ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
47-0937650
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
8725
Henderson Road, Renaissance One
Tampa,
Florida
|
33634
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(813)
290-6200
|
(Registrant’s
telephone number, including area
code)
|
Page
|
|
1
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2
|
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3
|
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4
|
|
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8
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19
|
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|
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19
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|
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|
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|
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20
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20
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20
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21
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22
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March
31,
|
December
31,
|
||||||
|
2007
|
2006
|
|||||
Assets
|
|||||||
Current
Assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,344,909
|
$
|
964,542
|
|||
Investments
|
151,143
|
126,422
|
|||||
Premium
and other receivables, net
|
119,433
|
102,465
|
|||||
Other
receivables from government partners, net
|
49,527
|
40,902
|
|||||
Prepaid
expenses and other current assets
|
76,181
|
87,507
|
|||||
Deferred
income taxes
|
31,724
|
14,841
|
|||||
Total
current assets
|
1,772,917
|
1,336,679
|
|||||
Property,
equipment and capitalized software, net
|
62,484
|
62,005
|
|||||
Goodwill
|
189,470
|
189,470
|
|||||
Other
intangibles, net
|
18,132
|
18,855
|
|||||
Restricted
investment assets
|
60,939
|
53,382
|
|||||
Other
assets
|
1,529
|
1,839
|
|||||
Total
Assets
|
$
|
2,105,471
|
$
|
1,662,230
|
|||
Liabilities
and Stockholders' Equity
|
|||||||
Current
Liabilities:
|
|||||||
Medical
benefits payable
|
$
|
556,947
|
$
|
465,581
|
|||
Unearned
premiums
|
232,055
|
23,806
|
|||||
Accounts
payable
|
6,982
|
8,015
|
|||||
Other
accrued expenses
|
143,498
|
172,043
|
|||||
Other
payables to government partners
|
36,083
|
104,076
|
|||||
Taxes
payable
|
22,298
|
13,181
|
|||||
Current
portion of long-term debt
|
1,600
|
1,600
|
|||||
Funds
held for the benefit of members
|
304,034
|
113,652
|
|||||
Other
current liabilities
|
418
|
418
|
|||||
Total
current liabilities
|
1,303,915
|
902,372
|
|||||
Long-term
debt
|
153,661
|
154,021
|
|||||
Deferred
income taxes
|
35,752
|
34,666
|
|||||
Other
liabilities
|
8,082
|
8,116
|
|||||
Commitments
and contingencies (see Note 6)
|
-
|
-
|
|||||
Total
liabilities
|
1,501,410
|
1,099,175
|
|||||
Stockholders'
Equity:
|
|||||||
Preferred
stock, $0.01 par value (20,000,000 authorized, no shares issued
or
outstanding)
|
-
|
-
|
|||||
Common
stock, $0.01 par value (100,000,000 authorized, 41,164,939 and
40,900,134
shares
|
|||||||
issued
and outstanding at March 31, 2007 and December 31, 2006,
respectively)
|
412
|
409
|
|||||
Paid-in
capital
|
310,053
|
294,443
|
|||||
Retained
earnings
|
293,532
|
268,559
|
|||||
Accumulated
other comprehensive income
|
64
|
(356
|
)
|
||||
Total
stockholders' equity
