Form 8-K CENTENE CORP For: Feb 03

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February 3, 2015 6:02 AM UTC



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February�3, 2015

CENTENE CORPORATION
(Exact Name of Registrant as Specified in Charter)

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)
Registrants telephone number, including area code: (314) 725-4477
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o����Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o����Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o����Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o����Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(a) On February�3, 2015, we issued a press release announcing our financial results for the fourth quarter and year ended December�31, 2014. The full text of the press release is included as Exhibit 99.1 to this report. The information contained in the website cited in the press release is not a part of this report.

The information contained in this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. Nor shall such information or exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such a filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
The following exhibit relating to Item 2.02 shall be deemed to be furnished and not filed:
99.1 Press release of Centene Corporation issued February�3, 2015, as to financial results for the fourth quarter and year ended December�31, 2014.





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
�
�
CENTENE CORPORATION
�
�
�
�
�
Date:
February�3, 2015
By:
�
/s/ William N. Scheffel
�
�
�
�
William N. Scheffel
Executive Vice President & Chief Financial Officer





EXHIBIT INDEX
Exhibit Number
�
Description
99.1
�
Press release* of Centene Corporation issued February 3, 2015, as to financial results for the fourth quarter and year ended December 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.








N E W S R E L E A S E������������������������������������ �������� ��������������������������������������������
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

FOR IMMEDIATE RELEASE

- CENTENE CORPORATION REPORTS 2014 FOURTH QUARTER AND FULL YEAR RESULTS -
-- 2014 Diluted earnings per share (EPS) from continuing operations for the year of $4.45 --
-- Board of Directors declares two-for-one stock split --

ST. LOUIS, MISSOURI (February�3, 2015) -- Centene Corporation (NYSE: CNC) today announced its financial results for the quarter and year ended December�31, 2014.� The following discussions, with the exception of cash flow information, are in the context of continuing operations.

2014 Results
�
Q4
�
Full Year
�
Premium and Service Revenues (in millions)
$
4,415

�
$
15,667

�
Consolidated Health Benefits Ratio
89.3
%
�
89.3
%
�
General & Administrative expense ratio
8.2
%
�
8.4
%
�
Diluted earnings per share (EPS)
$
1.74

�
$
4.45

�
Total cash flow from operations (in millions)
$
369

�
$
1,223

�

On February 2, 2015, the Board of Directors declared a two-for-one split of Centene's common stock in the form of a 100% stock dividend to be distributed on February 19, 2015 to stockholders of record on February 12, 2015. The impact of the stock split is not reflected in this press release.

Michael F. Neidorff, Centene's Chairman and Chief Executive Officer, stated, By any measure, 2014 was a significant year in the history of Centene.� Membership grew by 1.2 million lives, revenue by almost 50%, and EPS by 55%.� We are more diversified by product and geography - including our entry into the international market.� We look forward to continued progress in 2015 and beyond.

Fourth Quarter and Full Year Highlights

"
December�31, 2014 managed care membership of 4.1 million, an increase of 1.2 million members, or 41% over 2013.

"
Premium and service revenues for the fourth quarter of $4.4 billion, representing 54% growth compared to the fourth quarter of 2013 and $15.7 billion for 2014, representing 49% growth year over year.

"
Health Benefits Ratio of 89.3% for the fourth quarter 2014, compared to 88.1% in the fourth quarter of 2013 and 89.3% for the full year 2014 compared to 88.6% for the full year 2013.


1


"
General and Administrative expense ratio of 8.2% for the fourth quarter of 2014, compared to 8.9% in the fourth quarter of 2013 and 8.4% for the full year 2014 compared to 8.8% for 2013.

"
Operating cash flow of $369 million and $1.2 billion for the fourth quarter and full year of 2014, representing 3.5 and 4.6 times net earnings, respectively.

"
Diluted EPS for the fourth quarter of 2014 of $1.74, compared to $0.84 in 2013.

Other Events
�
"
In February 2015, our Louisiana subsidiary, Louisiana Healthcare Connections, began operating under a new contract with the Louisiana Department of Health and Hospitals to serve Bayou Health (Medicaid) beneficiaries. Members previously served under the shared savings program were transitioned to the at-risk program on February 1, 2015.

