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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________
FORM 10-Q
____________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to
____________________________________________
Commission file number: 001-31826
____________________________________________
CENTENE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware42-1406317
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
7700 Forsyth Boulevard 
St. Louis,Missouri63105
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (314) 725-4477 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock $0.001 Par ValueCNCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large Accelerated FilerAccelerated filer
Non-accelerated filer   Smaller reporting company
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  
As of October 16, 2020, the registrant had 579,797,682 shares of common stock outstanding.



CENTENE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 PAGE
  
Part I
Financial Information
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.


Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

All statements, other than statements of current or historical fact, contained in this filing are forward-looking statements. Without limiting the foregoing, forward-looking statements often use words such as “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “seek,” “target,” “goal,” “may,” “will,” “would,” “could,” “should,” “can,” “continue” and other similar words or expressions (and the negative thereof). Centene Corporation (Centene, the Company, our or we) intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor provisions. In particular, these statements include, without limitation, statements about our future operating or financial performance, market opportunity, growth strategy, competition, expected activities in completed and future acquisitions, including statements about the impact of our recently completed acquisition (the WellCare Acquisition) of WellCare Health Plans, Inc. (WellCare), other recent and future acquisitions, investments and the adequacy of our available cash resources. These statements may be found in the various sections of this filing, such as Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Part II, Item 1. “Legal Proceedings,” and Part II, Item 1A “Risk Factors.” 

These forward-looking statements reflect our current views with respect to future events and are based on numerous assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors we believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties and are subject to change because they relate to events and depend on circumstances that will occur in the future, including economic, regulatory, competitive and other factors that may cause our or our 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. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions.

All forward-looking statements included in this filing are based on information available to us on the date of this filing. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this filing, whether as a result of new information, future events or otherwise, after the date of this filing. You should not place undue reliance on any forward-looking statements, as actual results may differ materially from projections, estimates, or other forward-looking statements due to a variety of important factors, variables and events including but not limited to:

the impact of COVID-19 on global markets, economic conditions, the healthcare industry and our results of operations, which is unknown, and the response by governments and other third parties;
uncertainty as to our expected financial performance during the period of integration of the WellCare Acquisition;
our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, including fluctuations in medical utilization rates due to the impact of COVID-19;
the possibility that the expected synergies and value creation from the WellCare Acquisition will not be realized, or will not be realized within the expected time period;
the risk that unexpected costs will be incurred in connection with the integration of the WellCare Acquisition or that the integration of WellCare will be more difficult or time consuming than expected;
unexpected costs, charges or expenses resulting from the WellCare Acquisition;
the inability to retain key personnel;
disruption from the integration of the WellCare Acquisition, including potential adverse reactions or changes to business relationships with customers, employees, suppliers or regulators, making it more difficult to maintain business and operational relationships;
the risk that we may not be able to effectively manage our expanded operations;
competition;
membership and revenue declines or unexpected trends;
changes in healthcare practices, new technologies, and advances in medicine;
increased healthcare costs;
changes in economic, political or market conditions;
changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act (ACA) and the Health Care and Education Affordability Reconciliation Act, collectively referred to as the ACA and any regulations enacted thereunder that may result from changing political conditions or judicial actions, including the ultimate outcome in “Texas v. United States of America” regarding the constitutionality of the ACA;
rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;
i

Table of Contents
our ability to adequately price products on the Health Insurance Marketplaces and other commercial and Medicare products;
tax matters;
disasters or major epidemics;
the outcome of legal and regulatory proceedings;
changes in expected contract start dates;
provider, state, federal, foreign and other contract changes and timing of regulatory approval of contracts;
the expiration, suspension, or termination of our contracts with federal or state governments (including but not limited to Medicaid, Medicare, TRICARE or other customers);
the difficulty of predicting the timing or outcome of pending or future litigation or government investigations;
challenges to our contract awards;
cyber-attacks or other privacy or data security incidents;
the possibility that the expected synergies and value creation from acquired businesses, including businesses we may acquire in the future, will not be realized, or will not be realized within the expected time period;
the exertion of management’s time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental or third party consents or approvals for acquisitions;
disruption caused by significant completed and pending acquisitions, including, among others, the WellCare Acquisition, making it more difficult to maintain business and operational relationships;
the risk that unexpected costs will be incurred in connection with the completion and/or integration of acquisition transactions;
changes in expected closing dates, estimated purchase price and accretion for acquisitions;
the risk that acquired businesses will not be integrated successfully;
restrictions and limitations in connection with our indebtedness;
our ability to maintain or achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;
availability of debt and equity financing, on terms that are favorable to us;
inflation; and
foreign currency fluctuations.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other factors that may affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission (SEC), including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Item 1A. “Risk Factors” of Part II of this filing contains a further discussion of these and other important factors that could cause actual results to differ from expectations. Due to these important factors and risks, we cannot give assurances with respect to our future performance, including without limitation our ability to maintain adequate premium levels or our ability to control our future medical and selling, general and administrative costs.



