|
Coventry Health Care, Inc. (CVH) today reported consolidated
operating results for the quarter ended June 30, 2010. Operating
revenues totaled $2.9 billion for the quarter with net earnings of $1.0
million, or $0.01 earnings per diluted share (EPS). These results
include a favorable impact from the Medicare Advantage Private
Fee-for-Service (MA-PFFS) product of $0.18 EPS and an unfavorable impact
related to the previously announced provider class action litigation in
Louisiana of $1.18 EPS. Excluding the impact of MA-PFFS results(1) and
the provider class action charge(2), earnings for the quarter
were $149.2 million, or $1.01 EPS. Additionally, the Company has
increased guidance for full year 2010 as detailed on page 3.
"The outstanding second quarter fundamentals that Coventry reported
today are a result of the sharper focus and execution that have returned
to the organization with all seven of our core businesses performing at
or above expectations," said Allen F. Wise, chairman and chief executive
officer of Coventry. "Our diversified portfolio of risk and fee-based
businesses combined with a relentless emphasis on driving a low cost
structure throughout the organization positions us well for continued
success in the long term."
Consolidated Highlights
--
Commercial risk membership of 1,522,000, an organic increase of 21,000
members sequentially
--
Sequential membership growth in Medicare Advantage Coordinated Care
Plans (MA-CCP), Medicare Part D, and Medicaid
--
Announced an agreement to acquire Mercy Health Plans, a diversified
health plan with approximately 180,000 members throughout Missouri and
northwest Arkansas
--
GAAP cash flows from operations were $120.9 million
--
Approximately $670 million of deployable free cash at the parent at
quarter-end
(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 figures which exclude the 2010 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 July 2, 2010, the Company announced that it will incur a
non-recurring pre-tax charge to earnings in the second quarter of
2010 in the amount of $278 million, or $1.18 per 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.
Selected Second Quarter 2010 Highlights
--
Health Plan Commercial Group Risk. Reported
commercial group risk premium yields rose to $313.92 per member per
month (PMPM) in the quarter, an increase of 4.7% from the prior year
quarter. Reported commercial group risk premium yields rose to $313.00
PMPM year-to-date, an increase of 5.0% from the prior year-to-date.
The health plan commercial group risk MLR was 78.3% in the quarter, a
decrease of 340 basis points from the prior year quarter.
--
Medicare Advantage. As of June 30, 2010, MA-CCP
membership was 192,000, an increase of 10,000 members from the prior
year quarter. The MA-CCP MLR was 81.2% in the quarter. During the
second quarter, the MA-PFFS product line contributed $0.18 EPS largely
due to favorable medical cost experience during the claims run-out
process. When combined with the $0.17 EPS contribution reported in the
first quarter, the total year-to-date contribution from the MA-PFFS
product line was $0.35 EPS. As previously announced, the Company did
not renew this product line effective January 1, 2010.
--
Medicare Part D. As of June 30, 2010, Medicare Part D
membership was 1,631,000, an increase of 76,000 members from the prior
year quarter. The Medicare Part D MLR was 90.7% in the quarter, an
increase of 80 basis points from the prior year quarter. The Medicare
Part D MLR was 93.1% year-to-date, a decrease of 330 basis points from
the prior year-to-date.
--
Medicaid. As of June 30, 2010, Medicaid membership was
413,000, an increase of 28,000 members from the prior year quarter.
Coventry commenced operations in Pennsylvania during the second
quarter which contributed 5,000 new members. The Medicaid MLR was
84.2% in the quarter, a decrease of 600 basis points from the prior
year quarter.
2010 Full Year Guidance
--
Risk revenue of $10.10 billion to $10.33 billion
--
Management services revenue of $1.15 billion to $1.17 billion
--
Consolidated revenue of $11.25 billion to $11.50 billion
--
Consolidated MLR of 81.3% to 81.9%
--
Cost of sales expense of $245.0 million to $250.0 million
--
Selling, general, and administrative expense (SG&A) of $1.92 billion
to $1.96 billion
--
Charge for provider class action of $278.0 million
--
Depreciation and amortization expense of $137.0 million to $145.0
million
--
Other income of $72.0 million to $78.0 million
--
Interest expense of $80.0 million to $86.0 million
--
Tax rate of 37.0% to 38.0%
--
Diluted share count of 146.5 million to 148.0 million
--
EPS of $1.72 to $1.87
GUIDANCE PROGRESSION TABLE
-----------------------------------------------------------------------------------------
Guidance Provided as of:
---------------------------------------------
April 30, 2010 July 2, 2010 July 30, 2010
-------------- ------------- -------------
GAAP EPS range $2.35 - $2.50 $1.57 - $1.72 $1.72 - $1.87
Remove unfavorable impact of litigation charge(2) - $1.18 $1.18
-------------- ------------- -------------
Adjusted EPS range excluding litigation charge $2.35 - $2.50 $2.75 - $2.90 $2.90 - $3.05
Remove favorable impact of MA-PFFS(1) ($0.17) ($0.28) ($0.35)
-------------- ------------- -------------
Adjusted core EPS range $2.18 - $2.33 $2.47 - $2.62 $2.55 - $2.70
Mr. Allen F. Wise, chairman and chief executive officer of Coventry,
will host a conference call at 8:30 a.m. ET on Friday, July 30, 2010. To
listen to the call, dial toll-free at (888) 587-0615 or, for
international callers, (719) 325-2432. 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 8644262.
