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Coventry Health Care Reports Fourth Quarter Earnings

Stocks in this article: CVH

Coventry Health Care ( www.coventryhealthcare.com) is a diversified national managed health care company based in Bethesda, Maryland, dedicated to delivering high-quality health care solutions at an affordable price. Coventry provides a full portfolio of risk and fee-based products including Medicare and Medicaid programs, group and individual health insurance, workers’ compensation solutions, and network rental services. With a presence in every state in the nation, Coventry’s products currently serve approximately 5 million individuals helping them receive the greatest possible value for their health care investment.

   
COVENTRY HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
 
Quarters Ended Years Ended
December 31, December 31,
2012   2011 2012   2011
Operating revenues: (unaudited) (unaudited) (unaudited)
Managed care premiums $ 3,161,792 $ 2,841,976 $ 12,926,375 $ 11,014,950
Management services   284,025   287,180   1,186,988   1,171,733
Total operating revenues   3,445,817   3,129,156   14,113,363   12,186,683
 
Operating expenses:
Medical costs 2,613,570 2,331,881 10,853,774 9,041,402
Cost of sales 65,444 73,941 266,803 283,544
Selling, general, and administrative 551,752 539,717 2,080,236 2,016,042
Provider class action – release - - - (159,300)
Depreciation and amortization   36,517   34,674   152,859   136,865
Total operating expenses   3,267,283   2,980,213   13,353,672   11,318,553
 
Operating earnings 178,534 148,943 759,691 868,130
Operating earnings percentage of total revenues 5.2% 4.8% 5.4% 7.1%
 
Interest expense 24,622 28,219 99,468 99,062
Other income, net   37,174   22,833   124,312   89,033
 
Earnings before income taxes 191,086 143,557 784,535 858,101
 
Provision for income taxes   71,745   57,861   297,472   314,996
Net earnings $ 119,341 $ 85,696 $ 487,063 $ 543,105
 
Net earnings per share:
Basic earnings per common share $ 0.89 $ 0.60 $ 3.54 $ 3.70
Diluted earnings per common share $ 0.88 $ 0.60 $ 3.52 $ 3.67
 
Weighted average common shares outstanding, basic 133,329 141,196 136,042 144,775
Weighted average common shares outstanding, diluted 134,109 142,037 136,778 145,873
     
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
 
December 31, September 30, December 31,
2012 2012 2011
(unaudited) (unaudited)
Assets:
 
Current assets:
Cash and cash equivalents $ 1,399,162 $ 1,262,078 $ 1,579,003
Short-term investments 121,742 165,811 116,205
Accounts receivable, net 272,077 289,951 270,263
Other receivables, net 892,815 1,014,567 717,736
Other current assets 196,323 192,203 286,301
Total current assets 2,882,119 2,924,610 2,969,508
 
Long-term investments 2,658,582 2,563,559 2,635,309
Property and equipment, net 266,818 258,378 255,485
Goodwill 2,591,488 2,590,465 2,548,834
Other intangible assets, net 318,592 335,103 367,533
Other long-term assets 33,389 34,548 36,863
Total assets $ 8,750,988 $ 8,706,663 $ 8,813,532
 
 
 
Liabilities and Stockholders’ Equity:
 
Current liabilities:
Medical liabilities $ 1,418,914 $ 1,503,691 $ 1,308,507
Accounts payable and other accrued liabilities 488,175 480,582 695,235
Deferred revenue 137,981 123,841 114,510
Current portion of long-term debt - - 233,903
Total current liabilities 2,045,070 2,108,114 2,352,155
 
Long-term debt 1,585,190 1,585,067 1,584,700
Other long-term liabilities 397,813 387,159 365,686
Total liabilities 4,028,073 4,080,340 4,302,541
 
Stockholders’ equity 4,722,915 4,626,323 4,510,991
       
Total liabilities and stockholders’ equity $ 8,750,988 $ 8,706,663 $ 8,813,532
   
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
 
Quarter Ended Year Ended
December 31, 2012 December 31, 2012
 
Cash flows from operating activities:
Net earnings $ 119,341 $ 487,063
Adjustments to earnings:
Depreciation and amortization 36,517 152,859
Amortization of stock compensation 5,865 29,643
RADV Release - (132,977)
RADV Release – deferred tax adjustment - 50,531
Changes in assets and liabilities:
Accounts receivable, net 17,874 22,508
Other receivables, net 121,782 (168,479)
Medical liabilities (84,777) 57,073
Accounts payable and other accrued liabilities (1,195) (76,561)
Deferred revenue 14,140 23,471
Other operating activities 19,847 25,513
Net cash flows from operating activities 249,394 470,644
 
Cash flows from investing activities:
Capital expenditures, net (27,989) (89,064)

(Payments for) / Proceeds from sales and maturities net of payments for investments

(59,189) 19,061
Payments for acquisitions, net of cash acquired (6,465) (54,945)
Net cash flows from investing activities (93,643) (124,948)
 
Cash flows from financing activities:
Proceeds from issuance of stock 23,171 87,671
Payments for repurchase of stock (28,770) (339,985)
Repayment of debt - (233,903)
Excess tax benefit from stock compensation 3,668 12,210
Payments for cash dividends (16,736) (51,530)
Net cash flows from financing activities (18,667) (525,537)
 
