Updates Guidance to Reflect Pending Magellan
Complete Care Divestiture
Magellan Health, Inc. (NASDAQ: MGLN) today announced financial
results for the second quarter ended June 30, 2020, as summarized
below:
Three Months Ended Six Months Ended June
30 June 30 (In millions, except per share amounts)
Continuing Operations
2020
2019
Chg
2020
2019
Chg
Net revenue
$
1,100.1
$
1,154.3
-4.7
%
$
2,222.5
$
2,273.3
-2.2
%
Net income (loss)
$
47.1
$
7.2
552.9
%
$
46.0
$
(1.0
)
NM
Segment profit [1]
$
57.0
$
53.6
6.4
%
$
98.6
$
84.3
17.0
%
Adjusted net income [1]
$
21.3
$
12.9
64.7
%
$
27.3
$
10.4
161.7
%
Earnings (loss) per share
$
1.86
$
0.30
520.0
%
$
1.84
$
(0.04
)
NM
Adjusted earnings per share [1]
$
0.84
$
0.53
58.5
%
$
1.09
$
0.43
153.5
%
[1] Refer to the Basis of Presentation for a discussion of non-GAAP
financial measures. NM means not meaningful.
Magellan Complete Care Business Reflected as Discontinued
Operations
As previously announced, on April 30, 2020, the Company and
Molina Healthcare, Inc. (Molina) entered into a Stock and Asset
Purchase Agreement in which the Company has agreed to sell its
Magellan Complete Care (MCC) business to Molina. Therefore, the
consolidated financial statements for all periods presented now
reflect the MCC business as discontinued operations. In addition,
the Company’s updated 2020 guidance now reflects its continuing
operations, thereby excluding the MCC business from guidance for
the full fiscal year 2020.
Second Quarter 2020 Highlights (all percentage changes
compare second quarter 2020 to second quarter 2019 for continuing
operations unless otherwise noted):
- Net revenue decreased 4.7 percent to $1.1 billion.
- Net income increased 552.9 percent to $47.1 million.
- Segment profit increased 6.4 percent to $57.0 million.
- Adjusted net income increased 64.7 percent to $21.3
million.
- Unrestricted cash and investments were $161.5 million as of
June 30, 2020. Approximately $29 million of the unrestricted cash
and investments at June 30, 2020 is related to excess capital and
undistributed earnings held at regulated entities of continuing
operations. In addition, the Company had approximately $160 million
of excess capital and undistributed earnings held at regulated
entities of discontinued operations at June 30, 2020.
- On June 24, 2020, the Company announced the election of
Christopher J. Chen, M.D., and Mural R. (Joe) Josephson to
Magellan’s board of directors at the 2020 Annual Meeting of
Stockholders.
- On June 16, 2020, the Company announced the appointment of Dr.
Caroline Carney as the chief medical officer.
- On July 6, 2020, the Company announced the appointment of
Darren Lehrich as the chief investor relations officer.
“Throughout the COVID-19 pandemic, I continue to be inspired by
the dedication and resilience of our organization,” said Kenneth
Fasola, chief executive officer, Magellan Health.
“As we look to the balance of 2020, our strategic priorities
remain intact. We are resolute in delivering on our existing
commitments, lowering our operating cost structure, strengthening
our capabilities through innovation, and improving our ability to
capitalize on growth opportunities. The culmination of these
efforts will strengthen our competitive position and lead to
stronger growth in the future,” continued Fasola.
Net Revenue
Net revenue for the second quarter of 2020, was $1.1 billion,
representing a 4.7 percent decrease from the second quarter of
2019. This decrease was largely attributable to net contract losses
within the healthcare segment.
Segment Profit
Segment profit was $57.0 million for the second quarter,
compared to $53.6 million in the second quarter of 2019.
- Healthcare segment profit was $60.8 million, representing an
increase of $19.7 million from the second quarter of 2019. This
year-over-year increase was primarily driven by lower utilization
trends in the specialty healthcare reporting unit due to
COVID-19.
- Pharmacy Management segment profit was $13.2 million,
representing a decrease of $17.6 million from the second quarter of
2019. This year-over-year decrease was primarily driven by losses
in the Medicare Part D business, customer settlements related to
prior periods, and start-up costs associated with the Medi-Cal
contract implementation.
- Corporate costs inclusive of eliminations, but excluding stock
compensation expense, totaled $17.1 million, as compared to $18.3
million in the second quarter of 2019.
