10-QPeriod: Q1 FY2011

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 26, 2011For Securities:CNC

Summary

Centene Corporation (CNC) reported a strong first quarter for 2011, demonstrating significant revenue growth and improved profitability from continuing operations. Total revenues increased by 13.8% year-over-year, driven by a 15.4% rise in premium and service revenues, largely attributed to a 4.8% increase in at-risk managed care membership. The company successfully managed its medical costs, reflected in a lower Health Benefits Ratio (HBR) of 83.0% compared to 84.0% in the prior year, primarily due to decreased utilization. Despite an increase in General and Administrative (G&A) expenses, partly due to new market entries like Mississippi, Centene's earnings from operations saw a substantial 32.0% increase. Diluted earnings per share from continuing operations grew to $0.46 from $0.41, showcasing operational efficiency and growth. The company also reported robust operating cash flows of $94.0 million, a significant improvement from the prior year's negative cash flow, highlighting enhanced working capital management, particularly from increased unearned revenue.

Financial Highlights

51 data points
Beta

Revenue

$1.22B

Net Income

$23.75M

2.0% Net Margin

EPS (Diluted)

$0.12

Total Assets

$2.00B

Cash & Equivalents

$492.05M

Free Cash Flow

$77.11M

Financial Statements
Beta
Revenue$1.22B
Operating Expenses$1.18B
Operating Income$39.10M
Interest Expense$5.70M
Net Income$23.75M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)199.00M
Shares Outstanding (Diluted)207.25M

Key Highlights

  • 1Total revenues grew by 13.8% to $1.22 billion for the three months ended March 31, 2011.
  • 2At-risk managed care membership increased by 4.8% year-over-year to 1,542,500 members.
  • 3Health Benefits Ratio (HBR) improved to 83.0% from 84.0% in the prior year, indicating better medical cost management.
  • 4Earnings from continuing operations, net of income tax, increased by 12.3% to $22.8 million.
  • 5Diluted earnings per common share from continuing operations rose to $0.46 from $0.41 in the prior year.
  • 6Operating cash flows significantly improved, turning positive at $94.0 million compared to a negative $38.5 million in the same period last year.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in premium and service revenues, which rose by 15.4%. This increase is largely attributable to a 4.8% year-over-year growth in at-risk managed care membership and net premium rate increases implemented over the past year. Key states contributing to this growth include Arizona, Florida, Massachusetts, and Texas, through expansions and acquisitions.

Centene demonstrated effective management of medical costs, evidenced by an improved Health Benefits Ratio (HBR) of 83.0% for the first quarter of 2011, down from 84.0% in the prior year. This improvement was primarily due to decreased utilization of medical services. While General and Administrative (G&A) expenses increased due to investments in new markets and staff to support membership growth, the overall operational efficiency led to a significant increase in earnings from operations.

Centene began operations in Mississippi in January 2011, serving 33,100 members. However, the contract was still subject to CMS approval at the time of the filing. Consequently, revenue of $54.5 million and associated medical costs were not recognized, which deferred earnings recognition by approximately $0.07 per diluted share. General and administrative expenses were recognized. Upon final CMS approval, these revenues, costs, and earnings will be recognized retroactively to January 1, 2011.

Centene's liquidity and cash flow position showed significant improvement. Operating activities provided $94.0 million in cash during the first quarter of 2011, a substantial turnaround from using $38.5 million in the same period of 2010. This improvement was bolstered by a significant increase in unearned revenue (advance payments from states) and a positive trend in premium and related receivables. The company also renewed its revolving credit facility to $350 million, maintaining substantial availability for operations.