Delaware | 001-31826 | 42-1406317 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
7700 Forsyth Blvd. St. Louis, Missouri | 63105 | |
(Address of Principal Executive Offices) | (Zip Code) |
CENTENE CORPORATION | ||||
Date: | April 22, 2014 | By: | /s/ William N. Scheffel | |
William N. Scheffel Executive Vice President & Chief Financial Officer |
Exhibit Number | Description | |
99.1 | Press release* of Centene Corporation issued April 22, 2014, as to financial results for the first quarter ended March 31, 2014. |
* | The press release is being furnished pursuant to Item 2.02, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange of 1934, as amended. |
Contact: | Investor Relations Inquiries |
Edmund E. Kroll | |
Senior Vice President, Finance & Investor Relations | |
(212) 759-0382 | |
Media Inquiries | |
Deanne Lane | |
Vice President, Media Affairs | |
(314) 725-4477 |
Premium and Service Revenues (in millions) | $ | 3,352 | ||
Consolidated Health Benefits Ratio | 89.3 | % | ||
General & Administrative expense ratio | 8.8 | % | ||
Diluted earnings per share (EPS) | $ | 0.57 | ||
Diluted EPS excluding the effect of the health insurer fee and U.S. Medical Management transaction costs | $ | 0.79 | ||
Total cash flow from operations (in millions) | $ | 252.4 |
• | March 31, 2014 at-risk managed care membership of 2,885,700, an increase of 332,300 members, or 13% compared to the first quarter of 2013 |
• | Premium and service revenues for the first quarter of $3.4 billion, representing 38% growth compared to the first quarter of 2013. |
• | Health Benefits Ratio of 89.3% for the first quarter 2014, compared to 90.2% in the first quarter of 2013. |
• | General and Administrative expense ratio of 8.8% for the first quarter of 2014, compared to 8.4% in the first quarter of 2013. |
• | Operating cash flow of $252.4 million for the first quarter of 2014, or 7.8 times net earnings. |
• | Diluted earnings per share of $0.57; $0.79 excluding $0.16 of net cost associated with the health insurer fee and $0.06 of U.S. Medical Management acquisition transaction costs, compared to $0.41 in 2013. |
• | In April 2014, we signed a definitive agreement to purchase a noncontrolling interest in Ribera Salud S.A., a Spanish health management group. Centene will be a joint shareholder with Ribera Salud S.A.'s remaining investor, Banco Sabadell, the fourth largest private bank in Spain. The transaction is expected to close in 2014, subject to closing conditions and regulatory approval. |
March 31, | |||||
2014 | 2013 | ||||
Arizona | 7,100 | 23,300 | |||
Arkansas | 16,400 | — | |||
California | 118,100 | — | |||
Florida | 230,300 | 214,600 | |||
Georgia | 331,400 | 314,000 | |||
Illinois | 22,400 | 18,000 | |||
Indiana | 198,700 | 202,400 | |||
Kansas | 145,000 | 133,700 | |||
Louisiana | 149,800 | 162,900 | |||
Massachusetts | 50,800 | 17,300 | |||
Minnesota | 9,400 | — | |||
Mississippi | 85,400 | 77,000 | |||
Missouri | 58,100 | 57,900 | |||
New Hampshire | 37,100 | — | |||
Ohio | 181,800 | 157,700 | |||
South Carolina | 96,300 | 90,100 | |||
Tennessee | 21,100 | — | |||
Texas | 904,000 | 948,400 | |||
Washington | 151,700 | 63,500 | |||
Wisconsin | 70,800 | 72,600 | |||
Total | 2,885,700 | 2,553,400 |
March 31, | |||||
2014 | 2013 | ||||
Medicaid | 2,169,100 | 1,951,300 | |||
CHIP & Foster Care | 269,200 | 265,400 | |||
ABD & Medicare | 300,500 | 288,400 | |||
Health Insurance Marketplace (HIM) | 39,700 | — | |||
Hybrid Programs | 14,400 | 24,600 | |||
Long Term Care (LTC) | 51,800 | 23,700 | |||
Correctional services | 41,000 | — | |||