Other Items
The Company recorded a $38.9 million income tax benefit during
the second quarter of 2020 associated with deferred tax assets in
connection with the pending divestiture of MCC to Molina. The
Company recorded a special charge of $8.3 million during the second
quarter of 2020 associated with lease terminations and abandonments
related to planned reductions to the Company’s real estate
footprint. The non-recurring tax benefit and the special charge are
reflected as reconciling items for the adjusted net income
calculation.
Income from discontinued operations, net of tax, for the second
quarter of 2020 was $36.4 million, as compared to $6.4 million
during the second quarter of 2019. This improvement was primarily
driven by lower utilization trends due to COVID-19.
Cash Flow & Balance Sheet
Cash flow used in operations for the six months ended June 30,
2020, was $7.5 million, as compared to cash provided by operations
of $45.9 million for the six months ended June 30, 2019. The year
over year change is primarily attributable to timing of accounts
receivable and other working capital.
As of June 30, 2020, the Company’s unrestricted cash and
investments totaled $161.5 million, an increase of $80.5 million
from the balance at December 31, 2019. Approximately $29 million of
the unrestricted cash and investments at June 30, 2020 is related
to excess capital and undistributed earnings held at regulated
entities of continuing operations. In addition, the Company had
approximately $160 million of excess capital and undistributed
earnings held at regulated entities of discontinued operations at
June 30, 2020. At June 30, 2020, the Company had $320 million of
undrawn capacity on the Company’s $400 million revolving credit
facility.
“We were pleased with solid second quarter results, and believe
our key initiatives for the balance of 2020 should establish a
stronger foundation for future growth. We will also have
significant financial flexibility to add shareholder value
following the completion of the MCC sale, and we will remain
disciplined as we evaluate opportunities to deploy capital,” said
Jonathan N. Rubin, chief financial officer, Magellan Health.
Updated 2020 Guidance
The Company announced its updated 2020 fiscal year guidance
parameters for continuing operations. This updated guidance
excludes the MCC business, which is now reflected as discontinued
operations retrospective to January 1, 2020.
Updated 2020 Guidance (In millions, except per share
results)
Low High Net revenue
$
4,400.0
$
4,600.0
Income (loss) before income taxes
$
(22.0
)
$
(2.0
)
Net income
$
15.0
$
27.0
Segment Profit[1]
$
145.0
$
165.0
Adjusted net income[1]
$
16.0
$
28.0
Diluted per share results: Earnings per share[2]
$
0.59
$
1.06
Adjusted earnings per share[1][2]
$
0.63
$
1.10
[1] Refer to the Basis of Presentation for a discussion of non-GAAP
financial measures. [2] 2020 EPS and Adjusted EPS guidance includes
share repurchases and option exercises through the close of
business July 24, 2020, but excludes the impact of any potential
future activity. Based on average fully diluted shares of 25.4
million.
The Company expects net revenue in the range of $4.4 billion to
$4.6 billion. Net income is expected to be in the range of $15
million to $27 million, which equates to a diluted earnings per
share range of $0.59 to $1.06. Adjusted net income is expected to
be in the range of $16 million to $28 million, which equates to an
adjusted EPS range of $0.63 to $1.10. Segment profit for the full
year 2020 is expected to be in the range of $145 million to $165
million. This updated segment profit guidance includes $25 million
to $30 million of stranded overhead costs that were previously
allocated to the MCC business, but are required to be reclassified
to continuing operations in accordance with GAAP. Following the
closing of the MCC transaction, the Company expects approximately
half of the stranded overhead costs to be mitigated through planned
cost reductions, while the remaining amount is expected to be
largely offset in 2021 by payments under a transition services
agreement with Molina.
Earnings Conference Call
Management will discuss the Company’s second quarter 2020
results on a conference call scheduled for Wednesday, July 29, 2020
at 9:30 a.m. Eastern. The conference call may be accessed by
dialing (877) 269-7756 (Domestic) and (201) 689-7817
(International) using conference ID code 13707398. A telephonic
replay will be available shortly after the conclusion of the call
through August 28, 2020. This replay may be accessed by dialing
(877) 660-6853 (Domestic) or (201) 612-7415 (International) using
the same conference ID code. The conference call will also be
available live via webcast at Magellan's investor relations page at
MagellanHealth.com. A replay of the webcast will also be available
at the site listed above for 30 days, beginning approximately two
hours after its conclusion.