|
604,061
|
563,055
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
2,105,471
|
$
|
1,662,230
|
|
Three
Months
|
|
|||||
|
|
Ended
March 31,
|
|||||
|
2007
|
|
2006
|
||||
Revenues:
|
|||||||
Premium
|
$
|
1,221,766
|
$
|
722,221
|
|||
Investment
and other income
|
17,666
|
8,164
|
|||||
Total
revenues
|
1,239,432
|
730,385
|
|||||
Expenses:
|
|||||||
Medical
benefits
|
1,024,171
|
599,084
|
|||||
Selling,
general and administrative
|
166,556
|
97,265
|
|||||
Depreciation
and amortization
|
4,566
|
3,090
|
|||||
Interest
|
3,460
|
3,384
|
|||||
Total
expenses
|
1,198,753
|
702,823
|
|||||
Income
before income taxes
|
40,679
|
27,562
|
|||||
Income
tax expense
|
15,706
|
10,794
|
|||||
Net
income
|
$
|
24,973
|
$
|
16,768
|
|||
Net
income per common share (see Note 1):
|
|||||||
Net
income per common share — basic
|
$
|
0.62
|
$
|
0.43
|
|||
Net
income per common share — diluted
|
$
|
0.60
|
$
|
0.42
|
|
Three
Months
|
||||||
|
Ended
March 31,
|
||||||
|
2007
|
2006
|
|||||
Cash
from operating activities:
|
|||||||
Net
income
|
$
|
24,973
|
$
|
16,768
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization expense
|
4,566
|
3,090
|
|||||
Loss
on disposal of fixed assets
|
-
|
1,250
|
|||||
Equity-based
compensation expense, net of tax benefits
|
10,548
|
6,777
|
|||||
Incremental
tax benefit from option exercises
|
(4,928
|
)
|
(1,027
|
)
|
|||
Deferred
taxes, net
|
(15,797
|
)
|
(25,667
|
)
|
|||
Changes
in operating accounts:
|
|||||||
Premiums
and other receivables
|
(16,968
|
)
|
971
|
||||
Other
receivables from government partners
|
(8,625
|
)
|
(107,868
|
)
|
|||
Prepaid
expenses and other current assets
|
11,326
|
1,750
|
|||||
Medical
benefits payable
|
91,366
|
105,157
|
|||||
Unearned
premiums
|
208,249
|
193,384
|
|||||
Accounts
payable
|
(1,033
|
)
|
1,758
|
||||
Other
accrued expenses
|
(28,545
|
)
|
5,337
|
||||
Other
payables to government partners
|
(67,993
|
)
|
-
|
||||
Taxes
payable, net
|
9,117
|
35,344
|
|||||
Other,
net
|
734
|
(12,437
|
)
|
||||
Net
cash provided by operating activities
|
216,990
|
224,587
|
|||||
Cash
from investing activities:
|
|||||||
Proceeds
from sale and maturities of investments
|
1,106
|
775
|
|||||
Purchases
of investments
|
(25,827
|
)
|
(54,370
|
)
|
|||
Purchases
and dispositions of restricted investments, net
|
(7,557
|
)
|
(14,341
|
)
|
|||
Additions
to property, equipment and capitalized software, net
|
(4,322
|
)
|
(11,665
|
)
|
|||
Net
cash used in investing activities
|
(36,600
|
)
|
(79,601
|
)
|
|||
Cash
from financing activities:
|
|||||||
Proceeds
from common stock issuance, net
|
156
|
18,830
|
|||||
Proceeds
from options exercised
|
6,337
|
1,711
|
|||||
Incremental
tax benefit from option exercises
|
4,928
|
1,027
|
|||||
Purchase
of treasury stock
|
(1,426
|
)
|
-
|
||||
Payments
on debt
|
(400
|
)
|
(400
|
)
|
|||
Funds
held for the benefit of members
|
190,382
|
201,810
|
|||||
Net
cash provided by financing activities
|
199,977
|
222,978
|
|||||
Cash
and cash equivalents:
|
|||||||
Increase
(decrease) during period
|
380,367
|
367,964
|
|||||
Balance
at beginning of period
|
964,542
|
421,766
|
|||||
Balance
at end of period
|
$
|
1,344,909
|
$
|
789,730
|
|||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION —
|
|||||||
Cash
paid for taxes
|
$
|
17,040
|
$
|
240
|
|||
Cash
paid for interest
|
$
|
3,264
|
$
|
3,295
|
1.
|
ORGANIZATION
AND BASIS OF PRESENTATION
|
Three
Months Ended
March
31,
|
|||||||
(unaudited)
|
|||||||
2007
|
2006
|
||||||
Numerator:
|
|||||||
Net
income - basic and diluted
|
$
|
24,973
|
$
|
16,768
|
|||
Denominator:
|
|||||||
Weighted
average common shares outstanding - basic
|
40,163,234
|
38,590,948
|
|||||
Adjustment
for unvested restricted common shares
|
401,963
|
601,269
|
|||||
Dilutive
effect of stock options (as determined by the treasury stock
method)
|
1,023,159
|
767,385
|
|||||
Weighted
average common shares outstanding - diluted
|
41,588,356
|
39,959,602
|
|||||
Net
income per common share:
|
|||||||
Net
income per common share - basic
|
$
|
0.62
|
$
|
0.43
|
|||
Net
income per common share - diluted
|
$
|
0.60
|
$
|
0.42
|
2. |
SEGMENT
REPORTING
|
Three
Months
Ended
March 31,
|
|||||||
(Unaudited)
|
|||||||
2007
|
2006
|
||||||
Premium
revenue:
|
|||||||
Medicaid
|
$
|
636,394
|
$
|
353,475
|
|||
Medicare
|
585,372
|
368,746
|
|||||
Total
|
1,221,766
|
722,221
|
|||||
Medical
benefits expense:
|
|||||||
Medicaid
|
529,306
|
279,192
|
|||||
Medicare
|
494,865
|
319,892
|
|||||
Total
|
1,024,171
|
599,084
|
|||||
Gross
profit:
|
|||||||
Medicaid
|
107,088
|
74,283
|
|||||
Medicare
|
90,507
|
48,854
|
|||||
Total
|
$
|
197,595
|
$
|
123,137
|
3. |
EQUITY-BASED
COMPENSATION
|
4. |
INCOME
TAXES
|
5. |
CREDIT
AGREEMENT
|
6. |
COMMITMENTS
AND CONTINGENCIES
|
· |
the
potential expiration, cancellation or suspension of our state or
federal
contracts;
|
· |
lack
of prior operating history, including lack of experience with network
providers and health benefits management, in expansion markets, including
Georgia, Missouri and Ohio;
|
· |
our
lack of significant operating history in our Medicare PDP and PFFS
programs and potential inability to accurately predict the number
of
members in these programs;
|
· |
our
ability to accurately predict and effectively manage health benefits,
drug
costs and other operating expenses, including our ability to reinsure
certain risks related to medical
expenses;
|
· |
the
potential for confusion in the marketplace concerning PDP and PFFS
programs resulting from, among other things, the proliferation of
health
care options facing Medicare beneficiaries and the complexity of
the PDP
and PFFS offerings, including the benefit structures and the relative
lack
of awareness of these programs among health care providers, pharmacists
and patient advocates;
|
· |
our
ability to accurately estimate incurred but not reported medical
costs;
|
· |
risks
associated with future changes in healthcare laws, including repeal
or
modification of the Medicare Modernization Act of 2003 or any portion
thereof;
|
· |
potential
reductions in funding for government healthcare programs, including
reductions in funding resulting from the escalating costs of prescription
drugs;
|
· |
risks
associated with periodic government reimbursement rate adjustments,
the
timing of the CMS risk-corridor payments to PDP providers and the
accounting treatment for the PDP
programs;
|
· |
our
ability to develop processes and systems to support our operations
and
future growth;
|
· |
regulatory
changes and developments, including potential marketing restrictions
or
sanctions and premium recoupment;
|
· |
potential
fines, penalties or operating restrictions resulting from regulatory
audits, examinations, investigations or other
inquiries;
|
· |
risks
associated with our acquisition
strategy;
|
· |
risks
associated with our efforts to expand into additional states and
counties;
|
· |
risks
associated with our substantial debt obligations;
and
|
· |
risks
associated with our rapid growth, including our ability to attract
and
retain qualified management
personnel.
|
March
31,
2007
|
March
31,
2006
|
||||||
Medicaid
|
|||||||
TANF
|
864,000
|
590,000
|
|||||
S-CHIP
|
206,000
|
89,000
|
|||||
SSI
|
70,000
|
59,000
|
|||||
FHP
|
31,000
|
27,000
|
|||||
1,171,000
|
765,000
|
||||||
Medicare
|
|||||||
