MGLN Magellan Health Inc

Lowers 2018 Earnings Guidance

Magellan Health, Inc. (NASDAQ: MGLN) today announced financial results for the third quarter ended September 30, 2018, as summarized below:

      Three Months Ended Nine Months Ended September 30 September 30 (In millions, except per share amounts)       2018 2017 Chg 2018 2017 Chg Net revenue $ 1,853.5 $ 1,419.4 30.6 % $ 5,469.5 $ 4,144.2 32.0 % Net income $ 27.1 $ 32.5 -16.4 % $ 52.1 $ 55.7 -6.4 % Segment profit [1] $ 88.3 $ 87.7 0.7 % $ 211.9 $ 211.9 0.0 % Adjusted net income [1] $ 36.2 $ 40.4 -10.5 % $ 80.2 $ 80.6 -0.5 % Per share results: Earnings per share $ 1.09 $ 1.32 -17.4 % $ 2.06 $ 2.30 -10.4 % Adjusted earnings per share [1] $ 1.45 $ 1.64 -11.6 % $ 3.17 $ 3.33 -4.8 %   [1] Refer to the Basis of Presentation for a discussion of non-GAAP financial measures.  

Highlights Include:

• Net revenue increased 31 percent over the third quarter of 2017 to $1.9 billion.
• Net income decreased 16 percent over the third quarter of 2017 to $27.1 million.
• Segment profit was $88.3 million compared to $87.7 million in the third quarter of 2017.
• Adjusted net income decreased 11 percent from the third quarter of 2017 to $36.2 million.
• Unrestricted cash and investments were $232.2 million as of September 30, 2018. Approximately $134.2 million of the unrestricted cash and investments at September 30, 2018 related to excess capital and undistributed earnings held at regulated entities.
• The Company is lowering its full year 2018 earnings guidance.

“In light of our recent performance and lowering of guidance, we acknowledge that our financial results have been below our expectations. In the short-term, we expect the environment to remain challenging, but we see significant long-term opportunity in both our Healthcare and Pharmacy businesses,” said Barry M. Smith, chairman and chief executive officer of Magellan Health. “We are focused on partnering with our customers to increase the quality of healthcare for our members while effectively managing both the cost of care and administrative expenses.”

Net Revenue

Net revenue for the third quarter ended September 30, 2018, was $1.9 billion, an increase of 31 percent over the same period in 2017. This increase was mainly driven by net business growth and the annualization of revenue from prior year acquisitions.

Segment Profit

Segment profit was $88.3 million for the third quarter, compared to $87.7 million in the prior year quarter.

• Healthcare segment profit was $61.7 million, which represents an increase of 7 percent compared to the third quarter of 2017. Healthcare results for the quarter include net favorable out of period adjustments of approximately $22 million, largely driven by favorable client settlements. Other material drivers of the quarterly change in segment profit included the incremental losses in Virginia and the impact of the October 2017 rate reduction in Florida, partially offset by the incremental earnings contribution from the Senior Whole Health acquisition that closed on October 31, 2017.
• Pharmacy management segment profit was $33.6 million, which was a decrease of 13 percent compared to the third quarter of 2017. This year over year decrease was primarily driven by a decline in earnings in our specialty carve-out business resulting from lost formulary management contracts.
• Corporate costs inclusive of eliminations, but excluding stock compensation expense, totaled $7.0 million, compared to $8.5 million in the third quarter of 2017. This change was due to costs in the prior year quarter related to the Senior Whole Health acquisition.

Cash Flow & Balance Sheet

Cash flow from operations for the nine months ended September 30, 2018, was $34.0 million versus $112.7 million in the nine months ended September 30, 2017. This year over year change is primarily related to the timing of receivable collections from states in the Company’s MCC businesses.

As of September 30, 2018, the Company’s unrestricted cash and investments totaled $232.2 million versus $261.2 million from the balance at December 31, 2017. Approximately $134.2 million of the unrestricted cash and investments at September 30, 2018, is related to excess capital and undistributed earnings held at regulated entities.

Restricted cash and investments at September 30, 2018, was $380.8 million versus the balance at December 31, 2017 of $465.4 million. This decrease was primarily due to accounts receivable increases as well as improved capital efficiency through substituting a letter of credit for statutory surplus in one of the Company’s MCC markets.

