$ |
964,542 |
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Investments |
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166,264 |
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126,422 |
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Premium and other receivables, net |
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113,410 |
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100,561 |
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Other receivables from government partners, net |
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54,981 |
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40,902 |
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Prepaid expenses and other current assets, net |
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100,058 |
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87,163 |
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Deferred income taxes |
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41,396 |
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19,901 |
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Total current assets |
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1,951,157 |
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1,339,491 |
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Property, equipment and capitalized software, net |
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63,096 |
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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 intangible assets, net |
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17,451 |
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18,855 |
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Restricted investment assets |
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73,977 |
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53,382 |
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Other assets |
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2,283 |
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1,842 |
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Total Assets |
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$ |
2,297,434 |
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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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$ |
599,670 |
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$ |
460,728 |
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Unearned premiums |
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257,822 |
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3,313 |
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Accounts payable |
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9,832 |
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7,764 |
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Other accrued expenses |
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159,062 |
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194,295 |
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Other payables to government partners |
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102,582 |
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148,606 |
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Taxes payable |
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14,201 |
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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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299,395 |
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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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1,444,582 |
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933,244 |
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Long-term debt |
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153,301 |
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154,021 |
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Deferred income taxes |
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22,810 |
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31,858 |
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Other liabilities |
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21,397 |
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8,116 |
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Total liabilities |
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1,642,090 |
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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, $0.01 par value (100,000,000
authorized, 41,682,464 and 40,900,134 shares
issued and outstanding at June 30, 2007 and
December 31, 2006, respectively) |
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417 |
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409 |
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Paid-in capital |
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338,009 |
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297,351 |
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Retained earnings |
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316,890 |
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239,238 |
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Accumulated other comprehensive income |
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28 |
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61 |
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Total stockholders equity |
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655,344 |
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537,059 |
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Total Liabilities and Stockholders Equity |
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$ |
2,297,434 |
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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 per share data)
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Three Months |
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Six Months |
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Ended June 30, |
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Ended June 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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(Restated) |
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(Restated) |
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(Restated) |
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(Restated)) |
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Revenues: |
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Premium |
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$ |
1,307,823 |
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$ |
840,524 |
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$ |
2,596,516 |
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$ |
1,632,251 |
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Investment and other income |
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19,229 |
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10,153 |
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36,857 |
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18,317 |
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Total revenues |
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1,327,052 |
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850,677 |
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2,633,373 |
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1,650,568 |
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Expenses: |
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Medical benefits |
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1,068,847 |
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707,609 |
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2,164,119 |
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1,380,978 |
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Selling, general and administrative |
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161,699 |
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105,186 |
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327,315 |
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203,040 |
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Depreciation and amortization |
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4,252 |
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3,254 |
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8,818 |
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6,344 |
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Interest |
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3,439 |
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3,674 |
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6,899 |
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7,058 |
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Total expenses |
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1,238,237 |
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819,723 |
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2,507,151 |
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1,597,420 |
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Income before income taxes |
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88,815 |
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30,954 |
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126,222 |
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53,148 |
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Income tax expense |
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33,965 |
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12,294 |
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48,569 |
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21,203 |
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Net income |
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$ |
54,850 |
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$ |
18,660 |
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$ |
77,653 |
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$ |
31,945 |
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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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$ |
1.35 |
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$ |
0.47 |
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$ |
1.92 |
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$ |
0.82 |
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Net income per common share diluted |
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$ |
1.31 |
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$ |
0.46 |
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$ |
1.86 |
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$ |
0.79 |
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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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For the Six Months Ended June 30, |
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2007 |
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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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$ |
77,653 |
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$ |
31,945 |
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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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8,818 |
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6,344 |
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Loss on disposal of fixed assets |
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1,259 |
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Equity-based compensation expense |
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12,405 |
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8,650 |
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Incremental tax benefit received for options exercised |
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(18,646 |
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(2,704 |
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Deferred taxes, net |
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(32,278 |
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(14,568 |
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Changes in operating accounts: |
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Premiums and other receivables, net |
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(12,849 |
) |
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(37,491 |
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Other receivables from government partners, net |
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(14,079 |
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(118,489 |
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Prepaid expenses and other, net |
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(12,894 |
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(30,487 |
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Medical benefits payable |
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138,942 |
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186,557 |
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Unearned premiums |
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254,509 |
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149,315 |
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Accounts payable |
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1,321 |
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51,899 |
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Other accrued expenses |
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(34,486 |
) |
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18,213 |
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Other payables to government partners |
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(46,024 |
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Taxes payable, net |
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31,714 |
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24,045 |
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Other, net |
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12,884 |
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4,526 |
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Net cash provided by operating activities |
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366,990 |
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279,014 |
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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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39,932 |
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49,371 |
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Purchases of investments |
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(79,774 |
) |
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(134,053 |
) |
Purchases of restricted investments |
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(22,664 |
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(21,663 |
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Proceeds
from sale and maturities of restricted investments |
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2,069 |
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10,468 |
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Additions to property and equipment, and capitalized software |
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(9,252 |
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(21,298 |
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Other investing activities |
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(944 |
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Net cash used in investing activities |
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(69,689 |
) |
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(118,119 |
) |
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Cash from (used in) financing activities: |
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Proceeds from common stock issuance, net |
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338 |
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21,562 |
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Proceeds from option exercises and other |
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13,256 |
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3,302 |
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Incremental tax benefit received for option exercises |
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18,646 |
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2,704 |
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Purchase of treasury stock |
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(3,978 |
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Payments on debt |
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(800 |
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(800 |
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Funds received for the benefits of members |
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185,743 |
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224,730 |
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Net cash provided by financing activities |
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213,205 |
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251,498 |
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Cash and cash equivalents: |
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Increase during year |
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510,506 |
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412,393 |
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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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$ |
1,475,048 |
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$ |
834,159 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid for taxes |
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$ |
35,277 |
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$ |
13,883 |
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Cash paid for interest |
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$ |
6,519 |
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$ |
6,810 |
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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. |
|
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 2,302,000 members nationwide as of
June 30, 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
(TANF) program, Supplemental Security Income (SSI) program, State Childrens Health Insurance
program (S-CHIP), and the Family Health Plus (FHP) program. Through its licensed
subsidiaries, as of June 30, 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
June 30, 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 2007 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.
6
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
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:
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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(Restated) |
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(Restated) |
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(Restated) |
|
|
(Restated) |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income basic and diluted (in thousands) |
|
$ |
54,850 |
|
|
$ |
18,660 |
|
|
$ |
77,653 |
|
|
$ |
31,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding basic |
|
|
40,585,325 |
|
|
|
39,345,011 |
|
|
|
40,375,445 |
|
|
|
38,970,062 |
|
Dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested restricted common shares |
|
|
413,877 |
|
|
|
523,931 |
|
|
|
448,310 |
|
|
|
560,039 |
|
Stock options |
|
|
937,091 |
|
|
|
761,512 |
|
|
|
985,815 |
|
|
|
766,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding diluted |
|
|
41,936,293 |
|
|
|
40,630,454 |
|
|
|
41,809,570 |
|
|
|
40,296,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic |
|
$ |
1.35 |
|
|
$ |
0.47 |
|
|
$ |
1.92 |
|
|
$ |
0.82 |
|
Net income per common share diluted |
|
$ |
1.31 |
|
|
$ |
0.46 |
|
|
$ |
1.86 |
|
|
$ |
0.79 |
|
Certain options to purchase common stock were not included in weighted-average common shares
outstanding diluted and therefore are 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- and six-month periods ended June 30, 2007, approximately 65,000 shares with an exercise
prices ranging from $90.35 to $92.99 and 478,600 shares with exercise prices ranging from $85.53 to
$92.99 per share were excluded from diluted weighted-average common shares outstanding,
respectively. For the three- and six-month periods ended June 30, 2006, approximately 79,000
shares with exercise prices ranging from $47.40 to $48.50 were excluded from diluted
weighted-average common shares outstanding.
