10-QPeriod: Q1 FY2007

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2007

Filed April 24, 2007For Securities:CNC

Summary

Centene Corporation (CNC) reported strong first-quarter 2007 results, driven by significant growth in its Medicaid Managed Care segment. Total revenues surged by 47.4% year-over-year to $670.8 million, primarily fueled by a 26.1% increase in membership and premium rate adjustments. The company also saw substantial growth in its Specialty Services segment through strategic acquisitions. Net earnings more than tripled to $38.2 million, or $0.85 per diluted share, boosted by a significant tax benefit related to the abandonment of its Kansas health plan. The company demonstrated solid operating cash flow of $36.0 million, an improvement from the prior year. Centene continues to expand its geographic reach and service offerings, positioning itself for sustained growth in government-sponsored healthcare programs.

Key Highlights

  • 1Total revenues increased by 47.4% to $670.8 million in Q1 2007 compared to Q1 2006.
  • 2Net earnings increased significantly to $38.2 million ($0.85 per diluted share) in Q1 2007, up from $8.8 million ($0.20 per diluted share) in Q1 2006.
  • 3Medicaid Managed Care membership grew by 26.1% year-over-year.
  • 4The company completed the sale of its FirstGuard Missouri operating assets, recognizing a gain of $4.2 million.
  • 5Centene abandoned its FirstGuard Kansas stock, resulting in a significant tax benefit of $29.9 million.
  • 6Operating cash flow improved substantially to $36.0 million in Q1 2007, compared to $9.3 million in Q1 2006.
  • 7The company issued $175 million in Senior Notes in March 2007 to refinance existing debt and for general corporate purposes.

Frequently Asked Questions

Centene's revenue growth in Q1 2007 was primarily driven by a 26.1% increase in membership in its Medicaid Managed Care segment, along with premium rate increases and expansion in its Specialty Services segment through acquisitions.

The substantial increase in net earnings was largely due to a significant after-tax benefit of $29.9 million recognized from the abandonment of the FirstGuard Kansas health plan stock, in addition to the gain from the sale of FirstGuard Missouri and overall revenue growth.

Centene generated strong operating cash flow in Q1 2007. The company also issued $175 million in Senior Notes in March 2007 and has a $300 million revolving credit facility, providing ample liquidity for operations and strategic initiatives.

Key risks include potential reductions in Medicaid, SCHIP, and SSI funding, the non-reauthorization of SCHIP, termination or non-renewal of government contracts, changes in healthcare regulations, competition, and the ability to effectively manage medical costs and integrate acquisitions.