Centene Corporation (CNC)

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Centene Corporation (CNC)

Q4 2009 Earnings Call Transcript

February 9, 2009 8:30 am ET


Ed Kroll - SVP, Finance and IR

Michael Neidorff - Chairman, President and CEO

Bill Scheffel - EVP, CFO and Treasurer

Jesse Hunter - EVP, Corporate Development


Gregg Genova - Deutsche Bank

Brian Wright - Collins Stewart

Kevin Fischbeck - Bank of America

Daryn Miller - Goldman Sachs

Melissa Jaffe - CJI Markets

Tom Carroll - Stifel Nicolaus



Good morning. My name is Al, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Centene fourth quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Ed Kroll, you may begin your conference.

Ed Kroll

Thank you, and good morning, everyone. I'm Ed Kroll, Senior Vice President, Finance, and Investor Relations at Centene Corporation. Thank you for joining our fourth quarter 2009 earnings call. Michael Neidorff, Centene's Chairman and Chief Executive Officer; and, Bill Scheffel, Executive Vice President and Chief Financial Officer of Centene will host this morning's call.

The call is expected to last about 45 minutes, and may also be accessed through our Web site at centene.com. A replay will be available shortly after the call's completion, also on our Web site at centene.com, or by dialing 800-642-1687 in the US and Canada, or outside those countries, 706-645-9291, the access code, 51681793.

Any remarks that Centene may make about future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in Centene's most recently filed Form 10-Q dated October 27, 2009 as well as other SEC filings.

Centene anticipates that subsequent events and developments will cause its estimates to change. While the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

With that, I'd like to turn the call over to Chairman and CEO, Michael Neidorff. Michael?

Michael Neidorff

Thank you, Ed. Good morning, everyone, and thank you for joining Centene's fourth quarter and full year 2009 earnings call. Before commenting on what was another solid quarter and full year performance, I would like to make some overview comments regarding the economy, our recent fall on stock offering, and Federal health reform. I would then briefly review some of the highlights of the fourth quarter and the year, and then the call over to Bill who will walk you through the financial details.

It was this time last year when I first spoke about a global financial realignment taking place as a result of the 2008 economic crisis. A new era ensued in which states began facing high unemployment rates, severe budget deficits, and an expanding Medicaid eligible population. Consequently, Centene's cost effective and quality programs have become even more important to our existing and potential state customers. We need to help states stretch budget dollars further, while enhancing the access to care for vulnerable populations. It is also important for us to be a strong and reliable financial partner for our state customers with a focus on liquidity and capital adequacy, so we must be prudent balance sheet managers.

Consistent with this philosophy, we made an already strong balance sheet even stronger by raising $104.5 million in a follow-on equity offering in January 2010. These proceeds allow us to reduce our debt-to-cap ratio to the low mid-20s from the low 30s, and to reload our $300 million revolver to where the full amount is available.

It is generally recognized in our industry that a strong balance sheet enhances the ability to pursue M&A opportunities and new state contracts. We're always selective in choosing our growth opportunities. But this offering gives us additional flexibility to move quickly to take advantage of those targets that meet our strict accretion and return criteria. We look forward to reporting to you in the future on the effective deployment of this capital, and know fully, we will be judged on how we use it.

The reset that began in 2008 is not complete. It is an ongoing process. And as I said on our 2010 earnings guidance call last month, 2010 will be a realignment year for our industry, with even tighter state budgets and uncertainties surrounding levels of federal stimulus release. Though on the latter point, the recent budget proposal for fiscal year 2011 from President Obama was somewhat encouraging. It included $25 billion to extend increased FMAP payments through June of 2011.

The outcome for federal health reform remains uncertain. We are closely watching developments with a careful eye on what is meeting real needs and what is politics at work, or a combination of both. However, we're well prepared and continue to believe that the diversity of our multi-line strategy has positioned us to operate more effectively in whatever post-reform environment ensues. Regardless of federal health reform outcomes, states will continue to have a need for our products and services, and maybe more so. And we would expect to continue to meet their needs as well as those of new states.

Now, switching gears, I would like to mention some of the highlights of the past year. Our team has done a tremendous job, demonstrating its ability to successfully manage this business through a very difficult and uncertain economic times.

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