[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)
|
7711
Carondelet Avenue
|
|
St.
Louis, Missouri
|
63105
|
(Address
of principal executive offices)
|
(Zip
Code)
|
PAGE
|
|||
Part
I
|
|||
Financial
Information
|
|||
Item
1.
|
Financial
Statements
|
||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
5
|
|||
Item
2.
|
10
|
||
Item
3.
|
16
|
||
Item
4.
|
16
|
||
Part
II
|
|||
Other
Information
|
|||
Item
1.
|
17
|
||
Item
1A.
|
17
|
||
Item
2.
|
23
|
||
Item
4.
|
23
|
||
Item
6.
|
24
|
||
25
|
June
30,
2009
|
December
31,
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents of continuing operations
|
$ | 382,700 | $ | 370,999 | ||||
Cash
and cash equivalents of discontinued operations
|
1,799 | 8,100 | ||||||
Total
cash and cash equivalents
|
384,499 | 379,099 | ||||||
Premium
and related receivables, net of allowance for uncollectible accounts of
$48 and $595, respectively
|
157,863 | 92,531 | ||||||
Short-term
investments, at fair value (amortized cost $60,749 and $108,469,
respectively)
|
61,217 | 109,393 | ||||||
Other
current assets
|
73,686 | 75,333 | ||||||
Current
assets of discontinued operations other than cash
|
8,499 | 9,987 | ||||||
Total
current assets
|
685,764 | 666,343 | ||||||
Long-term
investments, at fair value (amortized cost $387,166 and $329,330,
respectively)
|
394,395 | 332,411 | ||||||
Restricted
deposits, at fair value (amortized cost $14,436 and $9,124,
respectively)
|
14,526 | 9,254 | ||||||
Property,
software and equipment, net of accumulated depreciation of $88,469 and
$74,194, respectively
|
194,277 | 175,858 | ||||||
Goodwill
|
218,121 | 163,380 | ||||||
Intangible
assets, net
|
22,714 | 17,575 | ||||||
Other
long-term assets
|
28,957 | 59,083 | ||||||
Long-term
assets of discontinued operations
|
27,455 | 27,248 | ||||||
Total
assets
|
$ | 1,586,209 | $ | 1,451,152 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Medical
claims liability
|
$ | 394,787 | $ | 373,037 | ||||
Accounts
payable and accrued expenses
|
181,605 | 219,566 | ||||||
Unearned
revenue
|
62,958 | 17,107 | ||||||
Current
portion of long-term debt
|
243 | 255 | ||||||
Current
liabilities of discontinued operations
|
23,851 | 31,013 | ||||||
Total
current liabilities
|
663,444 | 640,978 | ||||||
Long-term
debt
|
288,513 | 264,637 | ||||||
Other
long-term liabilities
|
48,678 | 43,539 | ||||||
Long-term
liabilities of discontinued operations
|
557 | 726 | ||||||
Total
liabilities
|
1,001,192 | 949,880 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Common
stock, $.001 par value; authorized 100,000,000 shares; issued and
outstanding 45,344,717 and 45,071,179 shares, respectively
|
45 | 45 | ||||||
Additional
paid-in capital
|
273,029 | 263,835 | ||||||
Accumulated
other comprehensive income:
|
||||||||
Unrealized
gain on investments, net of tax
|
5,081 | 3,152 | ||||||
Retained
earnings
|
313,924 | 275,236 | ||||||
Treasury
stock, at cost (2,369,133 and 2,083,415 shares,
respectively)
|
(46,405 | ) | (40,996 | ) | ||||
Total
Centene stockholders’ equity
|
545,674 | 501,272 | ||||||
Noncontrolling
interest
|
39,343 | — | ||||||
Total
stockholders’ equity
|
585,017 | 501,272 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 1,586,209 | $ | 1,451,152 |
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||
Revenues:
|
|||||||||||||
Premium
|
$
|
909,698
|
$
|
783,996
|
$
|
1,794,704
|
$
|
1,520,810
|
|||||
Service
|
21,591
|
18,466
|
45,440
|
38,996
|
|||||||||
Premium
and service revenues
|
931,289
|
802,462
|
1,840,144
|
1,559,806
|
|||||||||
Premium
tax
|
108,180
|
21,468
|
131,760
|
43,352
|
|||||||||
Total
revenues
|
1,039,469
|
823,930
|
1,971,904
|
1,603,158
|
|||||||||
Expenses:
|
|||||||||||||
Medical
costs
|
755,706
|
650,878
|
1,495,046
|
1,260,252
|
|||||||||
Cost
of services
|
14,559
|
14,437
|
30,521
|
30,613
|
|||||||||
General
and administrative expenses
|
129,221
|
109,270
|
251,500
|
204,763
|
|||||||||
Premium
tax
|
108,548
|
21,468
|
132,490
|
43,352
|
|||||||||
Total
operating expenses
|
1,008,034
|
796,053
|
1,909,557
|
1,538,980
|
|||||||||
Earnings
