10-QPeriod: Q2 FY2009

CENTENE CORP Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 28, 2009For Securities:CNC

Summary

Centene Corporation's (CNC) second quarter 2009 filing indicates robust revenue growth, primarily driven by an expansion in its Medicaid Managed Care membership and strategic acquisitions. Total revenues saw a significant increase of 26.2% year-over-year for the quarter, reaching $1.04 billion. This growth was fueled by a 12.2% increase in at-risk managed care membership and contributions from recent acquisitions like AMERIGROUP Community Care of South Carolina and the consolidation of Access Health Solutions LLC. Despite strong revenue performance, net earnings attributable to Centene Corporation saw a slight decrease of 11.7% for the six-month period ended June 30, 2009, compared to the prior year, totaling $38.7 million. This was partly due to the impact of a large retroactive premium rate increase recognized in the prior year's comparable period and increased general and administrative expenses related to new business initiatives. The company's Health Benefits Ratio (HBR) remained stable year-over-year, indicating effective management of medical costs relative to revenues.

Financial Highlights

27 data points
Beta

Revenue

$1.04B

Net Income

$20.23M

1.9% Net Margin

EPS (Diluted)

$0.12

Cash & Equivalents

$384.50M

Free Cash Flow

$32.29M

Financial Statements
Beta
Revenue$1.04B
Operating Expenses$1.01B
Operating Income$31.43M
Interest Expense$4.16M
Net Income$20.23M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)172.00M
Shares Outstanding (Diluted)176.97M

Key Highlights

  • 1Total revenues increased by 26.2% year-over-year to $1.04 billion for the three months ended June 30, 2009.
  • 2At-risk managed care membership grew by 12.2% to 1,289,000 members as of June 30, 2009.
  • 3Net earnings attributable to Centene Corporation decreased by 11.7% for the six-month period ended June 30, 2009, to $38.7 million.
  • 4The company adopted new accounting standards related to noncontrolling interests and business combinations, with immaterial impact.
  • 5Goodwill increased significantly to $218.1 million as of June 30, 2009, primarily due to the consolidation of Access Health Solutions LLC and recent acquisitions.
  • 6The company is developing a new corporate headquarters facility through a joint venture, which has a $95 million construction loan outstanding.
  • 7Centene is actively managing its investment portfolio, which includes a significant allocation to state and municipal securities.

Frequently Asked Questions

The substantial increase in revenue was driven by two main factors: a significant increase in at-risk managed care membership (12.2% growth) across various states, and the consolidation of Access Health Solutions LLC, along with the acquisition of AMERIGROUP Community Care of South Carolina, Inc. and other strategic growth initiatives.

The decrease in net earnings for the six-month period was influenced by a large retroactive premium rate increase recognized in the prior year's comparable period, which inflated prior year earnings. Additionally, general and administrative expenses increased due to new business initiatives such as the acquisition of Celtic, the consolidation of Access, and the startup of the CeltiCare health plan in Massachusetts.

Centene announced its intention to sell certain assets of its New Jersey health plan, UHP, in November 2008. A sale agreement with AMERIGROUP New Jersey was terminated by AMERIGROUP. Centene is contesting this termination and seeking specific performance and damages. The results of UHP are classified as discontinued operations and generated a net loss of $0.5 million for the three months ended June 30, 2009.

Centene's investment portfolio, totaling $443.9 million in cash, cash equivalents, and short-term investments and $408.9 million in long-term investments as of June 30, 2009, primarily consists of fixed-income securities. The company is subject to interest rate risk; a hypothetical 1% increase in market rates could decrease the fair value of its fixed income investments by approximately $10.8 million. Investments in state and municipal securities carry additional credit risk related to the financial stability of the issuing municipality.