BETHESDA, Md.--(BUSINESS WIRE)-- Coventry Health Care, Inc. (NYSE: CVH) today reported consolidated operating results for the quarter ended September 30, 2011. Operating revenues totaled $3.0 billion for the quarter with net earnings of $122.7 million, or earnings per diluted share (EPS) of $0.84. These results include EPS of $0.02 from the Medicare Advantage Private Fee-for-Service (MA-PFFS) product.
For the nine months ended September 30, 2011, total operating revenues were $9.1 billion with net earnings of $457.4 million, or $3.09 EPS. These results include EPS of $0.13 from the MA-PFFS product and EPS of $0.68 related to the definitive settlement agreement associated with the provider class action litigation in Louisiana which was approved by the court during the second quarter. Excluding the impact of MA-PFFS results(1) and the provider class action litigation adjustment(2), adjusted net earnings were $337.4 million, or $2.28 EPS.
“I am pleased with the progress the Company has made and the performance of the businesses, such that we can increase 2011 full year guidance for the third time this year,” said Allen F. Wise, chairman and chief executive officer of Coventry. “More importantly, I am optimistic about the growth opportunities for our Company. Recent examples include the pending Family Health Partners acquisition, the Kentucky Medicaid contract, and our new preferred network Part D product which was approved for 2012.”
Consolidated Highlights
- Announced an agreement to acquire the business of Family Health Partners, a Medicaid health plan with approximately 155,000 members in Kansas and 55,000 members in Missouri
- Awarded approximately 200,000 Medicaid members in Kentucky for a November 1, 2011 contract start date
- Commercial risk membership of 1,636,000, an increase of 103,000 members, or 7%, from the prior year quarter
- Commercial ASO membership of 710,000, an increase of 21,000 members sequentially
- Selling, general, and administrative expense (SG&A) as a percentage of total revenue declined by 40 basis points from the prior year quarter
- Approximately $1.15 billion of deployable free cash at the parent at September 30, 2011, net of cash required for the Family Health Partners transaction
- Repurchased 4.3 million shares for $127.5 million during the third quarter
- Total year-to-date share repurchase of 7.4 million shares for $227.7 million
Selected Third Quarter 2011 Highlights
- Health Plan Commercial Risk. As of September 30, 2011, health plan commercial risk membership was 1,636,000, an increase of 103,000 members from the prior year quarter and a decrease of 12,000 members sequentially as expected due to a portion of the State of Illinois account moving to ASO. The health plan commercial group risk medical loss ratio (MLR) was 82.5% in the quarter and 81.3% year-to-date.
- Medicare Advantage. As of September 30, 2011, Medicare Advantage Coordinated Care Plan (MA-CCP) membership was 220,000, an increase of 27,000 members from the prior year quarter. The MA-CCP MLR was 82.0% in the quarter and 83.0% year-to-date. During the third quarter, the run-out of the MA-PFFS product line contributed $0.02 EPS and has now contributed $0.13 EPS year-to-date. As previously announced, the Company did not renew this product line effective January 1, 2010.
- Medicare Part D. As of September 30, 2011, Medicare Part D membership was 1,148,000, approximately flat to the prior quarter. The Medicare Part D MLR was 76.8% in the quarter, a decrease of 220 basis points from the prior year quarter. The Medicare Part D MLR was 88.0% year-to-date, a decrease of 120 basis points from the prior year-to-date.
- Medicaid. As of September 30, 2011, Medicaid membership was 467,000, an increase of 5,000 members from the prior year quarter. The Medicaid MLR was 88.1% in the quarter and 87.0% year-to-date.
