form8-k.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): August 12, 2008
WELLCARE
HEALTH PLANS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-32209
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47-0937650
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
incorporation)
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Identification
No.)
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8725
Henderson Road, Renaissance One
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Tampa,
Florida
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33634
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
(813) 290-6200
Not
Applicable
(Former
name or former address, if changed since last report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02
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Results
of Operations and Financial
Statements
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On August
12, 2008, WellCare Health Plans, Inc. (the “Company”) filed a Form 12b-25
with the United States Securities and Exchange Commission to report that it will
not timely file its Quarterly Report on Form 10-Q for the quarter ended June 30,
2008. The Form 12b-25 included the following narrative:
“The
Quarterly Report on Form 10-Q of WellCare Health Plans, Inc. (the “Company”) for the quarter
ended June 30, 2008, could not be filed with the Securities and Exchange
Commission on a timely basis in light of the circumstances described
below.
Restatement
As
previously disclosed, certain federal and state agencies executed a search
warrant on October 24, 2007 at the headquarters of WellCare Health Plans, Inc.
(referred to in this Form 12b-25 as “we,” “our,” “us,” or the “Company”) in Tampa,
Florida. Our Board of Directors (the “Board”) formed a special
committee (the “Special
Committee”) comprised of independent directors to, among other things,
investigate independently and otherwise assess the facts and circumstances
raised in any federal or state regulatory or enforcement inquiries (including,
without limitation, any matters relating to accounting and operational issues)
and in any private party proceedings, and develop and recommend to the Board for
its consideration remedial measures. The Special Committee retained
the law firm of Davis Polk & Wardwell to advise and assist it in the
investigation. The Special Committee and the Company are cooperating fully with
regulators and enforcement officials.
As
previously announced, upon consideration of certain issues identified in the
Special Committee investigation, on July 18, 2008, the Audit Committee of the
Board (the “Audit
Committee”), after discussions with management and our independent
registered accounting firm, recommended to the Board that our previously issued
audited consolidated financial statements for the years ended December 31, 2004,
2005 and 2006 be restated. In addition, in light of the work of the
Special Committee, we reassessed our previously issued unaudited condensed
consolidated financial statements for the three months ended March 31 and June
30, 2007. Based on such reassessment, the Audit Committee, after
discussions with management and our independent registered accounting firm, also
recommended to the Board that our previously issued unaudited condensed
consolidated financial statements for the three months ended March 31 and June
30, 2007 be restated. In this Form 12b-25, the years ended December
31, 2004, 2005 and 2006, and the three months ended March 31 and June 30, 2007,
are referred to collectively as the “Restatement
Period.”
As
previously announced, upon the recommendation of the Audit Committee, the Board
concluded on July 21, 2008 that our previously issued consolidated financial
statements for the Restatement Period need to be
restated. Accordingly, our previously issued consolidated financial
statements for the Restatement Period and the corresponding report of our
independent registered accounting firm, Deloitte & Touche LLP, included in
our previously filed 2006 Annual Report on Form 10-K, should no longer be relied
upon.
The
Special Committee’s review is ongoing. Although we cannot provide any
assurances, at the present time we do not believe that the work currently being
performed by the Special Committee will require any material adjustments to our
previously issued financial statements beyond those previously
disclosed.
Also as
previously announced, until the independent investigation conducted by the
Special Committee is complete or substantially complete, the Company, in
addition to having been unable to file its Form 10-Q for the quarter ended
September 30, 2007, its Form 10-K for the year ended December 31, 2007 (the
“2007 10-K”) or its Form
10-Q for the quarter ended March 31, 2008, will not be in a position to file its
Form 10-Q for the quarter ended June 30, 2008 by the required filing date or on
or before the fifth calendar day following the required filing date as
prescribed by Rule 12b-25.
As a
result of the delay in its filing of the 2007 10-K, the Company is subject to
the New York Stock Exchange’s late filing procedures as they pertain to annual
reports.
The
Company currently intends to present the restated consolidated financial
statements and related financial information in the 2007 10-K. The
Company also expects to file its Form 10-Q for the quarter ended September 30,
2007, Form 10-Q for the quarter ended March 31, 2008, Form 10-Q for the quarter
ended June 30, 2008 and any subsequently delayed reports at the time of, or
shortly after, the filing of the 2007 10-K. The Company is currently
in the process of preparing the above-described reports and is currently unable
to estimate the timing for filing these reports.
