ST. LOUIS, Apr 25, 2005 (BUSINESS WIRE) -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended March 31, 2005.
First Quarter Highlights
-- Revenues of $332.4 million, a 47% increase from the first quarter of 2004.
-- Earnings from operations of $21.3 million, a 45% increase from the first quarter of 2004.
-- Earnings per diluted share of $0.32, a 33% increase from the first quarter of 2004.
-- Membership growth of 49% from the first quarter of 2004.
-- Operating cash flows of $19.9 million, a 61% increase from the first quarter of 2004.
-- Days in claims payable of 59.7.
-- Signed definitive agreement to acquire Medicaid assets of SummaCare, Inc. in Akron, Ohio; transaction to add approximately 39,000 members.
-- Specialty group awarded a $78 million behavioral health contract in Arizona.
Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, said, "The first quarter of 2005 marked our twenty-third consecutive quarter of consistent earnings growth and was consistent with our expectations. This quarter continued to show strong organic growth in membership of 23%, and combined with acquisition growth of 26%. We are confident that our goal to be a total low-cost producer and our strategy of building a multi-line enterprise will continue to offer predictability and strong long-term growth.
"We are pleased with the collective progress in our states and in particular the solid year-over-year growth in our Indiana, Texas and Wisconsin markets. The State of Indiana recently announced plans to convert its remaining counties to mandated status by the end of 2005, which will add approximately 150,000 Medicaid eligible members in managed care programs. In Wisconsin, membership growth was solid and the rollout of SSI is underway and will occur throughout 2005. In Kansas, our FirstGuard subsidiary has recently lifted its membership cap, which will allow for future expansion. While Missouri is in the process of finalizing legislation to reduce benefits to Medicaid beneficiaries, we expect these changes will only marginally affect our membership. In Ohio, we are preparing for the close of our SummaCare acquisition, effective May 1, 2005.
"In Texas, the service area expansion for the STAR+PLUS (SSI) population is still being reviewed by the legislature and administration. We remain optimistic about the expansion efforts and believe that they will create an opportunity to benefit more recipients while producing cost savings for the state. Although we do not presently have at-risk SSI membership in Texas, we are working to support organizations that do. We are proponents of any change that creates better public policy to protect members and providers, and promotes a more efficient and cost-effective healthcare environment.
"We are pleased with the progress in our specialty companies, particularly with the new Arizona contract, which will be effective July 1, 2005, and is expected to generate annualized revenues of approximately $78 million. Giving effect to the Arizona contract, we will have an annual run rate approaching $100 million in this segment, and we expect continuing growth in revenue from our specialty companies," concluded Neidorff.
Membership totaled 777,300, a 48.8% increase from 522,400 at March 31, 2004. The following table depicts membership in Centene's managed care organizations by state at March 31, 2005 and 2004:
2005 2004
----------- -----------
Indiana 149,900 125,400
Kansas 94,900 --
Missouri 41,300 --
New Jersey 52,700 54,000
Ohio 23,900 23,800
Texas 243,700 154,000
Wisconsin 170,900 165,200
----------- -----------
TOTAL 777,300 522,400
=========== ===========
The following table depicts membership in Centene's managed care organizations by member category at March 31, 2005 and 2004:
2005 2004
----------- ----------
Medicaid 588,100 446,900
SCHIP 178,500 65,900
SSI 10,700(a) 9,600(b)
----------- ----------
TOTAL 777,300 522,400
=========== ==========
(a) 4,500 at-risk; 6,200 ASO
(b) 4,400 at-risk; 5,200 ASO
Statement of Earnings Highlights
-- For the first quarter of 2005, revenues increased 47.4% to $332.4 million from $225.5 million in the first quarter of 2004.
-- The health benefits ratio (HBR), which reflects medical costs as a percent of premium revenues, was 80.9% compared to 81.0% for the same period in 2004. The HBR for the SSI category was 94.6%, and is still expected to be volatile given Centene's relatively small member base.
-- General and administrative (G&A) expenses as a percent of revenues were 12.8% in the first quarter of 2005 compared to 12.6% in the first quarter of 2004.
-- Earnings from operations increased 45.2% to $21.3 million from $14.7 million in 2004.
-- Net earnings were $14.4 million, or $0.32 per diluted share, compared to $10.1 million, or $0.24 per diluted share, for the first quarter of 2004.
Balance Sheet and Cash Flow Highlights
At March 31, 2005, the Company held cash and investments of $337.1 million, a portion of which is restricted due to state regulatory requirements. Medical claims liabilities totaled $177.6 million, representing 59.7 days in claims payable. A reconciliation of the Company's change in days in claims payable from the immediately preceding quarter is presented below:
Days in claims payable, December 31, 2004 66.5
Effect of full quarter of FirstGuard expense (9.4)
Increase in claims inventory 2.0
Increase in physician settlements 0.4
Increase in pharmacy payables 0.2
-------
Days in claims payable, March 31, 2005 59.7
=======
Cash flows from operating activities of $19.9 million for the quarter ended March 31, 2005; a 60.8% increase year-over-year.
