Coventry Health Care Reports Record First Quarter Earnings of $0.45 Per Diluted Share; First Quarter EPS Up 55% Over Prior Year.Business Editors BETHESDA Bethesda, city, United States Bethesda, uninc. city (1990 pop. 62,936), Montgomery co., W central Md., an affluent residential and commercial suburb of Washington, D.C. The area was settled in the late 17th cent. , Md.--(BUSINESS WIRE)--April 29, 2002 Coventry Health Care Coventry Health Care, Inc. (Coventry) (NYSE: CVH) is a managed health care company in the United States. On February 8th of 2007 Coventry agreed to acquire Concentra's Workers Compensation Managed Care Services Businesses. External links
See: New York Stock Exchange : CVH CVH Helicopter Carrier CVH Compound-valve-angle Hemispherical Combustion-chamber (Ford cylinder head design and family of engines) CVH Compound Valve Angle Hemispheral Combustion Chamber CVH continuous venous hemodialysis ) today reported operating results for the first quarter ended March 31, 2002. Operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. totaled $848.5 million for the quarter, a 12.9% increase over the first quarter of 2001. Net earnings were $28.4 million, or $0.45 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, a 46.1% increase over net earnings first quarter of 2001 and 55.2% on a per share basis. "This was an outstanding quarter of superior earnings results for our company and shareholders" said Allen Al·len , Edgar 1892-1943. American anatomist who is noted for his studies of hormones and for the discovery (1923) of estrogen. F. Wise, president and chief executive officer of Coventry Coventry, city, England Coventry (kŏv`əntrē, kŭv`–), city (1991 pop. 318,718) and metropolitan district, central England. Coventry is an industrial center noted for its automobile production. . "We were able to continue to expand our operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: through prudent risk selection and financial discipline. Although commercial membership declined in total, it was the result of continued pruning pruning, the horticultural practice of cutting away an unwanted, unnecessary, or undesirable plant part, used most often on trees, shrubs, hedges, and woody vines. of unprofitable business; new business growth in the first quarter was strong and we are seeing similar sales results for the second and third quarters. This sales momentum, coupled with acquisition opportunities like the recently announced New Alliance transaction, will provide our company tremendous opportunity for continued profitable growth." First Quarter Highlights: -- Membership. As of March 31, 2002, Coventry had a total of 1.81 million members, an increase of 80,734 members, or 4.7%, over the prior year. As compared to the prior year, commercial risk membership decreased 36,988 members or 3.1% due to the previously announced loss of 25,000 members in the Raytheon group in Wichita as well as other pricing-related membership losses in recent acquisitions. Medicaid membership grew 72,389 members or 35.1% due to continued growth in existing markets as well as participation in a new mental health program in the Pennsylvania market starting in the fourth quarter of 2001. Medicare+Choices membership grew 10,618 members or 22.0% primarily due to acquisition and organic growth in the Kansas City market. Non-risk membership grew 34,715, or 12.1% primarily through acquisition. -- Commercial Rate Increases. Coventry achieved commercial rate increases in excess of 15% on first quarter renewals, representing 55% of membership. These rate increases were over 50 basis points higher than previously announced expectations. The Company expects commercial rate increases to exceed 18% for the second quarter of 2002 representing a little over 5% of its membership. -- Medical Loss Ratio (MLR). MLR was 84.5% for the quarter, a 130 basis point improvement over the fourth quarter of 2001 and a 170 basis point improvement over the prior year first quarter. Commercial MLR of 84.1% was a 270 basis point improvement over the prior year quarter and was the main driver of overall MLR improvement. Total commercial inpatient days per thousand in the first quarter of 224 were 5.5% lower than the prior year quarter. Lower than expected inpatient utilization coupled with price increases contributed to the MLR improvement. -- Selling, General & Administrative (SG&A) Expenses. SG&A expenses were 12.3% of operating revenues for the quarter, an increase of 30 basis points over the prior quarter and 10 basis points over the prior year. The increase in the SG&A rate was partially due to certain timing and seasonal issues related to broker commissions, employee commissions, and payroll taxes that the company historically has experienced in the first quarter of the year. -- Balance Sheet. Cash and investments grew to $959.2 million during the quarter, up $6.7 million from the prior year-end. Total days in medical liabilities decreased less than half a day and remain at the high end of historical ranges. -- Cash Flow. Cash flow from operations was $13.8 million for the first quarter. Cash flow adjusted for the timing of CMS payments for Medicare+Choices beneficiaries was $44.2 million. -- Effect of Accounting Rule Changes. Effective January 1, 2002, the company adopted FAS 142 which requires companies to cease amortization of goodwill. For the year ended December 31, 2001, goodwill amortization averaged approximately $1.9 million per quarter. Mr. Wise will host a conference call at 9:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy today. To listen to the call, dial (800) 946-0782. Callers will be asked to identify themselves and their affiliations. The conference call will also be broadcast over the internet at http://www.cvty.com. Coventry asks participants on both the call and webcast to review and be familiar with its filings with the SEC. 