COVENTRY HEALTH CARE INC

CIK:0001054833|SEC Filings

EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2013

Earnings per share (“EPS”) is calculated under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. The Company grants restricted stock to certain employees under its stock-based compensation program, which entitles recipients to receive non-forfeitable cash dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities. In accordance with ASC 260, “Earnings Per Share,” the two-class method has been applied to all periods presented.

Basic EPS is calculated using the weighted average number of common shares outstanding during the period. Diluted EPS assumes the exercise of all options. Options issued under the stock-based compensation program that have an antidilutive effect are excluded from the computation of diluted EPS. Potential common stock equivalents to purchase 2.4 million and 7.5 million shares for the quarters ended March 31, 2013 and 2012, respectively, were excluded from the computation of diluted earnings per common share because the potential common stock equivalents were antidilutive.

The table below provides the reconciliation of the earnings and number of shares used in the Company's calculations of basic and diluted earnings per share.



	Quarters Ended March 31,
	2013			2012
(in thousands, except for per share data)
Basic earnings per common share
Net Earnings	$	135,369		$	170,719
Less: Distributed and undistributed earnings allocated to participating securities	(1,155		)	(2,472		)
Net earnings allocable to common shares	$	134,214		$	168,247

Basic weighted average common shares outstanding	133,464			139,323
Basic earnings per common share	$	1.01		$	1.21

Diluted earnings per common share
Net Earnings	$	135,369		$	170,719
Less: Distributed and undistributed earnings allocated to participating securities	(1,149		)	(2,459		)
Net earnings allocable to common shares	$	134,220		$	168,260

Basic weighted average common shares outstanding	133,464			139,323
Effect of dilutive options	836			844
Diluted weighted average common shares outstanding	134,300			140,167
Diluted earnings per common share	$	1.00		$	1.20

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net earnings	$ 135,369	$ 170,719
Adjustments to earnings:
Depreciation and amortization	37,631	36,303
Amortization of stock compensation	5,972	9,014
RADV release	0	(132,977)
RADV release - deferred tax adjustment	0	50,531
Changes in assets and liabilities:
Accounts receivable, net	11,268	39,538
Other receivables, net	(52,403)	(84,455)
Medical liabilities	57,643	101,984
Accounts payable and other accrued liabilities	20,252	(145,907)
Deferred revenue	13,018	343,163
Other operating activities	(6,525)	32,602
Net cash from operating activities	222,225	420,515
Cash flows from investing activities:
Capital expenditures, net	(15,871)	(23,517)
Proceeds from sales of investments	282,922	249,120
Proceeds from maturities of investments	67,125	122,567
Purchases of investments	(411,368)	(345,530)
Payments for acquisitions, net of cash acquired	0	(46,980)
Net cash from investing activities	(77,192)	(44,340)
Cash flows from financing activities:
Proceeds from issuance of stock	4,397	25,404
Payments for repurchase of stock	(664)	(4,564)
Repayment of debt	0	(233,903)
Excess tax benefit from stock compensation	565	2,868
Payments for cash dividends	(16,815)	0
Net cash from financing activities	(12,517)	(210,195)
Net change in cash and cash equivalents	132,516	165,980
Cash and cash equivalents at beginning of period	1,399,162	1,579,003
Cash and cash equivalents at end of period	$ 1,531,678	$ 1,744,983

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 1,531,678	$ 1,399,162
Short-term investments	120,745	121,742
Accounts receivable, net	260,809	272,077
Other receivables, net	945,218	892,815
Other current assets	195,479	196,323
Total current assets	3,053,929	2,882,119
Long-term investments	2,713,291	2,658,582
Property and equipment, net	261,668	266,818
Goodwill	2,591,488	2,591,488
Other intangible assets, net	302,118	318,592
Other long-term assets	32,783	33,389
Total assets	8,955,277	8,750,988
Current liabilities:
Medical liabilities	1,476,557	1,418,914
Accounts payable and other accrued liabilities	509,930	488,175
Deferred revenue	150,999	137,981
Total current liabilities	2,137,486	2,045,070
Long-term debt	1,585,312	1,585,190
Other long-term liabilities	396,476	397,813
Total liabilities	4,119,274	4,028,073
Stockholders' equity:
Common stock, $.01 par value; 570,000 authorized 197,196 issued and 134,688 outstanding in 2013; 197,080 issued and 134,573 outstanding in 2012	1,972	1,971
Treasury stock, at cost; 62,508 in 2013; 62,507 in 2012	(1,920,996)	(1,920,749)
Additional paid-in capital	1,981,156	1,970,877
Accumulated other comprehensive income, net	53,757	69,220
Retained earnings	4,720,114	4,601,596
Total stockholders' equity	4,836,003	4,722,915
Total liabilities and stockholders' equity	$ 8,955,277	$ 8,750,988