Net change in cash and cash equivalents for current period 137,084 (179,841)
Cash and cash equivalents at beginning of period 1,262,078 1,579,003
Cash and cash equivalents at end of period $ 1,399,162 $ 1,399,162
             
 
Cash and Investments:
Cash and cash equivalents $ 1,399,162 $ 1,399,162
Short-term investments 121,742 121,742
Long-term investments 2,658,582 2,658,582
Total cash and investments $ 4,179,486 $ 4,179,486
           
COVENTRY HEALTH CARE, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
 
Total Total
    2012   Q4 2012   Q3 2012   Q2 2012   Q1 2012   2011
Membership by Product (000s)                        
Commercial Risk 1,474 1,489 1,519 1,549 1,635
Health Plan Commercial ASO 730 736 729 725 700
Medicare Advantage 259 256 253 250 222
Medicaid Risk 974 998 932 924 692
Other National ASO 347 350 354 356 373
Medicare Part D       1,578     1,545     1,494     1,458     1,143
Total Membership       5,362     5,374     5,281     5,262     4,765
                         
Revenues by Product Type (000s)                        
Commercial Risk $ 5,737,626 $ 1,403,010 $ 1,409,863 $ 1,443,478 $ 1,481,275 $ 6,053,178
Commercial Management Services   429,209     100,736     101,138     113,558     113,777     387,949
Total Commercial Products 6,166,835 1,503,746 1,511,001 1,557,036 1,595,052 6,441,127
 
Medicare Advantage 2,912,143 695,815 697,724 684,291 834,312 2,382,330
Medicaid Risk 2,809,579 712,845 730,996 697,679 668,060 1,381,706
Medicare Part D   1,514,518     363,032     343,185     394,877     413,423     1,226,734
Total Government Programs 7,236,240 1,771,692 1,771,905 1,776,847 1,915,795 4,990,770
 
Workers’ Compensation   757,779     183,289     187,992     194,576     191,922     783,784
Corporate and Eliminations   (47,491)     (12,910)     (13,115)     (10,663)     (10,802)     (28,998)
Total Revenues $ 14,113,363 $ 3,445,817 $ 3,457,783 $ 3,517,796 $ 3,691,967 $ 12,186,683
                         
Consolidated Coventry                        
 
Operating Income % of Revenues 5.4% 5.2% 4.6% 4.1% 7.5% 7.1%
 
SGA % of Revenues 14.7% 16.0% 15.1% 14.3% 13.6% 16.5%
 
Total Health Plan Medical Liabilities (000s) (1) $ 1,258,279 $ 1,321,436 $ 1,315,078 $ 1,313,458 $ 1,106,174
Health Plan Days in Claims Payable (DCP) (1) 49.04 50.90 49.77 49.47 50.45
 
Total Debt (millions) $ 1,585.2 $ 1,585.1 $ 1,584.9 $ 1,584.8 $ 1,818.6
Total Capital (millions) $ 6,308.1 $ 6,211.4 $ 6,091.2 $ 6,287.5 $ 6,329.6
Debt to Capital 25.1% 25.5% 26.0% 25.2% 28.7%
           
COVENTRY HEALTH CARE, INC.
SELECTED REVENUE AND MEDICAL COST STATISTICS
(Unaudited)
 
Total Total
    2012   Q4 2012   Q3 2012   Q2 2012   Q1 2012   2011
Revenue PMPM                        
Commercial Risk $310.15 $310.27 $308.42 $309.91 $311.92 $303.69
Medicare Advantage (2) $938.71 $897.31 $908.57 $902.61 $1,048.93 $895.54
Medicare Part D (3) $ 85.94 $ 84.58 $ 86.24 $ 87.55 $ 85.44 $ 92.41
Medicaid $242.35 $240.38 $241.92 $248.48 $238.74 $228.85
 
                         
MLR%                        
Consolidated Total 84.0% 82.7% 84.4% 85.9% 82.9% 82.1%
 
Commercial Risk 81.7% 82.2% 81.5% 83.0% 79.9% 81.6%
Medicare Advantage (2) 81.1% 83.9% 83.1% 84.1% 74.1% 82.9%
Medicare Part D 85.4% 70.7% 84.2% 90.0% 94.9% 81.7%
Medicaid 94.1% 90.4% 93.0% 93.3% 100.0% 89.4%

(1)

 

“Total Health Plan Medical Liabilities” and “Health Plan Days in Claims Payable” are calculated consistent with prior disclosures to exclude the effect of the Kentucky Medicaid business for the fourth quarter of 2011 due to the timing of the contract implementation (November 1, 2011) but include the effect of the Kentucky Medicaid business and the acquired Children’s Mercy’s Family Health Partners business beginning in the first quarter of 2012.

 

(2)

First quarter 2012 Medicare Advantage statistics for Revenue PMPM and MLR% include the favorable impact from the release of MA-CCP RADV audit reserves. Excluding this impact, the comparable Revenue PMPM was $923.87 and the comparable MLR% was 82.9% for the first quarter 2012. For the full year, the comparable Revenue PMPM was $907.99 and the comparable MLR% was 83.5%.

 

(3)

Revenue PMPM excludes the impact of CMS risk-share premium adjustments and revenue ceded to external parties.





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