ii

Table of Contents
Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures in this report, 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 that excludes amortization of acquired intangible assets and acquisition related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company’s performance over time. The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
GAAP net earnings$568 $95 $1,820 $1,112 
Amortization of acquired intangible assets164 65 527 194 
Acquisition related expenses62 25 446 66 
Other adjustments (1)
— 271 12 271 
Income tax effects of adjustments (2)
(53)(54)(178)(95)
Adjusted net earnings $741 $402 $2,627 $1,548 
GAAP diluted earnings per share (EPS)$0.97 $0.23 $3.16 $2.65 
Amortization of acquired intangible assets (3)
0.21 0.12 0.70 0.35 
Acquisition related expenses (4)
0.08 0.04 0.65 0.12 
Other adjustments (1)
— 0.57 0.05 0.57 
Adjusted Diluted EPS $1.26 $0.96 $4.56 $3.69 
(1)    Other adjustments include the following items for the nine months ended September 30, 2020: (a) gain related to the divestiture of certain products of our Illinois health plan of $104 million, or $0.10 per diluted share, net of an income tax expense of $0.08; (b) non-cash impairment of our third-party care management software business of $72 million, or $0.10 per diluted share, net of an income tax benefit of $0.03; and (c) debt extinguishment costs of $44 million, or $0.05 per diluted share, net of an income tax benefit of $0.02. Other adjustments for the three and nine months ended September 30, 2019 includes the non-cash goodwill and intangible asset impairment of $271 million, or $0.57 per diluted share. The impairment is net of an income tax benefit of $0.08 for the three and nine months ended September 30, 2019.
(2)    The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment.
(3)    The amortization of acquired intangible assets per diluted share is net of an income tax benefit of $0.07 and $0.03 for the three months ended September 30, 2020 and 2019, respectively, and $0.22 and $0.11 for the nine months ended September 30, 2020 and 2019, respectively.
(4)    Acquisition related expenses per diluted share are net of an income tax benefit of $0.02 and $0.02 for the three months ended September 30, 2020 and 2019, respectively, and $0.12 and $0.04 for the nine months ended September 30, 2020 and 2019, respectively.
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
GAAP selling, general and administrative expenses$2,507 $1,617 $7,146 $4,800 
Acquisition related expenses61 23 426 61 
Adjusted selling, general and administrative expenses$2,446 $1,594 $6,720 $4,739 
iii

Table of Contents
PART I
FINANCIAL INFORMATION

ITEM 1. Financial Statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares in thousands and per share data in dollars)
 September 30, 2020December 31, 2019
(Unaudited)
ASSETS  
Current assets:
  
Cash and cash equivalents
$12,198 $12,123 
Premium and trade receivables
11,670 6,247 
Short-term investments
1,497 863 
Other current assets
1,910 1,090 
Total current assets27,275 20,323 
Long-term investments
9,859 7,717 
Restricted deposits
1,055 658 
Property, software and equipment, net
2,669 2,121 
Goodwill
17,964 6,863 
Intangible assets, net
8,130 2,063 
Other long-term assets
1,412 1,249 
Total assets$68,364 $40,994 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
  
Medical claims liability
$12,899 $7,473 
Accounts payable and accrued expenses
7,102 4,164 
Return of premium payable
1,123 824 
Unearned revenue
582 383 
Current portion of long-term debt
89 88 
Total current liabilities21,795 12,932 
Long-term debt
16,737 13,638 
Other long-term liabilities
3,953 1,732 
Total liabilities42,485 28,302 
Commitments and contingencies
Redeemable noncontrolling interests
36 33 
Stockholders’ equity:
  
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at September 30, 2020 and December 31, 2019
  
Common stock, $0.001 par value; authorized 800,000 shares; 595,622 issued and 579,726 outstanding at September 30, 2020, and 421,508 issued and 415,048 outstanding at December 31, 2019
  
Additional paid-in capital
19,390 7,647 
Accumulated other comprehensive earnings
293 134 
Retained earnings
6,804 4,984 
Treasury stock, at cost (15,896 and 6,460 shares, respectively)
(762)(214)
Total Centene stockholders’ equity25,725 12,551 
Nonredeemable Noncontrolling interest
118 108 
Total stockholders’ equity
25,843 12,659 
Total liabilities, redeemable noncontrolling interests and stockholders’ equity
$68,364 $40,994 
The accompanying notes to the consolidated financial statements are an integral part of these statements. 
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Table of Contents
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Revenues:
Premium$26,537 $17,472 $74,496 $50,229 
Service922 743 2,859 2,123 
Premium and service revenues
27,459 18,215 77,355 52,352 
Premium tax and health insurer fee
1,631 761 5,472 3,424 
Total revenues
29,090 18,976 82,827 55,776 
Expenses:  
Medical costs
22,932 15,406 63,659 43,642 
Cost of services
861 619 2,519 1,778 
Selling, general and administrative expenses
2,507 1,617 7,146 4,800 
Amortization of acquired intangible assets
164 65 527 194 
Premium tax expense
1,389 822 4,737 3,587 
Health insurer fee expense
376  1,100  
Impairment
 271 72 271 
Total operating expenses
28,229 18,800 79,760 54,272 
Earnings from operations
861 176 3,067 1,504 
Other income (expense):  
Investment and other income
95 98 375 317 
Debt extinguishment costs
  (44) 
Interest expense
(184)(99)(551)(299)
Earnings from operations, before income tax expense
772 175 2,847 1,522 
Income tax expense
207 79 1,034 415 
Net earnings
565 96 1,813 1,107 
Loss (earnings) attributable to noncontrolling interests
3 (1)7 5 
Net earnings attributable to Centene Corporation
$568 $95 $1,820 $1,112 