Recently Issued Accounting Standards
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 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. The Companys adoption of FIN 48 as of January 1,
2007 did not have a material impact on the Companys condensed consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS
157 does not require any new fair value measurements. The pronouncement is effective for fiscal
years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively
with the exception of: (i) block discounts of financial instruments; and (ii) certain
7
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
financial and hybrid instruments measured at initial recognition under Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133), which are to be applied retrospectively as of the beginning of initial adoption (a limited
form of retrospective application). The Company intends to adopt the new standard during the first
quarter of 2008 as required. The Company is currently evaluating the impact of SFAS 157 and does
not expect that the pronouncement will have a material impact on the Companys consolidated
financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits an
entity to measure certain financial assets and financial liabilities at fair value. Under SFAS
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 intends to adopt the new standard during the first quarter of 2008
as required. The Company is currently evaluating the impact of SFAS 159 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 Consolidated Statements of Cash Flows as originally reported to balances
as restated for the period ended June 30, 2007, the year ended December 31, 2006, the three and
six-month periods ended June 30, 2007 and 2006, and the six-month periods ended June 30, 2007 and
2006, respectively. 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)
June 30, 2007 Condensed Consolidated Balance Sheet Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,473,048 |
|
|
$ |
2,000 |
(1) |
|
$ |
|
|
|
$ |
1,475,048 |
|
Investments |
|
|
166,264 |
|
|
|
|
|
|
|
|
|
|
|
166,264 |
|
Premiums receivables, net |
|
|
112,893 |
|
|
|
517 |
(1) |
|
|
|
|
|
|
113,410 |
|
Other receivables from govt partners |
|
|
54,981 |
|
|
|
|
|
|
|
|
|
|
|
54,981 |
|
Prepaid Expenses and Other |
|
|
100,058 |
|
|
|
|
|
|
|
|
|
|
|
100,058 |
|
Deferred income taxes |
|
|
40,531 |
|
|
|
865 |
(1)(2) |
|
|
|
|
|
|
41,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
1,947,775 |
|
|
|
3,382 |
|
|
|
|
|
|
|
1,951,157 |
|
Property and Equipment and capitalized
software, net |
|
|
63,096 |
|
|
|
|
|
|
|
|
|
|
|
63,096 |
|
Goodwill |
|
|
189,470 |
|
|
|
|
|
|
|
|
|
|
|
189,470 |
|
Other intangibles, net |
|
|
17,451 |
|
|
|
|
|
|
|
|
|
|
|
17,451 |
|
Restricted investment assets |
|
|
73,977 |
|
|
|
|
|
|
|
|
|
|
|
73,977 |
|
Other Assets |
|
|
2,283 |
|
|
|
|
|
|
|
|
|
|
|
2,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
2,294,052 |
|
|
$ |
3,382 |
|
|
$ |
|
|
|
$ |
2,297,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits payable |
|
$ |
601,255 |
|
|
$ |
4,701 |
(1) |
|
$ |
(6,286 |
)(3) |
|
$ |
599,670 |
|
Unearned premiums |
|
|
261,830 |
|
|
|
(4,008 |
)(1) |
|
|
|
|
|
|
257,822 |
|
Accounts payable |
|
|
9,832 |
|
|
|
|
|
|
|
|
|
|
|
9,832 |
|
Other accrued expenses |
|
|
156,442 |
|
|
|
2,620 |
(1) |
|
|
|
|
|
|
159,062 |
|
Other payables to government partners |
|
|
49,854 |
|
|
|
46,442 |
(4) |
|
|
6,286 |
(3) |
|
|
102,582 |
|
Taxes payable |
|
|
37,946 |
|
|
|
(23,745 |
)(2) |
|
|
|
|
|
|
14,201 |
|
Current portion of long-term debt |
|
|
1,600 |
|
|
|
|
|
|
|
|
|
|
|
1,600 |
|
Funds held for the benefit of others |
|
|
299,395 |
|
|
|
|
|
|
|
|
|
|
|
299,395 |
|
Other current liabilities |
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
1,418,572 |
|
|
|
26,010 |
|
|
|
|
|
|
|
1,444,582 |
|
Long-term debt |
|
|
153,301 |
|
|
|
|
|
|
|
|
|
|
|
153,301 |
|
Deferred income taxes |
|
|
36,234 |
|
|
|
(13,424 |
)(2)(6) |
|
|
|
|
|
|
22,810 |
|
Other liabilities |
|
|
7,680 |
|
|
|
13,717 |
(6) |
|
|
|
|
|
|
21,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
1,615,787 |
|
|
|
26,303 |
|
|
|
|
|
|
|
1,642,090 |
|
Stockholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
417 |
|
|
|
|
|
|
|
|
|
|
|
417 |
|
Paid-in Capital |
|
|
329,643 |
|
|
|
8,366 |
(1) |
|
|
|
|
|
|
338,009 |
|
Retained earnings |
|
|
348,177 |
|
|
|
(31,287 |
)(5) |
|
|
|
|
|
|
316,890 |
|
Accumulated other comprehensive income
(loss) |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
678,265 |
|
|
|
(22,921 |
) |
|
|
|
|
|
|
655,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
2,294,052 |
|
|
$ |
3,382 |
|
|
$ |
|
|
|
$ |
2,297,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
(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 for the tax-effect of the restatement adjustments recorded in the period ended
June 30, 2007 and explained in the following June 30, 2007 Condensed Consolidated Statement
of Income reconciliation to restated June 30, 2007 balances. |
|
(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 $7,858 relates to the six-month period
ended June 30, 2007 and is reflected in the Six months ended
June 30, 2007 Condensed
Consolidated Statement of Income Reconciliation below, $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 six-month period ended June 30, 2007 and the year ended 2006, 2005 and 2004. |
|
(6) |
|
The adjustment of $13,717 to Deferred income taxes and Other liabilities is the result
of the restatement adjustments and to record a FIN 48 liability as of
June 30, 2007. Refer to Note 5 for further analysis. |
10
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
Three months ended June 30, 2007 Condensed Consolidated Statement of Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
|
(As originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(As restated) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
$ |
1,320,529 |
|
|
$ |
(4,338 |
)(2) |
|
$ |
(8,368 |
)(4) |
|
$ |
1,307,823 |
|
Investment and other income |
|
|
19,229 |
|
|
|
|
|
|
|
|
|
|
|
19,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues |
|
|
1,339,758 |
|
|
|
(4,338 |
) |
|
$ |
(8,368 |
) |
|
|
1,327,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
1,082,218 |
|
|
|
(5,003 |
)(1) |
|
|
(8,368 |
)(4) |
|
|
1,068,847 |
|
Selling, general and administrative |
|
|
160,859 |
|
|
|
840 |
(1) |
|
|
|
|
|
|
161,699 |
|
Depreciation and amortization |
|
|
4,252 |
|
|
|
|
|
|
|
|
|
|
|
4,252 |
|
Interest |
|
|
3,439 |
|
|
|
|
|
|
|
|
|
|
|
3,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses |
|
|
1,250,768 |
|
|
|
(4,163 |
) |
|
|
(8,368 |
) |
|
|
1,238,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
88,990 |
|
|
|
(175 |
) |
|
|
|
|
|
|
88,815 |
|
Income tax expense |
|
|
34,345 |
|
|
|
(380 |
)(3) |
|
|
|
|
|
|
33,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
54,645 |
|
|
$ |
205 |
|
|
$ |
|
|
|
$ |