Basis of Presentation
In addition to results determined under Generally Accepted
Accounting Principles (GAAP), Magellan provides certain non-GAAP
financial measures that management believes are useful in assessing
the Company’s performance. Following is a description of these
important non-GAAP measures.
Segment profit is equal to net revenue less the sum of cost of
care, cost of goods sold, direct service costs and other operating
expenses, and includes income from unconsolidated subsidiaries, but
excludes segment profit or loss from non-controlling interests held
by other parties, stock compensation expense, special charges or
benefits, as well as changes in the fair value of contingent
consideration recorded in relation to acquisitions.
Adjusted net income and adjusted earnings per share reflect
certain adjustments made for acquisitions completed after January
1, 2013, to exclude non‑cash stock compensation expense resulting
from restricted stock purchases by sellers, changes in the fair
value of contingent consideration, amortization of identified
acquisition intangibles, as well as impairment of identified
acquisition intangibles, special charges, and any impact related to
the sale of MCC.
Included in the tables issued with this press release are the
reconciliations from GAAP measures to the corresponding non-GAAP
measures.
About Magellan Health: Magellan Health, Inc., a Fortune
500 company, is a leader in managing the fastest growing, most
complex areas of health, including special populations, complete
pharmacy benefits and other specialty areas of healthcare. Magellan
supports innovative ways of accessing better health through
technology, while remaining focused on the critical personal
relationships that are necessary to achieve a healthy, vibrant
life. Magellan's customers include health plans and other managed
care organizations, employers, labor unions, various military and
governmental agencies and third-party administrators. For more
information, visit MagellanHealth.com.
Forward-Looking Statements
This press release, and oral statements made in connection with
this release, include statements which may constitute
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995,
the accuracy of which are necessarily subject to risks,
uncertainties, and assumptions as to future events that may not
prove to be accurate. Without limiting the foregoing, the words
“believes,” “anticipates,” “plans,” “expects,” “may,” “should,”
“could,” “estimate,” “intend” and other similar expressions are
intended to identify forward-looking statements. These statements
include, but are not limited to, express or implied forward-looking
statements relating to 2020 guidance for net revenue, income (loss)
before income taxes, net income, segment profit, adjusted net
income, earnings per share and adjusted earnings per share; growth
and margin opportunities and initiatives; business environment,
long term opportunities and strategy; transformation, process
improvement and innovation initiatives; new product offerings,
digital tools and advanced analytics capabilities; our expectations
regarding the benefits to the Company of the transaction to sell
the Magellan Complete Care business (the “transaction”), the
ability of the Company to obtain regulatory approvals for the
transaction and to satisfy other closing conditions, the
anticipated timing of the closing of the transaction, the benefits
to the Company of the commercial agreements entered into in
connection with the transaction, the ability of the Company to use
the proceeds of the transaction to fund future growth initiatives
or otherwise create value for the Company, the ability of the
Company to offset stranded overhead costs associated with the
transaction, the ability of the Company to strategically focus on
enhancing its behavioral and specialty health business, as well as
the continued growth of its pharmacy business, and the ability of
the Company to achieve our strategic and growth goals. These
statements are neither promises nor guarantees, but are subject to
a variety of risks and uncertainties, many of which are beyond our
control, which could cause actual results to differ materially from
those contemplated in these forward-looking statements. Existing
and prospective investors are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the
date hereof. Factors that could cause actual results to differ
materially from those expressed or implied include the
effectiveness of business continuity plans during, and the risks
associated with, the COVID-19 pandemic; termination or non-renewal
of customer contracts; changes in rates paid to and/or by the
Company by customers and/or providers; our ability to develop and
maintain satisfactory relationships with providers; higher
utilization of healthcare services by the Company’s members; risks
and uncertainties associated with the pharmacy benefits management
industry; costs to maintain or upgrade our information technology
and other business systems and the effectiveness and security of
such systems; cyberattacks, other privacy/data security incidents,
