ST. LOUIS, July 26, 2016 /PRNewswire/ -- Centene Corporation
(NYSE: CNC) today announced its financial results for the second
quarter ended June 30, 2016. The following discussions,
with the exception of cash flow information, are in the context of
continuing operations.
For the second quarter of 2016, we reported diluted earnings per
share of $0.98 and adjusted diluted
earnings per share (Adjusted diluted EPS) of $1.29 when excluding Health Net acquisition
related expenses and amortization of acquired intangible
assets. The second quarter of 2016 includes a $0.19 per diluted share benefit related to the
2015 risk adjustment and reinsurance reconciliations under the
Affordable Care Act (ACA) in connection with our health insurance
marketplace business. A reconciliation of GAAP diluted
earnings per share to Adjusted diluted EPS is highlighted
below:
GAAP diluted earnings
per share (EPS)
|
$
|
0.98
|
|
Health Net
acquisition related expenses
|
0.16
|
|
Amortization of
acquired intangible assets
|
0.15
|
|
Adjusted diluted
EPS
|
$
|
1.29
|
|
In summary, the 2016 second quarter results were as follows:
Total revenues (in
millions)
|
$
|
10,897
|
|
|
Health benefits
ratio
|
86.6
|
%
|
|
General &
administrative expense ratio
|
9.2
|
%
|
|
General &
administrative expense ratio, excluding Health Net acquisition
related expenses
|
9.0
|
%
|
|
GAAP diluted earnings
per share
|
$
|
0.98
|
|
|
Adjusted diluted
EPS
|
$
|
1.29
|
|
|
Total cash flow used
in operations (in millions)
|
$
|
(420)
|
|
|
Michael F. Neidorff, Centene's
Chairman and Chief Executive Officer, stated, "Centene's solid
second quarter results reinforce our positive operating momentum
and bode well for continued growth for the balance of 2016 and
beyond. The Health Net integration remains on track and the
benefits of our greater scale and diversity are being realized
accordingly."
Second Quarter Highlights
- June 30, 2016 managed care
membership of 11.4 million, an increase of 6.8 million members, or
148% compared to the second quarter of 2015.
- Total revenues for the second quarter of 2016 of $10.9 billion, representing 98% growth compared
to the second quarter of 2015.
- Health benefits ratio of 86.6% for the second quarter of 2016,
compared to 89.1% in the second quarter of 2015.
- General and administrative expense ratio of 9.2%, or 9.0%
excluding Health Net acquisition related expenses for the second
quarter of 2016, compared to 8.4% in the second quarter of
2015.
- Operating cash flow of $(420)
million for the second quarter of 2016, reflecting an
increase in premium and related receivables of approximately
$600 million due to the timing of
June capitation payments from several of our states (substantially
all of which has been collected in July).
- Diluted earnings per share for the second quarter of 2016 of
$0.98, or $1.29 of Adjusted diluted EPS. In comparison,
diluted EPS for the second quarter of 2015 was $0.72, or $0.76
Adjusted diluted EPS.
Other Events
- In July 2016, it was announced
that the Department of Defense awarded our wholly-owned subsidiary,
Health Net Federal Services, the TRICARE West Region contract. We
will continue to operate in the TRICARE North Region until the
middle of 2017, when we expect to start health care delivery for
the West Region.
- In June 2016, our Indiana subsidiary, Managed Health Services,
was selected by the Indiana Family & Social Services
Administration to begin contract negotiations to provide risk-based
managed care services for enrollees in the Healthy Indiana Plan and
Hoosier Healthwise programs. This new contract is expected to
commence on January 1, 2017.
- In June 2016, the Company issued
an additional $500 million of 4.75%
Senior Notes due 2022 at a premium to yield of 4.41%. The Company
used the net proceeds of the offering to repay amounts outstanding
under its Revolving Credit Facility and to pay related fees and
expenses.
- In June 2016, our correctional
health care joint venture, Centurion, began operating under two new
contracts with the State of New Mexico Corrections Department to
provide correctional medical health care services and pharmacy
services.
- In May 2016, our specialty
solutions division, Envolve, Inc. was selected by Maryland Care
Inc. d/b/a Maryland Physicians Care MCO to provide health plan
management services for its Medicaid operations in Maryland effective July
1, 2017.
- In April 2016, our Pennsylvania subsidiary, Pennsylvania Health
& Wellness, was selected by the Pennsylvania Department of
Human Services to service Medicaid recipients enrolled in the
HealthChoices program in three zones. In July 2016, the Commonwealth reissued the request
for proposal with an anticipated commencement of April 2017.
- In April 2016, we announced the
appointment of Christopher Isaak to
Senior Vice President, Corporate Controller and Chief Accounting
Officer.
Accreditations & Awards
- In July 2016, FORTUNE
magazine announced Centene's position of #470 in its annual ranking
of the largest companies globally by revenue.
- In June 2016, FORTUNE
magazine announced Centene's position of #124 in its annual ranking
of America's largest companies by revenue.