2011 Full Year Guidance
- Risk revenue of $10.90 billion to $10.98 billion
- Management services revenue of $1.180 billion to $1.195 billion
- Consolidated revenue of $12.080 billion to $12.175 billion
- Consolidated MLR of 82.0% to 82.4%
- Cost of sales expense of $277.0 million to $281.0 million
- SG&A of $2.01 billion to $2.03 billion
- Settlement of provider class action of $159.3 million, or $0.68 EPS
- Depreciation and amortization expense of $135.0 million to $137.0 million
- Other income of $83.0 million to $85.0 million
- Interest expense of $98.0 million to $99.0 million
- Tax rate of 35.5% to 36.5%
- Diluted share count of 146.5 million to 147.5 million
- GAAP EPS of $3.63 to $3.68
- $2.95 to $3.00 EPS, excluding the $0.68 litigation adjustment(2)
|
2011 GUIDANCE PROGRESSION TABLE |
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| Current Guidance | Previous Guidance | |||||||
| EPS from core businesses | $2.82 - $2.87 | $2.69 - $2.84 | ||||||
| Impact from non-recurring MA-PFFS(1) | $0.13 | $0.11 | ||||||
| EPS range including MA-PFFS | $2.95 - $3.00 | $2.80 - $2.95 | ||||||
| Impact from Q2 2011 litigation adjustment(2) | $0.68 | $0.68 | ||||||
| GAAP EPS range | $3.63 - $3.68 | $3.48 - $3.63 | ||||||
Mr. Allen F. Wise, chairman and chief executive officer of Coventry, will host a conference call at 8:30 a.m. ET on Friday, October 28, 2011. To listen to the call, dial toll-free at 888-208-1812 or, for international callers, 719-457-2713. Callers will be asked to identify themselves and their affiliations. The conference call will also be webcast from Coventry’s Investor Relations site at www.coventryhealthcare.com. Coventry asks participants on both the call and webcast to review and be familiar with its filings with the Securities and Exchange Commission. A replay of the call will be available for one week at (888) 203-1112 or, for international callers, (719) 457-0820. The access code is 9406396.
This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are defined as statements that are not historical facts and include those statements relating to future events or future financial performance, including the guidance herein. Actual performance may be significantly impacted by certain risks and uncertainties including those described in Coventry’s Annual Report on Form 10-K for the year ended December 31, 2010, and Coventry’s subsequent filings with the Securities and Exchange Commission. Among the factors that may materially affect Coventry’s business, operations or financial condition are the ability to accurately estimate and control future health care costs; the ability to increase premiums to offset increases in the Company’s health care costs; general economic conditions and disruptions in the financial markets; changes in laws or regulations or government investigations; potential state guaranty fund assessments; changes in government funding and various other risks associated with our participation in Medicare and Medicaid programs; a reduction in the number of members in the Company’s health plans; the Company’s ability to acquire additional managed care businesses and the Company’s ability to successfully integrate acquired businesses into its operations; an ability to attract new members or to increase or maintain premium rates; the non-renewal or termination of the Company’s government contracts, or unsuccessful bids for business with government agencies; failure of the Company’s independent agents and brokers to continue to market its products to employers; a failure to obtain cost-effective agreements with a sufficient number of providers that could result in higher medical costs and a decrease in membership; negative publicity regarding the managed health care industry generally or the Company in particular; a failure to effectively protect, maintain, and develop our information technology systems; periodic reviews, audits and investigations under the Company’s contracts with federal and state government agencies; litigation, including litigation based on new or evolving legal theories; volatility in the Company’s stock price and trading volume; the Company’s indebtedness, which imposes certain restrictions on its business and operations; an inability to generate sufficient cash to service the Company’s indebtedness; a substantial amount of Coventry’s cash flow is generated by its regulated subsidiaries; the Company’s certificate of incorporation and bylaws and Delaware law, which could delay, discourage or prevent a change in control of the Company that its stockholders may consider favorable; and an impairment of the Company’s intangible assets. Coventry undertakes no obligation to update or revise any forward-looking statements.
