Centene Corporation Reports 2011 Second Quarter Earnings of $0.54 Per Diluted Share

- Includes $(0.10) per diluted share charge for Debt Extinguishment Costs -

- Includes $0.07 per diluted share benefit recognized for Q1 Mississippi Earnings -

ST. LOUIS, July 26, 2011 /PRNewswire/ -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter ended June 30, 2011.  The discussions below, with the exception of cash flow information, are in the context of continuing operations and all financial ratios exclude premium taxes.

Second Quarter Highlights

    --  Quarter-end managed care at-risk membership of 1,580,500, an increase of
        45,900 members year over year.
    --  Premium and Service Revenues of $1.3 billion, representing 21.6% year
        over year growth.
    --  Health Benefits Ratio of 83.0%, compared to 83.8% in the prior year and
        83.0% in the first quarter of 2011.
    --  General and Administrative expense ratio (G&A ratio) of 13.0%, compared
        to 12.7% in the prior year. The G&A ratio for the six months ended June
        30, 2011 was 13.4%, compared to 13.0% in the prior year.
    --  Diluted earnings per share from continuing operations of $0.54,
        including $(0.10) of debt extinguishment costs, compared to $0.45 in the
        prior year.
    --  Recognition of Mississippi revenue and medical costs for the period
        January 1, 2011 through June 30, 2011 during the second quarter of 2011
        (includes $0.07 per diluted share benefit for period from January 1,
        2011 - March 31, 2011 recognized in the second quarter of 2011).


Other Events

    --  In July 2011, Louisiana Healthcare Connections, our joint venture
        subsidiary, was selected to contract with the Louisiana Department of
        Health and Hospitals to provide healthcare services to Medicaid
        enrollees participating in the Medicaid Coordinated Care Network project
        in all three of the state’s geographical services areas for a three
        year term. Services for these members are expected to begin in the first
        quarter of 2012, with a three-phased membership roll-out ending in the
        second quarter of 2012.
    --  In July 2011, our subsidiary, Kentucky Spirit Health Plan, announced it
        was awarded a three-year contract with the Kentucky Finance and
        Administration Cabinet (KFAC) to serve Medicaid beneficiaries. Kentucky
        Spirit Health Plan will provide integrated healthcare, behavioral
        health, pharmacy, vision and dental services to Medicaid recipients.
        Operations are expected to commence in the fourth quarter of 2011.
    --  In June 2011, CeltiCare Health Plan of Massachusetts, Inc. announced the
        extension of its contract with the Commonwealth of Massachusetts to
        serve Commonwealth Care Bridge members on an exclusive basis, effective
        July 1, 2011.
    --  In June 2011, our subsidiary, Managed Health Services was awarded the
        2011 National Environmental Leadership Award in Asthma Management from
        the Environmental Protection Agency.
    --  In May 2011, the Company called its $175 million 7.25% Senior Notes and
        recorded debt extinguishment costs of $(0.10) per diluted share for the
        call premium and the write off of unamortized debt issuance costs. The
        Company replaced the notes with new $250 million 5.75% Senior Notes due
        June 2017 and entered into interest rate swap agreements, converting the
        Senior Notes to a floating rate of interest at the three month LIBOR
        rate plus 3.50%.
    --  In May 2011, Bridgeway Health Solutions announced it was awarded a
        contract to deliver Long-term Care services in three geographic service
        areas in Arizona effective October 1, 2011. This contract award
        represents an estimated 50% increase in Bridgeway's Long-term Care
        at-risk membership.


Michael F. Neidorff, Centene’s Chairman and Chief Executive Officer, stated, “We are especially pleased with our results for the second quarter and the continuation of our positive operating momentum as well as our success in winning profitable new growth opportunities.”

The following table depicts membership in Centene’s managed care organizations, by state, at June 30, 2011 and 2010:


                          June 30,

                          2011       2010

Arizona                   22,800     22,100

Florida                   190,600    113,100

Georgia                   303,100    295,600

Illinois                  700        --

Indiana                   206,700    212,700

Massachusetts             32,900     30,100

Mississippi               30,800     --

Ohio                      159,900    159,300

South Carolina            82,800     92,600

Texas                     470,400    475,500

Wisconsin                 79,800     133,600

Total at-risk membership  1,580,500  1,534,600

Non-risk membership       10,400     50,900

Total                     1,590,900  1,585,500





The following table depicts membership in Centene’s managed care organizations, by member category, at June 30, 2011 and 2010:


                          June 30,

                          2011       2010

Medicaid                  1,172,400  1,135,500

CHIP & Foster Care        211,400    272,400

ABD & Medicare            156,300    93,800

Hybrid Programs           35,500     30,100

Long-term Care            4,900      2,800

Total at-risk membership  1,580,500  1,534,600

Non-risk membership       10,400     50,900

Total                     1,590,900  1,585,500





Statement of Operations: Three Months Ended June 30, 2011

    --  For the second quarter of 2011, Premium and Service Revenues increased
        21.6% to $1,278.0 million from $1,050.6 million in the second quarter of
        2010. The increase was primarily driven by the addition of our
        Mississippi contract, membership growth and premium rate increases
        during the second half of 2010. During the second quarter of 2011,
        premium revenue from the Mississippi contract of $100.4 million was
        recognized for the period January 1, 2011 through June 30, 2011, of
        which $52.8 million related to the first quarter of 2011.
    --  Consolidated HBR of 83.0% for the second quarter of 2011 represents a
        decrease of 0.8% from the comparable period in 2010. The year over year
        improvement in HBR is due to lower utilization levels in 2011.
        Consolidated HBR was consistent with the first quarter of 2011 at 83.0%.
    --  Consolidated G&A expense ratio for the first and second quarters in 2011
        has been impacted by the timing of the recognition of our Mississippi
        contract. For the three months ended June 30, 2011, our G&A expense
        ratio was 13.0%, compared to 12.7% in the prior year and 13.8% in the
        first quarter of 2011. For the six months ended June 30, 2011, our G&A
        expense ratio was 13.4%, compared to 13.0% in the prior year. The
        overall increase is due to additional business expansion costs compared
        to the prior year.
    --  Earnings from operations increased to $55.3 million in 2011 from $41.7
        million in 2010, or 32.6% year over year. Net earnings from continuing
        operations were $28.4 million, compared to $23.0 million in the second
        quarter of 2010.
    --  Earnings per diluted share increased to $0.54 in the second quarter of
        2011, which included a $(0.10) per diluted share charge for debt
        extinguishment costs as well as the benefit of $0.07 per diluted share
        from the recognition of Q1 2011 Mississippi earnings, compared to $0.45
        per diluted share in the second quarter of 2010.


Balance Sheet and Cash Flow

At June 30, 2011, the Company had cash and investments of $1,098.4 million, including $1,061.9 million held by its regulated entities and $36.5 million held by its unregulated entities.  Medical claims liabilities totaled $482.9 million, representing 44.4 days in claims payable, consistent with March 31, 2011.  Total debt was $339.6 million and debt to capitalization was 23.0% at June 30, 2011 excluding the $79.0 million non-recourse mortgage note.  Cash flows from operations for the six months ended June 30, 2011 were $53.2 million, or 1.0 times net earnings.

A reconciliation of the Company’s change in days in claims payable from the immediately preceding quarter-end is presented below:


Days in claims payable, March 31, 2011        44.4

Reduced time of claims processing and payment (0.4)

Payment of annual provider bonuses            (0.1)

Impact of new business                        0.5

Days in claims payable, June 30, 2011         44.4







Outlook

The table below depicts the Company’s updated annual guidance from continuing operations for 2011:


                                            Full Year 2011

                                            Low      High

Premium and Service Revenues (in millions)  $ 5,000  $ 5,200

Diluted EPS                                 $ 2.03   $ 2.13

Consolidated HBR                            83.0%    84.0%

General & Administrative expense ratio      12.8%    13.3%



Diluted Shares Outstanding (in thousands)   52,500







The updated guidance reflects the Senior Note issuance, the expected commencement of the Kentucky contract during the fourth quarter of 2011 and start up costs for the second half of 2011 related to Louisiana Healthcare Connections, our Louisiana health plan.

Conference Call

As previously announced, the Company will host a conference call Tuesday, July 26, 2011, at 8:30 A.M. (Eastern Time) to review the financial results for the second quarter ended June 30, 2011, and to discuss its business outlook.  Michael F. Neidorff and William N. Scheffel will host the conference call.  Investors and other interested parties are invited to listen to the conference call by dialing 1-800-860-2442 in the U.S. and Canada; +1-412-858.4600 from abroad; or via a live, audio webcast on the Company’s website at www.centene.com, under the Investors section.  A webcast replay will be available for on-demand listening shortly after the completion of the call for the next twelve months or until 11:59 p.m. (Eastern Time) on Tuesday, July 24, 2012, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 a.m. (Eastern Time) on Thursday, August 4, 2011, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088  from abroad, and entering access code 10001393.