Year to date through October 31, 2018, we repurchased approximately 680,000 shares for $53.2 million. We have approximately $200 million remaining in our share repurchase authorization program which runs through October 22, 2020.

Outlook

The Company is lowering its 2018 full year earnings guidance ranges.

    2018 Guidance Nov 7, 2018 July 27, 2018

Low

 

High

Low

 

High

Net revenue $ 7,300.0 $ 7,500.0 $ 7,300.0 $ 7,500.0 Income before income taxes $ 97.0 $ 131.0 $ 132.0 $ 170.0 Net income $ 68.0 $ 88.0 $ 93.0 $ 117.0 Segment Profit[1] $ 290.0 $ 310.0 $ 330.0 $ 350.0 Adjusted net income[1] $ 107.0 $ 123.0 $ 132.0 $ 152.0   Per share results: Earnings per share[2] $ 2.71 $ 3.51 $ 3.65 $ 4.59 Adjusted earnings per share[1][2] $ 4.26 $ 4.90 $ 5.18 $ 5.96   [1] Refer to the Basis of Presentation for a discussion of non-GAAP financial measures.

[2] 2018 EPS and Adjusted EPS guidance includes share repurchases and option exercises through theclose of business October 31, 2018, but excludes the impact of any potential future activity.

 

The reduction in earnings guidance reflects the following:

• Utilization pressures in our Healthcare business;
• In MCC of Virginia, the unfavorable update to the Company’s expected risk scores for 2018;
• Modestly lower margins in the Pharmacy business as a result of delayed timing of network rate improvement actions; and,
• As result of operating efficiency initiatives, an initial estimate of severance and other costs that the Company anticipates to recognize in 2018.

The Company now estimates net income for the full year 2018 to be in the range of $68 million to $88 million, adjusted net income in the range of $107 million to $123 million, EPS in the range of $2.71 to $3.51 and adjusted EPS in the range of $4.26 to $4.90. The full year segment profit guidance is expected to be in the range of $290 million to $310 million. The Company is maintaining its revenue range of $7.3 billion to $7.5 billion.

“After transforming our business and achieving strong top line growth over the past few years, we have significant earnings power in our current portfolio as we work to increase our margins to industry competitive levels,” said Jonathan N. Rubin, chief financial officer of Magellan Health.

Earnings Conference Call

Management will discuss the Company’s third quarter results on a conference call scheduled for Wednesday, November 7, 2018 at 8:00 a.m. Eastern. To participate in the conference call, dial 1-800-857-1812 and use passcode “3rd Quarter 2018” approximately 10 minutes before the start of the call. The conference call will also be available live via webcast at Magellan's investor relations page at MagellanHealth.com. A telephonic replay will be available shortly after the conclusion of the call through December 7, 2018. This replay may be accessed by dialing 1-866-501-2962 (Domestic) or 1-203-369-1830 (International). 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.

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 release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the Securities and Exchange Commission’s Fair Disclosure Regulation. This release contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, as amended, which involve a number of risks and uncertainties, many of which are out of our control. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements including, without limitation, statements regarding 2018 guidance for net revenue, income before income taxes, net income, earnings per share, segment profit, adjusted net income, adjusted earnings per share, an initial estimate of severance and other costs that we anticipate to recognize in 2018, growth opportunities, business environment, long term opportunities and strategy. These statements are based on management’s analysis, judgment, belief and expectation only as of the date hereof, and are subject to uncertainty and changes in circumstances. 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. Actual results could differ materially due to, among other things, the possible election of certain of the Company’s customers to manage the healthcare services of their members directly; changes in rates paid to and/or by the Company by customers and/or providers; higher utilization of healthcare services by the Company’s risk members; delays, higher costs or inability to implement new business or other Company initiatives; the impact of changes in the contracting model for Medicaid contracts; termination or non-renewal of customer contracts; the impact of new or amended laws or regulations; governmental inquiries; litigation; 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 Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 1, 2018, and the Company’s subsequent Quarterly Reports on Form 10-Q filed during 2018. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this release. Segment profit, adjusted net income, and adjusted EPS information referred to herein may be considered a non-GAAP financial measure. Further information regarding these measures, including the reasons management considers this information useful to investors, are included in the Company’s most recent Annual Report on Form 10-K and on subsequent Form 10-Qs.

  MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)               December 31, 2017 September 30, 2018 (unaudited) ASSETS   Current Assets: Cash and cash equivalents $ 398,732 $ 234,264 Accounts receivable, net 660,775 820,748 Short-term investments 310,578 374,669 Pharmaceutical inventory 40,945 44,035 Other current assets   72,323     102,829   Total Current Assets 1,483,353 1,576,545 Property and equipment, net 158,638 154,826 Long-term investments 17,287 4,090 Deferred income taxes 813 1,071 Other long-term assets 22,567 51,391 Goodwill 1,006,288 1,015,076 Other intangible assets, net   268,288     245,516   Total Assets $ 2,957,234   $ 3,048,515     LIABILITIES AND STOCKHOLDERS' EQUITY   Current Liabilities: Accounts payable $ 74,300 $ 73,144 Accrued liabilities 193,635 209,012 Short-term contingent consideration 6,892 7,131 Medical claims payable 327,625 402,497 Other medical liabilities 177,002 162,009 Current debt, capital lease and deferred financing obligations   112,849     64,778   Total Current Liabilities 892,303 918,571 Long-term debt, capital lease and deferred financing obligations 740,888 733,969 Deferred income taxes 12,298 12,802 Tax contingencies 14,226 14,326 Long-term contingent consideration 1,925 2,137 Deferred credits and other long-term liabilities   19,100     34,959   Total Liabilities   1,680,740     1,716,764     Stockholders’ Equity: Ordinary common stock 530 535 Additional paid-in capital 1,274,811 1,324,176 Retained earnings 1,399,495 1,447,416 Accumulated other comprehensive loss (380 ) (373 ) Ordinary common stock in treasury, at cost   (1,397,962 )   (1,440,003 ) Total Stockholders’ Equity   1,276,494     1,331,751   Total Liabilities and Stockholders’ Equity $ 2,957,234   $ 3,048,515       MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share amounts)             Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018 Net revenue: Managed care and other $ 834,358 $ 1,235,787 $ 2,385,397 $ 3,670,890 PBM 585,048 617,719 1,758,771 1,798,616 Total net revenue 1,419,406 1,853,506 4,144,168 5,469,506   Costs and expenses: Cost of care 569,306 938,031 1,634,624 2,802,506 Cost of goods sold 543,682 571,145 1,648,670 1,689,229 Direct service costs and other operating expenses (1)(2) 227,372 265,471 680,230 793,700 Depreciation and amortization 28,189 33,047 82,896 97,302 Interest expense 7,663 8,990 16,711 26,034 Interest and other income (1,781) (4,139) (3,801) (9,978) Total costs and expenses 1,374,431 1,812,545 4,059,330 5,398,793 Income before income taxes 44,975 40,961 84,838 70,713 Provision for income taxes 11,739 13,816 29,206 18,565 Net income 33,236 27,145 55,632 52,148 Less: net income (loss) attributable to non-controlling interest 785 - (66) - Net income attributable to Magellan $ 32,451 $ 27,145 $ 55,698 $ 52,148   Weighted average number of common shares outstanding — basic 23,282 24,433 23,135 24,451 Weighted average number of common shares outstanding — diluted 24,563 24,928 24,241 25,316   Net income attributable to Magellan per common share — basic $ 1.39 $ 1.11 $ 2.41 $ 2.13 Net income attributable to Magellan per common share — diluted $ 1.32 $ 1.09 $ 2.30 $ 2.06   Net income $ 33,236 $ 27,145 $ 55,632 $ 52,148 Other comprehensive income: Unrealized gain on available-for-sale securities (3) 26 194 27 7 Comprehensive income 33,262 27,339 55,659 52,155 Less: comprehensive income (loss) attributable to non-controlling interest 785 - (66) - Comprehensive income attributable to Magellan $ 32,477 $ 27,339 $ 55,725 $ 52,155    

(1) Includes stock compensation expense of $10,323 and $9,320 for the three months ended September 30, 2017 and 2018, respectively, and $31,834and $27,405 for the nine months ended September 30, 2017 and 2018, respectively.

 

(2) Includes changes in fair value of contingent consideration of $(834) and $148 for the three months ended September 30, 2017 and 2018,respectively, and $(631) and $451 for the nine months ended September 30, 2017 and 2018, respectively.

 

(3) Net of income tax provision of $16 and $61 for the three months ended September 30, 2017 and 2018, respectively, and $18 and $3 for the ninemonths ended September 30, 2017 and 2018, respectively.

        MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)     Nine Months Ended September 30, 2017 2018 Cash flows from operating activities: Net income $ 55,632 $ 52,148 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 82,896 97,302 Non-cash interest expense 3,120 919 Non-cash stock compensation expense 31,834 27,405 Non-cash income tax (benefit) provision (2,160 ) 1,814 Non-cash amortization on investments 3,052 1,404 Changes in assets and liabilities, net of effects from acquisitions of businesses: Accounts receivable, net (13,539 ) (160,904 ) Pharmaceutical inventory 9,609 (3,090 ) Other assets (15,481 ) (60,008 ) Accounts payable and accrued liabilities (70,006 ) (13,781 ) Medical claims payable and other medical liabilities 25,578 73,667 Contingent consideration (631 ) 451 Tax contingencies 158 100 Deferred credits and other long-term liabilities 2,408 16,497 Other   210     93   Net cash provided by operating activities   112,680     34,017     Cash flows from investing activities: Capital expenditures (42,703 ) (51,244 ) Acquisitions and investments in businesses, net of cash acquired (3,200 ) (402 ) Purchases of investments (341,280 ) (453,007 ) Proceeds from maturities and sales of investments   320,045     400,683   Net cash used in investing activities   (67,138 )   (103,970 )   Cash flows from financing activities: Proceeds from issuance of debt 949,239 - Payments to acquire treasury stock (15,457 ) (41,039 ) Proceeds from exercise of stock options 28,328 22,587 Payments on debt, capital lease and deferred financing obligations (798,359 ) (75,043 ) Payments on contingent consideration (1,032 ) - Other   (8,005 )   (1,020 ) Net cash provided by (used in) financing activities   154,714     (94,515 )   Net increase (decrease) in cash and cash equivalents 200,256 (164,468 ) Cash and cash equivalents at beginning of period   304,508     398,732   Cash and cash equivalents at end of period $ 504,764   $ 234,264                 MAGELLAN HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS BY BUSINESS SEGMENT (Unaudited) (In thousands)     Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018

Healthcare

Managed care and other revenue $ 769,451 $ 1,176,439 $ 2,190,097 $ 3,488,928 Cost of care (569,306 ) (938,031 ) (1,634,624 ) (2,802,506 ) Direct service costs and other (143,550 ) (179,022 ) (428,432 ) (543,258 ) Stock compensation expense (1) 2,623 2,165 8,388 7,857 Changes in fair value of contingent consideration (1) (834 ) 148 (631 ) 451 Less: non-controlling interest segment profit (loss) (2)   789     -     (56 )   -   Healthcare segment profit 57,595 61,699 134,854 151,472  

Pharmacy Management

Managed care and other revenue 65,131 59,500 195,970 182,410 PBM revenue 618,178 665,734 1,856,856 1,940,726 Cost of goods sold (575,327 ) (618,463 ) (1,742,610 ) (1,827,327 ) Direct service costs and other (74,976 ) (74,491 ) (225,782 ) (221,018 ) Stock compensation expense (1)   5,680     1,359     17,094     4,252   Pharmacy Management segment profit 38,686 33,639 101,528 79,043  

Corporate and Elimination (3)

Managed care and other revenue (224 ) (152 ) (670 ) (448 ) PBM revenue (33,130 ) (48,015 ) (98,085 ) (142,110 ) Cost of goods sold 31,645 47,318 93,940 138,098 Direct service costs and other (8,846 ) (11,958 ) (26,016 ) (29,424 ) Stock compensation expense (1) 2,020 5,796 6,352 15,296 Less: non-controlling interest segment profit (loss) (2)   (1 )   -     (3 )   -   Corporate and Elimination (8,534 ) (7,011 ) (24,476 ) (18,588 )  

