ST. LOUIS, Feb. 9 /PRNewswire-FirstCall/ -- Centene Corporation
(NYSE: CNC) today announced its financial results for the quarter
and year ended December 31, 2009. The results of operations for our
New Jersey health plan, University Health Plans, are classified as
discontinued operations. The discussions below, with the exception
of cash flow information, are in the context of continuing
operations and all financial ratios exclude premium taxes. 2009
Highlights Q4 Full Year ---- ---------- Premium and Service
Revenues (in millions) $1,050.8 $3,878.3 Consolidated HBR 83.9%
83.5% Diluted EPS $0.53 $1.94 Cash flow from operations (in
millions) $71.3 $248.2 Fourth Quarter Highlights -- Quarter-end
managed care at-risk membership of 1,455,600, an increase of
259,600 lives year over year. -- Premium and Service Revenues of
$1,050.8 million, representing 19.6% year over year growth. --
Health Benefits Ratio (HBR) of 83.9%. -- General and Administrative
(G&A) expense ratio of 12.7%. -- Cash flow from operations of
$71.3 million. -- Days in claims payable of 50.1, including
pharmacy claims payable. -- Diluted earnings per share from
continuing operations of $0.53. Other Events -- During the fourth
quarter of 2009, CeltiCare Health Plan of Massachusetts enrolled
27,300 members under our new managed healthcare service contracts
for the Commonwealth Bridge and Commonwealth Care programs. -- In
November 2009, we announced we were selected to provide managed
care services in Mississippi to Medicaid recipients through the
Mississippi Coordinated Access Network (MississippiCan) program. We
are working with the State and currently expect a 2010 start date.
-- In December 2009, Don Imholz was promoted to Executive Vice
President and Chief Information Officer, and in January 2010, Toni
Simonetti was appointed Senior Vice President of Public Affairs. --
We recently completed the sale of an additional 5.75 million shares
of common stock, including the underwriters overallotment option,
for a public offering price of $19.25 per share. Net proceeds from
the sale of the additional shares were approximately $104.5
million. As a result of the sale of these shares, the pro-forma
debt to capital ratio is reduced to 23.6% from 33.2% at December
31, 2009. Michael F. Neidorff, Centene's Chairman and Chief
Executive Officer, stated, "Our commitment to quality and
fundamentals drove solid 2009 results and we endeavor to maintain
this momentum in 2010." The following table depicts membership in
Centene's managed care organizations, by state, at December 31,
2009 and 2008: December 31, ------------ 2009 2008 ---- ----
Arizona 18,100 14,900 Florida 102,600 - Georgia 309,700 288,300
Indiana 208,100 175,300 Massachusetts 27,800 - Ohio 150,800 133,400
South Carolina 48,600 31,300 Texas 455,100 428,000 Wisconsin
134,800 124,800 ------- ------- Total at-risk membership 1,455,600
1,196,000 --------- --------- Non-risk membership 63,700* 3,700
------- ----- Total 1,519,300 1,199,700 ========= ========= *
Increase mainly due to consolidation of our Access Health Solutions
LLC investment, effective January 1, 2009. The following table
depicts membership in Centene's managed care organizations, by
member category, at December 31, 2009 and 2008: December 31,
------------ 2009 2008 ---- ---- Medicaid 1,081,400 877,400 CHIP
& Foster Care 263,600 257,300 ABD & Medicare 82,800 61,300
Other State programs 27,800 - ------ --- Total at-risk membership
1,455,600 1,196,000 --------- --------- Non-risk membership 63,700
3,700 ------ ----- Total 1,519,300 1,199,700 ========= =========
Statement of Operations -- For the fourth quarter of 2009, Premium
and Service Revenues increased 19.6% to $1,050.8 million from
$878.8 million in the fourth quarter of 2008. The increase was
primarily driven by membership growth in all states, premium rate
increases, the consolidation of Access and conversion of members to
our at-risk plan in Florida. -- The consolidated HBR, which
reflects medical costs as a percent of premium revenues, was 83.9%.
