Attached files
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| 8-K - 8-K - MAGELLAN HEALTH INC | a11-22281_28k.htm |
Exhibit 99.1
NEWS RELEASE
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Media Contact: David W. Carter, dwcarter@magellanhealth.com, (860) 507-1909 Investor Contact: Renie Shapiro, rshapiro@magellanhealth.com, (877) 645-6464 |
MAGELLAN HEALTH SERVICES REPORTS
SECOND QUARTER 2011 FINANCIAL RESULTS
- Increases 2011 EPS Guidance -
AVON, Conn. — July 29, 2011 — Magellan Health Services Inc. (NASDAQ: MGLN) today reported financial results for the second quarter of 2011, as summarized below. For the quarter ended June 30, 2011, the company reported net revenue of $698.3 million, segment profit of $75.9 million, and net income of $34.2 million or $1.07 per diluted common share. Segment profit represents income from operations before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, special charges or benefits, and income taxes.
Financial Results
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Three Months Ended June 30 |
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Six Months Ended June 30 |
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(Millions, except per share results) |
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2011 |
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2010 |
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Increase/ |
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2011 |
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2010 |
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Increase/ |
| ||||
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Revenue |
|
$ |
698.3 |
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$ |
741.7 |
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(5.9 |
)% |
$ |
1,391.1 |
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$ |
1,469.7 |
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(5.3 |
)% |
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Segment Profit |
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75.9 |
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78.5 |
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(3.3 |
)% |
151.7 |
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139.9 |
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8.4 |
% | ||||
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Net Income |
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34.2 |
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35.4 |
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(3.4 |
)% |
68.5 |
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60.9 |
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12.5 |
% | ||||
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Earnings per Share |
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1.07 |
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1.05 |
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1.9 |
% |
2.09 |
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1.77 |
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18.1 |
% | ||||
As of June 30, 2011, the company had unrestricted cash and investments of $308.3 million. In addition, under its current authorization, Magellan reported share repurchases through July 26, 2011 of 6.2 million shares for a total cost of $305.3 million.
“Magellan had a strong second quarter, completing a solid first half of the year with results meeting our expectations,” said René Lerer, M.D., chairman and chief executive officer. “It’s significant that contributions to these results came from across our lines of business, as well as solid care management results from our risk products. Looking ahead, our focus remains on executing our strategy and exploiting our deep experience and clinical expertise. We are particularly enthusiastic about opportunities to bring innovative solutions to new and existing customers in the areas of pharmacy and Medicaid.
“Magellan demonstrated traction during the quarter with existing customers. Our successful partnership with the state of Arizona resulted in a contract extension in Maricopa County through September 2013. And earlier this week, we announced an innovative partnership with the state of Iowa in launching an integrated health home program that focuses on individuals with serious mental illness, with the goal of driving better health outcomes. This brings the integration of medical and behavioral health management for this unique population under Magellan’s oversight, and is part of our ongoing efforts focused on total care management. We are the partner of choice in the specialty health care market providing comprehensive solutions and proven results to state governments, health plans, and employers.”
Magellan Health Services—55 Nod Road, Avon CT 06001—www.MagellanHealth.com
“I’m pleased with our operational performance during the quarter and our positioning in the marketplace for future growth,” said Karen S. Rohan, Magellan’s president. “We are continuing to differentiate our offerings in the market by developing new products in anticipation of customer needs and in response to the changing health care landscape. Our radiation oncology, cardiac management, and medical pharmacy products continue to generate significant market interest. In addition, there is growing demand from both commercial and public sector customers for our integrated behavioral and medical capabilities, which we are currently piloting with a number of clients through our patient-centered medical home and integrated health home programs.”
“Our financial position remains strong, with solid fundamentals and good liquidity,” said Jonathan N. Rubin, chief financial officer. “This enables us to continue to invest in our growth strategy, while making further progress in our share repurchase program.”
2011 Outlook
The company reaffirmed its 2011 guidance ranges for full-year net income of $105.5 million to $122.5 million, segment profit of $255 million to $275 million, and cash flow from operations of $180.5 million to $211.5 million, excluding the net shift of restricted funds between cash and investments. The company updated its diluted earnings per share to a range of $3.30 to $3.83 per share based on share repurchases through the close of business on July 26, 2011, but excluding any potential repurchases that may occur during the remainder of the year.
