Centene 10-Q 2008
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
For the quarterly period ended September 30, 2008
For the transition period from to
Commission file number 001-31826
(Exact name of registrant as specified in its charter)
Registrant’s telephone number, including area code:
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: [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer T Accelerated filer £ Non-accelerated filer £ Smaller reporting company £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of October 20, 2008, the registrant had 42,904,326 shares of common stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
ITEM 1. Financial Statements.
CENTENE CORPORATION AND SUBSIDIARIES
(In thousands, except share data)
See notes to consolidated financial statements.
CENTENE CORPORATION AND SUBSIDIARIES
(In thousands, except share data)
See notes to consolidated financial statements.
CENTENE CORPORATION AND SUBSIDIARIES
See notes to consolidated financial statements.
CENTENE CORPORATION AND SUBSIDIARIES
(Dollars in thousands, except share data)
Centene Corporation, or Centene or the Company, is a multi-line healthcare enterprise operating primarily in two segments: Medicaid Managed Care and Specialty Services. Centene’s Medicaid Managed Care segment provides Medicaid and Medicaid-related health plan coverage to individuals through government subsidized programs, including Medicaid, Medicare (Special Needs Plans), the State Children’s Health Insurance Program, or SCHIP, Foster Care and Supplemental Security Income including Aged, Blind or Disabled programs, or SSI. The Company’s Specialty Services segment provides specialty services, including behavioral health, life and health management, long-term care programs, managed vision, nurse triage, pharmacy benefits management and treatment compliance, to state programs, healthcare organizations, employer groups, and other commercial organizations, as well as to the Company’s own subsidiaries on market-based terms. Effective July 1, 2008, the Company’s Specialty Services segment also includes Celtic Insurance Company, or Celtic, which provides individual health insurance.
The unaudited interim financial statements herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements for the fiscal year ended December 31, 2007. Accordingly, footnote disclosures, which would substantially duplicate the disclosures contained in the December 31, 2007 audited financial statements, have been omitted from these interim financial statements where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented.
Certain 2007 amounts in the consolidated financial statements have been reclassified to conform to the 2008 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported.
In December 2007, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No.141 (revised 2007), “Business Combinations”, or SFAS No. 141R. The purpose of issuing the statement was to replace current guidance in SFAS No.141 to better represent the economic value of a business combination transaction. The changes to be effected with SFAS No. 141R from the current guidance include, but are not limited to: (1) acquisition costs will be recognized separately from the acquisition; (2) known contractual contingencies at the time of the acquisition will be considered part of the liabilities acquired and measured at their fair value; all other contingencies will be part of the liabilities acquired and measured at their fair value only if it is more likely than not that they meet the definition of a liability; (3) contingent consideration based on the outcome of future events will be recognized and measured at the time of the acquisition; (4) business combinations achieved in stages (step acquisitions) will need to recognize the identifiable assets and liabilities, as well as noncontrolling interests, in the acquiree, at the full amounts of their fair values; and (5) a bargain purchase (defined as a business combination in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree) will require that excess to be recognized as a gain attributable to the acquirer. SFAS No. 141R will be effective for any business combinations that occur after January 1, 2009.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51”, or SFAS No. 160. SFAS No. 160 was issued to improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way, that is, as equity in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. SFAS No. 160 will be effective January 1, 2009. The Company is currently evaluating the impact that SFAS No. 160 will have on its financial statements and disclosures.
The Company adopted SFAS No. 157, “Fair Value Measurements” for financial assets and liabilities on January 1, 2008. Short-term investments, long-term investments and restricted deposits are classified as available for sale and are carried at fair value based on quoted market prices for identical securities (Level 1 inputs). Additionally, fair value of debt disclosures are based on quoted market prices of the Company’s debt securities or, for variable rate debt, fair value is considered equal to book value (Level 2 inputs).
