[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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)
|
PAGE
|
|||
Part I
|
|||
Financial Information
|
|||
Item 1.
|
|||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
5
|
|||
Item 2.
|
10
|
||
Item 3.
|
15
|
||
Item 4.
|
15
|
||
Part II
|
|||
Other Information
|
|||
Item 1.
|
16
|
||
Item 1A.
|
16
|
||
Item 2.
|
22
|
||
Item 5.
|
22
|
||
Item 6.
|
23
|
||
24
|
·
|
our 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, including the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder;
|
·
|
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 our Medicaid managed care contracts by state governments;
|
·
|
availability of debt and equity financing, on terms that are favorable to us; and
|
·
|
general economic and market conditions.
|
June 30,
2011
|
December 31,
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 |
Three Months Ended
June 30,
|
Six Months Ended
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 Stockholders’ Equity
|
|||||||||||||||||||||||||
Common Stock
|
Treasury Stock
|
||||||||||||||||||||||||
$.001 Par
Value
Shares
|
Amt
|
Additional
Paid-in
Capital
|
Accumulated
Other
Comprehensive
Income
|
Retained
Earnings
|
$.001 Par
Value
Shares
|
Amt
|
Non
controlling
Interest
|
Total
|
|||||||||||||||||
Balance, December 31, 2010
|
52,172,037
|
$
|
52
|
$
|
384,206
|
$
|
6,424
|
$
|
453,743
|
2,555,213
|
$
|
(50,486)
|
$
|
3,116
|
$
|
797,055
|
|||||||||
Comprehensive Earnings:
|
|||||||||||||||||||||||||
Net earnings
|
—
|
—
|
—
|
—
|
52,119
|
—
|
—
|
(1,233)
|
50,886
|
||||||||||||||||
Change in unrealized investment gain, net of $450 tax
|
—
|
—
|
—
|
759
|
—
|
—
|
—
|
—
|
759
|
||||||||||||||||
Total comprehensive earnings
|
51,645
|
||||||||||||||||||||||||
Common stock issued for employee benefit plans
|
659,425
|
1
|
11,488
|
—
|
—
|
—
|
—
|
—
|
11,489
|
||||||||||||||||
Issuance of stock warrants
|
—
|
—
|
—
|
—
|
—
|
(50,000)
|
1,172
|
—
|
1,172
|
||||||||||||||||
Common stock repurchases
|
—
|
—
|
—
|
—
|
—
|
30,920
|
(1,029)
|
—
|
(1,029
|
)
|
|||||||||||||||
Stock compensation expense
|
—
|
—
|
8,839
|
—
|
—
|
—
|
—
|
—
|
8,839
|
||||||||||||||||
Excess tax benefits from stock compensation
|
—
|
—
|
1,178
|
—
|
—
|
—
|
—
|
—
|
1,178
|
||||||||||||||||
Contribution from Noncontrolling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
244
|
244
|
||||||||||||||||
Deconsolidation of Noncontrolling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(289)
|
(289
|
)
|
|||||||||||||||
Balance, June 30, 2011
|
52,831,462
|
$
|
53
|
$
|
405,711
|
$
|
7,183
|
$
|
505,862
|
2,536,133
|
$
|
(50,343)
|
$
|
1,838
|
$
|
870,304
|
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 |
1. Basis of Presentation
|
—
|
Casenet, LLC. In December 2010, the Company acquired an additional ownership interest in Casenet, LLC for total consideration of $6,619, bringing its ownership interest to 68%. The initial allocation resulted in goodwill of $1,752 and other identifiable intangible assets of $4,500 that were recorded in the Specialty Services segment. During the second quarter of 2011, the Company finalized the allocation of the fair value that resulted in goodwill of $8,975, other identifiable intangible assets of $3,561 and an increase in unearned revenue of $6,284. The goodwill is not deductible for income tax purposes. During the second quarter of 2011, the Company increased its ownership interest in Casenet to 73%.