Total | 2,885,700 | 2,553,400 |
March 31, | ||||
2014 | 2013 | |||
ABD | 72,800 | 70,000 | ||
LTC | 41,300 | 16,100 | ||
Medicare | 6,500 | 5,300 | ||
Total | 120,600 | 91,400 |
• | For the first quarter of 2014, Premium and Service Revenues increased 38% to $3.4 billion from $2.4 billion in the first quarter of 2013. The increase was primarily as a result of expansions in Florida and Ohio, the additions of the California, New Hampshire and three Centurion contracts, our participation in the Health Insurance Marketplaces, and the acquisitions of AcariaHealth and U.S. Medical Management. |
• | Consolidated HBR of 89.3% for the first quarter of 2014 represents a decrease from 90.2% in the comparable period in 2013 and an increase from 88.1% in the fourth quarter of 2013. The HBR improvement compared to 2013 reflects a lower level of flu costs compared to prior year and reduced utilization in certain markets in the first quarter of 2014 associated with inclement weather. The increase from the prior quarter is due to normal seasonality. |
• | The following table compares the results for new business and existing business for the quarters ended March 31,: |
2014 | 2013 | ||||
Premium and Service Revenue | |||||
New business | 20 | % | 37 | % | |
Existing business | 80 | % | 63 | % | |
HBR | |||||
New business | 93.1 | % | 93.7 | % | |
Existing business | 88.3 | % | 88.2 | % |
• | Consolidated G&A expense ratio for the first quarter of 2014 was 8.8%, compared to 8.4% in the prior year. The year over year increase reflects U.S. Medical Management transaction costs and the addition of the Acaria business, partially offset by the leveraging of expenses over higher revenue in 2014. |
• | Earnings from operations were $70.0 million in the first quarter of 2014 compared to $39.6 million in the first quarter of 2013. Net earnings attributable to Centene Corporation were $33.0 million in the first quarter of 2014, compared to $23.0 million in the first quarter of 2013. |
• | Diluted earnings per share of $0.57, or $0.79 excluding $0.16 of net cost associated with the health insurer fee and $0.06 of U.S. Medical Management acquisition transaction costs, compared to $0.41 in 2013. |
Days in claims payable, December 31, 2013 | 42.4 | ||
Timing of claim payments | 0.2 | ||
Days in claims payable, March 31, 2014 | 42.6 | ||
Full Year 2014 | |||||||||
Low | High | ||||||||
Premium and Service Revenues (in millions) | $ | 14,200 | $ | 14,800 | |||||
Diluted EPS | $ | 3.60 | $ | 3.90 | |||||
Consolidated Health Benefits Ratio | 88.7 | % | 89.2 | % | |||||
General & Administrative expense ratio | 8.5 | % | 9.0 | % | |||||
Effective Tax Rate | 50.0 | % | 51.0 | % | |||||
Diluted Shares Outstanding (in thousands) | 59,700 | 60,200 | |||||||
March 31, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents of continuing operations | $ | 1,218,004 | $ | 974,304 | |||
Cash and cash equivalents of discontinued operations | 52,788 | 63,769 | |||||
Total cash and cash equivalents | 1,270,792 | 1,038,073 | |||||
Premium and related receivables | 570,105 | 428,570 | |||||
Short term investments | 99,696 | 102,126 | |||||
Other current assets | 320,393 | 217,661 | |||||
Other current assets of discontinued operations | 20,863 | 13,743 | |||||
Total current assets | 2,281,849 | 1,800,173 | |||||
Long term investments | 840,152 | 791,900 | |||||
Restricted deposits | 57,826 | 46,946 | |||||
Property, software and equipment, net | 412,699 | 395,407 | |||||
Goodwill | 657,551 | 348,432 | |||||
Intangible assets, net | 85,134 | 48,780 | |||||
Other long term assets | 80,961 | 59,357 | |||||
