10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on October 25, 2022

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________
FORM 10-Q
____________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to
____________________________________________
Commission file number: 001-31826
____________________________________________
CENTENE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 42-1406317
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7700 Forsyth Boulevard  
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (314) 725-4477 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock $0.001 Par Value CNC New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large Accelerated Filer Accelerated filer
Non-accelerated filer   Smaller reporting company
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  
As of October 14, 2022, the registrant had 566,259,693 shares of common stock outstanding.



CENTENE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
  PAGE
   
Part I
Financial Information
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.



CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

All statements, other than statements of current or historical fact, contained in this filing are forward-looking statements. Without limiting the foregoing, forward-looking statements often use words such as "believe," "anticipate," "plan," "expect," "estimate," "intend," "seek," "target," "goal," "may," "will," "would," "could," "should," "can," "continue" and other similar words or expressions (and the negative thereof). Centene Corporation and its subsidiaries (Centene, the Company, our or we) intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor provisions. In particular, these statements include, without limitation, statements about our future operating or financial performance, market opportunity, value creation strategy, competition, expected activities in connection with completed and future acquisitions and dispositions, including statements about the impact of our recently completed acquisition of Magellan Health, Inc. (the Magellan Acquisition), other recent and future acquisitions and dispositions, our investments and the adequacy of our available cash resources. These statements may be found in the various sections of this filing, such as Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part II, Item 1. "Legal Proceedings."

These forward-looking statements reflect our current views with respect to future events and are based on numerous assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors we believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties and are subject to change because they relate to events and depend on circumstances that will occur in the future, including economic, regulatory, competitive and other factors that may cause our or our 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. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions.

All forward-looking statements included in this filing are based on information available to us on the date of this filing. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this filing, whether as a result of new information, future events or otherwise, after the date of this filing. You should not place undue reliance on any forward-looking statements, as actual results may differ materially from projections, estimates, or other forward-looking statements due to a variety of important factors, variables and events including, but not limited to:

our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, including fluctuations in medical utilization rates due to the ongoing impact of COVID-19;
our ability to maintain or achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;
the risk that the election of new directors, changes in senior management, and any inability to retain key personnel may create uncertainty or negatively impact our ability to execute quickly and effectively;
uncertainty as to the expected financial performance of the combined company following the recent completion of the Magellan Acquisition;
the possibility that the expected synergies and value creation from the Magellan Acquisition or the acquisition of WellCare Health Plans, Inc. (the WellCare Acquisition) or other acquired businesses will not be realized, or will not be realized within the respective expected time periods;
disruption from the integration of the Magellan Acquisition or the WellCare Acquisition, unexpected costs, or similar risks from other acquisitions or dispositions we may announce or complete from time to time, including potential adverse reactions or changes to business relationships with customers, employees, suppliers or regulators, making it more difficult to maintain business and operational relationships;
the risk that the closing conditions, including applicable regulatory approvals, for the pending dispositions of Magellan Rx and our Spanish and Central European businesses, may be delayed or not obtained;
impairments to real estate, investments, goodwill and intangible assets;
a downgrade of the credit rating of our indebtedness;
competition;
membership and revenue declines or unexpected trends;
changes in healthcare practices, new technologies, and advances in medicine;
increased healthcare costs;
changes in economic, political or market conditions;
i

changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act (collectively referred to as the ACA) and any regulations enacted thereunder that may result from changing political conditions, the current administration or judicial actions;
rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;
our ability to adequately price products;
tax matters;
disasters or major epidemics;
changes in expected contract start dates;
provider, state, federal, foreign and other contract changes and timing of regulatory approval of contracts;
the expiration, suspension, or termination of our contracts with federal or state governments (including, but not limited to, Medicaid, Medicare, TRICARE or other customers);
the difficulty of predicting the timing or outcome of legal or regulatory proceedings or matters, including, but not limited to, our ability to resolve claims and/or allegations made by states with regard to past practices, including at Envolve Pharmacy Solutions, Inc. (Envolve), as our pharmacy benefits manager (PBM) subsidiary, within the reserve estimate we previously recorded and on other acceptable terms, or at all, or whether additional claims, reviews or investigations relating to our PBM business will be brought by states, the federal government or shareholder litigants, or government investigations;
the timing and extent of benefits from our value creation strategy, including the possibility that the benefits received may be lower than expected, may not occur, or will not be realized within the expected time periods;
challenges to our contract awards;
cyber-attacks or other privacy or data security incidents;
the exertion of management's time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental or third party consents or approvals for acquisitions or dispositions;
any changes in expected closing dates, estimated purchase price and accretion for acquisitions or dispositions;
restrictions and limitations in connection with our indebtedness;
the availability of debt and equity financing on terms that are favorable to us;
inflation; and
foreign currency fluctuations.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other factors that may affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission (SEC), including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Due to these important factors and risks, we cannot give assurances with respect to our future performance, including without limitation our ability to maintain adequate premium levels or our ability to control our future medical and selling, general and administrative costs.
ii


Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures in this report, as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally in evaluating the Company’s performance and for planning purposes, by allowing management to focus on period-to-period changes in the Company's core business operations, and in determining employee incentive compensation. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Specifically, the Company believes the presentation of non-GAAP financial information that excludes amortization of acquired intangible assets and acquisition and divestiture related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company's core performance over time. The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
GAAP net earnings attributable to Centene $ 738  $ 584  $ 1,415  $ 748 
Amortization of acquired intangible assets 211  198  609  581 
Acquisition and divestiture related expenses 30  54  149  141 
Other adjustments (1)
(222) 11  1,225  1,427 
Income tax effects of adjustments (2)
(2) (102) (521) (455)
Adjusted net earnings $ 755  $ 745  $ 2,877  $ 2,442 
GAAP diluted earnings per share (EPS) attributable to Centene $ 1.27  $ 0.99  $ 2.41  $ 1.27 
Amortization of acquired intangible assets 0.36  0.34  1.04  0.98 
Acquisition and divestiture related expenses 0.05  0.09  0.25  0.24 
Other adjustments (1)
(0.38) 0.01  2.09  2.42 
Income tax effects of adjustments (2)
—  (0.17) (0.89) (0.77)
Adjusted diluted EPS $ 1.30  $ 1.26  $ 4.90  $ 4.14 
(1) Other adjustments include the following pre-tax items:
2022:
(a) for the three months ended September 30, 2022: PANTHERx Rare (PANTHERx) divestiture gain of $490 million, or $0.84 per share ($0.65 after-tax), the impairment of assets associated with the pending divestiture of the Spanish and Central European businesses of $165 million, or $0.28 per share ($0.23 after-tax), real estate impairments of $127 million, or $0.22 per share ($0.16 after-tax), an increase to the previously reported gain on the divestiture of U.S. Medical Management (USMM) due to the finalization of working capital adjustments of $13 million, or $0.02 per share ($0.01 after-tax), gain on debt extinguishment related to the repurchases of senior notes of $10 million, or $0.02 per share ($0.01 after-tax), and an adjustment to the costs related to the PBM legal settlement of $1 million, or $0.00 per share ($0.00 after-tax);

(b) for the nine months ended September 30, 2022: real estate impairments of $1,581 million, or $2.69 per share ($1.98 after-tax), PANTHERx divestiture gain of $490 million, or $0.83 per share ($0.65 after-tax), the impairment of assets associated with the pending divestiture of the Spanish and Central European businesses of $165 million, or $0.28 per share ($0.23 after-tax), gain on debt extinguishment of $23 million, or $0.04 per share ($0.03 after-tax), an increase to the previously reported gain related to the divestiture of USMM due to the finalization of working capital adjustments of $13 million, or $0.02 per share ($0.02 after-tax), and costs related to the PBM legal settlement of $5 million, or $0.01 per share ($0.01 after-tax).
iii

2021:
(a) for the three months ended September 30, 2021: non-cash gain related to the acquisition of the remaining 60% interest of Circle Health of $309 million, or $0.52 per share ($0.52 after-tax), non-cash impairment of our equity method investment in RxAdvance of $229 million, or $0.38 per share ($0.35 after-tax), debt extinguishment costs of $79 million, or $0.13 per share ($0.10 after-tax), PBM legal settlement expense of $11 million, or $0.02 per share ($0.01 after-tax), and severance costs due to a restructuring of $1 million, or $0.00 per share ($0.00 after-tax);

(b) for the nine months ended September 30, 2021: PBM legal settlement expense of $1,261 million, or $2.13 per share ($1.79 after-tax), non-cash gain related to the acquisition of the remaining 60% interest of Circle Health of $309 million, or $0.52 per share ($0.52 after-tax), non-cash impairment of our equity method investment in RxAdvance of $229 million, or $0.39 per share ($0.35 after-tax), debt extinguishment costs of $125 million, or $0.21 per share ($0.16 after-tax), a reduction to the previously reported gain on divestiture of certain products of our Illinois health plan of $62 million, or $0.11 per share ($0.08 after-tax), and severance costs due to a restructuring of $59 million, or $0.10 per share ($0.07 after-tax).

(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. The nine months ended September 30, 2022 also include an $18 million, or $0.03 per share, increase to the tax benefit on the previously reported non-cash impairment of our equity method investment in RxAdvance.

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
GAAP selling, general and administrative expenses $ 2,846  $ 2,537  $ 8,391  $ 6,910 
Less:
Acquisition and divestiture related expenses 28  41  149  126 
Restructuring costs —  —  59 
Costs related to the PBM legal settlement 11  11 
Real estate optimization —  — 
Adjusted selling, general and administrative expenses $ 2,814  $ 2,484  $ 8,230  $ 6,714 
Note: Beginning in 2022, we have included a separate line item for depreciation expense on the Consolidated Statements of Operations, which was previously included in selling, general and administrative (SG&A) expenses. Prior period SG&A expenses have been conformed to the current presentation.
iv

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares in thousands and per share data in dollars)
September 30, 2022 December 31, 2021
(Unaudited)
ASSETS    
Current assets:    
Cash and cash equivalents $ 14,987  $ 13,118 
Premium and trade receivables 13,770  12,238 
Short-term investments 2,191  1,539 
Other current assets 2,327  1,602 
Total current assets 33,275  28,497 
Long-term investments 14,053  14,043 
Restricted deposits 1,205  1,068 
Property, software and equipment, net 2,479  3,391 
Goodwill 20,040  19,771 
Intangible assets, net 7,523  7,824 
Other long-term assets 2,597  3,781 
Total assets $ 81,172  $ 78,375 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY  
Current liabilities:    
Medical claims liability $ 16,465  $ 14,243 
Accounts payable and accrued expenses 9,995  8,493 
Return of premium payable 2,205  2,328 
Unearned revenue 2,416  434 
Current portion of long-term debt 249  267 
Total current liabilities 31,330  25,765 
Long-term debt 18,084  18,571 
Deferred tax liability 480  1,407 
Other long-term liabilities 5,678  5,610 
Total liabilities 55,572  51,353 
Commitments and contingencies
Redeemable noncontrolling interests 66  82 
Stockholders’ equity:    
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at September 30, 2022 and December 31, 2021
   
Common stock, $0.001 par value; authorized 800,000 shares; 606,931 issued and 570,091 outstanding at September 30, 2022, and 602,704 issued and 582,479 outstanding at December 31, 2021
1  1 
Additional paid-in capital 19,774  19,672 
Accumulated other comprehensive earnings (1,394) 77 
Retained earnings 9,554  8,139 
Treasury stock, at cost (36,840 and 20,225 shares, respectively)
(2,557) (1,094)
Total Centene stockholders’ equity 25,378  26,795 
Nonredeemable noncontrolling interest 156  145 
Total stockholders’ equity 25,534  26,940 
Total liabilities, redeemable noncontrolling interests and stockholders’ equity $ 81,172  $ 78,375 
The accompanying notes to the consolidated financial statements are an integral part of these statements. 
1

CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Revenues:
Premium $ 31,848  $ 28,876  $ 95,247  $ 83,436 
Service 1,878  1,638  6,679  4,054 
Premium and service revenues 33,726  30,514  101,926  87,490 
Premium tax 2,139  1,892  7,060  5,924 
Total revenues 35,865  32,406  108,986  93,414 
Expenses:    
Medical costs 28,111  25,430  83,261  73,210 
Cost of services 1,571  1,355  5,658  3,510 
Selling, general and administrative expenses 2,846  2,537  8,391  6,910 
Depreciation expense 150  147  470  414 
Amortization of acquired intangible assets 211  198  609  581 
Premium tax expense 2,211  1,965  7,258  6,129 
Impairment 289  229  1,739  229 
Legal settlement       1,250 
Total operating expenses 35,389  31,861  107,386  92,233 
Earnings from operations 476  545  1,600  1,181 
Other income (expense):    
Investment and other income 692  424  786  566 
Debt extinguishment 10  (79) 26  (125)
Interest expense (169) (170) (491) (503)
Earnings before income tax 1,009  720  1,921  1,119 
Income tax expense 269  139  500  376 
Net earnings 740  581  1,421  743 
(Earnings) loss attributable to noncontrolling interests (2) 3  (6) 5 
Net earnings attributable to Centene Corporation $ 738  $ 584  $ 1,415  $ 748 

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share $ 1.29  $ 1.00  $ 2.44  $ 1.28 
Diluted earnings per common share $ 1.27  $ 0.99  $ 2.41  $ 1.27 

Weighted average number of common shares outstanding:
Basic 573,961  583,244  580,277  582,636 
Diluted 580,607  590,702  587,084  590,154 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
2

CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(In millions)
(Unaudited)
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Net earnings $ 740  $ 581  $ 1,421  $ 743 
Reclassification adjustment, net of tax 3  1  12  (16)
Change in unrealized gain (loss) on investments, net of tax (383) (47) (1,267) (125)
Foreign currency translation adjustments (101) (17) (216) (20)
Other comprehensive earnings (loss) (481) (63) (1,471) (161)
Comprehensive earnings (loss) 259  518  (50) 582 
Comprehensive (earnings) loss attributable to noncontrolling interests (2) 3  (6) 5 
Comprehensive earnings (loss) attributable to Centene Corporation $ 257  $ 521  $ (56) $ 587 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

3

CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
Three and Nine Months Ended September 30, 2022
  Centene Stockholders’ Equity    
  Common Stock       Treasury Stock    
 
$0.001 Par
Value
Shares
Amt Additional
Paid-in
Capital
Accumulated
Other
Comprehensive Earnings
(Loss)
Retained
Earnings
$0.001 Par
Value
Shares
Amt Non-redeemable
Non-
controlling
Interest
Total
Balance, December 31, 2021 602,704  $ 1  $ 19,672  $ 77  $ 8,139  20,225  $ (1,094) $ 145  $ 26,940 
Comprehensive Earnings:                  
Net earnings (loss) —  —  —  —  849  —  —  (1) 848 
Other comprehensive loss, net of $(171) tax
—  —  —  (562) —  —  —  —  (562)
Common stock issued for employee benefit plans 3,221  —  28  —  —  —  —  —  28 
Fair value of unvested equity awards in connection with acquisition —  —  60  —  —  —  —  —  60 
Common stock repurchases —  —  —  —  —  846  (71) —  (71)
Stock compensation expense —  —  70  —  —  —  —  —  70 
Balance, March 31, 2022 605,925  $ 1  $ 19,830  $ (485) $ 8,988  21,071  $ (1,165) $ 144  $ 27,313 
Comprehensive Earnings:                  
Net earnings (loss) —  —  —  —  (172) —  —  (3) (175)
Other comprehensive loss, net of $(106) tax
—  —  —  (428) —  —  —  —  (428)
Common stock issued for employee benefit plans 519  —  10  —  —  —  —  —  10 
Common stock repurchases —  —  —  —  —  4,249  (349) —  (349)
Stock compensation expense —  —  59  —  —  —  —  —  59 
Balance, June 30, 2022 606,444  $ 1  $ 19,899  $ (913) $ 8,816  25,320  $ (1,514) $ 141  $ 26,430 
Comprehensive Earnings:
Net earnings (loss) —  —  —  —  738  —  —  (2) 736 
Other comprehensive loss, net of $(120) tax
—  —  —  (481) —  —  —  —  (481)
Common stock issued for employee benefit plans 487  —  24  —  —  —  —  —  24 
Common stock repurchases —  —  (200) —  —  11,520  (1,043) —  (1,243)
Stock compensation expense —  —  51  —  —  —  —  —  51 
Reclassification to non-redeemable noncontrolling interest —  —  —  —  —  —  —  17  17 
Balance, September 30, 2022 606,931  $ 1  $ 19,774  $ (1,394) $ 9,554  36,840  $ (2,557) $ 156  $ 25,534 

4

Three and Nine Months Ended September 30, 2021
  Centene Stockholders’ Equity    
  Common Stock       Treasury Stock    
 