54,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share (see Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per common share - basic |
|
$ |
1.35 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1.35 |
|
Net income
per common share - diluted |
|
$ |
1.30 |
|
|
$ |
0.01 |
|
|
$ |
|
|
|
$ |
1.31 |
|
|
|
|
(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 $3,395
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 represents the three months ended June
30, 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 June 30, 2007. |
11
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
Six months ended June 30, 2007 Condensed Consolidated Statement of Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
|
(as originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(as restated) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
$ |
2,542,295 |
|
|
$ |
(4,246 |
)(2) |
|
$ |
58,467 |
(4) |
|
$ |
2,596,516 |
|
Investment and other income |
|
|
36,896 |
|
|
|
(39 |
)(1) |
|
|
|
|
|
|
36,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
2,579,191 |
|
|
|
(4,285 |
) |
|
$ |
58,467 |
|
|
|
2,633,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
2,106,389 |
|
|
|
(737 |
)(1) |
|
|
58,467 |
(4) |
|
|
2,164,119 |
|
Selling, general and administrative |
|
|
327,415 |
|
|
|
(100 |
)(1) |
|
|
|
|
|
|
327,315 |
|
Depreciation and amortization |
|
|
8,818 |
|
|
|
|
|
|
|
|
|
|
|
8,818 |
|
Interest |
|
|
6,900 |
|
|
|
(1 |
)(1) |
|
|
|
|
|
|
6,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses |
|
|
2,449,522 |
|
|
|
(838 |
) |
|
|
58,467 |
|
|
|
2,507,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
129,669 |
|
|
|
(3,447 |
) |
|
|
|
|
|
|
126,222 |
|
Income tax expense |
|
|
50,051 |
|
|
|
(1,482 |
)(3) |
|
|
|
|
|
|
48,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
79,618 |
|
|
$ |
(1,965 |
) |
|
$ |
|
|
|
$ |
77,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share (see Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per common share - basic |
|
$ |
1.97 |
|
|
$ |
(0.05 |
) |
|
$ |
|
|
|
$ |
1.92 |
|
Net income
per common share - diluted |
|
$ |
1.90 |
|
|
$ |
(0.04 |
) |
|
$ |
|
|
|
$ |
1.86 |
|
|
|
|
(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 $7,858
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 represents the six months ended June
30, 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 six months ended June 30, 2007. |
12
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
Six Months Ended June 30, 2007 Condensed Consolidated Statement of Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30 2007 (as |
|
|
|
|
|
|
|
|
|
|
June 30 2007 (as |
|
|
|
originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
restated) |
|
Cash from (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
79,618 |
|
|
$ |
(1,965 |
)(1) |
|
$ |
|
|
|
$ |
77,653 |
|
Adjustments to reconcile net income
to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
8,818 |
|
|
|
|
|
|
|
|
|
|
|
8,818 |
|
Equity-based compensation expense, net of tax benefit |
|
|
25,595 |
|
|
|
(13,190 |
)(2) |
|
|
|
|
|
|
12,405 |
|
Incremental tax benefit received for option exercises |
|
|
(13,713 |
) |
|
|
(4,933 |
)(2) |
|
|
|
|
|
|
(18,646 |
) |
Deferred taxes, net |
|
|
(24,122 |
) |
|
|
(8,156 |
)(2) |
|
|
|
|
|
|
(32,278 |
) |
Changes in operating accounts, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and other receivables |
|
|
(10,428 |
) |
|
|
(2,421 |
)(2) |
|
|
|
|
|
|
(12,849 |
) |
Other receivables from government partners |
|
|
(14,079 |
) |
|
|
|
|
|
|
|
|
|
|
(14,079 |
) |
Prepaid expenses and other current assets |
|
|
(12,551 |
) |
|
|
(343 |
)(2) |
|
|
|
|
|
|
(12,894 |
) |
Medical benefits payable |
|
|
135,674 |
|
|
|
3,609 |
(2) |
|
|
(341 |
)(3) |
|
|
138,942 |
|
Unearned premiums |
|
|
238,024 |
|
|
|
16,485 |
(2) |
|
|
|
|
|
|
254,509 |
|
Accounts payables |
|
|
1,817 |
|
|
|
(496 |
)(2) |
|
|
|
|
|
|
1,321 |
|
Other accrued expenses |
|
|
(15,601 |
) |
|
|
(18,885 |
)(2) |
|
|
|
|
|
|
(34,486 |
) |
Other payables to government partners |
|
|
(54,222 |
) |
|
|
7,857 |
(3) |
|
|
341 |
(3) |
|
|
(46,024 |
) |
Taxes, net |
|
|
24,765 |
|
|
|
6,949 |
(2) |
|
|
|
|
|
|
31,714 |
|
Other, net |
|
|
(419 |
) |
|
|
13,303 |
(2) |
|
|
|
|
|
|
12,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operations |
|
|
369,176 |
|
|
|
(2,186 |
) |
|
|
|
|
|
|
366,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale and maturities of investments, net |
|
|
39,932 |
|
|
|
|
|
|
|
|
|
|
|
39,932 |
|
Purchases of investments |
|
|
(79,774 |
) |
|
|
|
|
|
|
|
|
|
|
(79,774 |
) |
Purchases and dispositions of restricted investments, net |
|
|
(20,595 |
) |
|
|
|
|
|
|
20,595 |
(4) |
|
|
|
|
Purchases of
restricted investments |
|
|
|
|
|
|
|
|
|
|
(22,664 |
)(4) |
|
|
(22,664 |
) |
Proceeds
from sales and maturities of restricted investments |
|
|
|
|
|
|
|
|
|
|
2,069 |
(4) |
|
|
2,069 |
|
Additions to property, equipment, and capitalized software |
|
|
(8,505 |
) |
|
|
(747 |
)(5) |
|
|
|
|
|
|
(9,252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(68,942 |
) |
|
|
(747 |
) |
|
|
|
|
|
|
(69,689 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock issuance |
|
|
338 |
|
|
|
|
|
|
|
|
|
|
|
338 |
|
Proceeds from options exercised |
|
|
13,256 |
|
|
|
|
|
|
|
|
|
|
|
13,256 |
|
Incremental tax benefit from option exercises |
|
|
13,713 |
|
|
|
4,933 |
(2) |
|
|
|
|
|
|
18,646 |
|
Purchase of Treasury Stock |
|
|
(3,978 |
) |
|
|
|
|
|
|
|
|
|
|
(3,978 |
) |
Payments on debt |
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
|
(800 |
) |
Funds held for the benefit of members |
|
|
185,743 |
|
|
|
|
|
|
|
|
|
|
|
185,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
208,272 |
|
|
|
4,933 |
|
|
|
|
|
|
|
213,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase during period |
|
|
508,506 |
|
|
|
2,000 |
|
|
|
|
|
|
|
510,506 |
|
Balance at beginning of year |
|
|
964,542 |
|
|
|
|
|
|
|
|
|
|
|
964,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
1,473,048 |
|
|
$ |
2,000 |
|
|
$ |
|
|
|
$ |
1,475,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes |
|
$ |
35,277 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
35,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
6,519 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
|
|
|
(1) |
|
The adjustment to Net income represents the period ended
June 30,
2007 effect of the restatement amounts recorded for the six months
ended June 30, 2007 and included in the Six Months Ended June 30, 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 June 30, 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 the reclassification
of existing liabilities as discussed previously and shown in the June 30, 2007 Condensed Balance Sheet reconciliation. |
|
(4) |
|
The reclassifications were recorded to correct the presentation of
certain amounts to conform to the June 30, 2007 presentation as
presented in the Condensed Consolidated Statement of Cash Flows.