Outlook
Karey L. Witty, Centene's Chief Financial Officer, commented, "For the second quarter of 2005, we expect revenue in the range of $343 million to $346 million, net of experience rebates, and net earnings of $0.33 to $0.34 per diluted share. For the full-year 2005, we anticipate revenue in the range of $1.50 billion to $1.53 billion and net earnings of $1.38 to $1.44 per diluted share. We continue to maintain organic membership growth of 10% to 12%, year-over-year. This guidance reflects the close of our previously announced SummaCare transaction, effective May 1, 2005, as well as our previously announced behavioral health contract award in Arizona, effective July 1, 2005. We anticipate spending approximately $1.5 million during the second quarter in preparation for the Arizona contract effective date. This guidance excludes any impact of the Texas STAR+PLUS (SSI) rollout, the potential impact of any other acquisitions we may undertake during 2005, and expenses related to stock option grants under SFAS 123R. The SEC has delayed our required implementation date of SFAS 123R to January 1, 2006, and we anticipate expensing options commencing on that date."
Conference Call
As previously announced, the Company will host a conference call tomorrow, April 26, 2005, at 8:30 a.m. (Eastern Time) to review the financial results for the quarter ended March 31, 2005, and to discuss its business outlook. Michael F. Neidorff and Karey L. Witty will host the conference call. Investors are invited to participate in the conference call by dialing (800) 273-1254 in the United States and Canada, and (706) 679-8592 for international participants, or via a live Internet broadcast at the Company's website, www.centene.com, under the Investor Relations section. A replay of the call will be available from April 26, 2005, shortly after completion of the call until 11:59 p.m. (Eastern Time) on May 4, 2005 at the aforementioned URL, or by dialing (800) 642-1687 in the United States and (706) 645-9291 from abroad and entering access code 5171495.
About Centene Corporation
Centene Corporation provides multi-line managed care programs and related services to individuals receiving benefits under Medicaid, including Supplemental Security Income (SSI) and the State Children's Health Insurance Program (SCHIP). The Company operates health plans in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. In addition, the Company contracts with other healthcare organizations to provide specialty services including behavioral health, nurse triage and treatment compliance. Information regarding Centene is available via the Internet at www.centene.com.
The information provided in the first, second and fourth paragraphs following the bullet listing under "First Quarter Highlights" and in the paragraph under "Outlook" above contain forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses, competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare. The expiration, cancellation or suspension of Centene's Medicaid managed care contracts by state governments would also negatively affect Centene.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2005 2004
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $103,276 $84,105
Premium and related receivables, net
of allowances of $145 and $462,
respectively 36,987 31,475
Short-term investments, at fair value
(amortized cost $89,466 and $94,442,
respectively) 89,288 94,283
Other current assets 19,689 14,429
------------ ------------
Total current assets 249,240 224,292
Long-term investments, at fair value
(amortized cost $124,630 and $117,177,
respectively) 122,536 116,787
Restricted deposits, at fair value
(amortized cost $22,299 and $22,295,
respectively) 21,994 22,187
Property, software and equipment 45,264 43,248
Goodwill 101,830 101,631
Other intangible assets 13,889 14,439
Other assets 6,031 5,350
------------ ------------
Total assets $560,784 $527,934
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims liabilities $177,582 $165,980
Accounts payable and accrued expenses 39,995 31,737
Unearned revenue 3,935 3,956
Current portion of long-term debt and
notes payable 486 486
------------ ------------
Total current liabilities 221,998 202,159
Long-term debt 42,852 46,973
Other liabilities 5,935 7,490
------------ ------------
Total liabilities 270,785 256,622
Stockholders' equity:
Common stock, $.001 par value;
authorized 100,000,000 shares;
issued and outstanding 41,787,406
and 41,316,122 shares, respectively 42 41
Additional paid-in capital 170,857 165,391
Accumulated other comprehensive
income:
Unrealized loss on investments,
net of tax (1,598) (407)
Retained earnings 120,698 106,287
------------ ------------
Total stockholders' equity 289,999 271,312
------------ ------------
Total liabilities and
stockholders' equity $560,784 $527,934
============ ============
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Three Months Ended
March 31,
-----------------------
2005 2004
----------- -----------
(Unaudited)
Revenues:
Premiums $330,944 $222,690
Services 1,432 2,835
----------- -----------
Total revenues 332,376 225,525
----------- -----------
Expenses:
Medical costs 267,756 180,448
Cost of services 843 2,016
General and administrative expenses 42,459 28,377