- In May 2016, our Florida subsidiary, Sunshine Health, received
Accreditation from the National Committee for Quality Assurance for
its Medicaid and Health Insurance Marketplace Exchange plan,
Ambetter from Sunshine Health.
- In May 2016, at the Case In Point
Platinum Awards, Centene and its specialty solutions divisions,
Envolve, Inc. were honored with awards in five categories:
Behavioral Health Case Management, Women/Children Case
Management, Acute Care, Care Management, and Disease
Management/Population Health.
Membership
The following table sets forth the Company's membership by state
for its managed care organizations:
|
June
30,
|
|
2016
|
|
2015
|
Arizona
|
597,700
|
|
|
210,900
|
|
Arkansas
|
52,800
|
|
|
45,400
|
|
California
|
3,097,600
|
|
|
178,700
|
|
Florida
|
726,200
|
|
|
470,300
|
|
Georgia
|
493,300
|
|
|
405,000
|
|
Illinois
|
234,700
|
|
|
209,100
|
|
Indiana
|
291,000
|
|
|
250,400
|
|
Kansas
|
144,800
|
|
|
143,000
|
|
Louisiana
|
375,300
|
|
|
358,900
|
|
Massachusetts
|
47,100
|
|
|
61,500
|
|
Michigan
|
2,200
|
|
|
2,700
|
|
Minnesota
|
9,500
|
|
|
10,900
|
|
Mississippi
|
323,800
|
|
|
250,600
|
|
Missouri
|
102,900
|
|
|
82,600
|
|
New
Hampshire
|
79,700
|
|
|
70,800
|
|
New Mexico
|
7,100
|
|
|
—
|
|
Ohio
|
319,000
|
|
|
287,100
|
|
Oregon
|
221,500
|
|
|
—
|
|
South
Carolina
|
113,700
|
|
|
112,600
|
|
Tennessee
|
20,800
|
|
|
21,400
|
|
Texas
|
1,037,000
|
|
|
969,700
|
|
Vermont
|
1,600
|
|
|
2,800
|
|
Washington
|
239,700
|
|
|
214,100
|
|
Wisconsin
|
76,100
|
|
|
78,600
|
|
Total at-risk
membership
|
8,615,100
|
|
|
4,437,100
|
|
TRICARE
eligibles
|
2,815,700
|
|
|
—
|
|
Non-risk
membership
|
—
|
|
|
176,600
|
|
Total
|
11,430,800
|
|
|
4,613,700
|
|
The following table sets forth our membership by line of
business:
|
June
30,
|
|
2016
|
|
2015
|
Medicaid:
|
|
|
|
TANF, CHIP &
Foster Care
|
5,541,200
|
|
|
3,536,000
|
|
ABD &
LTC
|
757,500
|
|
|
454,000
|
|
Behavioral
Health
|
455,800
|
|
|
203,900
|
|
Commercial
|
1,423,400
|
|
|
167,400
|
|
Medicare &
Duals
|
300,700
|
|
|
28,200
|
|
Correctional
|
136,500
|
|
|
47,600
|
|
Total at-risk
membership
|
8,615,100
|
|
|
4,437,100
|
|
TRICARE
eligibles
|
2,815,700
|
|
|
—
|
|
Non-risk
membership
|
—
|
|
|
176,600
|
|
Total
|
11,430,800
|
|
|
4,613,700
|
|
At June 30, 2016, the Company served 1,004,200 members in
Medicaid expansion programs in nine states and 363,600
dual-eligible members, compared to 368,900 members in Medicaid
expansion programs in seven states and 187,400 dual-eligible
members at June 30, 2015. At June 30, 2016, the
Company served 617,700 members in Health Insurance Marketplaces,
compared to 167,400 at June 30, 2015.
Statement of Operations: Three Months Ended June 30,
2016
- For the second quarter of 2016, total revenues increased 98% to
$10.9 billion from $5.5 billion in the second quarter of 2015. The
increase was primarily a result of the acquisition of Health Net as
well as the impact from expansions, acquisitions or new programs in
many of our states in 2015.
- HBR of 86.6% for the second quarter of 2016 represents a
decrease from 89.1% in the comparable period in 2015 and a decrease
from 88.7% in the first quarter of 2016. The year over year HBR
decrease is primarily attributable to the acquisition of Health
Net, which operates at a lower HBR due to a higher mix of
commercial and Medicare business. The sequential decrease is due to
normal seasonality and the acquisition of Health Net.
- G&A expense ratio of 9.2%, or 9.0% excluding Health Net
acquisition related expenses for the second quarter of 2016,
compared to 8.4% in the second quarter of 2015. The increase in the
G&A expense ratio is primarily attributable to the addition of
the Health Net business.
- Diluted earnings per share for the second quarter of 2016 of
$0.98, or $1.29 of Adjusted diluted EPS when excluding
Health Net acquisition related expenses and amortization of
acquired intangible assets, including a $0.19 per diluted share benefit related to the
2015 risk adjustment and reinsurance reconciliations under the
Affordable Care Act (ACA) in connection with our health insurance
marketplace business. In comparison, diluted EPS for the second
quarter of 2015 was $0.72, or
$0.76 Adjusted diluted EPS when
excluding Health Net acquisition related expenses and amortization
of acquired intangible assets.