About Centene Corporation

Centene Corporation, a Fortune 500 company, is a leading multi-line healthcare enterprise that provides programs and related services to the rising number of under-insured and uninsured individuals. Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and long-term care, in addition to other state-sponsored/hybrid programs, and Medicare (Special Needs Plans). Centene's CeltiCare subsidiary offers states unique, "exchange based" and other cost-effective coverage solutions for low-income populations. The Company operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health, life and health management, managed vision, telehealth services, and pharmacy benefits management.

The information provided in this press release contains 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, membership and revenue projections, timing of regulatory contract approval, 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.

(Tables Follow)


CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



                                                    June 30,      December 31,

                                                    2011          2010

ASSETS

Current assets:

Cash and cash equivalents of continuing operations  $ 474,450   $ 433,914

Cash and cash equivalents of discontinued
operations                                            —         252

Total cash and cash equivalents                       474,450     434,166

Premium and related receivables, net of allowance
for uncollectible accounts of $574 and $17,
respectively                                          152,135     136,243

Short-term investments, at fair value (amortized
cost $77,560 and $21,141, respectively)               78,808      21,346

Other current assets                                  69,143      64,154

Current assets of discontinued operations other
than cash                                             —         912

Total current assets                                  774,536     656,821

Long-term investments, at fair value (amortized
cost $508,299 and $585,862, respectively)             518,490     595,879

Restricted deposits, at fair value (amortized cost
$26,615 and $22,755, respectively)                    26,662      22,758

Property, software and equipment, net of
accumulated depreciation of $157,706 and $138,629,
respectively                                          340,392     326,341

Goodwill                                              281,981     278,051

Intangible assets, net                                30,342      29,109

Other long-term assets                                38,041      30,057

Long-term assets of discontinued operations           —         4,866

Total assets                                        $ 2,010,444 $ 1,943,882



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Medical claims liability                            $ 482,913   $ 456,765

Accounts payable and accrued expenses                 152,578     185,218

Unearned revenue                                      111,110     117,344

Current portion of long-term debt                     3,172       2,817

Current liabilities of discontinued operations        —         3,102

Total current liabilities                             749,773     765,246

Long-term debt                                        336,468     327,824

Other long-term liabilities                           53,899      53,378

Long-term liabilities of discontinued operations      —         379

Total liabilities                                     1,140,140   1,146,827



Commitments and contingencies



Stockholders' equity:

Common stock, $.001 par value; authorized
100,000,000 shares; 52,831,462 issued and
50,295,329 outstanding at June 30, 2011, and
52,172,037 issued and 49,616,824 outstanding at
December 31, 2010                                     53          52

Additional paid-in capital                            405,711     384,206

Accumulated other comprehensive income:

Unrealized gain on investments, net of tax            7,183       6,424

Retained earnings                                     505,862     453,743

Treasury stock, at cost (2,536,133 and 2,555,213
shares, respectively)                                 (50,343)    (50,486)

Total Centene stockholders' equity                    868,466     793,939

Noncontrolling interest                               1,838       3,116

Total stockholders' equity                            870,304     797,055

Total liabilities and stockholders' equity          $ 2,010,444 $ 1,943,882








CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(Unaudited)



                      Three Months Ended           Six Months Ended

                      June 30,                     June 30,

                      2011           2010          2011           2010

Revenues:

Premium               $ 1,248,588    $ 1,025,928   $ 2,401,365    $ 2,025,243

Service                 29,428         24,682        55,812         47,589

Premium and service
revenues                1,278,016      1,050,610     2,457,177      2,072,832

Premium tax             36,998         26,162        74,194         72,661

Total revenues          1,315,014      1,076,772     2,531,371      2,145,493

Expenses:

Medical costs           1,035,740      859,335       1,992,814      1,699,043

Cost of services        20,312         15,707        40,488         32,859

General and
administrative
expenses                166,425        133,470       329,006        268,977

Premium tax             37,234         26,551        74,663         73,294

Total operating
expenses                1,259,711      1,035,063     2,436,971      2,074,173

Earnings from
operations              55,303         41,709        94,400         71,320

Other income
(expense):

Investment and other
income                  2,933          4,142         6,682          11,199

Debt extinguishment
costs                   (8,488)        —           (8,488)        —

Interest expense        (5,256)        (3,869)       (10,951)       (7,682)

Earnings from
continuing
operations, before
income tax expense      44,492         41,982        81,643         74,837

Income tax expense      16,429         17,254        30,757         29,779

Earnings from
continuing
operations, net of
income tax expense      28,063         24,728        50,886         45,058

