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Press release from Business Wire

WellCare Reports Third Quarter 2010 Results

Thursday, November 04, 2010

WellCare Reports Third Quarter 2010 Results06:30 EDT Thursday, November 04, 2010 TAMPA, Fla. (Business Wire) -- WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the three and nine months ended September 30, 2010. As determined under generally accepted accounting principles (“GAAP”), the Company reported net income for the third quarter of 2010 of $42.9 million, or $1.00 per diluted share, compared with net income of $28.7 million, or $0.68 per diluted share, for the prior year period. Adjusted net income for the third quarter of 2010 was $37.9 million, or $0.89 per diluted share, as compared with $34.7 million, or $0.82 per diluted share, for the same period in 2009. Adjusted net income excludes a benefit, net of certain expenses and before income taxes, of $7 million, which results from matters related to previously disclosed government investigations and related litigation. Additional information on this benefit is provided later in this news release. “We are pleased with our financial and operating results for the third quarter, which were driven by our progress in improving health care quality and access, ensuring a competitive cost structure, and re-establishing prudent, profitable growth,” said Alec Cunningham, WellCare's chief executive officer. “We will sustain our focus on these objectives in 2011 to continue to strengthen our performance in meeting the needs of our members, government customers, and business partners.” In addition to results determined under GAAP, net income and certain other operating results described in this news release are reported after adjustment for certain selling, general, and administrative (“SG&A”) expenses, primarily related to previously disclosed government investigations and related litigation that management believes are not indicative of long-term business operations. Please refer to the schedules in this news release that provide supplemental information reconciling results determined under GAAP to adjusted results. Highlights of Operations for the Third Quarter Adjusted net income for the third quarter of 2010 was favorable in comparison to the third quarter of 2009 primarily due to the performance of the Medicare prescription drug plan (“PDP”) and Medicaid segments, as well as lower SG&A expense. These improvements were offset in part by the loss of gross margin from the December 31, 2009, withdrawal of our Medicare Advantage private fee-for-service (“PFFS”) plans, and from reduced membership in our Medicare Advantage coordinated care plans (“CCPs”) due mainly to the impact of the previously disclosed 2009 CMS marketing sanction. Membership as of September 30, 2010, decreased to 2.2 million compared with 2.3 million members as of September 30, 2009. Medicaid segment membership increased by 6,000 year-over-year to 1.3 million as of September 30, 2010, principally due to growth in the Georgia Medicaid program. Medicare Advantage membership decreased year-over-year by 124,000 members. The withdrawal from PFFS plans reduced membership by 101,000 year-over-year. Medicare Advantage CCP membership decreased 23,000, and PDP membership decreased 12,000 year-over-year, principally due to the impact of the 2009 CMS marketing sanction. Premium revenue for the third quarter 2010 decreased 17% year-over-year to $1.4 billion. The decrease is attributable to the withdrawal of PFFS plans and to the impact of the 2009 CMS marketing sanction on Medicare Advantage CCP premium revenue, offset in part by growth in revenue for the Medicaid and PDP segments. Medical benefits expense was $1.1 billion, a decrease of 19% from the third quarter of 2009. The medical benefits ratio (“MBR”) was 82.8% in the third quarter of 2010, compared with 85.2% in the third quarter of 2009. Excluding the impact of premium taxes, the third quarter 2010 MBR was 83.9%, a decrease of 270 basis points from 86.6% in the third quarter of 2009. The decrease was driven by the improved performance of the Company's PDPs and Medicaid plans, as well as the withdrawal from PFFS plans. SG&A expense as determined under GAAP was $162 million in the third quarter of 2010, compared with $196 million for the same period in 2009. Adjusted SG&A was $169 million in 2010, a decrease of 9% from $186 million in the same period last