----------- -----------
Total operating expenses 311,058 210,841
----------- -----------
Earnings from operations 21,318 14,684
Other income (expense):
Investment and other income 2,120 1,510
Interest expense (562) (90)
----------- -----------
Earnings before income taxes 22,876 16,104
Income tax expense 8,465 5,966
----------- -----------
Net earnings $14,411 $10,138
=========== ===========
Earnings per share:
Basic earnings per common share $0.35 $0.25
Diluted earnings per common share $0.32 $0.24
Weighted average number of shares
outstanding:
Basic 41,560,587 40,384,018
Diluted 44,861,989 43,067,740
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
------------------
2005 2004
--------- --------
(Unaudited)
Cash flows from operating activities:
Net earnings $14,411 $10,138
Adjustments to reconcile net earnings to net
cash provided by operating activities --
Depreciation and amortization 2,782 2,271
Deferred income taxes (983) (755)
Tax benefits related to stock options 2,871 786
Stock compensation expense 1,091 19
Loss (gain) on sale of investments 10 (253)
Changes in assets and liabilities --
Premium and related receivables (5,512) (1,326)
Other current assets (4,268) (1,476)
Other assets (491) 13
Medical claims liabilities 11,602 3,272
Unearned revenue (21) 63
Accounts payable and accrued expenses (2,446) 1,211
Other operating activities 831 (1,598)
--------- --------
Net cash provided by operating
activities 19,877 12,365
--------- --------
Cash flows from investing activities:
Purchase of property, software and equipment (3,665) (2,126)
Purchase of investments (21,767) (93,742)
Sales and maturities of investments 27,542 69,814
Acquisitions, net of cash acquired -- (6,983)
--------- --------
Net cash provided by (used in)
investing activities 2,110 (33,037)
--------- --------
Cash flows from financing activities:
Reduction of long-term debt and notes payable (4,121) (363)
Proceeds from stock options and employee stock
purchase plan 1,390 1,052
Other financing (85) --
--------- --------
Net cash (used in) provided by
financing activities (2,816) 689
--------- --------
Net increase (decrease) in cash
and cash equivalents 19,171 (19,983)
--------- --------
Cash and cash equivalents, beginning of period 84,105 64,346
--------- --------
Cash and cash equivalents, end of period $103,276 $44,363
========= ========
Interest paid $692 $91
Income taxes paid $1,133 $3,390
CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA
Q1 Q4 Q3 Q2
2005 2004 2004 2004
-------- -------- -------- --------
MEMBERSHIP
Indiana 149,900 150,600 150,000 132,900
Kansas 94,900 94,200 -- --
Missouri 41,300 41,200 -- --
New Jersey 52,700 52,800 53,200 54,000
Ohio 23,900 23,800 23,500 23,800
Texas 243,700 244,300 250,200 155,300
Wisconsin 170,900 165,800 164,700 167,300
-------- -------- -------- --------
TOTAL 777,300 772,700 641,600 533,300
======== ======== ======== ========
Medicaid 588,100 580,200 479,500 460,300
SCHIP 178,500 182,100 152,100 63,200
SSI 10,700 10,400 10,000 9,800
-------- -------- -------- --------
TOTAL 777,300 772,700 641,600 533,300
======== ======== ======== ========
REVENUE PER MEMBER $142.15 $139.38 $144.70 $145.31
CLAIMS
Period-end inventory 227,700 150,300 141,200 89,700
Average inventory 191,900 128,300 96,800 98,800
Period-end inventory per member 0.29 0.19 0.22 0.17
DAYS IN CLAIMS PAYABLE (a) 59.7 66.5 57.3 53.5
(a) Days in Claims Payable is a calculation of Medical Claims
Liabilities at the end of the period divided by average claims
expense per calendar day for such period.
ANNUALIZED RETURN ON EQUITY (b) 20.5% 18.2% 18.2% 18.2%
(b) Annualized Return on Equity is calculated as follows: (net income
for quarter x 4) divided by ((beginning of period equity + end of
period equity) divided by 2).
HEALTH BENEFITS RATIO BY CATEGORY:
Three Months Ended
March 31,
2005 2004
---------- ---------
Medicaid and SCHIP 80.7% 80.6%
SSI 94.6 99.3
Total 80.9 81.0
GENERAL AND ADMINISTRATIVE EXPENSE RATIO BY BUSINESS SEGMENT:
Three Months Ended
March 31,
2005 2004
--------- --------
Medicaid Managed Care 10.8% 10.4%
Specialty Services 50.2 52.9
Total 12.8 12.6
MEDICAL CLAIMS LIABILITIES
(In thousands)
Four rolling quarters of the changes in medical claims liabilities are
summarized as follows:
Balance, March 31, 2004 $109,841
Acquisitions 24,909
Incurred related to:
Current period 897,838
Prior period (10,054)
---------
Total incurred 887,784
---------
Paid related to:
Current period 755,468
Prior period 89,484
---------
Total paid 844,952
---------
Balance, March 31, 2005 $177,582
=========
Centene's claims reserving process utilizes a consistent actuarial
methodology to estimate Centene's ultimate liability. Any reduction in
the "Incurred related to: Prior period" claims may be offset as
Centene actuarially determines "Incurred related to: Current period."
As such, only in the absence of a consistent reserving methodology
would favorable development of prior period claims liability estimates
reduce medical costs. Centene believes it has consistently applied its
claims reserving methodology in each of the periods presented.
SOURCE: Centene Corporation
Centene Corporation
Karey L. Witty, 314-725-4477
or
Investor Relations
Lisa M. Wilson, 212-759-3929