|
—
|
Citrus Health Care, Inc. In December 2010, the Company acquired certain assets in non-reform counties of Citrus Health Care, Inc., a Florida Medicaid and long term care health plan for $28,689. During 2010, the Company performed a preliminary allocation of fair value that resulted in goodwill of $22,951 and other identifiable intangible assets of $5,738 that were recorded in the Medicaid Managed Care segment. During the second quarter of 2011, the Company finalized the allocation of the fair value that resulted in goodwill of $19,069 and other identifiable intangible assets of $9,620. All of the goodwill is deductible for income tax purposes.
|
June 30, 2011
|
December 31, 2010
|
||||||||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$ | 28,254 | $ | 548 | $ | (34 | ) | $ | 28,768 | $ | 28,665 | $ | 510 | $ | (140 | ) | $ | 29,035 | |||||
Corporate securities
|
190,542 | 3,746 | (73 | ) | 194,215 | 197,577 | 3,124 | (586 | ) | 200,115 | |||||||||||||
Restricted certificates of deposit
|
5,888 | — | — | 5,888 | 6,814 | — | — | 6,814 | |||||||||||||||
Restricted cash equivalents
|
13,400 | — | — | 13,400 | 8,814 | — | — | 8,814 | |||||||||||||||
Municipal securities:
|
|||||||||||||||||||||||
General obligation
|
113,851 | 3,466 | — | 117,317 | 109,866 | 3,601 | (6 | ) | 113,461 | ||||||||||||||
Pre-refunded
|
32,072 | 689 | — | 32,761 | 32,442 | 756 | — | 33,198 | |||||||||||||||
Revenue
|
102,027 | 2,845 | (2 | ) | 104,870 | 100,198 | 2,781 | (15 | ) | 102,964 | |||||||||||||
Variable rate demand notes
|
91,160 | — | — | 91,160 | 106,540 | — | — | 106,540 | |||||||||||||||
Asset backed securities
|
13,387 | 301 | — | 13,688 | 17,391 | 243 | (43 | ) | 17,591 | ||||||||||||||
Cost method investments and equity method securities
|
7,347 | — | — | 7,347 | 7,060 | — | — | 7,060 | |||||||||||||||
Life insurance contracts
|
14,546 | — | — | 14,546 | 14,391 | — | — | 14,391 | |||||||||||||||
Total
|
$ | 612,474 | $ | 11,595 | $ | (109 | ) | $ | 623,960 | $ | 629,758 | $ | 11,015 | $ | (790 | ) | $ | 639,983 |
June 30, 2011
|
December 31, 2010
|
||||||||||||||||||||||
Less Than 12 Months
|
12 Months or More
|
Less Than 12 Months
|
12 Months or More
|
||||||||||||||||||||
Unrealized
Losses
|
Fair
Value
|
Unrealized Losses
|
Fair
Value
|
Unrealized Losses
|
Fair
Value
|
Unrealized Losses
|
Fair
Value
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$ | (34 | ) | $ | 7,371 | $ | — | $ | — | $ | (140 | ) | $ | 9,246 | $ | — | $ | — | |||||
Corporate securities
|
(73 | ) | 21,733 | — | — | (586 | ) | 40,341 | — | — | |||||||||||||
Municipal securities:
|
|||||||||||||||||||||||
General obligation
|
— | — | — | — | (6 | ) | 1,131 | — | — | ||||||||||||||
Revenue
|
(2 | ) | 838 | — | — | (15 | ) | 2,419 | — | — | |||||||||||||
Asset backed securities
|
— | — | — | — | (43 | ) | 5,276 | — | — | ||||||||||||||
Total
|
$ | (109 | ) | $ | 29,942 | $ | — | $ | — | $ | (790 | ) | $ | 58,413 | $ | — | $ | — |
June 30, 2011
|
December 31, 2010
|
|||||||||||||||||||||||
Investments
|
Restricted Deposits
|
Investments
|
Restricted Deposits
|
|||||||||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
|||||||||||||||||
One year or less
|
$ | 77,560 | $ | 78,808 | $ | 19,516 | $ | 19,516 | $ | 21,141 | $ | 21,346 | $ | 17,387 | $ | 17,392 | ||||||||
One year through five years
|
396,676 | 406,770 | 7,099 | 7,146 | 464,270 | 474,255 | 5,368 | 5,366 | ||||||||||||||||
Five years through ten years
|
37,983 | 37,990 | — | — | 39,732 | 39,731 | — | — | ||||||||||||||||
Greater than ten years
|
73,640 | 73,730 | — | — | 81,860 | 81,893 | — | — | ||||||||||||||||