Long term assets of discontinued operations | 30,275 | 38,305 | |||||
Total assets | $ | 4,446,447 | $ | 3,529,300 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Medical claims liability | $ | 1,298,513 | $ | 1,111,709 | |||
Accounts payable and accrued expenses | 614,541 | 375,862 | |||||
Unearned revenue | 74,260 | 38,191 | |||||
Current portion of long term debt | 6,110 | 3,065 | |||||
Current liabilities of discontinued operations | 28,019 | 30,294 | |||||
Total current liabilities | 2,021,443 | 1,559,121 | |||||
Long term debt | 810,970 | 665,697 | |||||
Other long term liabilities | 70,166 | 60,015 | |||||
Long term liabilities of discontinued operations | 1,009 | 1,028 | |||||
Total liabilities | 2,903,588 | 2,285,861 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interest | 120,681 | — | |||||
Stockholders’ equity: | |||||||
Common stock, $.001 par value; authorized 100,000,000 shares; 61,044,175 issued and 57,657,040 outstanding at March 31, 2014, and 58,673,215 issued and 55,319,239 outstanding at December 31, 2013 | 61 | 59 | |||||
Additional paid-in capital | 739,972 | 594,326 | |||||
Accumulated other comprehensive income: | |||||||
Unrealized loss on investments, net of tax | (614 | ) | (2,620 | ) | |||
Retained earnings | 764,902 | 731,919 | |||||
Treasury stock, at cost (3,387,135 and 3,353,976 shares, respectively) | (91,655 | ) | (89,643 | ) | |||
Total Centene stockholders’ equity | 1,412,666 | 1,234,041 | |||||
Noncontrolling interest | 9,512 | 9,398 | |||||
Total stockholders’ equity | 1,422,178 | 1,243,439 | |||||
Total liabilities and stockholders’ equity | $ | 4,446,447 | $ | 3,529,300 |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Revenues: | |||||||
Premium | $ | 3,070,887 | $ | 2,388,639 | |||
Service | 281,174 | 33,194 | |||||
Premium and service revenues | 3,352,061 | 2,421,833 | |||||
Premium tax and health insurer fee | 107,827 | 103,649 | |||||
Total revenues | 3,459,888 | 2,525,482 | |||||
Expenses: | |||||||
Medical costs | 2,742,453 | 2,154,546 | |||||
Cost of services | 242,284 | 25,065 | |||||
General and administrative expenses | 295,512 | 203,296 | |||||
Premium tax expense | 78,278 | 102,975 | |||||
Health insurer fee expense | 31,327 | — | |||||
Total operating expenses | 3,389,854 | 2,485,882 | |||||
Earnings from operations | 70,034 | 39,600 | |||||
Other income (expense): | |||||||
Investment and other income | 4,724 | 4,263 | |||||
Interest expense | (7,023 | ) | (6,625 | ) | |||
Earnings from continuing operations, before income tax expense | 67,735 | 37,238 | |||||
Income tax expense | 34,555 | 14,690 | |||||
Earnings from continuing operations, net of income tax expense | 33,180 | 22,548 | |||||
Discontinued operations, net of income tax expense (benefit) of $(8),and $348, respectively | (833 | ) | 363 | ||||
Net earnings | 32,347 | 22,911 | |||||
Noncontrolling interest | (636 | ) | (91 | ) | |||
Net earnings attributable to Centene Corporation | $ | 32,983 | $ | 23,002 | |||
Amounts attributable to Centene Corporation common shareholders: | |||||||
Earnings from continuing operations, net of income tax expense | $ | 33,816 | $ | 22,639 | |||
Discontinued operations, net of income tax expense (benefit) | (833 | ) | 363 | ||||
Net earnings | $ | 32,983 | $ | 23,002 | |||
Net earnings (loss) per common share attributable to Centene Corporation: | |||||||
Basic: | |||||||
Continuing operations | $ | 0.59 | $ | 0.43 | |||
Discontinued operations | (0.02 | ) | 0.01 | ||||
Basic earnings per common share | $ | 0.57 | $ | 0.44 | |||
Diluted: | |||||||