The 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 previously included in the Accounts payable line item. |
14
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
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 and explained in the following 2006 Condensed Consolidated Statement of Income
reconciliation to restated 2006 balances. |
|
(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 as presented in the 2007 Consolidated Balance Sheet. |
16
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
Three months ended June 30, 2006 Condensed Consolidated Statement of Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, 2006 (as |
|
|
|
|
|
|
|
|
|
|
June 30, 2006 (as |
|
|
|
originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
restated) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
$ |
842,658 |
|
|
$ |
(4,832 |
)(2) |
|
$ |
2,698 |
(4) |
|
$ |
840,524 |
|
Investment and other income |
|
|
10,153 |
|
|
|
|
|
|
|
|
|
|
|
10,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
852,811 |
|
|
|
(4,832 |
) |
|
|
2,698 |
|
|
|
850,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
704,964 |
|
|
|
(53 |
)(1) |
|
|
2,698 |
(4) |
|
|
707,609 |
|
Selling, general and administrative |
|
|
104,566 |
|
|
|
620 |
(1) |
|
|
|
|
|
|
105,186 |
|
Depreciation and amortization |
|
|
3,254 |
|
|
|
|
|
|
|
|
|
|
|
3,254 |
|
Interest |
|
|
3,674 |
|
|
|
|
|
|
|
|
|
|
|
3,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
816,458 |
|
|
|
567 |
|
|
|
2,698 |
|
|
|
819,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
36,353 |
|
|
|
(5,399 |
) |
|
|
|
|
|
|
30,954 |
|
Income tax expense |
|
|
14,179 |
|
|
|
(1,885 |
)(3) |
|
|
|
|
|
|
12,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
22,174 |
|
|
$ |
(3,514 |
) |
|
$ |
|
|
|
$ |
18,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share (see Note
1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per common share - basic |
|
$ |
.56 |
|
|
$ |
(0.09 |
) |
|
$ |
|
|
|
$ |
0.47 |
|
Net income per common
share - diluted |
|
$ |
.55 |
|
|
$ |
(0.09 |
) |
|
$ |
|
|
|
$ |
0.46 |
|
|
|
|
(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 June 30, 2006
impact of the restatement adjustment for retrospective premium refunds
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 June
30, 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 June 30, 2006. |
17
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
Six months ended June 30, 2006 Condensed Consolidated Statement of Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
June 30, 2006 |
|
|
|
(as originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(as restated) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
$ |
1,564,878 |
|
|
$ |
(9,663 |
)(2) |
|
$ |
77,036 |
(4) |
|
$ |
1,632,251 |
|
Investment and other income |
|
|
18,317 |
|
|
|
|
|
|
|
|
|
|
|
18,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,583,195 |
|
|
|
(9,663 |
) |
|
|
77,036 |
|
|
|
1,650,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
1,304,047 |
|
|
|
(105 |
)(1) |
|
|
77,036 |
(4) |
|
|
1,380,978 |
|
Selling, general and administrative |
|
|
201,831 |
|
|
|
1,209 |
(1) |
|
|
|
|
|
|
203,040 |
|
Depreciation and amortization |
|
|
6,344 |
|
|
|
|
|
|
|
|
|
|
|
6,344 |
|
Interest |
|
|
7,058 |
|
|
|
|
|
|
|
|
|
|
|
7,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1,519,280 |
|
|
|
1,104 |
|
|
|
77,036 |
|
|
|
1,597,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
63,915 |
|
|
|
(10,767 |
) |
|
|
|
|
|
|
53,148 |
|
Income tax expense |
|
|
24,973 |
|
|
|
(3,770 |
)(3) |
|
|
|
|
|
|
21,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
38,942 |
|
|
$ |
(6,997 |
) |
|
$ |
|
|
|
$ |
31,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
(see Note 1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share - basic |
|
$ |
1.00 |
|
|
$ |
(0.18 |
) |
|
$ |
|
|
|
$ |
0.82 |
|
Net income
per common share - diluted |
|
$ |
0.97 |
|
|
$ |
(0.18 |
) |
|
$ |
|
|
|
$ |
0.79 |
|
|
|
|
(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 six months ended June 30, 2006 impact
of the restatement adjustment for retrospective premium refunds
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 current income tax effect
of the restatement and other adjustments reflected above. |
|
(4) |
|
The reclassification to premium represents the six months ended June
30, 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 six months ended June 30, 2006. |
18
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
2006 Condensed Consolidated Statement of Cash Flows Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
June 30, 2006 |
|
|
|
(as originally reported) |
|
|
Adjustments |
|
|
Reclassifications |
|
|
(as restated) |
|
Cash from (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
38,942 |
|
|
$ |
(6,997 |
)(2) |
|
$ |
|
|
|
$ |
31,945 |
|
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
6,344 |
|
|
|
|
|
|
|
|
|
|
|
6,344 |
|
Gain on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on disposal of fixed assets |
|
|
1,259 |
|
|
|
|
|
|
|
|
|
|
|
1,259 |
|
Equity-based compensation expense |
|
|
12,575 |
|
|
|
(3,925 |
)(1) |
|
|
|
|
|
|
8,650 |
|
Incremental tax benefit received for
options exercises |
|
|
(2,160 |
) |
|
|
(544) |
(1) |
|
|
|
|
|
|
(2,704 |
) |
Deferred taxes, net |
|
|
(14,386 |
) |
|
|
(182) |
(1) |
|
|
|
|
|
|
(14,568 |
) |
Changes in operating accounts, net of
effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums and other receivables |
|
|
(37,491 |
) |
|
|
|
|
|
|
|
|
|
|
(37,491 |
) |
Other receivables from government
partners |
|
|
(118,489 |
) |
|
|
|
|
|
|
|
|
|
|
(118,489 |
) |
Prepaid expenses and other, net |
|
|
(29,753 |
) |
|
|
(734 |
)(1) |
|
|
|
|
|
|
(30,487 |
) |
Medical benefits payable |
|
|
180,679 |
|
|
|
|
|
|
|
5,878 |
(4) |
|
|
186,557 |
|
Unearned premiums |
|
|
149,315 |
|
|
|
|
|
|
|
|
|
|
|
149,315 |
|
Accounts payable and other accrued
expenses |
|
|
69,266 |
|
|
|
|
|
|
|
(69,266 |
)(5) |
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
|
|
51,899 |
(5) |
|
|
51,899 |
|
Other accrued expenses |
|
|
|
|
|
|
846 |
(1) |
|
|
17,367 |
(5) |
|
|
18,213 |
|
Taxes, net |
|
|
23,703 |
|
|
|
342 |
(1) |
|
|
|
|
|
|
24,045 |
|
Other, net |
|
|
(21 |
) |
|
|
10,425 |
(1) |
|
|
(5,878 |
)(4) |
|
|
4,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) operations |
|
|
279,783 |
|
|
|
(769 |
) |
|
|
|
|
|
|
279,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from (used in) investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of business, net of
cash acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale and
maturities of investments |
|
|
49,371 |
|
|
|
|
|
|
|
|
|
|
|
49,371 |
|
Purchases of investments |
|
|
(134,053 |
) |
|
|
|
|
|
|
|
|
|
|
(134,053 |
) |
Purchases and dispositions of restricted
investments, net |
|
|
(11,195 |
) |
|
|
|
|
|
|
11,195 |
(5) |
|
|
|
|
Purchases of
restricted investments |
|
|
|
|
|
|
|
|
|
|
(21,663 |
)(5) |
|
|
(21,663 |
) |
Proceeds
from sale and maturities of
restricted investments |
|
|
|
|
|
|
|
|
|
|
10,468 |
(5) |
|
|
10,468 |
|
Additions to property,
equipment, and capitalized software |
|
|
(21,523 |
) |
|
|
225 |
(3) |
|
|
|
|
|
|
(21,298 |
) |
Other investing activities |
|
|
(944 |
) |
|
|
|
|
|
|
|
|
|
|
(944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from (used in)
investing activities |
|
|
(118,344 |
) |
|
|
225 |
|
|
|
|
|
|
|
(118,119 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from (used in) financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock issuance, net |
|
|
21,562 |
|
|
|
|
|
|
|
|
|
|
|
21,562 |
|
Proceeds from options exercised |
|
|
3,302 |
|
|
|
|
|
|
|
|
|
|
|
3,302 |
|
Incremental tax benefit from options
exercises |
|
|
2,160 |
|
|
|
544 |
(1) |
|
|
|
|
|
|
2,704 |
|
Repayments on debt |
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
|
(800 |
) |
Funds held for the benefit of members, net
of disbursements |
|
|
224,730 |
|
|
|
|
|
|
|
|
|
|
|
224,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities |
|
|
250,954 |
|
|
|
544 |
|
|
|
|
|
|
|
251,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase during year |
|
|
412,393 |
|
|
|
|
|
|
|
|
|
|
|
412,393 |
|
Balance at beginning of year |
|
|
421,766 |
|
|
|
|
|
|
|
|
|
|
|
421,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
834,159 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
834,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes |
|
$ |
13,883 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
13,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
6,810 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
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 June 30, 2006 Condensed Consolidated Balance Sheet
reconciliation. Such errors were previously deemed immaterial, both
individually and in the aggregate, to the consolidated financial
statements. |
|
(2) |
|
The adjustment to Net income represents the effect of the restatement
amounts recorded for the six months ended June 30, 2006, and included
in the six months Ended June 30, 2006 Condensed Consolidated Statement
of Income reconciliation. |
|
(3) |
|
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 the Accounts payable line item. |
|
(4) |
|
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 June
30, 2006 Condensed Balance Sheet reconciliation. |
|
(5) |
|
The reclassifications were recorded to correct the
presentation of certain amounts to conform to the June 30, 2007
presentation as presented in the Consolidated Statement of Cash Flows.
