WellCare Fourth Quarter Net Income up 199% Year-over-Year on Membershi

WellCare Fourth Quarter Net Income up 199% Year-over-Year on Membership Growth of 35%

    Business Editors/Healthcare Writers

    TAMPA, Fla.--(BUSINESS WIRE)--Feb. 14, 2005--WellCare Health Plans, Inc. (NYSE: WCG):

--	Membership increased to 747,000 as of December 31, 2004, representing 35% growth year-over-year, including 19% organic growth
--	Total fourth quarter revenues increased 42% over prior year fourth quarter to $397 million
--	Continued execution of Medicare expansion strategy resulted in 5% Medicare membership growth in fourth quarter and 10% growth during 2004

    WellCare Health Plans, Inc. announced results for the fourth quarter and year ended December 31, 2004.
    Net income for the fourth quarter of 2004 increased 199% to $17.7 million, or $0.46 per diluted share, based on 38.1 million weighted average shares outstanding, compared to $5.9 million, or $0.17 per pro forma diluted share, based on 25.2 million pro forma weighted average shares outstanding in the prior year period. Total revenues increased 42% for the fourth quarter of 2004 to $397.3 million compared to $279.7 million for the fourth quarter of 2003.
    Net income for the year ended December 31, 2004 increased 109% to $49.3 million, or $1.56 per diluted share, based on 31.6 million weighted average shares outstanding, compared to $23.5 million, or $0.73 per pro forma diluted share, based on 23.9 million pro forma weighted average shares outstanding in 2003. Total revenues for the year ended December 31, 2004 increased 33% to $1,395.2 million compared to $1,046.0 million for the year ended December 31, 2003. Year-over-year membership increased 35% to 747,000 as of December 31, 2004, representing 19% organic growth and 16% growth attributable to the acquisition of Harmony Health Plans in June 2004.
    On December 22, 2004, WellCare successfully completed a public offering of 7,500,000 shares of common stock at $32.00 per share. Of the shares offered, 1,500,000 shares were sold by the Company with the remaining 6,000,000 being sold by selling stockholders. The net proceeds to the Company of approximately $44.9 million, after deducting underwriting discounts, commissions and other offering costs, will be used to provide additional long-term capital to support the growth of its business. WellCare did not receive any of the proceeds from the shares of common stock sold by the selling stockholders.
    In commenting on these results, Todd S. Farha, President and Chief Executive Officer of WellCare, stated, "We continue to grow by arranging for quality care for our members while helping to achieve cost savings for our government partners. Our strong performance in the fourth quarter was a direct result of our ability to manage effectively the healthcare needs of our Medicaid and Medicare beneficiaries in the markets we serve. During the quarter, we grew membership in all five of our Medicaid markets, a validation of the healthy partnerships we are building throughout the communities we serve."

    Results of Operations for the Fourth Quarter

    Total Revenue: Total revenue for the fourth quarter of 2004 increased $117.6 million, or 42%, to $397.3 million compared to $279.7 million for the same period last year.
    Medical Benefits Expense: Medical benefits expense for the fourth quarter of 2004 was $313.6 million, representing 79.3% of premium revenues, compared to $227.5 million, representing 81.5% of premium revenues, for the same period last year.
    Selling, General and Administrative Expense: Selling, general and administrative expense was $49.2 million for the fourth quarter of 2004, representing 12.4% of total revenues, compared to $39.0 million, or 13.9% of total revenues, for the same period last year. The Company continues its investment in technology, sales and marketing efforts and general spending necessary to support growth.
    Net Income: Net income for the fourth quarter of 2004 was $17.7 million, or $0.46 per diluted share, based on 38.1 million weighted average shares outstanding, compared to $5.9 million, or $0.17 per pro forma diluted share, based on 25.2 million pro forma weighted average shares outstanding for the same period last year.