In 2006, FirstGuard Health Plan Kansas, Inc., or FirstGuard Kansas, a wholly owned subsidiary, received notification that its Medicaid contract scheduled to terminate December 31, 2006 would not be renewed. In 2006, the Company also evaluated its strategic alternatives for its Missouri subsidiary, FirstGuard Health Plan, Inc., or FirstGuard Missouri, and decided to divest the business. FirstGuard Missouri was sold in February 2007. The assets, liabilities and results of operations of FirstGuard Kansas and FirstGuard Missouri are classified as discontinued operations for all periods presented beginning in December 2007, as substantially all liabilities had been paid as of that date.
In the fourth quarter of 2007, the Company abandoned its previously planned original redevelopment project in Clayton, Missouri, related to a corporate office expansion. As a result, the Company conducted an impairment analysis of the related real estate and capitalized construction costs and recorded an impairment charge of $7,207 at December 31, 2007. The impairment charges were recorded as General and Administrative expense under the Medicaid Managed Care segment. At September 30, 2008, the remaining liability for these charges was $850.
Also in the fourth quarter of 2007, the Company completed an organizational realignment, resulting in the elimination of approximately 35 positions. Accordingly, the Company recorded $2,185 in severance costs at December 31, 2007. This expense was recorded as General and Administrative expense under the Medicaid Managed Care segment. At September 30, 2008, the remaining liability for these costs was $43.
On July 1, 2008, the Company acquired Celtic , a health insurance carrier focused on the individual health insurance market. The Company paid approximately $82,000 in cash and related transaction costs, net of unregulated cash acquired. In conjunction with the closing of the acquisition, the Company received regulatory approval from the Illinois Division of Insurance to realize an extraordinary dividend of $31,411 from Celtic which was paid in July 2008. The results of operations for Celtic are included in the Specialty Services segment of the consolidated financial statements since July 1, 2008.
In accordance with FASB Statement No. 141, during our quarter ended September 30, 2008, the Company allocated total consideration paid to the assets acquired and liabilities assumed based on its initial estimates of fair value using methodologies and assumptions that it believed were reasonable. The preliminary purchase price allocation resulted in estimated identifiable intangible assets, associated deferred tax liabilities and goodwill of $8,550, $3,000 and $26,000, respectively. The identifiable intangible assets have estimated useful lives ranging from seven to 15 years. The acquired goodwill is not deductible for income tax purposes.
To estimate fair values, the Company considered a number of factors, including the application of multiples to discounted cash flow estimates. There is considerable management judgment with respect to cash flow estimates and appropriate multiples used in determining fair value. Certain amounts are subject to change as remaining information on the fair values is received and valuation analysis is finalized. Specifically, the Company continues to evaluate the valuation and useful lives of acquired tangible and intangible assets, medical claims liabilities, and the income tax implications triggered by the acquisition. The final fair values may differ materially from the preliminary estimates described above. The Company expects to complete its final allocation of the purchase price before June 30, 2009. Pro forma disclosures related to the acquisition have been excluded due to immateriality.
Investment and other income in the third quarter of 2008 included a loss on investments of $5,154. The loss was primarily due to investments in the Reserve Primary money market fund whose Net Asset Value fell below $1.00 per share due to its holdings of securities by Lehman Brothers Holdings, Inc. The loss represents less than 1% of Centene’s cash and investment portfolio as of September 30, 2008. The Company expects to recover 95% of its Reserve Primary Fund investments. Money market funds are generally recorded in Cash and cash equivalents in the Company's balance sheet, however our investment in the Reserve Primary money market fund is recorded in Short-term investments due to the restrictions placed on redemptions imposed by the fund. As of September 30, 2008, the Company has not received any of the proceeds from the Reserve Primary money market fund.
Short-term and long-term investments and restricted deposits available for sale by investment type at September 30, 2008 consist of the following:
Short-term and long-term investments and restricted deposits available for sale by investment type at December 31, 2007 consist of the following:
At September 30, 2008, total debt outstanding was $249,973 including current maturities of $276. The total debt outstanding consisted of $175,000 of senior notes due 2014, $20,364 of debt secured by real estate under the Company’s $25,000 Revolving Loan Agreement discussed below, $48,000 under the Company’s $300,000 Revolving Credit Agreement and $6,609 of capital leases. At September 30, 2008, the fair value of outstanding debt was approximately $240,348.