Balance Sheet and Cash Flow
At June 30, 2016, the Company had cash, investments and
restricted deposits of $7.5 billion,
including $196 million held by its
unregulated entities. Medical claims liabilities totaled
$4.0 billion. The Company's
days in claims payable was 43. Total debt was $4.5 billion, which includes $185 million of borrowings on the $1.0 billion revolving credit facility at
quarter-end. Debt to capitalization was 44.4% at
June 30, 2016, excluding the $66
million non-recourse mortgage note.
In the second quarter, we continued to make progress on the fair
valuation of the Health Net balance sheet. There has been no
unfavorable development on the medical claims liability as
established at March 24, 2016.
We did increase reserves for medical claims primarily associated
with disputed substance abuse treatment center costs.
Additionally, we recorded premium deficiency reserves primarily
associated with Arizona and the
California individual PPO
business.
Cash flow used in operations for the three months ended
June 30, 2016, was $(420)
million. The cash used in operating activities in 2016
reflects an increase in premium and related receivables of
approximately $600 million due to the
timing of June capitation payments from several of our states
(substantially all of which has been collected in July).
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, March 31, 20161
|
42
|
Impact of Health Net
acquisition accounting
|
1
|
Days in claims
payable, June 30, 2016
|
43
|
|
|
|
1 A
pro-forma adjustment has been made to medical costs to include a
full quarter of Health Net medical costs.
|
Outlook
The table below depicts the Company's updated annual guidance
for 2016.
|
|
Full Year
2016
|
|
|
|
Low
|
|
High
|
|
Total revenues (in
billions)
|
|
$
|
39.4
|
|
|
$
|
40.0
|
|
|
GAAP diluted
EPS
|
|
$
|
2.65
|
|
|
$
|
3.00
|
|
|
Adjusted diluted
EPS1
|
|
$
|
4.20
|
|
|
$
|
4.55
|
|
|
HBR
|
|
87.0
|
%
|
|
87.5
|
%
|
|
G&A expense
ratio
|
|
9.4
|
%
|
|
9.9
|
%
|
|
G&A expense
ratio, excluding acquisition related costs
|
|
9.0
|
%
|
|
9.5
|
%
|
|
Effective tax
rate
|
|
54.5
|
%
|
|
56.5
|
%
|
|
Diluted shares
outstanding (in millions)
|
|
162.5
|
|
|
163.5
|
|
|
|
|
|
|
|
|
|
1Adjusted
diluted EPS excludes Health Net acquisition related expenses of
$1.00 to $1.05 per diluted share and amortization of acquired
intangible assets of $0.50 to $0.55 per diluted share.
|
Conference Call
As previously announced, the Company will host a conference call
Tuesday, July 26, 2016, at 8:30 AM
(Eastern Time) to review the financial results for the
second quarter ended June 30, 2016, and to discuss its
business outlook. Michael Neidorff and Jeffrey Schwaneke will host the conference
call.
Investors and other interested parties are invited to listen to
the conference call by dialing 1-877-883-0383 in the U.S. and
Canada; +1-412-902-6506 from
abroad, including the following Elite Entry Number: 6099987 to
expedite caller registration; or via a live, audio webcast on the
Company's website at www.centene.com, under the Investors
section.
A webcast replay will be available for on-demand listening
shortly after the completion of the call for the next twelve months
or until 11:59 PM (Eastern Time) on
Tuesday, July 25, 2017, at the
aforementioned URL. In addition, a digital audio playback will be
available until 9:00 AM Eastern Time
on Tuesday, August 2, 2016, by
dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and
entering access code 10088567.
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 investors to more accurately assess the ongoing nature
of the Company's operations and measure the Company's performance
more consistently across periods. The Company uses the presented
non-GAAP financial measures internally to allow management to focus
on period-to-period changes in the Company's core business
operations. Therefore, the Company believes that 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.