The reclassifications do not impact the Companys previously
reported net cash provided by or used in operating activities,
financing activities, or investing activities. |
19
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
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 |
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(Restated) |
|
|
(Restated) |
|
|
(Restated) |
|
|
(Restated) |
|
Premium
revenue:
|
Medicaid |
|
$ |
649,410 |
|
|
$ |
383,203 |
|
|
$ |
1,282,834 |
|
|
$ |
731,930 |
|
Medicare |
|
|
658,413 |
|
|
|
457,321 |
|
|
|
1,313,682 |
|
|
|
900,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,307,823 |
|
|
|
840,524 |
|
|
|
2,596,516 |
|
|
|
1,632,251 |
|
|
Medical
benefits expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid |
|
|
543,187 |
|
|
|
310,289 |
|
|
|
1,075,600 |
|
|
|
589,512 |
|
Medicare |
|
|
525,660 |
|
|
|
397,320 |
|
|
|
1,088,519 |
|
|
|
791,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,068,847 |
|
|
|
707,609 |
|
|
|
2,164,119 |
|
|
|
1,380,978 |
|
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid |
|
|
106,223 |
|
|
|
72,914 |
|
|
|
207,234 |
|
|
|
142,418 |
|
Medicare |
|
|
132,753 |
|
|
|
60,001 |
|
|
|
225,163 |
|
|
|
108,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
$ |
238,976 |
|
|
$ |
132,915 |
|
|
$ |
432,397 |
|
|
$ |
251,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. |
|
EQUITY-BASED COMPENSATION |
The compensation expense recorded related to our equity-based compensation awards for the
three months ended June 30, 2007 and 2006 was $6,786 and $2,900, respectively, and $12,405 and
$8,650 for the six months ended June 30, 2007 and 2006, respectively. During the three months
ended June 30, 2007, the Company granted options under the Companys 2004 Equity Incentive Plan for
the purchase of 77,523 shares of common stock at a weighted-average exercise price of $90.12 per
share and a weighted-average Black-Scholes fair value of $24.28 per share. During the six months
ended June 30, 2007, the Company granted options under the Companys 2004 Equity Incentive Plan for
the purchase of 560,701 shares of common stock at a weighted-average exercise price of $84.90 per
share and a weighted-average Black-Scholes fair value of $23.93 per share. At June 30, 2007,
options for 2,678,114 shares were outstanding with a weighted-average exercise price of $44.06 per
share. The total intrinsic valueof options exercised during the three months ended June 30, 2007
and 2006 determined as of the date of exercise was $25,783 and $4,193, respectively, and $41,901
and $8,306 for the six months ended June 30, 2007 and 2006, respectively. During the three- and
six-month periods ended June 30, 2007, the Company granted 60,034 and 252,126 restricted shares,
respectively, under the Companys 2004 Equity Incentive Plan at a weighted-average grant-date fair
value of $88.74 and $84.56, respectively. At June 30, 2007, 867,519 restricted shares
20
WELLCARE HEALTH PLANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except member and share data)
remained unvested. The total fair value of restricted shares vested during the three months ended
June 30, 2007 and 2006 was $3,073 and $1,078, respectively, and
$5,683 and $1,772 for the six
months ended June 30, 2007 and 2006, respectively.
As of June 30, 2007, there was $62,863 of unrecognized compensation costs related to
non-vested equity-based compensation arrangements that is expected to be recognized over a
weighted-average period of 3.7 years.
The Company uses the asset and liability method of accounting for income taxes. As of June
30, 2007, net deferred tax assets were approximately $18,586. 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 June 30, 2007 is $14,810.
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 June 30, 2007, the Company recognized $0 in interest
expense and thus has no accrued interest. No amount was accrued for penalties. As of June 30,
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 $154,900 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 substantially all of the assets of our non-regulated
entities, which includes the stock of our operating subsidiaries directly held by 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 June 30, 2007, the revolving credit facility had not been utilized.
21
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 this 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 investigation, restatement, and related matters, refer to
the 2007 10-K filed with the SEC on January 26, 2009.
22
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
financial statements and the notes thereto for the year ended December 31, 2006, appearing in the
2006 Form 10-K.
This Amended Quarterly Report on 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; |
|
|
|
|
our lack of prior operating history in expansion markets such as Georgia, Missouri and Ohio,
including lack of experience with network providers and health benefits management in such
markets; |
|
|
|
|
our lack of prior operating history in our PDP program and PFFS program; |
|
|
|
|
our ability to accurately predict and effectively manage health benefits 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 healthcare options facing Medicare beneficiaries and the
complexity of the PDP and PFFS programs, including the benefit structures and the relative lack of
awareness of these programs among healthcare providers, pharmacists, patient advocates and state
regulators; |
|
|
|
|
our ability to accurately estimate incurred but not reported medical costs; |
|
|
|
|
risks associated with future changes in laws applicable to our business, including repeal or
modification of the Medicare Modernization Act of 2003 or any portion thereof; |
|
|
|
|
potential reductions in funding for government healthcare programs, including proposals in
Congress to reduce funding of Medicare Advantage programs; |
|
|
|
|
risks associated with periodic government rate reimbursement adjustments, including the timing of
the CMS risk-corridor payments to PDP providers and other program reconciliations; |
|
|
|
|
risks associated with negative publicity regarding the health insurance industry, including
government programs managed care organizations; |
|
|
|
|
our ability to develop processes and systems to support our operations and future growth; |
|
|
|
|
regulatory changes and developments, including potential marketing restrictions, sanctions,
governmental investigations or premium recoupments; |
|
|
|
|
potential fines, penalties or operating restrictions resulting from regulatory audits,
examinations, investigations or other inquiries; |
|
|
|
|
risks associated with our acquisition strategy; |
|
|
|
|
risks associated with our efforts to expand into additional states, counties and lines of business; |
|
|
|
|
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 and
Risk Factors in this Form 10-Q for the quarterly period ended June 30, 2007, 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.
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 2.3 million members nationwide as of June 30, 2007.