Continuing operations | $ | 0.57 | $ | 0.41 | |||
Discontinued operations | (0.01 | ) | 0.01 | ||||
Diluted earnings per common share | $ | 0.56 | $ | 0.42 | |||
Weighted average number of common shares outstanding: | |||||||
Basic | 57,483,876 | 52,357,119 | |||||
Diluted | 59,361,266 | 54,266,928 |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 32,347 | $ | 22,911 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities | |||||||
Depreciation and amortization | 20,318 | 15,691 | |||||
Stock compensation expense | 11,297 | 8,375 | |||||
Deferred income taxes | (7,873 | ) | 986 | ||||
Changes in assets and liabilities | |||||||
Premium and related receivables | (119,207 | ) | (56,734 | ) | |||
Other current assets | 3,411 | (50,537 | ) | ||||
Other assets | (14,425 | ) | 5 | ||||
Medical claims liabilities | 196,221 | 117,385 | |||||
Unearned revenue | 34,662 | 3,578 | |||||
Accounts payable and accrued expenses | 90,481 | (22,745 | ) | ||||
Other operating activities | 5,213 | 4,078 | |||||
Net cash provided by operating activities | 252,445 | 42,993 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (18,116 | ) | (10,654 | ) | |||
Purchases of investments | (167,373 | ) | (358,131 | ) | |||
Sales and maturities of investments | 111,994 | 212,508 | |||||
Investments in acquisitions, net of cash acquired | (76,989 | ) | — | ||||
Net cash used in investing activities | (150,484 | ) | (156,277 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from exercise of stock options | 1,464 | 1,408 | |||||
Proceeds from borrowings | 645,000 | — | |||||
Payment of long-term debt | (519,413 | ) | (776 | ) | |||
Excess tax benefits from stock compensation | 312 | 515 | |||||
Common stock repurchases | (2,012 | ) | (565 | ) | |||
Contribution from noncontrolling interest | 5,407 | 202 | |||||
Debt issue costs | — | (661 | ) | ||||
Net cash provided by financing activities | 130,758 | 123 | |||||
Net increase (decrease) in cash and cash equivalents | 232,719 | (113,161 | ) | ||||
Cash and cash equivalents, beginning of period | 1,038,073 | 843,952 | |||||
Cash and cash equivalents, end of period | $ | 1,270,792 | $ | 730,791 | |||
Supplemental disclosures of cash flow information: | |||||||
Interest paid | $ | 1,648 | $ | 1,410 | |||
Income taxes paid | 21,265 | 2,205 | |||||
Equity issued in connection with acquisition | 132,371 | — |
Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
2014 | 2013 | 2013 | 2013 | 2013 | |||||||||||||||
AT-RISK MEMBERSHIP | |||||||||||||||||||
Managed Care: | |||||||||||||||||||
Arizona | 7,100 | 7,100 | 23,700 | 23,200 | 23,300 | ||||||||||||||
Arkansas | 16,400 | — | — | — | — | ||||||||||||||
California | 118,100 | 97,200 | — | — | — | ||||||||||||||
Florida | 230,300 | 222,000 | 217,800 | 216,200 | 214,600 | ||||||||||||||
Georgia | 331,400 | 318,700 | 314,100 | 316,600 | 314,000 | ||||||||||||||
Illinois | 22,400 | 22,300 | 22,800 | 18,000 | 18,000 | ||||||||||||||
Indiana | 198,700 | 195,500 | 198,400 | 200,000 | 202,400 | ||||||||||||||
Kansas | 145,000 | 139,900 | 137,700 | 137,500 | 133,700 | ||||||||||||||
Louisiana | 149,800 | 152,300 | 152,600 | 153,700 | 162,900 | ||||||||||||||
Massachusetts | 50,800 | 22,600 | 23,200 | 15,200 | 17,300 | ||||||||||||||
Minnesota | 9,400 | — | — | — | — | ||||||||||||||
Mississippi | 85,400 | 78,300 | 76,900 | 77,300 | 77,000 | ||||||||||||||
Missouri | 58,100 | 59,200 | 58,200 | 58,800 | 57,900 | ||||||||||||||
New Hampshire | 37,100 | 33,600 | — | — | — | ||||||||||||||
Ohio | 181,800 | 173,200 | 170,900 | 156,700 | 157,700 | ||||||||||||||