Total
|
$ | 585,859 | $ | 597,298 | $ | 26,615 | $ | 26,662 | $ | 607,003 | $ | 617,225 | $ | 22,755 | $ | 22,758 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||
Gains
|
$ | — | $ | 683 | $ | 133 | $ | 3,717 | ||||
Losses
|
(11 | ) | (245 | ) | (26 | ) | (245 | ) | ||||
Net realized (losses) gains
|
$ | (11 | ) | $ | 438 | $ | 107 | $ | 3,472 |
4. Fair Value Measurements
|
Level Input:
|
Input Definition:
|
|
Level I
|
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
|
|
Level II
|
Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
|
|
Level III
|
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
|
Level I
|
Level II
|
Level III
|
Total
|
||||||||||
Assets
|
|||||||||||||
Cash and cash equivalents
|
$ | 474,450 | $ | ― | $ | ― | $ | 474,450 | |||||
Investments available for sale:
|
|||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$ | 19,117 | $ | 2,277 | $ | ― | $ | 21,394 | |||||
Corporate securities
|
― | 194,215 | ― | 194,215 | |||||||||
Municipal securities:
|
|||||||||||||
General obligation
|
― | 117,317 | ― | 117,317 | |||||||||
Pre-refunded
|
― | 32,761 | ― | 32,761 | |||||||||
Revenue
|
― | 104,870 | ― | 104,870 | |||||||||
Variable rate demand notes
|
― | 91,160 | ― | 91,160 | |||||||||
Asset backed securities
|
― | 13,688 | ― | 13,688 | |||||||||
Total investments
|
$ | 19,117 | $ | 556,288 | $ | ― | $ | 575,405 | |||||
Restricted deposits available for sale:
|
|||||||||||||
Cash and cash equivalents
|
$ | 13,400 | $ | ― | $ | ― | $ | 13,400 | |||||
Certificates of deposit
|
5,888 | ― | ― | 5,888 | |||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
6,844 | 530 | ― | 7,374 | |||||||||
Total restricted deposits
|
$ | 26,132 | $ | 530 | $ | ― | $ | 26,662 | |||||
Total assets at fair value
|
$ | 519,699 | $ | 556,818 | $ | ― | $ | 1,076,517 | |||||
Liabilities
|
|||||||||||||
Interest rate swap contract
|
$ | ― | $ | 1,819 | $ | ― | $ | 1,819 |
Level I
|
Level II
|
Level III
|
Total
|
||||||||||
Assets
|
|||||||||||||
Cash and cash equivalents
|
$ | 433,914 | $ | ― | $ | ― | $ | 433,914 | |||||
Investments available for sale:
|
|||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$ | 14,809 | $ | 7,096 | $ | ― | $ | 21,905 | |||||
Corporate securities
|
― | 200,115 | ― | 200,115 | |||||||||
Municipal securities:
|
|||||||||||||
General obligation
|
― | 113,461 | ― | 113,461 | |||||||||
Pre-refunded
|
― | 33,198 | ― | 33,198 | |||||||||
Revenue
|
― | 102,964 | ― | 102,964 | |||||||||
Variable rate demand notes
|
― | 106,540 | ― | 106,540 | |||||||||
Asset backed securities
|
― | 17,591 | ― | 17,591 | |||||||||
Total investments
|
$ | 14,809 | $ | 580,965 | $ | ― | $ | 595,774 | |||||
Restricted deposits available for sale:
|
|||||||||||||
Cash and cash equivalents
|
$ | 8,814 | $ | ― | $ | ― | $ | 8,814 | |||||
Certificates of deposit
|
6,814 | ― | ― | 6,814 | |||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
7,130 | ― | ― | 7,130 | |||||||||
Total restricted deposits
|
$ | 22,758 | $ | ― | $ | ― | $ | 22,758 | |||||
Total assets at fair value
|
$ | 471,481 | $ | 580,965 | $ | ― | $ | 1,052,446 |
June 30, 2011
|
December 31, 2010
|
|||||
Senior notes, at par
|
$ | 250,000 | $ | 175,000 | ||
Unamortized discount on Senior notes
|
(3,074 | ) | ― | |||
Interest rate swap fair value
|
(1,819 | ) | ― | |||
Senior notes, net
|
245,107 | 175,000 | ||||
Revolving credit agreement
|
― | 60,000 | ||||
Mortgage notes payable
|
88,335 | 89,500 | ||||
Capital leases and other
|
6,198 | 6,141 | ||||
Total debt
|
339,640 | 330,641 | ||||
Less current portion
|
(3,172 | ) | (2,817 | ) | ||
Long-term debt
|
$ | 336,468 | $ | 327,824 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||
Net earnings attributable to Centene Corporation common stockholders:
|
|||||||||||
Earnings from continuing operations, net of tax
|
$
|
28,374
|
$
|
22,999
|
$
|
52,119
|
$
|
43,081
|
|||
Discontinued operations, net of tax
|
―
|
(226
|
)
|
―
|
3,694
|
||||||
Net earnings
|
$
|
28,374
|
$
|
22,773
|
$
|
52,119
|
$
|
46,775
|
|||
Shares used in computing per share amounts:
|
|||||||||||
Weighted average number of common shares outstanding
|
50,167,052
|
49,135,552
|
49,959,892
|
48,203,312
|
|||||||
Common stock equivalents (as determined by applying the treasury stock method)
|
2,322,362
|
1,730,766
|
2,211,321
|
1,603,772
|
|||||||
Weighted average number of common shares and potential dilutive common shares outstanding
|
52,489,414
|
50,866,318
|
52,171,213
|
49,807,084
|
|||||||
Net earnings per share attributable to Centene Corporation common stockholders:
|
|||||||||||
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
|
|||
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||
Premium and service revenues from external customers
|
$ | 1,098,924 | $ | 179,092 | $ | — | $ | 1,278,016 | ||||||
Premium and service revenues from internal customers
|
17,297 | 177,351 | (194,648 | ) | — | |||||||||
Total premium and service revenues
|
$ | 1,116,221 | $ | 356,443 | $ | (194,648 | ) | $ | 1,278,016 | |||||
Earnings from operations
|
$ | 42,551 | $ | 12,752 | $ | — | $ | 55,303 |
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||
Premium and service revenues from external customers
|
$ | 900,463 | $ | 150,147 | $ | — | $ | 1,050,610 | ||||||
Premium and service revenues from internal customers
|
15,101 | 122,963 | (138,064 | ) | — | |||||||||
Total premium and service revenues
|
$ | 915,564 | $ | 273,110 | $ | (138,064 | ) | $ | 1,050,610 | |||||
Earnings from operations
|
$ | 28,043 | $ | 13,666 | $ | — | $ | 41,709 |
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||
Premium and service revenues from external customers
|
$ | 2,099,563 | $ | 357,614 | $ | — | $ | 2,457,177 | ||||||
Premium and service revenues from internal customers
|
33,044 | 324,471 | (357,515 | ) | — | |||||||||
Total premium and service revenues
|
$ | 2,132,607 | $ | 682,085 | $ | (357,515 | ) | $ | 2,457,177 | |||||
Earnings from operations
|
$ | 70,617 | $ | 23,783 | $ | — | $ | 94,400 |
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||
Premium and service revenues from external customers
|
$ | 1,780,442 | $ | 292,390 | $ | — | $ | 2,072,832 | ||||||
Premium and service revenues from internal customers
|
30,227 | 247,949 | (278,176 | ) | — | |||||||||
Total premium and service revenues
|
$ | 1,810,669 | $ | 540,339 | $ | (278,176 | ) | $ | 2,072,832 | |||||
Earnings from operations
|
$ | 46,743 | $ | 24,577 | $ | — | $ | 71,320 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||
Net earnings
|
$ | 28,063 | $ | 24,502 | $ | 50,886 | $ | 48,752 | |||
Reclassification adjustment, net of tax
|
10 | 323 | 192 | 135 | |||||||
Change in unrealized gains on investments, net of tax
|
1,204 | 1,874 | 567 | 1,917 | |||||||
Total change
|
1,214 | 2,197 | 759 | 2,052 | |||||||
Comprehensive earnings
|
29,277 | 26,699 | 51,645 | 50,804 | |||||||
Comprehensive (losses) earnings attributable to the noncontrolling interests
|
(311 | ) | 1,729 | (1,233 | ) | 1,977 | |||||
Comprehensive earnings attributable to Centene Corporation
|
$ | 29,588 | $ | 24,970 | $ | 52,878 | $ | 48,827 |
—
|
Quarter-end at-risk managed care membership of 1,580,500, an increase of 45,900 members.
|
—
|
Premium and service revenues from continuing operations of $1.3 billion, representing 21.6% growth year over year.
|
—
|
Health Benefits Ratio from continuing operations of 83.0%, compared to 83.8% in 2010.
|
—
|
General and Administrative expense ratio from continuing operations of 13.0%, compared to 12.7% in 2010.
|
—
|
Diluted net earnings per share from continuing operations of $0.54, including $(0.10) of debt extinguishment costs, compared to $0.45 in the prior year.
|
—
|
Total operating cash flows of $(40.8) million.
|
—
|
Arizona. In December 2010, Cenpatico Behavioral Health of Arizona began operating under an expanded contract to manage behavioral healthcare services for an additional four counties. In February 2011, Bridgeway Health Solutions, LLC began operating under an agreement with Pima Health Systems of Arizona to administer their long-term care program on a non-risk basis.
|
—
|
Celtic Insurance Company, Inc. In July 2010, we closed on the acquisition of certain assets and liabilities of NovaSys Health, LLC, a third party administrator in Arkansas that complements our existing Celtic business. In November 2010, Celtic began operating under a new contract with the Texas Department of Insurance to provide affordable health insurance plans for small businesses under the new Healthy Texas initiative.
|
—
|
Florida. During 2010, we completed the conversion of members from Access Health Solutions LLC, or Access, to our subsidiary, Sunshine State Health Plan, on an at-risk basis. Additionally, in December 2010, we completed the acquisition of Citrus Health Care, Inc., a Medicaid and long-term care health plan.
|
—
|
Illinois. In May 2011, our new subsidiary, IlliniCare Health Plan, began providing managed care services for older adults and adults with disabilities under the Integrated Care Program in six counties.
|
—
|
Massachusetts. In April 2010, we began offering an individual insurance product, under the names of Commonwealth Choice and CeltiCare Direct, for residents who do not qualify for other state funded insurance programs.
|
—
|
Mississippi. In January 2011, we began operating through the Mississippi Coordinated Access Network (MississippiCan) program. During the second quarter of 2011, the contract effectiveness provision was amended, and accordingly, revenue, medical costs and related earnings for January 1, 2011 through June 30, 2011 were recorded during the second quarter of 2011. As a result, the recognition of earnings of approximately $0.07 per diluted share related to the Mississippi operations from the first quarter were recorded in the second quarter of 2011. General and administrative expenses related to the Mississippi operations were recognized in our consolidated statement of operations during the first quarter of 2011.
|
—
|
South Carolina. In June 2010, we completed the acquisition of Carolina Crescent Health Plan.
|
—
|
Texas. In February 2011, we began operating under an additional STAR+PLUS ABD contract in the Dallas service area.
|
—
|
In May 2011, Bridgeway Health Solutions announced it was awarded a contract to deliver Long-term Care services in three geographic service areas of Arizona, effective October 1, 2011.
|
—
|
In July 2011, our subsidiary, Kentucky Spirit Health Plan, announced it was awarded a three-year contract with the Kentucky Finance and Administration Cabinet to serve Medicaid beneficiaries. Kentucky Spirit Health Plan will provide integrated healthcare which includes behavioral health, pharmacy, vision and dental services to Medicaid recipients. Operations are expected to commence in the fourth quarter of 2011.