23
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 June 30, 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 June 30,
2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 |
|
|
June 30, 2006 |
|
Medicaid |
|
|
|
|
|
|
|
|
TANF |
|
|
858,000 |
|
|
|
779,000 |
|
S-CHIP |
|
|
217,000 |
|
|
|
162,000 |
|
SSI |
|
|
70,000 |
|
|
|
59,000 |
|
FHP |
|
|
31,000 |
|
|
|
27,000 |
|
|
|
|
|
|
|
|
|
|
|
1,176,000 |
|
|
|
1,027,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
|
|
|
|
|
|
MA |
|
|
155,000 |
|
|
|
83,000 |
|
PDP |
|
|
971,000 |
|
|
|
901,000 |
|
|
|
|
|
|
|
|
|
|
|
1,126,000 |
|
|
|
984,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,302,000 |
|
|
|
2,011,000 |
|
|
|
|
|
|
|
|
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.
24
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 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,
25
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 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
26
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 revenues targeted in their bids 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. 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 condensed consolidated
balance sheets and 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
27
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 healthcare cost inflation, seasonality patterns and changes in 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 and 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, non-compete agreements, government contracts, licenses and permits. Our intangible
assets are amortized over their estimated useful lives ranging from one to 26 years.
28
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.
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 |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium |
|
|
98.6 |
% |
|
|
98.8 |
% |
|
|
98.6 |
% |
|
|
98.9 |
% |
Investment and other income |
|
|
1.4 |
% |
|
|
1.2 |
% |
|
|
1.4 |
% |
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical benefits |
|
|
80.5 |
% |
|
|
83.2 |
% |
|
|
82.2 |
% |
|
|
83.7 |
% |
Selling, general and administrative |
|
|
12.2 |
% |
|
|
12.4 |
% |
|
|
12.4 |
% |
|
|
12.3 |
% |
Depreciation and amortization |
|
|
0.3 |
% |
|
|
0.4 |
% |
|
|
0.3 |
% |
|
|
0.4 |
% |
Interest |
|
|
0.3 |
% |
|
|
0.4 |
% |
|
|
0.3 |
% |
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
93.3 |
% |
|
|
96.4 |
% |
|
|
95.2 |
% |
|
|
96.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
6.7 |
% |
|
|
3.6 |
% |
|
|
4.8 |
% |
|
|
3.2 |
% |
Income tax expense |
|
|
2.6 |
% |
|
|
1.4 |
% |
|
|
1.8 |
% |
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
4.1 |
% |
|
|
2.2 |
% |
|
|
3.0 |
% |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
One of our primary management tools for measuring profitability is MBR. 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- and Six-Month Periods Ended June 30, 2007 Compared to the Three- and Six-Month Periods Ended
June 30, 2006 (Restated)
Premium revenue. Premium revenues for the three months ended June 30, 2007 increased $467.3
million, or 55.6%, to approximately $1.3 billion from $840.5 million for the same period in the prior year. For
the six months ended June 30, 2007, premium revenues increased
$964.3 million, or 59.1%, to approximately $2.6
billion from $1.6 billion 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. The Medicaid segment increase is principally due to Georgia membership growth and
expansion into the Ohio market offset by the non-renewal of the Indiana contract. The Medicare
segment increase is primarily related to PDP membership growth and the launch of PFFS in January
2007. Total membership grew by approximately 291,000 members,
29
or 14.5%, from 2,011,000 at June 30,
2006 to 2,302,000 at June 30, 2007.
Our Medicaid segment includes Medicaid programs and other state-sponsored healthcare programs.
The Medicaid segment premium revenue for the three months ended June 30, 2007 increased $266.2
million, or 69.5%, to $649.4 million from $383.2 million for the same period in the prior year.
For the six months ended June 30, 2007, Medicaid segment premium revenue increased $550.9 million,
or 75.3%, to approximately $1.3 billion from $731.9 million for the same period in the prior year. The increase
in Medicaid segment revenue is due to year over year growth in membership, principally in Georgia
and the Ohio expansion, which accounted for $219.4 million and $43.0 million in the three-months
period, respectively, and $465.4 million and $72.6 million in the six-month periods, respectively.
Our membership growth was coupled with increases in premium rates in certain markets. Aggregate
membership in our Medicaid segment grew by approximately 149,000 members, or 14.5%, from 1,027,000
at June 30, 2006 to 1,176,000 at June 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid Revenues and Membership |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
Revenues (in millions) |
|
$ |
649.4 |
|
|
$ |
383.2 |
|
|
$ |
1,282.8 |
|
|
$ |
731.9 |
|
% of Total Premium Revenues |
|
|
49.7 |
% |
|
|
45.6 |
% |
|
|
49.4 |
% |
|
|
44.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Membership |
|
|
1,176,000 |
|
|
|
1,027,000 |
|
|
|
1,176,000 |
|
|
|
1,027,000 |
|
% of Total Membership |
|
|
51.1 |
% |
|
|
51.1 |
% |
|
|
51.1 |
% |
|
|
51.1 |
% |
Medicare segment premium revenue for the three months ended June 30, 2007 increased $201.1
million, or 44.0%, to $658.4 million from $457.3 million for the same period in the prior year.
For the six months ended June 30, 2007, Medicare segment premium revenue increased $413.4 million,
or 45.9%, to approximately $1.3 billion from $900.3 million for the same period in the prior year. Growth in
premium revenue within the Medicare segment was primarily due to PDP membership growth, the launch
of PFFS and premium increases associated with the demographic mix of our MA membership growth.
Membership within the Medicare segment grew by approximately 142,000 members, or 14.4% from 984,000
at June 30, 2006 to 1,126,000 at June 30, 2007, principally due to PDP and the PFFS product.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Revenues and Membership |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
(As Restated) |
|
|
|
|
Revenues (in millions) |
|
$ |
658.4 |
|
|
$ |
457.3 |
|
|
$ |
1,313.7 |
|
|
$ |
900.3 |
|
% of Total Premium Revenues |
|
|
50.3 |
% |
|
|
54.4 |
% |
|
|
50.6 |
% |
|
|
55.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Membership |
|
|
1,126,000 |
|
|
|
984,000 |
|
|
|
1,126,000 |
|
|
|
984,000 |
|
% of Total Membership |
|
|
48.9 |
% |
|
|
48.9 |
% |
|
|
48.9 |
% |
|
|
48.9 |
% |
Investment and other income. Investment and other income for the three months ended June 30,
2007 increased $9.0 million, or 88.2%, to $19.2 million from $10.2 million for the same period in
the prior year. For the six months ended June 30, 2007, investment income increased $18.6 million,
or 101.6%, to $36.9 million from $18.3 million for the same period in the prior year. The increase
was due primarily to a higher average cash balance and the investment of excess cash generated by
operations.
Medical benefits expense. Medical benefits expense for the three months ended June 30, 2007
increased $361.2 million, or 51.0%, to $1.1 billion from $707.6 million for the same period in the
prior year. For the six months ended June 30, 2007, medical benefits expense increased $783.1
million, or 56.7%, to approximately $2.2 billion from approximately $1.4 billion for the same period in the prior year. The
MBR for the three months ended June 30, 2007 was 81.7% compared to 84.2% for the same period in the
prior year. For the six months ended June 30, 2007, the MBR was 83.3% compared to 84.6% for the
same period in the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Benefits Expense |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
|
|
|
Medical Benefits Expense |
|
$ |
1,068.8 |
|
|
$ |
707.6 |
|
|
$ |
2,164.1 |
|
|
$ |
1,381.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBR |
|
|
81.7 |
% |
|
|
84.2 |
% |
|
|
83.3 |
% |
|
|
84.6 |
% |
30
The Medicaid segment medical benefits expense for the three months ended June 30, 2007
increased $232.9 million,
or 75.0%, to $543.2 million from $310.3 million for the same period in the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicaid Medical Benefits Expense |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
Medicaid Medical Benefits Expense |
|
$ |
543.2 |
|
|
$ |
310.3 |
|
|
$ |
1,075.6 |
|
|
$ |
589.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBR |
|
|
83.6 |
% |
|
|
81.0 |
% |
|
|
83.8 |
% |
|
|
80.5 |
% |
The increase in Medicaid medical benefits expense for the three-month period ended June 30,
2007 was primarily due to growth in membership. Growth and expansion in our Georgia and Ohio
markets accounted for $167.6 million and $36.8 million, respectively. This increase was partially
offset by the loss of our Indiana contract, which decreased our medical expenses by $26.1 million.