In February 2008, the Company refinanced its mortgage notes payable through the execution of an amendment to its $25,000 Revolving Loan Agreement. The amendment extends the maturity date to January 1, 2010 and borrowings under the agreement were amended to bear interest based upon LIBOR rates plus 1.0%.
The following table sets forth the calculation of basic and diluted net earnings per common share:
The calculation of diluted earnings per common share for the three and nine months ended September 30, 2008 excludes the impact of 1,784,542 and 1,438,852 shares, respectively, related to anti-dilutive stock options, restricted stock and restricted stock units. The calculation of diluted earnings per common share for the three and nine months ended September 30, 2007 excludes the impact of 2,576,042 and 2,571,841 shares, respectively.
In November 2005, the Company’s board of directors adopted a stock repurchase program authorizing the Company to repurchase up to 4,000,000 shares of common stock from time to time on the open market or through privately negotiated transactions. In October 2008, the repurchase program was extended through October 31, 2009, but the Company reserves the right to suspend or discontinue the program at any time. During the nine months ended September 30, 2008, the Company repurchased 943,504 shares at an average price of $19.42 and an aggregate cost of $18,325.
As previously disclosed, two class action lawsuits were filed against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Missouri, or Eastern District Court. The lawsuits were consolidated on November 2, 2006 and an amended consolidated complaint was filed in the Eastern District Court on January 17, 2007, referred to as the Consolidated Lawsuit. The Consolidated Lawsuit alleges, on behalf of purchasers of the Company’s common stock from April 25, 2006 through July 17, 2006, that the Company and certain of its officers and directors violated federal securities laws by issuing a series of materially false statements prior to the announcement of its fiscal 2006 second quarter results. According to the Consolidated Lawsuit, these allegedly materially false statements had the effect of artificially inflating the price of the Company’s common stock, which subsequently dropped after the issuance of a press release announcing the Company’s preliminary fiscal 2006 second quarter earnings and revised guidance. The Company filed a motion to dismiss the Consolidated Lawsuit. On June 29, 2007, the motion to dismiss was granted. The plaintiffs appealed the order of dismissal. On October 16, 2008, the order of dismissal was upheld by the United States Court of Appeals for the Eight Circuit.
Additionally, in August 2006, a separate derivative action was filed on behalf of Centene Corporation against the Company and certain of its officers and directors in the Eastern District Court. Plaintiff purported to bring suit derivatively on behalf of the Company against the Company’s directors for breach of fiduciary duties, gross mismanagement and waste of corporate assets by reason of the directors’ alleged failure to correct the misstatements alleged in the Consolidated Lawsuit discussed above. The derivative complaint largely repeated the allegations in the Consolidated Lawsuit. Based on discussions that have been held with plaintiff’s counsel, it is the Company’s understanding that plaintiff did not intend to pursue this action unless the Consolidated Lawsuit proceeded past the dismissal stage. The derivative action has been dismissed.
In addition, the Company is routinely subjected to legal proceedings in the normal course of business. While the ultimate resolution of such matters is uncertain, the Company does not expect the results of any of these matters discussed above individually, or in the aggregate, to have a material effect on its financial position or results of operations.
The Company operates in two segments: Medicaid Managed Care and Specialty Services. The Medicaid Managed Care segment consists of the Company’s health plans including all of the functions needed to operate them. The Specialty Services segment consists of the Company’s specialty companies including behavioral health, health management, individual health, long-term care programs, managed vision, nurse triage, pharmacy benefits management and treatment compliance functions.
Factors used in determining the reportable business segments include the nature of operating activities, existence of separate senior management teams, and the type of information presented to the Company’s chief operating decision maker to evaluate all results of operations.