"
In February 2015, our South Carolina subsidiary, Absolute Total Care, began operating under a new contract with the South Carolina Department of Health and Human Services and the Centers for Medicare and Medicaid Services to serve dual-eligible members as part of the state's dual demonstration program.

"
In February 2015, our Indiana subsidiary, Managed Health Services, began operating under an expanded contract with the Indiana Family & Social Services Administration to provide Medicaid services under the state's Healthy Indiana Plan 2.0 program.

"
In February 2015, Centurion began operating under a new contract with the State of Vermont Department of Corrections to provide comprehensive correctional healthcare services.

"
In January 2015, we signed a definitive agreement to acquire Agate Resources, Inc., a diversified holding company that offers an array of healthcare products and services to Oregon residents. The transaction is expected to close in the third quarter of 2015, subject to customary closing conditions, including Oregon regulatory approval.

"
In January 2015, our Mississippi subsidiary, Magnolia Health, began operating under a new contract with the State of Mississippi to provide services under the Children's Health Insurance Program (CHIP).

"
In January 2015, we expanded our participation in Health Insurance Marketplaces to include members in certain regions of Illinois and Wisconsin.

"
In December 2014, our subsidiary, Cenpatico of Arizona, in partnership with University of Arizona Health Plan, was selected by the Arizona Department of Health Services/Division of Behavioral Health Services to be the Regional Behavioral Health Authority for the new southern geographic service area. The new contract is expected to commence in the fourth quarter of 2015.

"
In December 2014, our Indiana subsidiary, Managed Health Services, was selected by the Indiana Family & Social Services Administration to begin contract negotiations to serve its ABD Medicaid enrollees who will qualify for the new Hoosier Care Connect Program. The contract is expected to commence in the first half of 2015.

Awards

"
In January 2015, NurseWise was awarded the Health Information Product 2 certification from the National Committee for Quality Assurance.

"
In November 2014, Centene's Start Smart For Your Baby Texting Program was awarded the Children's Health Award by the Medicaid Health Plans of America. The Best Practices Awards honor Medicaid health plans for their exemplary programs which have improved the health of Medicaid enrollees by ensuring high-quality care.



2


Membership

The following table sets forth the Company's membership by state for its managed care organizations:
�
December 31,
�
2014
�
2013
Arizona
204,000

�
163,700

Arkansas
38,400

�


California
163,900

�
97,200

Florida
425,700

�
222,000

Georgia
389,100

�
318,700

Illinois
87,800

�
22,300

Indiana
197,700

�
195,500

Kansas
143,300

�
139,900

Louisiana
152,900

�
152,300

Massachusetts
48,400

�
22,600

Minnesota
9,500

�


Mississippi
108,700

�
78,300

Missouri
71,000

�
59,200

New Hampshire
62,700

�
33,600

Ohio
280,100

�
173,200

South Carolina
109,700

�
91,900

Tennessee
21,000

�
20,700

Texas
971,000

�
935,100

Washington
194,400

�
82,100

Wisconsin
83,200

�
71,500

Total at-risk membership
3,762,500

�
2,879,800

Non-risk membership
298,400

�


Total
4,060,900

�
2,879,800


At December�31, 2014, the Company served 201,300 Medicaid members in Medicaid expansion programs in California, Illinois, Massachusetts, New Hampshire, Ohio and Washington included in the table above.

The following table sets forth our membership by line of business:

�
December 31,
�
2014
�
2013
Medicaid
2,754,900

�
2,054,700

CHIP & Foster Care
222,700

�
275,100

ABD, Medicare & Duals
392,700

�
305,300

Health Insurance Marketplaces
74,500

�


Hybrid Programs
18,900

�
19,000

LTC
60,800

�
37,800

Behavioral Health
197,000

�
156,600

Correctional Healthcare Services
41,000

�
31,300

Total at-risk membership
3,762,500

�
2,879,800

Non-risk membership
298,400

�


Total
4,060,900

�
2,879,800


�

3


The following table identifies our dual eligible membership by line of business. The membership tables above include these members.
�
December 31,
�
2014
�
2013
ABD
118,300

�
71,700
LTC
35,900

�
28,800
Medicare
10,400

�
6,500
Total
164,600

�
107,000

Statement of Operations: Three Months Ended December�31, 2014

"
For the fourth quarter of 2014, Premium and Service Revenues increased 54% to $4.4 billion from $2.9 billion in the fourth quarter of 2013. The increase was primarily a result of the expansions in Florida, Ohio, Washington, Texas and Illinois, growth in the AcariaHealth specialty pharmacy business, the addition of California and New Hampshire operations and our participation in the Health Insurance Marketplaces.

