News Releases
AVON, Conn.--(BUSINESS WIRE)--Feb. 28, 2007--Magellan Health Services, Inc. (Nasdaq:MGLN) today reported operating results for the fourth quarter and fiscal year 2006.
Financial Results
For the fiscal year ended December 31, 2006, the Company reported net revenue of $1.7 billion and net income of $86.3 million, or $2.23 per diluted common share. For the prior year, net revenue was $1.8 billion and net income was $130.6 million, or $3.46 per diluted common share. Net income for the prior year, as well as the fourth quarter of 2005, was favorably impacted by the sale of certain assets to Aetna, Inc., which generated an after-tax gain of $34.7 million. For 2006, the Company's segment profit (which represents profit from continuing operations before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, special charges or benefits, income taxes and minority interest) was $216.3 million, compared with $246.0 million in the prior year.
For the fourth quarter of 2006, the Company reported net revenue of $461.3 million, compared with $436.4 million in the prior year fourth quarter. Net income in the quarter was $22.5 million, or $0.58 per diluted common share, compared with $52.2 million, or $1.38 per diluted common share in the fourth quarter of 2005. Segment profit for the fourth quarter was $62.3 million, compared with $56.9 million in the prior year quarter.
See the attached tables detailing the Company's operating results, including results by segment.
The Company ended the quarter with unrestricted cash and investments of $188.8 million. Cash flow from operations for 2006 was $197.0 million compared with $188.0 million for the prior year period.
Steven J. Shulman, chairman and chief executive officer, said, "This past year was marked by continued robust financial performance overall coupled with significant advances in the Company's strategic development as a specialty managed health care organization. With our expansion into the radiology management and specialty pharmaceuticals arenas, we are demonstrating that we can bring to bear resources and skills to complement the specialized knowledge and innovative clinical approaches of the companies we acquired during 2006."
Mark S. Demilio, chief financial officer, noted, "The fourth quarter benefited from one-time favorable contractual settlements of $5.1 million and out-of-period favorable care development of $1.7 million in our health plan segment. These items contributed to the Company's exceeding the upper end of our previously announced 2006 segment profit guidance by $6 million and net income guidance by $2 million or $0.05 per diluted common share. The Company was also successful in 2006 in executing on our stated strategy of using our strong cash position to further our long-term objective of driving greater value for our customers and their stakeholders, and managing a greater portion of the health care dollar. Our strong balance sheet, rigorous financial management, and underwriting acumen are key to our customers' confidence in our ability to manage the most dynamic areas of health care. Our solid financial foundation also affords us the resources to invest in enhancements to our existing product lines and to fund business development efforts across our product lines."
Commenting on segment performance, Shulman said, "Our behavioral health business, particularly in the public sector segment, performed better than expected, and results for our specialty pharmaceutical segment were on target. With regard to radiology management, while results to date have lagged our expectations somewhat, we have implemented significant enhancements to operations and organizational infrastructure and achieved a major milestone with the development of a risk-based radiology management offering. I am confident that our persistent focus on further improvement in this segment will yield positive results.
Earnings Results Conference Call
A conference call will be held to discuss the Company's financial results at 9:30 a.m. Eastern time today, February 28, 2007. To participate in the conference call, interested parties should call 1-888-390-4698 and reference the passcode Fourth Quarter Earnings and conference leader Steve Shulman approximately 15 minutes before the start of the call.
The conference call also will be available via a live Webcast at Magellan's investor relations page at www.MagellanHealth.com.
A taped replay of the conference call will be available for one week following the call. The call-in numbers for the replay are 1-800-294-0344 and 1-402-220-9747 (from outside the U.S.).
About Magellan: Headquartered in Avon, Conn., Magellan Health Services, Inc. (Nasdaq:MGLN) is a leading specialty health care management organization, managing behavioral health, radiology and specialty pharmaceuticals for government agencies, health plans and corporations.
Cautionary Statement: Certain of the statements made in this press release including, without limitation, statements regarding improvement in the radiology benefit management segment and other matters constitute forward-looking statements contemplated under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and are subject to known and unknown uncertainties and risks which could cause actual results to differ materially from those contemplated or implied by such forward-looking statements, including (among others) risk concerning the possible election of certain of the Company's health plan customers to manage the behavioral health care services of their members directly; renegotiation of rates paid to and/or by the Company by customers and/or to providers; higher utilization of behavioral health treatment services by members; delays, higher costs or inability to implement the Company's initiatives; termination or non-renewal of contracts by customers; the impact of new or amended laws or regulations; governmental inquiries and/or litigation; the impact of increased competition on the Company's ability to maintain or obtain contracts; the impact of increased competition on rates paid to or by the Company; and other factors. Any forward-looking statements made in this document are qualified in their entirety by the more complete discussion of risks set forth in the section entitled "Risk Factors" in Magellan's Annual Report on Form 10-K for the year ended December 31, 2006, to be filed with the Securities and Exchange Commission today and posted on the Company's Web site. Segment profit information referred to in this press release may be considered a non-GAAP financial measure. Further information regarding this measure, including the reasons management considers this information useful to investors, will be included in Magellan's Annual Report on Form 10-K for the year ended December 31, 2006.