Consolidated

Managed care and other revenue 834,358 1,235,787 2,385,397 3,670,890 PBM revenue 585,048 617,719 1,758,771 1,798,616 Cost of care (569,306 ) (938,031 ) (1,634,624 ) (2,802,506 ) Cost of goods sold (543,682 ) (571,145 ) (1,648,670 ) (1,689,229 ) Direct service costs and other (227,372 ) (265,471 ) (680,230 ) (793,700 ) Stock compensation expense (1) 10,323 9,320 31,834 27,405 Changes in fair value of contingent consideration (1) (834 ) 148 (631 ) 451 Less: non-controlling interest segment profit (loss) (2)   788     -     (59 )   -   Consolidated segment profit $ 87,747   $ 88,327   $ 211,906   $ 211,927       Reconciliation of income before income taxes to segment profit: Income before income taxes $ 44,975 $ 40,961 $ 84,838 $ 70,713 Stock compensation expense 10,323 9,320 31,834 27,405 Changes in fair value of contingent consideration (834 ) 148 (631 ) 451 Non-controlling interest segment (profit) loss (788 ) - 59 - Depreciation and amortization 28,189 33,047 82,896 97,302 Interest expense 7,663 8,990 16,711 26,034 Interest and other income   (1,781 )   (4,139 )   (3,801 )   (9,978 ) Segment profit $ 87,747   $ 88,327   $ 211,906   $ 211,927      

(1) Stock compensation expense, changes in the fair value of contingent consideration recorded in relation to acquisitions and impairment ofintangible assets are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of segment profit.

 

(2) The non-controlling portion of AlphaCare's segment profit (loss) is excluded from the computation of segment profit.

 

(3) Healthcare subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Healthcare’s customers.In addition, Pharmacy Management provides pharmacy benefits management for the Company’s employees covered under its medical plan. Assuch, revenue, cost of goods sold and direct service costs and other related to these arrangements are eliminated.

              MAGELLAN HEALTH, INC. AND SUBSIDIARIES NON-GAAP MEASURES (Unaudited) (In thousands, except per share amounts)     Three Months Ended Nine Months Ended September 30, September 30, 2017 2018 2017 2018   Net income attributable to Magellan $ 32,451 $ 27,145 $ 55,698 $ 52,148 Adjusted for acquisitions starting in 2013 Stock compensation expense 4,960 - 14,718 530 Changes in fair value of contingent consideration (834 ) 148 (631 ) 451 Amortization of acquired intangibles 8,424 12,079 25,189 36,676 Tax impact   (4,605 )   (3,220 )   (14,372 )   (9,577 ) Adjusted net income $ 40,396   $ 36,152   $ 80,602   $ 80,228       Net income per common share attributable to Magellan —diluted $ 1.32 $ 1.09 $ 2.30 $ 2.06 Adjusted for acquisitions starting in 2013 Stock compensation expense 0.20 - 0.61 0.02 Changes in fair value of contingent consideration (0.03 ) 0.01 (0.03 ) 0.02 Amortization of acquired intangibles 0.34 0.48 1.04 1.45 Tax impact   (0.19 )   (0.13 )   (0.59 )   (0.38 ) Adjusted earnings per share $ 1.64   $ 1.45   $ 3.33   $ 3.17               MAGELLAN HEALTH, INC. AND SUBSIDIARIES FISCAL 2018 GUIDANCE (In millions, except per share amounts)     July 27, 2018 November 7, 2018 Low     High Low     High   Net revenue $ 7,300.0 $ 7,500.0 $ 7,300.0 $ 7,500.0 Income before income taxes 132.0 170.0 97.0 131.0 Net income 93.0 117.0 68.0 88.0 Segment profit (1) 330.0 350.0 290.0 310.0 Adjusted net income (1) 132.0 152.0 107.0 123.0 Per share results: Earnings per share (2) 3.65 4.59 2.71 3.51 Adjusted earnings per share (1)(2) 5.18 5.96 4.26 4.90     (1) Refer to the Reconciliation of GAAP to Non-GAAP measures table.  

(2) Based on average fully diluted shares of 25.5 million and 25.1 million for July 27, 2018 guidance and November 7,2018 guidance, respectively.