"
Consolidated HBR of 89.3% for the fourth quarter of 2014 represents an increase from 88.1% in the comparable period in 2013 and a decrease from 89.7% in the third quarter of 2014. The year over year HBR increase is primarily attributable to an increase in complex care membership. The sequential quarter decrease reflects the impact of retroactive rate increases recorded in the fourth quarter, partially offset by flu costs.

"
The following table compares the results for new business and existing business for the quarters ended December 31:
�
2014
�
2013
Premium and Service Revenue
�
�
�
New business
30
%
�
17
%
Existing business
70
%
�
83
%
�
�
�
�
HBR
�
�
�
New business
89.4
%
�
95.4
%
Existing business
89.2
%
�
86.6
%

New business HBR decreased from the third quarter of 2014 primarily as a result of the rate adjustments associated with the long term care program in Florida.

"
Consolidated G&A expense ratio for the fourth quarter of 2014 was 8.2%, compared to 8.9% in the prior year. �The year over year decrease primarily reflects the leveraging of expenses over higher revenues in 2014, offset by the acquisition of U.S. Medical Management and start-up of Health Insurance Marketplaces which operate at higher G&A ratios.

"
Diluted earnings per share of $1.74 in the fourth quarter of 2014, compared to $0.84 in 2013.

Statement of Operations: Year Ended December�31, 2014

"
Premium and service revenues increased 49% in the year ended December�31, 2014 over the corresponding period in 2013 as a result of expansions in Florida, Ohio, Washington, Texas and Illinois, growth in the AcariaHealth business, the addition of the California and New Hampshire operations and our participation in the Health Insurance Marketplaces.

"
The consolidated HBR for the year ended December�31, 2014, of 89.3% was an increase of 70 basis points over the comparable period in 2013. The increase compared to last year is primarily attributable to an increase in complex care membership over the prior year.

"
The consolidated G&A expense ratio for the year ended December�31, 2014 was 8.4%, compared to 8.8% in 2013. The year over year decrease in the G&A ratio reflects the leveraging of expenses over higher revenues in 2014, offset

4


by the acquisition of U.S. Medical Management and start up of Health Insurance Marketplaces which operate at higher G&A ratios.

"
Diluted earnings per share of $4.45 compared to $2.87 in 2013.

Balance Sheet and Cash Flow

At December�31, 2014, the Company had cash, investments and restricted deposits of $3.1 billion, including $85 million held by its unregulated entities. Medical claims liabilities totaled $1.7 billion, representing 44.2 days in claims payable. Total debt was $893 million, which includes $75 million of borrowings on the $500 million revolving credit facility at quarter end. Debt to capitalization was 32.1% at December�31, 2014, excluding the $70 million non-recourse mortgage note. Cash flow from operations for the three months ended December�31, 2014, was $369 million, or 3.5 times net earnings.

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, September 30, 2014
43.1

�
Timing of claim payments
1.1

�
Days in claims payable, December 31, 2014
44.2

�
�
�
�

Outlook

The table below depicts the Company's annual GAAP guidance for 2015.
�
�
Full Year 2015
�
�
�
Low
�
High�
�
Premium and Service Revenues (in millions)
�
$
20,300

�
$
20,800

�
Diluted EPS
�
$
5.05

�
$
5.35

�
Consolidated Health Benefits Ratio
�
89.2
%
�
89.6
%
�
General & Administrative expense ratio
�
8.0
%
�
8.4
%
�
Effective Tax Rate
�
48.0
%
�
50.0
%
�
Diluted Shares Outstanding (in thousands)
�
61,500

�
62,000

�
�
�
�
�
�
�
The guidance in the table above does not include the impact of the recently announced acquisition of Agate Resources, Inc.

