Summary
Centene Corporation (CNC) reported significant changes in its first quarter 2016 results, largely driven by the transformative acquisition of Health Net, Inc. on March 24, 2016. This acquisition immediately impacted the company's financial statements, adding eight days of Health Net's operations and substantially increasing its membership base by 162% year-over-year to 11.5 million. Total revenues saw a robust 36% increase to $7.0 billion, primarily fueled by expansions, new programs, and the Health Net acquisition. However, the quarter resulted in a net loss of $17 million, or $(0.14) per diluted share, a sharp contrast to the prior year's net earnings of $63 million. This loss was significantly influenced by $189 million in Health Net acquisition-related expenses, which included investment banking fees, charitable contributions, and employee termination costs. Excluding these one-time expenses and intangible asset amortization, Adjusted Diluted EPS stood at $0.74, compared to $0.55 in the prior year, indicating underlying operational improvements amidst the integration. Financially, the company experienced a substantial increase in total assets, from $7.3 billion to $18.7 billion, reflecting the acquisition. Long-term debt also surged to $4.3 billion from $1.2 billion, primarily to fund the Health Net transaction. Operating cash flow strengthened to $195 million, a significant improvement from $45 million in the prior year, suggesting healthy cash generation from core operations despite the acquisition-related costs. Investors should note the company's strategic pivot towards growth through acquisitions, the substantial integration efforts underway, and the impact of these on short-term profitability. The company's future performance will depend on its ability to successfully integrate Health Net, realize expected synergies, and manage its expanded operational footprint while navigating the complexities of government-sponsored healthcare programs.
Financial Highlights
51 data points| Revenue | $6.95B |
| SG&A Expenses | $722.00M |
| Operating Expenses | $6.93B |
| Operating Income | $20.00M |
| Interest Expense | $33.00M |
| Net Income | -$16.00M |
| EPS (Basic) | $-0.07 |
| EPS (Diluted) | $-0.07 |
| Shares Outstanding (Basic) | 251.09M |
| Shares Outstanding (Diluted) | 251.09M |
Key Highlights
- 1Completed the significant acquisition of Health Net, Inc. on March 24, 2016, substantially increasing membership by 162% to 11.5 million and total revenues by 36% to $7.0 billion for the quarter.
- 2Reported a net loss of $17 million ($0.14/share) for the quarter, heavily impacted by $189 million in acquisition-related expenses, compared to a net earning of $63 million ($0.51/share) in Q1 2015.
- 3Excluding acquisition expenses and intangible amortization, Adjusted Diluted EPS was $0.74, demonstrating operational strength despite integration costs.
- 4Total assets more than doubled to $18.7 billion from $7.3 billion, largely due to the Health Net acquisition.
- 5Long-term debt increased significantly to $4.3 billion from $1.2 billion, primarily to finance the Health Net acquisition.
- 6Operating cash flow improved substantially to $195 million from $45 million in the prior year.
- 7The Managed Care segment reported a loss from operations of $22 million, significantly impacted by acquisition costs, while the Specialty Services segment saw earnings increase to $42 million.