from operations
|
31,435
|
27,877
|
62,347
|
64,178
|
|||||||||
Other
income (expense):
|
|||||||||||||
Investment
and other income
|
4,418
|
5,434
|
8,031
|
13,016
|
|||||||||
Interest
expense
|
(4,160
|
)
|
(4,065
|
)
|
(8,146
|
)
|
(8,059
|
)
|
|||||
Earnings
from continuing operations, before income tax expense
|
31,693
|
29,246
|
62,232
|
69,135
|
|||||||||
Income
tax expense
|
11,789
|
11,363
|
22,634
|
26,319
|
|||||||||
Earnings
from continuing operations, net of income tax expense
|
19,904
|
17,883
|
39,598
|
42,816
|
|||||||||
Discontinued
operations, net of income tax (benefit) expense of $(196), $(116), $(356)
and $148, respectively
|
(485
|
)
|
320
|
(934
|
)
|
1,010
|
|||||||
Net
earnings
|
19,419
|
18,203
|
38,664
|
43,826
|
|||||||||
Noncontrolling
interest (loss)
|
(811
|
)
|
―
|
(24
|
)
|
―
|
|||||||
Net
earnings attributable to Centene Corporation
|
$
|
20,230
|
$
|
18,203
|
$
|
38,688
|
$
|
43,826
|
|||||
Amounts
attributable to Centene Corporation common shareholders:
|
|||||||||||||
Earnings
from continuing operations, net of income tax expense
|
$
|
20,715
|
$
|
17,883
|
$
|
39,622
|
$
|
42,816
|
|||||
Discontinued
operations, net of income tax (benefit) expense
|
(485
|
)
|
320
|
(934
|
)
|
1,010
|
|||||||
Net
earnings
|
$
|
20,230
|
$
|
18,203
|
$
|
38,688
|
$
|
43,826
|
|||||
Net
earnings (loss) per share attributable to Centene
Corporation:
|
|||||||||||||
Basic:
|
|||||||||||||
Continuing
operations
|
$
|
0.48
|
$
|
0.41
|
$
|
0.92
|
$
|
0.99
|
|||||
Discontinued
operations
|
(0.01
|
)
|
0.01
|
(0.02
|
)
|
0.02
|
|||||||
Earnings
per common share
|
$
|
0.47
|
$
|
0.42
|
$
|
0.90
|
$
|
1.01
|
|||||
Diluted:
|
|||||||||||||
Continuing
operations
|
$
|
0.47
|
$
|
0.40
|
$
|
0.90
|
$
|
0.96
|
|||||
Discontinued
operations
|
(0.01
|
)
|
0.01
|
(0.02
|
)
|
0.02
|
|||||||
Earnings
per common share
|
$
|
0.46
|
$
|
0.41
|
$
|
0.88
|
$
|
0.98
|
|||||
Weighted
average number of shares outstanding:
|
|||||||||||||
Basic
|
43,001,157
|
43,375,944
|
43,034,390
|
43,457,076
|
|||||||||
Diluted
|
44,242,339
|
44,275,601
|
44,240,071
|
44,516,890
|
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,
2008
|
45,071,179
|
$
|
45
|
$
|
263,835
|
$
|
3,152
|
$
|
275,236
|
2,083,415
|
$
|
(40,996)
|
$
|
—
|
$
|
501,272
|
||||||||||||||
Consolidation
of Access Health Solutions LLC
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
29,144
|
29,144
|
|||||||||||||||||||||
Consolidation
of Centene Center LLC
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
17,400
|
17,400
|
|||||||||||||||||||||
Comprehensive
Earnings:
|
||||||||||||||||||||||||||||||
Net
earnings
|
—
|
—
|
—
|
—
|
38,688
|
—
|
—
|
(24)
|
38,664
|
|||||||||||||||||||||
Change
in unrealized investment gains, net of $1,322 tax
|
—
|
—
|
—
|
1,929
|
—
|
—
|
—
|
—
|
1,929
|
|||||||||||||||||||||
Total
comprehensive earnings
|
40,593
|
|||||||||||||||||||||||||||||
Common
stock issued for employee stock compensation and employee stock purchase
plan
|
273,538
|
—
|
1,568
|
—
|
—
|
—
|
—
|
1,568
|
||||||||||||||||||||||
Common
stock repurchases
|
—
|
—
|
—
|
—
|
—
|
287,718
|
(5,447)
|
—
|
(5,447
|
)
|
||||||||||||||||||||
Treasury
stock issued for compensation
|
—
|
—
|
—
|
—
|
(2,000)
|
38
|
38
|
|||||||||||||||||||||||
Stock
compensation expense
|
—
|
—
|
7,611
|
—
|
—
|
—
|
—
|
—
|
7,611
|
|||||||||||||||||||||
Excess
tax benefits from stock compensation
|
—
|
—
|
15
|
—
|
—
|
—
|
—
|
—
|
15
|
|||||||||||||||||||||
Conversion
fee1
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,428)
|
(5,428
|
)
|
||||||||||||||||||||
Dividend
paid to noncontrolling interest
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1,749)
|
(1,749
|
)
|
||||||||||||||||||||
Balance, June 30,
2009
|
45,344,717
|
$
|
45
|
$
|
273,029
|
$
|
5,081
|
$
|
313,924
|
2,369,133
|
$
|
(46,405)
|
$
|
39,343
|
$
|
585,017
|
(1)
|
Conversion
fee represents additional purchase price to noncontrolling holders of
Access Health Solutions LLC for the transfer of membership to
the Company’s wholly-owned subsidiary, Sunshine State Health Plan,
Inc.