Earnings Results Conference Call
Management will host a conference call at 10:00 a.m. Eastern Time on Friday, July 29, 2011. To participate in the conference call, interested parties should call 1-888-566-8408 and reference the passcode Second Quarter Earnings Call 2011 approximately 15 minutes before the start of the call. The conference call will also be available via a live Webcast at Magellan’s investor relations page at www.MagellanHealth.com.
About Magellan Health Services: Headquartered in Avon, Conn., Magellan Health Services Inc. is a leading specialty health care management organization with expertise in managing behavioral health, radiology and specialty pharmaceuticals, as well as public sector pharmacy benefits programs. Magellan delivers innovative solutions to improve quality outcomes and optimize the cost of care for those we serve. Magellan’s customers include health plans, employers and government agencies, serving approximately 31.3 million members in our behavioral health business, 18.9 million members in our radiology benefits management segment, and five million members in our medical pharmacy management product. In addition, the specialty pharmaceutical segment serves 41 health plans and several pharmaceutical manufacturers and state Medicaid programs. The company’s Medicaid Administration segment serves 25 states and the District of Columbia. For more information, visit www.MagellanHealth.com.
Cautionary Statement
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. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements including, without limitation, statements regarding estimates of 2011 net income, segment profit, earnings per share, cash flow from operations 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 health care services of their members directly; changes in rates paid to and/or by the company by customers and/or providers; higher utilization of health care 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; health care 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, 2010, filed with the Securities and Exchange Commission on February 25, 2011, and the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, expected to be filed with the Securities and Exchange Commission and posted on the company’s website later today. 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 information referred to herein may be considered a non-GAAP financial measure. Further information regarding this measure, 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 SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2010 |
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2011 (1) |
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2010 |
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2011 (1) |
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Net revenue |
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$ |
741,658 |
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$ |
698,338 |
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$ |
1,469,711 |
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$ |
1,391,093 |
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Cost and expenses: |
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Cost of care |
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472,478 |
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441,446 |
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949,157 |
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875,146 |
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Cost of goods sold |
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54,771 |
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53,404 |
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111,067 |
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109,923 |
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Direct service costs and other operating expenses (2) |
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139,617 |
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131,779 |
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277,871 |
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263,346 |
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Depreciation and amortization |
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14,235 |
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14,267 |
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27,657 |
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28,219 |
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Interest expense |
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584 |
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494 |
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1,269 |
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965 |
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Interest income |
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(803 |
) |
(858 |
) |
(1,620 |
) |
(1,673 |
) | ||||
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680,882 |
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640,532 |
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1,365,401 |
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1,275,926 |
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Income before income taxes |
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60,776 |
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57,806 |
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104,310 |
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115,167 |
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Provision for income taxes |
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25,348 |
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23,575 |
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43,363 |
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46,638 |
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Net income |
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35,428 |
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34,231 |
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60,947 |
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68,529 |
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Other comprehensive (loss) income |
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(285 |
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(19 |
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(259 |
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78 |
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Comprehensive income |
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$ |
35,143 |
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$ |
34,212 |
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$ |
60,688 |
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$ |
68,607 |
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Weighted average number of common shares outstanding — basic |
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33,323 |
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31,301 |
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33,849 |
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32,171 |
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Weighted average number of common shares outstanding — diluted |
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33,800 |
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31,903 |
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34,434 |
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32,775 |
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Net income per common share — basic |
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$ |
1.06 |
