Coventry Health Care Reports Record Fourth Quarter Earnings of $1.01 Per Diluted Share; Re-Affirms 2005 EPS Guidance of $4.43 to $4.53.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. -- 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 quarter ended December December: see month. 31, 2004. 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 $1.38 billion for the quarter, a 13.2% increase over the fourth quarter of 2003. Net earnings were $91.8 million, or $1.01 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 31.7% increase over net earnings for the fourth quarter of 2003 and 32.9% on a per diluted share basis. For the twelve months ended December 31, 2004, total revenues were $5.31 billion, a 17.1% increase over 2003, with net earnings of $3.72 per diluted share, a 35.3% increase over 2003. "I am pleased to report our 26th consecutive quarter of increased profitability," said Dale Dale , Sir Henry Hallett 1875-1968. British physiologist. He shared a 1936 Nobel Prize for work on the chemical transmission of nerve impulses, particularly for the isolation and study of acetylcholine (1914). B. Wolf, 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. . "In addition to outstanding operating results, the Omnicare Omnicare (NYSE: OCR) is a Fortune 500 company based in Covington, Kentucky. This company provides services in skilled nursing, assisted living, and other healthcare facilities in 47 U.S. states and Canada. External links
Financial Highlights --4th Quarter Membership Up 5.3% over the prior year quarter --4th Quarter Revenues Up 13.2% over the prior year quarter --4th Quarter EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Up 32.9% over the prior year quarter --4th Quarter Operating Margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 9.7%, Up 120 basis points over the prior year quarter --4th Quarter Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. Return on Equity of 31.7% Fourth Quarter Highlights: --Membership. As of December 31, 2004, Coventry had a total of 2.51 million members, an increase of 126,000 members, or 5.3%, over the prior year quarter and an increase of 63,000 members over the prior quarter. Organic member growth for the quarter was slightly positive bringing the full year total to 2.7%. --Commercial Rate Increases. Commercial risk yields rose to $231 PMPM PMPM Per Member Per Month PMPM Pilgrim Monument and Provincetown Museum (Massachusetts) (per member per month) in the quarter, an increase of 10.3% over the prior year quarter. The Company continues to expect the 2005 commercial risk yield increase, net of benefit buydowns, to be in the range of 10.0% to 11.0%. --Medical Loss Ratio (MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there ). MLR was 80.4% for the quarter, a 50 basis point improvement over the prior year quarter, primarily driven by 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. results. MLR for the year was 80.5%, a 70 basis point improvement over 2003 primarily driven by commercial and Medicare results. --Selling, General & Administrative (SG&A) Expenses. SG&A expenses were 11.3% of operating revenues for the quarter, a 30 basis point improvement over the prior quarter and a 60 basis point improvement over the prior year quarter. Full year controllable SG&A (total SG&A less broker commissions and premium taxes) expenses PMPM of $16.40 declined $0.03 or 0.2% versus the prior year. --Balance Sheet. Cash and investments grew to $1.73 billion during the quarter, up $321.8 million from prior year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . Net Premium Accounts Receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $104.9 million represent 7.0 days of sales outstanding (DSO See CSO. ) with the commercial only DSO running at 6.0 days. Days in Claims Payable (DCP DCP - definitional constraint programming ) were 55.8 compared to the prior quarter of 57.0. Reduction in DCP was primarily due to the effort to reduce large dollar claim inventory in advance of year-end and January open enrollment activities. --Cash Flow. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the fourth quarter was $106.6 million as compared to net income of $91.8 million. Cash flow from operations for the twelve months ended December 31, 2004 was $453.9 million as reported, and $492.4 million when adjusted for the timing of CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. premium payments, as compared to year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net income of $337.1 million. Due to a change implemented by CMS in the timing of premium payments, cash flow from operations in 2004 included only 11 CMS premium payments versus 12 payments that are normally expected. Coventry received the twelfth payment in early January 2005. First Health Update "I am encouraged thus far with our integration efforts," said Dale B. Wolf, chief executive officer of Coventry. "We have developed and begun implementation of detailed action plans that will enable us to achieve our financial goals, compete more effectively, and grow profitably across all business lines. While a great deal of work needs to be done, we have identified and are moving forward on a clear path to accomplish these goals." --PPO Network. Efforts are underway to improve First Health provider contracts in existing Coventry health plan markets. In addition, re-contracting of physician fee schedules in other markets has commenced. These efforts are designed to improve the attractiveness of existing First Health networks in order to grow fee-based revenues through retention of existing and attraction attraction /at·trac·tion/ (ah-trak´shun) 1. the force, act, or process that draws one body toward another. 