News Releases
AVON, Conn.--(BUSINESS WIRE)--July 27, 2007--Magellan Health Services, Inc. (Nasdaq:MGLN) today reported operating results for the second quarter of fiscal year 2007. In addition, the Company said that it expects to generate 2007 segment profit in the range of $190 million to $210 million excluding an adverse impact of approximately $10 million associated with the start of the Company's contract to manage behavioral health care for the Maricopa County Regional Behavioral Health Authority, awarded in June.
For the quarter ended June 30, 2007, the Company reported net revenue of $452.9 million and net income of $16.8 million, or $.42 per diluted common share. For the prior year quarter, net revenue was $398.9 million. Net income for the prior year quarter was $20.2 million, or $.52 per diluted common share. Segment profit (which represents income 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) for the current year quarter was $46.6 million, compared with $50.1 million in the prior year quarter.
For the six months ended June 30, 2007, the Company reported net revenue of $939.9 million and net income of $37.8 million, or $0.96 per diluted common share. For the prior year period, the Company reported net revenue of $799.5 million and net income of $42.5 million, or $1.11 per diluted common share. Segment profit for the first six months of 2007 was $99.6 million versus $99.3 million for the prior year period.
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 $263.5 million. Cash flow from operations for the six months ended June 30, 2007 was $90.1 million compared with $69.8 million for the comparable period in the prior year.
"Magellan has consistently produced overall strong financial results and I am generally pleased with our performance again this quarter," said Steven J. Shulman, chairman and chief executive officer of Magellan. "Highlights of the quarter included the successful implementation of the initial markets of our CIGNA risk radiology contract and the announcement of the award of the Maricopa County behavioral program, a three-year contract with annual revenue of approximately $500 million that is widely considered the largest public sector behavioral health care contract in the nation. Our win of the Maricopa contract is indicative of the creativity and expertise that we bring to our work in the public sector and the confidence that public purchasers have in our ability to design and implement programs that comprehensively address the needs of their stakeholders. We remain on target for the September 1 implementation of this important program."
Mark S. Demilio, chief financial officer, said, "We are pleased to report another solid quarter of earnings and cash flows. While the results in the quarter benefited from favorable prior period development of behavioral care costs, the underlying operating results were in line with our expectations. We continue to expect segment profit for the year to be $190 million to $210 million before taking into account the adverse impact associated with the Maricopa County contract. Our expected full-year results contemplate better than previously projected results in our behavioral health business, primarily due to favorable prior period care development, offset by reduced projections for our specialty pharmaceutical management segment, primarily due to slower than expected growth. We expect the 2007 impact of the implementation and ramp-up of Maricopa to be approximately $10 million, which includes a portion of the previously announced $10.5 million purchase price for several behavioral health direct care facilities that currently serve the contract."
Earnings Results Conference Call
A conference call will be held to discuss the Company's financial results at 9:30 a.m. Eastern time on Friday, July 27. To participate in the conference call, interested parties should call 1-888-390-4698 and reference the passcode Second 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 the investor relations page of Magellan's Web site, 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 888-482-2247 and 402-998-1368 (from outside the U.S.).
Those who plan to access the Webcast are encouraged to read Magellan's Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007, for material information regarding Magellan's operational and financial results, including the section entitled "Risk Factors."
About Magellan: Headquartered in Avon, Conn., Magellan Health Services, Inc. (Nasdaq:MGLN) is a leading specialty health care management organization. Its customers include health plans, corporations and government agencies.
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, that 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 segment profit, the costs and timing of implementation for the Maricopa County behavioral contract. 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 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 most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the SEC. 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, is included in the Company's most recent Annual Report on Form 10-K and subsequent reports on Form 10-Q filed with the SEC.