A reconciliation of the change in HBR from the prior year same
period and from the immediately preceding quarter is presented
below: Q4:2009 vs. Q4:2008 Q4:2009 vs. Q3:2009 -------------------
------------------- Fourth Quarter 2008 82.3% Third Quarter 2009
83.7% New markets reserved at New markets reserved at higher higher
rates 1.6 rates 1.1 Impact of additional costs related to the
Impact of additional costs flu 0.8 related to the flu 0.3 Decrease
in Texas CHIP/ Perinate rates 0.6 Rate increases (1.2) ----
Improvements in ABD markets (1.7) Fourth Quarter 2009 83.9% ====
Net change in other markets 0.3 --- Fourth Quarter 2009 83.9% ====
The increase in the fourth quarter of 2009 over the comparable
period in 2008 was due to the effect of reserving at higher rates
for new markets, the March 1, 2009 rate decrease for our
CHIP/Perinate product in Texas which brought the HBR more in line
with our normal range and the impact of additional costs related to
the flu. We also experienced improvements in our ABD product,
particularly in Ohio and South Carolina. Sequentially, the increase
in the HBR reflects the impact of the aforementioned new markets,
additional costs related to the flu along with the effect of rate
increases, including the rate increase in Georgia for the period
July 1, 2009 to December 31, 2009, recorded in the fourth quarter.
-- Consolidated G&A expense as a percent of premium and service
revenues was 12.7% in the fourth quarter of 2009, a decrease from
13.8% in the fourth quarter of 2008. The reduction in the G&A
ratio between years reflects improved leveraging of our costs over
a higher revenue base and the impact of additional revenue from new
business (Florida and South Carolina). -- Earnings per diluted
share from continuing operations were $0.53, compared to $0.53 in
the fourth quarter of 2008. When compared to the fourth quarter of
2008, we anticipated and experienced an increase in costs related
to the flu of approximately $8.3 million. This was partially offset
by decreases in pharmacy and other medical expense categories and a
lower G&A expense ratio as discussed above. -- For the year
ended December 31, 2009, Premium and Service Revenues increased
18.4% to $3.9 billion in 2009 from $3.3 billion in 2008. G&A
expenses as a percent of Premium and Service Revenues decreased to
13.3% in 2009, compared to 13.6% in 2008. Earnings from operations
increased to $138.1 million in 2009 from $131.6 million in 2008.
Net earnings from continuing operations, were $86.1 million, or
$1.94 per diluted share in 2009 compared to $84.2 million, or $1.90
per diluted share in 2008. Recording the Georgia premium rate
increase for the period from July 1, 2007 to December 31, 2007
during the first quarter of 2008 had the effect of increasing our
2008 revenue and pre-tax earnings by $20.8 million, or $0.28 per
diluted share. Balance Sheet and Cash Flow At December 31, 2009,
the Company had cash and investments of $986.1 million, including
$949.9 million held by its regulated entities and $36.2 million
held by its unregulated entities. Medical claims liabilities
totaled $470.9 million, representing 50.1 days in claims payable,
an increase of 1.2 days from September 30, 2009. Total debt was
$307.7 million and debt to capitalization was 33.2%. Year to date
cash flow from operations was $248.2 million. Days in claims
payable have been adjusted to reflect the inclusion of pharmacy
claims payable. A reconciliation of the Company's change in days in
claims payable from the immediately preceding quarter-end is
presented below: Days in claims payable, September 30, 2009 48.9
Timing of medical claims processing 1.0 Pharmacy 0.2 --- Days in
claims payable, December 31, 2009 50.1 Outlook The table below
depicts the Company's annual guidance from continuing operations
for 2010: Full Year 2010 -------------- Low High --- ---- Premium
and Service revenues (in millions) $4,350 $4,450 Earnings per
diluted share (EPS) $1.70 $1.80 HBR % 84.0% 86.0% G&A % 12.4%
12.9% Diluted Shares Outstanding (in thousands) 50,500 The Company
is adjusting the EPS range of its earnings guidance to reflect the