Coventry Health Care (www.coventryhealthcare.com) is a diversified national managed healthcare company based in Bethesda, Maryland, operating health plans, insurance companies, network rental and workers’ compensation services companies. Coventry provides a full range of risk and fee-based managed care products and services to a broad cross section of individuals, employer and government-funded groups, government agencies, and other insurance carriers and administrators.
| COVENTRY HEALTH CARE, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Quarters Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Operating revenues: | ||||||||||||||||
| Managed care premiums | $ | 2,680,044 | $ | 2,543,180 | $ | 8,172,974 | $ | 7,684,263 | ||||||||
| Management services | 295,499 | 292,601 | 884,553 | 878,637 | ||||||||||||
| Total operating revenues | 2,975,543 | 2,835,781 | 9,057,527 | 8,562,900 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Medical costs | 2,185,568 | 1,963,016 | 6,709,521 | 6,109,914 | ||||||||||||
| Cost of sales | 71,511 | 64,638 | 209,603 | 187,900 | ||||||||||||
| Selling, general, and administrative | 492,855 | 481,345 | 1,476,325 | 1,430,505 | ||||||||||||
| Provider class action | - | - | (159,300) | 278,000 | ||||||||||||
| Depreciation and amortization | 32,996 | 34,839 | 102,191 | 104,342 | ||||||||||||
| Total operating expenses | 2,782,930 | 2,543,838 | 8,338,340 | 8,110,661 | ||||||||||||
| Operating earnings | 192,613 | 291,943 | 719,187 | 452,239 | ||||||||||||
| Operating earnings percentage of total revenues | 6.5% | 10.3% | 7.9% | 5.3% | ||||||||||||
| Interest expense | 28,227 | 20,388 | 70,844 | 60,713 | ||||||||||||
| Other income, net | 22,913 | 20,667 | 66,201 | 59,162 | ||||||||||||
| Earnings before income taxes | 187,299 | 292,222 | 714,544 | 450,688 | ||||||||||||
| Provision for income taxes | 64,618 | 102,277 | 257,135 | 162,398 | ||||||||||||
| Net earnings | $ | 122,681 | $ | 189,945 | $ | 457,409 | $ | 288,290 | ||||||||
| Net earnings per share: | ||||||||||||||||
| Basic earnings per share | $ | 0.85 | $ | 1.30 | $ | 3.13 | $ | 1.98 | ||||||||
| Diluted earnings per share | $ | 0.84 | $ | 1.29 | $ | 3.09 | $ | 1.96 | ||||||||
| Weighted average shares outstanding, basic | 144,415 | 146,167 | 145,982 | 145,965 | ||||||||||||
| Weighted average shares outstanding, diluted | 146,286 | 147,294 | 148,048 | 147,293 | ||||||||||||
| COVENTRY HEALTH CARE, INC. | ||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (Amounts in thousands) | ||||||||||||
| September 30, | June 30, | December 31, | ||||||||||
| 2011 | 2011 | 2010 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Assets: | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 1,986,323 | $ | 1,645,616 | $ | 1,853,988 | ||||||
| Restricted cash – litigation escrow |
|
- |
150,500 |
|
- |
|||||||
| Short-term investments | 222,631 | 254,166 | 16,849 | |||||||||
| Accounts receivable, net | 257,720 | 264,846 | 276,694 | |||||||||
| Other receivables, net | 496,631 | 588,653 | 515,882 | |||||||||
| Other current assets | 262,903 | 268,389 | 371,528 | |||||||||
| Total current assets | 3,226,208 | 3,172,170 | 3,034,941 | |||||||||
| Long-term investments | 2,553,792 | 2,461,548 | 2,184,606 | |||||||||