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$ |
1.09 |
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$ |
1.80 |
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$ |
2.13 |
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Net income per common share — diluted |
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$ |
1.05 |
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$ |
1.07 |
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$ |
1.77 |
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$ |
2.09 |
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(1) |
For a more detailed discussion of Magellan’s results for the quarter ended June 30, 2011, refer to the Company’s Quarterly Report on Form 10-Q, which will be filed with the SEC on July 29, 2011, and the live broadcast or taped replay of the Company’s earnings conference call on July 29, 2011, which will be available at www.MagellanHealth.com. |
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(2) |
Includes stock compensation expense of $3,706 and $4,205 for the three months ended June 30, 2010 and 2011, respectively, and $8,234 and $8,983 for the six months ended June 30, 2010 and 2011, respectively. |
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Six Months Ended June 30, |
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2010 |
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2011 (1) |
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Cash flows from operating activities: |
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Net income |
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$ |
60,947 |
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$ |
68,529 |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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27,657 |
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28,219 |
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Non-cash interest expense |
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361 |
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213 |
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Non-cash stock compensation expense |
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8,234 |
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8,983 |
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Non-cash income tax expense |
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18,039 |
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6,885 |
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Cash flows from changes in assets and liabilities, net of effects from acquisitions of businesses: |
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Restricted cash (2) |
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35,956 |
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13,697 |
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Accounts receivable, net |
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(2,445 |
) |
(77,031 |
) | ||
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Other assets |
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5,674 |
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(21,141 |
) | ||
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Accounts payable and accrued liabilities |
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(25,050 |
) |
(27,098 |
) | ||
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Medical claims payable and other medical liabilities |
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(7,638 |
) |
(12,390 |
) | ||
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Other |
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4,454 |
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9,246 |
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Net cash provided by (used in) operating activities |
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126,189 |
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(1,888 |
) | ||
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Cash flows from investing activities: |
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Capital expenditures |
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(21,681 |
) |
(26,693 |
) | ||
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Acquisitions and investments in businesses, net of cash acquired |
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— |
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(274 |
) | ||
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Purchase of investments |
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(96,515 |
) |
(187,807 |
) | ||
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Maturity of investments |
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84,959 |
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123,043 |
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Net cash used in investing activities |
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(33,237 |
) |
(91,731 |
) | ||
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Cash flows from financing activities: |
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Payments on long-term debt and capital lease obligations |
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(588 |
) |
— |
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Payments to acquire treasury stock |
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(74,427 |
) |
(211,451 |
) | ||
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Proceeds from issuance of equity |
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— |
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20,000 |
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Proceeds from exercise of stock options and warrants |
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17,148 |
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28,842 |
| ||
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Other |
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(1,504 |
) |
391 |
| ||
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Net cash used in financing activities |
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(59,371 |
) |
(162,218 |
) | ||
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Net increase (decrease) in cash and cash equivalents |
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33,581 |
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(255,837 |
) | ||
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Cash and cash equivalents at beginning of period |
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196,507 |
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337,179 |
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Cash and cash equivalents at end of period |
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$ |
230,088 |
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$ |
81,342 |
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(1) |
The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 will be filed with the SEC on July 29, 2011. |
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(2) |
Includes the net shift of restricted funds between cash and investments that results in an operating cash flow change that is directly offset by an investing cash flow change. During the six months ended June 30, 2010 and 2011, restricted cash of $662 and $84,077, respectively, was shifted to restricted cash that resulted in an operating cash flow use. |
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED OPERATING RESULTS BY BUSINESS SEGMENT
(Unaudited)
(In thousands)
|
|
|
Three Months Ended June 30, |
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Six Months Ended June 30, |
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2010 |