Anticipated
Significant Changes in Results of Operations
Although
the Company is unable to file its Form 10-Q for the quarter ended June 30, 2008
on a timely basis, it anticipates that it will experience significant changes in
its results of operations from the corresponding period for the last fiscal year
to be reflected by the earnings statements to be included in such report when
ultimately filed. Further, at this time, the Company is preparing its
financial statements for the Restatement Period and, therefore, has not been
able to finalize the financial statements for the three and six months ended
June 30, 2008. However, the Company’s results for the three and six
months ended June 30, 2008 are expected to reflect significant changes from the
same periods in 2007.
As
reflected in the following table, which is organized by segment and line of
business, the Company’s total membership as of June 30, 2008 has increased from
the prior year period.
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June
30,
2008
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June
30,
2007
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Medicaid
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TANF
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1,006,000
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858,000
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S-CHIP
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186,000
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217,000
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SSI
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73,000
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70,000
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FHP
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28,000
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31,000
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1,293,000
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1,176,000
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Medicare
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MA
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231,000
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155,000
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PDP
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999,000
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971,000
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1,230,000
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1,126,000
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Total
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2,523,000
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2,302,000
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The
increase in the Company’s total membership from the prior year period is
anticipated to cause increases in the Company’s premium revenues and medical
benefits and other expenses. The Company currently anticipates that
its revenues and medical benefits expenses for the three and six months ended
June 30, 2008 will be significantly higher than in the same periods for 2007 due
to the changes in the numbers and demographic mix of membership principally
occurring in the Company’s Medicare Advantage plans and Ohio Medicaid
market. The Company also anticipates that its net income will be
substantially lower in the three and six months ended June 30, 2008 than in the
same periods in 2007 and that it may incur a net loss, in large part resulting
from the following two significant factors:
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The
increase in medical benefits expense is anticipated to outpace the
increase in revenue in the three and six months ended June 30, 2008
compared to the same periods in 2007 primarily due to a widening of the
CMS-sponsored Medicare Part D risk corridors in 2008, which had the effect
of increasing the medical expenses incurred by the Part D product in the
three and six months ended June 30, 2008 as well as increasing the
seasonality of medical expenses associated with the Part D product;
and
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Administrative
expenses associated with or consequential to the government and Special
Committee investigations, including legal fees, consulting fees, employee
recruitment and retention costs, and similar expenses which are
anticipated to be approximately $32 million in the three months ended June
30, 2008 compared to $0 in the prior year period. Expenses
similar to those above are anticipated to be approximately $64 million in
the six months ended June 30, 2008 compared to $0 in the prior year
period. Additional expenses associated with the Company’s
previously announced reduction in force resulted in expense of
approximately $3 million in the three and six months ended June 30, 2008
compared to $0 in the same periods in
2007.
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In
addition to the anticipated significant changes noted above, there may be other
significant changes in the Company’s results of operations that have not yet
been identified as of the date of this report when the Company subsequently
files its Form 10-Q for the three months ended June 30, 2008. In
particular, the Company currently expects to restate financial information that
was included in its previously filed reports on Form 10-Q for the three months
ended March 31, 2007 and June 30, 2007. In connection with preparing
the financial statements for the Restatement Period, there may be significant
adjustments to the Company’s previously issued financial statements, including
previously issued reports on Form 10-Q for the three months ended March 31, 2007
and June 30, 2007 that are different from or in addition to those previously
disclosed, including, without limitation, the Company’s significant estimates
for these periods. Consequently, there may be additional significant
changes not yet identified when comparing its results of operations for the same
periods in 2007 and 2008.”
The
information furnished herewith pursuant to Item 2.02 of this Current Report on
Form 8-K shall not be deemed to be “filed” for the purpose of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise
subject to the liabilities of that section, and shall not be incorporated by
reference into any registration statement or other document under the Securities
Act of 1933, as amended, or the Exchange Act, except as shall be expressly set
forth by specific reference in such filing
Item
8.01 Other
Events
On August
15, 2008, the following subsidiaries of the Company filed quarterly unaudited
financial statements for the quarter ended June 30, 2008 (the “Health Quarterly Statements”)
with state regulatory authorities in each jurisdiction:
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WellCare
of Florida, Inc.
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HealthEase
of Florida, Inc.
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WellCare
of Connecticut, Inc.
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WellCare
of Georgia, Inc.
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WellCare
of Louisiana, Inc.
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WellCare
of Ohio, Inc.
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WellCare
of Texas, Inc.
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WellCare
Health Plans of New Jersey, Inc.
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WellCare
Health Insurance of Illinois, Inc.
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WellCare
Prescription Insurance, Inc.
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WellCare
Health Insurance of Arizona, Inc.
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WellCare
Health Insurance of New York, Inc.