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 785529. Coventry Health Care is a managed health care company based in Bethesda, Maryland Bethesda is an urbanized, but unincorporated, area in southern Montgomery County, Maryland, just Northwest of Washington, D.C. It takes its name from a church located there, the Bethesda Presbyterian Church, built in 1820 and rebuilt in 1850, which in turn took its name from operating health plans and insurance companies under the names Coventry Health Care, Coventry Health and Life, Carelink Health Plans, Southcare, Group Health Plan, HealthAmerica, HealthAssurance, HealthCare USA, Southern Health and WellPath. The Company provides a full range of managed care products and services including HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, , PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there , POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale , Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. +Choice, and Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. to 1.81 million members in a broad cross section of employer and government-funded groups in 12 markets throughout the Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians , Mid-Atlantic Adj. 1. mid-Atlantic - of a region of the United States generally including Delaware; Maryland; Virginia; and usually New York; Pennsylvania; New Jersey; "mid-Atlantic states" middle Atlantic and Southeast Southeast or south east is the ordinal direction halfway between south and east. It the opposite of northwest. Southeast or South East can refer to: This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements relate to future events or future financial performance and may be significantly impacted by certain risks and uncertainties described in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2001 filed with the Securities and Exchange Commission.
COVENTRY HEALTH CARE, INC.
MEMBERSHIP
March 31, Dec. 31, March 31,
2002 2001 2001
--------- -------- ---------
Membership by Market:
Carolinas 91,248 97,508 147,459
Delaware 158,377 156,547 145,160
Georgia 55,280 55,188 48,504
Iowa 87,747 90,741 87,903
Kansas 182,995 187,131 133,723
Louisiana 66,185 59,529 58,786
Nebraska 41,188 43,466 45,052
Pennsylvania 536,937 516,755 495,977
St. Louis 361,013 382,712 398,659
Virginia 147,747 162,159 56,919
West Virginia 76,594 88,990 106,435
--------- --------- ---------
Total membership 1,805,311 1,840,726 1,724,577
========= ========= =========
Membership by Product:
At-risk membership:
Commercial 1,144,913 1,210,739 1,181,901
Medicare 58,919 53,543 48,301
Medicaid 278,875 257,916 206,486
--------- --------- ---------
Total at-risk
membership by
product 1,482,707 1,522,198 1,436,688
Self-funded membership 322,604 318,528 287,889
--------- --------- ---------
Total membership 1,805,311 1,840,726 1,724,577
========= ========= =========
COVENTRY HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
----------------------
2002 2001
---- ----
Operating revenues:
Managed care premiums $831,229 $736,461
Management services 17,320 14,950
-------- --------
Total operating revenues 848,549 751,411
Operating expenses:
Medical costs 702,769 634,809
Selling, general and
administrative 104,658 91,334
Depreciation and
amortization 4,629 6,402
-------- --------
Total operating expenses 812,056 732,545
Operating earnings 36,493 18,866
Senior notes interest
expense, net 2,445 --
Other income, net 10,043 11,369
-------- --------
Earnings before
income taxes 44,091 30,235
Provision for
income taxes 15,652 11,644
Cumulative gain on
change in accounting
principle - SFAS 133,
net of tax -- 878
-------- --------
Net earnings $ 28,439 $ 19,469
======== ========
Net earnings per share:
Basic $ 0.47 $ 0.30
Diluted $ 0.45 $ 0.29
Net earnings per share
(excluding change in
accounting principle):
Basic $ 0.47 $ 0.29
Diluted $ 0.45 $ 0.27
Weighted average
shares outstanding:
Basic 60,668 65,119
Diluted 63,257 67,908
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
March 31, Dec. 31,
2002 2001
--------------------------
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 252,554 $ 312,364
Short-term investments 83,934 87,515
Accounts receivable, net 74,640 63,486
Other receivables, net 55,011 65,291
Deferred income taxes 43,509 43,509
Other current assets 8,603 6,353
-------------------------
Total current assets 518,251 578,518
Long-term investments 622,716 552,612
Property and equipment,
net 32,768 34,327
Goodwill and intangible
assets, net 262,272 262,111
Other long-term assets 31,141 23,705
-------------------------
Total assets $1,467,148 $1,451,273
=========================
Liabilities and Stockholders'
Equity:
Current liabilities:
Medical claims
liabilities $ 480,664 $ 460,489
Other medical liabilities 65,146 62,365
Accounts payable and
other accrued liabilities 162,967 165,697
Deferred revenue 30,190 62,994
-------------------------
Total current
liabilities 738,967 751,545
Senior notes 175,000 --
Other long-term
liabilities 10,516 10,649
-------------------------
Total liabilities 924,483 762,194
Stockholders' Equity:
Total stockholders'
equity 542,665 689,079
-------------------------
Total liabilities and
stockholders' equity $1,467,148 $1,451,273
=========================
COVENTRY HEALTH CARE, INC.