| Property and equipment, net | 262,432 | 260,462 | 262,282 | |||||||||
| Goodwill | 2,559,605 | 2,552,348 | 2,550,570 | |||||||||
| Other intangible assets, net | 383,582 | 399,641 | 431,886 | |||||||||
| Other long-term assets | 38,277 | 37,824 | 31,300 | |||||||||
| Total assets | $ | 9,023,896 | $ | 8,883,993 | $ | 8,495,585 | ||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||
| Current liabilities: | ||||||||||||
| Medical liabilities | $ | 1,224,216 | $ | 1,278,647 | $ | 1,237,690 | ||||||
| Accounts payable and accrued liabilities | 637,245 | 702,973 | 942,226 | |||||||||
| Deferred revenue | 398,756 | 158,185 | 103,082 | |||||||||
| Current portion of long-term debt | 233,903 | 233,903 | - | |||||||||
| Total current liabilities | 2,494,120 | 2,373,708 | 2,282,998 | |||||||||
| Long-term debt | 1,584,578 | 1,584,456 | 1,599,396 | |||||||||
| Other long-term liabilities | 432,603 | 431,007 | 414,025 | |||||||||
| Total liabilities | 4,511,301 | 4,389,171 | 4,296,419 | |||||||||
| Stockholders’ equity | 4,512,595 | 4,494,822 | 4,199,166 | |||||||||
| Total liabilities and stockholders’ equity | $ | 9,023,896 | $ | 8,883,993 | $ | 8,495,585 | ||||||
| COVENTRY HEALTH CARE, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Amounts in thousands) | ||||||||
| (unaudited) | ||||||||
| Quarter Ended | Nine Months Ended | |||||||
| September 30, 2011 | September 30, 2011 | |||||||
| Cash flows from operating activities: | ||||||||
| Net earnings | $ | 122,681 | $ | 457,409 | ||||
| Adjustments to earnings: | ||||||||
| Depreciation and amortization | 32,996 | 102,191 | ||||||
| Amortization of stock compensation | 11,449 | 29,964 | ||||||
| Provider class action – release | --- | (159,300) | ||||||
| Provider class action – deferred tax adjustment | --- | 58,145 | ||||||
| Changes in assets and liabilities: | ||||||||
| Provider class action – settlement | --- | (150,500) | ||||||
| Accounts receivable, net | 7,126 | 19,830 | ||||||
| Medical liabilities | (56,723) | (16,019) | ||||||
| Accounts payable and other accrued liabilities | 20,578 | 5,187 | ||||||
| Deferred revenue | 240,571 | 295,756 | ||||||
| Other operating activities | 105,556 | 28,077 | ||||||
| Net cash flows from operating activities | 484,234 | 670,740 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures, net | (18,900) | (53,895) | ||||||
| Payments for investments, net of sales and maturities | (26,326) | (530,567) | ||||||
| Payments for acquisitions, net of cash acquired | (116) | (4,116) | ||||||
| Net cash flows from investing activities | (45,342) | (588,578) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of stock | 4,577 | 42,091 | ||||||
| Payments for repurchase of stock | (102,781) | (209,605) | ||||||
| Proceeds from issuance of debt, net | (438) | 589,867 | ||||||
| Repayment of debt | --- | (380,029) | ||||||
| Excess tax benefit from stock compensation | 457 | 7,849 | ||||||
| Net cash flows from financing activities | (98,185) | 50,173 | ||||||
| Net change in cash and cash equivalents for current period | 340,707 | 132,335 | ||||||
| Cash and cash equivalents at beginning of period | 1,645,616 | 1,853,988 | ||||||
| Cash and cash equivalents at end of period | $ | 1,986,323 | $ | 1,986,323 | ||||
| Cash and Investments: | ||||||||