and/or our failure to comply with related regulations; delays,
higher costs or inability to implement new business or other
Company initiatives; the impact of changes in the contracting model
for Medicaid contracts; impairment of our goodwill and intangible
assets; the impact of new or amended laws or regulations; costs and
other liabilities associated with litigation, government
investigations, audits or reviews; competition; operational issues;
healthcare reform; and general business conditions. Additional
factors that could cause actual results to differ materially from
those reflected in the forward-looking statements include, but are
not limited to, the risks discussed in the “Risk Factors” section
included within the Company’s most recent Annual Report on Form
10-K, Quarterly Report on Form 10-Q for the quarter ended June 30,
2020, to be filed with the Securities and Exchange Commission later
today, and subsequent reports on Forms 10-Q and 8-K. The Company
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise, except as may be required under applicable securities
law.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) (In
thousands) December 31, 2019 June 30,
2020 ASSETS Current Assets: Cash and cash
equivalents
$
115,752
$
160,419
Accounts receivable, net
680,569
753,065
Short-term investments
98,797
75,671
Pharmaceutical inventory
44,962
36,694
Other current assets
69,687
80,375
Current portion of assets held for sale
663,276
1,145,904
Total Current Assets
1,673,043
2,252,128
Property and equipment, net
131,712
141,035
Long-term investments
2,864
-
Deferred income taxes
1,840
28,519
Other long-term assets
58,905
60,770
Goodwill
806,421
806,421
Other intangible assets, net
81,675
62,330
Assets held for sale, less current portion
335,713
-
Total Assets
$
3,092,173
$
3,351,203
LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts payable
$
83,790
$
99,199
Accrued liabilities
191,854
187,286
Medical claims payable
128,114
112,077
Other medical liabilities
92,915
110,268
Current debt, finance lease and deferred financing obligations
3,491
84,942
Current portion of liabilities held for sale
409,983
504,459
Total Current Liabilities
910,147
1,098,231
Long-term debt, finance lease and deferred financing obligations
679,125
641,950
Deferred income taxes
1,971
-
Tax contingencies
9,453
11,097
Deferred credits and other long-term liabilities
56,393
56,956
Liabilities held for sale, less current portion
37,301
-
Total Liabilities
1,694,390
1,808,234
Stockholders’ Equity: Ordinary common stock
543
550
Additional paid-in capital
1,386,616
1,429,995
Retained earnings
1,475,207
1,576,549
Accumulated other comprehensive income
144
602
Ordinary common stock in treasury, at cost
(1,464,727
)
(1,464,727
)
Total Stockholders’ Equity
1,397,783
1,542,969
Total Liabilities and Stockholders’ Equity
$
3,092,173
$
3,351,203
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In
thousands, except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2020
2019
2020
Net revenue: Managed care and other
$
608,614
$
548,711
$
1,175,162
$
1,101,879
PBM
545,675
551,364
1,098,133
1,120,575
Total net revenue
1,154,289
1,100,075
2,273,295
2,222,454
Costs and expenses: Cost of care
408,911
321,831
778,008
670,939
Cost of goods sold
501,081
528,067
1,027,395
1,061,308
Direct service costs and other operating expenses (1)
195,907
199,756
398,207
403,997
Depreciation and amortization
28,191
23,888
53,608
47,246
Interest expense
9,070
7,995
18,107
16,953
Interest and other income
(1,821
)
(551
)
(3,580
)
(1,770
)
Special charges
-
8,309
-
8,309
Total costs and expenses
1,141,339
1,089,295
2,271,745
2,206,982
Income from continuing operations before income taxes
12,950
10,780
1,550
15,472
Provision (benefit) for income taxes
5,735
(36,328
)
2,526
(30,566
)
Net income (loss) from continuing operations
7,215
47,108
(976
)
46,038
Income from discontinued operations, net of tax
6,398
36,397
15,020
55,717
Net Income
$
13,613
$
83,505
$
14,044
$
101,755
Weighted average number of common shares outstanding — basic
24,101
25,054
24,024
24,891
Weighted average number of common shares outstanding — diluted
24,416
25,278
24,315
25,074
Net income (loss) per common share — basic Continuing
operations
$
0.30
$
1.88
$
(0.04
)
$
1.85
Discountinued operations
0.26
1.45
0.62
2.24
Consolidated operations
$
0.56
$
3.33
$
0.58
$
4.09
Net income (loss) per common share — diluted Continuing operations
$
0.30
$
1.86
$
(0.04
)
$
1.84
Discountinued operations
0.26
1.44
0.62
2.22
Consolidated operations
$
0.56
$
3.30
$
0.58
$
4.06
Net income
$
13,613
$
83,505
$
14,044
$
101,755
Other comprehensive income: Unrealized gains on available-for-sale
securities (2)
419
659
739
458
Comprehensive income
$
14,032
$
84,164
$
14,783
$
102,213
(1) Includes stock compensation expense of $5,207 and $6,592 for
the three months ended June 30, 2019 and 2020, respectively, and
$14,607 and $12,389 for the six months ended June 30, 2019 and
2020, respectively. (2) Net of income tax provision of $131
and $219 for the three months ended June 30, 2019 and 2020,
respectively, and $231 and $152 for the six months ended June 30,
2019 and 2020, respectively.
