10-QPeriod: Q1 FY2014

CENTENE CORP Quarterly Report for Q1 Ended Mar 31, 2014

Filed April 22, 2014For Securities:CNC

Summary

Centene Corporation (CNC) reported strong financial performance for the first quarter ended March 31, 2014, with significant year-over-year growth in total revenues, driven by expanded operations in various states, new contracts, and strategic acquisitions. The company saw a substantial increase in premium and service revenues, up 38.4%, reaching $3.35 billion. This growth was fueled by expanding its reach in Florida, Ohio, California, New Hampshire, and securing new contracts, alongside the acquisitions of AcariaHealth and U.S. Medical Management (USMM). Profitability also improved, with net earnings attributable to Centene Corporation increasing by 43.4% to $33.0 million, resulting in diluted earnings per share of $0.56. The company successfully managed its medical costs, with the Health Benefits Ratio (HBR) improving to 89.3% from 90.2% in the prior year, attributed to lower flu costs and reduced utilization due to inclement weather. Operating cash flow saw a significant surge to $252.4 million, up from $43.0 million in the same period last year, underscoring robust operational performance and effective working capital management.

Financial Highlights

51 data points
Beta

Revenue

$3.46B

Net Income

$33.00M

1.0% Net Margin

EPS (Diluted)

$0.14

Total Assets

$4.45B

Cash & Equivalents

$1.22B

Free Cash Flow

$234.00M

Financial Statements
Beta
Revenue$3.46B
Operating Expenses$3.39B
Operating Income$70.00M
Interest Expense$7.00M
Net Income$33.00M
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)229.94M
Shares Outstanding (Diluted)237.45M

Key Highlights

  • 1Total revenues grew by 37.0% to $3.46 billion in Q1 2014 compared to Q1 2013.
  • 2Premium and service revenues increased significantly by 38.4% to $3.35 billion, driven by expansions and acquisitions.
  • 3Net earnings attributable to Centene Corporation increased by 43.4% to $33.0 million.
  • 4Diluted earnings per share rose to $0.56 from $0.42 in the prior year's first quarter.
  • 5Health Benefits Ratio (HBR) improved to 89.3% from 90.2%, indicating better medical cost management.
  • 6Operating cash flow dramatically increased to $252.4 million from $43.0 million.
  • 7Acquisition of a majority stake in U.S. Medical Management (USMM) in January 2014 for $214.9 million, financed by stock and cash.

Frequently Asked Questions

Centene's revenue growth was primarily driven by expansions in key states like Florida, Ohio, California, and New Hampshire, the addition of new contracts (including Centurion contracts and participation in Health Insurance Marketplaces), and the acquisitions of AcariaHealth and U.S. Medical Management (USMM). Premium and service revenues increased by 38.4% year-over-year.

Centene improved its medical cost management, evidenced by a lower Health Benefits Ratio (HBR) of 89.3% in Q1 2014, down from 90.2% in Q1 2013. This improvement was attributed to lower flu costs compared to the prior year and reduced utilization in certain markets due to inclement weather. This effective cost management contributed to the increase in net earnings and diluted earnings per share.

The most significant strategic move was the acquisition of a majority stake (68%) in U.S. Medical Management, LLC (USMM) in January 2014 for a total consideration of $214.9 million, financed through a combination of Centene common stock and cash. The company also continued its growth trajectory through various state expansions and contract wins across its service areas.

Centene experienced a substantial improvement in its cash flow position. Net cash provided by operating activities surged to $252.4 million in the first quarter of 2014, a significant increase from $43.0 million in the same period of 2013. This strong operating cash flow was primarily attributed to an increase in medical claims liabilities.