              MAGELLAN HEALTH, INC. AND SUBSIDIARIES FISCAL 2018 GUIDANCE RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In millions, except per share amounts)     July 27, 2018 November 7, 2018 Low     High Low     High   Net income attributable to Magellan $ 93.0 $ 117.0 $ 68.0 $ 88.0 Adjusted for acquisitions starting in 2013 Stock compensation expense 1.0 1.0 1.0 1.0 Changes in fair value of contingent consideration - - - - Amortization of acquired intangibles 52.0 47.0 52.0 47.0 Tax impact   (14.0 )   (13.0 )   (14.0 )   (13.0 ) Adjusted net income $ 132.0   $ 152.0   $ 107.0   $ 123.0         Net income per common share attributable to Magellan —Diluted $ 3.65 $ 4.59 $ 2.71 $ 3.51 Adjusted for acquisitions starting in 2013 Stock compensation expense 0.04 0.04 0.04 0.04 Changes in fair value of contingent consideration - - - - Amortization of acquired intangibles 2.04 1.84 2.07 1.87 Tax impact   (0.55 )   (0.51 )   (0.56 )   (0.52 ) Adjusted earnings per share $ 5.18   $ 5.96   $ 4.26   $ 4.90         Reconciliation of income before income taxes to segment profit: Income before income taxes $ 132.0 $ 170.0 $ 97.0 $ 131.0 Stock compensation expense 35.0 33.0 35.0 31.0 Changes in fair value of contingent consideration - - - - Depreciation and amortization 137.0 127.0 135.0 129.0 Interest expense 37.0 33.0 36.0 34.0 Interest income   (11.0 )   (13.0 )   (13.0 )   (15.0 ) Segment profit $ 330.0   $ 350.0   $ 290.0   $ 310.0       MAGELLAN HEALTH, INC. AND SUBSIDIARIES HEALTHCARE SEGMENT HISTORICAL RECLASSIFICATION (1) (Unaudited) (In thousands)         For the Quarter Ended Year Ended

 

 

March 31,

June 30,

September December 31, December 31, Healthcare Segment Results

2017

  2017   30, 2017   2017 2017 Behavioral & Specialty Health revenue

Risk-based, non-EAP

$ 315,344 $ 385,042 $ 372,755 $ 388,018 $ 1,461,159 EAP risk-based 97,920 100,009 90,000 94,118 382,047 ASO 56,291 61,080 66,785 73,154 257,310 Magellan Complete Care revenue Risk-based, non-EAP 183,076 196,281 226,905 447,654 1,053,916 ASO   12,745       12,858       13,006       13,236     51,845   Managed care and other revenue $ 665,376

$

755,270 $ 769,451 $ 1,016,180 $ 3,206,277   MLR Behavioral & Specialty Health risk 87.5 % 91.4 % 89.3 % 85.7 % 88.5 % MLR Behavioral & Specialty Health EAP risk 71.7 % 69.5 % 65.8 % 67.0 % 68.6 % MLR Magellan Complete Care risk 74.3 % 82.4 % 78.1 % 85.7 % 81.5 %   Membership Behavioral & Specialty Health Risk (2) 12,000 12,771 13,232 13,029 EAP risk 14,533 14,144 14,228 14,472 ASO 26,983 28,475 28,337 27,824 Magellan Complete Care Risk 72 73 77 120 ASO 20   20   20   21   53,608 55,483 55,894 55,466     For the Quarter Ended

 

March 31,

June 30,

September Healthcare Segment Results 2018   2018   30, 2018 Behavioral & Specialty Health revenue Risk-based, non-EAP $ 373,052 $ 378,076 $ 377,615 EAP risk-based 94,658 91,275 79,854 ASO 62,639 61,276 65,326 Magellan Complete Care revenue Risk-based, non-EAP 613,829 610,358 639,584 ASO   13,423       13,903       14,060   Managed care and other revenue $ 1,157,601 $ 1,154,888 $ 1,176,439   MLR Behavioral & Specialty Health risk 86.8 % 86.7 % 87.7 % MLR Behavioral & Specialty Health EAP risk 68.9 % 69.2 % 68.2 % MLR Magellan Complete Care risk 87.9 % 89.3 % 86.4 %   Membership Behavioral & Specialty Health Risk (2) 12,334 12,258 12,325 EAP risk 15,343 14,890 15,140 ASO 29,533 27,064 26,551 Magellan Complete Care Risk 131 132 144 ASO 21   22   22   57,362 54,366 54,182  

(1) During the third quarter of 2018, the Company re-evaluated how it was managing the Healthcare business segmentand decided a reorganization was necessary to effectively manage the business going forward. As a result of thisbusiness reorganization, the Company concluded that changes to Healthcare’s reporting units were warranted.Healthcare now consists of two reporting units – Behavioral & Specialty Health and Magellan Complete Care (“MCC”).

 

(2) May include some duplicate count of membership for customers that contract with Magellan for both behavioral andother specialty management services.

(MGLN-GEN)

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For Magellan Health, Inc.Media:Lilly Ackley, 860-507-1923ackleyl@magellanhealth.comorInvestors:Joe Bogdan, 860-507-1910jbogdan@magellanhealth.com