|
Six Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
earnings
|
$ | 38,664 | $ | 43,826 | ||||
Adjustments
to reconcile net earnings to net cash provided by operating
activities
|
||||||||
Depreciation
and amortization
|
20,892 | 16,229 | ||||||
Stock
compensation expense
|
7,611 | 7,839 | ||||||
Loss
(gain) on sale of investments, net
|
450 | (201 | ) | |||||
Deferred
income taxes
|
1,512 | 11,879 | ||||||
Changes
in assets and liabilities —
|
||||||||
Premium
and related receivables
|
(23,327 | ) | (23,144 | ) | ||||
Other
current assets
|
1,357 | (4,294 | ) | |||||
Other
assets
|
(608 | ) | (1,671 | ) | ||||
Medical
claims liabilities
|
16,369 | 27,316 | ||||||
Unearned
revenue
|
44,129 | (38,753 | ) | |||||
Accounts
payable and accrued expenses
|
(48,653 | ) | 45,907 | |||||
Other
operating activities
|
3,723 | 1,743 | ||||||
Net
cash provided by operating activities
|
62,119 | 86,676 | ||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(29,833 | ) | (34,581 | ) | ||||
Purchases
of investments
|
(415,052 | ) | (172,873 | ) | ||||
Sales
and maturities of investments
|
377,320 | 210,277 | ||||||
Investments
in acquisitions, net of cash acquired, and investment in equity
method investee
|
(7,621 | ) | (7,818 | ) | ||||
Net
cash used in investing activities
|
(75,186 | ) | (4,995 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from exercise of stock options
|
1,109 | 3,029 | ||||||
Proceeds
from borrowings
|
288,000 | 56,005 | ||||||
Payment
of long-term debt
|
(264,135 | ) | (41,287 | ) | ||||
Dividend
to noncontrolling interest
|
(1,749 | ) | ― | |||||
Contribution
from noncontrolling interest
|
1,042 | ― | ||||||
Excess
tax benefits from stock compensation
|
15 | 2,792 | ||||||
Common
stock repurchases
|
(5,447 | ) | (13,316 | ) | ||||
Debt
issue costs
|
(368 | ) | ― | |||||
Net
cash provided by financing activities
|
18,467 | 7,223 | ||||||
Net
increase in cash and cash equivalents
|
5,400 | 88,904 | ||||||
Cash and cash
equivalents, beginning of period
|
379,099 | 268,584 | ||||||
Cash and cash
equivalents, end of period
|
$ | 384,499 | $ | 357,488 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Interest
paid
|
$ | 7,658 | $ | 7,590 | ||||
Income
taxes paid
|
$ | 31,512 | $ | 15,966 | ||||
Supplemental
disclosure of non-cash investing and financing
activities:
|
||||||||
Contribution
from noncontrolling interest
|
$ | 5,107 | $ | ― |
1. Organization
and Operations
|
2. Basis
of Presentation
|
Balance,
December 31, 2008
|
$
|
1,110
|
Incurred
|
1,354
|
|
Paid
|
(200)
|
|
Balance,
June 30, 2009
|
$
|
2,264
|
·
|
Access. In
July 2007, the Company acquired a 49% ownership interest in Access, a
Medicaid managed care entity in Florida. The Company accounted
for its investment in Access using the equity method of accounting through
December 31, 2008. During the quarter ended March 31, 2009, the
Company began presenting its investment in Access as a consolidated
subsidiary in our financial statements. The consolidation of Access
resulted in goodwill of approximately $44,600, and other identified
intangible assets of approximately $5,400. In 2009, the
Company paid an additional $5,428 conversion fee for the transfer of
membership from Access to the Company’s wholly-owned subsidiary, Sunshine
State Health Plan, Inc.