year. Adjusted SG&A expense excludes a net benefit of $7 million resulting from directors and officers (“D&O”) liability insurance recoveries of $25 million, offset in part by $18 million in government investigations and related litigation expense. The year-over-year decrease in adjusted SG&A expense resulted principally from the reduction in the Georgia Medicaid program premium tax rate, the withdrawal from PFFS plans, and from gains in operating efficiency. Adjusted SG&A expense was 12.2% of total revenues in the third quarter of 2010, compared with 11.2% of total revenues in the same period in 2009, due primarily to a lower revenue base in 2010 resulting from the withdrawal of the Company's PFFS plans and the impact of the 2009 CMS marketing sanction. Cash Flow and Financial Condition Highlights Net cash used in operating activities as determined under GAAP was $72 million, compared with net cash provided by operating activities of $70 million for the nine month periods ended September 30, 2010 and 2009, respectively. Net cash used in operating activities, modified for the timing of receipts from and payments to the Company's government clients, was $28 million for the nine months ended September 30, 2010, compared with net cash provided by operating activities of $142 million for the nine months ended September 30, 2009. As of September 30, 2010, unregulated cash and short-term investments were approximately $201 million. Unregulated cash and short-term investments were approximately $160 million as of June 30, 2010, $120 million on December 31, 2009, and $93 million on September 30, 2009. Days in claims payable were 56 days as of September 30, 2010, compared with 54 days as of June 30, 2010, and 56 days as of September 30, 2009. Excluding the impact of Medicare Advantage PFFS plans, days in claims payable were 55 days as of September 30, 2010, 51 days as of June 30, 2010, and 52 days as of September 30, 2009. Financial Outlook WellCare is updating its financial outlook for the year ended December 31, 2010. Adjusted net income per diluted share now is expected to be between approximately $2.30 and $2.35, an increase from the previous guidance for adjusted net income per diluted share of between approximately $2.05 and $2.20. The following elements of WellCare's financial outlook also have changed. Premium revenue is expected to be between approximately $5.40 and $5.45 billion, an increase from the previous guidance of $5.30 to $5.40 billion. The 2010 Medicaid segment MBR is anticipated to be above the 2009 MBR. The previous guidance was for the 2010 Medicaid segment MBR to be below the 2009 MBR. Excluding the impact of premium taxes, the 2010 Medicaid segment MBR is expected to decrease relative to the 2009 MBR. The adjusted administrative expense ratio is expected to be in the mid-12% range, down from the high 12% range as described in the previous guidance. The following elements of WellCare's financial outlook are unchanged from the Company's previous guidance. The 2010 Medicare Advantage segment MBR will decrease relative to the 2009 MBR. The 2010 PDP segment MBR will decrease from the 2009 MBR. Webcast A discussion of WellCare's third quarter 2010 results will be webcast live on Thursday, November 4, 2010, beginning at 8:30 a.m. Eastern Time. A replay will be available beginning approximately one hour following the conclusion of the live broadcast and will be available for 30 days. The webcast is available via the Company's web site at www.wellcare.com and at www.earnings.com. About WellCare Health Plans, Inc. WellCare Health Plans, Inc. provides managed care services targeted to government-sponsored health care programs, focusing on Medicaid and Medicare. Headquartered in Tampa, Florida, WellCare offers a variety of health plans for families, children, and the aged, blind, and disabled, as well as prescription drug plans. The Company served approximately 2.2 million members nationwide as of September 30, 2010. For more information about WellCare, please visit the Company's website at www.wellcare.com. Cautionary Statement Regarding Forward-Looking Statements This news 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 are forward-looking statements. Our financial outlook contains 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, WellCare's current financial outlook for 2010 and progress on top priorities such as improving health care quality and access, ensuring a competitive cost position, and reestablishing prudent, profitable growth. Additional information concerning these and other important risks and uncertainties can be found under the captions “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and other filings by WellCare with the U.S. Securities and Exchange Commission, which contain discussions of WellCare's business and the various factors that may affect it. WellCare undertakes no duty to update these forward-looking statements to reflect any future events, developments, or otherwise.           