MA
|
131,000
|
74,000
|
|||||
PDP
|
970,000
|
703,500
|
|||||
1,101,000
|
777,500
|
||||||
Total
|
2,272,000
|
1,542,500
|
Three
Months
Ended
March 31,
|
|||||||
2007
|
2006
|
||||||
Statement
of Operations Data:
|
|||||||
Revenues
|
|||||||
Premium
|
98.6
|
%
|
98.9
|
%
|
|||
Investment
and other income
|
1.4
|
%
|
1.1
|
%
|
|||
Total
revenues
|
100.0
|
%
|
100.0
|
%
|
|||
Expenses
|
|||||||
Medical
benefits
|
82.6
|
%
|
82.0
|
%
|
|||
Selling,
general and administrative
|
13.4
|
%
|
13.3
|
%
|
|||
Depreciation
and amortization
|
0.4
|
%
|
0.4
|
%
|
|||
Interest
|
0.3
|
%
|
0.5
|
%
|
|||
Total
expenses
|
96.7
|
%
|
96.2
|
%
|
|||
Income
before income taxes
|
3.3
|
%
|
3.8
|
%
|
|||
Income
tax expense
|
1.3
|
%
|
1.5
|
%
|
|||
Net
Income
|
2.0
|
%
|
2.3
|
%
|
As
of March 31,
|
||||||||||
2007
|
2006
|
%
Change
|
||||||||
Membership
|
||||||||||
Medicaid
|
1,171,000
|
765,000
|
53.1
|
%
|
||||||
Medicare
|
1,101,000
|
777,500
|
41.6
|
%
|
||||||
Total
Membership
|
2,272,000
|
1,542,500
|
47.3
|
%
|
For
the Three Months Ended March 31,
|
|||||||||||||
2007
|
%
of Revenues
|
2006
|
%
of Revenues
|
||||||||||
Revenues
|
|||||||||||||
Medicaid
|
$
|
636.4
|
52.1%
|
|
$
|
353.5
|
48.9
|
%
|
|||||
Medicare
|
585.4
|
47.9%
|
|
368.7
|
51.1
|
%
|
|||||||
Total
Revenues
|
$
|
1,221.8
|
100.0%
|
|
$
|
722.2
|
100.0
|
%
|
Three
Months Ended March 31,
|
|||||||||||||
2007
|
MBR
|
2006
|
MBR
|
||||||||||
Medical
Benefit Expenses
|
|||||||||||||
Medicaid
|
$
|
529.3
|
83.2%
|
|
$
|
279.2
|
79.0
|
%
|
|||||
Medicare
|
494.9
|
84.5%
|
|
319.9
|
86.8
|
%
|
|||||||
Total
Expenses
|
$
|
1,024.2
|
$
|
599.1
|
Three
Months Ended March 31,
|
||||||||||
2007
|
2006
|
%
Change
|
||||||||
Selling,
general and administrative expenses (SG&A)
|
||||||||||
SG&A
|
$
|
166.6
|
$
|
97.3
|
71.2
|
%
|
||||
SG&A
expense to total revenue ratio
|
13.4
|
%
|
13.3
|
%
|
Three
Months Ended March 31,
|
||||||||||
2007
|
2006
|
%
Change
|
||||||||
Income
Tax Expense
|
||||||||||
Income
tax expense
|
$
|
15.7
|
$
|
10.8
|
45.4
|
%
|
||||
Effective
tax rate
|
38.6
|
%
|
39.2
|
%
|
Three
Months Ended March 31,
|
|||||||
2007
|
2006
|
||||||
Net
cash provided by operations
|
$
|
216,990
|
$
|
224,587
|
|||
Net
cash used in investing activities
|
(36,600
|
)
|
(79,601
|
)
|
|||
Net
cash provided by financing activities
|
199,977
|
222,978
|
INCORPORATED
BY REFERENCE
|
||||
Exhibit
Number
|
Description
|
Form
|
Filing
Date with
SEC
|
Exhibit
Number
|
2.1
|
Agreement
and Plan of Merger, dated as of February 12, 2004, between WellCare
Holdings, LLC and WellCare Group, Inc.
|
S-1/A
|
June
8, 2004
|
2.1
|
3.1
|
Amended
and Restated Certificate of Incorporation
|
10-Q
|
August
13, 2004
|
3.1
|
3.2
|
Amended
and Restated Bylaws of WellCare Health Plans, Inc.
|
10-Q
|
August
13, 2004
|
3.2
|
4.1
|
Specimen
common stock certificate
|
S-1/A
|
June
29, 2004
|
4.1
|
10.1
|
Amendment
number 1 to Medicaid Advantage Model Contract No. C021236 between
the New
York State Department of Health and WellCare of New York, Inc.
|
8-K
|
January
12, 2007
|
10.1
|
10.2
|
Amendment
number 1 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
(CFC)
|
8-K
|
January
12, 2007
|
10.2
|
10.3
|
Amendment
number 2 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
|
8-K
|
January
12, 2007
|
10.3
|
10.4
|
Amendment
number 1 to the Medical Services Agreement between the Florida Healthy
Kids Corporation and HealthEase of Florida, Inc. and WellCare of
Florida,
Inc. (f/k/a Well Care HMO, Inc.) d/b/a Staywell Health Plan of
Florida
|
8-K
|
January
12, 2007
|
10.4
|
10.5
|
Amendment
number 3 to Medicaid Managed Care and Family Health Plus Model Contract,
between the New York State Department of Health and WellCare of New
York,
Inc.
|
8-K
|
February
1, 2007
|
10.1
|
10.6
|
Amendment
number 1 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
(ABD)
|
8-K
|
February
21, 2007
|
10.1
|
10.7
|
Amendment
number 2 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
(ABD).
