Exhibit 99.1
Contact: | Edmund E. Kroll |
Senior Vice President, Finance & Investor Relations | |
(212) 759-0382 | |
Eric R. Slusser | |
Executive Vice President and Chief Financial Officer | |
(314) 725-4477 |
FOR IMMEDIATE RELEASE
CENTENE CORPORATION REPORTS 2008 SECOND QUARTER EARNINGS
ST. LOUIS, MISSOURI (July 22, 2008) -- Centene Corporation (NYSE: CNC) today announced its net earnings from continuing operations for the quarter ended June 30, 2008 were $18.0 million, or $0.41 per diluted share, compared to $10.2 million, or $0.23 per diluted share in the 2007 second quarter. As a reminder, the 2008 first quarter results included the benefit of the July 1 through December 31, 2007 period rate increase for Georgia of approximately $0.28 per diluted share. Unless specifically noted, the discussions below are in the context of continuing operations.
Second Quarter Highlights
· | Quarter-end Medicaid Managed Care membership of 1.2 million. |
· | Revenues of $860.1 million, or $837.9 million net of premium taxes, an 18.2% increase over the 2007 second quarter. |
· | Health Benefits Ratio (HBR), which reflects medical costs as a percent of premium revenues, of 83.3%, compared to 83.6% in the 2007 second quarter. |
· | General and administrative (G&A) expense ratio of 13.5%, compared to 14.4% in the 2007 second quarter. |
· | Cash flow from operations of $60.0 million. |
· | Days in claims payable of 48.5. |
Other Events |
· | Commenced operations under our Texas Foster Care contract, effective April 1, 2008. |
· | Repurchased 347,432 shares during the second quarter for approximately $6.4 million. |
· | Completed the previously announced acquisition of Celtic Insurance Company, or Celtic, a health insurance carrier focused on the individual health insurance market, effective July 1, 2008. |
· | Concluded operations for SSI recipients in the Northwest region of Ohio, effective June 30, 2008. |
· | Awarded a contract by the Arizona Health Care Cost Containment System to provide Acute Care services to Medicaid recipients in the Yavapai service area. Membership operations are expected to commence on October 1, 2008. |
Michael F. Neidorff, Centene’s Chairman and Chief Executive Officer, stated, “We are pleased with the progress our results show this quarter and believe they set a foundation for improvement that we can build on for the rest of 2008 and beyond. Our team remains committed to the goal of margin expansion and we expect to achieve a runrate pretax margin of 4% by the end of 2008 through focused medical management and G&A leverage. While the new growth opportunities available to us remain robust, we will employ a disciplined and selective approach to pursuing them,” concluded Neidorff.
Centene Corporation Reports 2008 Second Quarter Results July 22, 2008 / Page 2
The following table depicts membership in Centene’s managed care organizations, by state, at June 30, 2008 and 2007:
2008 | 2007 | ||||||
Georgia | 278,800 | 281,400 | |||||
Indiana | 161,700 | 161,700 | |||||
New Jersey | 55,100 | 59,100 | |||||
Ohio | 137,300 | 128,200 | |||||
South Carolina(a) | 22,500 | 31,100 | |||||
Texas | 427,200 | 333,900 | |||||
Wisconsin | 124,800 | 136,100 | |||||
Total | 1,207,400 | 1,131,500 | |||||
(a) Reflects the conversion of South Carolina membership from non-risk in 2007 to full risk in 2008. | |||||||
The following table depicts membership in Centene’s managed care organizations, by member category, at June 30, 2008 and 2007:
2008 | 2007 | ||||||
Medicaid | 866,700 | 846,900 | |||||
SCHIP/Foster Care | 267,000 | 216,500 | |||||
SSI/Medicare | 73,700 | 68,100 | |||||
Total | 1,207,400 | (a) | 1,131,500 | (b) | |||
(a) 1,203,900 at-risk; 3,500 ASO | |||||||
(b) 1,097,200 at-risk; 34,300 ASO |