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2007 (1) 2006 2007 (1)
--------- --------- --------- ---------
Net revenue $398,933 $452,868 $799,529 $939,872
Cost and expenses:
Cost of care 262,706 279,218 532,541 588,037
Cost of goods sold - 36,594 - 70,711
Direct service costs and
other operating
expenses (2) 92,698 98,139 180,166 196,014
Equity in earnings of
unconsolidated
subsidiaries - - (390) -
Depreciation and
amortization 11,333 13,505 21,990 27,157
Interest expense 1,721 1,604 3,690 3,456
Interest income (4,921) (5,519) (9,138) (10,706)
Gain on sale of assets (403) - (5,148) -
--------- --------- --------- ---------
363,134 423,541 723,711 874,669
--------- --------- --------- ---------
Income from continuing
operations before income
taxes and minority
interest 35,799 29,327 75,818 65,203
Provision for income taxes 15,575 12,311 33,279 27,218
--------- --------- --------- ---------
Income from continuing
operations before
minority interest 20,224 17,016 42,539 37,985
Minority interest, net - 192 - 192
--------- --------- --------- ---------
Net income 20,224 16,824 42,539 37,793
Other comprehensive income
(loss) 166 (13) 376 (8)
--------- --------- --------- ---------
Comprehensive income $ 20,390 $ 16,811 $ 42,915 $ 37,785
========= ========= ========= =========
Weighted average number of
common shares outstanding
-- basic 36,999 38,842 36,852 38,538
========= ========= ========= =========
Weighted average number of
common shares outstanding
-- diluted 38,599 39,838 38,384 39,553
========= ========= ========= =========
Net income per common
share -- basic $ 0.55 $ 0.43 $ 1.15 $ 0.98
========= ========= ========= =========
Net income per common
share -- diluted $ 0.52 $ 0.42 $ 1.11 $ 0.96
========= ========= ========= =========
(1) For a more detailed discussion of Magellan's results for the
quarter ended June 30, 2007, refer to the Company's Quarterly Report
on Form 10-Q which will be filed with the SEC on July 27, 2007, and
the live broadcast or taped replay of the Company's earnings
conference call on July 27, 2007, which will be available at
www.MagellanHealth.com.
(2) Includes stock compensation expense of $6,594 and $7,703 for the
three months ended June 30, 2006 and 2007, respectively, and $12,094
and $14,490 for the six months ended June 30, 2006 and 2007,
respectively.
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended June 30,
-------------------------
2006 2007
------------ ------------
Cash flows from operating activities:
Net income $ 42,539 $ 37,793
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of assets (5,148) -
Depreciation and amortization 21,990 27,157
Equity in earnings of unconsolidated
subsidiaries (390) -
Non-cash interest expense 694 694
Non-cash stock compensation expense 12,094 14,490
Non-cash income tax expense 30,116 25,895
Cash flows from changes in assets and
liabilities, net of effects from
acquisitions of businesses:
Restricted cash (11,627) (22,203)
Accounts receivable, net 6,878 3,233
Other assets (3,336) (3,206)
Accounts payable and accrued liabilities (20,481) (11,210)
Medical claims payable and other medical
liabilities (1,970) 17,404
Other (1,534) 89
------------ ------------
Net cash provided by operating
activities 69,825 90,136
------------ ------------
Cash flows from investing activities:
Capital expenditures (8,923) (12,675)
Acquisitions and investments in
businesses, net of cash acquired (120,735) (5,277)
Proceeds from sale of assets 22,200 -
Purchase of investments (23,481) (45,665)
Maturity of investments 206,534 50,347
Proceeds from note receivable 3,000 -
------------ ------------
Net cash provided by (used in)
investing activities 78,595 (13,270)
------------ ------------
Cash flows from financing activities:
Payments on long-term debt and capital
lease obligations (12,657) (14,074)
Proceeds from exercise of stock options
