WellCare Health Plans ends Q1 with $1.94 billion of cash, untapped $1 billion credit facility

By Paul Deckelman

New York, May 3 – WellCare Health Plans, Inc. ended the 2017 first quarter flush with liquidity, company executives said Wednesday.

Its balance sheet as of the March 31 end of the quarter showed $1.94 billion of cash, its executive vice president and chief financial officer, Drew L. Asher, told analysts on a conference call following the release of its results for the quarter.

Additionally, he said, the company “paid down our credit facility by $100 million to a balance of zero before the end of the quarter and increased the total capacity of our credit facility by $150 million. Today, we now have a $1 billion credit facility untapped.”

The Tampa, Fla.-based Medicaid managed care provider entered into what was originally an $850 million revolving credit facility in January of 2016.

It paid off all of its revolver borrowings during the quarter using a portion of the proceeds of a new $1.2 billion offering of 5¼% senior notes due 2025.

That quick-to-market transaction priced at par on March 8.

Besides paying off the revolver debt, the company used the proceeds from the bond deal, which it received before the quarter’s end, to repay its $900 million of outstanding 5¾% senior notes due 2020, with the remainder of the money slated for general corporate purposes, including organic growth and working capital.

Asher said that while the company’s balance sheet showed $1.94 billion of cash as the quarter ended, the redemption of the 2020 notes “did not close until early April, which is why the parent cash position is still high at quarter end. “He said that the early redemption resulted in a one-time cost of $25.9 million or 36 cents per share, which will be recorded in the second quarter and will be reported as excluded from adjusted earnings.

The CFO said that the redemption of the notes cost WellCare $946 million, including accrued interests and the early redemption premium, “so that would take [the cash balance] down to $1 billion.”

He said that two other sizable transactions that closed during the current quarter will further take the hefty Q1 cash figure down to a more normalized $230 million to $250 million by the end of the second quarter.

Well Care closed on its pending acquisition of Universal American Corp., which provides Medicare Advantage services in Texas, New York and Maine, on April 28. The total transaction value was approximately $800 million, including the assumption of debt and the make-whole premium payable on conversion of Universal American's convertible debt. WellCare funded the transaction with unrestricted cash available from both entities.

Just three days later, on May 1, WellCare closed on the acquisition of certain assets, including Arizona Medicaid membership and certain provider contracts, from Phoenix Health Plan, a wholly owned managed care subsidiary of Tenet Healthcare Corp. The transaction was funded with available cash on hand, but the financial terms of the deal were not disclosed.

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