issuance of 5.75 million common shares of stock related to the
Company's recently completed stock offering, which is partially
offset by a reduction in interest expense from the pay down of our
revolving credit facility. Conference Call As previously announced,
the Company will host a conference call Tuesday, February 9, 2010,
at 8:30 A.M. (Eastern Time) to review the financial results for the
fourth quarter ended December 31, 2009, and to discuss its business
outlook. Michael F. Neidorff and William N. Scheffel will host the
conference call. Investors and other interested parties are invited
to listen to the conference call by dialing 800-273-1254 in the
U.S. and Canada; 973-638-3440 from abroad, or via a live, audio
webcast on the Company's website at http://www.centene.com/, under
the Investors section. A replay will be available for on-demand
listening shortly after the completion of the call until 11:59 PM
(Eastern Time) on Tuesday, February 23, 2010, at the aforementioned
URL, or by dialing 800-642-1687 in the U.S. and Canada, or
706-645-9291 from abroad, and entering access code 51681793. About
Centene Corporation Centene Corporation is a leading multi-line
healthcare enterprise that provides programs and related services
to individuals receiving benefits under Medicaid, including the
Children's Health Insurance Program (CHIP), as well as Aged, Blind,
or Disabled (ABD), Foster Care, Long-Term Care and Medicare
(Special Needs Plans). The Company operates local health plans and
offers a wide range of health insurance solutions to individuals
and the rising number of uninsured Americans. It also contracts
with other healthcare and commercial organizations to provide
specialty services including behavioral health, life and health
management, managed vision, telehealth services, pharmacy benefits
management and medication adherence. Information regarding Centene
is available via the Internet at http://www.centene.com/. The
information provided in this press release contains forward-looking
statements that relate to future events and future financial
performance of Centene. Subsequent events and developments may
cause the Company's estimates to change. The Company disclaims any
obligation to update this forward-looking financial information in
the future. Readers are cautioned that matters subject to
forward-looking statements involve known and unknown risks and
uncertainties, including economic, regulatory, competitive and
other factors that may cause Centene's or its industry's actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by these
forward-looking statements. Actual results may differ from
projections or estimates due to a variety of important factors,
including Centene's ability to accurately predict and effectively
manage health benefits and other operating expenses, competition,
changes in healthcare practices, changes in federal or state laws
or regulations, inflation, provider contract changes, new
technologies, reduction in provider payments by governmental
payors, major epidemics, disasters and numerous other factors
affecting the delivery and cost of healthcare. The expiration,
cancellation or suspension of Centene's Medicaid Managed Care
contracts by state governments would also negatively affect
Centene. (Tables Follow) CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
(Unaudited) December 31, ---------------------------- 2009 2008
----------- ----------- ASSETS Current assets: Cash and cash
equivalents of continuing operations $400,951 $370,999 Cash and
cash equivalents of discontinued operations 2,801 8,100 -----------
----------- Total cash and cash equivalents 403,752 379,099 Premium
and related receivables, net of allowance for uncollectible
accounts of $1,338 and $1,304, respectively 103,456 92,531
Short-term investments, at fair value (amortized cost $39,230 and
$108,469, respectively) 39,554 109,393 Other current assets 64,866
75,333 Current assets of discontinued operations other than cash
4,506 9,987 ----------- ----------- Total current assets 616,134
666,343 Long-term investments, at fair value (amortized cost
$514,256 and $329,330, respectively) 525,497 332,411 Restricted