Conference Call
As previously announced, the Company will host a conference call Tuesday, February�3, 2015, at 8:30 A.M. (Eastern Time) to review the financial results for the fourth quarter and year ended December�31, 2014, and to discuss its business outlook.� Michael F. Neidorff and William N. Scheffel will host the conference call.�
Investors and other interested parties are invited to listen to the conference call by dialing 1-866-739-7850 in the U.S. and Canada; +1-412-902-6577 from abroad; or via a live, audio webcast on the Company's website at www.centene.com, under the Investors section. Or, participants can register for the conference call in advance by navigating to: http://dpregister.com/10058403, to receive a dial-in number upon registration. 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, February 2, 2016, at the aforementioned URL. In addition, a digital audio playback will be available until 9:00 AM Eastern Time on Wednesday, February 11, 2015, by dialing 1-877-344-7529 in the U.S. and Canada, or +1-412-317-0088 from abroad, and entering access code 10058403.
Other Information
The discussion in the third bullet under the heading "Statement of Operations: Three Months Ended December�31, 2014" contains financial information for new and existing businesses. Existing businesses are primarily state markets or significant geographic expansion in an existing state or product that we have managed for four complete quarters. New businesses are primarily new state markets or significant geographic expansion in an existing state or product that conversely, we have not managed for four complete quarters.

5



About Centene Corporation

Centene Corporation, a Fortune 500 company, is a diversified leading multi-national healthcare enterprise that provides programs and 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/hybrid programs, and Medicare (Special Needs Plans). The Company 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.

The information provided in this press release contains forward-looking statements that relate to future events and future financial performance of Centene. Subsequent events and developments may cause the Company's estimates to change. The Company disclaims any obligation to update this forward-looking financial information in the future. Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause Centene's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ from projections or estimates due to a variety of important factors, including Centene's ability to accurately predict and effectively manage health benefits and other operating expenses and reserves; competition; membership and revenue projections; timing of regulatory contract approval; changes in healthcare practices; changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder; changes in expected contract start dates; changes in expected closing dates, estimated purchase price and accretion for acquisitions; inflation; foreign currency fluctuations; provider and state contract changes; new technologies; advances in medicine; 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 Medicare or Medicaid managed care contracts by federal or state governments; the outcome of pending legal proceedings; availability of debt and equity financing, on terms that are favorable to us; and general economic and market conditions, as well as those factors disclosed in the Company's publicly filed documents.


[Tables Follow]

6



CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except share data)
(Unaudited)

�
December�31,
2014
�
December�31,
2013
ASSETS
�
�
�
Current assets:
�
�
�
Cash and cash equivalents of continuing operations
$
1,546

�
$
974

Cash and cash equivalents of discontinued operations
64

�
64

Total cash and cash equivalents
1,610

�
1,038

Premium and related receivables
912

�
429

Short term investments
177

�
102

Other current assets
324

�
217

Other current assets of discontinued operations
11

�
14

Total current assets
3,034

�
1,800

Long term investments
1,280

�
792

Restricted deposits
100

�
47

Property, software and equipment, net
445

�
395

Goodwill
751

�
348

Intangible assets, net
123

�
49

Other long term assets
80

�
60

Long term assets of discontinued operations
25

�
38

Total assets
$
5,838

�
$
3,529

LIABILITIES AND STOCKHOLDERS EQUITY
�

�
�

Current liabilities:
�

�
�

Medical claims liability
$
1,723

�
$
1,112

Accounts payable and accrued expenses
751

�
338

Return of premium payable
236

�
38

Unearned revenue
168

�
38

Current portion of long term debt
5

�
3

Current liabilities of discontinued operations
17

�
30

Total current liabilities
2,900

�
1,559

Long term debt
888

�
666

Other long term liabilities
158

�
60

Long term liabilities of discontinued operations
1

�
1

Total liabilities
3,947

�
2,286

Commitments and contingencies


�


Redeemable noncontrolling interest
148

�


Stockholders equity:
�

�
�

Common stock, $.001 par value; authorized 200,000,000 shares; 62,137,432 issued and 59,216,708 outstanding at December 31, 2014, and 58,673,215 issued and 55,319,239 outstanding at December 31, 2013