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2011 (1) |
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2010 |
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2011 (1) |
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Net revenue |
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- Commercial |
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$ |
160,982 |
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$ |
139,686 |
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$ |
322,684 |
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$ |
289,721 |
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- Public Sector |
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368,011 |
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362,284 |
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717,479 |
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712,800 |
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- Radiology Benefits Management |
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105,263 |
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90,608 |
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214,720 |
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179,820 |
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- Specialty Pharmaceutical Management |
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67,993 |
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69,366 |
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136,131 |
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139,596 |
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- Medicaid Administration (2) |
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39,409 |
|
56,637 |
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78,697 |
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109,930 |
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- Elimination (2) |
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— |
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(20,243 |
) |
— |
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(40,774 |
) | ||||
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Total net revenue |
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741,658 |
|
698,338 |
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1,469,711 |
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1,391,093 |
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|
|
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|
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|
|
|
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Cost of care |
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|
|
|
|
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|
|
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- Commercial |
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90,583 |
|
79,122 |
|
181,255 |
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154,435 |
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- Public Sector (2) |
|
311,609 |
|
309,934 |
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620,671 |
|
614,855 |
| ||||
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- Radiology Benefits Management |
|
70,286 |
|
53,828 |
|
147,231 |
|
108,545 |
| ||||
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- Medicaid Administration |
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— |
|
18,805 |
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— |
|
38,085 |
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- Elimination (2) |
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— |
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(20,243 |
) |
— |
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(40,774 |
) | ||||
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Total cost of care |
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472,478 |
|
441,446 |
|
949,157 |
|
875,146 |
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|
|
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|
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|
|
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Cost of goods sold - Specialty Pharmaceutical Management |
|
54,771 |
|
53,404 |
|
111,067 |
|
109,923 |
| ||||
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|
|
|
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|
|
|
| ||||
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Direct service costs and other operating expenses |
|
|
|
|
|
|
|
|
| ||||
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- Commercial |
|
37,716 |
|
39,112 |
|
75,184 |
|
76,920 |
| ||||
|
- Public Sector |
|
15,458 |
|
16,486 |
|
33,005 |
|
33,462 |
| ||||
|
- Radiology Benefits Management |
|
15,401 |
|
15,858 |
|
30,239 |
|
32,563 |
| ||||
|
- Specialty Pharmaceutical Management |
|
5,922 |
|
6,083 |
|
11,473 |
|
12,095 |
| ||||
|
- Medicaid Administration |
|
34,039 |
|
25,849 |
|
66,627 |
|
51,835 |
| ||||
|
- Corporate |
|
31,081 |
|
28,391 |
|
61,343 |
|
56,471 |
| ||||
|
Total direct service costs and other operating expenses |
|
139,617 |
|
131,779 |
|
277,871 |
|
263,346 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Stock compensation expense (3) |
|
|
|
|
|
|
|
|
| ||||
|
- Commercial |
|
(194 |
) |
(218 |
) |
(432 |
) |
(469 |
) | ||||
|
- Public Sector |
|
(172 |
) |
(214 |
) |
(373 |
) |
(436 |
) | ||||
|
- Radiology Benefits Management |
|
(368 |
) |
(401 |
) |
(761 |
) |
(883 |
) | ||||
|
- Specialty Pharmaceutical Management |
|
(114 |
) |
(133 |
) |
(257 |
) |
(259 |
) | ||||
|
- Medicaid Administration |
|
(22 |
) |
(41 |
) |
(40 |
) |
(64 |
) | ||||
|
- Corporate |
|
(2,836 |
) |
(3,198 |
) |
(6,371 |
) |
(6,872 |
) | ||||
|
Total stock compensation expense |
|
(3,706 |
) |
(4,205 |
) |
(8,234 |
) |
(8,983 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Segment profit (loss) |
|
|
|
|
|
|
|
|
| ||||
|
- Commercial |
|
32,877 |
|
21,670 |
|
66,677 |
|
58,835 |
| ||||
|
- Public Sector |
|
41,116 |
|
36,078 |
|
64,176 |
|
64,919 |
| ||||
|
- Radiology Benefits Management |
|
19,944 |
|
21,323 |
|
38,011 |
|
39,595 |
| ||||
|
- Specialty Pharmaceutical Management |
|
7,414 |
|
10,012 |
|
13,848 |
|
17,837 |
| ||||
|
- Medicaid Administration |
|
5,392 |
|
12,024 |
|
12,110 |
|
20,074 |
| ||||
|
- Corporate and Elimination |
|
(28,245 |
) |
(25,193 |
) |
(54,972 |
) |
(49,599 |
) | ||||
|
Total segment profit |
|
$ |
78,498 |
|
$ |
75,914 |
|
$ |
139,850 |
|
$ |
151,661 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Reconciliation of segment profit to income before income taxes: |
|
|
|
|
|
|
|
|
| ||||
|
Segment profit |
|
$ |
78,498 |
|
$ |
75,914 |
|
$ |
139,850 |
|
$ |
151,661 |
|
|
Stock compensation expense |
|
(3,706 |
) |
(4,205 |
) |
(8,234 |
) |
(8,983 |
) | ||||
|
Depreciation and amortization |
|
(14,235 |
) |
(14,267 |
) |
(27,657 |
) |
(28,219 |
) | ||||
|
Interest expense |
|
(584 |
) |
(494 |
) |
(1,269 |
) |
(965 |
) | ||||
|
Interest income |
|
803 |
|
858 |
|
1,620 |
|
1,673 |
| ||||
|
Income before income taxes |
|
$ |
60,776 |
|
$ |
57,806 |
|
$ |
104,310 |
|
$ |
115,167 |
|
|
(1) |
The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 will be filed with the SEC on July 29, 2011. |
|
|
|
|
(2) |
Effective September 1, 2010, Public Sector has subcontracted with Medicaid Administration to provide pharmacy benefits management services on a risk basis for one of Public Sector’s customers. As such, revenue and cost of care related to this intersegment arrangement are eliminated. |
|
|
|
|
(3) |
Stock compensation expense is included in direct service costs and other operating expenses; however, this amount is excluded from the computation of segment profit since it is managed on a consolidated basis. |