Specifically, the Company believes the presentation of non-GAAP
financial information which excludes Health Net acquisition related
expenses and amortization of acquired intangible assets allows
investors to understand the Company's performance more
consistently. The tables below provide a reconciliation of
non-GAAP items ($ in millions, except share data):
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
GAAP general and
administrative expenses
|
$
|
949
|
|
|
$
|
437
|
|
|
$
|
1,671
|
|
|
$
|
833
|
|
Health Net
acquisition related expenses
|
25
|
|
|
2
|
|
|
214
|
|
|
2
|
|
General and
administrative expenses, excluding Health Net acquisition related
expenses
|
$
|
924
|
|
|
$
|
435
|
|
|
$
|
1,457
|
|
|
$
|
831
|
|
|
|
|
|
|
|
|
|
GAAP net earnings
from continuing operations
|
$
|
170
|
|
|
$
|
88
|
|
|
$
|
154
|
|
|
$
|
152
|
|
Health Net
acquisition related expenses
|
25
|
|
|
2
|
|
|
214
|
|
|
2
|
|
Amortization of
acquired intangible assets
|
43
|
|
|
5
|
|
|
52
|
|
|
12
|
|
Income tax effects of
adjustments (1)
|
(14)
|
|
|
(2)
|
|
|
(101)
|
|
|
(5)
|
|
Adjusted net earnings
from continuing operations
|
$
|
224
|
|
|
$
|
93
|
|
|
$
|
319
|
|
|
$
|
161
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
Annual
Guidance
December 31,
2016
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
GAAP diluted earnings
per share (EPS)
|
$
|
0.98
|
|
|
$
|
0.72
|
|
|
$
|
1.02
|
|
|
$
|
1.24
|
|
|
$2.65 -
$3.00
|
Health Net
acquisition related expenses (2)
|
0.16
|
|
|
0.01
|
|
|
0.89
|
|
|
0.01
|
|
|
$1.00 -
$1.05
|
Amortization of
acquired intangible assets (3)
|
0.15
|
|
|
0.03
|
|
|
0.20
|
|
|
0.06
|
|
|
$0.50 -
$0.55
|
Adjusted
diluted EPS
|
$
|
1.29
|
|
|
$
|
0.76
|
|
|
$
|
2.11
|
|
|
$
|
1.31
|
|
|
$4.20 -
$4.55
|
|
|
(1)
|
The income tax
effects of adjustments are based on the effective income tax rates
applicable to adjusted (non-GAAP) results. The amounts
are based on the annual estimated effective income tax rate that
would increase or decrease based on the exclusion of these
expenses.
|
|
|
(2)
|
The Health Net
acquisition related expenses per diluted share presented above are
net of the income tax benefit (expense) of $(0.02) and $0.01 for
the three months ended June 30, 2016 and 2015, respectively; $0.53
and zero for the six months ended June 30, 2016 and 2015,
respectively; and estimated $0.37 to $0.41 for the year ended
December 31, 2016.
|
|
|
(3)
|
The amortization of
acquired intangible assets per diluted share presented above are
net of the income tax benefit of $0.10 and $0.01 for the three
months ended June 30, 2016 and 2015, respectively; $0.14 and $0.04
for the six months ended June 30, 2016 and 2015, respectively; and
estimated $0.31 to $0.35 for the year ended December 31,
2016.
|
About Centene Corporation
Centene Corporation, a Fortune 500 company, is a diversified,
multi-national healthcare enterprise that provides a portfolio of
services to government sponsored healthcare programs, focusing on
under-insured and uninsured individuals. Many receive benefits
provided under Medicaid, including the State Children's Health
Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD),
Foster Care and Long Term Care
(LTC), in addition to other state-sponsored programs, Medicare
(including the Medicare prescription drug benefit commonly known as
"Part D"), as well as programs with the U.S. Department of Defense
and U.S. Department of Veterans Affairs. Centene operates local
health plans and offers a range of health insurance solutions. It
also contracts with other healthcare and commercial organizations
to provide specialty services including behavioral health
management, care management software, correctional healthcare
services, dental benefits management, in-home health services, life
and health management, managed vision, pharmacy benefits
management, specialty pharmacy and telehealth services.
Centene uses its investor relations website to publish important
information about the Company, including information that may be
deemed material to investors. Financial and other information about
Centene is routinely posted and is accessible on Centene's investor
relations website, http://www.centene.com/investors.
Forward-Looking Statements
The information provided in this press release may contain
certain forward-looking statements with respect to the financial
condition, results of operations and business of Centene and
certain plans and objectives of Centene with respect thereto,
including the expected benefits of the acquisition of Health Net.
These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts.