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. 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, 2009 and Coventry’s Form 10-Q for the quarter ended
March 31, 2010. 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)
Quarters Ended Six Months Ended
June 30, June 30,
------------------------------------- -------------------------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Operating revenues: (unaudited) (unaudited) (unaudited) (unaudited)
Managed care premiums $ 2,570,508 $ 3,201,919 $ 5,141,083 $ 6,442,731
Management services 297,633 296,455 586,036 588,538
--------- --------- --------- ---------
Total operating revenues 2,868,141 3,498,374 5,727,119 7,031,269
--------- --------- --------- ---------
Operating expenses:
Medical costs 2,032,556 2,766,974 4,146,898 5,599,971
Cost of sales 64,116 58,020 123,262 115,896
Selling, general, administrative 454,254 535,949 949,159 1,079,969
Charge for provider class action 278,000 - 278,000 -
Depreciation and amortization 33,985 34,972 69,504 69,649
--------- --------- --------- ---------
Total operating expenses 2,862,911 3,395,915 5,566,823 6,865,485
--------- --------- --------- ---------
Operating earnings 5,230 102,459 160,296 165,784
--------- --------- --------- ---------
Operating earnings percentage of total revenues 0.2 % 2.9 % 2.8 % 2.4 %
Interest expense 20,195 21,775 40,325 43,906
Other income, net 18,207 31,895 38,494 51,762
--------- --------- --------- ---------
Earnings before income taxes 3,242 112,579 158,465 173,640
Provision for income taxes 2,221 44,871 60,119 67,825
--------- --------- --------- ---------
Income from continuing operations 1,021 67,708 98,346 105,815
--------- --------- --------- ---------
Discontinued operations:
Loss from discontinued operations - (65,507 ) - (55,900 )
Income tax benefit - 16,224 - 12,677
--------- --------- --------- ---------
Loss from discontinued operations - (49,283 ) - (43,223 )
--------- --------- --- --------- --------- ---
Net earnings $ 1,021 $ 18,425 $ 98,346 $ 62,592
=== ========= === ========= === ========= === =========
Net earnings per share:
Basic earnings per share from continuing operations $ 0.01 $ 0.46 $ 0.67 $ 0.72
Basic loss per share from discontinued operations - (0.33 ) - (0.29 )
--------- --------- --- --------- --------- ---
Total basic earnings per share $ 0.01 $ 0.13 $ 0.67 $ 0.43
=== ========= === ========= === ========= === =========
Diluted earnings per share from continuing operations $ 0.01 $ 0.46 $ 0.67 $ 0.72
Diluted loss per share from discontinued operations - (0.34 ) - (0.30 )
--------- --------- --- --------- --------- ---
Total diluted earnings per share $ 0.01 $ 0.12 $ 0.67 $ 0.42
=== ========= === ========= === ========= === =========
Weighted average shares outstanding, basic 145,943 146,955 145,863 146,901
Weighted average shares outstanding, diluted 147,300 147,616 147,291 147,460
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 30, March 31, December 31,
2010 2010 2009
----------- ----------- ------------
(unaudited) (unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 1,495,414 $ 1,370,243 $ 1,418,554
Short-term investments 16,011 6,000 442,106
Accounts receivable, net 271,108 264,334 258,993
Other receivables, net 499,457 502,535 496,059
Other current assets 338,131 232,732 234,446
------------------------------------------- ----------- ----------- ------------
Total current assets 2,620,121 2,375,844 2,850,158
Long-term investments 2,285,411 2,297,901 1,994,987
Property and equipment, net 258,503 266,027 271,931
Goodwill 2,546,351 2,551,884 2,529,284
Other intangible assets, net 448,948 464,906 471,693
Other long-term assets 32,454 33,526 48,479
------------------------------------------- ----------- ----------- ------------
Total assets $ 8,191,788 $ 7,990,088 $ 8,166,532
=========================================== =========== =========== ============
Liabilities and Stockholders’ Equity:
Current liabilities:
Medical liabilities $ 1,353,268 $ 1,417,027 $ 1,605,407
Accounts payable and accrued liabilities 855,927 606,479 682,171
