8-K/AOther EventsExhibits & Filings

CENTENE CORP 8-K/A Report, Corporate Update (Feb 26, 2020)

Filed February 26, 2020For Securities:CNC

Summary

This 8-K filing from Centene Corporation (CNC) primarily focuses on providing a clearer financial picture of its acquired subsidiary, WellCare, by presenting non-GAAP financial measures. Centene explains that these adjusted measures are useful for assessing WellCare's performance, facilitating period-over-period comparisons, and enhancing comparability with competitors. The adjustments exclude specific items such as government investigation costs, acquisition-related amortization, and transaction/integration costs associated with the WellCare acquisition and prior acquisitions. Additionally, the filing details how certain Medicaid-related reimbursements are excluded from revenue calculations for key ratios. The report also includes reconciliations for WellCare's Selling, General and Administrative (SG&A) expense ratios and other key financial metrics like net income and earnings per share, both on a GAAP and adjusted non-GAAP basis. This aims to provide investors with a view of WellCare's core operating performance by removing the impact of these discrete or non-recurring items. The filing also notes the inclusion of WellCare's historical financial statements and pro forma combined financial information as exhibits.

Key Highlights

  • 1Centene is presenting WellCare non-GAAP financial measures to offer investors a more insightful view of WellCare's core operational performance.
  • 2Key adjustments to GAAP figures include excluding government investigation costs, acquisition-related amortization, and transaction/integration costs.
  • 3The filing provides reconciliations for adjusted SG&A expense ratios and other financial metrics (net income, EPS) for both 2019 and 2018, on quarterly and annual bases.
  • 4Certain Medicaid premium taxes and ACA industry fee reimbursements are excluded from revenue for specific ratio calculations to better reflect operating performance.
  • 5Adjusted diluted EPS for WellCare showed a significant increase compared to GAAP EPS for the three months and full year ended December 31, 2019, due to the exclusion of these costs.
  • 6Exhibit 99.1 provides the audited consolidated financial statements of WellCare for the years ended December 31, 2019 and 2018, and Exhibit 99.2 contains pro forma condensed combined financial information.
  • 7The intention is to facilitate period-over-period comparisons and provide comparability to competitor results by highlighting ongoing business trends.

Frequently Asked Questions

The primary purpose of this filing is to provide investors with adjusted, non-GAAP financial measures for WellCare, a recently acquired subsidiary. Centene aims to offer a clearer view of WellCare's underlying operational performance by excluding certain one-time or non-recurring expenses, making it easier to compare performance over time and against industry peers.

The excluded expenses primarily consist of: 1) Costs related to government investigations and litigation, 2) Amortization expenses stemming from acquisitions, and 3) Specific transaction and integration costs associated with Centene's acquisition of WellCare and WellCare's prior acquisitions.

The adjusted (non-GAAP) diluted EPS for WellCare is generally higher than the GAAP diluted EPS. For example, for the full year ended December 31, 2019, adjusted diluted EPS was $14.92 compared to GAAP diluted EPS of $11.46. This difference is due to the exclusion of significant costs like integration expenses and acquisition-related amortization, which are part of the GAAP figures.

Centene excludes these specific reimbursements from revenue when calculating key ratios (like SG&A expense ratio) because they are included within the premium rates or reimbursement established in certain Medicaid contracts but are also recognized separately as an expense. Centene believes these components do not reflect WellCare's core operating performance and excluding them provides a more accurate view of operational efficiency.