Statement of Operations
· | For the 2008 second quarter, revenues, net of premium taxes, increased 18.4% to $837.9 million from $707.9 million in the 2007 second quarter. The increase was primarily driven by premium rate increases in Georgia, membership growth in Texas and Ohio, which are the two markets that added SSI products in 2007, as well as growth in Texas from the new Foster Care contract commencing in April 2008. |
· | The consolidated HBR, which reflects medical costs as a percent of premium revenues, was 83.3%, a decrease from 83.6% in the 2007 second quarter. The decrease is primarily due to overall increased premium yield and improvement in our Georgia market. Sequentially, our consolidated HBR increased from 83.0% in the 2008 first quarter to 83.3% due to the effect of the Georgia rate increase included in the first quarter, offset by moderating medical cost trends, especially related to SSI members in Ohio. |
· | Consolidated G&A expense as a percent of premium and service revenues was 13.5% in the second quarter of 2008, a decrease from 14.4% in the second quarter of 2007. |
· | Earnings per diluted share from continuing operations were $0.41, compared to $0.23 in the 2007 second quarter. |
Balance Sheet and Cash Flow
At June 30, 2008, the Company had cash and investments of $709.9 million, including $680.9 million held by its regulated entities and $29.0 million held by its unregulated entities. Medical claims liabilities totaled $363.7 million, representing 48.5 days in claims payable, an increase of 2.3 days from June 30, 2007 and a decrease of 0.8 days from March 31, 2008. Total debt was $222.1 million and debt to capitalization was 32.6%. Year to date cash flow from operations was $86.7 million.
Centene Corporation Reports 2008 Second Quarter Results July 22, 2008 / Page 3
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, March 31, 2008 | 49.3 | |
Effect of the addition of Foster Care | (0.3) | |
Change in provider bonus accrual | (0.2) | |
Claims inventory reduction | (0.3) | |
Days in claims payable, June 30, 2008 | 48.5 | |
Outlook
The table below depicts the Company’s annual guidance for 2008:
Full Year 2008 | |||||
Low | High | ||||
Revenue (in millions)1 | $ 3,360 | $ 3,410 | |||
Earnings per diluted share | $ 1.87 | $ 1.97 | |||
____________________________________ | |||||
1 Revenue net of premium tax |
Eric R. Slusser, Centene’s Chief Financial Officer, stated, “We are increasing our revenue guidance, but maintaining our previous earnings per share guidance for the year. With the acquisition of Celtic and our new Arizona contract, our revenue expectations have increased for the second half of the year. However, we do not expect either of these to have a material contribution to earnings in 2008. We are optimistic about the second half of the year as we continue to invest in infrastructure and execute on new and existing opportunities. We continue to expect an overall HBR range for the full year of 82.0% to 84.0%.”
Conference Call
As previously announced, the Company will host a conference call Tuesday, July 22, 2008, at 8:00 A.M. (Eastern Time) to review the financial results for the second quarter ended June 30, 2008, and to discuss its business outlook. Michael F. Neidorff and Eric R. Slusser will host the conference call. Investors are invited to participate in the conference call by dialing 800-273-1254 in the U.S. and Canada, 706-679-8592 from abroad, or via a live internet broadcast on the Company's website at www.centene.com, under the Investor Relations section. A replay will be available for on-demand listening shortly after the completion of the call until 11:59 P.M. (Eastern Time) on August 5, 2008 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 51471537.
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 State Children’s Health Insurance Program (SCHIP), Foster Care, Supplemental Security Income (SSI) and Medicare (Special Needs Plans). The Company operates health plans in Arizona, Georgia, Indiana, New Jersey, Ohio, South Carolina, Texas and Wisconsin. In addition, the Company contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, life and health management, long-term care, managed vision, nurse triage, pharmacy benefits management and treatment compliance. Information regarding Centene is available via the Internet at 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 Reports 2008 Second Quarter Results July 22, 2008 / Page 4
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, 2008 | December 31, 2007 | |||||||
ASSETS | (Unaudited) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 357,488 | $ | 268,584 | ||||
Premium and related receivables | 113,233 | 90,072 | ||||||
Short-term investments, at fair value (amortized cost $69,205 and $46,392, respectively) | 69,524 | 46,269 | ||||||
Other current assets | 38,602 | 41,414 | ||||||
Total current assets | 578,847 | 446,339 | ||||||
Long-term investments, at fair value (amortized cost $252,441 and $314,681, respectively) | 254,578 | 317,041 | ||||||
Restricted deposits, at fair value (amortized cost $28,023 and $27,056, respectively) | 28,283 | 27,301 | ||||||
Property, software and equipment, net | 157,775 | 138,139 | ||||||
Goodwill | 141,009 | 141,030 | ||||||
Other intangible assets, net | 12,177 | 13,205 | ||||||
Other assets | 42,396 | 36,067 | ||||||
Total assets | $ | 1,215,065 | $ | 1,119,122 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Medical claims liabilities | $ | 363,708 | $ | 335,856 | ||||
Accounts payable and accrued expenses | 148,535 | 105,096 | ||||||
Unearned revenue | 5,266 | 44,016 | ||||||
Current portion of long-term debt | 338 | 971 | ||||||
Current liabilities of discontinued operations | 200 | 861 | ||||||
Total current liabilities | 518,047 | 486,800 | ||||||
Long-term debt | 221,757 | 206,406 | ||||||
Other liabilities | 15,493 | 10,869 | ||||||
Total liabilities | 755,297 | 704,075 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $.001 par value; authorized 100,000,000 shares; issued and outstanding 43,261,883 and 43,667,837 shares, respectively | 43 | 44 | ||||||
Additional paid-in capital | 222,438 | 221,693 | ||||||
Accumulated other comprehensive income: | ||||||||
Unrealized gain on investments, net of tax | 1,722 | 1,571 | ||||||
Retained earnings | 235,565 | 191,739 | ||||||
Total stockholders’ equity | 459,768 | 415,047 | ||||||
Total liabilities and stockholders’ equity | $ | 1,215,065 | $ | 1,119,122 |
Centene Corporation Reports 2008 Second Quarter Results July 22, 2008 / Page 5
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Revenues: | ||||||||||||||||
Premium | $ | 819,409 | $ | 687,842 | $ | 1,592,887 | $ | 1,312,668 | ||||||||
Premium tax | 22,192 | 19,874 | 44,823 | 37,690 | ||||||||||||
Service | 18,466 | 20,015 | 38,996 | 41,607 | ||||||||||||
Total revenues | 860,067 | 727,731 | 1,676,706 | 1,391,965 | ||||||||||||
Expenses: | ||||||||||||||||
Medical costs | 682,589 | 575,146 | 1,324,208 | 1,103,666 | ||||||||||||
Cost of services | 14,437 | 16,670 | 30,613 | 32,300 | ||||||||||||
General and administrative expenses | 113,199 | 102,007 | 212,482 | 188,474 | ||||||||||||
Premium tax | 22,192 | 19,874 | 44,823 | 37,690 | ||||||||||||
Total operating expenses | 832,417 | 713,697 | 1,612,126 | 1,362,130 | ||||||||||||
Earnings from operations | 27,650 | 14,034 | 64,580 | 29,835 | ||||||||||||
Other income (expense): | ||||||||||||||||
Investment and other income | 5,600 | 6,588 | 13,369 | 12,605 | ||||||||||||
Interest expense | (4,065 | ) | (4,213 | ) | (8,059 | ) | (7,345 | ) | ||||||||
Earnings before income taxes | 29,185 | 16,409 | 69,890 | 35,095 | ||||||||||||
Income tax expense | 11,146 | 6,234 | 26,314 | 13,323 | ||||||||||||
Net earnings from continuing operations | 18,039 | 10,175 | 43,576 | 21,772 | ||||||||||||
Discontinued operations, net of income tax expense (benefit) of $101, $(5,417), $153 and $(32,197), respectively | 164 | 7,607 | 250 | 34,221 | ||||||||||||
Net earnings | $ | 18,203 | $ | 17,782 | $ | 43,826 | $ | 55,993 | ||||||||
Net earnings per share: | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing operations | $ | 0.42 | $ | 0.23 | $ | 1.00 | $ | 0.50 | ||||||||
Discontinued operations | — | 0.18 | 0.01 | 0.79 | ||||||||||||
Basic earnings per common share | $ | 0.42 | $ | 0.41 | $ | 1.01 | $ | 1.29 | ||||||||
Diluted: | ||||||||||||||||
Continuing operations | $ | 0.41 | $ | 0.23 | $ | 0.98 | $ | 0.49 | ||||||||
Discontinued operations | — | 0.17 | 0.01 | 0.76 | ||||||||||||
Diluted earnings per common share | $ | 0.41 | $ | 0.40 | $ | 0.98 | $ | 1.25 | ||||||||
�� | ||||||||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 43,375,944 | 43,617,360 | 43,457,076 | 43,525,848 | ||||||||||||
Diluted | 44,275,601 | 44,815,369 | 44,516,890 | 44,871,114 | ||||||||||||
Centene Corporation Reports 2008 Second Quarter Results July 22, 2008 / Page 6
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 43,826 | $ | 55,993 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities — | ||||||||
Depreciation and amortization | 16,229 | 12,991 | ||||||
Stock compensation expense | 7,839 | 7,837 | ||||||
Deferred income taxes | 11,879 | (327 | ) | |||||
Gain on sale of FirstGuard Missouri | — | (7,472 | ) | |||||
Changes in assets and liabilities — | ||||||||
Premium and related receivables | (23,144 | ) | (21,823 | ) | ||||
Other current assets | (4,294 | ) | (24,583 | ) | ||||
Other assets | (1,671 | ) | (931 | ) | ||||
Medical claims liabilities | 27,316 | 15,035 | ||||||
Unearned revenue | (38,753 | ) | 8,203 | |||||
Accounts payable and accrued expenses | 45,907 | 11,832 | ||||||
Other operating activities | 1,542 | 3,119 | ||||||
Net cash provided by operating activities | 86,676 | 59,874 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, software and equipment | (34,581 | ) | (29,352 | ) | ||||
Purchases of investments | (172,873 | ) | (290,962 | ) | ||||
Sales and maturities of investments | 210,277 | 196,407 | ||||||
Proceeds from asset sales | — | 14,102 | ||||||
Investments in acquisitions and equity method investee, net of cash acquired | (7,818 | ) | (5,336 | ) | ||||
Net cash used in investing activities | (4,995 | ) | (115,141 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options | 3,029 | 2,651 | ||||||
Proceeds from borrowings | 56,005 | 191,000 | ||||||
Payment of long-term debt | (41,287 | ) | (165,484 | ) | ||||
Excess tax benefits from stock compensation | 2,792 | 797 | ||||||
Common stock repurchases | (13,316 | ) | (3,231 | ) | ||||
Debt issue costs | — | (5,070 | ) | |||||
Net cash provided by financing activities | 7,223 | 20,663 | ||||||
Net increase (decrease) in cash and cash equivalents | 88,904 | (34,604 | ) | |||||
Cash and cash equivalents, beginning of period | 268,584 | 271,047 | ||||||
Cash and cash equivalents, end of period | $ | 357,488 | $ | 236,443 | ||||
Interest paid | $ | 7,590 | $ | 3,738 | ||||
Income taxes paid | $ | 15,966 | $ | 6,049 |
Centene Corporation Reports 2008 Second Quarter Results July 22, 2008 / Page 7
CENTENE CORPORATION
CONTINUING OPERATIONS SUPPLEMENTAL FINANCIAL DATA
Q2 | Q1 | Q4 | Q3 | Q2 | ||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||
MEMBERSHIP | ||||||||||||||
Managed Care: | ||||||||||||||
Georgia | 278,800 | 282,700 | 287,900 | 286,200 | 281,400 | |||||||||
Indiana | 161,700 | 161,300 | 154,600 | 156,300 | 161,700 | |||||||||
New Jersey | 55,100 | 56,500 | 57,300 | 58,300 | 59,100 | |||||||||
Ohio | 137,300 | 131,100 | 128,700 | 127,500 | 128,200 | |||||||||
South Carolina | 22,500 | 29,300 | 31,800 | 29,300 | 31,100 | |||||||||
Texas | 427,200 | 369,000 | 354,400 | 347,000 | 333,900 | |||||||||
Wisconsin | 124,800 | 126,900 | 131,900 | 132,700 | 136,100 | |||||||||
TOTAL | 1,207,400 | 1,156,800 | 1,146,600 | 1,137,300 | 1,131,500 | |||||||||
Medicaid | 866,700 | 862,900 | 848,100 | 841,600 | 846,900 | |||||||||
SCHIP & Foster Care | 267,000 | 216,000 | 224,400 | 223,500 | 216,500 | |||||||||
SSI & Medicare | 73,700 | 77,900 | 74,100 | 72,200 | 68,100 | |||||||||
TOTAL | 1,207,400 | 1,156,800 | 1,146,600 | 1,137,300 | 1,131,500 | |||||||||
Specialty Services(a): | ||||||||||||||
Arizona | 99,400 | 97,900 | 99,900 | 99,000 | 95,200 | |||||||||
Kansas | 40,000 | 39,400 | 39,000 | 35,600 | 37,500 | |||||||||
TOTAL | 139,400 | 137,300 | 138,900 | 134,600 | 132,700 | |||||||||
(a) Includes behavioral health contracts only. | ||||||||||||||
REVENUE PER MEMBER(b) | $ | 214.63 | $ | 215.35 | $ | 210.34 | $ | 201.05 | $ | 193.09 | ||||
CLAIMS(b) | ||||||||||||||
Period-end inventory | 336,900 | 393,700 | 312,700 | 265,400 | 281,000 | |||||||||
Average inventory | 244,800 | 281,600 | 288,700 | 319,900 | 248,200 | |||||||||
Period-end inventory per member | 0.28 | 0.34 | 0.28 | 0.24 | 0.26 | |||||||||
(b) Revenue per member and claims information are presented for the Medicaid Managed Care segment. |
Centene Corporation Reports 2008 Second Quarter Results July 22, 2008 / Page 8
Q2 | Q1 | Q4 | Q3 | Q2 | ||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | ||||||||||
DAYS IN CLAIMS PAYABLE (c) | 48.5 | 49.3 | 49.1 | 49.1 | 46.2 | |||||||||
(c) 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 | $ | 680.9 | $ | 651.1 | $ | 626.2 | $ | 593.6 | $ | 527.9 | ||||
Unregulated | 29.0 | 25.8 | 33.0 | 45.9 | 65.8 | |||||||||
TOTAL | $ | 709.9 | $ | 676.9 | $ | 659.2 | $ | 639.5 | $ | 593.7 | ||||
DEBT TO CAPITALIZATION (d) | 32.6% | 32.8% | 33.3% | 33.1% | 34.0% | |||||||||
(d) Debt to Capitalization is calculated as follows: total debt divided by (total debt + equity). |
OPERATING RATIOS:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Health Benefits Ratios | ||||||||||||||||
Medicaid and SCHIP | 81.7 | % | 83.2 | % | 80.6 | % | 83.9 | % | ||||||||
SSI and Medicare | 89.8 | 90.2 | 93.7 | 89.6 | ||||||||||||
Specialty Services | 85.8 | 76.4 | 85.0 | 77.9 | ||||||||||||
Total | 83.3 | 83.6 | 83.1 | 84.1 | ||||||||||||
General & Administrative Expense Ratio | 13.5 | % | 14.4 | % | 13.0 | % | 13.9 | % |
MEDICAL CLAIMS LIABILITIES (In thousands)
Four rolling quarters of the changes in medical claims liabilities are summarized as follows:
Balance, June 30, 2007 | $ | 292,298 | ||
Incurred related to: | ||||
Current period | 2,552,697 | |||
Prior period | (7,669 | ) | ||
Total incurred | 2,545,028 | |||
Paid related to: | ||||
Current period | 2,193,031 | |||
Prior period | 280,587 | |||
Total paid | 2,473,618 | |||
Balance, June 30, 2008 | $ | 363,708 |
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” claims 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.