Discontinued
operations, net of
income tax expense
(benefit) of $0, $
(90), $0 and $4,350,
respectively            —            (226)         —            3,694

Net earnings            28,063         24,502        50,886         48,752

Noncontrolling
interest (loss)         (311)          1,729         (1,233)        1,977

Net earnings
attributable to
Centene Corporation   $ 28,374       $ 22,773      $ 52,119       $ 46,775



Amounts attributable
to Centene
Corporation common
stockholders:

Earnings from
continuing
operations, net of
income tax expense    $ 28,374       $ 22,999      $ 52,119       $ 43,081

Discontinued
operations, net of
income tax (benefit)
expense                 —            (226)         —            3,694

Net earnings          $ 28,374       $ 22,773      $ 52,119       $ 46,775



Net earnings (loss)
per common share
attributable to
Centene Corporation:

Basic:

Continuing operations $ 0.57         $ 0.46        $ 1.04         $ 0.89

Discontinued
operations              —            —           —            0.08

Earnings per common
share                 $ 0.57         $ 0.46        $ 1.04         $ 0.97

Diluted:

Continuing operations $ 0.54         $ 0.45        $ 1.00         $ 0.86

Discontinued
operations              —            —           —            0.08

Earnings per common
share                 $ 0.54         $ 0.45        $ 1.00         $ 0.94



Weighted average
number of shares
outstanding:

Basic                   50,167,052     49,135,552    49,959,892     48,203,312

Diluted                 52,489,414     50,866,318    52,171,213     49,807,084








CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



                                                     Six Months Ended June 30,

                                                     2011         2010



Cash flows from operating activities:

Net earnings                                         $ 50,886     $ 48,752

Adjustments to reconcile net earnings to net cash
provided by operating activities

Depreciation and amortization                          28,567       24,918

Stock compensation expense                             8,839        6,888

Gain on sale of investments, net                       (107)        (3,987)

Debt extinguishment costs                              8,488        —

Gain on sale of UHP                                    —          (8,201)

Deferred income taxes                                  (3,529)      4,928

Changes in assets and liabilities

Premium and related receivables                        (16,146)     (57,718)

Other current assets                                   (4,001)      948

Other assets                                           (878)        1,719

Medical claims liabilities                             24,684       (28,868)

Unearned revenue                                       (12,465)     (85,950)

Accounts payable and accrued expenses                  (34,739)     (3,536)

Other operating activities                             3,555        1,851

Net cash provided by (used in) operating activities    53,154       (98,256)

Cash flows from investing activities:

Capital expenditures                                   (31,744)     (31,177)

Capital expenditures of Centene Center LLC             (3,384)      (32,425)

Purchases of investments                               (103,239)    (306,124)

Proceeds from asset sales                              —          13,420

Sales and maturities of investments                    120,448      291,735

Investments in acquisitions, net of cash acquired      (3,192)      (21,473)

Net cash used in investing activities                  (21,111)     (86,044)

Cash flows from financing activities:

Proceeds from exercise of stock options                12,264       1,759

Proceeds from borrowings                               419,183      42,161

Proceeds from stock offering                           —          104,534

Payment of long-term debt                              (414,695)    (97,193)

Contributions from (distributions to) noncontrolling
interest                                               244          (4,840)

Excess tax benefits from stock compensation            1,369        295

Common stock repurchases                               (1,029)      (568)

Debt issue costs                                       (9,095)      —

Net cash provided by financing activities              8,241        46,148

Net increase (decrease) in cash and cash equivalents   40,284       (138,152)

Cash and cash equivalents, beginning of period         434,166      403,752

Cash and cash equivalents, end of period             $ 474,450    $ 265,600



Supplemental disclosures of cash flow information:

Interest paid                                        $ 11,822     $ 7,320

Income taxes paid                                    $ 40,111     $ 27,940



Supplemental disclosure of non-cash investing and
financing activities:

Contribution from noncontrolling interest            $ —        $ 306

Capital expenditures                                 $ 1,381      $ 36,280








CENTENE CORPORATION



CONTINUING OPERATIONS SUPPLEMENTAL FINANCIAL DATA



                         Q2         Q1         Q4         Q3         Q2

                         2011       2011       2010       2010       2010

MEMBERSHIP

Managed Care:

Arizona                  22,800     22,600     22,400     22,300     22,100

Florida                  190,600    188,800    194,900    116,300    113,100

Georgia                  303,100    303,300    305,800    300,900    295,600

Illinois                 700        —        —        —        —

Indiana                  206,700    209,400    215,800    213,300    212,700

Massachusetts            32,900     34,100     36,200     34,400     30,100

Mississippi              30,800     —        —        —        —

Ohio                     159,900    160,900    160,100    161,800    159,300

South Carolina           82,800     84,900     90,300     90,600     92,600

Texas                    470,400    456,700    433,100    428,100    475,500

Wisconsin                79,800     81,800     74,900     106,100    133,600

Total at-risk membership 1,580,500  1,542,500  1,533,500  1,473,800  1,534,600

Non-risk membership      10,400     10,400     4,200      35,900     50,900

TOTAL                    1,590,900  1,552,900  1,537,700  1,509,700  1,585,500





Medicaid                 1,172,400  1,169,700  1,177,100  1,122,800  1,135,500

CHIP & Foster Care       211,400    208,900    210,500    219,100    272,400

ABD & Medicare           156,300    123,800    104,600    94,500     93,800

Hybrid Programs          35,500     35,200     36,200     34,400     30,100

Long-term Care           4,900      4,900      5,100      3,000      2,800

Total at-risk membership 1,580,500  1,542,500  1,533,500  1,473,800  1,534,600

Non-risk membership      10,400     10,400     4,200      35,900     50,900

TOTAL                    1,590,900  1,552,900  1,537,700  1,509,700  1,585,500



Specialty Services(a):

Cenpatico Behavioral
Health

Arizona                  173,200    172,700    174,600    121,300    119,700

Kansas                   45,000     44,000     39,200     39,800     39,100

TOTAL                    218,200    216,700    213,800    161,100    158,800



(a) Includes external membership
only.



REVENUE PER MEMBER PER
MONTH(b)                 $ 240.57   $ 238.31   $ 239.66   $ 224.62   $ 218.40



CLAIMS(b)

Period-end inventory     415,700    527,100    434,900    469,000    480,400

Average inventory        332,300    347,900    304,700    307,500    306,900

Period-end inventory per
member                   0.26       0.34       0.28       0.32       0.31



(b) Revenue per member and claims information are presented for the Managed
Care at-risk members.










                            Q2         Q1         Q4         Q3       Q2

                            2011       2011       2010       2010     2010



DAYS IN CLAIMS PAYABLE(c)   44.4       44.4       45.6       47.1     48.2

(c) 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 (Days in Claims Payable for Q2 2011 reflects the most recent
three months of Mississippi medical expense).



CASH AND INVESTMENTS (in millions)

Regulated                   $ 1,061.9  $ 1,096.3  $ 1,043.0  $ 895.4  $ 813.0

Unregulated                   36.5       31.7       30.9       32.7     39.4

TOTAL                       $ 1,098.4  $ 1,128.0  $ 1,073.9  $ 928.1  $ 852.4



DEBT TO CAPITALIZATION      28.1%      26.9%      29.3%      24.7%    24.5%

DEBT TO CAPITALIZATION
EXCLUDING NON-RECOURSE DEBT
(d)                         23.0%      21.4%      23.9%

Debt to Capitalization is calculated as follows: total debt divided by (total
debt + total equity).

(d) The non-recourse debt represents our mortgage note payable of $79.0
million at June 30, 2011, $79.6 million at March 31, 2011 and $80.0 million
at December 31, 2010.








OPERATING RATIOS:



                                       Three Months Ended  Six Months Ended

                                       June 30,            June 30,

                                       2011     2010       2011     2010

Health Benefits Ratios:

Medicaid and CHIP                      80.1 %   83.4 %     81.3 %   84.5 %

ABD and Medicare                       88.0     86.5       86.8     83.4

Specialty Services                     85.8     81.7       84.2     81.2

Total                                  83.0     83.8       83.0     83.9



Total General & Administrative Expense
Ratio                                  13.0 %   12.7 %     13.4 %   13.0 %








MEDICAL CLAIMS LIABILITY (In thousands)

The changes in medical claims liability are summarized as follows:



Balance, June 30, 2010 $ 455,375

Incurred related to:

Current period           3,870,465

Prior period             (62,300)

Total incurred           3,808,165

Paid related to:

Current period           3,398,570

Prior period             382,057

Total paid               3,780,627

Balance, June 30, 2011 $ 482,913






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" amount 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.



The amount of the "Incurred related to: Prior period" above includes the
effects of reserving under moderately adverse conditions, new markets where we
use a conservative approach in setting reserves during the initial periods of
operations, increased receipts from other third party payors related to
coordination of benefits and lower medical utilization and cost trends for
dates of service prior to June 30, 2010.







SOURCE Centene Corporation