Centene Corporation Reports 2006 Fourth Quarter Results.ST. LOUIS -- Centene Corporation Centene Corporation is in the industry of Medicaid managed care. Centene is a multi-line healthcare enterprise operating primarily in two segments: Medicaid Managed Care and Specialty Services. (NYSE NYSE See: New York Stock Exchange : CNC (Computerized Numerical Control) See numerical control. CNC - Collaborative Networked Communication ) today announced its financial results for the quarter and year ended December 31, 2006.
Highlights
Q4 Full Year
Total Revenues (in millions) $697.4 $2,279.0
Medicaid/SCHIP HBR 82.1% 82.6%
EPS $0.31 $(1.01)
EPS excluding Impairment/Exit Costs $0.41 $1.03
Fourth Quarter Summary * Year-end Medicaid Managed Care membership of 1.3 million, including 138,900 Kansas and Missouri members. * Membership growth of 44.8% over the 2005 fourth quarter. * Revenues of $697.4 million, a 64.8% increase over the 2005 fourth quarter. * Earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share of $0.41, excluding $7.4 million (pre-tax) FirstGuard exit costs, compared to $0.31 in the 2005 fourth quarter. * Health Benefits Ratio (HBR HBR Harvard Business Review HBR Harbor HBR High Bit Rate HBR Human Behavioral Representation HBR Heijmans Blackwell Remediation HBR Hydrobromide Acid HBR House Budget Resolution HBR Hybrid Block Repair HBR Host-Based Replication ) for Centene's Medicaid and SCHIP SCHIP State Children's Health Insurance Program populations, which reflects medical costs as a percent of premium revenues, of 82.1%. * Medicaid Managed Care G&A expense ratio of 12.7% and Specialty Services G&A ratio of 14.4%. * Operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of $70.5 million. * Days in claims payable of 46.4. Other Events * Commenced operations in the 16 new counties awarded in the Northwest market of Ohio. * Commenced Arizona Long-Term Care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. contract effective October 1, 2006. * Awarded an Ohio Medicaid ABD ABD n. A candidate for a doctorate who has completed all the requirements for the degree, such as courses and examinations, with the exception of the dissertation. [a(ll) b(ut) d(issertation).] contract in all four regions in which we submitted a bid. * Received notice of tentative contract award of the Texas Comprehensive Health Care for Foster Care, subject to contract finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. . * Announced definitive agreement to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. the assets of FirstGuard Health Plan, Inc., our Missouri health plan. The sale was completed effective February 1, 2007. * Exited Kansas Medicaid market. Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "Our fourth quarter results were consistent with our expectations, with strong growth in Georgia, Texas, and Ohio. Our overall Medicaid and SCHIP HBR was 82.1%, as guided. We saw a decline in our Indiana membership as we initiated re-contracting with our physician network and due to the state's decision to implement a one-month freeze on assigning members into new plans. Our Indiana plan continues to require focused attention on pharmacy costs; we believe that we have begun to favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact the medical cost trend in that state. In addition, the company-wide medical management initiatives that we put in place earlier this year are giving us added visibility of trends and we continue to evaluate further steps to more effectively control and manage these costs. "We are pleased with the performance of our Georgia business which has exceeded our expectations, reaching 308,800 members at year-end. While we faced some specific challenges regarding provider claims due to a substantial number of doctors signing contracts at the last minute, we are paying current claims in a timely fashion and expect to have the backlog for the older claims cleared up by the end of February. "We were disappointed with the loss of our contract to serve the state of Kansas' Medicaid recipients. We have managed a smooth transition of our membership and have recognized all of the significant financial charges in 2006. Additionally, we sold our Missouri health plan assets to Healthcare USA when the state continued its unfavorable posture towards Medicaid; this transaction closed on February 1, 2007. We expect to incur minimal additional exit costs in 2007. "In Ohio, the state commenced its Aged, Blind or Disabled (ABD) roll-out in the Northeast and Southwest regions on January 1, and February 1, respectively; we expect the East Central and Northwest regions