MAGELLAN HEALTH, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Six Months Ended
June 30,
2019
2020
Cash flows from operating activities: Net income
$
14,044
$
101,755
Adjustments to reconcile net income to net cash from operating
activities: Depreciation and amortization
64,198
57,951
Special charges
-
8,309
Non-cash interest expense
679
941
Non-cash stock compensation expense
15,021
13,015
Non-cash income tax provision (benefit)
1,026
(29,443
)
Non-cash (amortization) accretion on investments
(327
)
907
Changes in assets and liabilities, net of effects from acquisitions
of businesses: Accounts receivable, net
(51,544
)
(24,535
)
Pharmaceutical inventory
(4,793
)
8,268
Other assets
(23,890
)
(38,322
)
Accounts payable and accrued liabilities
20,821
62,970
Medical claims payable and other medical liabilities
4,329
10,510
Contingent consideration
(3,758
)
-
Tax contingencies
610
1,343
Deferred credits and other long-term liabilities
(7,429
)
(2,537
)
Other
372
(289
)
Net cash provided by operating activities
29,359
170,843
Net cash (used in) provided by operating activities from
discontinued operations
(16,574
)
178,326
Net cash provided by (used in) operating activities from continuing
operations
45,933
(7,483
)
Cash flows from investing activities: Capital
expenditures
(27,804
)
(38,305
)
Acquisitions and investments in businesses, net of cash acquired
(320
)
(369
)
Purchases of investments
(295,768
)
(417,688
)
Proceeds from maturities and sales of investments
288,290
288,137
Net cash used in investing activities
(35,602
)
(168,225
)
Net cash used in investing activities from discontinued operations
(3,210
)
(156,800
)
Net cash used in investing activities from continuing operations
(32,392
)
(11,425
)
Cash flows from financing activities: Proceeds from
borrowings on revolving line of credit
-
80,000
Payments to acquire treasury stock
(4,124
)
-
Proceeds from exercise of stock options
20,647
29,825
Payments on debt, finance lease and deferred financing obligations
(15,543
)
(40,264
)
Payments on contingent consideration
(6,247
)
-
Other
(446
)
(1,136
)
Net cash (used in) provided by financing activities
(5,713
)
68,425
Net cash provided by financing activities from discontinued
operations
-
4,850
Net cash (used in) provided by financing activities from continuing
operations
(5,713
)
63,575
Net increase in cash and cash equivalents
7,828
44,667
Cash and cash equivalents at beginning of period
86,923
115,752
Cash and cash equivalents at end of period
$
94,751
$
160,419
MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONTINUING
OPERATIONS RESULTS BY BUSINESS SEGMENT (Unaudited)
(In thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2020
2019
2020
Healthcare Managed care and other
revenue
$
546,113
$
481,021
$
1,052,935
$
969,927
Cost of care
(408,911
)
(321,831
)
(778,008
)
(670,939
)
Direct service costs and other
(98,314
)
(100,450
)
(198,424
)
(206,386
)
Stock compensation expense (1)
2,237
2,102
3,780
3,863
Healthcare segment profit
41,125
60,842
80,283
96,465
Pharmacy Management Managed
care and other revenue
62,648
67,867
122,543
132,302
PBM revenue
550,010
556,195
1,106,575
1,129,973
Cost of goods sold
(505,203
)
(532,685
)
(1,035,410
)
(1,070,259
)
Direct service costs and other
(78,776
)
(80,082
)
(158,411
)
(161,948
)
Stock compensation expense (1)
2,124
1,939
3,796
4,046
Pharmacy Management segment profit
30,803