CONSOLIDATED CHANGES IN CASH AND INVESTMENTS
(Amounts in thousands)
(unaudited)
Three Months Ended
March 31, 2002
------------------
Cash and investment flows from
operating activities:
Net earnings $ 28,439
Depreciation and amortization 4,704
Changes in working capital
Accounts receivable, net (11,154)
Medical claim liabilities 20,175
Other medical liabilities 2,781
Accounts payable and accrued
liabilities (3,327)
Interest payable on senior
notes 2,370
Deferred revenue (32,804)
Changes in other working
capital 2,593
---------
Total cash and investment
flows from operating
activities 13,777
---------
Cash and investment flows from
investing activities:
Changes in fixed assets (2,292)
Purchase price of acquisitions (1,076)
---------
Total cash and investment
flows from investing
activities (3,368)
---------
Cash and investment flows from
financing activities:
Changes in stock 1,874
Proceeds from issuance of
senior notes, net of
issuance costs 170,500
Net payments for repurchase of
shares (176,070)
---------
Total cash and investment
flows from financing
activities (3,696)
---------
Net change in cash and
investments for current period 6,713
Cash and investments at
beginning of period 952,491
---------
Cash and investments at end of
period $ 959,204
=========
COVENTRY HEALTH CARE
SELECTED OPERATING STATISTICS
(Excluding charges)
Total Total
Q1 2002 2001 Q4 2001 Q3 2001 Q2 2001 Q1 2001 2000
-------- ------- ------- -------- -------- -------- --------
Revenue PMPM
Commercial 178.31 163.05 167.20 163.77 161.24 159.95 146.79
Medicare 594.17 565.70 569.31 573.21 563.94 555.99 484.90
Medicaid 144.62 144.80 141.40 148.64 146.69 142.91 135.05
Management
Fees 17.91 18.30 18.30 18.52 19.02 17.37 16.10
Medical PMPM
Commercial 149.99 140.03 142.31 139.39 139.67 138.77 125.31
Medicare 528.32 505.84 537.20 517.99 504.13 462.32 431.58
Medicaid 119.87 120.93 116.15 128.78 117.25 122.30 113.17
MLR %
Commercial 84.1% 85.9% 85.1% 85.1% 86.6% 86.8% 85.4%
Medicare 88.9% 89.4% 94.4% 90.4% 89.4% 83.2% 89.0%
Medicaid 82.9% 83.5% 82.1% 86.6% 79.9% 85.6% 83.8%
-------- ------- ------- -------- -------- -------- --------
Total 84.5% 86.0% 85.8% 85.9% 86.1% 86.2% 85.8%
SGA % of
revenues 12.3% 12.0% 12.0% 12.0% 12.1% 12.2% 12.7%
SGA PMPM 19.47 17.90 17.86 17.96 18.06 17.71 17.74
Claims
Statistics
Claims
Inven-
tory 194,865 248,171 225,180 200,260 232,590
Inventory
per
Member 0.11 0.13 0.12 0.11 0.13
Total
Medical
Liabilities
(000's) $545,810 $522,854 $503,760 $456,656 $457,472
Days in
Claims
Payable 61.55 61.98 60.99 56.06 57.03
Days in
Other
Medical
Liabili-
ties 8.34 8.39 8.30 6.55 7.82
Total Days
in Medical
Liabili-
ties 69.89 70.37 69.29 62.61 64.85
Member
Growth(a)
Same
Store (25,194) (8,615) 30,452 (15,770) 14,399 (37,696) 107,531
Acquisi-
tion (10,221)136,307 (41,536) 88,695 39,909 49,239 142,130
(a) Acquisition Growth reflects initial acquisition and all changes
to acquired entities during the first twelve months of operations.
Membership activity subsequent to the initial twelve month period is
reflected as same store growth.
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