and warrants 7,771 23,762
Other - (333)
------------ ------------
Net cash (used in) provided by
financing activities (4,886) 9,355
------------ ------------
Net increase in cash and cash equivalents 143,534 86,221
Cash and cash equivalents at beginning of
period 81,039 163,737
------------ ------------
Cash and cash equivalents at end of period $ 224,573 $ 249,958
============ ============
MAGELLAN HEALTH SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except membership amounts in millions)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
Net revenue
- Health Plan $159,381 $157,646 $317,168 $336,246
- Employer 32,057 31,393 65,237 62,606
- Public Sector 195,066 201,819 396,965 426,193
- Radiology Benefits
Management 12,429 18,461 20,159 29,192
- Specialty
Pharmaceutical
Management - 43,549 - 85,635
--------- --------- --------- ---------
Total revenue 398,933 452,868 799,529 939,872
--------- --------- --------- ---------
Cost of care
- Health Plan 89,899 87,626 176,175 193,401
- Employer 6,911 6,944 15,066 13,768
- Public Sector 165,896 178,343 341,300 374,563
- Radiology Benefits
Management - 6,305 - 6,305
--------- --------- --------- ---------
Total cost of care 262,706 279,218 532,541 588,037
--------- --------- --------- ---------
Cost of goods sold - Specialty
Pharmaceutical Management - 36,594 - 70,711
--------- --------- --------- ---------
Direct service costs
- Health Plan 25,844 25,332 52,415 51,951
- Employer 17,511 16,270 34,274 31,786
- Public Sector 9,126 10,589 17,341 20,548
- Radiology Benefits
Management 10,457 11,262 16,915 22,222
- Specialty
Pharmaceutical
Management - 5,607 - 10,226
--------- --------- --------- ---------
Total direct services
costs 62,938 69,060 120,945 136,733
--------- --------- --------- ---------
Other operating expenses -
Corporate & Other 29,760 29,079 59,221 59,281
--------- --------- --------- ---------
Equity in earnings of
unconsolidated subsidiaries -
Health Plan - - (390) -
--------- --------- --------- ---------
Stock compensation expense (1)
- Health Plan (328) (501) (566) (893)
- Employer (84) (152) (152) (268)
- Public Sector (208) (246) (361) (457)
- Radiology Benefits
Management (327) (546) (534) (1,008)
- Specialty
Pharmaceutical
Management - (2,101) - (4,153)
- Corporate & Other (5,647) (4,157) (10,481) (7,711)
--------- --------- --------- ---------
Total stock compensation
expense (6,594) (7,703) (12,094) (14,490)
--------- --------- --------- ---------
Segment profit (loss)
- Health Plan 43,966 45,189 89,534 91,787
- Employer 7,719 8,331 16,049 17,320
- Public Sector 20,252 13,133 38,685 31,539
- Radiology Benefits
Management 2,299 1,440 3,778 1,673
- Specialty
Pharmaceutical
Management - 3,449 - 8,851
- Corporate & Other (24,113) (24,922) (48,740) (51,570)
--------- --------- --------- ---------
Total segment profit $ 50,123 $ 46,620 $ 99,306 $ 99,600
========= ========= ========= =========
Reconciliation of segment
profit to income from
continuing operations before
income taxes and minority
interest:
Segment profit $ 50,123 $ 46,620 $ 99,306 $ 99,600
Stock compensation expense (6,594) (7,703) (12,094) (14,490)
Depreciation and
amortization (11,333) (13,505) (21,990) (27,157)
Interest expense (1,721) (1,604) (3,690) (3,456)
Interest income 4,921 5,519 9,138 10,706
Gain on sale of assets 403 - 5,148 -
--------- --------- --------- ---------
Income from continuing
operations before income
taxes and minority
interest $ 35,799 $ 29,327 $ 75,818 $ 65,203
========= ========= ========= =========
Membership
- Health Plan 25.7
- Employer 14.3
- Public Sector 1.8
- Radiology Benefits
Management 18.4
---------
Total membership 60.2
=========
(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.
Investors:
Melissa Rose, 877-645-6464
or
Media:
Erin Somers, 410-953-2405
SOURCE: Magellan Health Services, Inc.