2. of new customers. --Membership. Mail Handlers handlers persons involved in the handling of, for example, circus animals. Includes grooms, milkers, herdsmen, strappers. Used mostly in referring to persons handling animals for show or auction. Benefit Plan (MHBP MHBP Mail Handlers Benefit Plan ) membership guidance is provided below. Actual membership results for the entire FEHB FEHB Federal Employees Health Benefits business as well as the Corporate/National Accounts business will be provided beginning with our first quarter 2005 results and on a quarterly basis thereafter. --Revenue Guidance. Overall revenue for 2005 for the First Health businesses is expected to be between $885 million and $905 million on a full year basis. Due to the timing of the closing on January 28, 2005, Coventry expects to realize approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 11/12 of the full year estimate in calendar year 2005 results. This timing adjustment also applies to the First Health business specific guidance provided below. --Federal Employees Health Benefits (FEHB). As a result of the January 2005 open enrollment period, the Mail Handlers Benefit Plan (MHBP) enrollment is expected to be approximately 260,000 contracts or a reduction of approximately 13% from the fourth quarter of 2004. As expected, there was significant shift from the high option to the standard option benefit plan. This result is consistent with Coventry's pre-acquisition expectations. Total revenue in 2005 is expected to be between $220 million and $230 million on a full year basis. --Corporate/National Accounts. Total revenue in 2005 for Corporate/National Accounts is expected to be between $155 million and $165 million on a full year basis. --Network Rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. . Total revenue in 2005 for the Network Rental business is expected to be between $95 million and $105 million on full year basis. --Workers' Compensation. Total revenue in 2005 for the Workers' Compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. business is expected to be between $215 million and $225 million on a full year basis. --Medicaid/Public Sector. Total revenue in 2005 for the Medicaid/Public Sector business is expected to be between $185 million and $195 million on a full year basis. Overall 2005 Guidance Details Q1 2005 Guidance --Total Revenues of $1.56 billion to $1.59 billion --Earnings per share (EPS) on a diluted basis of $1.05 to $1.07 2005 Guidance --Risk revenues in the range of $5.80 billion to $5.90 billion --Management services revenues of $875.0 million to $925.0 million --Medical loss ratio (MLR%) of 80.5% to 81.5% of risk revenues --Selling, general, and administrative expenses (SG&A) of $1.15 billion to $1.17 billion --Depreciation and amortization expense of $85.0 million to $95.0 million --Investment income of $42.0 million to $45.0 million --Interest expense of $56.0 million to $60.0 million --Tax rate of 36.8 % to 37.3% --Diluted share count of 106.5 million to 108.5 million shares --Earnings per share (EPS) on a diluted basis of $4.43 to $4.53 Mr. Wolf will host a conference call at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Tuesday Tuesday: see week. , February February: see month. 22, 2005. To listen to the call, dial (888) 283-6901, or for international callers, (719) 955-1564. Callers will be asked to identify themselves and their affiliations. The conference call will also be broadcast over the internet at 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 454475. This press release may contain 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, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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 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 31, 2003, as filed with the SEC, and Coventry's Registration Statement on Form S-4, as filed with the SEC on November November: see month. 9, 2004 and amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. on December 23, 2004. Coventry Health Care is a national 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, insurance companies, network rental / managed care services companies, and worker's compensation services companies. Coventry provides a full range of risk and fee-based 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 Advantage, 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. , Worker's Compensation and Network Rental to a broad cross section of employer and government-funded groups, government agencies, and other insurance carriers and administrators in all 50 states as well as the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. . More information is available on the Internet at www.coventryhealth.com and www.firsthealth.com.
COVENTRY HEALTH CARE, INC.
