UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2004

or

For the transition period from __________ to __________

Commission file number: 001-32209

WELLCARE HEALTH PLANS, INC.

(813) 290-6200
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

     As of August 12, 2004, there were 37,069,090 shares of the registrant’s common stock, par value $.01 per share, outstanding.

WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

TABLE OF CONTENTS

i

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, dollars in thousands, except unit and pro forma share data)

See notes to condensed consolidated financial statements.

1

WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, dollars in thousands, except per unit and pro forma per share data)

See notes to condensed consolidated financial statements.

2

WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, dollars in thousands)

See notes to condensed consolidated financial statements.

3

WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit and per unit data)

1.

ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     WellCare Health Plans, Inc., a Delaware corporation (the “Company”), provides managed care services targeted exclusively to government-sponsored healthcare programs, focusing on Medicaid and Medicare. Through its health plans, the Company offers a diverse array of products, primarily Medicaid and related state programs, such as the State Children’s Health Insurance Program (S-CHIP), and Medicare programs, serving approximately 695,000 members as of June 30, 2004.

History

     WellCare Holdings, LLC, a Delaware limited liability company (“Holdings”), was formed on May 8, 2002 for the purpose of acquiring the WellCare group of companies. Holdings began operations on August 1, 2002 in conjunction with the acquisition of its operating subsidiaries in Florida, New York and Connecticut. On June 3, 2004, Holdings acquired a new subsidiary that provides Medicaid managed care services in Illinois and Indiana.

     The Company, formerly known as WellCare Group, Inc., became the successor to Holdings following a reorganization that took place immediately prior to the closing of the Company’s initial public offering on July 7, 2004. The reorganization was effected through a merger of Holdings with and into the Company, a wholly-owned subsidiary of Holdings. Upon consummation of the merger, the Company changed its name to WellCare Health Plans, Inc.

Basis of Presentation

     The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated and combined financial statements and notes thereto included in the Company’s Registration Statement on Form S-1 declared effective by the Securities and Exchange Commission on June 30, 2004. In the opinion of the Company’s management, the interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the financial position and results of operations and cash flows for the interim periods presented. The interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. Results for the interim periods presented are not necessarily indicative of results that may be expected for the entire year or any other interim period.

     Basic net income attributable per unit is computed by dividing the net income less the Class A common unit yield for the period by the weighted average number of units outstanding during the period, less units outstanding that are unvested and subject to provisions that allow the Company to repurchase units at its sole discretion. Diluted net income attributable per unit is computed by dividing the net income for the period less the Class A common unit yield by the weighted average number of units outstanding during the period, including the unvested units that are subject to provisions that allow the Company to repurchase units at its sole discretion.

     Holdings’ historic capital structure is not indicative of the Company’s prospective structure due to the automatic conversion of all units of Holdings into common stock of the Company immediately prior to the closing of the Company’s initial public offering. Accordingly, historic basic and diluted net income attributable per common unit should not be used as an indicator of the future earnings per common share. The pro forma information in the balance sheet assumes conversion of all outstanding units of Holdings into shares of the Company’s common stock

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WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

resulting from the completion of the initial public offering as if it had occurred at the beginning of all periods presented. Pro forma net income per share is computed using the weighted average number of common shares outstanding, including the pro forma effects of automatic conversion of all outstanding common units into shares of the Company’s common stock effective immediately prior to the closing of the Company’s initial public offering on July 7, 2004.

     The following table presents the calculation of net income attributable per common unit—basic and diluted:

     The Company has equity-based compensation plans for the benefit of its eligible associates and directors. The Company accounts for equity-based compensation under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.”

5

WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     The following table illustrates the effect on net income and net income attributable per common unit as if the fair value based method had been applied to all awards:

2. BUSINESS ACQUISITION

     On June 3, 2004, the Company acquired Harmony Health Systems, Inc. (“HHS”) and its subsidiaries, Harmony Health Plan of Illinois, Inc. and Harmony Health Management, Inc., referred to collectively as the “Acquired Subsidiaries,” pursuant to the terms of a merger agreement entered into on March 3, 2004, for $50,296, including acquisition costs of $1,609. The Acquired Subsidiaries serve approximately 94,000 Medicaid members in Illinois and Indiana as of June 30, 2004. The results of the Acquired Subsidiaries’ operations have been included in the condensed consolidated financial statements since the acquisition date.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at May 31, 2004. No material transactions occurred between May 31, 2004 and the transaction date. Goodwill and other intangibles are estimated to be $35,571. The Company has not yet finalized the fair value analysis; therefore, the allocation of the assets and liabilities is subject to adjustment.

     The following unaudited pro forma summary information presents the consolidated income statement information for the three-month and six-month periods ended June 30, 2004 and 2003 as if the acquisition had been consummated on January 1, 2003, and does not purport to be indicative of what would have occurred had the acquisition been completed at that date or the results that may occur in the future.

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WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

3. DEBT

     In May 2004, the Company and certain subsidiaries entered into a credit agreement and obtained two new credit facilities, consisting of a senior secured term loan facility in the amount of $160,000 and a revolving credit facility in the amount of $50,000, of which $10,000 is available for short-term borrowings on a swingline basis. Interest is payable quarterly at a rate per annum based on the optional rates available to the Company. The Company has the option to select either (a) LIBOR plus a 4 percent margin or (b) the greater of (i) prime or (ii) the federal funds rate plus 0.50%, plus a margin of 3 percent. In May 2004, the Company chose the six month LIBOR rate option which is 5.5625%. At the end of the six month period, the Company will have to select a new rate option. The term loan facility will mature in May 2009, and the revolving credit facility will mature in May 2008. The Company is a party to this facility for the purpose of guaranteeing the indebtedness of certain of its subsidiaries.

     The credit agreement also contains various restrictive covenants which limit among other things, indebtedness, liens and business combination transactions. In addition, the Company must maintain certain fixed charge and leverage ratios. The Company is in compliance with the financial covenant ratios at June 30, 2004.

     Concurrently, the Company entered into an agreement with the former stockholders of certain of the Company’s subsidiaries to prepay $85,000 of the principal balance of a note previously issued to them (the “Seller Note”), using a portion of the proceeds of the new senior secured term loan facility. In addition, $3,000 of the principal balance of the Seller Note was forgiven in consideration of that prepayment. The remaining balance of the Seller Note, $28,241, is due on September 15, 2006, and would be due immediately upon the sale of the Company. The Company also used $18,263 of the proceeds of the new facility to prepay the $16,271 senior discount notes issued in March 2003 by a subsidiary of the Company, and terminated the previously available $15,000 line of credit obtained in March 2003 by a subsidiary of the Company. No amounts have been drawn on the $50,000 revolving credit facility.

     At June 30, 2004, maturities on the new credit facility and the Seller Note were as follows:

4. SEGMENT REPORTING

     The Company has two reportable segments: Medicaid and Medicare. The segments were determined based upon the type of governmental administration and funding of the health plans. Segment performance is evaluated based upon earnings from operations without corporate allocations.

     The Medicaid segment includes operations to provide healthcare services to recipients that are eligible for state supported programs including Medicaid and family and children’s health programs. The Medicare segment

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WELLCARE HEALTH PLANS, INC.
(SUCCESSOR TO WELLCARE HOLDINGS, LLC)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

includes operations to provide healthcare services to recipients who are eligible for the federally supported Medicare program. The corporate and other segment includes revenue and claims associated with commercial members. As of June 30, 2004, the Company has no commercial members and is not offering commercial products.

     Asset, liability and equity amounts by segment have not been disclosed, as they are not reported by segment internally by the Company.