13,234
39,093
34,114
Corporate and Elimination (2)
Managed care and other revenue
(147
)
(177
)
(316
)
(350
)
PBM revenue
(4,335
)
(4,831
)
(8,442
)
(9,398
)
Cost of goods sold
4,122
4,618
8,015
8,951
Direct service costs and other
(18,817
)
(19,224
)
(41,372
)
(35,663
)
Stock compensation expense (1)
846
2,551
7,031
4,480
Corporate and Elimination
(18,331
)
(17,063
)
(35,084
)
(31,980
)
Consolidated Managed care and
other revenue
608,614
548,711
1,175,162
1,101,879
PBM revenue
545,675
551,364
1,098,133
1,120,575
Cost of care
(408,911
)
(321,831
)
(778,008
)
(670,939
)
Cost of goods sold
(501,081
)
(528,067
)
(1,027,395
)
(1,061,308
)
Direct service costs and other
(195,907
)
(199,756
)
(398,207
)
(403,997
)
Stock compensation expense (1)
5,207
6,592
14,607
12,389
Segment profit from continuing operations
$
53,597
$
57,013
$
84,292
$
98,599
Reconciliation of income from continuing before
income taxes (GAAP) to segment profit (non-GAAP): Income from
continuing operations before income taxes
$
12,950
$
10,780
$
1,550
$
15,472
Stock compensation expense
5,207
6,592
14,607
12,389
Depreciation and amortization
28,191
23,888
53,608
47,246
Interest expense
9,070
7,995
18,107
16,953
Interest and other income
(1,821
)
(551
)
(3,580
)
(1,770
)
Special charges
-
8,309
-
8,309
Segment profit from continuing operations
$
53,597
$
57,013
$
84,292
$
98,599
(1) Stock compensation expense, changes in the fair value of
contingent consideration recorded in relation to acquisitions and
impairment of intangible assets are included in direct service
costs and other operating expenses; however, these amounts are
excluded from the computation of segment profit. (2)
Pharmacy Management provides pharmacy benefits management for
certain Healthcare customers, and for the Company’s employees
covered under its medical plan. As such, revenue, cost of goods
sold and direct service costs and other related to these
arrangements are eliminated.
MAGELLAN HEALTH, INC. AND
SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (Unaudited) (In thousands, except per share
amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2020
2019
2020
Net income (loss) from continuing operations
$
7,215
$
47,108
$
(976
)
$
46,038
Adjustments Amortization of acquired intangibles
7,749
9,573
15,501
19,259
Special charges
-
8,309
-
8,309
Tax impact
(2,047
)
(4,808
)
(4,097
)
(7,413
)
Nonrecurring tax benefit - divestiture
-
(38,907
)
-
(38,907
)
Adjusted net income from continuing operations
$
12,917
$
21,275
$
10,428
$
27,286
Net income (loss) per common share — Diluted
$
0.30
$
1.86
$
(0.04
)
$
1.84
Adjustments Amortization of acquired intangibles
0.32
0.38
0.64
0.77
Special charges
-
0.33
-
0.33
Tax impact
(0.09
)
(0.19
)
(0.17
)
(0.30
)
Nonrecurring tax benefit - divestiture
-
(1.54
)
-
(1.55
)
Adjusted earnings per share
$
0.53
$
0.84
$
0.43
$
1.09
MAGELLAN HEALTH, INC. AND SUBSIDIARIES FISCAL 2020
CONTINUING OPERATIONS GUIDANCE RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (In millions, except per share
amounts) July 29, 2020 Low
High Net income
$
15.0
$
27.0
Adjusted for acquisitions starting in 2013 Amortization of acquired
intangibles ~39.0 Special charges ~15.0 Tax impact ~(14.0)
Nonrecurring tax benefit - divestiture ~(39.0) Adjusted net income
$
16.0
$
28.0
Net income per common share —Diluted
$
0.59
$
1.06
Adjusted for acquisitions starting in 2013 Amortization of acquired