WELLCARE HEALTH PLANS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited; dollars in thousands except per share data)       Three Months Ended September 30,   Nine Months Ended September 30,2010   20092010   2009 Revenues: Premium $ 1,385,874 $ 1,666,031 $ 4,077,269 $ 5,245,809 Investment and other income   2,299   1,614   7,506     8,375 Total revenues   1,388,173   1,667,645   4,084,775     5,254,184   Expenses: Medical benefits 1,147,107 1,420,193 3,435,870 4,477,210 Selling, general and administrative 161,662 195,665 739,769 682,488 Depreciation and amortization 6,123 5,851 17,770 17,547 Interest   117   4   160     3,087 Total expenses   1,315,009   1,621,713   4,193,569     5,180,332   Income (loss) before income taxes 73,164 45,932 (108,794 ) 73,852 Income tax expense (benefit)   30,248   17,272   (29,257 )   45,120 Net income (loss) $ 42,916 $ 28,660 $ (79,537 ) $ 28,732   Net income (loss) per common share: Basic $ 1.01 $ 0.68 $ (1.88 ) $ 0.69 Diluted $ 1.00 $ 0.68 $ (1.88 ) $ 0.68   Weighted average common shares outstanding: Basic 42,411,455 41,849,749 42,313,973 41,771,713 Diluted 42,740,369 42,280,035 42,313,973 42,007,302           WELLCARE HEALTH PLANS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in thousands)       Sept. 30, 2010   Dec. 31, 2009   (Unaudited)ASSETS Current Assets: Cash and cash equivalents $ 1,091,015 $ 1,158,131 Investments 72,709 62,722 Premium and other receivables, net 309,998 285,808 Funds receivable for the benefit of members 55,262 77,851 Prepaid expenses and other current assets, net 121,106 104,079 Deferred income tax asset   56,638     28,874   Total current assets 1,706,728 1,717,465 Property, equipment and capitalized software, net 68,534 61,785 Goodwill 111,131 111,131 Other intangible assets, net 11,811 12,961 Long-term investments 46,838 51,710 Restricted investments 124,694 130,550 Deferred income tax asset 69,277 29,654 Other assets   4,118     3,191   Total Assets $ 2,143,131   $ 2,118,447     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Medical benefits payable $ 703,664 $ 802,515 Unearned premiums 65,992 90,496 Accounts payable 8,869 5,270 Other accrued expenses and liabilities 150,834 220,562 Current portion of amounts accrued related to investigation resolution 117,601 18,192 Other payables to government partners 42,447 38,147 Income taxes payable   18,362     4,888   Total current liabilities 1,107,769 1,180,070 Amounts accrued related to investigation resolution 213,649 40,205 Other liabilities   19,677     17,272   Total liabilities   1,341,095     1,237,547   Commitments and contingencies – – 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, 42,538,975 and 42,361,207 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively) 425 424 Paid-in capital 424,529 425,083 Retained earnings 378,975 458,512 Accumulated other comprehensive loss   (1,893 )   (3,119 ) Total stockholders' equity   802,036     880,900   Total Liabilities and Stockholders' Equity $ 2,143,131   $ 2,118,447             WELLCARE HEALTH PLANS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited; dollars in thousands)       Nine Months Ended September 30,2010   2009 Cash provided by (used in) operating activities: Net (loss) income $ (79,537 ) $ 28,732 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 17,770 17,547 Equity-based compensation expense 8,655 29,776 Deferred taxes, net (67,386 ) 8,526 Changes in operating accounts: Premium and other receivables, net (24,190 ) 10,111 Other receivables from government partners, net – (40,073 ) Prepaid expenses and other current assets, net (17,027 ) 15,301 Medical benefits payable (98,851 ) 91,708 Unearned premiums (24,504 ) (60,489 ) Accounts payable and other accrued expenses (43,635 ) (64,465 ) Other payables to government partners 4,300 18,397 Amounts accrued related to investigation resolution 249,915 30,249 