Segment information for the three months ended September 30, 2008, follows:
Segment information for the three months ended September 30, 2007, follows:
Segment information for the nine months ended September 30, 2008, follows:
Segment information for the nine months ended September 30, 2007, follows:
Differences between net earnings and total comprehensive earnings resulted from changes in unrealized losses and gains on investments available for sale, as follows:
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing, and in our annual report on Form 10-K for the year ended December 31, 2007. The discussion contains forward-looking statements that involve known and unknown risks and uncertainties, including those set forth under “Item 1A. Risk Factors.”
We are a multi-line healthcare enterprise operating in two segments. Our Medicaid Managed Care segment provides Medicaid and Medicaid-related programs to organizations and individuals through government subsidized programs, including Medicaid, Medicare (Special Needs Plans), the State Children’s Health Insurance Program, or SCHIP, Foster Care and Supplemental Security Income including Aged, Blind or Disabled programs, or SSI. Our Specialty Services segment provides specialty services, including behavioral health, life and health management, long-term care programs, managed vision, nurse triage, pharmacy benefits management and treatment compliance, to state programs, healthcare organizations, employer groups and other commercial organizations, as well as to our own subsidiaries on market-based terms. Effective July 1, 2008, our Specialty Services segment also includes Celtic Insurance Company, or Celtic, which provides individual health insurance.
Our Medicaid contract in Kansas terminated effective December 31, 2006, and we sold the operating assets of FirstGuard Health Plan, Inc., our Missouri health plan, effective February 1, 2007. Unless specifically noted, the discussions below are in the context of continuing operations, and therefore, exclude the Kansas and Missouri health plans, collectively referred to as FirstGuard. The results of operations for FirstGuard are classified as discontinued operations for all periods presented.
Our third quarter performance for 2008 is summarized as follows:
The following new contracts and acquisitions contributed to our growth during the last year:
We have opportunities to increase profitability through the following:
RESULTS OF OPERATIONS AND KEY METRICS
Summarized comparative financial data are as follows ($ in millions, except share data):
Revenues and Revenue Recognition
Our Medicaid Managed Care segment generates revenues primarily from premiums we receive from the states in which we operate health plans. We receive a fixed premium per member per month pursuant to our state contracts. We generally receive premium payments during the month we provide services and recognize premium revenue during the period in which we are obligated to provide services to our members. Some states enact premium taxes or similar assessments, collectively, premium taxes, and these taxes are recorded as a component of revenue as well as operating expenses. Some contracts allow for additional premium associated with certain supplemental services provided such as maternity deliveries. Revenues are recorded based on membership and eligibility data provided by the states, which may be adjusted by the states for updates to this data. These adjustments have been immaterial in relation to total revenue recorded and are reflected in the period known.
Our Specialty Services segment generates revenues under contracts with state programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries on market-based terms. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services.
Premium and service revenues collected in advance are recorded as unearned revenue. For performance-based contracts, we do not recognize revenue subject to refund until data is sufficient to measure performance. Premium and service revenues due to us are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and our management’s judgment on the collectibility of these accounts. As we generally receive payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of our financial condition or results of operations.
Our total revenue increased in the three and nine months ended September 30, 2008 over the previous year primarily through 1) membership growth in the Medicaid Managed Care segment, 2) premium rate increases, and 3) growth in our Specialty Services segment.
From September 30, 2007 to September 30, 2008, we increased our Medicaid Managed Care membership by 8.1%. The following table sets forth our membership by state in our Medicaid Managed Care segment:
The following table sets forth our membership by line of business in our Medicaid Managed Care segment:
From September 30, 2007 to September 30, 2008, our membership increased as a result of growth in Indiana and Texas. In Texas, we increased our membership through organic growth of SCHIP, especially in the EPO market. In addition, we increased Texas membership through our new Foster Care program, with 34,100 members at September 30, 2008. We increased our membership in Indiana through temporary eligibility determinations and network expansions. Our membership decreased in Wisconsin due to the termination of certain provider contracts. In South Carolina, we continue to add at-risk membership as additional counties convert, with 26,600 at-risk members at September 30, 2008. The prior year membership in South Carolina was entirely on a non-risk basis. In Florida, Access served 96,000 members on a non-risk basis at September 30, 2008.