Deferred revenue 111,737 126,781 110,855
------------------------------------------- ----------- ----------- ------------
Total current liabilities 2,320,932 2,150,287 2,398,433
Long-term debt 1,599,211 1,599,119 1,599,027
Other long-term liabilities 428,155 421,571 456,518
------------------------------------------- ----------- ----------- ------------
Total liabilities 4,348,298 4,170,977 4,453,978
------------------------------------------- ----------- ----------- ------------
Stockholders’ equity 3,843,490 3,819,111 3,712,554
Total liabilities and stockholders’ equity $ 8,191,788 $ 7,990,088 $ 8,166,532
=========================================== =========== =========== ============
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Quarter Ended Year Ended
June 30, 2010 June 30, 2010
------------- -------------
Cash flows from operating activities:
Net earnings $ 1,021 $ 98,346
Adjustments to earnings:
Depreciation and amortization 33,985 69,504
Amortization of stock compensation 10,742 21,258
Charge for provider class action 278,000 278,000
Changes in assets and liabilities:
Accounts receivable, net (6,514) (2,915)
Medical liabilities (60,183) (291,330)
Accounts payable and other accrued liabilities (135,194) (240,155)
Deferred revenue (15,044) (2,743)
Other operating activities 14,083 4,007
---------------------------------------------------------- ------------- -------------
Net cash flows from operating activities 120,896 (66,028)
---------------------------------------------------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures, net (10,439) (22,920)
Proceeds from investments, net of purchases 16,066 234,215
Payments for acquisitions, net of cash acquired - (66,894)
---------------------------------------------------------- ------------- -------------
Net cash flows from investing activities 5,627 144,401
---------------------------------------------------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of stock 747 1,128
Payments for repurchase of stock (2,349) (3,628)
Excess tax benefit from stock compensation 250 987
---------------------------------------------------------- ------------- -------------
Net cash flows from financing activities (1,352) (1,513)
---------------------------------------------------------- ------------- -------------
Net change in cash and cash equivalents for current period 125,171 76,860
Cash and cash equivalents at beginning of period 1,370,243 1,418,554
---------------------------------------------------------- ------------- -------------
Cash and cash equivalents at end of period $ 1,495,414 $ 1,495,414
========================================================== ============= =============
Cash and Investments:
Cash and cash equivalents $ 1,495,414 $ 1,495,414
Short-term investments 16,011 16,011
Long-term investments 2,285,411 2,285,411
---------------------------------------------------------- ------------- -------------
Total cash and investments $ 3,796,836 $ 3,796,836
========================================================== ============= =============
COVENTRY HEALTH CARE, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
Q2 2010 Q1 2010 Total Q4 2009 Q3 2009 Q2 2009 Q1 2009 Total
2009 2008
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Membership by Product (000s)
-------------------------------------------------
Health Plan Commercial Risk 1,522 1,501 1,418 1,431 1,477 1,501 1,575
Health Plan Commercial ASO 657 663 685 689 697 702 714
Medicare Advantage CCP 192 190 186 185 182 176 137
Medicaid Risk 413 406 402 391 385 375 371
--------- --------- --------- --------- --------- --------- ----------
Health Plan Total 2,784 2,760 2,691 2,696 2,741 2,754 2,797
Medicare Advantage PFFS - - 329 336 329 318 243
Other National Risk - - 2 5 15 21 24
Other National ASO 466 482 564 567 571 575 633
--------- --------- --------- --------- --------- --------- ----------
Total Medical Membership 3,250 3,242 3,586 3,604 3,656 3,668 3,697
Medicare Part D 1,631 1,600 1,683 1,636 1,555 1,501 931