|
·
|
Additional 2009
Acquisitions. The Company acquired assets
of the following entities: Pediatric Associates LLC, effective
February 2009, and AMERIGROUP Community Care of South Carolina, Inc.,
effective March 2009. The Company paid a total of
approximately $10,000 in cash for these acquisitions. Goodwill
of approximately $8,500 and other identifiable intangible assets of
approximately $1,500 were included in the Medicaid Managed Care
segment, all of which is deductible for income tax
purposes.
|
·
|
Celtic Insurance
Company. On July 1, 2008, the Company acquired Celtic
Insurance Company, or Celtic. The Company paid approximately
$82,100 in cash and related transaction costs, net of unregulated cash
acquired. In conjunction with the closing of the acquisition,
Celtic paid to the Company an extraordinary dividend of $31,411 in July
2008. Goodwill of $24,300 and other identifiable intangible assets
of $8,600 were included in the Specialty Services
segment.
|
Medicaid
Managed Care
|
Specialty
Services
|
Total
|
||||||||||
Balance
as of December 31, 2008
|
$ | 51,548 | $ | 111,832 | $ | 163,380 | ||||||
Acquisitions
|
53,049 | 1,692 | 54,741 | |||||||||
Balance
as of June 30, 2009
|
$ | 104,597 | $ | 113,524 | $ | 218,121 |
Centene
Center LLC
|
||||
Total
Assets
|
$ | 57,705 | ||
Total
Liabilities
|
22,905 | |||
Equity
|
||||
Centene
Corporation (50% ownership)
|
$ | 17,400 | ||
Joint
venture partners (50% ownership)
|
17,400 | |||
Total
equity
|
$ | 34,800 |
June
30, 2009
|
December
31, 2008
|
|||||||||||||||||||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|||||||||||||||||||||||||
U.S.
Treasury securities
|
$ | 7,290 | $ | 96 | $ | (1 | ) | $ | 7,385 | $ | 4,054 | $ | 130 | $ | — | $ | 4,184 | |||||||||||||||
Corporate
securities
|
34,867 | 427 | (242 | ) | 35,052 | 47,733 | 74 | (1,154 | ) | 46,653 | ||||||||||||||||||||||
State
and municipal securities
|
392,160 | 8,222 | (480 | ) | 399,902 | 360,638 | 5,964 | (11 | ) | 366,591 | ||||||||||||||||||||||
Equity
securities
|
9,521 | 192 | (427 | ) | 9,286 | 7,183 | 17 | (885 | ) | 6,315 | ||||||||||||||||||||||
Money
market funds
|
4,018 | — | — | 4,018 | 12,988 | — | — | 12,988 | ||||||||||||||||||||||||
Life
insurance contracts
|
14,495 | — | — | 14,495 | 14,327 | — | — | 14,327 | ||||||||||||||||||||||||
Total
|
$ | 462,351 | $ | 8,937 | $ | (1,150 | ) | $ | 470,138 | $ | 446,923 | $ | 6,185 | $ | (2,050 | ) | $ | 451,058 |
June
30, 2009
|
December
31, 2008
|
|||||||||||||||||||||||||||||||
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
|
$ | (1 | ) | $ | 540 | $ | — | $ | — | $ | — | $ | 314 | $ | — | $ | — | |||||||||||||||
Corporate
securities
|
(235 | ) | 2,206 | (7 | ) | 125 | (1,071 | ) | 20,898 | (83 | ) | 2,072 | ||||||||||||||||||||
State
and municipal securities
|
(479 | ) | 79,495 | (1 | ) | 100 | (9 | ) | 3,798 | (2 | ) | 101 | ||||||||||||||||||||
Equity
securities
|
(427 | ) | 2,313 | — | — | (885 | ) | 2,658 | — | — | ||||||||||||||||||||||
Total
|
$ | (1,142 | ) | $ | 84,554 | $ | (8 | ) | $ | 225 | $ | (1,965 | ) | $ | 27,668 | $ | (85 | ) | $ | 2,173 |
Investments
|
Restricted
Deposits
|
|||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
|||||||||||||
One
year or less
|
$ | 60,749 | $ | 61,217 | $ | 7,549 | $ | 7,552 | ||||||||
One
year through five years
|
287,668 | 294,969 | 6,887 | 6,974 | ||||||||||||
Five
years through ten years
|
46,351 | 46,482 | — | — | ||||||||||||
Greater
than ten years
|
53,147 | 52,944 | — | — | ||||||||||||
Total
|
$ | 447,915 | $ | 455,612 | $ | 14,436 | $ | 14,526 |
Investments
|
Restricted
Deposits
|
|||||||||||||||
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
|||||||||||||
One
year or less
|
$ | 108,469 | $ | 109,393 | $ | 6,038 | $ | 6,044 | ||||||||
One
year through five years
|
181,958 | 185,867 | 3,086 | 3,210 | ||||||||||||
Five
years through ten years
|
56,936 | 56,188 | — | — | ||||||||||||
Greater
than ten years
|
90,436 | 90,356 | — | — | ||||||||||||
Total
|
$ | 437,799 | $ | 441,804 | $ | 9,124 | $ | 9,254 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Gains
|
$ | 173 | $ | 355 | $ | 553 | $ | 572 | ||||||||
Losses
|
(164 | ) | (182 | ) | (983 | ) | (371 | ) |
9.