Income taxes, net 7,594 (5,450 ) Other, net   (5,088 )   (10,328 ) Net cash (used in) provided by operating activities   (71,984 )   69,542   Cash provided by (used in) investing activities: Purchases of investments (117,903 ) (19,295 ) Proceeds from sales and maturities of investments 114,726 34,012 Purchases of restricted investments (18,386 ) (64,039 ) Proceeds from maturities of restricted investments 24,298 131,707 Additions to property, equipment and capitalized software, net   (16,192 )   (9,908 ) Net cash (used in) provided by investing activities   (13,457 )   72,477   Cash provided by (used in) financing activities: Proceeds from option exercises and other 1,091 418 Purchase of treasury stock (4,420 ) – Payments on debt – (152,800 ) Payments on capital leases (935 ) – Funds received (used) for the benefit of members   22,589     (341 ) Net cash provided by (used in) financing activities   18,325     (152,723 ) Cash and cash equivalents: Decrease during the period (67,116 ) (10,704 ) Balance at beginning of year   1,158,131     1,181,922   Balance at end of period $ 1,091,015   $ 1,171,218     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for taxes $ 35,686   $ 58,489   Cash paid for interest $ 183   $ 2,642   Equipment acquired through capital leases $ 8,868   $ 559             WELLCARE HEALTH PLANS, INC.MEMBERSHIP STATISTICS       As of September 30,2010   2009Membership by ProgramMedicaid Membership TANF 1,073,000 1,072,000 S-CHIP 168,000 158,000 SSI and ABD 77,000 78,000 FHP 10,000 14,000 Total Medicaid Membership 1,328,000 1,322,000   Medicare Membership Medicare Advantage 116,000 240,000 Prescription Drug Plan (stand-alone) 756,000 768,000 Total Medicare Membership 872,000 1,008,000 Total Membership 2,200,000 2,330,000   Medicaid Membership by State Florida 418,000 412,000 Georgia 548,000 527,000 Other states 362,000 383,000 Total Medicaid Membership 1,328,000 1,322,000           WELLCARE HEALTH PLANS, INC.SEGMENT INFORMATION(Unaudited; dollars in thousands)       Three Months Ended September 30,   Nine Months Ended September 30,2010   20092010   2009Premium revenue: Medicaid: Florida $ 223,409 $ 220,409 $ 669,654 $ 720,662 Georgia 359,744 345,640 1,013,471 999,487 Other states   271,740   248,062   781,499   716,899 Total Medicaid   854,893   814,111   2,464,624   2,437,048   Medicare: Medicare Advantage plans 331,338 660,009 1,012,366 2,142,921 Prescription Drug plans   199,643   191,911   600,279   665,840 Total Medicare   530,981   851,920   1,612,645   2,808,761 Total Premium Revenue $ 1,385,874 $ 1,666,031 $ 4,077,269 $ 5,245,809           WELLCARE HEALTH PLANS, INC. UNAUDITED SUPPLEMENTAL INFORMATION   Reconciliation of GAAP Statements of Operations to Adjusted Statements of Operations(Dollars in thousands except per-share data)   The Company reports adjusted operating results on a non-GAAP basis to exclude certain expenses that management believes are not indicative of longer-term business trends and operations. Following are statements of operations and related measures for the third quarters ended September 30, 2010 and 2009, as determined under GAAP, reconciled to the adjusted statements of operations and related measures for each of the same periods.       Three Months Ended September 30, 2010   Three Months Ended September 30, 2009GAAP   Adjustments   AdjustedGAAP   Adjustments   Adjusted Revenues: Premium $ 1,385,874 $ – $ 1,385,874 $ 1,666,031 $ – $ 1,666,031 Investment and other income   2,299     –     2,299     1,614     –     1,614   Total revenues   1,388,173     –     1,388,173     1,667,645     –     1,667,645     Expenses: Medical benefits 1,147,107 – 1,147,107 1,420,193 – 1,420,193 Selling, general, and administrative 161,662 7,342 (a)(b)(c) 169,004 195,665 (9,463 ) (a)(b) 186,202 Depreciation and amortization 6,123 – 6,123 5,851 – 5,851 Interest   117     –     117     4     –     4   Total expenses   1,315,009     7,342     1,322,351     1,621,713     (9,463 )   1,612,250     Income before income taxes 73,164 (7,342 ) 65,822 45,932 9,463 55,395 Income tax expense   30,248     (2,280 )   27,968     17,272     3,414     20,686   Net income $ 42,916   $ (5,062 ) $ 37,854   $ 28,660   $ 6,049   $ 34,709     Weighted average shares: Basic 42,411,455 – 42,411,455 41,849,749 – 41,849,749 Diluted 42,740,369 – 42,740,369 42,280,035 – 42,280,035   Net income per share: Basic $ 1.01 $ (0.12 ) $ 0.89 $ 0.68 $ 0.15 $ 0.83 Diluted $ 1.00 $ (0.11 ) $ 0.89 $ 0.68 $ 0.14 $ 0.82   Medical benefits ratio: Medicaid 86.9 % 86.9 % 87.2 % 87.2 % Medicare Advantage 78.7 % 78.7 % 83.4 % 83.4 % Prescription Drug Plans 71.7 % 71.7 % 83.2 % 83.2 % Aggregate 82.8 % 82.8 % 85.2 % 85.2 %   Administrative expense ratio 11.6 % 0.6 % (a)(b)(c) 12.2 % 11.7 % -0.5 % (a)(b) 11.2 %   Days in claims payable 56 56 56 56   (a) Investigation-related legal, accounting, employee retention, and other costs:  Administrative expenses associated with the government and Company investigations, net of D&O insurance recoveries, amounted to a credit of $10.5 million and expense of $9.0 million, in the quarters ended September 30, 2010 and 2009, respectively. (b) Liability for investigation resolution:  Based on the status of the government investigations, the Company recorded expense of $2.3 million and $0.5 million, respectively, in the quarters ended September 30, 2010 and 2009. (c) Liability for securities class action litigation resolution:  The Company recorded expense of $0.8 million in the three months ended September 30, 2010, as its estimate for the resolution of putative securities class action litigation.           WELLCARE HEALTH PLANS, INC. UNAUDITED SUPPLEMENTAL INFORMATION   Reconciliation of GAAP Statements of Operations to Adjusted Statements of Operations(Dollars in thousands except per-share data)       Nine Months Ended September 30, 2010   Nine Months Ended September 30, 2009GAAP   Adjustments   AdjustedGAAP   Adjustments   Adjusted   Revenues: Premium $ 4,077,269 $ – $ 4,077,269 $ 5,245,809 $ – $ 5,245,809 Investment and other income   7,506     –     7,506     8,375     –     8,375   Total revenues   4,084,775     –     4,084,775     5,254,184     –     5,254,184     Expenses: Medical benefits 3,435,870 – 3,435,870 4,477,210 – 4,477,210 Selling, general, and administrative 739,769 (250,381 ) (a)(b)(c) 489,388 682,488 (93,146 ) (a)(b) 589,342 Depreciation and amortization 17,770 – 17,770 17,547 – 17,547 Interest   160     –     160     3,087     –     3,087   Total expenses   4,193,569     (250,381 )   3,943,188     5,180,332     (93,146 )   5,087,186     (Loss) income before income taxes (108,794 ) 250,381 141,587 73,852 93,146 166,998 Income tax (benefit) expense   (29,257 )   87,038     57,781     45,120     15,120     60,240   Net (loss) income $ (79,537 ) $ 163,343   $ 83,806   $ 28,732   $ 78,026   $ 106,758     Weighted average shares: Basic 42,313,973 – 42,313,973 41,771,713 – 41,771,713 Diluted 42,313,973 424,564 42,738,537 42,007,302 – 42,007,302   Net (loss) income per share: Basic $ (1.88 ) $ 3.86 $ 1.98 $ 0.69 $ 1.87 $ 2.56 Diluted $ (1.88 ) $ 3.84 $ 1.96 $ 0.68 $ 1.86 $ 2.54   Medical benefits ratio: Medicaid 86.6 % 86.6 % 85.8 % 85.8 % Medicare Advantage 78.6 % 78.6 % 82.2 % 82.2 % Prescription Drug Plans 84.4 % 84.4 % 93.6 % 93.6 % Aggregate 84.3 % 84.3 % 85.3 % 85.3 %   Administrative expense ratio 18.1 % -6.1 % (a)(b)(c) 12.0 % 13.0 % -1.8 % (a)(b) 11.2 %   (a) Investigation-related legal, accounting, employee retention, and other costs:  Administrative expenses associated with the government and Company investigations, net of D&O insurance recoveries, amounted to a credit of $1.1 million and expense of $32.9 million, in the nine months ended September 30, 2010 and 2009, respectively. (b) Liability for investigation resolution:  Based on the status of the government investigations, the Company recorded expense of $56.7 million and $60.2 million, respectively, in the nine months ended September 30, 2010 and 2009. (c) Liability for securities class action litigation resolution:  The Company recorded expense of $194.8 million in the nine months ended September 30, 2010, as its estimate for the resolution of putative securities class action litigation.           WELLCARE HEALTH PLANS, INC.UNAUDITED SUPPLEMENTAL INFORMATION   Reconciliation of Medical Benefits Ratios and Administrative Expense Ratioto Medical Benefits Ratios and Administrative Expense Ratio Modifiedto Exclude Premium Taxes and Certain Specified Expenses   The Company reports MBRs and administrative expense ratios on a non-GAAP basis that excludes premium taxes paid primarily on Medicaid managed care premium revenue, as well as certain investigation and litigation-related administrative expenses, net of D&O insurance recoveries.  