Forward-looking statements often use words such as "anticipate",
"target", "expect", "estimate", "intend", "plan", "goal",
"believe", "hope", "aim", "continue", "will", "may", "would",
"could" or "should" or other words of similar meaning or the
negative thereof. There are several factors which could cause
actual plans and results to differ materially from those expressed
or implied in forward-looking statements. Such factors include, but
are not limited to, the possibility that the expected synergies and
value creation from the acquisition will not be realized, or will
not be realized within the expected time period, including, but not
limited to, as a result of conditions, terms, obligations or
restrictions imposed by regulators in connection with their
approval of, or consent to, the acquisition; the exertion of
management's time and Centene's resources, and other out-of-pocket
expenses incurred in connection with complying with the
undertakings in connection with certain regulatory approvals; the
risk that the businesses will not be integrated successfully;
disruption from the acquisition making it more difficult to
maintain business and operational relationships; the risk that
unexpected costs will be incurred; changes in economic conditions
or political conditions; changes in federal or state laws or
regulations, including the Patient Protection and Affordable Care
Act and the Health Care Education Affordability Reconciliation Act
and any regulations enacted thereunder; provider and state contract
changes; the outcome of pending legal or regulatory proceedings;
reduction in provider payments by governmental payors; the
expiration or termination of Centene's Medicare or Medicaid managed
care contracts with federal or state governments; tax matters;
increased health care costs; and risks and uncertainties discussed
in the reports that Centene has filed with the Securities and
Exchange Commission (the "SEC"). These forward-looking statements
reflect Centene's current views with respect to future events and
are based on numerous assumptions and assessments made by Centene
in light of its experience and perception of historical trends,
current conditions, business strategies, operating environments,
future developments and other factors it believes appropriate. By
their nature, forward-looking statements involve known and unknown
risks and uncertainties because they relate to events and depend on
circumstances that will occur in the future. The factors
described in the context of such forward-looking statements in this
announcement could cause Centene's plans with respect to the
acquisition, actual results, performance or achievements, industry
results and developments to differ materially from those expressed
in or implied by such forward-looking statements. Although it is
believed that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such
expectations will prove to have been correct and persons reading
this announcement are therefore cautioned not to place undue
reliance on these forward-looking statements which speak only as of
the date of this announcement. Centene does not assume any
obligation to update the information contained in this announcement
(whether as a result of new information, future events or
otherwise), except as required by applicable law. This list
of important factors is not intended to be exhaustive. We discuss
certain of these matters more fully, as well as certain risk
factors that may affect our business operations, financial
condition and results of operations, in our filings with the
Securities and Exchange Commission, including our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K.
[Tables Follow]
CENTENE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In millions,
except share data)
|
|
|
June 30,
2016
|
|
December 31,
2015
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
2,710
|
|
|
$
|
1,760
|
|
Premium and related
receivables
|
3,488
|
|
|
1,279
|
|
Short term
investments
|
443
|
|
|
176
|
|
Other current
assets
|
1,212
|
|
|
390
|
|
Total current
assets
|
7,853
|
|
|
3,605
|
|
Long term
investments
|
4,230
|
|
|
1,927
|
|
Restricted
deposits
|
137
|
|
|
115
|
|
Property, software
and equipment, net
|
626
|
|
|
518
|
|
Goodwill
|
4,707
|
|
|
842
|
|
Intangible assets,
net
|
1,609
|
|
|
155
|
|
Other long term
assets
|
334
|
|
|
177
|
|
Total
assets
|
$
|
19,496
|
|
|
$
|
7,339