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
|
|||||||||||||
Investments
available for sale:
|
||||||||||||||||
U.S.
Treasury securities and obligations of U.S. government corporations and
agencies
|
$ | 7,385 | $ | ― | $ | ― | $ | 7,385 | ||||||||
Corporate
securities
|
32,858 | ― | ― | 32,858 | ||||||||||||
State
and municipal securities
|
399,901 | ― | ― | 399,901 | ||||||||||||
Equity
securities
|
3,372 | ― | ― | 3,372 | ||||||||||||
Total
|
$ | 443,516 | $ | ― | $ | ― | $ | 443,516 |
June
30, 2009
|
December
31, 2008
|
|||||||
$175,000
senior notes
|
$ | 175,000 | $ | 175,000 | ||||
$300,000
revolving credit agreement
|
87,000 | 63,000 | ||||||
$20,500
revolving loan agreement
|
20,364 | 20,364 | ||||||
Capital
leases
|
6,392 | 6,528 | ||||||
Joint
venture construction loan
|
― | ― | ||||||
Total
debt
|
288,756 | 264,892 | ||||||
Less
current maturities
|
(243 | ) | (255 | ) | ||||
Long-term
debt
|
$ | 288,513 | $ | 264,637 |
Three
Months Ended June
30,
|
Six
Months Ended June
30,
|
||||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||||
Earnings
(loss) attributable to Centene Corporation common
shareholders:
|
|||||||||||||||
Earnings
from continuing operations, net of tax
|
$
|
20,715
|
$
|
17,883
|
$
|
39,622
|
$
|
42,816
|
|||||||
Discontinued
operations, net of tax
|
(485
|
)
|
320
|
(934
|
)
|
1,010
|
|||||||||
Net
earnings
|
$
|
20,230
|
$
|
18,203
|
$
|
38,688
|
$
|
43,826
|
|||||||
Shares
used in computing per share amounts:
|
|||||||||||||||
Weighted
average number of common shares outstanding
|
43,001,157
|
43,375,944
|
43,034,390
|
43,457,076
|
|||||||||||
Common
stock equivalents (as determined by applying the treasury stock
method)
|
1,241,182
|
899,657
|
1,205,681
|
1,059,814
|
|||||||||||
Weighted
average number of common shares and potential dilutive common shares
outstanding
|
44,242,339
|
44,275,601
|
44,240,071
|
44,516,890
|
|||||||||||
Net
earnings (loss) per share attributable to Centene
Corporation:
|
|||||||||||||||
Basic:
|
|||||||||||||||
Continuing
operations
|
$
|
0.48
|
$
|
0.41
|
$
|
0.92
|
$
|
0.99
|
|||||||
Discontinued
operations
|
(0.01
|
)
|
0.01
|
(0.02
|
)
|
0.02
|
|||||||||
Earnings
per common share
|
$
|
0.47
|
$
|
0.42
|
$
|
0.90
|
$
|
1.01
|
|||||||
Diluted:
|
|||||||||||||||
Continuing
operations
|
$
|
0.47
|
$
|
0.40
|
$
|
0.90
|
$
|
0.96
|
|||||||
Discontinued
operations
|
(0.01
|
)
|
0.01
|
(0.02
|
)
|
0.02
|
|||||||||
Earnings
per common share
|
$
|
0.46
|
$
|
0.41
|
$
|
0.88
|
$
|
0.98
|
|||||||
13.
Contingencies
|
14.
