Centene Corporation Reports 2007 Third 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 ended September 30, 2007. The revenues, general and administrative expenses and related financial ratios included in this release present premium taxes on a gross basis, consistent with our past reporting practice. [TABLE OMITTED] Third Quarter Summary * Quarter-end Medicaid Managed Care membership of 1.1 million * Revenues of $749.9 million, an 18.8% increase over the 2006 third 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 $0.37 (excluding FirstGuard Activity), compared to $0.31 in the 2006 third quarter (excluding FirstGuard 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. charges). * 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 79.0% on a gross basis. * Medicaid Managed Care G&A expense ratio of 13.6% and Specialty Services G&A ratio of 15.1%, including premium taxes. * 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 $104.9 million. * Days in claims payable of 49.2. Other Events * In July 2007, we acquired a minority interest in Access Health Solutions, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , the third largest Medicaid managed care entity in Florida. * Appointed Mark Eggert to position of Executive Vice President, Health Plans. * Stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program extended through October 31, 2008. Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, "During the third quarter, overall results for revenue, membership growth and earnings were consistent with our expectations, and our Medicaid and SCHIP HBR improved by 160 basis points sequentially. "In Texas, we experienced growing membership in both SCHIP and in the Texas STAR Plus (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. ) program. Recently, we received notification from the state of Texas that it will launch its Foster Care program on April 1, 2008; we have worked diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d to prepare for this and look forward to serving the needs of these recipients. "In Georgia, membership was 286,200, within our guided range. Positive momentum in cost and utilization trends in the state continue, and we recently hired Michael Cadger cadge intr. & tr.v. cadged, cadg·ing, cadg·es To beg or get by begging. [Perhaps back-formation from obsolete cadger, peddler, from Middle English cadgear. as our plan President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . Michael Cadger brings over 30 years of relevant experience in the health and managed care industry. We are currently waiting to receive our rate increase from the state. "We are encouraged by the opportunity in South Carolina South Carolina, state of the SE United States. It is bordered by North Carolina (N), the Atlantic Ocean (SE), and Georgia (SW). Facts and Figures Area, 31,055 sq mi (80,432 sq km). Pop. (2000) 4,012,012, a 15. as the state converts to full-risk later this year, as well as our entry into Florida, where we are preparing for the state's future conversion. We remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the prospects for growth in both new and existing markets in Medicaid managed care and in our specialty businesses," concluded Neidorff. The following table depicts membership in Centene's managed care organizations by state at September 30, 2007 and 2006: [TABLE OMITTED] The following table depicts membership in Centene's managed care organizations by member category at September 30, 2007 and 2006: [TABLE OMITTED] Statement of Operations See Income statement. * For the 2007 third quarter, revenues increased 18.8% to $749.9 million from $631.2 million in the 2006 third quarter. * The HBR for Centene's Medicaid and SCHIP populations, which reflects medical costs as a percent of premium revenues, was 79.0% on a gross basis, a decrease of 3.0% over 2006. The decrease in the current year is primarily attributable to increased premium yield and the effect of higher premium taxes combined with a moderating medical cost trend. Sequentially, our Medicaid and SCHIP HBR decreased from 80.6% in the 2007 second quarter to 79.0% because of higher premium yield combined with a continued moderate medical cost trend. The 2007 third quarter reflects expected claims reserve development and is based on consistent reserving methodology. * G&A expense as a percent of revenues for the Medicaid Managed Care segment was 13.6% in the third quarter of 2007 compared to 13.1% in the third quarter of 2006. The increase in the Medicaid Managed Care G&A expense ratio for the three months ended September 30, 2007 primarily reflects increased premium taxes and start-up costs for our South Carolina and Texas Foster Care operations. Premium taxes were $20.7 million in the 2007 third quarter and $13.8 million in the 2006 third quarter. This increase was offset by a FirstGuard 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 charge of $6.0 million in the third quarter of 2006. * 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 were $23.1 million, including $0.8 million of net expense for other FirstGuard Activity. Excluding the FirstGuard Activity in 2007 and the FirstGuard non-cash impairment charges in 2006, operating earnings were $23.9 million in 2007 compared to $20.5 million in the 2006 third quarter. * Reported GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings per diluted share were $0.36, or $0.37 excluding FirstGuard Activity, compared to $0.31 in the 2006 third quarter (excluding the FirstGuard non-cash impairment charges). * For the nine months ended September 30, 2007, revenues increased 35.8% to $2.1 billion from $1.6 billion for the same period in the prior year. Medicaid Managed Care G&A expenses as a percent of revenues increased to 13.5% in the first nine months of 2007 compared to 12.5% in the first nine months of 2006. Earnings from operations, excluding the FirstGuard Activity in 2007 and the FirstGuard non-cash impairment charges in 2006, increased to $56.7 million in the first nine months of 2007 from $39.4 million in the first nine months of 2006. Net earnings, excluding the FirstGuard Activity, were $40.1 million or $0.90 per diluted share in the first nine months of 2007. Balance Sheet and Cash Flow At September 30, 2007, the Company had cash and investments of $639.5 million, including $593.6 million held by its regulated entities and $45.9 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 $316.6 million, representing 49.2 days in claims payable. Total debt was $202.1 million and debt to capitalization was 33.1%. 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, June 30, 2007 46.8 Change in provider accruals 1.3 Increase in days receipt to paid 0.6 Specialty segment 0.5 Days in claims payable, September 30, 2007 49.2 Outlook The table below depicts the Company's guidance for the 2007 fourth quarter and full year. [TABLE OMITTED] Eric R. Slusser, Centene's Chief Financial Officer, stated, "The 2007 fourth quarter and full year guidance reflects our expectation for the Georgia rate increase. The high end of our guidance range was reduced to reflect our current rate expectations. As mentioned in our second quarter 2007 earnings call, the 2008 guidance will be announced in early December." Stock Repurchase Authorization On October 22, 2007, the Company's Board of Directors extended the expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. of the Company's stock repurchase program to October 31, 2008. The program would have expired October 31, 2007. The program authorizes the repurchase of up to 4,000,000 shares of the Company's common stock from time to time on the open market or through privately negotiated transactions. Conference Call As previously announced, the Company will host a conference call Tuesday, October 23, 2007, at 8:30 A.M. (Eastern Time) to review the financial results for the third quarter ended September 30, 2007, and to discuss its business outlook. Michael F. Neidorff and Eric R. Slusser 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 November 6, 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 16108117. Non-GAAP Financial Presentation The Company is providing certain non-GAAP financial measures in this release as the Company believes 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 2007 non-GAAP information presented above in the "highlights" table, third bullet under "Third Quarter Summary" and fourth through sixth bullets under "Statement of Operations" excludes the activity for the Kansas and Missouri health plans, collectively, FirstGuard Activity. This exclusion has been made in the non-GAAP financial measures as management believes the 2007 results of the Kansas and Missouri health plans are not indicative of future company operations. The 2006 non-GAAP information presented above in the third bullet under "Third Quarter Summary" and fourth through sixth bullets under "Statement of Operations" excludes the FirstGuard non-cash goodwill and intangible asset impairment charges related to the loss of our Kansas contract. This exclusion has been made in the non-GAAP financial measures as management believes this charge is 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 operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . Therefore, the Company believes 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. The following tables reconcile the Company's Statement of Operations for the three and nine months ended September 30, 2007 and 2006 on a GAAP basis to a non-GAAP basis. The 2007 non-GAAP basis excludes the FirstGuard Activity and the 2006 non-GAAP basis excludes the FirstGuard non-cash goodwill and intangible asset impairment charges related to the loss of our Kansas contract (in thousands, except share data). [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Premium Tax Presentation The Company reports premium taxes as a component of revenues and general and administrative expenses, or on a gross basis. Effective with the reporting of our results for the fourth quarter of 2007, the Company intends to report premium taxes on the face of the statement of operations as a component of revenues and a component of 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. . The following statement of operations, for the three months ended September 30, 2007 and 2006, displays the intended format. [TABLE OMITTED] The Company also intends to alter the definition of its HBR and G&A ratios to a net basis. On a net basis, the HBR is calculated as Medical costs divided by Premium revenues. On a net basis, the G&A ratio is recorded as G&A expense divided by the sum of Premium revenue and Service revenue. The following table shows the Company's Medicaid/SCHIP HBR and the Medicaid Managed Care G&A ratio on a gross basis as reported as well as on a net basis for analytical purposes. [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). The Company operates health plans in Florida, Georgia, Indiana, New Jersey, Ohio, South Carolina, 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 , health management, 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. , 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, 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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