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------------------- -----------------------
2005 2006 (1) 2005 2006 (1)
------------ ------------ ----------- -----------
(unaudited) (unaudited)
Net revenue $ 436,439 $ 461,254 $1,808,003 $1,690,270
Cost and expenses:
Cost of care 284,396 276,634 1,204,659 1,081,080
Cost of goods sold - 26,597 - 41,809
Direct service
costs and other
operating expenses
(2) 98,575 108,651 377,533 385,478
Equity in
(earnings) loss of
unconsolidated
subsidiaries 361 - (4,350) (390)
Depreciation and
amortization 12,136 13,776 49,088 48,862
Interest expense 18,044 1,795 44,005 7,292
Interest income (5,537) (4,210) (17,464) (17,628)
Gain on sale of
assets (56,367) - (56,367) (5,148)
Special benefits - - (556) -
------------ ------------ ----------- -----------
351,608 423,243 1,596,548 1,541,355
------------ ------------ ----------- -----------
Income from
continuing
operations before
income taxes and
minority interest 84,831 38,011 211,455 148,915
Provision for income
taxes 32,709 15,526 82,405 62,695
------------ ------------ ----------- -----------
Income from
continuing
operations before
minority interest 52,122 22,485 129,050 86,220
Minority interest,
net 11 (2) 58 (42)
------------ ------------ ----------- -----------
Income from
continuing
operations 52,111 22,487 128,992 86,262
Income from
discontinued
operations (3) 71 - 1,597 -
------------ ------------ ----------- -----------
Net income 52,182 22,487 130,589 86,262
Other comprehensive
income (loss) (4) 319 47 (109) 609
------------ ------------ ----------- -----------
Comprehensive income $ 52,501 $ 22,534 $ 130,480 $ 86,871
============ ============ =========== ===========
Weighted average
number of common
shares outstanding
-- basic (5) 36,474 37,144 35,966 36,986
============ ============ =========== ===========
Weighted average
number of common
shares outstanding
-- diluted (5) 37,712 38,762 37,691 38,621
============ ============ =========== ===========
Income per common
share -- basic:
Income from
continuing
operations $ 1.43 $ 0.61 $ 3.59 $ 2.33
============ ============ =========== ===========
Income from
discontinued
operations $ - $ - $ 0.04 $ -
============ ============ =========== ===========
Net income $ 1.43 $ 0.61 $ 3.63 $ 2.33
============ ============ =========== ===========
Income per common
share -- diluted:
Income from
continuing
operations $ 1.38 $ 0.58 $ 3.42 $ 2.23
============ ============ =========== ===========
Income from
discontinued
operations $ - $ - $ 0.04 $ -
============ ============ =========== ===========
Net income $ 1.38 $ 0.58 $ 3.46 $ 2.23
============ ============ =========== ===========
(1) For a more detailed discussion of Magellan's results for the
fiscal year ended December 31, 2006, refer to the Company's Annual
Report on Form 10-K, which will be filed with the SEC on February 28,
2007, and the live broadcast or taped replay of the Company's
earnings conference call on February 28, 2007, which will be
available at www.MagellanHealth.com.
(2) Includes stock compensation expense of $3,783 and $12,958 for the
three months ended December 31, 2005 and 2006, respectively, and
$15,807 and $33,991 for the years ended December 31, 2005 and 2006,
respectively.
(3) Net of income tax provision (benefit) of $(21) and $1,052 for the
three months and year ended December 31, 2005, respectively.
(4) Net of income tax provision (benefit) of $338 and $(4) for the
three months and years ended December 31, 2005 and 2006,
respectively.
(5) Weighted average number of common shares outstanding for the
fiscal years ended December 31, 2005 and 2006 were calculated using
outstanding shares of the Company's Ordinary Common Stock and Multi-
Vote Common Stock as appropriate.
