Centene Corporation Reports Fourth Quarter and Year-End 2001 Results

ST. LOUIS, Feb 5, 2002 /PRNewswire-FirstCall via COMTEX/ -- Centene Corporation (Nasdaq: CNTE) today announced the company's financial results for the fourth quarter and year-ended December 31, 2001.

    Fourth Quarter Highlights
     * Centene successfully executed an initial public offering (IPO) of
       common stock in December 2001.  The company raised net proceeds of
       approximately $41.0 million via the issuance of 3,250,000 shares.
     * Centene achieved a 51% increase in total revenue to $90.3 million in
       the fourth quarter 2001 versus $59.8 million for the prior year period.
     * Earnings from operations increased 112% to $5.7 million in the fourth
       quarter 2001 versus $2.7 million for the prior year period.
     * Pro forma earnings per share of $0.37, assuming that the company's IPO
       occurred as of October 1, 2001; earnings were $0.45 as reported.
     * Tenth consecutive quarter of increased profitability from continuing
       operations.
     * Sixth consecutive quarter of declining general and administrative
       expenses as a percent of revenue.
     * Days in claims payable of 73.4 reflect the payment of physician bonuses
       and a change in EDI claims submission patterns.

    Year-Ended 2001 Highlights
     * Membership increased 21% to 235,100 lives at December 31, 2001 versus
       194,200 at the end of 2000.
     * Total revenue increased 48% to $326.6 million in 2001 compared to
       $221.4 million for 2000.
     * Earnings from operations increased 183% to $18.5 million in 2001 from
       $6.5 million in 2000.
     * Pro forma earnings per share of $1.25, assuming that the company's IPO
       occurred as of January 1, 2001; earnings were $1.61 as reported.
     * Operating cash flow of $30.2 million in 2001 represented a
       124% increase over 2000.
Michael F. Neidorff, Centene's president and chief executive officer said, "Our performance in 2001 sets a strong foundation for continued growth, both in terms of total revenue and operating profit. Following our successful IPO in December 2001, we are better positioned to target the highly fragmented Medicaid market and expand our geographic network of managed care services with a focus on Medicaid managed care mandated states. With only nine percent of the Medicaid members currently being served by the top 10 publicly traded Medicaid HMOs, we have a significant opportunity to leverage our sophisticated infrastructure and continue to lower states' health care costs."

Mr. Neidorff added, "We approach 2002 with the same vision and purpose that enabled us to achieve our results in 2001 -- to provide quality care to Medicaid patients in a cost effective manner. We will continue to execute timely business initiatives while remaining committed to further operational improvements.

"Centene is well positioned to work effectively with state and federal agencies to protect the soundness of the health care delivery system for our Medicaid recipients consisting primarily of women and children. Through the visibility we have in the states in which we operate, we believe that both the federal and state political and regulatory leaders are supportive of our programs."

Fourth Quarter 2001

Revenue for the fourth quarter increased 51% to $90.3 million from $59.8 million in 2000. The medical loss ratio (MLR) of 82.8% was within the company's targeted range of 82.0% to 83.5% versus 83.7% for the same period in 2000. General and administrative expenses as a percent of revenue decreased 270 basis points to 11.0% from 13.7%. Earnings from operations increased 112% to $5.7 million from $2.7 million in 2000. Net earnings increased $0.7 million to $3.9 million, or $0.45 per share. Pro forma earnings of $0.37 per share for the quarter ended December 31, 2001 assumes that the company's IPO occurred as of October 1, 2001, increasing the weighted average diluted share basis to 11,228,177 for the period presented. Additionally, pro forma results reflect interest earned on the IPO proceeds and exclude interest expense resulting from the full payment of the company's subordinated notes with proceeds from the IPO. Fourth quarter net earnings for 2000 of $3.2 million reflected an income tax benefit of $0.6 million. This tax benefit was created primarily by the reversal of a valuation allowance previously established against a net operating loss carry-forward.

Year-Ended 2001

Revenue for the year-ended December 31, 2001 increased 48% to $326.6 million from $221.4 million in the prior year. The MLR was 82.8% compared to 84.3% for the prior year. General and administrative expenses as a percent of revenue decreased 300 basis points to 11.6% from 14.6%. Earnings from operations increased 183% to $18.5 million from $6.5 million in 2000. Net earnings increased $5.2 million to $12.9 million, or $1.61 per share. Pro forma earnings of $1.25 per share for the year-ended December 31, 2001 assumes that the company's IPO occurred as of January 1, 2001, increasing the weighted average diluted share basis to 11,100,319 for the period presented. Additionally, pro forma results reflect interest earned on the IPO proceeds and exclude interest expense resulting from the full payment of the company's subordinated notes with proceeds from the IPO. Net earnings for 2000 of $7.7 million reflected an income tax benefit of $0.5 million. This tax benefit was created primarily by the reversal of a valuation allowance previously established against a net operating loss carry-forward.

Cash flow from operations was $30.2 million for 2001, a 124% increase over 2000. Cash provided by financing activities of $37.0 million reflects the company's net proceeds from the IPO after the $4.0 million payoff of the company's subordinated notes. At December 31, 2001, Centene had no debt on its balance sheet and had cash and short-term investments of $90.0 million.

Outlook

Mr. Neidorff commented, "We anticipate revenue growth in excess of 20% in 2002 through a combination of both organic growth and premium rate increases in our markets served. The company should continue to operate within its targeted 82.0% to 83.5% MLR while reducing general and administrative expenses as a percentage of total revenue by 60 to 100 basis points year over year."

As previously announced, the company will host a conference call tomorrow morning, February 6, 2002, at 9:00 a.m. (Eastern Time) to review the financial results for the fourth quarter and year-ended December 31, 2001 and to discuss its business outlook. Mr. Michael F. Neidorff and Mr. Karey L. Witty, chief financial officer of Centene, will host the conference call. Investors and other interested parties may access the conference call by dialing (800) 230-1951 (domestic) or (612) 332-1020 (international), or via a live Internet broadcast on the company's web site at http://www.centene.com. A replay of the call will be available through February 13, 2002 by dialing (800) 475-6701 (domestic) or (320) 365-3844 (international) and entering access code 624655.

About Centene

Centene Corporation provides 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 (CHIP). The company operates health plans in Wisconsin, Indiana and Texas.

This press release contains forward-looking statements that relate to future events and future financial performance of Centene. These forward-looking statements represent the company's estimates as of February 5, 2002. 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 health care 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 health care. The expiration, cancellation or suspension of Centene's Medicaid managed care contracts by state governments would also negatively impact Centene.

                     CENTENE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF EARNINGS
              FOR THE QUARTERS ENDED DECEMBER 31, 2001 AND 2000
                      (In thousands, except share data)
                                 (Unaudited)

                                                       2001           2000
    REVENUES:
      Premiums                                       $90,189        $58,420
      Administrative services fees                       102          1,392
        Total revenues                                90,291         59,812
    EXPENSES:
      Medical services costs                          74,639         48,919
      General and administrative expenses              9,954          8,203
        Total operating expenses                      84,593         57,122
        Earnings from operations                       5,698          2,690

    OTHER INCOME (EXPENSE):
      Investment and other income, net                 1,110            173
      Interest expense                                  (77)          (105)
      Equity in income (losses) from joint ventures       --          (179)
        Earnings before income taxes                   6,731          2,579
    INCOME TAX EXPENSE (BENEFIT)                       2,811          (643)
        Net earnings                                   3,920          3,222
    ACCRETION OF REDEEMABLE PREFERRED STOCK             (98)          (123)
        Net earnings attributable to
         common stockholders                          $3,822         $3,099
    EARNINGS PER COMMON SHARE:
      Basic                                           $ 1.37          $3.44
      Diluted                                           $.45           $.47
    WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                        2,799,303        901,526
      Diluted                                      8,649,373      6,894,305



                     CENTENE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF EARNINGS
                FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
                      (In thousands, except share data)
                                 (Unaudited)

                                                      2001            2000
    REVENUES:
      Premiums                                      $326,184       $216,414
      Administrative services fees                       385          4,936
        Total revenues                               326,569        221,350
    EXPENSES:
      Medical services costs                         270,151        182,495
      General and administrative expenses             37,946         32,335
        Total operating expenses                     308,097        214,830
        Earnings from operations                      18,472          6,520
    OTHER INCOME (EXPENSE):
      Investment and other income, net                 3,916          1,784
      Interest expense                                 (362)          (611)
      Equity in income (losses) from joint ventures       --          (508)
        Earnings before income taxes                  22,026          7,185
    INCOME TAX EXPENSE (BENEFIT)                       9,131          (543)
        Net earnings                                  12,895          7,728
    ACCRETION OF REDEEMABLE PREFERRED STOCK            (467)          (492)
        Net earnings attributable to
         common stockholders                         $12,428         $7,236
    EARNINGS PER COMMON SHARE:
      Basic                                            $8.97          $8.03
      Diluted                                          $1.61          $1.13

    WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                        1,385,399        901,526
      Diluted                                      8,019,497      6,819,595



                     CENTENE CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF EARNINGS - PRO FORMA
                   FOR THE QUARTER ENDED DECEMBER 31, 2001
                      (In thousands, except share data)
                                 (Unaudited)

                                                      Pro Forma   Adjusted
                                   As Reported       Adjustments  Pro Forma
    REVENUES:
      Premiums                      $90,189             $--       $90,189
      Administrative services fees      102              --           102
        Total revenues               90,291              --        90,291
    EXPENSES:
      Medical services costs         74,639              --        74,639
      General and administrative
       expenses                       9,954              --         9,954
        Total operating expenses     84,593              --        84,593
        Earnings from operations      5,698              --         5,698
    OTHER INCOME (EXPENSE):
      Investment and other
       income, net                    1,110             281         1,391
      Interest expense                 (77)              77            --
        Earnings before income taxes  6,731             358         7,089
    INCOME TAX EXPENSE (BENEFIT)      2,811             147         2,958
        Net earnings                  3,920             211         4,131
    ACCRETION OF REDEEMABLE
     PREFERRED STOCK                   (98)              98            --
        Net earnings attributable
         to common stockholders      $3,822            $309        $4,131
    EARNINGS PER COMMON SHARE:
      Basic                           $1.37                          $.41
      Diluted                          $.45                          $.37