|
—
|
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.
|
June 30,
|
December 31,
|
||||
2011
|
2010
|
2010
|
|||
Arizona
|
22,800 | 22,100 | 22,400 | ||
Florida
|
190,600 | 113,100 | 194,900 | ||
Georgia
|
303,100 | 295,600 | 305,800 | ||
Illinois
|
700 | ― | ― | ||
Indiana
|
206,700 | 212,700 | 215,800 | ||
Massachusetts
|
32,900 | 30,100 | 36,200 | ||
Mississippi
|
30,800 | ― | ― | ||
Ohio
|
159,900 | 159,300 | 160,100 | ||
South Carolina
|
82,800 | 92,600 | 90,300 | ||
Texas
|
470,400 | 475,500 | 433,100 | ||
Wisconsin
|
79,800 | 133,600 | 74,900 | ||
Total at-risk membership
|
1,580,500 | 1,534,600 | 1,533,500 | ||
Non-risk membership
|
10,400 | 50,900 | 4,200 | ||
Total
|
1,590,900 | 1,585,500 | 1,537,700 |
June 30,
|
December 31,
|
||||
2011
|
2010
|
2010
|
|||
Medicaid
|
1,172,400 | 1,135,500 | 1,177,100 | ||
CHIP & Foster Care
|
211,400 | 272,400 | 210,500 | ||
ABD & Medicare
|
156,300 | 93,800 | 104,600 | ||
Hybrid Programs
|
35,500 | 30,100 | 36,200 | ||
Long-term Care
|
4,900 | 2,800 | 5,100 | ||
Total at-risk membership
|
1,580,500 | 1,534,600 | 1,533,500 | ||
Non-risk membership
|
10,400 | 50,900 | 4,200 | ||
Total
|
1,590,900 | 1,585,500 | 1,537,700 |
June 30,
|
December 31,
|
||||
2011
|
2010
|
2010
|
|||
Cenpatico Behavioral Health:
|
|||||
Arizona
|
173,200 | 119,700 | 174,600 | ||
Kansas
|
45,000 | 39,100 | 39,200 |
Three Months Ended June 30,
|
Six months Ended June 30,
|
||||||||||||||||
2011
|
2010
|
% Change 2010-2011
|
2011
|
2010
|
% Change 2010-2011
|
||||||||||||
Premium
|
$
|
1,248.6
|
$
|
1,025.9
|
21.7
|
%
|
$
|
2,401.4
|
|
$
|
2,025.2
|
18.6
|
%
|
||||
Service
|
29.4
|
24.7
|
19.2
|
%
|
55.8
|
47.6
|
17.3
|
%
|
|||||||||
Total premium and service revenues
|
1,278.0
|
1,050.6
|
21.6
|
%
|
2,457.2
|
2,072.8
|
18.5
|
%
|
|||||||||
Premium tax
|
37.0
|
26.2
|
41.4
|
%
|
74.2
|
72.7
|
2.1
|
%
|
|||||||||
Total revenues
|
1,315.0
|
1,076.8
|
22.1
|
%
|
2,531.4
|
2,145.5
|
18.0
|
%
|
|||||||||
Medical costs
|
1,035.7
|
859.3
|
20.5
|
%
|
1,992.8
|
1,699.0
|
17.3
|
%
|
|||||||||
Cost of services
|
20.3
|
15.7
|
29.3
|
%
|
40.5
|
32.9
|
23.2
|
%
|
|||||||||
General and administrative expenses
|
166.4
|
133.5
|
24.7
|
%
|
329.0
|
|
269.0
|
22.3
|
%
|
||||||||
Premium tax expense
|
37.2
|
26.6
|
40.2
|
%
|
74.7
|
73.3
|
1.9
|
%
|
|||||||||
Earnings from operations
|
55.4
|
41.7
|
32.6
|
%
|
94.4
|
71.3
|
32.4
|
%
|
|||||||||
Investment and other income, net
|
(10.9)
|
0.3
|
―
|
%
|
(12.8)
|
3.5
|
(462.7
|
)%
|
|||||||||