The Company believes that MBRs and administrative expense ratios excluding premium taxes are useful measures for investors, as premium taxes are recorded as both revenue of and expense to the Company, and therefore do not affect the Company's operating results.  In addition, certain investigation and litigation-related administrative expenses, net of D&O insurance recoveries, are excluded from the administrative expense ratio, as management believes these expenses are not indicative of longer-term business trends and operations.       GAAP   Adjustments (see pages 10 and 11)   Adjusted   Premium Tax Impact   Excluding Premium TaxesThree Months Ended September 30, 2010 Medical benefits ratio: Medicaid 86.9% 86.9% 2.0% 88.9% Medicare Advantage 78.7% 78.7% 78.7% PDP 71.7% 71.7% 71.7% Aggregate 82.8% 82.8% 1.1% 83.9%   Administrative expense ratio 11.6% 0.6% 12.2% -1.2% 11.0%   Three Months Ended September 30, 2009 Medical benefits ratio: Medicaid 87.2% 87.2% 3.0% 90.2% Medicare Advantage 83.4% 83.4% 83.4% PDP 83.2% 83.2% 83.2% Aggregate 85.2% 85.2% 1.4% 86.6%   Administrative expense ratio 11.7% -0.5% 11.2% -1.5% 9.7%       GAAPAdjustments (see pages 10 and 11)AdjustedPremium Tax ImpactExcluding Premium TaxesNine Months Ended September 30, 2010 Medical benefits ratio: Medicaid 86.6% 86.6% 1.3% 87.9% Medicare Advantage 78.6% 78.6% 78.6% PDP 84.4% 84.4% 84.4% Aggregate 84.3% 84.3% 0.8% 85.1%   Administrative expense ratio 18.1% -6.1% 12.0% -0.8% 11.2%   Nine Months Ended September 30, 2009 Medical benefits ratio: Medicaid 85.8% 85.8% 3.0% 88.8% Medicare Advantage 82.2% 82.2% 82.2% PDP 93.6% 93.6% 93.6% Aggregate 85.3% 85.3% 1.4% 86.7%   Administrative expense ratio 13.0% -1.8% 11.2% -1.4% 9.8%   Premium taxes were $19.0 million and $26.8 million, respectively, for the three months ended September 30, 2010 and 2009.  Premium taxes were $38.1 million and $80.1 million, respectively, for the nine months ended September 30, 2010 and 2009.           WELLCARE HEALTH PLANS, INC.UNAUDITED SUPPLEMENTAL INFORMATION   Reconciliation of GAAP Net Cash (Used in) Provided by Operating Activitiesto Net Cash (Used in) Provided by Operating Activities Modifiedfor the Timing of Receipts from and Payments to Government Clients(Dollars in thousands)   The Company reports cash (used in) provided by operating activities on a non-GAAP basis to exclude the changes in unearned premiums, premiums and other receivables, and other receivables from and payables to government customers.  The Company believes that cash flow excluding these changes is a useful measure for investors, as the excluded changes are a function of the timing of cash receipts from and payments to federal and state government agencies at the end of a period.     Nine Months Ended September 30,2010   2009 Net cash (used in) provided by operating activities, as reported under GAAP Modifications to eliminate changes in: $ (71,984 ) $ 69,542 Premium and other receivables, net 24,190 (10,111 ) Other receivables from government partners, net – 40,073 Unearned premiums 24,504 60,489 Other payables to government partners   (4,300 )   (18,397 ) Net cash (used in) provided by operating activities, modified for the timing of receipts from and payments to government clients $ (27,590 ) $ 141,596         Reconciliation of GAAP Days in Claims Payable to Days in Claims Payable Modifiedto Eliminate the Impact of Medicare Advantage Private Fee-for-Service Plans   The Company reports days in claims payable on a non-GAAP basis to exclude the impact of Medicare Advantage PFFS plans.  The Company believes that days in claims payable excluding the impact of PFFS plans is a useful measure for investors, because the Company withdrew these plans on December 31, 2009, and, as a result, the impact of the plans on historical operations is not necessarily indicative of the Company's future long-term business operations.  Days in claims payable is equal to the medical benefits payable at the end of a quarter divided by average medical benefits expense per calendar day for the quarter.       Quarters EndedSeptember 30, 2009   December 31, 2009   March 31, 2010   June 302010   September 30,2010 Days in claims payable, as reported under GAAP 56 53 55 54 56 Modification to eliminate impact of PFFS plans (4 ) (4 ) (5 ) (3 ) (1 ) Days in claims payable, modified to eliminate the impact of PFFS plans 52   49   50   51   55         WellCare Health Plans, Inc.Investor relations:Gregg Haddad, 813-206-3916gregg.haddad@wellcare.comorMedia relations:Amy Knapp, 813-290-6208amy.knapp@wellcare.com