Coventry Health Care Reports Record Second Quarter Earnings of $1.05 Per Diluted Share; EPS Up 75% 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)--July 29, 2003 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 June June: see month. 30, 2003. 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 $1.1 billion for the quarter, a 23% increase over the second quarter of 2002. Net earnings were $63.4 million, or $1.05 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 73% increase over net earnings for the second quarter of 2002 and 75% on a per diluted share basis. "I am pleased to report another quarter of profitable growth and broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased record earnings for our 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. . "In addition to this quarter's outstanding results, we also announced our entry into the Utah market via our pending acquisition of Altius Health Plans. Our model of operational excellence, built on disciplined pricing, intense expense management, and best-in-class See best-of-class. customer service, continues to drive superior results today, while building the operational and financial foundation necessary to meet the challenges of the future." Financial Highlights -- 2nd Quarter Membership Up 12% over prior year -- 2nd Quarter Revenues Up 23% over prior year -- 2nd 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 75% over prior year -- 2nd Quarter Operating Margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 8.3%, Up 250 basis points over prior year -- 2nd 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 34% Second Quarter Highlights: -- Membership. As of June 30, 2003, excluding 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. members, Coventry had a total of 2.15 million members, an increase of 228,000 members, or 12%, over the prior year and an increase of 21,000 members, or 1%, over the prior quarter due to organic growth of 29,000 members, partially offset by membership losses in recently acquired health plans of 8,000. -- Commercial Rate Increases. Coventry achieved commercial rate increases in excess of 15.0% on second quarter renewals, representing approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 12% of commercial risk membership. The Company expects commercial rate increases, net of benefit buydowns, to be in the range of 13% to 15% for the remainder of 2003. -- Medical Loss Ratio (MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there ). MLR was 80.9% for the quarter, a 230 basis point improvement over the prior year quarter. Commercial MLR of 80.0% was a 270 basis point improvement over the prior year quarter and is the main driver of overall MLR improvement. -- Selling, General & Administrative (SG&A) Expenses. SG&A expenses were 11.9% of operating revenues for the quarter, a 30 basis point reduction over the prior quarter and prior year quarter. -- Balance Sheet. Cash and investments grew to $1.28 billion during the quarter, up $157.4 million from 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. . 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 $79.6 million represent 6.6 days of sales. Days in Claims Payable (DCP DCP - definitional constraint programming ) were 55.1. The decline in DCP is due to faster claims receipts and payments over the prior year and quarter. -- 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 second quarter was $84.7 million as reported as compared to net income of $63.4 million. Cash flow for the six months ending June 30, 2003 was $144.2 million as reported, and $177.3 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. payments for 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 beneficiaries 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 $112.9 million. -- Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Program. The Company did not repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. any shares during the second quarter under its program. The Company will continue to opportunistically repurchase shares under its existing program, with outstanding authority of 2.5 million shares. 2003 Guidance -- Total risk revenues in the range of $4.35 billion to $4.50 billion -- Management services revenues of $85.0 million to $90.0 million -- Medical loss ratio (MLR%) of 81.0% to 82.0% of risk revenues -- Total selling, general, and administrative expenses (SGA SGA abbr. small for gestational age Small-for-gestational-age (SGA) A term used to describe newborns who are below the 10th percentile in height or weight for their estimated gestational age. ) of $520.0 million to $530.0 million -- Depreciation and amortization of $19.0 million to $22.0 million -- Investment income of $42.0 million to $44.0 million -- Interest expense of $14.8 million to $15.0 million -- Tax rate of 36% - 36.5% -- Diluted share count of 60 million to 61 million shares -- Earnings per share (EPS) on a diluted basis of $3.95 to $4.00 versus prior guidance of $3.40 to $3.50 for the full year -- EPS expectation for the third quarter of $1.05 Mr. Wise will host a conference call at 9:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Tuesday Tuesday: see week. , July July: see month. 29, 2003. To listen to the call, dial (800) 967-7184, or for international callers, (719) 457-2633. 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 274029. 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, insurance companies, and provider networks under the names Coventry Health Care, Coventry Health and Life, Carelink Health Plans, Group Health Plan, HealthAmerica, HealthAssurance, HealthCare USA, PersonalCare, SouthCare, 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+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 2.9 million members in a broad cross section of employer and government-funded groups in 13 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, 2002 filed with the Securities and Exchange Commission.
COVENTRY HEALTH CARE, INC.