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Harmony
Health Plan of Illinois, Inc.
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Harmony
Behavioral Health of Florida, Inc.
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In
preparing the Health Quarterly Statements, the Company has considered
information about the ongoing investigations discussed above known to the
Company as of the date hereof. However, the information contained in
the Health Quarterly Statements may be subject to adjustment based on the
outcome of the pending investigations, as new information becomes available to
the Company or as the Company prepares the financial statements for the
Restatement Period. The Health Quarterly Statements filed in each of
the states listed above have been prepared in accordance with the requirements
of each respective state’s law and have not been prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”). Additionally,
the Health Quarterly Statements filed in each of the states listed above should
not be considered, individually or in the aggregate, as representative or
indicative of the Company’s results of operations or financial condition on a
consolidated GAAP basis.
When the
2007 10-K and quarterly reports on Form 10-Q discussed above under Item 2.02,
“Results of Operations and Financial Statements,” are ultimately filed in
connection with the restatement, there may be other significant changes in the
Company’s results of operations that have not yet been identified as of the date
of this Current Report on Form 8-K. In connection with preparing the
financial statements for the Restatement Period, there may be significant
adjustments to the Company’s previously issued financial statements, including
previously issued reports on Form 10-Q for the three months ended March 31, 2007
and June 30, 2007, that are different from or in addition to those previously
disclosed, including, without limitation, the Company’s significant estimates
for these periods. Consequently, the Health Quarterly Statements for
each of the corresponding periods may also be materially different than those
previously filed with state regulatory authorities in each
jurisdiction.
Copies of
the Health Quarterly Statements for each of the subsidiaries listed above can be
accessed at the Company’s website at
www.wellcare.com/investor relations/financial reports/statutory filings.
(http://ir.wellcare.com/phoenix.zhtml?c=176521&p=irol-statfiling)
Cautionary Note Regarding
Forward-looking Statements:
This
Current Report on Form 8-K contains forward-looking statements within the safe
harbor provisions of the Private Securities Litigation Report Act of
1995. All statements other than those that are purely historical are
forward-looking statements. Words such as “expect,” “anticipate,”
“believe,” “estimate,” “intend,” “plan,” “potential” and similar expressions
also identify forward-looking statements. Forward-looking statements
include statements regarding expected materiality or significance, the
quantitative effects of the restatement, and any anticipated conclusions of the
Company, the Audit Committee or management.
Because
these forward-looking statements involve risks and uncertainties, there are
important factors that could cause the Company’s actual results, as well as the
Company’s expectations regarding materiality or significance, the restatement’s
quantitative effects, the possibility that specified financial data contained in
the Health Quarterly Statements may be adjusted based on the outcome of the
previously disclosed investigations, the effectiveness of the Company’s
disclosure controls and procedures, and material weaknesses in internal control
over financial reporting, to differ materially from those in the forward-looking
statements.
These
factors include, among other things, the risk that additional information may
arise from the preparation of the Company’s restated consolidated financial
statements and that its internal control over financial reporting may be
inadequate or have weaknesses of which the Company is not currently aware or
which have not been detected. Furthermore, there can be no assurance
that additional issues or matters will not arise from the matters discussed
above under “Other
Proceedings” in the Company’s Current Report on Form 8-K filed on July
21, 2008.
For a
discussion of a variety of risk factors affecting the Company’s business and
prospects, see “Item 1A — Risk Factors” in the Compay’s Annual Report on
Form 10-K for the year ended December 31, 2006 (the “2006 10-K”), as supplemented
by the reports the Company has filed since the 2006 10-K, as well as the
additional risk factors noted below. Readers are strongly urged to
review all such filings for a more detailed discussion of the Company’s risks
and uncertainties. The Company assumes no obligation to update any
forward-looking statements and expressly disclaims any duty to update the
information referred to in this filing except as required by law.
As noted
above, the Company is subject to pending investigations by federal and state
regulatory and enforcement agencies. In the event those, or any
future, investigations result in criminal or other sanctions against the Company
for health care related violations or otherwise, it could be disqualified from
doing business in one or more jurisdictions under various statutes, regulations
and contracts.
In
addition, sanctions in the form of fines, penalties and interest, among other
things, could be imposed on the Company, and the Company could be disqualified
from participating in one or more health care funding programs which are
material to its business. Any such disqualifications and/or sanctions
could have a material adverse effect on the Company’s business, operations,
financial results and financial condition.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Date:
August 15, 2008
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WELLCARE
HEALTH PLANS, INC.
/s/ Heath
Schiesser
Heath
Schiesser
President
and Chief Executive Officer
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