HEALTH PLAN MEMBERSHIP
(Amounts in thousands)
December 31, September 30, December 31,
2004 2004 2003
------------ ------------- ------------
Membership by Market:
Delaware 102 103 104
Georgia 73 76 80
Illinois - Central 87 87 75
Iowa 66 66 96
Kansas City 209 210 222
Louisiana 76 76 73
Michigan 62 0 0
Nebraska 50 50 48
North Carolina 119 120 118
Pennsylvania 740 736 694
St. Louis 495 495 470
Utah 187 184 169
Virginia 169 166 155
West Virginia 74 77 79
------------ ------------- ------------
2,509 2,446 2,383
============ ============= ============
Membership by Product:
Risk membership:
Commercial 1,483 1,487 1,510
Medicare 69 68 65
Medicaid 397 333 324
------------ ------------- ------------
Total risk membership 1,949 1,888 1,899
Non-risk membership 560 558 484
------------ ------------- ------------
Total Membership 2,509 2,446 2,383
============ ============= ============
COVENTRY HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Quarters Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Operating revenues:
Managed care
premiums $1,355,070 $1,197,561 $5,198,599 $4,442,445
Management services 29,110 25,745 113,370 92,698
----------- ----------- ----------- -----------
Total operating
revenues 1,384,180 1,223,306 5,311,969 4,535,143
----------- ----------- ----------- -----------
Operating expenses:
Medical costs 1,089,035 969,258 4,185,895 3,607,289
Selling, general
and administrative 156,096 145,900 611,801 543,478
Depreciation and
amortization 4,681 4,755 17,602 18,179
----------- ----------- ----------- -----------
Total operating
expenses 1,249,812 1,119,913 4,815,298 4,168,946
----------- ----------- ----------- -----------
Operating earnings 134,368 103,393 496,671 366,197
Operating earnings
percentage of total
revenues 9.7% 8.5% 9.4% 8.1%
Senior notes interest
expense, net 3,581 3,581 14,301 15,051
Other income, net 12,039 10,803 44,621 41,918
----------- ----------- ----------- -----------
Earnings before income
taxes 142,826 110,615 526,991 393,064
Provision for income
taxes 51,060 40,927 189,874 142,919
----------- ----------- ----------- -----------
Net earnings $ 91,766 $ 69,688 $ 337,117 $ 250,145
=========== =========== =========== ===========
Net earnings per
share, basic $ 1.04 $ 0.78 $ 3.83 $ 2.84
Net earnings per
share, diluted $ 1.01 $ 0.76 $ 3.72 $ 2.75
Weighted average
shares outstanding,
basic 88,635 88,945 88,126 88,113
Weighted average
shares outstanding,
diluted 90,773 91,701 90,589 90,765
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
December 31, September 30, December 31,
2004 2004 2003
------------ ------------- ------------
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 417,636 $ 398,853 $ 253,331
Short-term investments 349,722 287,141 101,191
Accounts receivable, net 104,924 91,523 89,766
Other receivables, net 47,070 52,240 45,335
Deferred income taxes 37,368 35,698 36,255
Other current assets 16,307 8,670 8,089
------------ ------------- ------------
Total current assets 973,027 874,125 533,967
Long-term investments 960,379 949,099 1,051,400
Property and equipment, net 32,193 29,917 33,085
Goodwill 280,615 281,328 281,183
Other intangible assets, net 38,491 26,154 27,447
Other long-term assets 55,895 57,171 54,654
------------ ------------- ------------
Total assets $ 2,340,600 $ 2,217,794 $ 1,981,736
============ ============= ============
Liabilities and Stockholders'
Equity:
Current liabilities:
Medical liabilities $ 660,475 $ 646,277 $ 597,190
Accounts payable and other
accrued liabilities 211,809 198,139 183,781
Deferred revenue 59,536 72,720 73,909
------------ ------------- ------------
Total current liabilities 931,820 917,136 854,880
Senior notes 170,500 170,500 170,500
Other long-term liabilities 25,854 26,065 27,358
------------ ------------- ------------
Total liabilities 1,128,174 1,113,701 1,052,738
Stockholders' Equity:
Total stockholders'
equity 1,212,426 1,104,093 928,998
------------ ------------- ------------
Total liabilities and
stockholders' equity $ 2,340,600 $ 2,217,794 $ 1,981,736
============ ============= ============
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Twelve
Quarter Months
Ended Ended
Dec. 31, Dec. 31,
2004 2004
----------- -----------
Cash flows from operating activities:
Net earnings $ 91,766 $ 337,117
Depreciation and amortization 4,681 17,602
Amortization of deferred compensation 4,544 15,488
Changes in assets and liabilities:
Accounts receivable, net (13,401) (15,158)
Medical claims liabilities 14,198 63,285
Accounts payable and accrued liabilities 18,590 46,782
Deferred revenue (13,184) (14,373)
Other operating activities (610) 3,162
----------- -----------
Net cash flows from operating activities 106,584 453,905
----------- -----------
Cash flows from investing activities:
Capital expenditures, net (7,158) (14,972)
Payments for investments, net of sales and
maturities (81,826) (186,985)
Payments for acquisitions, net of cash
acquired (5,877) (6,852)
----------- -----------
Net cash flows from investing activities (94,861) (208,809)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock 7,299 16,184
Payments for repurchase of stock (239) (96,842)
Payments for fractional shares from stock
split 0 (133)
----------- -----------
Net cash flows from financing activities 7,060 (80,791)
----------- -----------
Net change in cash and cash equivalents for
current period 18,783 164,305
Cash and cash equivalents at beginning of
period 398,853 253,331
----------- -----------
Cash and cash equivalents at end of period $ 417,636 $ 417,636
=========== ===========
----------------------------------------------------------------------
Cash and Investments:
Cash and cash equivalents $ 417,636 $ 417,636
Short-term investments 349,722 349,722
Long-term investments 960,379 960,379
----------- -----------
Total cash and investments $1,727,737 $1,727,737
=========== ===========
COVENTRY HEALTH CARE, INC.
SELECTED OPERATING STATISTICS
(Excluding charges)
Total
2004 Q4 2004 Q3 2004 Q2 2004 Q1 2004
-------------------------------------------------
Revenue PMPM
Commercial 226.59 231.36 228.36 224.56 222.08
Medicare 695.96 707.74 698.82 693.74 683.12
Medicaid 145.23 153.43 143.87 140.61 141.49
Management Fees 17.10 17.37 16.68 17.06 17.28
Medical PMPM
Commercial 179.21 181.17 182.12 177.19 176.36
Medicare 579.92 592.51 541.55 579.18 607.02
Medicaid 126.88 136.98 122.86 122.80 122.98
MLR %
Commercial 79.1% 78.3% 79.8% 78.9% 79.4%
Medicare 83.3% 83.7% 77.5% 83.5% 88.9%
Medicaid 87.4% 89.3% 85.4% 87.3% 86.9%
-------------------------------------------------
Total 80.5% 80.4% 80.1% 80.3% 81.3%
SGA % of revenues 11.5% 11.3% 11.6% 11.6% 11.6%
SGA PMPM 20.81 20.78 21.05 20.86 20.54
Claims Statistics
Claims Inventory 149,263 143,645 161,212 142,080
Inventory Days on
Hand 1.6 1.5 1.7 1.5
Total Medical
Liabilities (000's) $660,475 $646,277 $644,652 $645,017
Total Days in
Medical Liabilities 55.80 56.99 56.96 57.33
Member Growth
Same Store 64,000 1,000 (12,000) 27,000 48,000
Acquisition 62,000 62,000 0 0 0
Total Total
2003 2002
-------------------
Revenue PMPM
Commercial 206.08 183.80
Medicare 629.52 593.29
Medicaid 139.69 137.54
Management Fees 17.86 17.71
Medical PMPM
Commercial 164.59 152.12
Medicare 527.84 509.60
Medicaid 122.25 115.58
MLR %
Commercial 79.9% 82.8%
Medicare 83.8% 85.9%
Medicaid 87.5% 84.0%
-------------------
Total 81.2% 83.3%
SGA % of revenues 12.0% 12.2%
SGA PMPM 20.60 19.56
Claims Statistics
Claims Inventory 128,556 146,842
Inventory Days on
Hand 1.2 2.0
Total Medical
Liabilities (000's) $597,190 $558,599
Total Days in
Medical Liabilities 56.69 66.79
Member Growth
Same Store 157,000 51,000
Acquisition 191,000 143,000
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