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Medical claims
liability
|
$
|
3,950
|
|
|
$
|
2,298
|
|
Accounts payable and
accrued expenses
|
3,218
|
|
|
976
|
|
Return of premium
payable
|
589
|
|
|
207
|
|
Unearned
revenue
|
212
|
|
|
143
|
|
Current portion of
long term debt
|
845
|
|
|
5
|
|
Total current
liabilities
|
8,814
|
|
|
3,629
|
|
Long term
debt
|
3,649
|
|
|
1,216
|
|
Other long term
liabilities
|
1,346
|
|
|
170
|
|
Total
liabilities
|
13,809
|
|
|
5,015
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
147
|
|
|
156
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock,
$0.001 par value; authorized 10,000,000 shares; no shares issued or
outstanding at June 30, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
Common stock, $0.001
par value; authorized 400,000,000 shares; 176,231,905 issued and
170,653,478 outstanding at June 30, 2016, and 126,855,477 issued
and 120,342,981 outstanding at December 31, 2015
|
—
|
|
|
—
|
|
Additional paid-in
capital
|
4,119
|
|
|
956
|
|
Accumulated other
comprehensive earnings (loss)
|
43
|
|
|
(10)
|
|
Retained
earnings
|
1,510
|
|
|
1,358
|
|
Treasury stock, at
cost (5,578,427 and 6,512,496 shares, respectively)
|
(143)
|
|
|
(147)
|
|
Total
Centene stockholders' equity
|
5,529
|
|
|
2,157
|
|
Noncontrolling
interest
|
11
|
|
|
11
|
|
Total stockholders'
equity
|
5,540
|
|
|
2,168
|
|
Total liabilities and
stockholders' equity
|
$
|
19,496
|
|
|
$
|
7,339
|
|
CENTENE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions,
except share data)
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
|
Premium
|
$
|
9,688
|
|
|
$
|
4,692
|
|
|
$
|
15,674
|
|
|
$
|
8,991
|
|
Service
|
588
|
|
|
492
|
|
|
1,013
|
|
|
954
|
|
Premium and service
revenues
|
10,276
|
|
|
5,184
|
|
|
16,687
|
|
|
9,945
|
|
Premium tax and
health insurer fee
|
621
|
|
|
322
|
|
|
1,163
|
|
|
692
|
|
Total
revenues
|
10,897
|
|
|
5,506
|
|
|
17,850
|
|
|
10,637
|
|
Expenses:
|
|
|
|
|
|
|
|
Medical
costs
|
8,385
|
|
|
4,181
|
|
|
13,696
|
|
|
8,042
|
|
Cost of
services
|
515
|
|
|
419
|
|
|
882
|
|
|
821
|
|
General and
administrative expenses
|
949
|
|
|
437
|
|
|
1,671
|
|
|
833
|
|
Amortization of
acquired intangible assets
|
43
|
|
|
5
|
|
|
52
|
|
|
12
|
|
Premium tax
expense
|
498
|
|
|
239
|
|
|
948
|
|
|
520
|
|
Health insurer fee
expense
|
130
|
|
|
52
|
|
|
204
|
|
|
107
|
|
Total operating
expenses
|
10,520
|
|
|
5,333
|
|
|
17,453
|
|
|
10,335
|
|
Earnings from
operations
|
377
|
|
|
173
|
|
|
397
|
|
|
302
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Investment and other
income
|
32
|
|
|
10
|
|
|
47
|
|
|
19
|
|
Interest
expense
|
(52)
|
|
|
(11)
|
|
|
(85)
|
|
|
(21)
|
|
Earnings from
continuing operations, before income tax expense
|
357
|
|
|
172
|
|
|
359
|
|
|
300
|
|
Income tax
expense
|
188
|
|
|
84
|
|
|
205
|
|
|
147
|
|
Earnings from
continuing operations, net of income tax expense
|
169
|
|
|
88
|
|
|
154
|
|
|
153
|
|
Discontinued
operations, net of income tax benefit
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
Net
earnings
|
168
|
|
|
88
|
|
|
152
|
|
|
152
|
|
(Earnings) loss
attributable to noncontrolling interests
|
1
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Net earnings
attributable to Centene Corporation
|
$
|
169
|
|
|
$
|
88
|
|
|
$
|
152
|
|
|
$
|
151
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to Centene Corporation common
shareholders:
|
Earnings from
continuing operations, net of income tax expense
|
$
|
170
|
|
|
$
|
88
|
|
|
$
|
154
|
|
|
$
|
152
|
|
Discontinued
operations, net of income tax benefit
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
Net
earnings
|
$
|
169
|
|
|
$
|
88
|
|
|
$
|
152
|
|
|
$
|
151
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) per common share attributable to Centene
Corporation:
|
Basic:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.00
|
|
|
$
|
0.74
|
|
|
$
|
1.04
|
|
|
$
|
1.28
|
|
Discontinued
operations
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
(0.01)
|
|
Basic earnings per
common share
|
$
|
0.99
|
|
|
$
|
0.74
|
|
|
$
|
1.03
|
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
0.98
|
|
|
$
|
0.72
|
|
|
$
|
1.02
|
|
|
$
|
1.24
|
|
Discontinued
operations
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
(0.01)
|
|
Diluted earnings per
common share
|
$
|
0.97
|
|
|
$
|
0.72
|
|
|
$
|
1.01
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
170,558,778
|
|
119,003,569
|