$0.001 Par
Value
Shares
Amt Additional
Paid-in
Capital
Accumulated
Other
Comprehensive Earnings
(Loss)
Retained
Earnings
$0.001 Par
Value
Shares
Amt Non-redeemable
 Non-
controlling
Interest
Total
Balance, December 31, 2020 598,249  $ 1  $ 19,459  $ 337  $ 6,792  16,770  $ (816) $ 112  $ 25,885 
Comprehensive Earnings:                  
Net earnings (loss) —  —  —  —  699  —  —  (5) 694 
Other comprehensive loss, net of $(49) tax
—  —  —  (161) —  —  —  —  (161)
Common stock issued for employee benefit plans 1,675  —  9  —  —  —  —  —  9 
Common stock repurchases (316) —  (19) —  —  156  (10) —  (29)
Stock compensation expense —  —  51  —  —  —  —  —  51 
Contribution from noncontrolling interest —  —  —  —  —  —  —  9  9 
Balance, March 31, 2021 599,608  $ 1  $ 19,500  $ 176  $ 7,491  16,926  $ (826) $ 116  $ 26,458 
Comprehensive Earnings:                  
Net earnings (loss) —  —  —  —  (535) —  —  (3) (538)
Other comprehensive earnings, net of $19 tax
—  —  —  63  —  —  —  —  63 
Common stock issued for employee benefit plans 390  —  9  —  —  —  —  —  9 
Common stock repurchases (10) —  —  —  —  60  (4) —  (4)
Stock compensation expense —  —  36  —  —  —  —  —  36 
Contribution from noncontrolling interest —  —  —  —  —  —  —  21  21 
Balance, June 30, 2021 599,988  $ 1  $ 19,545  $ 239  $ 6,956  16,986  $ (830) $ 134  $ 26,045 
Comprehensive Earnings:
Net earnings (loss) —  —  —  —  584  —  —  (8) 576 
Other comprehensive loss, net of $(15) tax
—  —  —  (63) —  —  —  —  (63)
Common stock issued for employee benefit plans 720  —  9  —  —  —  —  —  9 
Common stock repurchases —  —  —  —  —  222  (15) —  (15)
Stock compensation expense —  —  40  —  —  —  —  —  40 
Contribution from noncontrolling interest —  —  —  —  —  —  —  5  5 
Divestiture of noncontrolling interests —  —  —  —  —  —  (10) (10)
Acquisition resulting in noncontrolling interests —  —  —  —  —  —  3  3 
Balance, September 30, 2021 600,708  $ 1  $ 19,594  $ 176  $ 7,540  17,208  $ (845) $ 124  $ 26,590 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
5

CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, unaudited)
  Nine Months Ended September 30,
  2022 2021
Cash flows from operating activities:    
Net earnings $ 1,421  $ 743 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization 1,178  1,098 
Stock compensation expense 180  127 
Impairment 1,739  229 
(Gain) loss on debt extinguishment (26) 125 
(Gain) on acquisition (2) (309)
Deferred income taxes (682) (143)
(Gain) loss on divestitures (503) 62 
Other adjustments, net 164  (6)
Changes in assets and liabilities    
Premium and trade receivables (1,274) (1,723)
Other assets 152  (124)
Medical claims liabilities 1,976  1,661 
Unearned revenue 1,964  (169)
Accounts payable and accrued expenses 686  993 
Other long-term liabilities 863  964 
Other operating activities, net 1  2 
Net cash provided by operating activities 7,837  3,530 
Cash flows from investing activities:    
Capital expenditures (771) (662)
Purchases of investments (5,118) (5,253)
Sales and maturities of investments 2,842  4,069 
Acquisitions, net of cash acquired (1,457) (534)
Divestiture proceeds, net of divested cash 1,362  (62)
Net cash used in investing activities (3,142) (2,442)
Cash flows from financing activities:    
Proceeds from long-term debt 357  9,247 
Payments and repurchases of long-term debt (1,202) (7,411)
Common stock repurchases (1,663) (49)
Payments for debt extinguishment (14) (157)
Debt issuance costs   (72)
Other financing activities, net 57  39 
Net cash (used in) provided by financing activities (2,465) 1,597 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (37) (8)
Net increase in cash, cash equivalents, and restricted cash and cash equivalents 2,193  2,677 
Cash and cash equivalents reclassified from (to) held for sale (192)  
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period
13,214  10,957 
Cash, cash equivalents, and restricted cash and cash equivalents, end of period
$ 15,215  $ 13,634 
Supplemental disclosures of cash flow information:    
Interest paid $ 462  $ 479 
Income taxes paid $ 448  $ 477 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above:
September 30,
2022 2021
Cash and cash equivalents $ 14,987  $ 13,423 
Restricted cash and cash equivalents, included in restricted deposits 228  211 
Total cash, cash equivalents, and restricted cash and cash equivalents $ 15,215  $ 13,634