    Results of Operations for the Year Ended December 31, 2004

    Total Revenue: Total revenue for the year ended December 31, 2004 increased $349.2 million, or 33.4%, to $1,395.2 million compared to $1,046.0 million for 2003.
    Medical Benefits Expense: Medical benefits expense for the year ended December 31, 2004 was $1,125.6 million, representing 80.9% of premium revenues, compared to $861.1 million, representing 82.6% of premium revenues, for 2003.
    Selling, General and Administrative Expense: Selling, general and administrative expense was $171.3 million for the year ended December 31, 2004, representing 12.3% of total revenues, compared to $126.1 million, or 12.1% of total revenues, for 2003. WellCare expects its current selling, general and administrative expense ratio to stabilize at these levels as the Company continues to invest in sales and marketing efforts, technology and other spending on infrastructure necessary to sustain growth efforts.
    Net Income: Net income for the year ended December 31, 2004 was $49.3 million, or $1.56 per diluted share, compared to $23.5 million, or $0.73 per pro forma diluted share, for 2003. Earnings per share for the year ended December 31, 2004 was positively affected by $0.03 per share due to prepayments of certain long-term indebtedness in the second quarter and due to the hurricanes that impacted Florida during the third quarter.

    Balance Sheet and Cash Flow Highlights

    As of December 31, 2004, the Company had cash and cash equivalents of $397.6 million as well as investments classified as current assets of $75.5 million. For the year ended December 31, 2004, the Company had positive cash flow from operations of $61.7 million on an adjusted basis excluding the change in unearned premiums of $12.9 million. Cash provided by operations was $48.8 million on a GAAP basis, which does not include this unearned premiums adjustment. The Company believes that excluding changes in unearned premiums is a better measure of cash flow from operations, as changes in unearned premiums are strictly a function of the timing of cash receipts from federal and state agencies at the end of a period.
    Days in claims payable was 56 at the end of the fourth quarter of 2004 compared to 55 at the end of the third quarter of 2004, principally due to the timing of the claims payment process at quarter end.

Membership and Other Operating Statistics (1):

Dec. 31, Dec. 31, 2004 2003 ---------- ---------- Florida 532,000 475,000 New York 69,000 56,000 Connecticut 34,000 24,000 Illinois 67,000 - Indiana 45,000 - ---------- ---------- Total 747,000 555,000 ========== ==========

(1) Louisiana enrollment, which began in November, was less than 100 members as of December 31, 2004.

Dec. 31, Dec. 31, 2004 2003 ---------- ---------- TANF 535,000 376,000 SSI 57,000 51,000 SCHIP 94,000 76,000 FHP 15,000 9,000 Medicare 46,000 42,000 Commercial - 1,000 ---------- ---------- Total 747,000 555,000 ========== ==========

Three Months Ended Year Ended Dec. 31, Dec. 31, --------------------- --------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Medical Benefits Ratio 79.3% 81.5% 80.9% 82.6% Selling, General and Administrative Expense Ratio 12.4% 13.9% 12.3% 12.1%

Dec. 31, Sept. 30, 2004 2004 ---------- ---------- Days in Claims Payable 56 55

    Guidance

    The Company confirmed its 2005 net income guidance in the range of $57 to $60 million, based on anticipated revenues of $1.7 billion, and earnings per fully diluted share of $1.43 to $1.50 assuming 40 million weighted average shares outstanding. WellCare also issued first quarter earnings per share guidance of $0.23 to $0.25 on revenues of $403 to $408 million.
    In closing, Mr. Farha stated, "We are pleased with our results in 2004. We have achieved many milestones, including our initial public offering and the acquisition of Harmony Health Plans. We continue to execute on our strategy emphasizing strong organic growth. In addition, during the second half of 2004, we successfully leveraged our Medicaid operations to expand our Medicare business. Our momentum in 2004 provides confidence in our ability to continue our strong performance in 2005 and beyond."

    Pro Forma Earnings Per Diluted Share

    Pro forma earnings per diluted share, a non-GAAP financial measure, is calculated giving effect to the Company's change in capital structure effected in connection with its initial public offering. Pro forma earnings per diluted share is reconciled to GAAP net income per common unit in the accompanying condensed consolidated statements of income. Because pro forma earnings per share is not a measurement determined in accordance with accounting principles generally accepted in the United States of America and is thus susceptible to varying calculations, it may not be comparable to other similarly titled measures of other companies.

    Conference Call

    The live broadcast of WellCare's year end conference call will begin at 5:30 p.m. Eastern time on February 14, 2005. A 30-day online replay will be available beginning approximately one hour following the conclusion of the live broadcast. A link to these events can be found on the Company's website at www.wellcare.com, under the Investor Relations section, or at www.fulldisclosure.com.

    About WellCare Health Plans, Inc.

    WellCare Health Plans, Inc. provides managed care services targeted exclusively to government-sponsored healthcare programs, focusing on Medicaid and Medicare. Headquartered in Tampa, Florida, WellCare serves 747,000 members in Florida, New York, Connecticut, Illinois, Indiana and Louisiana. For more information about WellCare, please visit the Company's website at www.wellcare.com.

    Cautionary Statement Regarding Forward-Looking Statements

    This release contains "forward-looking" statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," and similar expressions, including statements related to WellCare's expected 2005 financial results, are forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause WellCare's actual future results to differ materially from those projected or contemplated in the forward-looking statements. These risks and uncertainties include, but are not limited to, the potential expiration, cancellation or suspension of WellCare's state or federal contracts; WellCare's ability to accurately predict and effectively manage health benefits and other operating expenses; WellCare's ability to accurately estimate incurred but not reported medical costs; risks associated with future changes in healthcare laws; potential reductions in funding for government healthcare programs; regulatory changes or developments, including that the state of Florida may seek to recoup premiums incorrectly paid by them or that the state of Connecticut may seek to restrict the ability to engage in marketing activities; risks associated with WellCare's acquisition strategy; risks associated with WellCare's substantial debt obligations; and risks associated with WellCare's business operations, including its ability to attract and retain qualified management personnel. Additional information concerning these and other important risks and uncertainties can be found under the heading "Risk Factors" in the prospectus from WellCare's secondary public offering, as filed with the Securities and Exchange Commission on December 17, 2004. WellCare specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, dollars in thousands, except per share and unit data)

Three Months Ended Year Ended Dec. 31, Dec. 31, --------------------- --------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Revenues: Premium $395,281 $279,168 $1,390,896 $1,042,852 Investment and other income 2,011 552 4,307 3,130 ---------- ---------- ---------- ---------- Total revenues 397,292 279,720 1,395,203 1,045,982

Expenses: Medical benefits 313,604 227,501 1,125,560 861,053 Selling, general and administrative 49,182 38,986 171,257 126,106 Depreciation and amortization 2,112 1,864 7,715 8,159 Interest 3,140 3,721 10,165 10,172 ---------- ---------- ---------- ---------- Total expenses 368,038 272,072 1,314,697 1,005,490 ---------- ---------- ---------- ----------

Income before income taxes 29,254 7,648 80,506 40,492 Income tax expense 11,555 1,734 31,256 16,955 ---------- ---------- ---------- ---------- Net income $17,699 5,914 $49,250 23,537 ========== ==========

Class A common unit yield (1,560) (5,997) ---------- ----------

Net income attributable to common units $4,354 $17,540 ========== ==========

Net income per share: Basic $0.50 $1.70 Diluted $0.46 $1.56

Net income attributable per common unit: Basic $0.16 $0.66 Diluted $0.14 $0.60

Pro forma net income attributable per share (1): Basic $0.20 $0.82 Diluted $0.17 $0.73

Pro forma weighted average common shares outstanding (1): Basic 22,268,047 21,466,300 Diluted 25,214,134 23,937,664

(1) Pro forma net income attributable per share is calculated as net income divided by pro forma weighted average common shares outstanding and reflects the pro forma effects of automatic conversion of all outstanding common units into shares of the Company's common stock effective upon the closing of the Company's initial public offering, but does not include any common stock issued in conjunction with the initial public offering. The Company's historical capital structure is not indicative of its current structure due to the automatic conversion of all units into common stock, the conversion of the Class A Common Unit Yield into common stock, and issuance of new common stock concurrent with the closing of the Company's initial public offering and secondary public offering. Accordingly, historical basic and diluted net income attributable per common unit should not be used as an indicator of the future earnings per common share.

WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, dollars in thousands, except share and unit data)

Dec. 31, Dec. 31, 2004 2003 ---------- ---------- ASSETS

Current Assets: Cash and cash equivalents $397,627 $237,321 Investments 75,515 33,778 Premiums and other receivables, net 52,170 12,792 Prepaid expenses and other current assets 6,119 3,663 Income taxes receivable 1,615 -- Deferred income taxes 15,362 12,036 ---------- ---------- Total current assets 548,408 299,590

Property and equipment, net 12,587 4,717 Goodwill 180,848 158,725 Other intangibles, net 25,441 12,403 Restricted investment assets 31,473 21,392 Other assets 279 280 ---------- ---------- TOTAL ASSETS $799,036 $497,107 ========== ==========

LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY

Current Liabilities: Medical benefits payable $190,595 $148,297 Unearned premiums 63,449 76,248 Accounts payable and accrued expenses 35,520 29,830 Income taxes payable -- 143 Deferred income taxes -- 1,252 Current portion of notes payable to related party -- 48,170 Current portion of long-term debt 1,600 -- ---------- ---------- Total current liabilities 291,164 303,940

Note payable to related party 25,000 71,568 Long-term debt 156,901 16,017 Accrued interest 1,349 1,782 Deferred income taxes 14,818 3,971 Other liabilities 1,173 252 ---------- ---------- Total liabilities 490,405 397,530

Commitments and contingencies

Stockholders' and Members' Equity: Preferred Units, no par value (no units issued or outstanding) -- -- Class A Common Units, no par value (23,507,839 units issued and outstanding) -- -- Class B Common Units, no par value (no units issued and outstanding) -- -- Class C Common Units, no par value (4,807,508 units issued and outstanding) -- -- 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, 38,590,655 shares issued and outstanding) 386 -- Paid-in capital 230,804 71,382 Retained earnings 77,444 28,194 Accumulated other comprehensive income (3) 1 ---------- ---------- Total stockholders' and members' equity 308,631 99,577 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY $799,036 $497,107 ========== ==========

WELLCARE HEALTH PLANS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)

Year Ended Dec. 31, --------------------- 2004 2003 ---------- ---------- Cash from operating activities: Net income $49,250 $23,537 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 7,715 8,159 Equity-based compensation expense 2,044 746 Accreted interest 378 903 Provision for doubtful receivables 1,195 4,247 Net gain on loan prepayment (2,697) -- Changes in operating accounts, net of effect of acquisition: Premiums and other receivables (23,408) 6,048 Prepaid expenses and other current assets (6,680) (1,194) Deferred income tax asset (2,221) (3,139) Medical benefits payable 24,138 34,627 Unearned premiums (12,901) 52,584 Accounts payable and other accrued expenses 2,889 149 Accrued interest (433) 530 Taxes payable and deferred liability 9,913 (4,409) Other, net (420) 10 ---------- ---------- Net cash provided by operations 48,762 122,798 ---------- ----------

Cash from investing activities: Purchase of business (36,542) -- Proceeds from sale of investments 103,434 10,450 Purchases of investments (145,174) (25,012) Purchases and depositions of restricted investments (9,505) (709) Additions to property and equipment, net (8,679) (3,042) ---------- ---------- Net cash used in investing activities (96,466) (18,313) ---------- ----------

Cash from financing activities: Contribution of capital 95 400 Proceeds from debt issuance, net 159,200 14,568 Payments on debt (108,833) (28,916) Proceeds from options exercised 82 -- Proceeds from public offerings, net 157,466 -- ---------- ---------- Net cash provided by (used in) financing activities 208,010 (13,948) ---------- ---------- Net increase in cash and cash equivalents 160,306 90,537 Cash and cash equivalents at beginning of period 237,321 146,784 ---------- ---------- Cash and cash equivalents at end of period $397,627 $237,321 ========== ==========

Supplemental disclosures of cash flow information: Cash paid for taxes $27,151 $16,101 ========== ========== Cash paid for interest $11,343 $7,416 ========== ==========

--30--CB/na*

CONTACT: WellCare Health Plans, Inc. Jeffrey Potter, 813-290-6313 Jeff.Potter@wellcare.com

KEYWORD: FLORIDA INDUSTRY KEYWORD: MEDICAL EARNINGS CONFERENCE CALLS SOURCE: WellCare Health Plans, Inc.

Copyright Business Wire 2005