|
148,050,927
|
|
118,894,269
|
Diluted
|
173,778,537
|
|
122,965,011
|
|
151,147,640
|
|
122,785,459
|
CENTENE
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In
millions)
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
152
|
|
|
$
|
152
|
|
Adjustments to
reconcile net earnings to net cash (used in) provided by operating
activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
111
|
|
|
53
|
|
Stock compensation
expense
|
83
|
|
|
33
|
|
Deferred income
taxes
|
(13)
|
|
|
(13)
|
|
Gain on contingent
consideration
|
(1)
|
|
|
(10)
|
|
Changes in assets and
liabilities
|
|
|
|
Premium and related
receivables
|
(1,121)
|
|
|
(341)
|
|
Other current
assets
|
(26)
|
|
|
(28)
|
|
Medical claims
liabilities
|
188
|
|
|
366
|
|
Unearned
revenue
|
(50)
|
|
|
(102)
|
|
Accounts payable and
accrued expenses
|
(8)
|
|
|
166
|
|
Other long term
liabilities
|
463
|
|
|
144
|
|
Other operating
activities, net
|
(3)
|
|
|
(25)
|
|
Net cash (used in)
provided by operating activities
|
(225)
|
|
|
395
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(94)
|
|
|
(58)
|
|
Purchases of
investments
|
(956)
|
|
|
(513)
|
|
Sales and maturities
of investments
|
593
|
|
|
276
|
|
Investments in
acquisitions, net of cash acquired
|
(862)
|
|
|
(11)
|
|
Other investing
activities, net
|
—
|
|
|
7
|
|
Net cash used in
investing activities
|
(1,319)
|
|
|
(299)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
borrowings
|
5,711
|
|
|
750
|
|
Payment of long term
debt
|
(3,124)
|
|
|
(479)
|
|
Common stock
repurchases
|
(27)
|
|
|
(7)
|
|
Purchase of
noncontrolling interest
|
(14)
|
|
|
—
|
|
Debt issue
costs
|
(59)
|
|
|
(4)
|
|
Other financing
activities, net
|
7
|
|
|
1
|
|
Net cash provided by
financing activities
|
2,494
|
|
|
261
|
|
Net increase in cash
and cash equivalents
|
950
|
|
|
357
|
|
Cash and cash
equivalents, beginning of period
|
1,760
|
|
|
1,610
|
|
Cash and cash
equivalents, end of period
|
$
|
2,710
|
|
|
$
|
1,967
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Interest
paid
|
$
|
36
|
|
|
$
|
27
|
|
Income taxes
paid
|
$
|
222
|
|
|
$
|
145
|
|
Equity issued in
connection with acquisitions
|
$
|
3,105
|
|
|
$
|
13
|
|
CENTENE
CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING
OPERATIONS
|
|
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
MANAGED CARE
MEMBERSHIP BY STATE
|
Arizona
|
|
597,700
|
|
|
607,000
|
|
|
440,900
|
|
|
223,600
|
|
|
210,900
|
|
|
Arkansas
|
|
52,800
|
|
|
50,700
|
|
|
41,900
|
|
|
40,900
|
|
|
45,400
|
|
|
California
|
|
3,097,600
|
|
|
3,125,400
|
|
|
186,000
|
|
|
183,900
|
|
|
178,700
|
|
|
Florida
|
|
726,200
|
|
|
660,800
|
|
|
510,400
|
|
|
486,500
|
|
|
470,300
|
|
|
Georgia
|
|
493,300
|
|
|
495,500
|
|
|
408,600
|
|
|
406,700
|
|
|
405,000
|
|
|
Illinois
|
|
234,700
|
|
|
239,100
|
|
|
207,500
|
|
|
211,300
|
|
|
209,100
|
|
|
Indiana
|
|
291,000
|
|
|
290,300
|
|
|
282,100
|
|
|
276,700
|
|
|
250,400
|
|
|
Kansas
|
|
144,800
|
|
|
141,100
|
|
|
141,000
|
|
|
137,500
|
|
|
143,000
|
|
|
Louisiana
|
|
375,300
|
|
|
381,200
|
|
|
381,900
|
|
|
358,800
|
|
|
358,900
|
|
|
Massachusetts
|
|
47,100
|
|
|
52,400
|
|
|
61,500
|
|
|
63,700
|
|
|
61,500
|
|
|
Michigan
|
|
2,200
|
|
|
2,600
|
|
|
4,800
|
|
|
6,600
|
|
|
2,700
|
|
|
Minnesota
|
|
9,500
|
|
|
9,500
|
|
|
9,600
|
|
|
9,400
|
|
|
10,900
|
|
|
Mississippi
|
|
323,800
|
|
|
328,300
|
|
|
302,200
|
|
|
301,000
|
|
|
250,600
|
|
|
Missouri
|
|
102,900
|
|
|
100,000
|
|
|
95,100
|
|
|
88,400
|
|
|
82,600
|
|
|
New
Hampshire
|
|
79,700
|
|
|
81,500
|
|
|
71,400
|
|
|
71,900
|
|
|
70,800
|
|
|
New Mexico
|
|
7,100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Ohio
|
|
319,000
|
|
|
314,000
|
|
|
302,700
|
|
|
308,100
|
|
|
287,100
|
|
|
Oregon
|
|
221,500
|
|
|
209,000
|
|
|
98,700
|
|
|
99,800
|
|
|
—
|
|
|
South
Carolina
|
|
113,700
|
|
|
107,700
|
|
|
104,000
|
|
|
104,800
|
|
|
112,600
|
|
|
Tennessee
|
|
20,800
|
|
|
20,100
|
|
|
20,000
|
|
|
20,200
|
|
|
21,400
|
|
|
Texas
|
|
1,037,000
|
|
|
1,036,700
|
|
|
983,100
|
|
|
976,500
|
|
|
969,700
|
|
|
Vermont
|
|
1,600
|
|
|
1,500
|
|
|
1,700
|
|
|
1,500
|
|
|
2,800
|
|
|
Washington
|
|
239,700
|
|
|
226,500
|
|
|
209,400
|
|
|
208,600
|
|
|
214,100
|
|
|
Wisconsin
|
|
76,100
|
|
|
78,400
|
|
|
77,100
|
|
|
78,100
|
|
|
78,600
|
|
|
Total at-risk
membership
|
|
8,615,100
|
|
|
8,559,300
|
|
|
4,941,600
|
|
|
4,664,500
|
|
|
4,437,100
|
|
|
TRICARE
eligibles
|
|
2,815,700
|