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December
31,
----------------------
2005 2006
---------- ----------
Cash flows from operating activities:
Net income $ 130,589 $ 86,262
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of assets (56,367) (5,148)
Depreciation and amortization 49,088 48,862
Equity in earnings of unconsolidated
subsidiaries (4,350) (390)
Non-cash interest expense 1,389 1,389
Non-cash stock compensation expense 15,807 33,991
Non-cash income tax expense 77,998 57,487
Cash flows from changes in assets and
liabilities, net of effects from
acquisitions of businesses:
Restricted cash (45,309) 8,941
Accounts receivable, net 17,779 128
Other assets 1,631 (4,365)
Accounts payable and accrued
liabilities (15,746) (8,062)
Medical claims payable and other
medical liabilities 14,932 (23,155)
Other 541 1,024
---------- ----------
Net cash provided by operating
activities 187,982 196,964
---------- ----------
Cash flows from investing activities:
Capital expenditures (22,207) (25,477)
Acquisitions and investments in businesses,
net of cash acquired - (283,005)
Proceeds from sale of assets 55,789 22,200
Purchase of investments (797,564) (69,807)
Maturity of investments 906,878 254,397
Proceeds from note receivable 7,000 3,000
Other 343 -
---------- ----------
Net cash provided by (used in)
investing activities 150,239 (98,692)
---------- ----------
Cash flows from financing activities:
Payments on long-term debt and capital lease
obligations (315,866) (25,202)
Proceeds from exercise of stock options and
warrants 13,294 9,628
---------- ----------
Net cash used in financing
activities (302,572) (15,574)
---------- ----------
Net increase in cash and cash equivalents 35,649 82,698
Cash and cash equivalents at beginning of
period 45,390 81,039
---------- ----------
Cash and cash equivalents at end of period $ 81,039 $ 163,737
========== ==========
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except membership amounts in millions)
Three Months Ended Year Ended December 31,
December 31,
----------------------- -----------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Net revenue
- Health Plan $ 220,552 $ 174,374 $ 907,796 $ 656,022
- Employer 32,251 31,430 127,090 128,746
- Public Sector 183,636 210,106 773,117 808,657
- Radiology
Benefits
Management - 10,811 - 41,617
- Specialty
Pharmaceutical
Management - 34,533 - 55,228
----------- ----------- ----------- -----------
Total revenue 436,439 461,254 1,808,003 1,690,270
----------- ----------- ----------- -----------
Cost of care
- Health Plan 119,286 91,544 501,831 363,121
- Employer 7,134 7,003 30,256 28,945
- Public Sector 157,976 178,087 672,572 689,014
----------- ----------- ----------- -----------
Total cost of care 284,396 276,634 1,204,659 1,081,080
----------- ----------- ----------- -----------
Cost of goods sold -
Specialty
Pharmaceutical
Management - 26,597 - 41,809
----------- ----------- ----------- -----------
Direct service costs
- Health Plan 41,128 27,812 163,026 105,981
- Employer 16,752 16,844 64,660 67,723
- Public Sector 7,360 10,052 29,812 36,321
- Radiology
Benefits
Management - 13,376 - 40,136
- Specialty
Pharmaceutical
Management - 4,806 - 7,437
----------- ----------- ----------- -----------
Total direct
services costs 65,240 72,890 257,498 257,598
----------- ----------- ----------- -----------
Other operating
expenses - Corporate
& Other 33,335 35,761 120,035 127,880
----------- ----------- ----------- -----------
Equity in (earnings)
loss of
unconsolidated
subsidiaries - Health
Plan 361 - (4,350) (390)
----------- ----------- ----------- -----------
Stock compensation
expense (1)
- Health Plan (114) (356) (519) (1,313)
- Employer (42) (36) (108) (282)
- Public Sector (78) (44) (337) (647)
- Radiology
Benefits
Management - (2,852) - (3,739)
- Specialty
Pharmaceutical
Management - (2,269) - (3,577)
- Corporate &
Other (3,549) (7,401) (14,843) (24,433)
----------- ----------- ----------- -----------
Total stock
compensation
expense (3,783) (12,958) (15,807) (33,991)
----------- ----------- ----------- -----------
Segment profit (loss)
- Health Plan 59,891 55,374 247,808 188,623
- Employer 8,407 7,619 32,282 32,360
- Public Sector 18,378 22,011 71,070 83,969
- Radiology
Benefits
Management - 287 - 5,220
- Specialty
Pharmaceutical
Management - 5,399 - 9,559
- Corporate &
Other (29,786) (28,360) (105,192) (103,447)
----------- ----------- ----------- -----------
Total segment
profit $ 56,890 $ 62,330 $ 245,968 $ 216,284
=========== =========== =========== ===========
Reconciliation of
segment profit to
income from
continuing operations
before income taxes
and minority
interest:
Segment profit $ 56,890 $ 62,330 $ 245,968 $ 216,284
Stock compensation
expense (3,783) (12,958) (15,807) (33,991)
Depreciation and
amortization (12,136) (13,776) (49,088) (48,862)
Interest expense (18,044) (1,795) (44,005) (7,292)
Interest income 5,537 4,210 17,464 17,628
Gain on sale of assets 56,367 - 56,367 5,148
Special benefits - - 556 -
----------- ----------- ----------- -----------
Income from
continuing
operations
before income
taxes and
minority
interest $ 84,831 $ 38,011 $ 211,455 $ 148,915
=========== =========== =========== ===========
Membership
- Health Plan 27.6
- Employer 13.9
- Public Sector 2.0
- Radiology
Benefits
Management 17.3
-----------
Total membership 60.8
===========
(1) 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.
CONTACT: Magellan Health Services, Inc., Avon
Media:
Erin Somers, 410-953-2405
or
Investor:
Melissa Rose, 877-645-6464
SOURCE: Magellan Health Services, Inc.