Segment Information
|
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||||
Revenue
from external customers
|
$ | 923,109 | $ | 116,360 | $ | — | $ | 1,039,469 | ||||||||
Revenue
from internal customers
|
16,450 | 132,096 | (148,546 | ) | — | |||||||||||
Total
revenue
|
$ | 939,559 | $ | 248,456 | $ | (148,546 | ) | $ | 1,039,469 | |||||||
Earnings
from operations
|
$ | 21,347 | $ | 10,088 | $ | — | $ | 31,435 |
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||||
Revenue
from external customers
|
$ | 753,006 | $ | 70,924 | $ | — | $ | 823,930 | ||||||||
Revenue
from internal customers
|
15,026 | 122,042 | (137,068 | ) | — | |||||||||||
Total
revenue
|
$ | 768,032 | $ | 192,966 | $ | (137,068 | ) | $ | 823,930 | |||||||
Earnings
from operations
|
$ | 23,967 | $ | 3,910 | $ | — | $ | 27,877 |
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||||
Revenue
from external customers
|
$ | 1,741,776 | $ | 230,128 | $ | — | $ | 1,971,904 | ||||||||
Revenue
from internal customers
|
32,124 | 266,172 | (298,296 | ) | — | |||||||||||
Total
revenue
|
$ | 1,773,900 | $ | 496,300 | $ | (298,296 | ) | $ | 1,971,904 | |||||||
Earnings
from operations
|
$ | 38,090 | $ | 24,257 | $ | — | $ | 62,347 |
Medicaid
Managed Care
|
Specialty
Services
|
Eliminations
|
Consolidated
Total
|
|||||||||||||
Revenue
from external customers
|
$ | 1,461,685 | $ | 141,473 | $ | — | $ | 1,603,158 | ||||||||
Revenue
from internal customers
|
29,704 | 228,678 | (258,382 | ) | — | |||||||||||
Total
revenue
|
$ | 1,491,389 | $ | 370,151 | $ | (258,382 | ) | $ | 1,603,158 | |||||||
Earnings
from operations
|
$ | 54,204 | $ | 9,974 | $ | — | $ | 64,178 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
earnings
|
$ | 19,419 | $ | 18,203 | $ | 38,664 | $ | 43,826 | ||||||||
Reclassification
adjustment, net of tax
|
(76 | ) | 126 | (138 | ) | 151 | ||||||||||
Change
in unrealized gains (losses) on investments, net of tax
|
21 | (1,514 | ) | 2,067 | — | |||||||||||
Total
change
|
(55 | ) | (1,388 | ) | 1,929 | 151 | ||||||||||
Comprehensive
earnings
|
19,364 | 16,815 | 40,593 | 43,977 | ||||||||||||
Comprehensive
(loss) attributable to the noncontrolling interest
|
(811 | ) | — | (24 | ) | — | ||||||||||
Comprehensive
earnings attributable to Centene Corporation
|
$ | 20,175 | $ | 16,815 | $ | 40,617 | $ | 43,977 |
·
|
our
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 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.
|
|
—
|
Quarter-end
at-risk managed care membership of
1,289,000.
|
|
—
|
Total
revenues of $1,039.5 million.
|
|
—
|
Health
Benefits Ratio, or HBR, of 83.1%.
|
—
|
General
and Administrative, or G&A, expense ratio of
13.9%.
|
|
—
|
Operating
earnings of $31.4 million.
|
—
|
Diluted
earnings per share of $0.47.
|
|
—
|
Operating
cash flows of $38.7 million.
|
—
|
In
March 2009, we completed the acquisition of certain assets of AMERIGROUP
Community Care of South Carolina, Inc. We now serve 46,000
at-risk members in South Carolina at June 30,
2009.
|
—
|
In
February 2009, we began converting non-risk managed care membership in
Florida from Access Health Solutions LLC, or Access, to our new
subsidiary, Sunshine State Health Plan on an at-risk basis. We previously
acquired a 49% ownership interest in Access in July
2007. At June 30, 2009, we served 22,300 members on an at-risk
basis while Access served 110,100 members on a non-risk
basis. Beginning January 1, 2009, we have presented our
investment in Access as a consolidated
subsidiary.
|
—
|
In
October 2008, we began operating under our contract in Arizona to provide
Acute Care services in Yavapai county, with 16,200 members at June 30,
2009.
|
—
|
Effective
July 1, 2008, we completed the acquisition of Celtic, a health insurance
carrier focused on the individual health insurance
market.
|
—
|
In
March 2009, we were awarded a contract to manage health care services for
Massachusetts residents who lack access to traditional public or private
health insurance. Effective July 1, 2009, we began serving the
Central, Northern, Boston and Southern regions operating as CeltiCare
Health Plan of Massachusetts.