The remaining increase is attributed to overall membership changes, combined with utilization
patterns and costs. For the six months ended June 30, 2007, Medicaid medical benefits expense
increased $486.1 million, or 82.5%, to $1.1 billion from $589.5 million for the same period in the
prior year. Membership growth in our Georgia market accounted for $577.6 million of the increase
and expansion into Ohio contributed another $107.2 million. The
loss of our Indiana contract
offset the increase by $57.9 million. The remaining $140.8 million decrease when comparing the
six-month periods were primarily attributed to increased healthcare costs and changes in membership
mix. The Medicaid MBR for the three months ended June 30, 2007 was 83.6% compared to 81.0% for the
same period in the prior year. This decrease was primarily due to higher medical costs in our
Georgia market in 2006 during the early stages of operation. For the six months ended June 30,
2007, the Medicaid MBR was 83.8% compared to 80.5% for the same period in the prior year. This
increase is due to changes in the healthcare utilization pattern of our members and the demographic
mix of our members.
Medicare segment medical benefits expense for the three months ended June 30, 2007 increased
$128.4 million, or 32.3%, to $525.7 million from $397.3 million for the same period in the prior
year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Medical Benefits Expense |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
Medicare Medical Benefits Expense |
|
$ |
525.7 |
|
|
$ |
397.3 |
|
|
$ |
1,088.5 |
|
|
$ |
791.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MBR |
|
|
79.8 |
% |
|
|
86.9 |
% |
|
|
82.9 |
% |
|
|
87.9 |
% |
The decrease in medical benefits expense was primarily due to the growth in membership in
PFFS, which accounted for $109.7 million of the increase in the quarter. Additional membership
growth in other markets, increased healthcare costs and changes in membership mix accounted for the
remaining $18.7 million of the quarterly increase. For the six months ended June 30, 2007,
Medicare medical benefits expense increased $297.0 million, or 37.5%, to approximately $1.1 billion from $791.5
million for the same period in the prior year. Membership growth in our PFFS and PDP business
accounted for $177.3 and $149.3 million, respectively, of the increase in the six-month period, while
the absence of a formulary transition period in our PDP product
resulted in better formulary compliance and increased generic fill
rates in the first half of 2007. This offset the increase in medical
benefits expense by $99.3 million, membership growth in other markets, increased healthcare costs and changes in membership mix
accounted for the remaining $69.7 million six-month increase. The Medicare MBR for the three
months ended June 30, 2007 was 79.8% compared to 86.9% for the same period in the prior year. The
MBR decreased primarily as a result of the changes in the demographic mix of our members including
PFFS. For the six months ended June 30, 2007, the Medicare MBR was 82.9% compared to 87.9% for the
same period in the prior year. High PDP membership retention and
increased generic fill rates in the first half of 2007 contributed to
the decrease in MBR.
31
Selling, general and administrative expense. Selling, general and administrative (SG&A)
expense for the three months ended June 30, 2007 increased $56.5 million, or 53.7%, to $161.7
million from $105.2 million for the same period in the prior year. For the six months ended June
30, 2007, SG&A expense increased $124.3 million, or 61.2%, to $327.3 million from $203.0 million
for the same period in the prior year. Our SG&A expense to revenue ratio was 12.2% for the three
months ended June 30, 2007 compared to 12.4% for the same period in the prior year. For the six
months ended June 30, 2007, our SG&A expense to revenue ratio was 12.4% compared to 12.3% for the
same period in the prior year. The decrease in our SG&A expense
to total revenue ratio was attributed to becoming operational in
both our PFFS and Ohio markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and Administrative Expense |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
|
|
|
SG&A (in millions) |
|
$ |
161.7 |
|
|
$ |
105.2 |
|
|
$ |
327.3 |
|
|
$ |
203.0 |
|
SG&A expense to total revenue ratio |
|
|
12.2 |
% |
|
|
12.4 |
% |
|
|
12.4 |
% |
|
|
12.3 |
% |
Depreciation and amortization expense. Depreciation and amortization expense for the three
months ended June 30, 2007 increased $1.0 million, or 30.3%, to $4.3 million from $3.3 million for
the same period in the prior year. For the six months ended June 30, 2007, depreciation and
amortization expense increased $2.5 million, or 39.7%, to $8.8 million from $6.3 million for the
same period in the prior year. An increase in the three-month period is primarily attributable to
approximately $2.3 million accelerated amortization for our Indiana Medicaid contract and provider
agreement intangible assets purchased in 2004 that were deemed to have no further economic value in
the third quarter of 2006. Increased depreciation expense resulting from our investment in
infrastructure, primarily technology to support our increased membership growth, accounted for the
change in the six-month period.
Interest expense. Interest expense was $3.4 million and $3.7 million for the three months
ended June 30, 2007 and 2006, respectively, and $6.9 million and $7.1 million for the six months
ended June 30, 2007 and 2006, respectively. The change in the periods is primarily attributable to
a decrease in the outstanding debt balance due to repayment of the note payable to related party in
2006, partially offset by a higher interest rate environment.
Income tax expense. Income tax expense for the three months ended June 30, 2007 was $34.0
million with an effective tax rate of 38.2% as compared to $12.3 million for the same period in the
prior year with an effective tax rate of 39.7%. Income tax expense for the six months ended June
30, 2007 was $48.6 million with an effective tax rate of 38.5% as compared to $21.2 million for the
same six-month period in the prior year with an effective tax rate of
39.9%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
Income tax expense (in millions) |
|
$ |
34.0 |
|
|
$ |
12.3 |
|
|
$ |
48.6 |
|
|
$ |
21.2 |
|
Effective tax rate |
|
|
38.2 |
% |
|
|
39.7 |
% |
|
|
38.5 |
% |
|
|
39.9 |
% |
Net income. Net income for the three months ended June 30, 2007 was $54.9 million compared to
$18.7 million for the same period in the prior year, representing an increase of 193.6%. For the
six months ended June 30, 2007, net income was $77.7 million compared to $31.9 million for the same
period in the prior year, representing an increase of 143.6%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(As Restated) |
|
|
|
(In millions, except per share data) |
|
Net income |
|
$ |
54.9 |
|
|
$ |
18.7 |
|
|
$ |
77.7 |
|
|
$ |
31.9 |
|
Net income per diluted share |
|
$ |
1.31 |
|
|
$ |
0.46 |
|
|
$ |
1.86 |
|
|
$ |
0.79 |
|
32
Liquidity and Capital Resources
Cash Generating Activities
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 At June 30, 2007 and 2006, cash and cash equivalents were $1,475.0 million and $834.1
million, respectively. We also had short-term investments of $166.3 million and $178.8 million at
June 30, 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 June 30, 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 99 days and 86 days, respectively. The average portfolio yield for the three-month periods
ended June 30, 2007 and 2006 was approximately 3.72% and 3.87%, respectively.
Our non-regulated businesses also generate positive cash flows that are used for corporate
purposes. At June 30, 2007, free cash in our non-regulated
businesses was approximately $107.0
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 June 30,
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.
Overview of Cash Flow Activities
For
the six-month periods ended June 30, 2007 and 2006 as
restated our cash flows are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Restated) |
|
|
(Restated) |
|
|
|
(In thousands) |
|
Net cash provided by operations |
|
$ |
366,990 |
|
|
$ |
279,014 |
|
Net cash used in investing activities |
|
|
(68,689 |
) |
|
|
(118,119 |
) |
Net cash provided by financing activities |
|
|
213,205 |
|
|
|
251,498 |
|
Cash from 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 six-month period ended June 30, 2007, cash provided from operations consisted primarily
of $77.7 million of net income from operations, an increase in medical benefits payable of $138.9
million, an increase in unearned premiums of $254.5 million and $31.7 million in taxes payable.