deposits, at fair value (amortized cost $20,048 and $9,124,
respectively) 20,132 9,254 Property, software and equipment, net of
accumulated depreciation of $103,883 and $74,194, respectively
230,421 175,858 Goodwill 224,587 163,380 Intangible assets, net
22,479 17,575 Other long-term assets 36,829 59,083 Long-term assets
of discontinued operations 26,285 27,248 ----------- -----------
Total assets $1,702,364 $1,451,152 =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Medical
claims liability $470,932 $384,360 Accounts payable and accrued
expenses 132,001 208,243 Unearned revenue 91,644 17,107 Current
portion of long-term debt 646 255 Current liabilities of
discontinued operations 20,685 31,013 ----------- ----------- Total
current liabilities 715,908 640,978 Long-term debt 307,085 264,637
Other long-term liabilities 59,561 43,539 Long-term liabilities of
discontinued operations 383 726 ----------- ----------- Total
liabilities 1,082,937 949,880 Commitments and contingencies
Stockholders' equity: Common stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding 45,593,383 and
45,071,179 shares, respectively 46 45 Additional paid-in capital
281,806 263,835 Accumulated other comprehensive income: Unrealized
gain on investments, net of tax 7,348 3,152 Retained earnings
358,907 275,236 Treasury stock, at cost (2,414,010 and 2,083,415
shares, respectively) (47,262) (40,996) ----------- -----------
Total Centene stockholders' equity 600,845 501,272 Noncontrolling
interest 18,582 - ----------- ----------- Total stockholders'
equity 619,427 501,272 ----------- ----------- Total liabilities
and stockholders' equity $1,702,364 $1,451,152 ===========
=========== CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except share data)
(Unaudited) Three Months Ended Year Ended December 31, December 31,
------------------------ ------------------------ 2009 2008 2009
2008 ----------- ----------- ----------- ----------- Revenues:
Premium $1,031,812 $860,811 $3,786,525 $3,199,360 Service 19,018
17,995 91,758 74,953 ----------- ----------- -----------
----------- Premium and service revenues 1,050,830 878,806
3,878,283 3,274,313 Premium tax 41,896 23,952 224,581 90,202
----------- ----------- ----------- ----------- Total revenues
1,092,726 902,758 4,102,864 3,364,515 ----------- -----------
----------- ----------- Expenses: Medical costs 865,415 708,163
3,163,523 2,640,335 Cost of services 14,425 13,453 60,789 56,920
General and administrative expenses 133,005 121,343 514,529 444,733
Premium tax 42,103 24,329 225,888 90,966 ----------- -----------
----------- ----------- Total operating expenses 1,054,948 867,288
3,964,729 3,232,954 ----------- ----------- ----------- -----------
Earnings from operations 37,778 35,470 138,135 131,561 Other income
(expense): Investment and other income 3,910 6,004 15,691 21,728
Interest expense (4,108) (4,237) (16,318) (16,673) -----------
----------- ----------- ----------- Earnings from continuing
operations, before income tax expense 37,580 37,237 137,508 136,616
Income tax expense 13,781 13,971 48,841 52,435 -----------
----------- ----------- ----------- Earnings from continuing
operations, net of income tax expense 23,799 23,266 88,667 84,181
Discontinued operations, net of income tax (benefit) expense of
$(56), $(671), $(1,204) and $(281), respectively (28) (1,843)
(2,422) (684) ----------- ----------- ----------- ----------- Net
earnings 23,771 21,423 86,245 83,497 Noncontrolling interest 56 -
2,574 - ----------- ----------- ----------- ----------- Net
earnings attributable to Centene Corporation $23,715 $21,423
$83,671 $83,497 =========== =========== =========== ===========
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing operations, net of income tax expense
$23,743 $23,266 $86,093 $84,181 Discontinued operations, net of
income tax (benefit) expense (28) (1,843) (2,422) (684) -----------
----------- ----------- ----------- Net earnings $23,715 $21,423
$83,671 $83,497 =========== =========== =========== =========== Net
earnings (loss) per share attributable to Centene Corporation:
Basic: Continuing operations $0.55 $0.54 $2.00 $1.95 Discontinued