�


Additional paid-in capital
840

�
594

Accumulated other comprehensive loss
(1
)
�
(3
)
Retained earnings
1,003

�
732

Treasury stock, at cost (2,920,724 and 3,353,976 shares, respectively)
(98
)
�
(89
)
Total Centene stockholders equity
1,744

�
1,234

Noncontrolling interest
(1
)
�
9

Total stockholders equity
1,743

�
1,243

Total liabilities and stockholders equity
$
5,838

�
$
3,529


7



CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)
�
Three Months Ended December 31,
�
Year Ended
December 31,
�
2014
�
2013
�
2014
�
2013
Revenues:
�
�
�
�
�
�
�
Premium
$
4,016

�
$
2,738

�
$
14,198

�
$
10,153

Service
399

�
121

�
1,469

�
373

Premium and service revenues
4,415

�
2,859

�
15,667

�
10,526

Premium tax and health insurer fee
310

�
73

�
893

�
337

Total revenues
4,725

�
2,932

�
16,560

�
10,863

Expenses:
�
�
�
�
�
�
�
Medical costs
3,585

�
2,412

�
12,678

�
8,995

Cost of services
345

�
108

�
1,280

�
327

General and administrative expenses
364

�
256

�
1,314

�
931

Premium tax expense
206

�
71

�
698

�
333

Health insurer fee expense
31

�


�
126

�


Total operating expenses
4,531

�
2,847

�
16,096

�
10,586

Earnings from operations
194

�
85

�
464

�
277

Other income (expense):
�
�
�
�
�
�
�
Investment and other income
10

�
5

�
28

�
19

Interest expense
(10
)
�
(6
)
�
(35
)
�
(27
)
Earnings from continuing operations, before income tax expense
194

�
84

�
457

�
269

Income tax expense
90

�
34

�
196

�
107

Earnings from continuing operations, net of income tax expense
104

�
50

�
261

�
162

Discontinued operations, net of income tax expense of $0, $3, $1, and $2, respectively
1

�
5

�
3

�
4

Net earnings
105

�
55

�
264

�
166

(Earnings) loss attributable to noncontrolling interests
2

�
(2
)
�
7

�
(1
)
Net earnings attributable to Centene Corporation
$
107

�
$
53

�
$
271

�
$
165

�
�
�
�
�
�
�
�
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing operations, net of income tax expense
$
106

�
$
48

�
$
268

�
$
161

Discontinued operations, net of income tax expense
1

�
5

�
3

�
4

Net earnings
$
107

�
$
53

�
$
271

�
$
165

�
�
�
�
�
�
�
�
Net earnings per common share attributable to Centene Corporation:
Basic:
�
�
�
�
�
�
�
Continuing operations
$
1.80

�
$
0.87

�
$
4.61

�
$
2.98

Discontinued operations
0.02

�
0.10

�
0.05

�
0.07

Basic earnings per common share
$
1.82

�
$
0.97

�
$
4.66

�
$
3.05

�
�
�
�
�
�
�
�
Diluted:
�
�
�
�
�
�
�
Continuing operations
$
1.74

�
$
0.84

�
$
4.45

�
$
2.87

Discontinued operations
0.02

�
0.09

�
0.05

�
0.07

Diluted earnings per common share
$
1.76

�
$
0.93

�
$
4.50

�
$
2.94

�
�
�
�
�
�
�
�
Weighted average number of common shares outstanding:
�
�
�
�
Basic
58,816,006

�
54,906,274

�
58,172,882

�
54,126,545

Diluted
60,857,893

�
57,078,257

�
60,180,106

�
56,247,173


8



CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
�
Year Ended December 31,
�
2014
�
2013
Cash flows from operating activities:
�
�
�
Net earnings
$
264

�
$
166

Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization
89

�
67

Stock compensation expense
48

�
36

Deferred income taxes
(42
)
�
(2
)
Changes in assets and liabilities
�

�
�

Premium and related receivables
(463
)
�
(143
)
Other current assets
(5
)
�
(80
)
Other assets
(8
)
�
(1
)
Medical claims liabilities
609