Cash used in Investing Activities: During the six-month period ended June 30, 2007, investing
activities consisted primarily of the investment of excess cash generated by operations totaling
approximately $79.8 million in various short-term investment
instruments and $22.7 million in
restricted investments. An additional $9.3 million was invested in capitalized assets and
investments in technology needed to sustain our membership growth.
33
Cash from Financing Activities: Included in financing activities are funds held for the
benefit of others, which increased approximately $185.7 million as of June 30, 2007. These PDP
member subsidies represent pass-through payments from government partners and are not accounted for
in our 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 $13.3 million was received for options exercised.
We have a senior secured term loan facility of approximately $155 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 June 30, 2007, the revolving credit facility had not been
utilized. As of June 30, 2007, our outstanding term loan interest rate was 7.875%. As of June 30,
2007, our senior debt was rated BB- by Standard & Poors and Ba3 by Moodys.
Off-Balance Sheet Arrangements
As of June 30, 2007, we did not have any off-balance sheet arrangements that are required to
be disclosed under Item 303(a)(4) of Regulation S-K.
Item 3. |
|
Quantitative and Qualitative Disclosures about Market Risk. |
As of June 30, 2007, we had cash and cash equivalents of $1.5 billion, investments classified
as current assets of $166.3 million, and restricted investments on deposit for licensure of $74.0
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 June 30, 2007, the
fair value of our fixed income investments would decrease by less than $1.4 million. Similarly, a
1% decrease in market interest rates at June 30, 2007 would result in an increase of the fair value
of our investments of less than $1.7 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.
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 June 30, 2007. Based on that
re-evaluation, our
34
CEO and CFO have concluded that our disclosure controls and procedures were not
effective as of June 30, 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 June 30, 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 June 30, 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 June 30, 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.
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 June 30, 2007 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
35
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 June 30, 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.
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 29, 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 June 30, 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.
36
Item 3. |
|
Defaults upon Senior Securities. |
As of June 30, 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.
37
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 to Medicaid Managed Care and Family Health Plus
Model Contract, between the City of New York Department
of Health and Mental Hygiene and WellCare of New York,
Inc.
|
|
8-K
|
|
April 11, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Amendment number 1 to the Department of Community Health
Contract No. 651, between the Georgia Department of
Community Health and WellCare of Georgia, Inc.
|
|
8-K
|
|
April 24, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Amendment number 4 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
|
|
May 4, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Amendment number 4 to the 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
|
|
May 17, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Amendment to Medicaid Advantage Model Contract between
the City of New York Department of Health and Mental
Hygiene and WellCare of New York, Inc.
|
|
8-K
|
|
June 8, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Amendment number 16 to Purchase of Service Contract
number 093-MED-FCHP-1, between the Department of Social
Services and WellCare of Connecticut, Inc., incorporated
by reference to an exhibit to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007.
|
|
10-Q
|
|
August 3, 2007
|
|
|
10.6 |
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Amendment number 1 to Purchase of Service Contract number
093-HUS-WCC-2, between the Department of Social Services
and WellCare of Connecticut, Inc., incorporated by
reference to an exhibit to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007.
|
|
10-Q
|
|
August 3, 2007
|
|
|
10.7 |
|
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
Amendment number 3 to Contract No. FAR001, between the
State of Florida, Agency for Healthcare Administration
and HealthEase of Florida, Inc. (Medicaid Reform
2006-2009).
|
|
8-K
|
|
June 22, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
Amendment number 3 to Contract No. FAR009, between the
State of Florida, Agency for Healthcare Administration
and WellCare of Florida, Inc. d/b/a Staywell Health Plan
of Florida (Medicaid Reform 2006-2009).
|
|
8-K
|
|
June 22, 2007
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
2008 Managed Care Plan for the Northeast Region Provider
Agreement between the Ohio Department of Job and Family
Services and WellCare of Ohio, Inc. (ABD).
|
|
8-K
|
|
June 29, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
2008 Managed Care Plan for the Northeast Region Provider
Agreement between the Ohio Department of Job and Family
Services and WellCare of Ohio, Inc. (CFC).
|
|
8-K
|
|
June 29, 2007
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Amendment number 1 to Contract No. FA615, between the
State of Florida, Agency for Healthcare Administration
and WellCare of Florida, Inc. d/b/a Staywell Health Plan
of Florida (Medicaid 2006-2009).
|
|
8-K
|
|
June 29, 2007
|
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
10.13
|
|
Renewal Notice for Contract #654 for Fiscal Year 2008
Medicaid Managed Care
|
|
8-K
|
|
June 29, 2007
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
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*
|
|
|
|
|
|
|
|
|
38
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 |
|
39
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 to Medicaid Managed Care and Family Health Plus
Model Contract, between the City of New York Department
of Health and Mental Hygiene and WellCare of New York,
Inc.
|
|
8-K
|
|
April 11, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Amendment number 1 to the Department of Community Health
Contract No. 651, between the Georgia Department of
Community Health and WellCare of Georgia, Inc.
|
|
8-K
|
|
April 24, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Amendment number 4 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
|
|
May 4, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Amendment number 4 to the 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
|
|
May 17, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Amendment to Medicaid Advantage Model Contract between
the City of New York Department of Health and Mental
Hygiene and WellCare of New York, Inc.
|
|
8-K
|
|
June 8, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Amendment number 16 to Purchase of Service Contract
number 093-MED-FCHP-1, between the Department of Social
Services and WellCare of Connecticut, Inc., incorporated
by reference to an exhibit to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007.
|
|
10-Q
|
|
August 3, 2007
|
|
|
10.6 |
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Amendment number 1 to Purchase of Service Contract number
093-HUS-WCC-2, between the Department of Social Services
and WellCare of Connecticut, Inc., incorporated by
reference to an exhibit to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007.
|
|
10-Q
|
|
August 3, 2007
|
|
|
10.7 |
|
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
Amendment number 3 to Contract No. FAR001, between the
State of Florida, Agency for Healthcare Administration
and HealthEase of Florida, Inc. (Medicaid Reform
2006-2009).
|
|
8-K
|
|
June 22, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
Amendment number 3 to Contract No. FAR009, between the
State of Florida, Agency for Healthcare Administration
and WellCare of Florida, Inc. d/b/a Staywell Health Plan
of Florida (Medicaid Reform 2006-2009).
|
|
8-K
|
|
June 22, 2007
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
2008 Managed Care Plan for the Northeast Region Provider
Agreement between the Ohio Department of Job and Family
Services and WellCare of Ohio, Inc. (ABD).
|
|
8-K
|
|
June 29, 2007
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
2008 Managed Care Plan for the Northeast Region Provider
Agreement between the Ohio Department of Job and Family
Services and WellCare of Ohio, Inc. (CFC).
|
|
8-K
|
|
June 29, 2007
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Amendment number 1 to Contract No. FA615, between the
State of Florida, Agency for Healthcare Administration
and WellCare of Florida, Inc. d/b/a Staywell Health Plan
of Florida (Medicaid 2006-2009).
|
|
8-K
|
|
June 29, 2007
|
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|
|
|
10.13
|
|
Renewal Notice for Contract #654 for Fiscal Year 2008
Medicaid Managed Care
|
|
8-K
|
|
June 29, 2007
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification of President and Chief Executive Officer
pursuant to Section 302 of Sarbanes-Oxley Act of 2002* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
incorporated by reference |
Exhibit |
|
|
|
|
|
Filing Date |
|
Exhibit |
Number |
|
Description |
|
Form |
|
with SEC |
|
Number |
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*
|
|
|
|
|
|
|
|
|