|
|
2,819,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-risk
membership
|
|
—
|
|
|
161,400
|
|
|
166,300
|
|
|
169,900
|
|
|
176,600
|
|
|
Total
|
|
11,430,800
|
|
|
11,540,400
|
|
|
5,107,900
|
|
|
4,834,400
|
|
|
4,613,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MANAGED CARE
MEMBERSHIP BY LINE OF BUSINESS
|
Medicaid:
|
|
|
|
|
|
|
|
|
|
|
|
TANF, CHIP
& Foster Care
|
|
5,541,200
|
|
|
5,464,200
|
|
|
3,763,400
|
|
|
3,719,900
|
|
|
3,536,000
|
|
|
ABD &
LTC
|
|
757,500
|
|
|
757,600
|
|
|
478,600
|
|
|
473,700
|
|
|
454,000
|
|
|
Behavioral
Health
|
|
455,800
|
|
|
456,500
|
|
|
456,800
|
|
|
216,700
|
|
|
203,900
|
|
|
Commercial
|
|
1,423,400
|
|
|
1,518,900
|
|
|
146,100
|
|
|
155,600
|
|
|
167,400
|
|
|
Medicare &
Duals
|
|
300,700
|
|
|
303,100
|
|
|
37,400
|
|
|
39,300
|
|
|
28,200
|
|
|
Correctional
|
|
136,500
|
|
|
59,000
|
|
|
59,300
|
|
|
59,300
|
|
|
47,600
|
|
|
Total at-risk
membership
|
|
8,615,100
|
|
|
8,559,300
|
|
|
4,941,600
|
|
|
4,664,500
|
|
|
4,437,100
|
|
|
TRICARE
eligibles
|
|
2,815,700
|
|
|
2,819,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-risk
membership
|
|
—
|
|
|
161,400
|
|
|
166,300
|
|
|
169,900
|
|
|
176,600
|
|
|
Total
|
|
11,430,800
|
|
|
11,540,400
|
|
|
5,107,900
|
|
|
4,834,400
|
|
|
4,613,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF
EMPLOYEES
|
|
28,900
|
|
|
28,000
|
|
|
18,200
|
|
|
17,100
|
|
|
15,800
|
|
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
DAYS IN CLAIMS
PAYABLE (a)
|
43
|
|
|
66
|
|
|
44
|
|
|
45
|
|
|
46
|
|
|
(a) 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. On a pro-forma basis, DCP for
Q1 2016 is 42, reflecting adjusted medical costs to include a full
quarter of Health Net operations.
|
|
|
|
|
|
|
|
|
|
|
|
CASH, INVESTMENTS
AND RESTRICTED DEPOSITS (in millions)
|
Regulated
|
$
|
7,324
|
|
|
$
|
7,682
|
|
|
$
|
3,900
|
|
|
$
|
3,834
|
|
|
$
|
3,667
|
|
|
Unregulated
|
196
|
|
|
139
|
|
|
78
|
|
|
91
|
|
|
82
|
|
|
Total
|
$
|
7,520
|
|
|
$
|
7,821
|
|
|
$
|
3,978
|
|
|
$
|
3,925
|
|
|
$
|
3,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEBT TO
CAPITALIZATION
|
44.8
|
%
|
|
44.6
|
%
|
|
36.0
|
%
|
|
38.4
|
%
|
|
37.1
|
%
|
|
DEBT TO
CAPITALIZATION EXCLUDING NON-RECOURSE DEBT
(b)
|
44.4
|
%
|
|
44.3
|
%
|
|
34.7
|
%
|
|
37.1
|
%
|
|
35.7
|
%
|
|
(b) The
non-recourse debt represents the Company's mortgage note payable
($66 million at June 30, 2016).
|
Debt to
capitalization is calculated as follows: total debt divided by
(total debt + total equity).
|
|
OPERATING
RATIOS
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Health benefits
ratio
|
86.6
|
%
|
|
89.1
|
%
|
|
87.4
|
%
|
|
89.4
|
%
|
General &
administrative expense ratio
|
9.2
|
%
|
|
8.4
|
%
|
|
10.0
|
%
|
|
8.4
|
%
|
General &
administrative expense ratio, excluding Health Net acquisition
related expenses
|
9.0
|
%
|
|
8.4
|
%
|
|
8.7
|
%
|
|
8.4
|
%
|
MEDICAL CLAIMS
LIABILITY
|
|
|
|
The changes in
medical claims liability are summarized as follows (in
millions):
|
|
|
|
Balance, June 30,
2015
|
|
$
|
2,092
|
|
Acquisitions
|
|
1,540
|
|
Incurred related
to:
|
|
|
Current
period
|
|
23,148
|
|
Prior
period
|
|
(252)
|
|
Total
incurred
|
|
22,896
|
|
Paid related
to:
|
|
|
Current
period
|
|
20,780
|
|
Prior
period
|
|
1,798
|
|
Total paid
|
|
22,578
|
|
Balance, June 30,
2016
|
|
$
|
3,950
|
|
Centene's claims reserving process utilizes a consistent
actuarial methodology to estimate Centene's ultimate
liability. Any reduction in the "Incurred related to: Prior
period" amount 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
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. Additionally, as a result of minimum HBR and other
return of premium programs, approximately $22 million of the "Incurred related to: Prior
period" was recorded as a reduction to premium revenues.
The amount of the "Incurred related to: Prior period" above
represents favorable development and includes the effects of
reserving under moderately adverse conditions, new markets where we
use a conservative approach in setting reserves during the initial
periods of operations, receipts from other third party payors
related to coordination of benefits and lower medical utilization
and cost trends for dates of service June 30, 2015 and
prior.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/centene-corporation-reports-2016-second-quarter-results-300303676.html
SOURCE Centene Corporation