�
172

Unearned revenue
129

�
3

Accounts payable and accrued expenses
506

�
152

Other operating activities
96

�
12

Net cash provided by operating activities
1,223

�
382

Cash flows from investing activities:
�

�
�

Capital expenditures
(103
)
�
(68
)
Purchases of investments
(1,015
)
�
(790
)
Sales and maturities of investments
406

�
579

Investments in acquisitions, net of cash acquired
(136
)
�
(63
)
Net cash used in investing activities
(848
)
�
(342
)
Cash flows from financing activities:
�

�
�

Proceeds from exercise of stock options
8

�
9

Proceeds from borrowings
1,875

�
180

Payment of long term debt
(1,674
)
�
(41
)
Proceeds from stock offering


�
15

Excess tax benefits from stock compensation
19

�
6

Common stock repurchases
(29
)
�
(20
)
Contribution from noncontrolling interest
6

�
8

Debt issue costs
(7
)
�
(3
)
Net cash provided by financing activities
198

�
154

Effect of exchange rate changes on cash and cash equivalents
(1
)
�


Net increase in cash and cash equivalents
572

�
194

Cash and cash equivalents, beginning of period
1,038

�
844

Cash and cash equivalents, end of period
$
1,610

�
$
1,038

Supplemental disclosures of cash flow information:
�

�
�

Interest paid
$
40

�
$
30

Income taxes paid
$
237

�
$
85

Equity issued in connection with acquisitions
$
190

�
$
75






9



CENTENE CORPORATION
SUPPLEMENTAL FINANCIAL DATA FROM CONTINUING OPERATIONS
�
Q4
�
Q3
�
Q2
�
Q1
�
Q4
�
2014
�
2014
�
2014
�
2014
�
2013
MANAGED CARE MEMBERSHIP
�
�
�
�
�
�
�
�
�
Arizona
204,000

