10-QPeriod: Q2 FY2010

CENTENE CORP Quarterly Report for Q2 Ended Jun 30, 2010

Filed July 27, 2010For Securities:CNC

Summary

Centene Corporation (CNC) reported a significant increase in total revenues for the six months ended June 30, 2010, reaching $2.145 billion, up 8.8% from the prior year's $1.972 billion. This growth was primarily driven by an 12.8% increase in premium and service revenues to $2.073 billion, reflecting strong membership growth across its various state Medicaid and CHIP programs, along with expansion into new markets like Massachusetts. Despite revenue growth, the company saw a slight increase in its Health Benefits Ratio (HBR) to 83.9% for the six-month period, indicating rising medical costs. Net earnings attributable to Centene Corporation common stockholders increased by 20.9% to $46.8 million for the six months, demonstrating improved profitability amidst expanding operations. However, operating activities used $98.3 million in cash, a notable shift from the prior year's positive cash flow, largely due to timing differences in premium payments from state clients. The company also completed a stock offering, raising approximately $104.5 million, and used a portion to repay its revolving credit facility, strengthening its financial position.

Financial Highlights

50 data points
Beta

Revenue

$1.08B

Net Income

$22.77M

2.1% Net Margin

EPS (Diluted)

$0.11

Total Assets

$1.73B

Cash & Equivalents

$265.60M

Free Cash Flow

-$78.41M

Financial Statements
Beta
Revenue$1.08B
Operating Expenses$1.04B
Operating Income$41.71M
Interest Expense$3.87M
Net Income$22.77M
EPS (Basic)$0.12
EPS (Diluted)$0.11
Shares Outstanding (Basic)196.54M
Shares Outstanding (Diluted)203.47M

Key Highlights

  • 1Total revenues increased by 8.8% to $2.145 billion for the six months ended June 30, 2010, compared to $1.972 billion in the prior year.
  • 2Premium and service revenues grew by 12.6% to $2.073 billion, driven by significant membership increases in core states and new market entries.
  • 3Net earnings attributable to Centene Corporation common stockholders rose by 20.9% to $46.8 million for the six-month period.
  • 4The Health Benefits Ratio (HBR) slightly increased to 83.9% for the six months ended June 30, 2010, up from 83.3% in the prior year, signaling higher medical costs.
  • 5Cash flow from operating activities was negative at $(98.3) million for the six months, a decrease from $62.1 million in the prior year, due to timing of premium receipts.
  • 6Completed a stock offering in Q1 2010, raising approximately $104.5 million, and used proceeds to repay debt.
  • 7Acquired certain assets of Carolina Crescent Health Plan in June 2010, expanding presence in South Carolina.

Frequently Asked Questions

The primary driver of Centene's revenue growth is the increase in premium and service revenues, which rose by 12.6% for the six months ended June 30, 2010. This growth is attributed to significant membership increases across its state-based Medicaid and CHIP programs, as well as expansion into new markets such as Massachusetts.

Operating cash flow turned negative primarily due to timing differences in the receipt of monthly premium payments from state clients. Specifically, the company received fewer premium payments in the first six months of 2010 compared to the prior year due to state payment cycles, and also experienced an increase in premium and related receivables.

While revenues are growing, Centene's Health Benefits Ratio (HBR) has slightly increased to 83.9% for the six months ended June 30, 2010. This indicates that medical costs are rising as a percentage of premium revenues. Although net earnings have increased due to overall revenue growth and operational efficiencies, sustained increases in the HBR could pressure future profitability if not managed effectively through cost controls or rate adjustments.

Centene strengthened its financial position by completing a stock offering in the first quarter of 2010, raising approximately $104.5 million. A portion of these proceeds was used to repay its $300,000 revolving credit facility, reducing its outstanding debt and improving its liquidity.