Total Membership 4,881 4,842 5,269 5,240 5,211 5,169 4,628
========= ========= ========= ========= ========= ========= ==========
Revenues by Product Type (000s)
-------------------------------------------------
Commercial Risk $ 1,367,457 $ 1,317,221 $ 5,174,772 $ 1,257,335 $ 1,279,571 $ 1,310,645 $ 1,327,221 $ 5,421,984
Commercial Management Services 82,395 82,957 346,042 96,896 81,661 83,675 83,810 352,369
Medicare Advantage 505,084 507,592 4,901,918 1,247,725 1,268,592 1,224,011 1,161,590 3,177,244
Medicaid Risk 268,460 265,771 1,066,231 261,208 281,146 263,039 260,838 1,087,189
--------- --------- ---------- --------- --------- --------- --------- ----------
Total Health Plan and Medical Services Businesses 2,223,396 2,173,541 11,488,963 2,863,164 2,910,970 2,881,370 2,833,459 10,038,786
Medicare Part D 423,664 473,809 1,545,858 347,991 316,654 397,090 484,123 847,702
Other Premiums 25,201 25,105 94,562 23,291 23,568 23,746 23,957 64,783
Other Management Services 217,706 207,904 850,184 212,054 211,769 215,468 210,893 826,321
--------- --------- ---------- --------- --------- --------- --------- ----------
Total Specialized Managed Care Businesses 666,571 706,818 2,490,604 583,336 551,991 636,304 718,973 1,738,806
Total Premiums 2,589,866 2,589,498 12,783,341 3,137,550 3,169,531 3,218,531 3,257,729 10,598,902
Total Management Services 300,101 290,861 1,196,226 308,950 293,430 299,143 294,703 1,178,690
Other/Eliminations (21,826) (21,381) (76,041) (18,353) (18,851) (19,300) (19,537) (43,365)
--------- --------- ---------- --------- --------- --------- --------- ----------
Total Revenue $ 2,868,141 $ 2,858,978 $ 13,903,526 $ 3,428,147 $ 3,444,110 $ 3,498,374 $ 3,532,895 $ 11,734,227
=== ========= === ========= == ========== === ========= === ========= === ========= === ========= == ==========
Consolidated Coventry
-------------------------------------------------
Operating Income % of Revenues 0.2% 5.4% 3.6% 5.4% 4.4% 2.9% 1.8% 5.0%
SGA % of Revenues 15.8% 17.3% 15.5% 15.9% 15.3% 15.3% 15.4% 16.5%
Total Medical Liabilities (000s)(3) $ 1,026,355 $ 979,173 $ 900,402 $ 939,678 $ 904,711 $ 898,224 $ 846,004
Days in Claims Payable (DCP) (3) 55.47 54.14 49.45 50.39 48.35 48.54 47.57
Total Debt (millions) $ 1,599.2 $ 1,599.1 $ 1,599.0 $ 1,708.9 $ 1,806.8 $ 1,902.6 $ 1,902.5
Total Capital (millions) $ 5,442.7 $ 5,418.2 $ 5,311.6 $ 5,311.6 $ 5,332.9 $ 5,402.8 $ 5,333.1
Debt to Capital 29.4% 29.5% 30.1% 32.2% 33.9% 35.2% 35.7%
(3) "Total Medical Liabilities" and "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. These statistics also
exclude the effect of the Preferred Health Systems ("PHS")
acquisition for the first quarter of 2010 but include the effect of
the PHS acquisition for the second quarter of 2010 due to the timing
of closing (February 1, 2010).
COVENTRY HEALTH CARE, INC.
SELECTED REVENUE AND MEDICAL COST STATISTICS
(Unaudited)
Q2 2010 Q1 2010 Total Q4 2009 Q3 2009 Q2 2009 Q1 2009 Total
2009 2008
--------- --------- -------- --------- --------- --------- --------- --------
Revenue PMPM
---------------------------------
Health Plan Commercial Group Risk $ 313.92 $ 312.05 $ 301.63 $ 306.75 $ 304.13 $ 299.79 $ 296.36 $ 286.30
Medicare Advantage(4), (5) $ 867.43 $ 885.26 $ 855.16 $ 849.62 $ 853.90 $ 857.05 $ 860.46 $ 862.60
Medicare Part D(6) $ 90.49 $ 88.05 $ 84.40 $ 83.42 $ 84.63 $ 85.27 $ 84.35 $ 88.34
Medicaid $ 217.77 $ 218.76 $ 229.94 $ 218.62 $ 239.22 $ 230.27 $ 231.93 $ 208.50
MLR%
---------------------------------
Consolidated Total 79.1% 82.3% 85.4% 83.2% 84.4% 86.4% 87.4% 84.0%
Health Plan Commercial Group Risk 78.3% 80.2% 81.9% 82.9% 82.1% 81.7% 80.9% 81.7%
Medicare Advantage(5) 81.2% 85.7% 89.9% 89.4% 89.4% 90.4% 90.5% 89.0%
Medicare Part D 90.7% 95.3% 85.7% 64.4% 79.4% 89.9% 101.8% 84.1%
Medicaid 84.2% 84.0% 87.6% 85.8% 86.1% 90.2% 88.3% 85.3%
(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.
SOURCE: Coventry Health Care, Inc.
Coventry Health Care, Inc.
John Stelben
Interim Chief Financial Officer
301-581-5729
or
Drew Asher
SVP, Corporate Finance
301-581-5717
|