�
202,500

�
189,200

�
169,800

�
163,700

Arkansas
38,400

�
36,600

�
31,100

�
16,400

�


California
163,900

�
144,700

�
131,100

�
118,100

�
97,200

Florida
425,700

�
411,200

�
313,800

�
230,300

�
222,000

Georgia
389,100

�
382,600

�
373,000

�
331,400

�
318,700

Illinois
87,800

�
31,300

�
29,500

�
22,400

�
22,300

Indiana
197,700

�
199,500

�
200,500

�
198,700

�
195,500

Kansas
143,300

�
144,200

�
146,100

�
145,000

�
139,900

Louisiana
152,900

�
150,800

�
148,600

�
149,800

�
152,300

Massachusetts
48,400

�
46,600

�
47,200

�
50,800

�
22,600

Minnesota
9,500

�
9,500

�
9,400

�
9,400

�


Mississippi
108,700

�
99,300

�
97,400

�
85,400

�
78,300

Missouri
71,000

�
64,900

�
58,700

�
58,100

�
59,200

New Hampshire
62,700

�
56,600

�
39,500

�
37,100

�
33,600

Ohio
280,100

�
261,000

�
225,900

�
181,800

�
173,200

South Carolina
109,700

�
106,500

�
101,800

�
96,300

�
91,900

Tennessee
21,000

�
21,200

�
21,300

�
21,100

�
20,700

Texas
971,000

�
961,100

�
921,500

�
904,000

�
935,100

Washington
194,400

�
192,500

�
193,800

�
151,700

�
82,100

Wisconsin
83,200

�
74,700

�
67,300

�
70,800

�
71,500

Total at-risk membership
3,762,500

�
3,597,300

�
3,346,700

�
3,048,400

�
2,879,800

Non-risk membership
298,400

�
303,500

�


�


�


TOTAL
4,060,900

�
3,900,800

�
3,346,700

�
3,048,400

�
2,879,800

�
�
�
�
�
�
�
�
�
�
Medicaid
2,754,900

�
2,578,300

�
2,385,500

�
2,169,100

�
2,054,700

CHIP & Foster Care
222,700

�
247,700

�
261,800

�
269,200

�
275,100

ABD, Medicare & Duals
392,700

�
383,400

�
329,700

�
300,500

�
305,300

Health Insurance Marketplaces
74,500

�
76,000

�
75,700

�
39,700

�


Hybrid Programs
18,900

�
19,900

�
17,000

�
14,400

�
19,000

LTC
60,800

�
55,200

�
53,500

�
51,800

�
37,800

Behavorial Health
197,000

�
195,500

�
182,200

�
162,700

�
156,600

Correctional Healthcare Services
41,000

�
41,300

�
41,300

�
41,000

�
31,300

Total at-risk membership
3,762,500

�
3,597,300

�
3,346,700

�
3,048,400

�
2,879,800

Non-risk membership
298,400

�
303,500

�


�


�


TOTAL
4,060,900

�
3,900,800

�
3,346,700

�
3,048,400

�
2,879,800

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
REVENUE PER MEMBER PER MONTH(a)
$
360

�
$
354

�
$
344

�
$
340

�
$
321

�
�
�
�
�
�
�
�
�
�
CLAIMS(a)
�
�
�
�
�
�
�
�
�
Period-end inventory
1,086,600

�
1,021,200

�
771,900

�
832,600

�
642,100

Average inventory
806,000

�
660,200

�
603,700

�
584,700

�
533,000

Period-end inventory per member
0.29

�
0.28

�
0.23

�
0.27

�
0.22

(a)�Revenue per member and claims information are presented for the Managed Care at-risk members.
�
�
�
�
�
�
�
�
�
�
NUMBER OF EMPLOYEES
13,400

�
12,900

�
12,300

�
11,200

�
8,800



10


�
Q4
�
Q3
�
Q2
�
Q1
�
Q4
�
2014
�
2014
�
2014
�
2014
�
2013
�
�
�
�
�
�
�
�
�
�
DAYS IN CLAIMS PAYABLE�(b)
44.2

�
43.1

�
42.9

�
42.6

�
42.4

(b)�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, INVESTMENTS AND RESTRICTED DEPOSITS (in millions)
Regulated
$
3,018

�
$
2,829

�
$
2,353

�
$
2,167

�
$
1,870

Unregulated
85

�
70

�
50

�
49

�
45

TOTAL
$
3,103

�
$
2,899

�
$
2,403

�
$
2,216

�
$
1,915

�
�
�
�
�
�
�
�
�
�
DEBT TO CAPITALIZATION
33.9
%
�
36.8
%
�
37.5
%
�
36.5
%
�
35.0
%
DEBT TO CAPITALIZATION EXCLUDING NON-RECOURSE DEBT(c)
32.1
%
�
35.0
%
�
35.5
%
�
34.4
%
�
32.4
%
(c)�The non-recourse debt represents the Company's mortgage note payable ($70 million at December 31, 2014).
Debt to Capitalization is calculated as follows: total debt divided by (total debt + total equity).
Operating Ratios:
�
Three Months Ended December 31,
�
Year Ended December 31,
�
2014
�
2013
�
2014
�
2013
Health Benefits Ratios:
�
�
�
�
�
�
�
Medicaid, CHIP, Foster Care & Health Insurance Marketplaces
86.9
%
�
86.5
%
�
86.3
%
�
87.5
%
ABD, LTC & Medicare
92.3

�
90.4

�
93.5

�
90.4

Specialty Services
87.2

�
87.7

�
85.5

�
85.4

��Total
89.3

�
88.1

�
89.3

�
88.6

�
�
�
�
�
�
�
�
Total General & Administrative Expense Ratio
8.2
%
�
8.9
%
�
8.4
%
�
8.8
%
MEDICAL CLAIMS LIABILITY (In millions)

The changes in medical claims liability are summarized as follows:

Balance, December 31, 2013
�
$
1,112

Incurred related to:
�
�
Current period
�
12,820

Prior period
�
(142
)
Total incurred
�
12,678

Paid related to:
�
�
Current period
�
11,122

Prior period
�
945

Total paid
�
12,067

Balance, December 31, 2014
�
$
1,723


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.

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 prior to December�31, 2013.

11

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