|
8-K
|
March
6, 2007
|
10.1
|
10.8
|
Amendment
number 2 to the Medicaid Managed Care - Eastern Region contract between
the State of Missouri Office of Administration Division of Purchasing
and
Materials Management and Harmony Health Plan of Illinois,
Inc.
|
8-K
|
March
30, 2007
|
10.1
|
10.9
|
Amendment
number 3 to the Medicaid Managed Care - Eastern Region contract between
the State of Missouri Office of Administration Division of Purchasing
and
Materials Management and Harmony Health Plan of Illinois,
Inc.
|
8-K
|
March
30, 2007
|
10.2
|
10.10
|
Amendment
to Medicaid Advantage Care Contract between the City of New York
Department of Health and Mental Hygiene and WellCare of New York,
Inc.
|
8-K
|
March
30, 2007
|
10.3
|
10.11
|
Amendment
number 2 to Medicaid Advantage Contract No. C021236 between the New
York
State Department of Health and WellCare of New York, Inc.
|
8-K
|
March
30, 2007
|
10.4
|
*
Filed herewith
|
WELLCARE
HEALTH PLANS, INC.
|
|||
By:
|
/ s / Paul L.
Behrens
|
||
Paul
L. Behrens, Senior Vice President and Chief Financial
Officer
|
|||
(Principal
Financial and Accounting Officer and duly authorized
officer)
|
INCORPORATED
BY REFERENCE
|
||||
Exhibit
Number
|
Description
|
Form
|
Filing
Date with
SEC
|
Exhibit
Number
|
2.1
|
Agreement
and Plan of Merger, dated as of February 12, 2004, between WellCare
Holdings, LLC and WellCare Group, Inc.
|
S-1/A
|
June
8, 2004
|
2.1
|
3.1
|
Amended
and Restated Certificate of Incorporation
|
10-Q
|
August
13, 2004
|
3.1
|
3.2
|
Amended
and Restated Bylaws of WellCare Health Plans, Inc.
|
10-Q
|
August
13, 2004
|
3.2
|
4.1
|
Specimen
common stock certificate
|
S-1/A
|
June
29, 2004
|
4.1
|
10.1
|
Amendment
number 1 to Medicaid Advantage Model Contract No. C021236 between
the New
York State Department of Health and WellCare of New York, Inc.
|
8-K
|
January
12, 2007
|
10.1
|
10.2
|
Amendment
number 1 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
(CFC)
|
8-K
|
January
12, 2007
|
10.2
|
10.3
|
Amendment
number 2 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
|
8-K
|
January
12, 2007
|
10.3
|
10.4
|
Amendment
number 1 to the Medical Services Agreement between the Florida
Healthy
Kids Corporation and HealthEase of Florida, Inc. and WellCare of
Florida,
Inc. (f/k/a Well Care HMO, Inc.) d/b/a Staywell Health Plan of
Florida
|
8-K
|
January
12, 2007
|
10.4
|
10.5
|
Amendment
number 3 to Medicaid Managed Care and Family Health Plus Model
Contract,
between the New York State Department of Health and WellCare of
New York,
Inc.
|
8-K
|
February
1, 2007
|
10.1
|
10.6
|
Amendment
number 1 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
(ABD)
|
8-K
|
February
21, 2007
|
10.1
|
10.7
|
Amendment
number 2 to the 2007 Northeast Regional Provider Agreement, between
the
Ohio Department of Job and Family Services and WellCare of Ohio,
Inc.
(ABD).
|
8-K
|
March
6, 2007
|
10.1
|
10.8
|
Amendment
number 2 to the Medicaid Managed Care - Eastern Region contract
between
the State of Missouri Office of Administration Division of Purchasing
and
Materials Management and Harmony Health Plan of Illinois,
Inc.
|
8-K
|
March
30, 2007
|
10.1
|
10.9
|
Amendment
number 3 to the Medicaid Managed Care - Eastern Region contract
between
the State of Missouri Office of Administration Division of Purchasing
and
Materials Management and Harmony Health Plan of Illinois,
Inc.
|
8-K
|
March
30, 2007
|
10.2
|
10.10
|
Amendment
to Medicaid Advantage Care Contract between the City of New York
Department of Health and Mental Hygiene and WellCare of New York,
Inc.
|
8-K
|
March
30, 2007
|
10.3
|
10.11
|
Amendment
number 2 to Medicaid Advantage Contract No. C021236 between the
New York
State Department of Health and WellCare of New York, Inc.
|
8-K
|
March
30, 2007
|
10.4
|
*
Filed herewith
|