|
Three
Months Ended June 30,
|
Six
months Ended June 30,
|
|||||||||||||||||||||||
2009
|
2008
|
%
Change
2008-2009
|
2009
|
2008
|
%
Change
2008-2009
|
|||||||||||||||||||
Premium
|
$ | 909.7 | $ | 784.0 | 16.0 | % | $ | 1,794.7 | $ | 1,520.8 | 18.0 | % | ||||||||||||
Service
|
21.6 | 18.5 | 16.9 | % | 45.4 | 39.0 | 16.5 | % | ||||||||||||||||
Total
premium and service revenues
|
931.3 | 802.5 | 16.1 | % | 1,840.1 | 1,559.8 | 18.0 | % | ||||||||||||||||
Premium
tax
|
108.2 | 21.5 | 403.9 | % | 131.8 | 43.4 | 203.9 | % | ||||||||||||||||
Total
revenues
|
1,039.5 | 824.0 | 26.2 | % | 1,971.9 | 1,603.2 | 23.0 | % | ||||||||||||||||
Medical
costs
|
755.7 | 650.9 | 16.1 | % | 1,495.1 | 1,260.3 | 18.6 | % | ||||||||||||||||
Cost
of services
|
14.6 | 14.4 | 0.8 | % | 30.5 | 30.6 | (0.3 | )% | ||||||||||||||||
General
and administrative expenses
|
129.2 | 109.3 | 18.3 | % | 251.5 | 204.8 | 22.8 | % | ||||||||||||||||
Premium
tax expense
|
108.5 | 21.5 | 405.6 | % | 132.5 | 43.4 | 205.6 | % | ||||||||||||||||
Earnings
from operations
|
31.5 | 27.9 | 12.8 | % | 62.3 | 64.1 | (2.9 | )% | ||||||||||||||||
Investment
and other income, net
|
0.2 | 1.4 | (81.2 | )% | (0.1 | ) | 5.0 | (102.3 | )% | |||||||||||||||
Earnings
from continuing operations, before income tax expense
|
31.7 | 29.3 | 8.4 | % | 62.2 | 69.1 | (10.0 | )% | ||||||||||||||||
Income
tax expense
|
11.8 | 11.4 | 3.7 | % | 22.6 | 26.3 | (14.0 | )% | ||||||||||||||||
Earnings
from continuing operations, net of income tax expense
|
19.9 | 17.9 | 11.3 | % | 39.6 | 42.8 | (7.5 | )% | ||||||||||||||||
Discontinued
operations, net of income tax (benefit) expense of $(0.2), $(0.1), $(0.4)
and $0.1 respectively
|
(0.5 | ) | 0.3 | ― | % | (0.9 | ) | 1.0 | ― | % | ||||||||||||||
Net
earnings
|
19.4 | 18.2 | 6.7 | % | 38.7 | 43.8 | (11.8 | )% | ||||||||||||||||
Noncontrolling
interest (loss)
|
(0.8 | ) | ― | ― | % | ― | ― | ― | % | |||||||||||||||
Net
earnings attributable to Centene Corporation
|
$ | 20.2 | $ | 18.2 | 11.1 | % | $ | 38.7 | $ | 43.8 | (11.7 | )% | ||||||||||||
Diluted
earnings per common share attributable to Centene
Corporation:
|
||||||||||||||||||||||||
Continuing
operations
|
$ | 0.47 | $ | 0.40 | 17.5 | % | $ | 0.90 | $ | 0.96 | (6.3 | )% | ||||||||||||
Discontinued
operations
|
(0.01 | ) | 0.01 | (200.0 | )% | (0.02 | ) | 0.02 | (200.0 | )% | ||||||||||||||
Total
diluted earnings per common share
|
$ | 0.46 | $ | 0.41 | 12.2 | % | $ | 0.88 | $ | 0.98 | (10.2 | )% | ||||||||||||
|
1.
|
Membership
growth
|
June
30,
|
||||||||
2009
|
2008
|
|||||||
Arizona
|
16,200 | — | ||||||
Florida
|
22,300 | — | ||||||
Georgia
|
292,800 | 278,800 | ||||||
Indiana
|
196,100 | 161,700 | ||||||
Ohio
|
141,200 | 137,300 | ||||||
South
Carolina
|
46,000 | 22,500 | ||||||
Texas
|
443,200 | 423,700 | ||||||
Wisconsin
|
131,200 | 124,800 | ||||||
Total
at-risk membership
|
1,289,000 | 1,148,800 | ||||||
Non-risk
membership
|
114,000 | 3,500 | ||||||
Total
|
1,403,000 | 1,152,300 |
June
30,
|
||||||||
2009
|
2008
|
|||||||
Medicaid
|
958,600 | 828,700 | ||||||
CHIP
& Foster Care
|
261,400 | 256,900 | ||||||
ABD
& Medicare
|
69,000 | 63,200 | ||||||
Total
at-risk membership
|
1,289,000 | 1,148,800 | ||||||
Non-risk
membership
|
114,000 | 3,500 | ||||||
Total
|
1,403,000 | 1,152,300 |
|
2.
|
Premium
rate increases
|
|
3.