    WEIGHTED AVERAGE SHARES
     OUTSTANDING:
      Basic                       2,799,303       7,267,018    10,066,321
      Diluted                     8,649,373       2,578,804    11,228,177
The pro forma presentation assumes that as of October 1, 2001 (i) the company's IPO occurred, (ii) all classes of preferred and common stock were converted into a single class of common stock, (iii) the company's subordinated notes were repaid and (iv) the net IPO proceeds were invested in short-term interest bearing instruments.

                     CENTENE CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF EARNINGS - PRO FORMA
                     FOR THE YEAR ENDED DECEMBER 31, 2001
                      (In thousands, except share data)
                                 (Unaudited)

                                                     Pro Forma     Adjusted
                                 As Reported        Adjustments   Pro Forma
    REVENUES:
      Premiums                     $326,184             $--      $326,184
      Administrative services fees      385              --           385
        Total revenues              326,569              --       326,569
    EXPENSES:
      Medical services costs        270,151              --       270,151
      General and administrative
       expenses                      37,946              --        37,946
        Total operating expenses    308,097              --       308,097
        Earnings from operations     18,472              --        18,472
    OTHER INCOME (EXPENSE):
      Investment and other
       income, net                    3,916           1,296         5,212
      Interest expense                (362)             362            --
        Earnings before income
         taxes                       22,026           1,658        23,684
    INCOME TAX EXPENSE (BENEFIT)      9,131             680         9,811
        Net earnings                 12,895             978        13,873
    ACCRETION OF REDEEMABLE
     PREFERRED STOCK                  (467)             467            --
        Net earnings attributable
         to common stockholders     $12,428          $1,445       $13,873
    EARNINGS PER COMMON SHARE:
      Basic                           $8.97                         $1.38
      Diluted                         $1.61                         $1.25

    WEIGHTED AVERAGE SHARES
     OUTSTANDING:
      Basic                       1,385,399       8,663,686    10,049,085
      Diluted                     8,019,497       3,080,822    11,100,319
The pro forma presentation assumes that as of January 1, 2001 (i) the company's IPO occurred, (ii) all classes of preferred and common stock were converted into a single class of common stock, (iii) the company's subordinated notes were repaid and (iv) the net IPO proceeds were invested in short-term interest bearing instruments.

                     CENTENE CORPORATION AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                       AS OF DECEMBER 31, 2001 AND 2000
                      (In thousands, except share data)
                                 (Unaudited)

                                                       2001           2000
                              ASSETS
    CURRENT ASSETS:
      Cash and short-term investments                $90,036        $26,423
      Premium and related receivables, net             7,032         15,538
      Other current assets                             4,979          4,755
        Total current assets                         102,047         46,716

    LONG-TERM INVESTMENTS                             22,339         14,459

    OTHER LONG-TERM INVESTMENTS                        6,980          4,842
        Total assets                                $131,366        $66,017

               LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES:
      Medical claims liabilities                     $59,565        $45,805
      Accounts payable and accrued expenses            7,712          6,168
        Total current liabilities                     67,277         51,973

    SUBORDINATED DEBT                                     --          4,000
        Total liabilities                             67,277         55,973

    SERIES D REDEEMABLE PREFERRED STOCK                   --         18,878

    STOCKHOLDERS' EQUITY                              64,089        (8,834)

        Total liabilities and stockholders' equity  $131,366        $66,017



                     CENTENE CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
                                (In thousands)
                                 (Unaudited)

                                                       2001           2000
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                     $12,895         $7,728
      Adjustments to reconcile net income to
       net cash provided by operating activities-
        Depreciation and amortization                  1,847          1,034
        Other                                          (384)            548
    Net changes in assets and liabilities             15,829          4,148
          Net cash provided by operating activities   30,187         13,458

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of equipment                          (3,635)          (642)
      Net purchase of investments                      (444)       (12,878)
      Contract acquisition                           (1,250)             --
      Investments in joint ventures                    7,995        (1,097)
          Net cash provided by (used in)
           investing activities                        2,666       (14,617)

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Payment of note payable                             --        (2,350)
      Payment of subordinated debt                   (4,000)             --
      Net proceeds from issuance of common stock      41,042             --
      Other, net                                        (51)             --
        Net cash provided by (used in)
         financing activities                         36,991        (2,350)
        Net increase (decrease) in cash
         and cash equivalents                         69,844        (3,509)
    CASH AND CASH EQUIVALENTS, beginning of period    19,023         22,532
    CASH AND CASH EQUIVALENTS, end of period         $88,867        $19,023

                    
SOURCE Centene Corporation

CONTACT:          Mr. Karey L. Witty, Chief Financial Officer of Centene
                  Corporation, +1-314-725-4477

URL:              http://www.centene.com
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