MEMBERSHIP
(Amounts in thousands)
June 30, March 31, June 30,
2003 2003 2002
---------- ---------- ----------
Membership by Market:
Delaware 103 104 155
Georgia 75 72 80
Illinois - Central 75 77 -
Iowa 92 91 85
Kansas City 239 256 188
Louisiana 73 73 70
Nebraska 46 45 42
North Carolina 116 115 100
Pennsylvania 657 651 615
St. Louis 451 425 367
Virginia 152 149 146
West Virginia 73 73 76
---------- ---------- ----------
Total membership 2,152 2,131 1,924
========== ========== ==========
Membership by Product:
Risk membership:
Commercial 1,344 1,357 1,203
Medicare 64 63 59
Medicaid 314 307 307
---------- ---------- ----------
Total risk membership 1,722 1,727 1,569
Non-risk membership 430 404 355
---------- ---------- ----------
Total membership 2,152 2,131 1,924
========== ========== ==========
Network rental membership 739 786 690
COVENTRY HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Operating revenues:
Managed care
premiums $1,074,983 $871,927 $2,118,290 $1,703,156
Management services 21,448 18,186 43,558 35,507
----------- ----------- ----------- -----------
Total operating
revenues 1,096,431 890,113 2,161,848 1,738,663
----------- ----------- ----------- -----------
Operating expenses:
Medical costs 870,005 725,250 1,731,275 1,428,020
Selling, general and
administrative 130,634 108,681 260,719 213,339
Depreciation and
amortization 4,537 4,745 9,145 9,374
----------- ----------- ----------- -----------
Total operating
expenses 1,005,176 838,676 2,001,139 1,650,733
----------- ----------- ----------- -----------
Operating earnings 91,255 51,437 160,709 87,930
Operating earnings
percentage of total
revenues 8.3% 5.8% 7.4% 5.1%
Senior notes interest
expense, net 3,667 3,667 7,344 6,112
Other income, net 11,516 8,976 21,904 19,019
----------- ----------- ----------- -----------
Earnings before income
taxes 99,104 56,746 175,269 100,837
Provision for income
taxes 35,677 20,145 62,335 35,797
----------- ----------- ----------- -----------
Net earnings $63,427 $36,601 $112,934 $65,040
=========== =========== =========== ===========
Net earnings per share,
basic $1.08 $0.62 $1.94 $1.09
Net earnings per share,
diluted $1.05 $0.60 $1.88 $1.05
Weighted average shares
outstanding, basic 58,598 58,900 58,289 59,779
Weighted average shares
outstanding, diluted 60,407 61,000 60,028 62,124
----------------------------------------------------------------------
Reconciliation of
Operating Earnings
to EBITDA
Operating earnings $91,255 $51,437 $160,709 $87,930
Add : Depreciation
and amortization 4,537 4,745 9,145 9,374
Add: Other income,
net 11,516 8,976 21,904 19,019
----------- ----------- ----------- -----------
EBITDA $107,308 $65,158 $191,758 $116,323
EBITDA percentage of
total revenues 9.8% 7.3% 8.9% 6.7%
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
June 30, March 31, December 31,
2003 2003 2002
-------------------------------------
(unaudited) (unaudited)
Assets:
Current assets:
Cash and cash equivalents $230,105 $250,481 $186,768
Short-term investments 74,645 47,235 57,895
Accounts receivable, net 79,551 85,768 71,044
Other receivables, net 55,464 63,093 63,943
Deferred income taxes 42,332 41,343 36,861
Other current assets 10,989 9,200 7,764
-------------------------------------
Total current assets 493,086 497,120 424,275
Long-term investments 971,746 888,459 874,457
Property and equipment, net 31,730 32,068 34,045
Goodwill 257,619 257,619 243,746
Other intangible assets, net 25,237 25,798 25,687
Other long-term assets 43,438 41,641 41,230
-------------------------------------
Total assets $1,822,856 $1,742,705 $1,643,440
=====================================
Liabilities and Stockholders' Equity:
Current liabilities:
Medical claims liabilities $527,115 $537,471 $497,318
Other medical liabilities 61,211 69,558 61,281
Accounts payable and other
accrued liabilities 200,303 182,472 178,577
Deferred revenue 49,178 55,319 63,536
-------------------------------------
Total current liabilities 837,807 844,820 800,712
Senior notes 175,000 175,000 175,000
Other long-term liabilities 27,471 22,048 21,691
-------------------------------------
Total liabilities 1,040,278 1,041,868 997,403
Stockholders' Equity:
Total stockholders' equity 782,578 700,837 646,037
-------------------------------------
Total liabilities and
stockholders' equity $1,822,856 $1,742,705 $1,643,440
=====================================
COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Six Months
Quarter Ended Ended
June 30, 2003 June 30, 2003
----------------------------
Cash flows from operating activities:
Net earnings $63,427 $112,934
Depreciation and amortization 4,537 9,145
Amortization of deferred compensation 2,154 4,024
Changes in assets and liabilities:
Accounts receivable, net 6,217 (7,454)
Medical claims liabilities (10,356) 10,677
Other medical liabilities (8,347) (311)
Accounts payable and accrued
liabilities 21,554 21,508
Interest payable on senior notes 3,555 0
Deferred revenue (6,141) (17,643)
Other operating activities 8,053 11,293
----------------------------
Total cash flows from operating
activities 84,653 144,173
----------------------------
Cash flows from investing activities:
Capital expenditures, net (3,728) (5,160)
Purchases of investments, net of proceeds (104,335) (84,565)
Payments for acquisitions, net of cash
acquired 0 (16,045)
----------------------------
Total cash flows from investing
activities (108,063) (105,770)
----------------------------
Cash flows from financing activities:
Proceeds from issuance of stock 6,108 8,008
Payments for repurchase of stock (3,074) (3,074)
----------------------------
Total cash flows from financing
activities 3,034 4,934
----------------------------
Net change in cash and cash equivalents
for current period (20,376) 43,337
Cash and cash equivalents at beginning of
period 250,481 186,768
----------------------------
Cash and cash equivalents at end of period $230,105 $230,105
============================
----------------------------------------------------------------------
Cash and Investments:
Cash and cash equivalents $230,105 $230,105
Short-term investments 74,645 74,645
Long-term investments 971,746 971,746
----------------------------
Total cash and investments $1,276,496 $1,276,496
============================
COVENTRY HEALTH CARE, INC.
SELECTED OPERATING STATISTICS
(Excluding charges)
Total
Q2 2003 Q1 2003 2002
---------------------------
Revenue PMPM
Commercial 204.83 200.88 183.80
Medicare 628.20 627.05 593.29
Medicaid 140.08 139.25 137.54
Management Fees 17.40 18.29 17.71
Medical PMPM
Commercial 163.91 162.66 152.12
Medicare 504.19 542.55 509.60
Medicaid 122.18 123.82 115.58
MLR %
Commercial 80.0% 81.0% 82.8%
Medicare 80.3% 86.5% 85.9%
Medicaid 87.2% 88.9% 84.0%
---------------------------
Total 80.9% 82.6% 83.3%
SGA % of revenues 11.9% 12.2% 12.2%
SGA PMPM 20.46 20.72 19.56
Claims Statistics
Claims Inventory 156,238 133,600
Inventory Days on Hand 1.9 1.7
Total Medical Liabilities (000's) $588,326 $607,029
Days in Claims Payable 55.14 56.16
Days in Other Medical Liabilities 6.40 7.27
Total Days in Medical Liabilities 61.54 63.43
Member Growth (a)
Same Store 29,000 50,000 51,000
Acquisition (8,000) 46,000 143,000
Total
Q4 2002 Q3 2002 Q2 2002 2001
------------------------------------
Revenue PMPM
Commercial 188.63 186.48 181.33 163.05
Medicare 589.25 596.91 593.39 565.70
Medicaid 137.39 129.16 138.52 144.80
Management Fees 18.02 16.82 18.08 18.30
Medical PMPM
Commercial 155.54 152.67 150.02 140.03
Medicare 510.28 513.58 486.26 505.84
Medicaid 113.90 107.95 119.70 120.93
MLR %
Commercial 82.5% 81.9% 82.7% 85.9%
Medicare 86.6% 86.0% 81.9% 89.4%
Medicaid 82.9% 83.6% 86.4% 83.5%
------------------------------------
Total 83.0% 82.6% 83.2% 86.0%
SGA % of revenues 12.2% 12.2% 12.2% 12.0%
SGA PMPM 19.91 19.55 19.30 17.90
Claims Statistics
Claims Inventory 146,842 162,294 193,413 248,171
Inventory Days on Hand 2.0 2.5 2.8 3.7
Total Medical Liabilities (000's) $558,599 $533,842 $541,983 $522,854
Days in Claims Payable 59.46 59.92 59.86 61.98
Days in Other Medical Liabilities 7.33 8.10 8.14 8.39
Total Days in Medical Liabilities 66.79 68.02 68.00 70.37
Member Growth (a)
Same Store 37,000 (35,000) 75,000 (8,000)
Acquisition 118,000 (9,000) 44,000 136,000
(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. Membership growth excludes network rental membership. |
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