South Carolina | 96,300 | 91,900 | 89,400 | 88,800 | 90,100 | ||||||||||||||
Tennessee | 21,100 | 20,700 | 20,400 | — | — | ||||||||||||||
Texas | 904,000 | 935,100 | 957,300 | 960,400 | 948,400 | ||||||||||||||
Washington | 151,700 | 82,100 | 77,100 | 67,600 | 63,500 | ||||||||||||||
Wisconsin | 70,800 | 71,500 | 72,000 | 73,400 | 72,600 | ||||||||||||||
TOTAL | 2,885,700 | 2,723,200 | 2,612,500 | 2,563,400 | 2,553,400 | ||||||||||||||
Medicaid | 2,169,100 | 2,054,700 | 1,953,300 | 1,953,600 | 1,951,300 | ||||||||||||||
CHIP & Foster Care | 269,200 | 275,100 | 274,900 | 273,200 | 265,400 | ||||||||||||||
ABD & Medicare | 300,500 | 305,300 | 302,000 | 289,800 | 288,400 | ||||||||||||||
HIM | 39,700 | — | — | — | — | ||||||||||||||
Hybrid Programs | 14,400 | 19,000 | 19,600 | 22,400 | 24,600 | ||||||||||||||
LTC | 51,800 | 37,800 | 31,600 | 24,400 | 23,700 | ||||||||||||||
Correctional Services | 41,000 | 31,300 | 31,100 | — | — | ||||||||||||||
TOTAL | 2,885,700 | 2,723,200 | 2,612,500 | 2,563,400 | 2,553,400 | ||||||||||||||
Specialty Services(a): | |||||||||||||||||||
Cenpatico Behavioral Health Arizona | 162,700 | 156,600 | 160,700 | 157,100 | 156,200 | ||||||||||||||
(a) Includes external membership only. | |||||||||||||||||||
REVENUE PER MEMBER PER MONTH(b) | $ | 355 | $ | 335 | $ | 328 | $ | 306 | $ | 304 | |||||||||
CLAIMS(b) | |||||||||||||||||||
Period-end inventory | 808,500 | 622,200 | 698,900 | 703,400 | 940,200 | ||||||||||||||
Average inventory | 555,400 | 511,700 | 505,800 | 510,000 | 555,800 | ||||||||||||||
Period-end inventory per member | 0.28 | 0.23 | 0.27 | 0.27 | 0.37 | ||||||||||||||
(b) Revenue per member and claims information are presented for the Managed Care at-risk members. | |||||||||||||||||||
NUMBER OF EMPLOYEES | 9,500 | 8,800 | 8,200 | 7,900 | 7,100 |
Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||
2014 | 2013 | 2013 | 2013 | 2013 | |||||||||||||||
DAYS IN CLAIMS PAYABLE (c) | 42.6 | 42.4 | 40.6 | 41.5 | 39.7 | ||||||||||||||
(c) Days in Claims Payable is a calculation of Medical Claims Liabilities at the end of the period divided by average claims expense per calendar day for such period. | |||||||||||||||||||
CASH AND INVESTMENTS (in millions) | |||||||||||||||||||
Regulated | $ | 2,166.4 | $ | 1,870.6 | $ | 1,612.9 | $ | 1,502.9 | $ | 1,494.0 | |||||||||
Unregulated | 49.3 | 44.7 | 37.6 | 33.8 | 45.5 | ||||||||||||||
TOTAL | $ | 2,215.7 | $ | 1,915.3 | $ | 1,650.5 | $ | 1,536.7 | $ | 1,539.5 | |||||||||
DEBT TO CAPITALIZATION | 36.5 | % | 35.0 | % | 30.5 | % | 32.9 | % | 35.2 | % | |||||||||
DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT(d) | 34.4 | % | 32.4 | % | 27.4 | % | 29.8 | % | 31.9 | % | |||||||||
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity). | |||||||||||||||||||
(d) The non-recourse debt represents the Company's mortgage note payable ($72.1 million at March 31, 2014). |
Three Months Ended March 31, | |||||
2014 | 2013 | ||||
Health Benefits Ratios: | |||||
Medicaid, CHIP, Foster Care & HIM | 86.9 | % | 90.8 | % | |
ABD, LTC & Medicare | 92.9 | 90.0 | |||
Specialty Services | 87.7 | 83.4 | |||
Total | 89.3 | 90.2 | |||
Total General & Administrative Expense Ratio | 8.8 | % | 8.4 | % |
Balance, March 31, 2013 | $ | 950,090 | ||
Incurred related to: | ||||
Current period | 9,691,530 | |||
Prior period | (108,982 | ) | ||
Total incurred | 9,582,548 | |||
Paid related to: | ||||
Current period | 8,410,937 | |||
Prior period | 823,188 | |||
Total paid | 9,234,125 | |||
Balance, March 31, 2014 | $ | 1,298,513 |
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