|
Specialty
Services segment growth
|
June
30,
|
||||||||
2009
|
2008
|
|||||||
Cenpatico
Behavioral Health:
|
||||||||
Arizona
|
110,500 | 99,400 | ||||||
Kansas
|
41,100 | 40,000 | ||||||
Bridgeway:
|
||||||||
Long-term
Care
|
2,400 | 1,800 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Medicaid
and CHIP
|
83.7 | % | 81.6 | % | 84.2 | % | 80.4 | % | ||||||||
ABD
and Medicare
|
82.6 | 88.5 | 82.0 | 93.0 | ||||||||||||
Specialty
Services
|
79.8 | 86.2 | 79.0 | 85.2 | ||||||||||||
Total
|
83.1 | 83.0 | 83.3 | 82.9 |
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Investment
income
|
$ | 4.4 | $ | 4.7 | $ | 8.0 | $ | 9.9 | ||||||||
Earnings
from equity method investee
|
— | 0.7 | — | 3.1 | ||||||||||||
Interest
expense
|
(4.2 | ) | (4.0 | ) | (8.1 | ) | (8.0 | ) | ||||||||
Other
income (expense), net
|
$ | 0.2 | $ | 1.4 | $ | (0.1 | ) | $ | 5.0 |
Six
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Net
cash provided by operating activities
|
$
|
62.1
|
$
|
86.7
|
||||
Net
cash used in investing activities
|
(75.2
|
)
|
(5.0
|
)
|
||||
Net
cash provided by financing activities
|
18.5
|
7.2
|
||||||
Net
increase in cash and cash equivalents
|
$
|
5.4
|
$
|
88.9
|
Issuer
Purchases of Equity Securities 1
Second
Quarter 2009
|
||||||||||||
Period
|
|
Total
Number of Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total
Number of
Shares Purchased
as Part
of Publicly Announced
Plans or
Programs
|
|
Maximum
Number
of Shares that
May Yet Be Purchased
Under the
Plans or Programs
|
||||
April
1 – April 30, 2009
|
218,210
|
2
|
$
|
18.88
|
|
216,925
|
|
1,716,956
|
||||
May
1 – May 31, 2009
|
49,232
|
|
18.39
|
|
49,232
|
|
1,667,724
|
|||||
June
1 – June 30, 2009
|
|
791
|
2
|
18.62
|
|
—
|
|
1,667,724
|
||||
Total
|
|
268,233
|
|
$
|
18.79
|
|
266,157
|
|
1,667,724
|
|||
|
|
|
|
|
|
|
|
|
||||
(1) Our
Board of Directors adopted a stock repurchase program of up to 4,000,000
shares, which extends through October 31, 2009.
(2) 1,285
shares acquired in April 2009 and 791 shares acquired in June 2009
represent shares relinquished to the Company by certain employees for
payment of taxes upon vesting of restricted stock
units.
|
Total
Vote For Each
Director
|
Total
Vote Withheld From Each Director
|
|||
Mr.
Ditmore
|
35,303,235
|
4,865,633
|
||
Mr.
Eppinger
|
35,497,570
|
4,671,298
|
||
Mr.
Steward
|
35,487,990
|
4,680,878
|
|
Total
Vote For
|
Total
Vote Against
|
Total
Vote Abstain
|
|||
KPMG
LLP
|
39,981,036
|
175,996
|
11,835
|
|
Exhibits.
|
EXHIBIT NUMBER
|
DESCRIPTION
|
|
10.1
|
Amendment
No. 7 to Credit Agreement dated as of September 14, 2004 among Centene
Corporation, the various financial institutions party hereto and LaSalle
Bank National Association.
|
|
10.2
|
Notice
of Renewal for fiscal year 2010 between Peach State Health Plan, Inc. and
Georgia Department of Community Health.
|
|
12.1
|
Computation
of ratio of earnings to fixed charges.
|
|
31.1
|
Certification
of Chairman, President and Chief Executive Officer pursuant to Rule
13(a)-14(a) under the Securities Exchange Act of 1934, as
amended.
|
|
31.2
|
Certification
of Executive Vice President and Chief Financial Officer pursuant to Rule
13(a)-14(a) under the Securities Exchange Act of 1934, as
amended.
|
|
32.1
|
Certification
of Chairman, President and Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
32.2
|
Certification
of Executive Vice President and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
CENTENE
CORPORATION
|
||
|
|
|
By:
|
/s/ MICHAEL
F. NEIDORFF
|
|
Chairman,
President and Chief Executive Officer
(principal
executive officer)
|
By:
|
/s/
WILLIAM N. SCHEFFEL
|
|
Executive Vice
President and Chief Financial Officer
(principal financial
officer)
|
By:
|
/s/
JEFFREY A. SCHWANEKE
|
|
Vice
President, Corporate Controller and Chief Accounting
Officer
(principal
accounting officer)
|