Earnings from continuing operations, before income tax expense
|
44.5
|
42.0
|
6.0
|
%
|
81.6
|
74.8
|
9.1
|
%
|
|||||||||
Income tax expense
|
16.4
|
17.3
|
(4.8
|
)%
|
30.7
|
29.7
|
3.3
|
%
|
|||||||||
Earnings from continuing operations, net of income tax expense
|
28.1
|
24.7
|
13.5
|
%
|
50.9
|
45.1
|
12.9
|
%
|
|||||||||
Discontinued operations, net of income tax expense (benefit) of $0, $(0.1), $0 and $4.4 respectively
|
―
|
(0.2)
|
(100.0
|
)%
|
―
|
3.7
|
(100.0
|
)%
|
|||||||||
Net earnings
|
28.1
|
24.5
|
14.5
|
%
|
50.9
|
48.8
|
4.4
|
%
|
|||||||||
Noncontrolling interest
|
(0.3)
|
1.7
|
(118.0
|
)%
|
(1.2)
|
2.0
|
(162.4
|
)%
|
|||||||||
Net earnings attributable to Centene Corporation
|
$
|
28.4
|
$
|
22.8
|
24.6
|
%
|
$
|
52.1
|
$
|
46.8
|
11.4
|
%
|
|||||
Amounts attributable to Centene Corporation common stockholders:
|
|||||||||||||||||
Earnings from continuing operations, net of income tax expense
|
$
|
28.4
|
$
|
23.0
|
23.4
|
%
|
$
|
52.1
|
$
|
43.1
|
21.0
|
%
|
|||||
Discontinued operations, net of income tax expense (benefit)
|
―
|
(0.2)
|
(100.0
|
)%
|
―
|
3.7
|
(100.0
|
)%
|
|||||||||
Net earnings
|
$
|
28.4
|
$
|
22.8
|
24.6
|
%
|
$
|
52.1
|
$
|
46.8
|
11.4
|
%
|
|||||
Diluted earnings per common share attributable to Centene Corporation:
|
|||||||||||||||||
Continuing operations
|
$
|
0.54
|
$
|
0.45
|
20.0
|
%
|
$
|
1.00
|
$
|
0.86
|
16.3
|
%
|
|||||
Discontinued operations
|
―
|
―
|
―
|
%
|
―
|
0.08
|
(100.0
|
)%
|
|||||||||
Total diluted earnings per common share
|
$
|
0.54
|
$
|
0.45
|
20.0
|
%
|
$
|
1.00
|
$
|
0.94
|
6.4
|
%
|
2011
|
2010
|
|||||
Medicaid and CHIP
|
80.1 | % | 83.4 | % | ||
ABD and Medicare
|
88.0 | 86.5 | ||||
Specialty Services
|
85.8 | 81.7 | ||||
Total
|
83.0 | 83.8 |
2011
|
2010
|
|||||||
Investment income
|
$ | 3.0 | $ | 4.2 | ||||
Debt extinguishment costs
|
(8.5 | ) | ― | |||||
Interest expense
|
(5.3 | ) | (3.9 | ) | ||||
Other income (expense), net
|
$ | (10.8 | ) | $ | 0.3 |
2011
|
2010
|
% Change
2010-2011
|
||||||||
Premium and Service Revenues
|
||||||||||
Medicaid Managed Care
|
$ | 1,116.2 | $ | 915.6 | 21.9 | % | ||||
Specialty Services
|
356.4 | 273.1 | 30.5 | % | ||||||
Eliminations
|
(194.6 | ) | (138.1 | ) | 41.0 | % | ||||
Consolidated Total
|
$ | 1,278.0 | $ | 1,050.6 | 21.6 | % | ||||
Earnings from Operations
|
||||||||||
Medicaid Managed Care
|
$ | 42.5 | $ | 28.0 | 51.7 | % | ||||
Specialty Services
|
12.8 | 13.7 | (6.7 | )% | ||||||
Consolidated Total
|
$ | 55.3 | $ | 41.7 | 32.6 | % |