intangibles ~1.54 Special charges ~0.59 Tax impact ~(0.55)
Nonrecurring tax benefit - divestiture ~(1.54) Adjusted earnings
per share
$
0.63
$
1.10
Reconciliation of income (loss) before income
taxes to segment profit: Income (loss) before income taxes
$
(22.0
)
$
(2.0
)
Stock compensation expense ~25.0 Depreciation and amortization
~98.0 Interest expense ~31.0 Interest income ~(2.0) Special charges
~15.0 Segment profit
$
145.0
$
165.0
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In
thousands, except per share amounts)
Year Ended
Three Months Ended
Year Ended
Three Months Ended
December 31,
March 31,
June 30,
September 30,
December 31,
December 31,
March 31,
June 30,
2018
2019
2019
2019
2019
2019
2020
2020
Net revenue: Managed care and other
$
2,350,576
$
566,548
$
608,614
$
591,229
$
580,544
$
2,346,935
$
553,168
$
548,711
PBM
2,606,946
552,458
545,675
567,314
553,231
2,218,678
569,211
551,364
Total net revenue
4,957,522
1,119,006
1,154,289
1,158,543
1,133,775
4,565,613
1,122,379
1,100,075
Costs and expenses: Cost of care
1,554,691
369,097
408,911
397,697
367,819
1,543,524
349,108
321,831
Cost of goods sold
2,452,703
526,314
501,081
523,973
507,917
2,059,285
533,241
528,067
Direct service costs and other operating expenses (1)(2)
773,915
202,300
195,907
195,844
207,616
801,667
204,241
199,756
Depreciation and amortization
112,284
25,417
28,191
28,890
27,869
110,367
23,358
23,888
Interest expense
35,180
9,037
9,070
8,935
8,826
35,868
8,958
7,995
Interest and other income
(4,884
)
(1,759
)
(1,821
)
(1,699
)
(1,578
)
(6,857
)
(1,219
)
(551
)
Special charges
-
-
-
-
-
-
-
8,309
Total costs and expenses
4,923,889
1,130,406
1,141,339
1,153,640
1,118,469
4,543,854
1,117,687
1,089,295
Income (loss) from continuing operations before income taxes
33,633
(11,400
)
12,950
4,903
15,306
21,759
4,692
10,780
Provision (benefit) for income taxes
11,457
(3,209
)
5,735
782
5,854
9,162
5,762
(36,328
)
Net income (loss) from continuing operations
22,176
(8,191
)
7,215
4,121
9,452
12,597
(1,070
)
47,108
Income from discontinued operations, net of tax
2,005
8,622
6,398
17,153
11,132
43,305
19,320
36,397
Net Income
$
24,181
$
431
$
13,613
$
21,274
$
20,584
$
55,902
$
18,250
$
83,505
Weighted average number of common shares outstanding — basic
24,349
23,946
24,101
24,426
24,491
24,243
24,728
25,054
Weighted average number of common shares outstanding — diluted
25,035
24,213
24,416
24,708
24,905
24,563
24,869
25,278
Net income (loss) per common share — basic Continuing
operations
$
0.91
$
(0.34
)
$
0.30
$
0.17
$
0.39
$
0.52
$
(0.04
)
$
1.88
Discontinued operations
0.08
0.36
0.26
0.70
0.45
1.79
0.78
1.45
Consolidated operations
$
0.99
$
0.02
$
0.56
$
0.87
$
0.84
$
2.31
$
0.74
$
3.33
Net income (loss) per common share — diluted Continuing operations
$
0.89
$
(0.34
)
$
0.30
$
0.17
$
0.38
$
0.52
$
(0.04
)
$
1.86
Discontinued operations
0.08
0.36
0.26
0.69
0.45
1.76
0.78
1.44
Consolidated operations
$
0.97
$
0.02
$
0.56
$
0.86
$
0.83
$
2.28
$
0.74
$
3.30
(1) Includes stock compensation expense of $28,936 and $24,673 for
the years ended December 31, 2018 and 2019, respectively, and
$9,400, $5,207, $4,604, $5,462, $5,797 and $6,592 for the three
months ended March 31, June 30, September 30 and December 31, 2019
and March 31 and June 30, 2020, respectively. (2) Includes
changes in fair value of contingent consideration of $1,108 for the
year ended December 31, 2018.