operations - (0.04) (0.06) (0.02) ----------- -----------
----------- ----------- Earnings per common share $0.55 $0.50 $1.94
$1.93 =========== =========== =========== =========== Diluted:
Continuing operations $0.53 $0.53 $1.94 $1.90 Discontinued
operations - (0.04) (0.05) (0.02) ----------- -----------
----------- ----------- Earnings per common share $0.53 $0.49 $1.89
$1.88 =========== =========== =========== =========== Weighted
average number of shares outstanding: Basic 43,068,502 42,957,593
43,034,791 43,275,187 Diluted 44,513,679 44,043,749 44,316,467
44,398,955 CENTENE CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Year Ended
December 31, --------------------------- 2009 2008 ---------
--------- Cash flows from operating activities: Net earnings
$86,245 $83,497 Adjustments to reconcile net earnings to net cash
provided by operating activities: Depreciation and amortization
44,004 35,414 Stock compensation expense 14,634 15,328 (Gain) loss
on sale of investments, net (141) 4,988 Impairment loss - 2,546
Deferred income taxes 3,696 1,286 Changes in assets and
liabilities: Premium and related receivables 2,379 (1,548) Other
current assets (1,263) (4,244) Other assets 9 (2,700) Medical
claims liability 79,000 47,283 Unearned revenue 78,345 (36,447)
Accounts payable and accrued expenses (60,915) 74,166 Other
operating activities 2,202 2,409 --------- --------- Net cash
provided by operating activities 248,195 221,978 ---------
--------- Cash flows from investing activities: Capital
expenditures (83,113) (65,156) Purchase of investments (791,194)
(549,652) Sales and maturities of investments 642,783 546,264
Investments in acquisitions, net of cash acquired, and investment
in equity method investee (38,563) (85,377) --------- --------- Net
cash used in investing activities (270,087) (153,921) ---------
--------- Cash flows from financing activities: Proceeds from
exercise of stock options 2,365 5,354 Proceeds from borrowings
659,059 236,005 Payment of long-term debt (616,219) (178,491)
Distributions to noncontrolling interest (3,170) - Contribution
from noncontrolling interest 11,219 - Excess tax benefits from
stock compensation 53 3,100 Common stock repurchases (6,304)
(23,510) Debt issue costs (458) - --------- --------- Net cash
provided by financing activities 46,545 42,458 --------- ---------
Net increase in cash and cash equivalents 24,653 110,515 ---------
--------- Cash and cash equivalents, beginning of period 379,099
268,584 --------- --------- Cash and cash equivalents, end of
period $403,752 $379,099 ========= ========= Supplemental
disclosures of cash flow information: Interest paid $15,428 $15,312
Income taxes paid $52,928 $36,801 Supplemental disclosure of
non-cash investing and financing activities: Contribution from
noncontrolling interest $5,875 $- CENTENE CORPORATION CONTINUING
OPERATIONS SUPPLEMENTAL FINANCIAL DATA Q4 Q3 Q2 Q1 Q4 2009 2009
2009 2009 2008 --------- --------- --------- --------- ---------
MEMBERSHIP Managed Care: Arizona 18,100 17,400 16,200 15,500 14,900
Florida 102,600 84,400 22,300 29,100 - Georgia 309,700 303,400
292,800 289,300 288,300 Indiana 208,100 200,700 196,100 179,100
175,300 Massachusetts 27,800 500 - - - Ohio 150,800 151,200 141,200
137,000 133,400 South Carolina 48,600 46,100 46,000 48,500 31,300
Texas 455,100 450,200 443,200 421,100 428,000 Wisconsin 134,800
132,500 131,200 127,700 124,800 --------- --------- ---------
--------- --------- Total at-risk membership 1,455,600 1,386,400
1,289,000 1,247,300 1,196,000 --------- --------- ---------
--------- --------- Non-risk membership 63,700 63,200 114,000
96,000 3,700 --------- --------- --------- --------- ---------
TOTAL 1,519,300 1,449,600 1,403,000 1,343,300 1,199,700 =========
========= ========= ========= ========= Medicaid 1,081,400
1,040,000 958,600 921,100 877,400 CHIP & Foster Care 263,600
263,400 261,400 256,900 257,300 ABD & Medicare 82,800 82,500
69,000 69,300 61,300 Other State programs 27,800 500 - - -
--------- --------- --------- --------- --------- Total at-risk
membership 1,455,600 1,386,400 1,289,000 1,247,300 1,196,000
--------- --------- --------- --------- --------- Non-risk
