10-QPeriod: Q2 FY2004

CENTENE CORP Quarterly Report for Q2 Ended Jun 30, 2004

Filed July 26, 2004For Securities:CNC

Summary

Centene Corporation's (CNC) Q2 2004 filing showcases robust revenue growth, primarily driven by expansion in its Medicaid Managed Care segment. Total revenues increased by 26.3% year-over-year for the first six months of 2004, fueled by organic growth, acquisitions in Ohio and Texas, and favorable premium rate adjustments. The company has successfully managed its health benefits ratio, which improved from 83.3% to 81.0% due to cost-containment initiatives, indicating improved operational efficiency. Despite increased general and administrative expenses related to membership growth, expansion, and a new premium tax, Centene reported a significant increase in net earnings of 40.9% for the first half of 2004. This growth in profitability, coupled with a healthy increase in diluted EPS, suggests positive momentum. The company's liquidity also improved, with cash and cash equivalents increasing and a positive working capital position at quarter-end, supported by a recent credit facility amendment.

Key Highlights

  • 1Total revenues for the first six months of 2004 increased by 26.3% to $459.1 million, compared to $363.7 million in the prior year period, driven by membership growth and strategic acquisitions.
  • 2Net earnings for the first six months of 2004 grew by 40.9% to $21.0 million, compared to $14.9 million in the prior year period.
  • 3Diluted earnings per share (EPS) increased by 16.9% to $0.97 for the first six months of 2004, up from $0.83 in the same period last year.
  • 4Membership increased by 21.6% to 533,300 members as of June 30, 2004, compared to 438,700 members a year prior, indicating successful market penetration and expansion.
  • 5The health benefits ratio improved to 81.0% for the first six months of 2004, down from 83.3% in the prior year period, reflecting successful cost-containment initiatives.
  • 6The company amended its revolving credit facility to $50 million, enhancing its financial flexibility, and ended the quarter with $80.5 million in cash and cash equivalents, up from $64.3 million at the start of the period.
  • 7Acquisitions, including the commencement of operations in Ohio through the acquisition of Family Health Plan, Inc., contributed to membership and revenue growth.

Frequently Asked Questions

Centene's revenue growth is primarily driven by an increase in membership within its Medicaid Managed Care segment. This growth is a result of both organic expansion in existing markets and strategic acquisitions, such as the recent commencement of operations in Ohio and the purchase of contract rights in Texas.

Centene has successfully improved its health benefits ratio through initiatives aimed at reducing inappropriate emergency room usage and establishing preferred drug lists. These measures have helped to control medical costs relative to premium revenues.

The acquisition of Medicaid-related assets from Family Health Plan, Inc. in Ohio, effective January 1, 2004, allowed Centene to commence operations in a new market, serving approximately 23,800 members. This acquisition contributed to overall membership and revenue growth for the period.

Centene's liquidity has strengthened, with cash and cash equivalents increasing significantly. The company also amended its revolving credit facility to $50 million, providing greater financial flexibility. Working capital improved to a positive $10.3 million at June 30, 2004, compared to a negative position at year-end 2003.