MAGELLAN HEALTH, INC. AND
SUBSIDIARIES CONTINUING OPERATIONS RESULTS BY BUSINESS
SEGMENT (Unaudited) (In thousands)
Year Ended
Three Months Ended
Year Ended
Three Months Ended
December 31,
March 31,
June 30,
September 30,
December 31,
December 31,
March 31,
June 30,
2018
2019
2019
2019
2019
2019
2020
2020
Healthcare Managed care and other
revenue
$
2,110,756
$
506,822
$
546,113
$
521,379
$
507,774
$
2,082,088
$
488,906
$
481,021
Cost of care
(1,554,691
)
(369,097
)
(408,911
)
(397,697
)
(367,819
)
(1,543,524
)
(349,108
)
(321,831
)
Direct service costs and other
(401,083
)
(100,110
)
(98,314
)
(99,416
)
(104,166
)
(402,006
)
(105,936
)
(100,450
)
Stock compensation expense (1)
6,446
1,543
2,237
1,995
1,864
7,639
1,761
2,102
Changes in fair value of contingent consideration (1)
1,108
-
-
-
-
-
-
-
Healthcare segment profit
162,536
39,158
41,125
26,261
37,653
144,197
35,623
60,842
Pharmacy Management Managed
care and other revenue
240,427
59,895
62,648
69,968
72,928
265,439
64,435
67,867
PBM revenue
2,625,417
556,565
550,010
572,086
558,168
2,236,829
573,778
556,195
Cost of goods sold
(2,468,170
)
(530,207
)
(505,203
)
(528,500
)
(512,599
)
(2,076,509
)
(537,574
)
(532,685
)
Direct service costs and other
(298,713
)
(79,635
)
(78,776
)
(79,842
)
(84,909
)
(323,162
)
(81,866
)
(80,082
)
Stock compensation expense (1)
5,458
1,672
2,124
1,669
2,369
7,834
2,107
1,939
Pharmacy Management segment profit
104,419
8,290
30,803
35,381
35,957
110,431
20,880
13,234
Corporate and Elimination (2)
Managed care and other revenue
(607
)
(169
)
(147
)
(118
)
(158
)
(592
)
(173
)
(177
)
PBM revenue
(18,471
)
(4,107
)
(4,335
)
(4,772
)
(4,937
)
(18,151
)
(4,567
)
(4,831
)
Cost of goods sold
15,467
3,893
4,122
4,527
4,682
17,224
4,333
4,618
Direct service costs and other
(74,119
)
(22,555
)
(18,817
)
(16,586
)
(18,541
)
(76,499
)
(16,439
)
(19,224
)
Stock compensation expense (1)
17,032
6,185
846
940
1,229
9,200
1,929
2,551
Corporate and Elimination
(60,698
)
(16,753
)
(18,331
)
(16,009
)
(17,725
)
(68,818
)
(14,917
)
(17,063
)
Consolidated Managed care and
other revenue
2,350,576
566,548
608,614
591,229
580,544
2,346,935
553,168
548,711
PBM revenue
2,606,946
552,458
545,675
567,314
553,231
2,218,678
569,211
551,364
Cost of care
(1,554,691
)
(369,097
)
(408,911
)
(397,697
)
(367,819
)
(1,543,524
)
(349,108
)
(321,831
)
Cost of goods sold
(2,452,703
)
(526,314
)
(501,081
)
(523,973
)
(507,917
)
(2,059,285
)
(533,241
)
(528,067
)
Direct service costs and other
(773,915
)
(202,300
)
(195,907
)
(195,844
)
(207,616
)
(801,667
)
(204,241
)
(199,756
)
Stock compensation expense (1)
28,936
9,400
5,207
4,604
5,462
24,673
5,797
6,592
Changes in fair value of contingent consideration (1)
1,108
-
-
-
-
-
-
-
Segment profit from continuing operations
$
206,257
$
30,695
$
53,597
$
45,633
$
55,885
$
185,810
$
41,586
$
57,013
Reconciliation of income from continuing before
income taxes (GAAP) to segment profit (non-GAAP): Income (loss)
from continuing operations before income taxes
$
33,633
$
(11,400
)
$
12,950
$
4,903
$
15,306
$
21,759
$
4,692
$
10,780
Stock compensation expense
28,936
9,400
5,207
4,604
5,462
24,673
5,797
6,592
Changes in fair value of contingent consideration
1,108
-
-
-
-
-
-
-
Depreciation and amortization
112,284
25,417
28,191
28,890
27,869
110,367
23,358
23,888
Interest expense
35,180
9,037
9,070
8,935
8,826
35,868
8,958
7,995
Interest and other income
(4,884
)
(1,759
)
(1,821
)
(1,699
)
(1,578
)
(6,857
)
(1,219
)
(551
)
Special charges
-
-
-
-
-
-
-
8,309
Segment profit from continuing operations
$
206,257
$
30,695
$
53,597
$
45,633
$
55,885
$
185,810
$
41,586
$
57,013
(1) Stock compensation expense, changes in the fair value of
contingent consideration recorded in relation to acquisitions and
impairment of intangible assets are included in direct service
costs and other operating expenses; however, these amounts are
excluded from the computation of segment profit. (2)
Pharmacy Management provides pharmacy benefits management for the
Company’s employees covered under its medical plan. As such,
revenue, cost of goods sold and direct service costs and other
related to this arrangements are eliminated.
(MGLN-GEN)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005199/en/
Media Contact: Lilly Ackley, ackleyl@magellanhealth.com,
(860) 507-1923 Investor Contact: Darren Lehrich,
lehrichd@magellanhealth.com, (860) 507-1814
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