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share
$0.98 $0.23 $3.21 $2.69 
Diluted earnings per common share
$0.97 $0.23 $3.16 $2.65 

Weighted average number of common shares outstanding:
Basic
579,510 413,616 567,586 413,302 
Diluted
587,971 419,956 575,732 419,700 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
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Table of Contents
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In millions)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net earnings
$565 $96 $1,813 $1,107 
Reclassification adjustment, net of tax
 (1)1  
Change in unrealized gain on investments, net of tax
38 34 152 208 
Defined benefit pension plan net gain, net of tax
  2  
Foreign currency translation adjustments
10 (7)4 (7)
Other comprehensive earnings
48 26 159 201 
Comprehensive earnings
613 122 1,972 1,308 
Comprehensive loss (earnings) attributable to noncontrolling interests
3 (1)7 5 
Comprehensive earnings attributable to Centene Corporation
$616 $121 $1,979 $1,313 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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Table of Contents
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
Three and Nine Months Ended September 30, 2020
 Centene Stockholders’ Equity  
 Common Stock   Treasury Stock  
 
$0.001 Par
Value
Shares
AmtAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Earnings
(Loss)
Retained
Earnings
$0.001 Par
Value
Shares
AmtNon-redeemable
Non-
controlling
Interest
Total
Balance, December 31, 2019421,508 $ $7,647 $134 $4,984 6,460 $(214)$108 $12,659 
Comprehensive Earnings:         
Net earnings (loss)— — — — 46 — — (3)43 
Other comprehensive loss, net of $(40) tax
— — — (139)— — — — (139)
Common stock issued for acquisitions
171,225 — 11,526 — — — — — 11,526 
Common stock issued for employee benefit plans
2,448 — 5 — — — — — 5 
Common stock repurchases
(291)— (17)— — 9,308 (541)— (558)
Stock compensation expense
— — 117 — — — — — 117 
Contribution from noncontrolling interest
— — — — — — — 2 2 
Other
— — 1 — — — —  1 
Balance, March 31, 2020594,890 $ $19,279 $(5)$5,030 15,768 $(755)$107 $23,656 
Comprehensive Earnings:         
Net earnings (loss)— — — — 1,206 — — (6)1,200 
Other comprehensive earnings, net of $76 tax
— — — 250 — — — — 250 
Common stock issued for employee benefit plans
269 — 7 — — — — — 7 
Common stock repurchases
1 — — — — 47 (3)— (3)
Stock compensation expense
— — 47 — — — — — 47 
Contribution from noncontrolling interest
— — — — — — — 15 15 
Balance, June 30, 2020595,160 $ $19,333 $245 $6,236 15,815 $(758)$116 $25,172 
Comprehensive Earnings:
Net earnings (loss)— — — — 568 — — (6)562 
Other comprehensive earnings, net of $13 tax
— — — 48 — — — — 48 
Common stock issued for employee benefit plans
531 — 8 — — — — — 8 
Common stock repurchases
(69)— (5)— — 81 (4)— (9)
Stock compensation expense
— — 54 — — — — — 54 
Contribution from noncontrolling interest
— — — — — — — 8 8 
Balance, September 30, 2020595,622 $ $19,390 $293 $6,804 15,896 $(762)$118 $25,843 
 
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Table of Contents
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
Three and Nine Months Ended September 30, 2019
 Centene Stockholders’ Equity  
 Common Stock   Treasury Stock  
 
$0.001 Par
Value
Shares
AmtAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive Earnings
(Loss)
Retained
Earnings
$0.001 Par
Value
Shares
AmtNon-redeemable
Non-
controlling
Interest
Total
Balance, December 31, 2018417,695 $ $7,449 $(56)$3,663 5,217 $(139)$96 $11,013 
Comprehensive Earnings:         
Net earnings (loss)— — — — 522 — — (2)520 
Other comprehensive earnings, net of $30 tax
— — — 94 — — — — 94 
Common stock issued for employee benefit plans
1,363 — 4 — — — — — 4 
Common stock repurchases— — — — — 536 (35)— (35)
Stock compensation expense
— — 38 — — — — — 38 
Balance, March 31, 2019419,058 $ $7,491 $38 $4,185 5,753 $(174)$94 $11,634 
Comprehensive Earnings:         
Net earnings— — — — 495 — — — 495 
Other comprehensive earnings, net of $25 tax
— — — 81 — — — — 81 
Common stock issued for employee benefit plans
261 — 6 — — — — — 6 
Common stock repurchases
— — — — — 39 (2)— (2)
Stock compensation expense
— — 34 — — — — — 34 
Balance, June 30, 2019419,319 $ $7,531