membership 63,700 63,200 114,000 96,000 3,700 --------- ---------
--------- --------- --------- TOTAL 1,519,300 1,449,600 1,403,000
1,343,300 1,199,700 ========= ========= ========= =========
========= Specialty Services(a): Cenpatico Behavioral Health
Arizona 120,100 117,300 110,500 104,700 105,000 Kansas 41,400
41,000 41,100 40,600 41,100 Bridgeway Health Solutions Long-term
Care 2,600 2,500 2,400 2,300 2,100 --------- --------- ---------
--------- --------- TOTAL 164,100 160,800 154,000 147,600 148,200
========= ========= ========= ========= ========= (a) Includes
external membership only. REVENUE PER MEMBER PER MONTH(b) $226.42
$222.77 $219.75 $220.29 $218.52 CLAIMS(b) Period-end inventory
423,400 414,900 362,200 325,000 269,300 Average inventory 279,000
227,100 234,500 267,600 288,600 Period-end inventory per member
0.29 0.30 0.28 0.26 0.23 (b) Revenue per member and claims
information are presented for the Managed Care at-risk members. Q4
Q3 Q2 Q1 Q4 2009 2009 2009 2009 2008 --------- --------- ---------
--------- --------- DAYS IN CLAIMS PAYABLE Medical 48.1 47.1 47.5
45.3 48.5 Pharmacy 2.0 1.8 1.5 1.8 1.4 --------- ---------
--------- --------- --------- TOTAL 50.1 48.9 49.0 47.1 49.9
========= ========= ========= ========= ========= Days in Claims
Payable is a calculation of Medical Claims Liabilities at the end
of the period divided by average claims expense per calendar day
for such period. CASH AND INVESTMENTS (in millions) Regulated
$949.9 $911.4 $825.8 $816.8 $798.0 Unregulated 36.2 27.6 27.0 28.9
24.1 --------- --------- --------- --------- --------- TOTAL $986.1
$939.0 $852.8 $845.7 $822.1 ========= ========= ========= =========
========= DEBT TO CAPITALIZATION 33.2% 31.9% 33.0% 34.6% 34.6% Debt
to Capitalization is calculated as follows: total debt divided by
(total debt + total equity). The pro-forma debt to capital ratio,
adjusted for the follow on stock offering which would have reduced
total debt by $84.0 million and increased total equity by $104.5
million, is reduced to 23.6% from 33.2% at December 31, 2009.
Operating Ratios: Three Months Ended Year Ended December 31,
December 31, ---------------- ---------------- 2009 2008 2009 2008
------ ------ ------ ------ Health Benefits Ratios: Medicaid and
CHIP 85.3% 80.3% 84.6% 80.6% ABD and Medicare 79.9 90.1 81.1 91.1
Specialty Services 81.8 85.4 80.2 83.8 Total 83.9 82.3 83.5 82.5
General & Administrative Expense Ratios 12.7% 13.8% 13.3% 13.6%
MEDICAL CLAIMS LIABILITY (In thousands) The changes in medical
claims liability are summarized as follows: Balance, December 31,
2008 $384,360 Acquisitions - Incurred related to: Current period
3,216,533 Prior period (53,010) --------- Total incurred 3,163,523
========= Paid related to: Current period 2,752,983 Prior period
323,968 --------- Total paid 3,076,951 --------- Balance, December
31, 2009 $470,932 ========= Centene's claims reserving process
utilizes a consistent actuarial methodology to estimate Centene's
ultimate liability. Any reduction in the "Incurred related to:
Prior period" amount may be offset as Centene actuarially
determines "Incurred related to: Current period." As such, only in
the absence of a consistent reserving methodology would favorable
development of prior period claims liability estimates reduce
medical costs. Centene believes it has consistently applied its
claims reserving methodology in each of the periods presented. The
amount of the "Incurred related to: Prior period" above includes
the effects of reserving under moderately adverse conditions, new
markets where we use a conservative approach in setting reserves
during the initial periods of operations, increased receipts from
other third party payors related to coordination of benefits and
lower medical utilization and cost trends for dates of service
prior to December 31, 2008. DATASOURCE: Centene Corporation
CONTACT: Investor Relations, Edmund E. Kroll, Jr., Senior Vice
President, Finance & Investor Relations, +1-212-759-0382, or
Media, Toni Simonetti, Senior Vice President, Public Affairs,
+1-314-725-4477, both of Centene Corporation Web Site:
http://www.centene.com/
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