During the nine months ended September 30, 2008, we received premium rate increases in some markets which yield a 2.9% composite increase across all of our markets. During the nine months ended September 30, 2007, we received premium rate increases in some markets which yield a 2.7% composite increase across all of our markets.
In November 2007, we received a contract amendment from the State of Georgia providing for an effective premium rate increase in Georgia of approximately 3.8% effective July 1, 2007. The State also mandated service changes, retroactively recalculated certain rate cells and adjusted for duplicate member issues. We executed this amendment on November 16, 2007. The State of Georgia returned the fully executed contract in January 2008 and, accordingly, we recorded the additional premium revenue, retroactive to July 1, 2007, in the first quarter of 2008. This premium revenue, related to the period from July 1, 2007 to December 31, 2007, totals approximately $20.8 million. Approximately $7.3 million of this amount is related to the mandated services, rate cell changes and duplicate member issues, while the remaining $13.5 million yields the calculated 3.8% increase.
In October 2008, we received a contract amendment from the State of Georgia providing for an effective premium rate increase of approximately 1.3%, net of certain cost passthroughs. The rate increase is effective July 1, 2008. The revenue increase attributable to the period from July 1, 2008 through September 30, 2008 will be recorded in our consolidated statement of operations in the fourth quarter of 2008.
For the three and nine months ended September 30, 2008, Specialty Services segment revenue from external customers was $92.1 million and $233.5 million, respectively, compared to $62.1 million and $182.4 million for the same prior year periods. The increase is primarily attributable to the acquisition of Celtic as well as increasing membership for both our behavioral health company, Cenpatico, and our long-term care program, Bridgeway. At September 30, 2008, Cenpatico provided behavioral health services to 102,400 members in Arizona and 40,100 members in Kansas, compared to 99,000 members in Arizona and 35,600 members in Kansas at September 30, 2007. At September 30, 2008, Bridgeway provided long-term care services to 1,900 members, compared to 1,400 members at September 30, 2007.
Our medical costs include payments to physicians, hospitals, and other providers for healthcare and specialty services claims. Medical costs also include estimates of medical expenses incurred but not yet reported, or IBNR, and estimates of the cost to process unpaid claims. Monthly, we estimate our IBNR based on a number of factors, including inpatient hospital utilization data and prior claims experience. As part of this review, we also consider the costs to process medical claims and estimates of amounts to cover uncertainties associated with fluctuations in physician billing patterns, membership, products and inpatient hospital trends. These estimates are adjusted as more information becomes available. We employ actuarial professionals and use the services of independent actuaries who are contracted to review our estimates quarterly. While we believe that our process for estimating IBNR is actuarially sound, we cannot assure you that healthcare claim costs will not materially differ from our estimates.
Our results of operations depend on our ability to manage expenses associated with health benefits and to accurately predict costs incurred. Our health benefits ratio, or HBR, represents medical costs as a percentage of premium revenues (excluding premium taxes) and reflects the direct relationship between the premium received and the medical services provided. The table below depicts our HBR for our external membership by member category:
Our consolidated HBR for the three and nine months ended September 30, 2008 were 82.4% and 82.9%, respectively, decreases of 1.0% and 0.9% over 2007. The decrease for the third quarter of 2008 over 2007 is due to overall increased premium yield, a moderating medical cost trend and the effect of the acquisition of Celtic. The decrease for the nine months ended September 30, 2008 over 2007 is due to the aforementioned factors as well as the effect of recording the Georgia premium rate increase retroactive to July 1, 2007. Sequentially, our consolidated HBR decreased from 83.3% in the 2008 second quarter to 82.4% due to the effect of the Celtic acquisition and a moderating medical cost trend.
Cost of Services
Our cost of services expense includes the pharmaceutical costs associated with our pharmacy benefit manager’s external revenues. Cost of services also includes all direct costs to support the functions responsible for generation of our services revenues. These expenses consist of the salaries and wages of the teachers and other professionals who provide the services and expenses associated with facilities and equipment used to provide services.