The Northwest Region to begin enrolling members in March and April. Our contract to serve Texas Star Plus members commenced on February 1, a slight delay from the original January 1 start date. We look forward to serving the health needs of these recipients. "We've closed the fourth quarter and year with the knowledge and confidence that we have taken considerable steps to address and resolve our medical management issues and look forward to pursuing the growth opportunities that exist in our core business and specialty companies with the goal of covering more of the nation's 50 million uninsured Americans," concluded Neidorff. The following table depicts membership in Centene's managed care organizations by state at December 31, 2006 and 2005:
2006 >
2005
Georgia 308,800 >
--
Indiana 183,100 >
193,300
New Jersey 58,900 >
56,500
Ohio 109,200 >
58,700
Texas 298,500 >
242,000
Wisconsin 164,800 >
172,100
Subtotal 1,123,300 >
722,600
Kansas 107,000 >
113,300
Missouri 31,900 >
36,000
Total 1,262,200 >
871,900
The following table depicts membership in Centene's managed care organizations by member category at December 31, 2006 and 2005: [TABLE OMITTED] (a) 10,200 at-risk; 9,600 ASO ASO arteriosclerosis obliterans. ASO 1 Administrative services organization, see there 2 Allele-specific–oligonucleotide hybridization 3 Anti-streptolysin O, see there (b) 8,100 at-risk; 6,800 ASO Statement of Operations See Income statement. * For the 2006 fourth quarter, revenues increased 64.8% to $697.4 million from $423.2 million in the 2005 fourth quarter. Our fourth quarter 2006 revenue in Kansas and Missouri totaled $79.6 million. * The HBR for Centene's Medicaid and SCHIP populations, which reflects medical costs as a percent of premium revenues, was 82.1% for the three months ended December 31, 2006, a decrease of 0.2% over the comparable 2005 period. The HBR for the three months ended December 31, 2006 did not include any overall adverse medical cost development related to prior periods. * General and administrative (G&A) expense as a percent of revenues for the Medicaid Managed Care segment was 12.7% in the fourth quarter of 2006 compared to 10.3% in the fourth quarter of 2005, increasing primarily because of premium taxes enacted in certain markets and FirstGuard exit costs. Fourth quarter 2006 premium taxes were $17.4 million. The Medicaid Managed Care G&A ratio would have been 10.4% excluding those premium taxes, and 9.3% excluding the premium taxes and $7.4 million of FirstGuard exit costs. * Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before of $18.7 million, including $7.4 million of FirstGuard exit costs, compared to $20.4 million in the 2005 fourth quarter. * Earnings per diluted share of $0.31. Earnings per diluted share of $0.41, excluding the FirstGuard exit costs, compared to $0.31 in the 2005 fourth quarter. * For the year ended December 31, 2006, revenues increased 51.3% to $2.3 billion from $1.5 billion in 2005. Our 2006 revenues in Kansas and Missouri totaled $317.0 million. Medicaid Managed Care G&A expenses including premium tax and FirstGuard exit costs as a percent of revenues increased to 12.6% in 2006 compared to 10.5% in 2005. Net loss in 2006 of $43.6 million, or $1.01 per diluted share, including a non-cash intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge related to the loss of the Kansas contract of $87.1 million pre-tax and the FirstGuard exit costs of $7.4 million pre-tax. Net earnings, excluding the impairment charge and exit costs, were $45.9 million or $1.03 per diluted share in 2006. Balance Sheet and Cash Flow At December 31, 2006, the Company had cash and investments of $508.7 million, including $479.8 million held by its regulated entities and $28.9 million held by its unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. entities. Medical claims liabilities totaled $280.4 million, representing 46.4 days in claims payable. 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, September 30, 2006 45.3 Increase in claims inventory 1.1 Days in claims payable, December 31, 2006 46.4 Outlook The table below depicts the Company's guidance for the 2007 first quarter and full year:
Q1 2007 > > 2007 >
Low > > High >
Low
High
Revenue (in millions) $635 > > $645 >
$2,700
$2,800
Earnings per diluted share $0.24 > > $0.27 >
$1.51
$1.61
J. Per Brodin, Centene's Chief Financial Officer, stated, "The 2007 guidance reflects our previously announced intention to begin reporting our revenue net of premium taxes. This guidance also excludes any gain or loss from the sale of our Missouri health plan or tax benefits from the stock of our Kansas health plan and the effect of the tentative Texas Foster Care award. Our expected sequential change in EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. is summarized as follows:
Low >
High
Q4 2006 adjusted non-GAAP EPS $ 0.41 >
$ 0.41
Q4 2006 FirstGuard net earnings (0.14) >
(0.14)
Reallocated corporate overhead (0.05) >
(0.05)
Profit improvement and growth 0.02 >
0.05
Q1 2007 earnings per diluted share $ 0.24 >
$ 0.27
"The reallocated corporate overhead costs overhead costs see fixed costs. represent the centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. infrastructure for managing claims payment, IT, finance and other costs needed to support our FirstGuard operations. Our growth plans require us to maintain the existing infrastructure and will allow us to operate at an appropriate G&A ratio in 2007." Conference Call As previously announced, the Company will host a conference call Tuesday, February 6, 2007, at 8:30 A.M. (Eastern Time) to review the financial results for the fourth quarter and year ended December 31, 2006, and to discuss its business outlook. Michael F. Neidorff and J. Per Brodin will host the conference call. Investors are invited to participate in the conference call by dialing 800-273-1254 in the U.S. and Canada, 706-679-8592 from abroad, or via a live Internet broadcast on the Company's website at www.centene.com, under the Investor Relations Investor relations The process by which the corporation communicates with its investors. section. A replay will be available for on-demand listening shortly after the completion of the call until 11:59 P.M. (Eastern Time) on February 20, 2007 at the aforementioned URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. , or by dialing 800-642-1687 in the U.S. and Canada, or 706-645-9291 from abroad, and entering access code 6573810. Non-GAAP Financial Presentation The Company is providing certain non-GAAP financial measures in this release as the Company believes that these figures are helpful in allowing individuals to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently. The non-GAAP information presented above in the "highlights" table, fourth bullet under "Fourth Quarter Summary" and fifth and sixth bullets under "Statement of Operations" excludes the non-cash intangible asset impairment charge related to the Kansas contract non-renewal notification and exit costs for the Kansas and Missouri health plans. This exclusion has been made in the non-GAAP financial measures as management believes that these costs are an unusual event. The Company uses the presented non-GAAP financial measures internally to focus management on period-to-period changes in the Company's core business. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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. The following unaudited tables reconcile the Company's Statement of Operations for the fourth quarter and full year of 2006 on a GAAP basis to a non-GAAP basis. The non-GAAP basis excludes the FirstGuard impairment and exit costs. [TABLE OMITTED] [TABLE OMITTED] About Centene Corporation Centene Corporation is a leading multi-line healthcare enterprise that provides programs and related services to individuals receiving benefits under Medicaid, including the State Children's Health Children's Health Definition Children's health encompasses the physical, mental, emotional, and social well-being of children from infancy through adolescence. Insurance Program (SCHIP) and Supplemental Security Income Supplemental Security Income A Social Security program established to help the blind, disabled, and poor. (SSI (1) See server-side include and single-system image. (2) (Small-Scale Integration) Less than 100 transistors on a chip. See MSI, LSI, VLSI and ULSI. 1. (electronics) SSI - small scale integration. 2. ). The Company operates health plans in Georgia, Indiana, New Jersey, Ohio, Texas and Wisconsin. In addition, the Company contracts with other healthcare and commercial organizations to provide specialty services including behavioral health Behavioral health was first used in the 1980's to name the combination of the fields mental health and substance abuse. As an example, an organization serving both mental health and substance abuse clients might refer to its practice as behavioral health or , disease management, long-term care, managed vision, nurse triage triage Division of patients for priority of care, usually into three categories: those who will not survive even with treatment; those who will survive without treatment; and those whose survival depends on treatment. , pharmacy benefits management and treatment compliance. Information regarding Centene is available via the Internet at www.centene.com. The information provided in this press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , competition, changes in healthcare practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare. The expiration, cancellation or suspension of Centene's Medicaid Managed Care contracts by state governments would also negatively affect Centene. [Tables Follow] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Centene's claims reserving process utilizes a consistent actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin methodology to estimate Centene's ultimate liability. Any reduction in the "Incurred related to: Prior period" claims may be offset as Centene actuarially determines "Incurred related to: Current period." As such, only in the absence of a consistent reserving methodology would favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. 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. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion