Centene Corporation Reports Second Quarter Results and Increases Guidance for 2002; Company Posts Twelfth Consecutive Quarter of Profit Improvement.Business Editors ST. LOUIS--(BUSINESS WIRE)--July 24, 2002 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. (Nasdaq:CNTE) today announced the Company's financial results for the second quarter ended June June: see month. 30, 2002. Second Quarter Highlights -- For the second quarter of 2002, revenues increased 34% to $107.6 million from $80.6 in the second quarter of 2001. The health benefits ratio, which reflects medical services costs as a percent of premium revenues, was 82.0%, which was within the Company's targeted range of 82.0% to 83.5% and compares to 82.6% for the same period in 2001. General and administrative expenses as a percent of revenues decreased to 10.9% from 11.9%. Earnings from operations increased 71% to $7.7 million from $4.5 million in 2001. Net earnings improved to $5.2 million, or $0.45 per diluted share, compared to $3.2 million, or $0.42 per diluted share, for the second quarter of 2001. -- For the six months ended June 30, 2002, revenues increased 35% to $203.4 million from $150.9 million in the first six months of 2001. The health benefits ratio of 82.2% compares to 83.0% for the same period in 2001. General and administrative expenses as a percent of revenues decreased to 11.0% from 12.2%. Earnings from operations increased 88% to $14.0 million from $7.4 million in 2001. Net earnings improved to $9.5 million, or $0.83 per diluted share, compared to $5.4 million, or $0.70 per diluted share, for the six months ended in 2001. -- In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested at least annually for impairment. The Company adopted SFAS No. 142 effective January 1, 2002. For the quarter ended June 30, 2001, this adjustment would have added $122,000 in net earnings, or $0.02 per diluted share. Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. F. Neidorff, Centene's president and chief executive officer, said, "We continue to meet our targets and to deliver consistent, sustainable and predictable results. Growth this quarter was driven by significant increases in membership, an improved health benefits ratio within our target range, and continued improvement in our general and administrative expense ratio. We will continue to work with the states regarding rate increases and healthcare cost decreases that will help us to maintain margins going forward." Membership totaled 278,600 at June 30, 2002, a 31% increase from 213,200 at June 30, 2001 and a 12% increase from 249,300 at March 31, 2002.
The following table depicts membership by state at June 30, 2002
and 2001:
2002 2001
------------------ -------------------
Wisconsin 123,900 103,000
Indiana 92,800 54,600
Texas 61,900 55,600
------------------ -------------------
TOTAL 278,600 213,200
================== ===================
The following table depicts membership by line of business at
June 30, 2002 and 2001:
2002 2001
------------------ -------------------
Medicaid 254,700 194,800
CHIP 23,900 18,400
------------------ -------------------
TOTAL 278,600 213,200
================== ===================
Statement of Earnings Highlights -- For the second quarter of 2002, revenues increased 34% to $107.6 million from $80.6 in the second quarter of 2001. The health benefits ratio, which reflects medical services costs as a percent of premium revenues, was 82.0%, which was within the Company's targeted range of 82.0% to 83.5% and compares to 82.6% for the same period in 2001. General and administrative expenses as a percent of revenues decreased to 10.9% from 11.9%. Earnings from operations increased 71% to $7.7 million from $4.5 million in 2001. Net earnings improved to $5.2 million, or $0.45 per diluted share, compared to $3.2 million, or $0.42 per diluted share, for the second quarter of 2001. -- For the six months ended June 30, 2002, revenues increased 35% to $203.4 million from $150.9 million in the first six months of 2001. The health benefits ratio of 82.2% compares to 83.0% for the same period in 2001. General and administrative expenses as a percent of revenues decreased to 11.0% from 12.2%. Earnings from operations increased 88% to $14.0 million from $7.4 million in 2001. Net earnings improved to $9.5 million, or $0.83 per diluted share, compared to $5.4 million, or $0.70 per diluted share, for the six months ended in 2001. -- In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested at least annually for impairment. The Company adopted SFAS No. 142 effective January 1, 2002. For the quarter ended June 30, 2001, this adjustment would have added $122,000 in net earnings, or $0.02 per diluted share. The following table sets forth the first and second quarters of 2002 compared to 2001 on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis. Pro forma net 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 assume that: 1) the Company's initial public offering was completed as of January January: see month. 1, 2001, 2) all classes of preferred and common stock were converted into a single class of common stock, 3) subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes of $4.0 million were repaid with a portion of the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $41.0 million from the Company's initial public offering, and 4) the balance of the net proceeds was invested in short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. instruments bearing interest of 3.5%.
As Reported Pro Forma
2002 2001
------------------ -------------------
First Quarter $0.38 $0.22
Second Quarter $0.45 $0.32
------------------ -------------------
Year To Date $0.83 $0.54
================== ===================
Balance Sheet Highlights At June 30, 2002, the Company had cash and investments of $129.2 million, a portion of which is restricted due to state regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . Consistent with the prior quarter guidance, medical claims liabilities total $63.6 million representing 65.6 days in claims payable, a reduction from the immediately preceding quarter. The decrease in days in claims payable reflects the Company's settlement of payments related to provider risk sharing arrangements, as well as expected improvements in claims payment efficiencies. Efficiencies gained during the quarter enabled the Company to reduce its claims inventory on hand at quarter end to 0.28 per member from 0.34 at the immediately preceding quarter end. Outlook The Company raised its full-year earnings outlook for fiscal year 2002 to a range of $1.73 to $1.77 per share, or a 38% to 42% increase from Centene's pro forma $1.25 for 2001. Centene expects to continue to operate within its targeted 82.0% to 83.5% health benefits ratio while reducing general and administrative expenses as a percentage of total revenue by 60 to 100 basis points year over year. Revenues are expected to increase by 30% to 33% for the year ended December December: see month. 31, 2002 compared to 2001. Neidorff commented, "We intend to continue to grow organically by adding new members in both Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. and CHIP, and by increasing our fee-for-service fee-for-ser·vice adj. Charging a fee for each service performed. revenues in Medicaid-related products. Additionally, we remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the opportunity to expand and diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. the business and intend to leverage our strong balance sheet to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution our acquisition strategy. These strategies have served us well over the past twelve quarters, and we look forward to continuing to grow revenues and increase shareholder value going forward." Conference Call As previously announced, the Company will host a conference call tomorrow morning, July July: see month. 25, 2002, at 8:30 a.m. (Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time) to review the financial results for the second quarter ended June 30, 2002, and to discuss its business outlook. Michael F. Neidorff and Karey L. Witty wit·ty adj. wit·ti·er, wit·ti·est 1. Possessing or demonstrating wit in speech or writing; very clever and humorous. 2. , chief financial officer of Centene, will host the conference call. Investors are invited to participate in the conference call by dialing (800) 450-0819 in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , and (612) 332-0819 for international participants, or via a live Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the broadcast at the Company's website, http://www.centene.com. A replay of the call will be available from July 25, 2002 beginning at 12:00 p.m. and ending on August 1, 2002 at 11:59 p.m. Investors may dial (800) 475-6701 in the United States and (320) 365-3844 from abroad and enter access number 644427. Additionally, the webcast will be archived for the same period at http://www.centene.com. About Centene Corporation Centene Corporation provides managed care programs and related services to individuals receiving benefits under Medicaid, including 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. ), and the 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 (CHIP). The Company operates health plans in Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee , Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). and Texas. The information provided in the first paragraph under "Statement of Earnings Highlights" and both paragraphs under "Outlook" above 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. These forward-looking statements represent the Company's estimates as of July 24, 2002. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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 reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. , 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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 health care practices, changes in federal or state laws or regulations, inflation, provider contract changes, new technologies, reduction in provider payments by governmental payors, major epidemics This article is a list of major epidemics. Worldwide Pandemics
2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created , cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. or suspension suspension, in vehicles suspension, in automobiles, system of springs used to suspend the frame, body, engine, and power train above the wheels. Its principal purpose is to lessen the jarring of the automobile that is caused by irregularities in the roads of Centene's Medicaid managed care contracts by state governments would also negatively affect Centene.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
2002 2001
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 44,336 $ 88,867
Premium and related receivables,
net of allowances of $3,164 and
$3,879, respectively 7,524 7,032
Short-term investments, at fair
value (amortized cost $6,135
and $1,166, respectively) 6,132 1,169
Deferred income taxes 3,424 2,515
Other current assets 4,215 2,464
--------- ---------
Total current assets 65,631 102,047
LONG-TERM INVESTMENTS, at fair value
(amortized cost $78,390 and
$22,127, respectively) 78,752 22,339
PROPERTY AND EQUIPMENT, net 5,395 3,796
INTANGIBLE ASSETS, net 2,732 2,396
DEFERRED INCOME TAXES 382 788
OTHER ASSETS 4,844 --
--------- ---------
Total assets $ 157,736 $ 131,366
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Medical claims liabilities $ 63,557 $ 59,565
Accounts payable and
accrued expenses 5,141 7,712
--------- ---------
Total current liabilities 68,698 67,277
Other liabilities 4,738 --
--------- ---------
Total liabilities 73,436 67,277
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 40,000,000 shares;
10,638,207 and 10,085,112
shares issued and outstanding 11 10
Additional paid-in capital 71,443 60,857
Net unrealized gain on
investments, net of tax 226 135
Retained earnings 12,620 3,087
--------- ---------
Total stockholders' equity 84,300 64,089
--------- ---------
Total liabilities and
stockholders' equity $ 157,736 $ 131,366
========= =========
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
REVENUES:
Premiums $ 107,503 $ 80,458 $ 203,152 $ 150,682
Administrative
services fees 107 102 211 182
----------- ----------- ----------- -----------
Total revenues 107,610 80,560 203,363 150,864
----------- ----------- ----------- -----------
EXPENSES:
Medical services
costs 88,109 66,466 167,053 125,039
General and
administrative
expenses 11,783 9,581 22,330 18,406
----------- ----------- ----------- -----------
Total operating
expenses 99,892 76,047 189,383 143,445
----------- ----------- ----------- -----------
Earnings from
operations 7,718 4,513 13,980 7,419
OTHER INCOME
(EXPENSE):
Investment and
other income, net 976 931 1,891 1,897
Interest expense (11) (101) (11) (196)
----------- ----------- ----------- -----------
Earnings before
income taxes 8,683 5,343 15,860 9,120
INCOME TAX EXPENSE 3,449 2,113 6,327 3,708
----------- ----------- ----------- -----------
Net earnings 5,234 3,230 9,533 5,412
ACCRETION OF
REDEEMABLE
PREFERED STOCK -- (123) -- (246)
----------- ----------- ----------- -----------
Net earnings
attributable
to common
stockholders $ 5,234 $ 3,107 $ 9,533 $ 5,166
=========== =========== =========== ===========
EARNINGS PER COMMON
SHARE, BASIC:
Net earnings per
common share $ 0.51 $ 3.41 $ 0.93 $ 5.68
EARNINGS PER COMMON
SHARE, DILUTED:
Net earnings per
common share $ 0.45 $ 0.42 $ 0.83 $ 0.70
SHARES USED IN
COMPUTING PER
SHARE AMOUNTS:
Basic 10,322,610 911,636 10,207,618 908,907
Diluted 11,546,379 7,738,742 11,435,183 7,748,825
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30,
-----------------------
2002 2001
---------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 9,533 $ 5,412
Adjustments to reconcile net
earnings to net cash provided
by operating activities -
Depreciation and
amortization 975 631
Stock compensation expense 49 6
Gain on sale of investments (307) (49)
Changes in assets and
liabilities -
(Increase) decrease in
premium and related
receivables (492) 10,882
(Increase) decrease in other
current assets (1,676) 2,104
(Increase) decrease in
deferred income taxes (555) 925
Increase in other assets (106) --
Increase in medical claims
liabilities 3,992 2,784
(Decrease) increase in
accounts payable and
accrued expenses (2,497) 5,299
---------- ----------
Net cash provided by
operating activities 8,916 27,994
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property
and equipment (2,431) (1,793)
Purchase of investments (87,328) (15,918)
Sales and maturities of
investments 29,093 10,455
Contract acquisitions -- (1,000)
Investment in subsidiary (3,193) 7,701
---------- ----------
Net cash used in
investing activities (63,859) (555)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of
common stock 10,304 --
Proceeds from exercise of
stock options 108 17
---------- ----------
Net cash provided by
financing activities 10,412 17
---------- ----------
Net (decrease) increase
in cash and cash
equivalents (44,531) 27,456
---------- ----------
CASH AND CASH EQUIVALENTS,
beginning of period 88,867 19,023
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 44,336 $ 46,479
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ -- $ 439
Income taxes paid $ 9,282 $ 1,758
The Company purchased all of the
capital stock of Bankers Reserve
for $3,527. In conjunction with
the acquisition, liabilities were
assumed as follows:
Fair value of assets acquired $ 8,719
Cash paid for the capital stock (3,527)
-----------
Liabilities assumed $ 5,192
===========
CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA
Q2 Q1 Q4 Q3
2002 2002 2001 2001
------- ------- ------- -------
MEMBERSHIP
Wisconsin 123,900 114,600 114,300 108,100
Indiana 92,800 77,600 65,900 61,800
Texas 61,900 57,100 54,900 54,900
------- ------- ------- -------
TOTAL 278,600 249,300 235,100 224,800
======= ======= ======= =======
Medicaid 254,700 228,400 214,100 205,200
CHIP 23,900 20,900 21,000 19,600
------- ------- ------- -------
TOTAL 278,600 249,300 235,100 224,800
======= ======= ======= =======
REVENUE PER MEMBER $132.33 $131.84 $129.95 $129.27
CLAIMS
Inventory 79,013 83,957 123,355 142,759
Inventory per Member 0.28 0.34 0.52 0.64
DAYS IN CLAIMS PAYABLE 65.6 74.0 73.4 83.5
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