General and Administrative Expenses
Our general and administrative expenses, or G&A, primarily reflect wages and benefits, including stock compensation expense, and other administrative costs associated with our health plans, specialty companies and centralized functions that support all of our business units. Our major centralized functions are finance, information systems and claims processing. G&A increased in the three and nine months ended September 30, 2008 over the comparable period in 2007 primarily due to expenses for additional facilities and staff to support our growth.
Our G&A expense ratio represents G&A expenses as a percentage of the sum of Premium revenue and Service revenue, and reflects the relationship between revenues earned and the costs necessary to earn those revenues. The consolidated G&A expense ratio for the three and nine months ended September 30, 2008 were 14.0% and 13.4%, respectively, compared to 13.7% and 13.9% for the same periods in 2007. The increase in the ratio for the three months ended September 30, 2008 reflects the acquisition of Celtic. The decrease for the nine months ended September 30, 2008 reflects the overall leveraging of our expenses over higher revenues, partially offset by the effect of the acquisition of Celtic and of our start-up costs in Florida, South Carolina and for our Texas Foster Care product.
Other Income (Expense)
Other income (expense) consists principally of investment income from our cash and investments, our equity in earnings of Access, and interest expense on our debt. Investment and other income was a net expense of $2.2 million and income of $3.1 million in the three and nine months ended September 30, 2008, respectively, decreases of 201.4% and 58.4% over the comparable periods in 2007. The decrease in the third quarter was due to a loss on investments of $5.2 million. The loss was primarily related to investments in the Reserve Primary money market fund whose Net Asset Value fell below $1.00 per share. The loss represents less than 1% of Centene’s cash and investment portfolio as of September 30, 2008. The Company expects to recover 95% of its Reserve Primary Fund investments. Money market funds are generally recorded in Cash and cash equivalents in our balance sheet, however, our investment in the Reserve Primary money market fund is recorded in Short-term investments due to the restrictions placed on redemptions imposed by the fund. As of September 30, 2008 we had not received any of our proceeds from the Reserve primary money market fund. The decrease for the nine months also reflects an overall decline in investment interest rates, partially offset by earnings of unconsolidated subsidiaries resulting from our investment in Access.
Income Tax Expense
Our effective tax rates for the three and nine months ended September 30, 2008 were 40.4% and 38.5%, respectively, compared to 36.9% and 37.5% for the three and nine months ended September 30, 2007, respectively. The increase in the current year was due to higher state taxes as a result of a change in the estimated benefit to be realized from certain state net operating loss carryforwards.
Net earnings from discontinued operations were $237 thousand in the nine months ended September 30, 2008, compared to net earnings of $33.7 million in the nine months ended September 30, 2007, respectively. In the first nine months of 2007, we abandoned the stock of our FirstGuard health plans resulting in tax benefits of $34.0 million, net of the associated asset write-offs. The 2007 results also included exit costs associated with FirstGuard and one month of FirstGuard Missouri operations.
LIQUIDITY AND CAPITAL RESOURCES
We finance our activities primarily through operating cash flows and borrowings under our revolving credit facility. Our total operating activities provided cash of $126.5 million in the nine months ended September 30, 2008 compared to $164.8 million in the comparable period in 2007. The decrease was primarily due to the timing of receipt of September revenue from the states of Indiana and Wisconsin. The September 2008 revenue of approximately $50 million was received in October of 2008 compared to being received in September of the prior year.
Our investing activities used cash of $152.0 million in the nine months ended September 30, 2008 compared to $177.0 million in the comparable period in 2007. Cash flows from investing activities in 2008 included the purchase price of Celtic which we acquired on July 1, 2008, and our investment in the Reserve Primary fund previously discussed. Net cash provided by and used in investing activities will fluctuate from year to year due to the timing of investment purchases, sales and maturities. Our investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets within our investment guidelines. As of September 30, 2008, our investment portfolio consisted primarily of fixed-income securities with an average duration of 1.8 years. Cash is invested in investment vehicles such as municipal bonds, money market funds, corporate bonds, instruments of the U.S. Treasury, insurance contracts, commercial paper and equity securities. These securities generally are a