| Cash and cash equivalents | $ | 1,986,323 | $ | 1,986,323 | ||||
| Short-term investments | 222,631 | 222,631 | ||||||
| Long-term investments | 2,553,792 | 2,553,792 | ||||||
| Total cash and investments | $ | 4,762,746 | $ | 4,762,746 | ||||
| COVENTRY HEALTH CARE, INC. | ||||||||||||||||||||||||
| SELECTED OPERATING STATISTICS | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
|
Q3 2011 |
Q2 2011 |
Q1 2011 |
Total 2010 |
Q4 2010 |
Q3 2010 |
|||||||||||||||||||
| Membership by Product (000s) | ||||||||||||||||||||||||
| Health Plan Commercial Risk | 1,636 | 1,648 | 1,636 | 1,641 | 1,533 | |||||||||||||||||||
| Health Plan Commercial ASO | 710 | 689 | 688 | 698 | 636 | |||||||||||||||||||
| Medicare Advantage CCP | 220 | 219 | 219 | 224 | 193 | |||||||||||||||||||
| Medicaid Risk | 467 | 467 | 468 | 468 | 462 | |||||||||||||||||||
| Health Plan Total | 3,033 | 3,023 | 3,011 | 3,031 | 2,824 | |||||||||||||||||||
| Other National ASO | 376 | 379 | 383 | 459 | 462 | |||||||||||||||||||
| Total Medical Membership | 3,409 | 3,402 | 3,394 | 3,490 | 3,286 | |||||||||||||||||||
| Medicare Part D | 1,148 | 1,150 | 1,159 | 1,628 | 1,618 | |||||||||||||||||||
| Total Membership | 4,557 | 4,552 | 4,553 | 5,118 | 4,904 | |||||||||||||||||||
| Revenues by Product Type (000s) | ||||||||||||||||||||||||
| Commercial Risk | $ | 1,497,133 | $ | 1,510,849 | $ | 1,491,099 | $ | 5,540,470 | $ | 1,475,773 | $ | 1,380,019 | ||||||||||||
| Commercial Management Services | 79,615 | 74,016 | 77,842 | 327,084 | 81,861 | 79,869 | ||||||||||||||||||
| Medicare Advantage | 591,051 | 601,240 | 591,242 | 2,114,205 | 579,329 | 522,202 | ||||||||||||||||||
| Medicaid Risk | 316,255 | 305,788 | 311,066 | 1,133,353 | 312,359 | 286,762 | ||||||||||||||||||
| Total Health Plan and Medical Services Businesses | 2,484,054 | 2,491,893 | 2,471,249 | 9,115,112 | 2,449,322 | 2,268,852 | ||||||||||||||||||
| Medicare Part D | 271,947 | 316,196 | 358,445 | 1,604,198 | 357,941 | 348,784 | ||||||||||||||||||
| Other Premiums | 26,341 | 26,709 | 26,415 | 100,130 | 24,770 | 25,054 | ||||||||||||||||||
| Other Management Services | 218,393 | 223,892 | 218,141 | 856,072 | 215,279 | 215,185 | ||||||||||||||||||
| Total Specialized Managed Care Businesses | 516,681 | 566,797 | 603,001 | 2,560,400 | 597,990 | 589,023 | ||||||||||||||||||
| Total Premiums | 2,702,727 | 2,760,782 | 2,778,267 | 10,492,356 | 2,750,172 | 2,562,821 | ||||||||||||||||||
| Total Management Services | 298,008 | 297,908 | 295,983 | 1,183,156 | 297,140 | 295,054 | ||||||||||||||||||
| Other/Eliminations | (25,192) | (25,644) | (25,312) | (87,596) | (22,296) | (22,094) | ||||||||||||||||||
| Total Revenue | $ | 2,975,543 | $ | 3,033,046 | $ | 3,048,938 | $ | 11,587,916 | $ | 3,025,016 | $ | 2,835,781 | ||||||||||||
| Consolidated Coventry | ||||||||||||||||||||||||
| Operating Income % of Revenues | 6.5% | 11.7% | 5.6% | 5.9% | 7.8% | 10.3% | ||||||||||||||||||
| SGA % of Revenues | 16.6% | 16.0% | 16.4% | 16.9% | 17.6% | 17.0% | ||||||||||||||||||
| Total Health Plan Medical Liabilities (000s)(3) | $ | 1,088,989 | $ | 1,094,021 | $ | 1,087,137 | $ | 1,021,667 | $ | 952,810 | ||||||||||||||
| Health Plan Days in Claims Payable (DCP) (3) | 50.52 | 50.48 | 50.40 | 48.62 | 51.70 | |||||||||||||||||||
| Total Debt (millions) | $ | 1,818.5 | $ | 1,818.4 | $ | 1,599.5 | $ | 1,599.4 | $ | 1,599.3 | ||||||||||||||
| Total Capital (millions) | $ | 6,331.1 | $ | 6,313.2 | $ | 5,869.3 | $ | 5,798.6 | $ | 5,655.7 | ||||||||||||||
| Debt to Capital | 28.7% | 28.8% | 27.3% | 27.6% | 28.3% | |||||||||||||||||||
| COVENTRY HEALTH CARE, INC. | ||||||||||||||||||
| SELECTED REVENUE AND MEDICAL COST STATISTICS | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
|
|
Q3 2011 |
Q2 2011 |
Q1 2011 |
Total
2010 |
Q4 2010 |
Q3 2010 |
||||||||||||
| Revenue PMPM | ||||||||||||||||||
| Health Plan Commercial Group Risk | $321.43 | $322.83 | $320.97 | $314.58 | $316.34 | $315.82 | ||||||||||||
| Medicare Advantage(4), (5) | $893.22 | $909.10 | $883.09 | $876.67 | $857.39 | $899.89 | ||||||||||||
| Medicare Part D(6) | $ 94.10 | $ 93.72 | $ 90.86 | $ 87.96 | $ 85.74 | $ 87.56 | ||||||||||||
| Medicaid | $226.39 | $218.28 | $221.16 | $218.98 | $223.54 | $215.51 | ||||||||||||
| MLR% | ||||||||||||||||||
| Consolidated Total | 81.5% | 82.1% | 82.6% | 79.4% | 79.0% | 77.2% | ||||||||||||
| Health Plan Commercial Group Risk | 82.5% | 81.1% | 80.2% | 79.2% | 81.3% | 76.8% | ||||||||||||
| Medicare Advantage(5) | 82.0% | 82.9% | 84.2% | 82.0% | 84.1% | 77.0% | ||||||||||||
| Medicare Part D | 76.8% | 88.8% | 95.8% | 83.7% | 64.7% | 79.0% | ||||||||||||
| Medicaid | 88.1% | 86.9% | 86.0% | 85.7% | 85.4% | 89.0% | ||||||||||||
| (1) | The Company did not renew the MA-PFFS product line effective January 1, 2010 and is in the process of paying claims liabilities related to prior dates of service. The Company believes that disclosing adjusted earnings, which exclude the 2011 impact of the MA-PFFS results, provides a more meaningful measure of its operating results for comparison to future periods and previously announced guidance. | ||
| (2) | On May 31, 2011, the Company announced that it will record a non-recurring pre-tax adjustment to earnings in the second quarter of 2011 in the amount of $159.3 million, or $0.68 per diluted share related to such litigation. The Company believes that disclosing adjusted earnings figures which exclude the impact of this litigation provides a more meaningful measure of its operating results for comparison to future periods and previously announced guidance. | ||
| (3) | “Total Health Plan Medical Liabilities” and “Health Plan Days in Claims Payable” are calculated consistent with prior disclosures to exclude MA-PFFS for all periods presented due to the Company’s non-renewal of this product line effective January 1, 2010. | ||
| (4) | Revenue PMPM excludes the impact of revenue ceded to external parties. | ||
| (5) | Beginning with Q1 2010, Medicare Advantage revenue and medical cost statistics represent the MA-CCP business only as the Company did not renew the MA-PFFS product line effective January 1, 2010. | ||
| (6) | Revenue PMPM excludes the impact of CMS risk-share premium adjustments and revenue ceded to external parties. | ||
CONTACT:
Coventry Health Care, Inc.
Randy Giles
Chief Financial Officer
(301) 581-5687
or
Drew Asher
SVP, Corporate Finance
(301) 581-5717
KEYWORDS: United States North America Maryland
INDUSTRY KEYWORDS: Health Hospitals Professional Services Insurance General Health Managed Care
MEDIA: