Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Mar. 31, 2014 | |
Document and Entity Information | ' |
Entity Registrant Name | 'MAGELLAN HEALTH SERVICES INC |
Entity Central Index Key | '0000019411 |
Document Type | '10-Q |
Document Period End Date | 31-Mar-14 |
Amendment Flag | 'false |
Current Fiscal Year End Date | '--12-31 |
Entity Current Reporting Status | 'Yes |
Entity Filer Category | 'Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 27,558,633 |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q1 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets: | ' | ' |
Cash and cash equivalents | $261,300 | $203,187 |
Restricted cash | 264,566 | 236,696 |
Accounts receivable, less allowance for doubtful accounts of $5,447 and $5,598 at December 31, 2013 and March 31, 2014, respectively | 202,767 | 238,185 |
Short-term investments (restricted investments of $117,674 and $151,251 at December 31, 2013 and March 31, 2014, respectively) | 181,788 | 175,883 |
Deferred income taxes | 37,044 | 37,530 |
Pharmaceutical inventory | 47,105 | 49,609 |
Other current assets (restricted deposits of $25,009 and $30,454 at December 31, 2013 and March 31, 2014, respectively) | 62,656 | 48,268 |
Total Current Assets | 1,057,226 | 989,358 |
Property and equipment, net | 167,110 | 172,333 |
Restricted long-term investments | 27,060 | 32,430 |
Other long-term assets | 9,888 | 7,197 |
Goodwill | 488,203 | 488,206 |
Other intangible assets, net | 68,386 | 69,694 |
Total Assets | 1,817,873 | 1,759,218 |
Current Liabilities: | ' | ' |
Accounts payable | 35,742 | 42,853 |
Accrued liabilities | 173,372 | 134,652 |
Medical claims payable | 240,046 | 228,341 |
Other medical liabilities | 65,288 | 67,416 |
Current maturities of long-term capital lease obligations | 3,040 | 3,005 |
Total Current Liabilities | 517,488 | 476,267 |
Long-term capital lease obligations | 22,568 | 23,720 |
Deferred income taxes | 38,445 | 42,046 |
Tax contingencies | 33,593 | 32,343 |
Deferred credits and other long-term liabilities | 20,336 | 17,803 |
Total Liabilities | 632,430 | 592,179 |
Redeemable non-controlling interest | 9,214 | 10,554 |
Preferred stock, par value $.01 per share Authorized - 10,000 shares at December 31, 2013 and March 31, 2014 - Issued and outstanding - none | ' | ' |
Other Stockholders' Equity: | ' | ' |
Additional paid-in capital | 933,274 | 922,325 |
Retained earnings | 1,126,213 | 1,100,493 |
Accumulated other comprehensive loss | -50 | -93 |
Ordinary common stock in treasury, at cost, 19,735 shares and 20,019 shares at December 31, 2013 and March 31, 2014, respectively | -883,684 | -866,714 |
Total Stockholders' Equity | 1,176,229 | 1,156,485 |
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity | 1,817,873 | 1,759,218 |
Ordinary common stock | ' | ' |
Current Liabilities: | ' | ' |
Common stock | 476 | 474 |
Multi-Vote common stock | ' | ' |
Current Liabilities: | ' | ' |
Common stock | ' | ' |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Per Share data, unless otherwise specified | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $5,598 | $5,447 |
Short-term restricted investments (in dollars) | 151,251 | 117,674 |
Other current assets, restricted deposits (in dollars) | $30,454 | $25,009 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, Authorized shares | 10,000 | 10,000 |
Preferred stock, Issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Ordinary common stock in treasury, shares | 20,019 | 19,735 |
Ordinary common stock | ' | ' |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, Authorized shares | 100,000 | 100,000 |
Common stock, Issued shares | 47,578 | 47,351 |
Common stock, outstanding shares | 27,559 | 27,616 |
Multi-Vote common stock | ' | ' |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, Authorized shares | 40,000 | 40,000 |
Common stock, Issued shares | 0 | 0 |
Common stock, outstanding shares | 0 | 0 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | |||
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | ||
Net revenue: | ' | ' | ||
Managed care and other | $829,591 | $722,589 | ||
PBM and dispensing | 136,884 | 99,172 | ||
Total net revenue | 966,475 | 821,761 | ||
Cost and expenses: | ' | ' | ||
Cost of care | 605,708 | 525,027 | ||
Cost of goods sold | 125,298 | 93,512 | ||
Direct service costs and other operating expenses | 164,722 | [1] | 139,627 | [1] |
Depreciation and amortization | 20,229 | 16,170 | ||
Interest expense | 836 | 610 | ||
Interest income | -311 | -353 | ||
Total costs and expenses | 916,482 | 774,593 | ||
Income before income taxes | 49,993 | 47,168 | ||
Provision for income taxes | 25,613 | 19,110 | ||
Net income | 24,380 | 28,058 | ||
Less: Net income (loss) attributable to non-controlling interest | -1,340 | ' | ||
Net income attributable to Magellan Health Services, Inc. | 25,720 | 28,058 | ||
Net income per common share attributable to Magellan Health Services, Inc.: | ' | ' | ||
Basic (See Note B) (in dollars per share) | $0.94 | $1.03 | ||
Diluted (See Note B) (in dollars per share) | $0.92 | $1.01 | ||
Other comprehensive income: | ' | ' | ||
Unrealized (losses) gains on available-for-sale securities | 43 | [2] | -77 | [2] |
Comprehensive income | 24,423 | 27,981 | ||
Less: Comprehensive income (loss) attributable to non-controlling interest | -1,340 | ' | ||
Comprehensive income attributable to Magellan Health Services, Inc. | $25,763 | $27,981 | ||
[1] | (1) Includes stock compensation expense of $5,638 and $4,472 for the three months ended March 31, 2013 and 2014, respectively. | |||
[2] | (2) Net of income tax (benefit) provision of $(52) and $29 for the three months ended March 31, 2013 and 2014, respectively. |
CONSOLIDATED_STATEMENTS_OF_COM1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ' | ' |
Stock compensation expense | $4,472 | $5,638 |
Net of income tax (benefit) provision | $29 | ($52) |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net income | $24,380 | $28,058 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 20,229 | 16,170 |
Non-cash interest expense | 184 | 184 |
Non-cash stock compensation expense | 4,472 | 5,638 |
Non-cash income tax benefit | -3,733 | -630 |
Non-cash amortization on investments | 1,611 | 2,508 |
Realized loss on sale of investments | 49 | ' |
Cash flows from changes in assets and liabilities, net of effects from acquisitions of businesses: | ' | ' |
Restricted cash | -27,870 | 4,764 |
Accounts receivable, net | 34,843 | -8,359 |
Pharmaceutical inventory | 2,504 | -2,004 |
Other assets | -17,273 | -2,039 |
Accounts payable and accrued liabilities | 30,344 | -15,285 |
Medical claims payable and other medical liabilities | 9,803 | 15,752 |
Tax contingencies | 801 | 601 |
Deferred credits and other long-term liabilities | 2,533 | 222 |
Other | -50 | 299 |
Net cash provided by operating activities | 82,827 | 45,879 |
Cash flows from investing activities: | ' | ' |
Capital expenditures | -11,059 | -11,382 |
Purchase of investments | -76,548 | -66,596 |
Maturity of investments | 74,424 | 47,647 |
Net cash used in investing activities | -13,183 | -30,331 |
Cash flows from financing activities: | ' | ' |
Payments to acquire treasury stock | -16,970 | -24,830 |
Proceeds from exercise of stock options and warrants | 7,180 | 9,675 |
Payments on capital lease obligations | -1,117 | -414 |
Other | -624 | -1,022 |
Net cash used in financing activities | -11,531 | -16,591 |
Net (decrease) increase in cash and cash equivalents | 58,113 | -1,043 |
Cash and cash equivalents at beginning of period | 203,187 | 189,464 |
Cash and cash equivalents at end of period | 261,300 | 188,421 |
Non-cash investing activities: | ' | ' |
Property and equipment acquired under capital leases | ' | $28,836 |
General
General | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
General | ' | |||||||||||||
General | ' | |||||||||||||
NOTE A—General | ||||||||||||||
Basis of Presentation | ||||||||||||||
The accompanying unaudited consolidated financial statements of Magellan Health Services, Inc., a Delaware corporation ("Magellan"), include the accounts of Magellan, its majority owned subsidiaries, and all variable interest entities ("VIEs") for which Magellan is the primary beneficiary (together with Magellan, the "Company"). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the Securities and Exchange Commission's (the "SEC") instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated in consolidation. | ||||||||||||||
The Company has evaluated subsequent events for recognition or disclosure in the consolidated financial statements filed on this Form 10-Q. Other than as described in Note F—"Subsequent Events", the Company did not have any material recognizable events during the period. | ||||||||||||||
These unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2013 and the notes thereto, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 3, 2014. | ||||||||||||||
Business Overview | ||||||||||||||
The Company is engaged in the healthcare management business, and is focused on meeting needs in areas of healthcare that are fast growing, highly complex and high cost, with an emphasis on special population management. The Company provides services to health plans, managed care organizations ("MCOs"), insurance companies, employers, labor unions, various military and governmental agencies, third party administrators, and brokers. The Company's business is divided into the following five segments, based on the services it provides and/or the customers that it serves, as described below. | ||||||||||||||
Managed Healthcare | ||||||||||||||
Two of the Company's segments are in the managed healthcare business. This line of business reflects the Company's: (i) management of behavioral healthcare services, and (ii) the integrated management of physical, behavioral and pharmaceutical healthcare for special populations, delivered through Magellan Complete Care ("MCC"). The Company's coordination and management of physical and behavioral healthcare includes services provided through its comprehensive network of medical and behavioral health professionals, clinics, hospitals and ancillary service providers. This network of credentialed and privileged providers is integrated with clinical and quality improvement programs to enhance the healthcare experience for individuals in need of care, while at the same time managing the cost of these services for our customers. The treatment services provided through the Company's provider network include outpatient programs, intermediate care programs, inpatient treatment and crisis intervention services. The Company generally does not directly provide or own any provider of treatment services, although it does employ licensed behavioral health counselors to deliver non-medical counseling under certain government contracts. | ||||||||||||||
The Company's integrated management of physical and behavioral healthcare includes its full service health plans which provide for the holistic management of special populations. These special populations include individuals with serious mental illness, dual eligibles, those eligible for long term care, intellectually and developmentally disabled individuals, and other populations with unique and often complex healthcare needs. | ||||||||||||||
The Company provides its management services primarily through: (i) risk-based products, where the Company assumes all or a substantial portion of the responsibility for the cost of providing treatment services in exchange for a fixed per member per month fee, (ii) administrative services only ("ASO") products, where the Company provides services such as utilization review, claims administration and/or provider network management, but does not assume responsibility for the cost of the treatment services, and (iii) employee assistance programs ("EAPs") where the Company provides short-term outpatient behavioral counseling services. | ||||||||||||||
The managed healthcare business is managed based on the services provided and/or the customers served, through the following two segments: | ||||||||||||||
Commercial. The Managed Healthcare Commercial segment ("Commercial") generally reflects managed behavioral healthcare services and EAP services provided under contracts with health plans, insurance companies and MCOs for some or all of their commercial, Medicaid and Medicare members, as well as with employers, including corporations, governmental agencies, and labor unions. Commercial's contracts encompass risk-based, ASO and EAP arrangements. | ||||||||||||||
Public Sector. The Managed Healthcare Public Sector segment ("Public Sector") generally reflects: (i) the management of behavioral health services provided to recipients under Medicaid and other state sponsored programs under contracts with state and local governmental agencies, and (ii) the integrated management of physical, behavioral and pharmaceutical care for special populations covered under Medicaid and other government sponsored programs. Public Sector contracts encompass either risk-based or ASO arrangements. | ||||||||||||||
Specialty Solutions | ||||||||||||||
The Specialty Solutions segment ("Specialty Solutions") generally reflects the management of the delivery of diagnostic imaging (radiology benefits management or "RBM") and a variety of other specialty areas such as radiation oncology, obstetrical ultrasound, cardiology and musculoskeletal management to ensure that such services are clinically appropriate and cost effective. The Company's Specialty Solutions services are currently provided under contracts with health plans and insurance companies for some or all of their commercial, Medicaid and Medicare members. The Company also contracts with state and local governmental agencies for the provision of such services to Medicaid recipients. The Company offers its Specialty Solutions services through risk-based contracts, where the Company assumes all or a substantial portion of the responsibility for the cost of providing services, and through ASO contracts, where the Company provides services such as utilization review and claims administration, but does not assume responsibility for the cost of the services. | ||||||||||||||
Pharmacy Management | ||||||||||||||
The Pharmacy Management segment ("Pharmacy Management") comprises products and solutions that provide clinical and financial management of drugs paid under medical and pharmacy benefit programs. Pharmacy Managements' services include (i) traditional pharmacy benefit management ("PBM") services; (ii) pharmacy benefit administration ("PBA") for state Medicaid and other government sponsored programs; (iii) specialty pharmaceutical dispensing operations, contracting and formulary optimization programs; (iv) medical pharmacy management programs; and (v) programs for the integrated management of drugs that treat complex conditions, regardless of site of service, method of delivery, or benefit reimbursement. In addition, the Company had a subcontract arrangement to provide PBM services on a risk basis for one of Public Sector's customers, which terminated on March 31, 2014. | ||||||||||||||
The Company's Pharmacy Management programs are provided under contracts with health plans, employers, Medicaid MCOs, state Medicaid programs, and other government agencies, and encompass risk-based and fee-for-service ("FFS") arrangements. | ||||||||||||||
Corporate | ||||||||||||||
This segment of the Company is comprised primarily of operational support functions such as sales and marketing and information technology, as well as corporate support functions such as executive, finance, human resources and legal. | ||||||||||||||
Summary of Significant Accounting Policies | ||||||||||||||
Recent Accounting Pronouncements | ||||||||||||||
In July 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-06, "Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2011-06"), which addresses how fees mandated by the Patient Protection and the Affordable Care Act ("ACA"), as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "Health Reform Law"), should be recognized and classified in the income statements of health insurers. The Health Reform Law imposes a mandatory annual fee on health insurers for each calendar year beginning on or after January 1, 2014. ASU 2011-06 stipulates that the liability incurred for that fee be amortized to expense over the calendar year in which it is payable. This ASU is effective for calendar years beginning after December 31, 2013, when the fee initially becomes effective. The Company is currently pursuing rate adjustments to cover the direct costs of these fees and the impact from non-deductibility of such fees for federal income tax purposes. To the extent the Company has a state public sector customer that does not renew, there may be some impact due to taxes paid where the timing and amount of recoupment of these additional costs is uncertain. In the event the Company is unable to obtain rate adjustments to cover the financial impact of the annual fee, the fee may have a material impact on the Company. For 2014, the projected ACA fee is currently estimated to be $20.2 million and is included in accrued liabilities in the consolidated balance sheets. Of this amount $5.1 million was expensed in the three months ended March 31, 2014, which is included in direct service costs and other operating expenses in the consolidated statements of comprehensive income. | ||||||||||||||
In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Carryforward Exists" ("ASU 2013-11"). ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2013 and were adopted by the Company during the quarter ended March 31, 2014. The effect of the guidance is immaterial to the Company's consolidated results of operations, financial position, and cash flows. | ||||||||||||||
Use of Estimates | ||||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, valuation allowances for deferred tax assets, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, stock compensation assumptions, tax contingencies and legal liabilities. Actual results could differ from those estimates. | ||||||||||||||
Managed Care and Other Revenue | ||||||||||||||
Managed Care Revenue. Managed care revenue, inclusive of revenue from the Company's risk, EAP and ASO contracts, is recognized over the applicable coverage period on a per member basis for covered members. The Company is paid a per member fee for all enrolled members, and this fee is recorded as revenue in the month in which members are entitled to service. The Company adjusts its revenue for retroactive membership terminations, additions and other changes, when such adjustments are identified, with the exception of retroactivity that can be reasonably estimated. The impact of retroactive rate amendments is generally recorded in the accounting period that terms to the amendment are finalized, and that the amendment is executed. Any fees paid prior to the month of service are recorded as deferred revenue. Managed care revenues approximated $629.7 million and $728.8 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Fee-For-Service and Cost-Plus Contracts. The Company has certain fee-for-service contracts, including cost-plus contracts, with customers under which the Company recognizes revenue as services are performed and as costs are incurred. Revenues from these contracts approximated $49.3 million and $59.7 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Block Grant Revenues. The Maricopa Contract (as defined below) is partially funded by federal, state and county block grant money, which represents annual appropriations. The Company recognizes revenue from block grant activity ratably over the period to which the block grant funding applies. Block grant revenues were approximately $33.2 million and $33.0 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Performance-Based Revenue. The Company has the ability to earn performance-based revenue under certain risk and non-risk contracts. Performance-based revenue generally is based on either the ability of the Company to manage care for its clients below specified targets, or on other operating metrics. For each such contract, the Company estimates and records performance-based revenue after considering the relevant contractual terms and the data available for the performance-based revenue calculation. Pro-rata performance-based revenue may be recognized on an interim basis pursuant to the rights and obligations of each party upon termination of the contracts. Performance-based revenues were $1.9 million and $3.0 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Rebate Revenue. The Company administers a rebate program for certain clients through which the Company coordinates the achievement, calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients. Each period, the Company estimates the total rebates earned based on actual volumes of pharmaceutical purchases by the Company's clients, as well as historical and/or anticipated sharing percentages. The Company earns fees based upon the volume of rebates generated for its clients. The Company does not record as rebate revenue any rebates that are passed through to its clients. Total rebate revenues were $8.7 million and $4.1 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
In relation to the Company's PBM business, the Company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers. The Company recognizes rebates when the Company is entitled to them and when the amounts of the rebates are determinable. The amount recorded for rebates earned by the Company from the pharmaceutical manufacturers are recorded as a reduction of cost of goods sold. | ||||||||||||||
PBM and Dispensing Revenue | ||||||||||||||
Pharmacy Benefit Management Revenue. The Company recognizes PBM revenue, which consists of a negotiated prescription price (ingredient cost plus dispensing fee), co-payments collected by the pharmacy and any associated administrative fees, when claims are adjudicated. The Company recognizes PBM revenue on a gross basis (i.e. including drug costs and co-payments) as it is acting as the principal in the arrangement and is contractually obligated to its clients and network pharmacies, which is a primary indicator of gross reporting. In addition, the Company is solely responsible for the claims adjudication process, negotiating the prescription price for the pharmacy, collection of payments from the client for drugs dispensed by the pharmacy, and managing the total prescription drug relationship with the client's members. If the Company enters into a contract where it is only an administrator, and does not assume any of the risks previously noted, revenue will be recognized on a net basis. PBM revenues were $5.0 million and $81.2 million for the three months ended March 31, 2013 and 2014, respectively. The increase mainly relates to the acquisition of Partners Rx Management, LLC ("Partners Rx"). | ||||||||||||||
Dispensing Revenue. The Company recognizes dispensing revenue, which includes the co-payments received from members of the health plans the Company serves, when the specialty pharmaceutical drugs are shipped. At the time of shipment, the earnings process is complete; the obligation of the Company's customer to pay for the specialty pharmaceutical drugs is fixed, and, due to the nature of the product, the member may neither return the specialty pharmaceutical drugs nor receive a refund. Revenues from the dispensing of specialty pharmaceutical drugs on behalf of health plans were $94.1 million and $55.7 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Significant Customers | ||||||||||||||
Consolidated Company | ||||||||||||||
Through March 31, 2014, the Company provided behavioral healthcare management and other related services to approximately 680,000 members in Maricopa County, Arizona as the Regional Behavioral Health Authority ("RBHA") for GSA6 ("Maricopa County") pursuant to a contract with the State of Arizona (the "Maricopa Contract"). The Maricopa Contract was for the management of the publicly funded behavioral health system that delivered mental health, substance abuse and crisis services for adults, youth, and children. The Maricopa Contract generated net revenues of $182.3 million and $201.0 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
The State of Arizona had previously issued a Solicitation for a new RBHA for Maricopa County (the "New Contract") to replace the current contract with the Company to be effective on October 1, 2013. The New Contract is for the management of the publicly funded behavioral health system currently provided by the Company under the Maricopa Contract, and also includes an integrated behavioral and physical healthcare system for a small number of individuals with serious mental illness. Magellan Complete Care of Arizona ("MCCAZ"), a joint venture owned 80% by the Company and 20% by Vanguard/Phoenix Health Plan, previously submitted a bid for the Contract. On March 25, 2013, the Company was notified that MCCAZ was not selected as the RBHA for the New Contract. | ||||||||||||||
Subsequent to the announcement of the winning bidder for the New Contract, Magellan has filed various protests and appeals regarding the decision. Most recently, in December 2013, Magellan filed an appeal in the Arizona Superior Court in Maricopa County (the "Superior Court") and a motion seeking a judicial stay of the implementation of the New Contract until after the court's decision on the appeal. On February 18, 2014 the Superior Court issued an order denying the Company's motion for stay. The denial of the motion for stay does not impact the final decision on the merits of Magellan's appeal, which will continue to proceed in the Superior Court. The Company also previously filed a separate civil lawsuit in the Superior Court challenging the legal authority of the public entity that is one of the key members of the non-profit winning bidder to invest in and participate in the winning bidder's performance under the New Contract. In connection with such civil suit, the Company previously filed a motion seeking a preliminary injunction that, if granted, could prohibit such public entity from participation as a member of the winning bidder in the New Contract. On March 14, 2014, the Superior Court issued an order dismissing the Company's claims that formed the basis of the motion for preliminary injunction and denying the motion for preliminary injunction as moot. There is no assurance that the Company will prevail on its appeal to the Superior Court. | ||||||||||||||
By Segment | ||||||||||||||
In addition to the Maricopa Contract previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2013 and 2014 (in thousands): | ||||||||||||||
Segment | Term Date | 2013 | 2014 | |||||||||||
Commercial | ||||||||||||||
Customer A | June 30, 2014(1) | $ | 51,641 | $ | 55,540 | |||||||||
Customer B | December 31, 2019 | 35,811 | 42,898 | |||||||||||
Customer C | August 14, 2017 | 15,254 | * | 22,652 | ||||||||||
Public Sector | ||||||||||||||
Customer D | June 30, 2015 | 64,312 | 103,171 | |||||||||||
Specialty Solutions | ||||||||||||||
Customer E | December 31, 2015 | 31,361 | 33,390 | |||||||||||
Customer F | June 30, 2016(2) | 15,235 | 12,574 | |||||||||||
Customer G | July 31, 2015 | 16,083 | 16,552 | |||||||||||
Customer A | November 30, 2016 | 768 | * | 12,379 | ||||||||||
Customer H | January 31, 2016 | 9,759 | 11,307 | |||||||||||
Pharmacy Management | ||||||||||||||
Customer I | November 30, 2014 to December 31, 2014(3) | 33,311 | 28,579 | |||||||||||
Customer J | December 31, 2013(4) | 15,297 | 6,029 | * | ||||||||||
Customer K | September 27, 2013 to December 31, 2013(3)(4) | 21,641 | 1,130 | * | ||||||||||
Customer L | March 31, 2014(5)(6) | 15,245 | 18,055 | * | ||||||||||
* | ||||||||||||||
Revenue amount did not exceed ten percent of net revenues for the respective segment for the period presented. Amount is shown for comparative purposes only. | ||||||||||||||
-1 | ||||||||||||||
The customer has informed the Company that, after a competitive evaluation process, it has decided not to renew its contract. The contract was extended through June 30, 2014 to allow for transition to the new vendor. | ||||||||||||||
-2 | ||||||||||||||
This contract will transition from risk to ASO based services effective July 1, 2014. | ||||||||||||||
-3 | ||||||||||||||
The customer has more than one contract. The individual contracts are scheduled to terminate at various points during the time period indicated above. | ||||||||||||||
-4 | ||||||||||||||
The contract has terminated, however, the Company continues to provide services as the contract is transitioned to the new vendor. | ||||||||||||||
-5 | ||||||||||||||
The contract has terminated. | ||||||||||||||
-6 | ||||||||||||||
This customer represents a subcontract with a Public Sector customer and is eliminated in consolidation. | ||||||||||||||
Concentration of Business | ||||||||||||||
The Company also has a significant concentration of business with various counties in the State of Pennsylvania (the "Pennsylvania Counties") which are part of the Pennsylvania Medicaid program. Net revenues from the Pennsylvania Counties in the aggregate totaled $86.7 million and $90.1 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
In addition, the Company has a significant concentration of business with the State of Florida. The Company currently has behavioral healthcare contracts with various areas in the State of Florida (the "Florida Areas") which are part of the Florida Medicaid program. The State of Florida is implementing a new system of mandated managed care through which Medicaid enrollees will receive integrated healthcare services, and it will phase out the behavioral healthcare programs under which the Florida Areas' contracts operate by July 31, 2014. The Company has a contract with the State of Florida to provide integrated healthcare services under the new program. Net revenues from the State of Florida in the aggregate totaled $33.3 million and $31.8 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
The Company's contracts with customers typically have terms of one to three years, and in certain cases contain renewal provisions (at the customer's option) for successive terms of between one and two years (unless terminated earlier). Substantially all of these contracts may be immediately terminated with cause and many of the Company's contracts are terminable without cause by the customer or the Company either upon the giving of requisite notice and the passage of a specified period of time (typically between 60 and 180 days) or upon the occurrence of other specified events. In addition, the Company's contracts with federal, state and local governmental agencies generally are conditioned on legislative appropriations. These contracts generally can be terminated or modified by the customer if such appropriations are not made. | ||||||||||||||
Fair Value Measurements | ||||||||||||||
The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. Financial assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows: | ||||||||||||||
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. | ||||||||||||||
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). | ||||||||||||||
Level 3—Unobservable inputs that reflect the Company's assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including the Company's data. | ||||||||||||||
In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company's financial assets and liabilities that are required to be measured at fair value as of December 31, 2013 and March 31, 2014 (in thousands): | ||||||||||||||
December 31, 2013 | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Cash and cash equivalents(1) | $ | — | $ | 101,028 | $ | — | $ | 101,028 | ||||||
Restricted cash(2) | — | 128,318 | — | 128,318 | ||||||||||
Investments: | ||||||||||||||
U.S. government and agency securities | 1,129 | — | — | 1,129 | ||||||||||
Obligations of government-sponsored enterprises(3) | — | 8,440 | — | 8,440 | ||||||||||
Corporate debt securities | — | 198,594 | — | 198,594 | ||||||||||
Certificates of deposit | — | 150 | — | 150 | ||||||||||
| | | | | | | | | | | | | | |
December 31, 2013 | $ | 1,129 | $ | 436,530 | $ | — | $ | 437,659 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
March 31, 2014 | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Cash and cash equivalents(4) | $ | — | $ | 145,413 | $ | — | $ | 145,413 | ||||||
Restricted cash(5) | — | 87,746 | — | 87,746 | ||||||||||
Investments: | ||||||||||||||
U.S. government and agency securities | 1,528 | — | — | 1,528 | ||||||||||
Obligations of government-sponsored enterprises(3) | — | 6,923 | — | 6,923 | ||||||||||
Corporate debt securities | — | 199,247 | — | 199,247 | ||||||||||
Certificates of deposit | — | 1,150 | — | 1,150 | ||||||||||
| | | | | | | | | | | | | | |
March 31, 2014 | $ | 1,528 | $ | 440,479 | $ | — | $ | 442,007 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
Excludes $102.2 million of cash held in bank accounts by the Company. | ||||||||||||||
-2 | ||||||||||||||
Excludes $108.4 million of restricted cash held in bank accounts by the Company. | ||||||||||||||
-3 | ||||||||||||||
Includes investments in notes issued by the Federal Home Loan Bank. | ||||||||||||||
-4 | ||||||||||||||
Excludes $115.9 million of cash held in bank accounts by the Company. | ||||||||||||||
-5 | ||||||||||||||
Excludes $176.9 million of restricted cash held in bank accounts by the Company. | ||||||||||||||
For the three months ended March 31, 2014, the Company has not transferred any assets between fair value measurement levels. | ||||||||||||||
All of the Company's investments are classified as "available-for- sale" and are carried at fair value. | ||||||||||||||
If a debt security is in an unrealized loss position and the Company has the intent to sell the debt security, or it is more likely than not that the Company will have to sell the debt security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to other-than-temporary impairment losses recognized in income in the consolidated statements of comprehensive income. For impaired debt securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in other-than-temporary impairment losses recognized in income in the consolidated statements of comprehensive income and the non-credit component of the other-than-temporary impairment is recognized in other comprehensive income. | ||||||||||||||
As of December 31, 2013 and March 31, 2014, there were no unrealized losses that the Company believed to be other-than-temporary. No realized gains or losses were recorded for the three months ended March 31, 2013. During the three months ended March 31, 2014, the Company recognized a $0.1 million loss on the sale of investments. The following is a summary of short-term and long-term investments at December 31, 2013 and March 31, 2014 (in thousands): | ||||||||||||||
December 31, 2013 | ||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||||
Gains | Losses | Value | ||||||||||||
U.S. government and agency securities | $ | 1,129 | $ | — | $ | — | $ | 1,129 | ||||||
Obligations of government-sponsored enterprises(1) | 8,441 | 2 | (3 | ) | 8,440 | |||||||||
Corporate debt securities | 198,748 | 18 | (172 | ) | 198,594 | |||||||||
Certificates of deposit | 150 | — | — | 150 | ||||||||||
| | | | | | | | | | | | | | |
Total investments at December 31, 2013 | $ | 208,468 | $ | 20 | $ | (175 | ) | $ | 208,313 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
March 31, 2014 | ||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||||
Gains | Losses | Value | ||||||||||||
U.S. government and agency securities | $ | 1,527 | $ | 1 | $ | — | $ | 1,528 | ||||||
Obligations of government-sponsored enterprises(1) | 6,924 | 2 | (3 | ) | 6,923 | |||||||||
Corporate debt securities | 199,330 | 26 | (109 | ) | 199,247 | |||||||||
Certificates of deposit | 1,150 | — | — | 1,150 | ||||||||||
| | | | | | | | | | | | | | |
Total investments at March 31, 2014 | $ | 208,931 | $ | 29 | $ | (112 | ) | $ | 208,848 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
Includes investments in notes issued by the Federal Home Loan Bank. | ||||||||||||||
The maturity dates of the Company's investments as of March 31, 2014 are summarized below (in thousands): | ||||||||||||||
Amortized | Estimated | |||||||||||||
Cost | Fair Value | |||||||||||||
2014 | $ | 150,273 | $ | 150,229 | ||||||||||
2015 | 54,489 | 54,460 | ||||||||||||
2016 | 4,169 | 4,159 | ||||||||||||
| | | | | | | | |||||||
Total investments at March 31, 2014 | $ | 208,931 | $ | 208,848 | ||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Income Taxes | ||||||||||||||
The Company's effective income tax rates were 40.5 percent and 51.2 percent for the three months ended March 31, 2013 and 2014, respectively. These rates differ from the federal statutory income tax rate primarily due to state income taxes, permanent differences between book and tax income, and changes to recorded tax contingencies. The Company also accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The effective income tax rate for the three months ended March 31, 2013 is lower than the effective rate for the three months ended March 31, 2014 mainly due to the non-deductible ACA fees. | ||||||||||||||
The Company files a consolidated federal income tax return for the Company and its eighty percent or more owned subsidiaries, and the Company and its subsidiaries file income tax returns in various states and local jurisdictions. With few exceptions, the Company is no longer subject to income tax assessments by tax authorities for years ended prior to 2010. | ||||||||||||||
Stock Compensation | ||||||||||||||
At December 31, 2013 and March 31, 2014, the Company had equity-based employee incentive plans, which are described more fully in Note 6 in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The Company recorded stock compensation expense of $5.6 million and $4.5 million for the three months ended March 31, 2013 and 2014, respectively. Stock compensation expense recognized in the consolidated statements of comprehensive income for the three months ended March 31, 2013 and 2014 has been reduced for estimated forfeitures, estimated at four percent for both periods. | ||||||||||||||
The weighted average grant date fair value of all stock options granted during the three months ended March 31, 2014 was $13.63 as estimated using the Black-Scholes-Merton option pricing model, which also assumed an expected volatility of 26.20 percent based on the historical volatility of the Company's stock price. | ||||||||||||||
The benefits of tax deductions in excess of recognized stock compensation expense are reported as a financing cash flow, rather than as an operating cash flow. In the three months ended March 31, 2013 and 2014, $0.3 million and $0.5 million, respectively, of benefits of such tax deductions related to stock compensation expense were realized and as such were reported as financing cash flows. For the three months ended March 31, 2013, the net change to additional paid in capital related to tax benefits (deficiencies) was $(0.2) million, which includes $(0.5) million of excess tax deficiencies offset by the $0.3 million of excess tax benefits. For the three months ended March 31, 2014, the net change to additional paid in capital related to tax benefits (deficiencies) was $0.4 million, which includes the $0.5 million of excess tax benefits offset by $(0.1) million of excess tax deficiencies. | ||||||||||||||
Summarized information related to the Company's stock options for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Options | Weighted | |||||||||||||
Average | ||||||||||||||
Exercise | ||||||||||||||
Price | ||||||||||||||
Outstanding, beginning of period | 4,010,146 | $ | 47.23 | |||||||||||
Granted | 640,636 | 60.28 | ||||||||||||
Forfeited | (35,244 | ) | 50.4 | |||||||||||
Exercised | (152,943 | ) | 46.78 | |||||||||||
| | | | | | | | |||||||
Outstanding, end of period | 4,462,595 | $ | 49.1 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Vested and expected to vest at end of period | 4,409,250 | $ | 49.02 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Exercisable, end of period | 2,679,575 | $ | 45.46 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
All of the Company's options granted during the three months ended March 31, 2014 vest ratably on each anniversary date over the three years subsequent to grant. All options granted during the three months ended March 31, 2014 have a ten year life. | ||||||||||||||
Summarized information related to the Company's nonvested restricted stock awards ("RSAs") for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Shares | Weighted | |||||||||||||
Average | ||||||||||||||
Grant Date | ||||||||||||||
Fair Value | ||||||||||||||
Outstanding, beginning of period | 192,165 | $ | 56.59 | |||||||||||
Awarded | — | — | ||||||||||||
Vested | — | — | ||||||||||||
Forfeited | — | — | ||||||||||||
| | | | | | | | |||||||
Outstanding, ending of period | 192,165 | $ | 56.59 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Summarized information related to the Company's nonvested restricted stock units ("RSUs") for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Shares | Weighted | |||||||||||||
Average | ||||||||||||||
Grant Date | ||||||||||||||
Fair Value | ||||||||||||||
Outstanding, beginning of period | 194,913 | $ | 50.21 | |||||||||||
Awarded | 76,306 | 60.39 | ||||||||||||
Vested | (90,177 | ) | 49.55 | |||||||||||
Forfeited | (2,319 | ) | 51.06 | |||||||||||
| | | | | | | | |||||||
Outstanding, ending of period | 178,723 | $ | 54.88 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
RSAs generally vest on the anniversary of the grant. In general, RSUs vest ratably on each anniversary over the three years subsequent to grant, assuming that the associated performance hurdle(s) for that vesting year are met. | ||||||||||||||
Long Term Debt and Capital Lease Obligations | ||||||||||||||
On December 9, 2011, the Company entered into a Senior Secured Revolving Credit Facility Credit Agreement with Citibank, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and U.S. Bank, N.A. that provides for up to $230.0 million of revolving loans with a sublimit of up to $70.0 million for the issuance of letters of credit for the account of the Company (the "2011 Credit Facility"). Citibank, N.A., has assigned a portion of its interest in the 2011 Credit Facility to Bank of Tokyo. The 2011 Credit Facility is guaranteed by substantially all of the subsidiaries of the Company and is secured by substantially all of the assets of the Company and the subsidiary guarantors. The 2011 Credit Facility will mature on December 9, 2014. Although the 2011 Credit Facility expires on December 9, 2014, the Company believes it will be able to obtain a new facility or, if not, to use cash on hand to fund letters of credit and other liquidity needs. | ||||||||||||||
Under the 2011 Credit Facility, the annual interest rate on revolving loan borrowings is equal to (i) in the case of U.S. dollar denominated loans, the sum of a borrowing margin of 0.75 percent plus the higher of the prime rate, one-half of one percent in excess of the overnight "federal funds" rate, or the Eurodollar rate for one month plus 1.00 percent, or (ii) in the case of Eurodollar denominated loans, the sum of a borrowing margin of 1.75 percent plus the Eurodollar rate for the selected interest period. The Company has the option to borrow in U.S. dollar denominated loans or Eurodollar denominated loans at its discretion. Letters of credit issued under the Revolving Loan Commitment bear interest at the rate of 1.875 percent. The commitment commission on the 2011 Credit Facility is 0.375 percent of the unused Revolving Loan Commitment. | ||||||||||||||
There were $26.7 million and $25.6 million of capital lease obligations at December 31, 2013 and March 31, 2014, respectively. The Company had $33.7 million and $32.9 million of letters of credit outstanding at December 31, 2013 and March 31, 2014, respectively, and no revolving loan borrowings at December 31, 2013 or March 31, 2014. | ||||||||||||||
Redeemable Non-Controlling Interest | ||||||||||||||
On December 31, 2013, the Company acquired a 65% equity interest in AlphaCare Holdings, Inc. ("AlphaCare Holdings"). The other shareholders of AlphaCare Holdings have the right to exercise put options, requiring the Company to purchase up to 50 percent of the remaining shares prior to January 1, 2017 provided certain membership levels are attained. After December 31, 2016 the other shareholders of AlphaCare Holdings have the right to exercise put options requiring the Company to purchase all or any portion of the remaining shares. In addition, after December 31, 2016 the Company has the right to purchase all remaining shares. Non-controlling interests with redemption features, such as put options, that are not solely within the Company's control are considered redeemable non-controlling interest. Redeemable non-controlling interest is considered to be temporary and is therefore reported in a mezzanine level between liabilities and stockholders' equity on the Company's consolidated balance sheet at the greater of the initial carrying amount adjusted for the non-controlling interest's share of net income or loss or its redemption value. The Company recorded $10.6 million of redeemable non-controlling interest in relation to the acquisition. The carrying value of the non-controlling interest as of March 31, 2014 was $9.2 million. The $1.4 million reduction in carrying value for the three months ended March 31, 2014 is a result of operating losses. The Company recognizes changes in the redemption value on a quarterly basis and adjusts the carrying amount of the non-controlling interest to equal the redemption value at the end of each reporting period. Under this method, this is viewed at the end of the reporting period as if it were also the redemption date for the non-controlling interest. The Company will reflect redemption value adjustments in the earnings per share calculation if redemption value is in excess of the carrying value of the non-controlling interest. As of March 31, 2014 the carrying value of the non-controlling interest exceeded the redemption value and therefore no adjustment to the carrying value was required. | ||||||||||||||
Reclassifications | ||||||||||||||
Certain prior year amounts have been reclassified to conform with the current year presentation. | ||||||||||||||
Net_Income_per_Common_Share_At
Net Income per Common Share Attributable to Magellan Helath Services, Inc | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Net Income per Common Share Attributable to Magellan Helath Services, Inc | ' | |||||||
Net Income per Common Share Attributable to Magellan Helath Services, Inc | ' | |||||||
NOTE B—Net Income per Common Share Attributable to Magellan Health Services, Inc. | ||||||||
The following tables reconcile income attributable to common shareholders (numerator) and shares (denominator) used in the computations of net income per share attributable to common shareholders (in thousands, except per share data): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
Numerator: | ||||||||
Net income attributable to Magellan Health Services, Inc. | $ | 28,058 | $ | 25,720 | ||||
| | | | | | | | |
| | | | | | | | |
Denominator: | ||||||||
Weighted average number of common shares outstanding—basic | 27,110 | 27,370 | ||||||
Common stock equivalents—stock options | 467 | 594 | ||||||
Common stock equivalents—restricted stock | 17 | 32 | ||||||
Common stock equivalents—restricted stock units | 52 | 54 | ||||||
Common stock equivalents—employee stock purchase plan | 2 | 1 | ||||||
| | | | | | | | |
Weighted average number of common shares outstanding—diluted | 27,648 | 28,051 | ||||||
| | | | | | | | |
| | | | | | | | |
Net income attributable to Magellan Health Services, Inc. per common share—basic | $ | 1.03 | $ | 0.94 | ||||
| | | | | | | | |
| | | | | | | | |
Net income attributable to Magellan Health Services, Inc. per common share—diluted | $ | 1.01 | $ | 0.92 | ||||
| | | | | | | | |
| | | | | | | | |
The weighted average number of common shares outstanding for the three months ended March 31, 2013 and 2014 were calculated using outstanding shares of the Company's common stock. Common stock equivalents included in the calculation of diluted weighted average common shares outstanding for the three months ended March 31, 2013 and 2014 represent stock options to purchase shares of the Company's common stock, restricted stock awards and restricted stock units, and stock purchased under the Employee Stock Purchase Plan. | ||||||||
The Company had additional potential dilutive securities outstanding representing 1.7 million and 0.3 million options for the three months ended March 31, 2013 and 2014, respectively that were not included in the computation of dilutive securities because they were anti-dilutive for the period. Had these shares not been anti-dilutive, all of these shares would not have been included in the net income attributable to common shareholder per common share calculation as the Company uses the treasury stock method of calculating diluted shares. | ||||||||
Business_Segment_Information
Business Segment Information | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||
Business Segment Information | ' | |||||||||||||||||||
Business Segment Information | ' | |||||||||||||||||||
NOTE C—Business Segment Information | ||||||||||||||||||||
The accounting policies of the Company's segments are the same as those described in Note A—"General." The Company evaluates performance of its segments based on segment profit attributable to Magellan shareholders, which is defined as profit or loss from operations, before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, and special charges or benefits ("Segment Profit"). Management uses Segment Profit information for internal reporting and control purposes and considers it important in making decisions regarding the allocation of capital and other resources, risk assessment and employee compensation, among other matters. Public Sector subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Public Sector's customers. In addition, Pharmacy Management provides pharmacy benefits management for the Company's employees covered under its medical plan. As such, revenue, cost of care, cost of goods sold and direct service costs and other related to these arrangements are eliminated. The Company's segments are defined above. | ||||||||||||||||||||
The following tables summarize, for the periods indicated, operating results by business segment (in thousands): | ||||||||||||||||||||
Commercial | Public | Specialty | Pharmacy | Corporate | Consolidated | |||||||||||||||
Sector | Solutions | Management | and | |||||||||||||||||
Elimination | ||||||||||||||||||||
Three Months Ended March 31, 2013 | ||||||||||||||||||||
Managed care and other revenue | $ | 187,837 | $ | 406,620 | $ | 90,278 | $ | 53,099 | $ | (15,245 | ) | $ | 722,589 | |||||||
PBM and dispensing revenue | — | — | — | 99,172 | — | 99,172 | ||||||||||||||
Cost of care | (113,271 | ) | (355,379 | ) | (58,067 | ) | (13,555 | ) | 15,245 | (525,027 | ) | |||||||||
Cost of goods sold | — | — | — | (93,512 | ) | — | (93,512 | ) | ||||||||||||
Direct service costs and other | (41,392 | ) | (25,643 | ) | (13,371 | ) | (29,561 | ) | (29,660 | ) | (139,627 | ) | ||||||||
Stock compensation expense(1) | 133 | 307 | 434 | 320 | 4,444 | 5,638 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Segment profit (loss) | $ | 33,307 | $ | 25,905 | $ | 19,274 | $ | 15,963 | $ | (25,216 | ) | $ | 69,233 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial | Public | Specialty | Pharmacy | Corporate | Consolidated | |||||||||||||||
Sector | Solutions | Management | and | |||||||||||||||||
Elimination | ||||||||||||||||||||
Three Months Ended March 31, 2014 | ||||||||||||||||||||
Managed care and other revenue | $ | 188,891 | $ | 497,943 | $ | 105,434 | $ | 55,378 | $ | (18,055 | ) | $ | 829,591 | |||||||
PBM and dispensing revenue | — | — | — | 139,624 | (2,740 | ) | 136,884 | |||||||||||||
Cost of care | (111,202 | ) | (422,518 | ) | (73,652 | ) | (16,391 | ) | 18,055 | (605,708 | ) | |||||||||
Cost of goods sold | — | — | — | (128,031 | ) | 2,733 | (125,298 | ) | ||||||||||||
Direct service costs and other | (40,276 | ) | (42,958 | ) | (15,141 | ) | (35,551 | ) | (30,796 | ) | (164,722 | ) | ||||||||
Stock compensation expense(1) | 155 | 274 | 414 | 303 | 3,326 | 4,472 | ||||||||||||||
Less: Non-controlling interest segment profit (loss)(2) | — | (1,330 | ) | — | — | — | (1,330 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Segment profit (loss) | $ | 37,568 | $ | 34,071 | $ | 17,055 | $ | 15,332 | $ | (27,477 | ) | $ | 76,549 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
-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. | ||||||||||||||||||||
-2 | ||||||||||||||||||||
The non-controlling portion of AlphaCare's segment profit (loss) is excluded from the computation of Segment Profit. | ||||||||||||||||||||
The following table reconciles Segment Profit to income before income taxes (in thousands): | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | ||||||||||||||||||||
2013 | 2014 | |||||||||||||||||||
Segment profit | $ | 69,233 | $ | 76,549 | ||||||||||||||||
Stock compensation expense | (5,638 | ) | (4,472 | ) | ||||||||||||||||
Non-controlling interest segment profit (loss) | — | (1,330 | ) | |||||||||||||||||
Depreciation and amortization | (16,170 | ) | (20,229 | ) | ||||||||||||||||
Interest expense | (610 | ) | (836 | ) | ||||||||||||||||
Interest income | 353 | 311 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Income before income taxes | $ | 47,168 | $ | 49,993 | ||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Commitments and Contingencies | ' | |||||||||||||
Commitments and Contingencies | ' | |||||||||||||
NOTE D—Commitments and Contingencies | ||||||||||||||
Legal | ||||||||||||||
The Company's operating activities entail significant risks of liability. From time to time, the Company is subject to various actions and claims arising from the acts or omissions of its employees, network providers or other parties. In the normal course of business, the Company receives reports relating to deaths and other serious incidents involving patients whose care is being managed by the Company. Such incidents occasionally give rise to malpractice, professional negligence and other related actions and claims against the Company or its network providers. Many of these actions and claims received by the Company seek substantial damages and therefore require the Company to incur significant fees and costs related to their defense. | ||||||||||||||
The Company is also subject to or party to certain class actions and other litigation and claims relating to its operations or business practices. In the opinion of management, the Company has recorded reserves that are adequate to cover litigation, claims or assessments that have been or may be asserted against the Company, and for which the outcome is probable and reasonably estimable. Management believes that the resolution of such litigation and claims will not have a material adverse effect on the Company's financial condition or results of operations; however, there can be no assurance in this regard. | ||||||||||||||
Stock Repurchases | ||||||||||||||
On October 25, 2011 the Company's board of directors approved a stock repurchase plan which authorized the Company to purchase up to $200 million of its outstanding common stock through October 25, 2013. On July 24, 2013 the Company's board of directors approved an increase and extension of the stock repurchase plan which authorizes the Company to purchase up to $300 million of its outstanding stock through October 25, 2015. | ||||||||||||||
Stock repurchases under the program may be purchased from time to time in open market transactions (including blocks) or in privately negotiated transactions. The timing of repurchases and the actual amount purchased will depend on a variety of factors including the market price of the Company's shares, general market and economic conditions, and other corporate considerations. Repurchases may be made pursuant to plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, which could allow the Company to purchase its shares during periods when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Repurchases are expected to be funded from working capital and anticipated cash from operations. The repurchase authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by the Company's board of directors at any time. Pursuant to this program, the Company made open market purchases of 671,776 shares of the Company's common stock at an average price of $48.72 per share for an aggregate cost of $32.7 million (excluding broker commissions) during the period from November 11, 2011 through December 31, 2011. Pursuant to this program, the Company made open market purchases of 459,252 shares of the Company's common stock at an average price of $50.27 per share for an aggregate cost of $23.1 million (excluding broker commissions) during 2012. Pursuant to this program, the Company made open market purchases of 1,159,871 shares of the Company's common stock at an average price of $51.83 per share for an aggregate cost of $60.1 million (excluding broker commissions) during 2013. Pursuant to this program, the Company made open market purchases of 284,889 shares of the Company's common stock at an average price of $59.54 per share for an aggregate cost of $17.0 million (excluding broker commissions) during the three months ended March 31, 2014. As of March 31, 2014, the total dollar value remaining under the current authorization was $167.1 million. | ||||||||||||||
During the period from April 1, 2014 through April 25, 2014, the Company made additional open market purchases of 185,325 shares of the Company's common stock at an aggregate cost of $10.3 million (excluding broker commissions). | ||||||||||||||
Restructuring Activities | ||||||||||||||
As a result of restructuring activities initiated in 2013, the Company recorded liabilities for employee termination costs. The restructuring activities initiated in 2013 were related to contract terminations and organizational changes made in an effort to improve the Company's ability to execute its strategy. The Company anticipates additional restructuring costs in 2014 associated with employee terminations of $0.9 million and lease termination and exit costs of $2.4 million. The additional projected restructuring costs by segment are Public Sector $2.0 million and Commercial $1.3 million. For the three months ended March 31, 2014, the Company incurred $0.7 million of employee termination costs. The restructuring costs incurred by segment were Public Sector $0.5 million and Commercial $0.2 million. Restructuring costs are included in direct service costs and other operating expenses in the consolidated statements of comprehensive income. | ||||||||||||||
The following table summarizes the activity related to the restructuring liabilities for the three months ended March 31, 2014, by reportable segment (in thousands): | ||||||||||||||
Commercial | Public | Corporate | Consolidated | |||||||||||
Sector | ||||||||||||||
Liability for employee termination costs at December 31, 2013 | $ | 4,744 | $ | 4,296 | $ | 3,429 | $ | 12,469 | ||||||
Additions | 202 | 518 | — | 720 | ||||||||||
Payments | (73 | ) | (6 | ) | (1,143 | ) | (1,222 | ) | ||||||
Liability released | — | (235 | ) | (58 | ) | (293 | ) | |||||||
| | | | | | | | | | | | | | |
Liability for employee termination costs at March 31, 2014 | $ | 4,873 | $ | 4,573 | $ | 2,228 | $ | 11,674 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Acquisitions
Acquisitions | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Acquisitions | ' | ||||||||||
Acquisitions | ' | ||||||||||
NOTE E—Acquisitions | |||||||||||
Acquisition of Partners Rx Management, LLC | |||||||||||
Pursuant to the September 6, 2013 Agreement and Plan of Merger (the "Partners Agreement") with Partners Rx Management, LLC ("Partners Rx"), on October 1, 2013 the Company acquired all of the outstanding ownership interests of Partners Rx. Partners Rx is a full-service commercial PBM with a strong focus on health plans and self-funded employers primarily through sales through third party administrators, consultants and brokers. As consideration for the transaction, the Company paid $100 million in cash, subject to working capital adjustments. The Company funded the acquisition with cash on hand. | |||||||||||
As of March 31, 2014, settlement of the working capital and certain contractual liabilities remain open and therefore are subject to further estimation. In addition, the amount recognized for deferred tax assets may be impacted by the determination of these items. The Company will make appropriate adjustments to the purchase price allocation prior to the completion of the measurement period as required. | |||||||||||
Acquisition of AlphaCare Holdings, Inc. | |||||||||||
Pursuant to the August 13, 2013 stock purchase agreement (the "AlphaCare Agreement"), on December 31, 2013 the Company acquired a 65% equity interest in AlphaCare Holdings, Inc. ("AlphaCare Holdings"), the holding company for AlphaCare New York, Inc. ("AlphaCare"), a Health Maintenance Organization ("HMO") in New York that operates a New York Managed Long-Term Care Plan in Bronx, New York, Queens, Kings and Westchester Counties, and Medicare Plans in Bronx, New York, Queens and Kings Counties. | |||||||||||
The Company previously held a 7% equity interest in AlphaCare through a previous equity investment of $2.0 million in preferred membership units of AlphaCare's previous holding company, AlphaCare Holdings, LLC on May 17, 2013. The Company also previously loaned $5.9 million to AlphaCare Holdings, LLC. As part of the AlphaCare Agreement, AlphaCare Holdings, LLC was reorganized into a Delaware corporation, the preferred membership units and the loan were converted into Series A Participating Preferred Stock ("AlphaCare Series A Preferred") of AlphaCare Holdings and the Company purchased an additional $17.4 million of AlphaCare Series A Preferred. The Company holds a 65% voting interest and the remaining shareholders hold a 35% voting interest in AlphaCare Holdings. | |||||||||||
Based on the Company's 65% equity and voting interest in AlphaCare Holdings, the Company has included the results of operations in its consolidated financial statements. The Company reports the results of operations of AlphaCare Holdings within the Public Sector segment. | |||||||||||
During the three months ended March 31, 2014, the Company made net retrospective adjustments to provisional amounts related to the AlphaCare Holdings acquisition that were recognized at the acquisition date that, if known, would have affected the measurement amounts recognized as of that date. | |||||||||||
The estimated fair values of AlphaCare Holdings assets acquired and liabilities assumed at the date of acquisition are summarized as follows (in thousands): | |||||||||||
Initial Amounts | Measurement | Current | |||||||||
Recognized at | Period | Amounts | |||||||||
Acquisition Date(1) | Adjustments(2) | Recognized at | |||||||||
Acquisition Date | |||||||||||
Assets acquired: | |||||||||||
Current assets (includes $6,249 of cash and $7,900 of restricted cash) | $ | 14,766 | $ | (548 | ) | $ | 14,218 | ||||
Property and equipment, net | 310 | (39 | ) | 376 | |||||||
Other assets | 475 | 66 | 436 | ||||||||
Other identified intangible assets | 4,590 | 2,600 | 7,190 | ||||||||
Goodwill | 20,882 | (3 | ) | 20,879 | |||||||
| | | | | | | | | | | |
Total assets acquired | 41,023 | 2,076 | 43,099 | ||||||||
| | | | | | | | | | | |
Liabilities assumed: | |||||||||||
Current liabilities | 3,139 | 1,039 | 4,178 | ||||||||
Deferred tax liabilities | 1,830 | 1,037 | 2,867 | ||||||||
| | | | | | | | | | | |
Total liabilities assumed | 4,969 | 2,076 | 7,045 | ||||||||
| | | | | | | | | | | |
Net assets acquired | 36,054 | — | 36,054 | ||||||||
Less: net assets attributable to noncontrolling interest | (10,554 | ) | — | (10,554 | ) | ||||||
| | | | | | | | | | | |
Net consideration | $ | 25,500 | $ | — | $ | 25,500 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
-1 | |||||||||||
As previously reported in the Company's Form 10-K for the year ended December 31, 2013. | |||||||||||
-2 | |||||||||||
The measurement period adjustments were recorded to reflect a $2.6 million increase in the customer contracts identified intangible and a $1.0 million increase to the deferred tax liability as a result of finalization of the valuation and other net changes of ($1.6) as a result of changes in the estimated fair values of the associated assets acquired and liabilities assumed based on factors existing at the acquisition date. | |||||||||||
Subsequent_Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events | ' |
Subsequent Events | ' |
NOTE F—Subsequent Events | |
Acquisition of CDMI, LLC | |
On March 31, 2014 the Company entered into a Purchase Agreement (the "CDMI Agreement") to acquire all of the outstanding equity interests of CDMI, LLC ("CDMI"), a privately held company that provides a range of clinical consulting programs and negotiates and administers drug rebates for managed care organizations and other customers. | |
Under the terms of the CDMI Agreement, the base purchase price is $205 million plus potential contingent payments up to a maximum aggregate amount of $165 million. The base purchase price includes $125 million to be paid in cash at closing, and $80 million to be reinvested in Magellan restricted common stock by the principal owners and certain key management of CDMI. The $80 million in Magellan restricted common stock will be subject to vesting over a 42-month period, and is conditional upon certain employment and performance targets. In addition to the base purchase price, there is a contingent payment of up to $65 million which will be paid depending upon CDMI's performance relative to certain targets for 2015 rebate retention. In addition, there is a potential earn-out opportunity of up to $100 million, of which up to $65 million is dependent upon the number of CDMI customers that become full-service PBM customers during 2015 and 2016, and potential cash payments of up to $35 million based upon achievement of 2014 and 2015 gross profit performance targets. | |
The Company will report the results of operations of CDMI within its Pharmacy Management segment. All material closing conditions for the transaction involving third parties have been met, and the Company expects that the transaction will be consummated on April 30, 2014. | |
General_Policies
General (Policies) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
General | ' | |||||||||||||
Recent Accounting Pronouncements | ' | |||||||||||||
Recent Accounting Pronouncements | ||||||||||||||
In July 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-06, "Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2011-06"), which addresses how fees mandated by the Patient Protection and the Affordable Care Act ("ACA"), as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "Health Reform Law"), should be recognized and classified in the income statements of health insurers. The Health Reform Law imposes a mandatory annual fee on health insurers for each calendar year beginning on or after January 1, 2014. ASU 2011-06 stipulates that the liability incurred for that fee be amortized to expense over the calendar year in which it is payable. This ASU is effective for calendar years beginning after December 31, 2013, when the fee initially becomes effective. The Company is currently pursuing rate adjustments to cover the direct costs of these fees and the impact from non-deductibility of such fees for federal income tax purposes. To the extent the Company has a state public sector customer that does not renew, there may be some impact due to taxes paid where the timing and amount of recoupment of these additional costs is uncertain. In the event the Company is unable to obtain rate adjustments to cover the financial impact of the annual fee, the fee may have a material impact on the Company. For 2014, the projected ACA fee is currently estimated to be $20.2 million and is included in accrued liabilities in the consolidated balance sheets. Of this amount $5.1 million was expensed in the three months ended March 31, 2014, which is included in direct service costs and other operating expenses in the consolidated statements of comprehensive income. | ||||||||||||||
In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Carryforward Exists" ("ASU 2013-11"). ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for reporting periods beginning after December 15, 2013 and were adopted by the Company during the quarter ended March 31, 2014. The effect of the guidance is immaterial to the Company's consolidated results of operations, financial position, and cash flows. | ||||||||||||||
Use of Estimates | ' | |||||||||||||
Use of Estimates | ||||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, valuation allowances for deferred tax assets, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, stock compensation assumptions, tax contingencies and legal liabilities. Actual results could differ from those estimates. | ||||||||||||||
Revenue recognition | ' | |||||||||||||
Managed Care and Other Revenue | ||||||||||||||
Managed Care Revenue. Managed care revenue, inclusive of revenue from the Company's risk, EAP and ASO contracts, is recognized over the applicable coverage period on a per member basis for covered members. The Company is paid a per member fee for all enrolled members, and this fee is recorded as revenue in the month in which members are entitled to service. The Company adjusts its revenue for retroactive membership terminations, additions and other changes, when such adjustments are identified, with the exception of retroactivity that can be reasonably estimated. The impact of retroactive rate amendments is generally recorded in the accounting period that terms to the amendment are finalized, and that the amendment is executed. Any fees paid prior to the month of service are recorded as deferred revenue. Managed care revenues approximated $629.7 million and $728.8 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Fee-For-Service and Cost-Plus Contracts. The Company has certain fee-for-service contracts, including cost-plus contracts, with customers under which the Company recognizes revenue as services are performed and as costs are incurred. Revenues from these contracts approximated $49.3 million and $59.7 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Block Grant Revenues. The Maricopa Contract (as defined below) is partially funded by federal, state and county block grant money, which represents annual appropriations. The Company recognizes revenue from block grant activity ratably over the period to which the block grant funding applies. Block grant revenues were approximately $33.2 million and $33.0 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Performance-Based Revenue. The Company has the ability to earn performance-based revenue under certain risk and non-risk contracts. Performance-based revenue generally is based on either the ability of the Company to manage care for its clients below specified targets, or on other operating metrics. For each such contract, the Company estimates and records performance-based revenue after considering the relevant contractual terms and the data available for the performance-based revenue calculation. Pro-rata performance-based revenue may be recognized on an interim basis pursuant to the rights and obligations of each party upon termination of the contracts. Performance-based revenues were $1.9 million and $3.0 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Rebate Revenue. The Company administers a rebate program for certain clients through which the Company coordinates the achievement, calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients. Each period, the Company estimates the total rebates earned based on actual volumes of pharmaceutical purchases by the Company's clients, as well as historical and/or anticipated sharing percentages. The Company earns fees based upon the volume of rebates generated for its clients. The Company does not record as rebate revenue any rebates that are passed through to its clients. Total rebate revenues were $8.7 million and $4.1 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
In relation to the Company's PBM business, the Company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers. The Company recognizes rebates when the Company is entitled to them and when the amounts of the rebates are determinable. The amount recorded for rebates earned by the Company from the pharmaceutical manufacturers are recorded as a reduction of cost of goods sold. | ||||||||||||||
PBM and Dispensing Revenue | ||||||||||||||
Pharmacy Benefit Management Revenue. The Company recognizes PBM revenue, which consists of a negotiated prescription price (ingredient cost plus dispensing fee), co-payments collected by the pharmacy and any associated administrative fees, when claims are adjudicated. The Company recognizes PBM revenue on a gross basis (i.e. including drug costs and co-payments) as it is acting as the principal in the arrangement and is contractually obligated to its clients and network pharmacies, which is a primary indicator of gross reporting. In addition, the Company is solely responsible for the claims adjudication process, negotiating the prescription price for the pharmacy, collection of payments from the client for drugs dispensed by the pharmacy, and managing the total prescription drug relationship with the client's members. If the Company enters into a contract where it is only an administrator, and does not assume any of the risks previously noted, revenue will be recognized on a net basis. PBM revenues were $5.0 million and $81.2 million for the three months ended March 31, 2013 and 2014, respectively. The increase mainly relates to the acquisition of Partners Rx Management, LLC ("Partners Rx"). | ||||||||||||||
Dispensing Revenue. The Company recognizes dispensing revenue, which includes the co-payments received from members of the health plans the Company serves, when the specialty pharmaceutical drugs are shipped. At the time of shipment, the earnings process is complete; the obligation of the Company's customer to pay for the specialty pharmaceutical drugs is fixed, and, due to the nature of the product, the member may neither return the specialty pharmaceutical drugs nor receive a refund. Revenues from the dispensing of specialty pharmaceutical drugs on behalf of health plans were $94.1 million and $55.7 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
Significant Customers | ||||||||||||||
Consolidated Company | ||||||||||||||
Through March 31, 2014, the Company provided behavioral healthcare management and other related services to approximately 680,000 members in Maricopa County, Arizona as the Regional Behavioral Health Authority ("RBHA") for GSA6 ("Maricopa County") pursuant to a contract with the State of Arizona (the "Maricopa Contract"). The Maricopa Contract was for the management of the publicly funded behavioral health system that delivered mental health, substance abuse and crisis services for adults, youth, and children. The Maricopa Contract generated net revenues of $182.3 million and $201.0 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
The State of Arizona had previously issued a Solicitation for a new RBHA for Maricopa County (the "New Contract") to replace the current contract with the Company to be effective on October 1, 2013. The New Contract is for the management of the publicly funded behavioral health system currently provided by the Company under the Maricopa Contract, and also includes an integrated behavioral and physical healthcare system for a small number of individuals with serious mental illness. Magellan Complete Care of Arizona ("MCCAZ"), a joint venture owned 80% by the Company and 20% by Vanguard/Phoenix Health Plan, previously submitted a bid for the Contract. On March 25, 2013, the Company was notified that MCCAZ was not selected as the RBHA for the New Contract. | ||||||||||||||
Subsequent to the announcement of the winning bidder for the New Contract, Magellan has filed various protests and appeals regarding the decision. Most recently, in December 2013, Magellan filed an appeal in the Arizona Superior Court in Maricopa County (the "Superior Court") and a motion seeking a judicial stay of the implementation of the New Contract until after the court's decision on the appeal. On February 18, 2014 the Superior Court issued an order denying the Company's motion for stay. The denial of the motion for stay does not impact the final decision on the merits of Magellan's appeal, which will continue to proceed in the Superior Court. The Company also previously filed a separate civil lawsuit in the Superior Court challenging the legal authority of the public entity that is one of the key members of the non-profit winning bidder to invest in and participate in the winning bidder's performance under the New Contract. In connection with such civil suit, the Company previously filed a motion seeking a preliminary injunction that, if granted, could prohibit such public entity from participation as a member of the winning bidder in the New Contract. On March 14, 2014, the Superior Court issued an order dismissing the Company's claims that formed the basis of the motion for preliminary injunction and denying the motion for preliminary injunction as moot. There is no assurance that the Company will prevail on its appeal to the Superior Court. | ||||||||||||||
By Segment | ||||||||||||||
In addition to the Maricopa Contract previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2013 and 2014 (in thousands): | ||||||||||||||
Segment | Term Date | 2013 | 2014 | |||||||||||
Commercial | ||||||||||||||
Customer A | June 30, 2014(1) | $ | 51,641 | $ | 55,540 | |||||||||
Customer B | December 31, 2019 | 35,811 | 42,898 | |||||||||||
Customer C | August 14, 2017 | 15,254 | * | 22,652 | ||||||||||
Public Sector | ||||||||||||||
Customer D | June 30, 2015 | 64,312 | 103,171 | |||||||||||
Specialty Solutions | ||||||||||||||
Customer E | December 31, 2015 | 31,361 | 33,390 | |||||||||||
Customer F | June 30, 2016(2) | 15,235 | 12,574 | |||||||||||
Customer G | July 31, 2015 | 16,083 | 16,552 | |||||||||||
Customer A | November 30, 2016 | 768 | * | 12,379 | ||||||||||
Customer H | January 31, 2016 | 9,759 | 11,307 | |||||||||||
Pharmacy Management | ||||||||||||||
Customer I | November 30, 2014 to December 31, 2014(3) | 33,311 | 28,579 | |||||||||||
Customer J | December 31, 2013(4) | 15,297 | 6,029 | * | ||||||||||
Customer K | September 27, 2013 to December 31, 2013(3)(4) | 21,641 | 1,130 | * | ||||||||||
Customer L | March 31, 2014(5)(6) | 15,245 | 18,055 | * | ||||||||||
* | ||||||||||||||
Revenue amount did not exceed ten percent of net revenues for the respective segment for the period presented. Amount is shown for comparative purposes only. | ||||||||||||||
-1 | ||||||||||||||
The customer has informed the Company that, after a competitive evaluation process, it has decided not to renew its contract. The contract was extended through June 30, 2014 to allow for transition to the new vendor. | ||||||||||||||
-2 | ||||||||||||||
This contract will transition from risk to ASO based services effective July 1, 2014. | ||||||||||||||
-3 | ||||||||||||||
The customer has more than one contract. The individual contracts are scheduled to terminate at various points during the time period indicated above. | ||||||||||||||
-4 | ||||||||||||||
The contract has terminated, however, the Company continues to provide services as the contract is transitioned to the new vendor. | ||||||||||||||
-5 | ||||||||||||||
The contract has terminated. | ||||||||||||||
-6 | ||||||||||||||
This customer represents a subcontract with a Public Sector customer and is eliminated in consolidation. | ||||||||||||||
Concentration of Business | ||||||||||||||
The Company also has a significant concentration of business with various counties in the State of Pennsylvania (the "Pennsylvania Counties") which are part of the Pennsylvania Medicaid program. Net revenues from the Pennsylvania Counties in the aggregate totaled $86.7 million and $90.1 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
In addition, the Company has a significant concentration of business with the State of Florida. The Company currently has behavioral healthcare contracts with various areas in the State of Florida (the "Florida Areas") which are part of the Florida Medicaid program. The State of Florida is implementing a new system of mandated managed care through which Medicaid enrollees will receive integrated healthcare services, and it will phase out the behavioral healthcare programs under which the Florida Areas' contracts operate by July 31, 2014. The Company has a contract with the State of Florida to provide integrated healthcare services under the new program. Net revenues from the State of Florida in the aggregate totaled $33.3 million and $31.8 million for the three months ended March 31, 2013 and 2014, respectively. | ||||||||||||||
The Company's contracts with customers typically have terms of one to three years, and in certain cases contain renewal provisions (at the customer's option) for successive terms of between one and two years (unless terminated earlier). Substantially all of these contracts may be immediately terminated with cause and many of the Company's contracts are terminable without cause by the customer or the Company either upon the giving of requisite notice and the passage of a specified period of time (typically between 60 and 180 days) or upon the occurrence of other specified events. In addition, the Company's contracts with federal, state and local governmental agencies generally are conditioned on legislative appropriations. These contracts generally can be terminated or modified by the customer if such appropriations are not made. | ||||||||||||||
Fair Value Measurements | ' | |||||||||||||
Fair Value Measurements | ||||||||||||||
The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. Financial assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows: | ||||||||||||||
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. | ||||||||||||||
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). | ||||||||||||||
Level 3—Unobservable inputs that reflect the Company's assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including the Company's data. | ||||||||||||||
In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company's financial assets and liabilities that are required to be measured at fair value as of December 31, 2013 and March 31, 2014 (in thousands): | ||||||||||||||
December 31, 2013 | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Cash and cash equivalents(1) | $ | — | $ | 101,028 | $ | — | $ | 101,028 | ||||||
Restricted cash(2) | — | 128,318 | — | 128,318 | ||||||||||
Investments: | ||||||||||||||
U.S. government and agency securities | 1,129 | — | — | 1,129 | ||||||||||
Obligations of government-sponsored enterprises(3) | — | 8,440 | — | 8,440 | ||||||||||
Corporate debt securities | — | 198,594 | — | 198,594 | ||||||||||
Certificates of deposit | — | 150 | — | 150 | ||||||||||
| | | | | | | | | | | | | | |
December 31, 2013 | $ | 1,129 | $ | 436,530 | $ | — | $ | 437,659 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
March 31, 2014 | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Cash and cash equivalents(4) | $ | — | $ | 145,413 | $ | — | $ | 145,413 | ||||||
Restricted cash(5) | — | 87,746 | — | 87,746 | ||||||||||
Investments: | ||||||||||||||
U.S. government and agency securities | 1,528 | — | — | 1,528 | ||||||||||
Obligations of government-sponsored enterprises(3) | — | 6,923 | — | 6,923 | ||||||||||
Corporate debt securities | — | 199,247 | — | 199,247 | ||||||||||
Certificates of deposit | — | 1,150 | — | 1,150 | ||||||||||
| | | | | | | | | | | | | | |
March 31, 2014 | $ | 1,528 | $ | 440,479 | $ | — | $ | 442,007 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
Excludes $102.2 million of cash held in bank accounts by the Company. | ||||||||||||||
-2 | ||||||||||||||
Excludes $108.4 million of restricted cash held in bank accounts by the Company. | ||||||||||||||
-3 | ||||||||||||||
Includes investments in notes issued by the Federal Home Loan Bank. | ||||||||||||||
-4 | ||||||||||||||
Excludes $115.9 million of cash held in bank accounts by the Company. | ||||||||||||||
-5 | ||||||||||||||
Excludes $176.9 million of restricted cash held in bank accounts by the Company. | ||||||||||||||
For the three months ended March 31, 2014, the Company has not transferred any assets between fair value measurement levels. | ||||||||||||||
All of the Company's investments are classified as "available-for- sale" and are carried at fair value. | ||||||||||||||
If a debt security is in an unrealized loss position and the Company has the intent to sell the debt security, or it is more likely than not that the Company will have to sell the debt security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to other-than-temporary impairment losses recognized in income in the consolidated statements of comprehensive income. For impaired debt securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in other-than-temporary impairment losses recognized in income in the consolidated statements of comprehensive income and the non-credit component of the other-than-temporary impairment is recognized in other comprehensive income. | ||||||||||||||
As of December 31, 2013 and March 31, 2014, there were no unrealized losses that the Company believed to be other-than-temporary. No realized gains or losses were recorded for the three months ended March 31, 2013. During the three months ended March 31, 2014, the Company recognized a $0.1 million loss on the sale of investments. The following is a summary of short-term and long-term investments at December 31, 2013 and March 31, 2014 (in thousands): | ||||||||||||||
December 31, 2013 | ||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||||
Gains | Losses | Value | ||||||||||||
U.S. government and agency securities | $ | 1,129 | $ | — | $ | — | $ | 1,129 | ||||||
Obligations of government-sponsored enterprises(1) | 8,441 | 2 | (3 | ) | 8,440 | |||||||||
Corporate debt securities | 198,748 | 18 | (172 | ) | 198,594 | |||||||||
Certificates of deposit | 150 | — | — | 150 | ||||||||||
| | | | | | | | | | | | | | |
Total investments at December 31, 2013 | $ | 208,468 | $ | 20 | $ | (175 | ) | $ | 208,313 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
March 31, 2014 | ||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||||
Gains | Losses | Value | ||||||||||||
U.S. government and agency securities | $ | 1,527 | $ | 1 | $ | — | $ | 1,528 | ||||||
Obligations of government-sponsored enterprises(1) | 6,924 | 2 | (3 | ) | 6,923 | |||||||||
Corporate debt securities | 199,330 | 26 | (109 | ) | 199,247 | |||||||||
Certificates of deposit | 1,150 | — | — | 1,150 | ||||||||||
| | | | | | | | | | | | | | |
Total investments at March 31, 2014 | $ | 208,931 | $ | 29 | $ | (112 | ) | $ | 208,848 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
Includes investments in notes issued by the Federal Home Loan Bank. | ||||||||||||||
The maturity dates of the Company's investments as of March 31, 2014 are summarized below (in thousands): | ||||||||||||||
Amortized | Estimated | |||||||||||||
Cost | Fair Value | |||||||||||||
2014 | $ | 150,273 | $ | 150,229 | ||||||||||
2015 | 54,489 | 54,460 | ||||||||||||
2016 | 4,169 | 4,159 | ||||||||||||
| | | | | | | | |||||||
Total investments at March 31, 2014 | $ | 208,931 | $ | 208,848 | ||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Income Taxes | ' | |||||||||||||
Income Taxes | ||||||||||||||
The Company's effective income tax rates were 40.5 percent and 51.2 percent for the three months ended March 31, 2013 and 2014, respectively. These rates differ from the federal statutory income tax rate primarily due to state income taxes, permanent differences between book and tax income, and changes to recorded tax contingencies. The Company also accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The effective income tax rate for the three months ended March 31, 2013 is lower than the effective rate for the three months ended March 31, 2014 mainly due to the non-deductible ACA fees. | ||||||||||||||
The Company files a consolidated federal income tax return for the Company and its eighty percent or more owned subsidiaries, and the Company and its subsidiaries file income tax returns in various states and local jurisdictions. With few exceptions, the Company is no longer subject to income tax assessments by tax authorities for years ended prior to 2010. | ||||||||||||||
Stock Compensation | ' | |||||||||||||
Stock Compensation | ||||||||||||||
At December 31, 2013 and March 31, 2014, the Company had equity-based employee incentive plans, which are described more fully in Note 6 in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The Company recorded stock compensation expense of $5.6 million and $4.5 million for the three months ended March 31, 2013 and 2014, respectively. Stock compensation expense recognized in the consolidated statements of comprehensive income for the three months ended March 31, 2013 and 2014 has been reduced for estimated forfeitures, estimated at four percent for both periods. | ||||||||||||||
The weighted average grant date fair value of all stock options granted during the three months ended March 31, 2014 was $13.63 as estimated using the Black-Scholes-Merton option pricing model, which also assumed an expected volatility of 26.20 percent based on the historical volatility of the Company's stock price. | ||||||||||||||
The benefits of tax deductions in excess of recognized stock compensation expense are reported as a financing cash flow, rather than as an operating cash flow. In the three months ended March 31, 2013 and 2014, $0.3 million and $0.5 million, respectively, of benefits of such tax deductions related to stock compensation expense were realized and as such were reported as financing cash flows. For the three months ended March 31, 2013, the net change to additional paid in capital related to tax benefits (deficiencies) was $(0.2) million, which includes $(0.5) million of excess tax deficiencies offset by the $0.3 million of excess tax benefits. For the three months ended March 31, 2014, the net change to additional paid in capital related to tax benefits (deficiencies) was $0.4 million, which includes the $0.5 million of excess tax benefits offset by $(0.1) million of excess tax deficiencies. | ||||||||||||||
Summarized information related to the Company's stock options for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Options | Weighted | |||||||||||||
Average | ||||||||||||||
Exercise | ||||||||||||||
Price | ||||||||||||||
Outstanding, beginning of period | 4,010,146 | $ | 47.23 | |||||||||||
Granted | 640,636 | 60.28 | ||||||||||||
Forfeited | (35,244 | ) | 50.4 | |||||||||||
Exercised | (152,943 | ) | 46.78 | |||||||||||
| | | | | | | | |||||||
Outstanding, end of period | 4,462,595 | $ | 49.1 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Vested and expected to vest at end of period | 4,409,250 | $ | 49.02 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Exercisable, end of period | 2,679,575 | $ | 45.46 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
All of the Company's options granted during the three months ended March 31, 2014 vest ratably on each anniversary date over the three years subsequent to grant. All options granted during the three months ended March 31, 2014 have a ten year life. | ||||||||||||||
Summarized information related to the Company's nonvested restricted stock awards ("RSAs") for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Shares | Weighted | |||||||||||||
Average | ||||||||||||||
Grant Date | ||||||||||||||
Fair Value | ||||||||||||||
Outstanding, beginning of period | 192,165 | $ | 56.59 | |||||||||||
Awarded | — | — | ||||||||||||
Vested | — | — | ||||||||||||
Forfeited | — | — | ||||||||||||
| | | | | | | | |||||||
Outstanding, ending of period | 192,165 | $ | 56.59 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Summarized information related to the Company's nonvested restricted stock units ("RSUs") for the three months ended March 31, 2014 is as follows: | ||||||||||||||
Shares | Weighted | |||||||||||||
Average | ||||||||||||||
Grant Date | ||||||||||||||
Fair Value | ||||||||||||||
Outstanding, beginning of period | 194,913 | $ | 50.21 | |||||||||||
Awarded | 76,306 | 60.39 | ||||||||||||
Vested | (90,177 | ) | 49.55 | |||||||||||
Forfeited | (2,319 | ) | 51.06 | |||||||||||
| | | | | | | | |||||||
Outstanding, ending of period | 178,723 | $ | 54.88 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
RSAs generally vest on the anniversary of the grant. In general, RSUs vest ratably on each anniversary over the three years subsequent to grant, assuming that the associated performance hurdle(s) for that vesting year are met. | ||||||||||||||
Long Term Debt and Capital Lease Obligations | ' | |||||||||||||
Long Term Debt and Capital Lease Obligations | ||||||||||||||
On December 9, 2011, the Company entered into a Senior Secured Revolving Credit Facility Credit Agreement with Citibank, N.A., Wells Fargo Bank, N.A., Bank of America, N.A., and U.S. Bank, N.A. that provides for up to $230.0 million of revolving loans with a sublimit of up to $70.0 million for the issuance of letters of credit for the account of the Company (the "2011 Credit Facility"). Citibank, N.A., has assigned a portion of its interest in the 2011 Credit Facility to Bank of Tokyo. The 2011 Credit Facility is guaranteed by substantially all of the subsidiaries of the Company and is secured by substantially all of the assets of the Company and the subsidiary guarantors. The 2011 Credit Facility will mature on December 9, 2014. Although the 2011 Credit Facility expires on December 9, 2014, the Company believes it will be able to obtain a new facility or, if not, to use cash on hand to fund letters of credit and other liquidity needs. | ||||||||||||||
Under the 2011 Credit Facility, the annual interest rate on revolving loan borrowings is equal to (i) in the case of U.S. dollar denominated loans, the sum of a borrowing margin of 0.75 percent plus the higher of the prime rate, one-half of one percent in excess of the overnight "federal funds" rate, or the Eurodollar rate for one month plus 1.00 percent, or (ii) in the case of Eurodollar denominated loans, the sum of a borrowing margin of 1.75 percent plus the Eurodollar rate for the selected interest period. The Company has the option to borrow in U.S. dollar denominated loans or Eurodollar denominated loans at its discretion. Letters of credit issued under the Revolving Loan Commitment bear interest at the rate of 1.875 percent. The commitment commission on the 2011 Credit Facility is 0.375 percent of the unused Revolving Loan Commitment. | ||||||||||||||
There were $26.7 million and $25.6 million of capital lease obligations at December 31, 2013 and March 31, 2014, respectively. The Company had $33.7 million and $32.9 million of letters of credit outstanding at December 31, 2013 and March 31, 2014, respectively, and no revolving loan borrowings at December 31, 2013 or March 31, 2014. | ||||||||||||||
Redeemable Non-controlling Interest | ' | |||||||||||||
Redeemable Non-Controlling Interest | ||||||||||||||
On December 31, 2013, the Company acquired a 65% equity interest in AlphaCare Holdings, Inc. ("AlphaCare Holdings"). The other shareholders of AlphaCare Holdings have the right to exercise put options, requiring the Company to purchase up to 50 percent of the remaining shares prior to January 1, 2017 provided certain membership levels are attained. After December 31, 2016 the other shareholders of AlphaCare Holdings have the right to exercise put options requiring the Company to purchase all or any portion of the remaining shares. In addition, after December 31, 2016 the Company has the right to purchase all remaining shares. Non-controlling interests with redemption features, such as put options, that are not solely within the Company's control are considered redeemable non-controlling interest. Redeemable non-controlling interest is considered to be temporary and is therefore reported in a mezzanine level between liabilities and stockholders' equity on the Company's consolidated balance sheet at the greater of the initial carrying amount adjusted for the non-controlling interest's share of net income or loss or its redemption value. The Company recorded $10.6 million of redeemable non-controlling interest in relation to the acquisition. The carrying value of the non-controlling interest as of March 31, 2014 was $9.2 million. The $1.4 million reduction in carrying value for the three months ended March 31, 2014 is a result of operating losses. The Company recognizes changes in the redemption value on a quarterly basis and adjusts the carrying amount of the non-controlling interest to equal the redemption value at the end of each reporting period. Under this method, this is viewed at the end of the reporting period as if it were also the redemption date for the non-controlling interest. The Company will reflect redemption value adjustments in the earnings per share calculation if redemption value is in excess of the carrying value of the non-controlling interest. As of March 31, 2014 the carrying value of the non-controlling interest exceeded the redemption value and therefore no adjustment to the carrying value was required. | ||||||||||||||
Reclassifications | ' | |||||||||||||
Reclassifications | ||||||||||||||
Certain prior year amounts have been reclassified to conform with the current year presentation. | ||||||||||||||
General_Tables
General (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
General | ' | |||||||||||||
Schedule of customers generating in excess of ten percent of net revenues for respective segment | ' | |||||||||||||
In addition to the Maricopa Contract previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2013 and 2014 (in thousands): | ||||||||||||||
Segment | Term Date | 2013 | 2014 | |||||||||||
Commercial | ||||||||||||||
Customer A | June 30, 2014(1) | $ | 51,641 | $ | 55,540 | |||||||||
Customer B | December 31, 2019 | 35,811 | 42,898 | |||||||||||
Customer C | August 14, 2017 | 15,254 | * | 22,652 | ||||||||||
Public Sector | ||||||||||||||
Customer D | June 30, 2015 | 64,312 | 103,171 | |||||||||||
Specialty Solutions | ||||||||||||||
Customer E | December 31, 2015 | 31,361 | 33,390 | |||||||||||
Customer F | June 30, 2016(2) | 15,235 | 12,574 | |||||||||||
Customer G | July 31, 2015 | 16,083 | 16,552 | |||||||||||
Customer A | November 30, 2016 | 768 | * | 12,379 | ||||||||||
Customer H | January 31, 2016 | 9,759 | 11,307 | |||||||||||
Pharmacy Management | ||||||||||||||
Customer I | November 30, 2014 to December 31, 2014(3) | 33,311 | 28,579 | |||||||||||
Customer J | December 31, 2013(4) | 15,297 | 6,029 | * | ||||||||||
Customer K | September 27, 2013 to December 31, 2013(3)(4) | 21,641 | 1,130 | * | ||||||||||
Customer L | March 31, 2014(5)(6) | 15,245 | 18,055 | * | ||||||||||
* | ||||||||||||||
Revenue amount did not exceed ten percent of net revenues for the respective segment for the period presented. Amount is shown for comparative purposes only. | ||||||||||||||
-1 | ||||||||||||||
The customer has informed the Company that, after a competitive evaluation process, it has decided not to renew its contract. The contract was extended through June 30, 2014 to allow for transition to the new vendor. | ||||||||||||||
-2 | ||||||||||||||
This contract will transition from risk to ASO based services effective July 1, 2014. | ||||||||||||||
-3 | ||||||||||||||
The customer has more than one contract. The individual contracts are scheduled to terminate at various points during the time period indicated above. | ||||||||||||||
-4 | ||||||||||||||
The contract has terminated, however, the Company continues to provide services as the contract is transitioned to the new vendor. | ||||||||||||||
-5 | ||||||||||||||
The contract has terminated. | ||||||||||||||
-6 | ||||||||||||||
This customer represents a subcontract with a Public Sector customer and is eliminated in consolidation. | ||||||||||||||
Schedule of fair value of financial assets and liabilities | ' | |||||||||||||
In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company's financial assets and liabilities that are required to be measured at fair value as of December 31, 2013 and March 31, 2014 (in thousands): | ||||||||||||||
December 31, 2013 | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Cash and cash equivalents(1) | $ | — | $ | 101,028 | $ | — | $ | 101,028 | ||||||
Restricted cash(2) | — | 128,318 | — | 128,318 | ||||||||||
Investments: | ||||||||||||||
U.S. government and agency securities | 1,129 | — | — | 1,129 | ||||||||||
Obligations of government-sponsored enterprises(3) | — | 8,440 | — | 8,440 | ||||||||||
Corporate debt securities | — | 198,594 | — | 198,594 | ||||||||||
Certificates of deposit | — | 150 | — | 150 | ||||||||||
| | | | | | | | | | | | | | |
December 31, 2013 | $ | 1,129 | $ | 436,530 | $ | — | $ | 437,659 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
March 31, 2014 | ||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Cash and cash equivalents(4) | $ | — | $ | 145,413 | $ | — | $ | 145,413 | ||||||
Restricted cash(5) | — | 87,746 | — | 87,746 | ||||||||||
Investments: | ||||||||||||||
U.S. government and agency securities | 1,528 | — | — | 1,528 | ||||||||||
Obligations of government-sponsored enterprises(3) | — | 6,923 | — | 6,923 | ||||||||||
Corporate debt securities | — | 199,247 | — | 199,247 | ||||||||||
Certificates of deposit | — | 1,150 | — | 1,150 | ||||||||||
| | | | | | | | | | | | | | |
March 31, 2014 | $ | 1,528 | $ | 440,479 | $ | — | $ | 442,007 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
Excludes $102.2 million of cash held in bank accounts by the Company. | ||||||||||||||
-2 | ||||||||||||||
Excludes $108.4 million of restricted cash held in bank accounts by the Company. | ||||||||||||||
-3 | ||||||||||||||
Includes investments in notes issued by the Federal Home Loan Bank. | ||||||||||||||
-4 | ||||||||||||||
Excludes $115.9 million of cash held in bank accounts by the Company. | ||||||||||||||
-5 | ||||||||||||||
Excludes $176.9 million of restricted cash held in bank accounts by the Company. | ||||||||||||||
Summary of short-term and long-term "available-for-sale" investments | ' | |||||||||||||
The following is a summary of short-term and long-term investments at December 31, 2013 and March 31, 2014 (in thousands): | ||||||||||||||
December 31, 2013 | ||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||||
Gains | Losses | Value | ||||||||||||
U.S. government and agency securities | $ | 1,129 | $ | — | $ | — | $ | 1,129 | ||||||
Obligations of government-sponsored enterprises(1) | 8,441 | 2 | (3 | ) | 8,440 | |||||||||
Corporate debt securities | 198,748 | 18 | (172 | ) | 198,594 | |||||||||
Certificates of deposit | 150 | — | — | 150 | ||||||||||
| | | | | | | | | | | | | | |
Total investments at December 31, 2013 | $ | 208,468 | $ | 20 | $ | (175 | ) | $ | 208,313 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
March 31, 2014 | ||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||
Cost | Unrealized | Unrealized | Fair | |||||||||||
Gains | Losses | Value | ||||||||||||
U.S. government and agency securities | $ | 1,527 | $ | 1 | $ | — | $ | 1,528 | ||||||
Obligations of government-sponsored enterprises(1) | 6,924 | 2 | (3 | ) | 6,923 | |||||||||
Corporate debt securities | 199,330 | 26 | (109 | ) | 199,247 | |||||||||
Certificates of deposit | 1,150 | — | — | 1,150 | ||||||||||
| | | | | | | | | | | | | | |
Total investments at March 31, 2014 | $ | 208,931 | $ | 29 | $ | (112 | ) | $ | 208,848 | |||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
Includes investments in notes issued by the Federal Home Loan Bank. | ||||||||||||||
Summary of maturity dates of investments | ' | |||||||||||||
The maturity dates of the Company's investments as of March 31, 2014 are summarized below (in thousands): | ||||||||||||||
Amortized | Estimated | |||||||||||||
Cost | Fair Value | |||||||||||||
2014 | $ | 150,273 | $ | 150,229 | ||||||||||
2015 | 54,489 | 54,460 | ||||||||||||
2016 | 4,169 | 4,159 | ||||||||||||
| | | | | | | | |||||||
Total investments at March 31, 2014 | $ | 208,931 | $ | 208,848 | ||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Schedule of stock option activity | ' | |||||||||||||
Options | Weighted | |||||||||||||
Average | ||||||||||||||
Exercise | ||||||||||||||
Price | ||||||||||||||
Outstanding, beginning of period | 4,010,146 | $ | 47.23 | |||||||||||
Granted | 640,636 | 60.28 | ||||||||||||
Forfeited | (35,244 | ) | 50.4 | |||||||||||
Exercised | (152,943 | ) | 46.78 | |||||||||||
| | | | | | | | |||||||
Outstanding, end of period | 4,462,595 | $ | 49.1 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Vested and expected to vest at end of period | 4,409,250 | $ | 49.02 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Exercisable, end of period | 2,679,575 | $ | 45.46 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Schedule of nonvested restricted stock award activity | ' | |||||||||||||
Shares | Weighted | |||||||||||||
Average | ||||||||||||||
Grant Date | ||||||||||||||
Fair Value | ||||||||||||||
Outstanding, beginning of period | 192,165 | $ | 56.59 | |||||||||||
Awarded | — | — | ||||||||||||
Vested | — | — | ||||||||||||
Forfeited | — | — | ||||||||||||
| | | | | | | | |||||||
Outstanding, ending of period | 192,165 | $ | 56.59 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Schedule of nonvested restricted stock units | ' | |||||||||||||
Shares | Weighted | |||||||||||||
Average | ||||||||||||||
Grant Date | ||||||||||||||
Fair Value | ||||||||||||||
Outstanding, beginning of period | 194,913 | $ | 50.21 | |||||||||||
Awarded | 76,306 | 60.39 | ||||||||||||
Vested | (90,177 | ) | 49.55 | |||||||||||
Forfeited | (2,319 | ) | 51.06 | |||||||||||
| | | | | | | | |||||||
Outstanding, ending of period | 178,723 | $ | 54.88 | |||||||||||
| | | | | | | | |||||||
| | | | | | | | |||||||
Net_Income_per_Common_Share_At1
Net Income per Common Share Attributable to Magellan Helath Services, Inc (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Net Income per Common Share Attributable to Magellan Helath Services, Inc | ' | |||||||
Computation of basic and diluted earnings per share | ' | |||||||
The following tables reconcile income attributable to common shareholders (numerator) and shares (denominator) used in the computations of net income per share attributable to common shareholders (in thousands, except per share data): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
Numerator: | ||||||||
Net income attributable to Magellan Health Services, Inc. | $ | 28,058 | $ | 25,720 | ||||
| | | | | | | | |
| | | | | | | | |
Denominator: | ||||||||
Weighted average number of common shares outstanding—basic | 27,110 | 27,370 | ||||||
Common stock equivalents—stock options | 467 | 594 | ||||||
Common stock equivalents—restricted stock | 17 | 32 | ||||||
Common stock equivalents—restricted stock units | 52 | 54 | ||||||
Common stock equivalents—employee stock purchase plan | 2 | 1 | ||||||
| | | | | | | | |
Weighted average number of common shares outstanding—diluted | 27,648 | 28,051 | ||||||
| | | | | | | | |
| | | | | | | | |
Net income attributable to Magellan Health Services, Inc. per common share—basic | $ | 1.03 | $ | 0.94 | ||||
| | | | | | | | |
| | | | | | | | |
Net income attributable to Magellan Health Services, Inc. per common share—diluted | $ | 1.01 | $ | 0.92 | ||||
| | | | | | | | |
| | | | | | | | |
Business_Segment_Information_T
Business Segment Information (Tables) | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||
Business Segment Information | ' | |||||||||||||||||||
Schedule of operating results by business segment | ' | |||||||||||||||||||
The following tables summarize, for the periods indicated, operating results by business segment (in thousands): | ||||||||||||||||||||
Commercial | Public | Specialty | Pharmacy | Corporate | Consolidated | |||||||||||||||
Sector | Solutions | Management | and | |||||||||||||||||
Elimination | ||||||||||||||||||||
Three Months Ended March 31, 2013 | ||||||||||||||||||||
Managed care and other revenue | $ | 187,837 | $ | 406,620 | $ | 90,278 | $ | 53,099 | $ | (15,245 | ) | $ | 722,589 | |||||||
PBM and dispensing revenue | — | — | — | 99,172 | — | 99,172 | ||||||||||||||
Cost of care | (113,271 | ) | (355,379 | ) | (58,067 | ) | (13,555 | ) | 15,245 | (525,027 | ) | |||||||||
Cost of goods sold | — | — | — | (93,512 | ) | — | (93,512 | ) | ||||||||||||
Direct service costs and other | (41,392 | ) | (25,643 | ) | (13,371 | ) | (29,561 | ) | (29,660 | ) | (139,627 | ) | ||||||||
Stock compensation expense(1) | 133 | 307 | 434 | 320 | 4,444 | 5,638 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Segment profit (loss) | $ | 33,307 | $ | 25,905 | $ | 19,274 | $ | 15,963 | $ | (25,216 | ) | $ | 69,233 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial | Public | Specialty | Pharmacy | Corporate | Consolidated | |||||||||||||||
Sector | Solutions | Management | and | |||||||||||||||||
Elimination | ||||||||||||||||||||
Three Months Ended March 31, 2014 | ||||||||||||||||||||
Managed care and other revenue | $ | 188,891 | $ | 497,943 | $ | 105,434 | $ | 55,378 | $ | (18,055 | ) | $ | 829,591 | |||||||
PBM and dispensing revenue | — | — | — | 139,624 | (2,740 | ) | 136,884 | |||||||||||||
Cost of care | (111,202 | ) | (422,518 | ) | (73,652 | ) | (16,391 | ) | 18,055 | (605,708 | ) | |||||||||
Cost of goods sold | — | — | — | (128,031 | ) | 2,733 | (125,298 | ) | ||||||||||||
Direct service costs and other | (40,276 | ) | (42,958 | ) | (15,141 | ) | (35,551 | ) | (30,796 | ) | (164,722 | ) | ||||||||
Stock compensation expense(1) | 155 | 274 | 414 | 303 | 3,326 | 4,472 | ||||||||||||||
Less: Non-controlling interest segment profit (loss)(2) | — | (1,330 | ) | — | — | — | (1,330 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Segment profit (loss) | $ | 37,568 | $ | 34,071 | $ | 17,055 | $ | 15,332 | $ | (27,477 | ) | $ | 76,549 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
-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. | ||||||||||||||||||||
-2 | ||||||||||||||||||||
The non-controlling portion of AlphaCare's segment profit (loss) is excluded from the computation of Segment Profit. | ||||||||||||||||||||
Schedule of reconciliation of Segment Profit to income before income taxes | ' | |||||||||||||||||||
The following table reconciles Segment Profit to income before income taxes (in thousands): | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | ||||||||||||||||||||
2013 | 2014 | |||||||||||||||||||
Segment profit | $ | 69,233 | $ | 76,549 | ||||||||||||||||
Stock compensation expense | (5,638 | ) | (4,472 | ) | ||||||||||||||||
Non-controlling interest segment profit (loss) | — | (1,330 | ) | |||||||||||||||||
Depreciation and amortization | (16,170 | ) | (20,229 | ) | ||||||||||||||||
Interest expense | (610 | ) | (836 | ) | ||||||||||||||||
Interest income | 353 | 311 | ||||||||||||||||||
| | | | | | | | |||||||||||||
Income before income taxes | $ | 47,168 | $ | 49,993 | ||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Commitments and Contingencies | ' | |||||||||||||
Summary of activity related to restructuring liabilities | ' | |||||||||||||
The following table summarizes the activity related to the restructuring liabilities for the three months ended March 31, 2014, by reportable segment (in thousands): | ||||||||||||||
Commercial | Public | Corporate | Consolidated | |||||||||||
Sector | ||||||||||||||
Liability for employee termination costs at December 31, 2013 | $ | 4,744 | $ | 4,296 | $ | 3,429 | $ | 12,469 | ||||||
Additions | 202 | 518 | — | 720 | ||||||||||
Payments | (73 | ) | (6 | ) | (1,143 | ) | (1,222 | ) | ||||||
Liability released | — | (235 | ) | (58 | ) | (293 | ) | |||||||
| | | | | | | | | | | | | | |
Liability for employee termination costs at March 31, 2014 | $ | 4,873 | $ | 4,573 | $ | 2,228 | $ | 11,674 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Acquisitions_Tables
Acquisitions (Tables) (AlphaCare Holdings) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
AlphaCare Holdings | ' | ||||||||||
Acquisitions | ' | ||||||||||
Summary of estimated fair values of assets acquired and liabilities assumed at the date of the acquisition | ' | ||||||||||
The estimated fair values of AlphaCare Holdings assets acquired and liabilities assumed at the date of acquisition are summarized as follows (in thousands): | |||||||||||
Initial Amounts | Measurement | Current | |||||||||
Recognized at | Period | Amounts | |||||||||
Acquisition Date(1) | Adjustments(2) | Recognized at | |||||||||
Acquisition Date | |||||||||||
Assets acquired: | |||||||||||
Current assets (includes $6,249 of cash and $7,900 of restricted cash) | $ | 14,766 | $ | (548 | ) | $ | 14,218 | ||||
Property and equipment, net | 310 | (39 | ) | 376 | |||||||
Other assets | 475 | 66 | 436 | ||||||||
Other identified intangible assets | 4,590 | 2,600 | 7,190 | ||||||||
Goodwill | 20,882 | (3 | ) | 20,879 | |||||||
| | | | | | | | | | | |
Total assets acquired | 41,023 | 2,076 | 43,099 | ||||||||
| | | | | | | | | | | |
Liabilities assumed: | |||||||||||
Current liabilities | 3,139 | 1,039 | 4,178 | ||||||||
Deferred tax liabilities | 1,830 | 1,037 | 2,867 | ||||||||
| | | | | | | | | | | |
Total liabilities assumed | 4,969 | 2,076 | 7,045 | ||||||||
| | | | | | | | | | | |
Net assets acquired | 36,054 | — | 36,054 | ||||||||
Less: net assets attributable to noncontrolling interest | (10,554 | ) | — | (10,554 | ) | ||||||
| | | | | | | | | | | |
Net consideration | $ | 25,500 | $ | — | $ | 25,500 | |||||
| | | | | | | | | | | |
| | | | | | | | | | | |
-1 | |||||||||||
As previously reported in the Company's Form 10-K for the year ended December 31, 2013. | |||||||||||
-2 | |||||||||||
The measurement period adjustments were recorded to reflect a $2.6 million increase in the customer contracts identified intangible and a $1.0 million increase to the deferred tax liability as a result of finalization of the valuation and other net changes of ($1.6) as a result of changes in the estimated fair values of the associated assets acquired and liabilities assumed based on factors existing at the acquisition date. | |||||||||||
General_Details
General (Details) | 3 Months Ended |
Mar. 31, 2014 | |
segment | |
Operating results by business segment | ' |
Number of segments | 5 |
Managed Healthcare | ' |
Operating results by business segment | ' |
Number of segments | 2 |
General_Details_2
General (Details 2) (USD $) | 3 Months Ended | 12 Months Ended | 0 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||||||||||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Maricopa County Regional Behavioral Health Authority | Maricopa County Regional Behavioral Health Authority | Maricopa County Regional Behavioral Health Authority | Magellan Complete Care of Arizona, Inc. | Vanguard/Phoenix Health Plan | Commercial | Commercial | Commercial | Commercial | Commercial | Commercial | Public Sector | Public Sector | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Specialty Solutions | Pharmacy Management | Pharmacy Management | Pharmacy Management | Pharmacy Management | Pharmacy Management | Pharmacy Management | Pharmacy Management | Pharmacy Management | ||||
Item | Magellan Complete Care of Arizona, Inc. | Customer A | Customer A | Customer B | Customer B | Customer C | Customer C | Customer D | Customer D | Customer A | Customer A | Customer E | Customer E | Customer F | Customer F | Customer G | Customer G | Customer H | Customer H | Customer I | Customer I | Customer J | Customer J | Customer K | Customer K | Customer L | Customer L | |||||||
Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | Service | |||||||||
Item | Item | |||||||||||||||||||||||||||||||||
Net revenues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Projected ACA fees | ' | ' | $20,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
ACA fees expensed | 5,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Managed Care Revenue | 728,800,000 | 629,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fee-For-Service and Cost-Plus Contracts Revenue | 59,700,000 | 49,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Block Grant Revenues | 33,000,000 | 33,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Performance-Based Revenue | 3,000,000 | 1,900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Rebate Revenues | 4,100,000 | 8,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
PBM Revenue | 81,200,000 | 5,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Dispensing Revenue | 55,700,000 | 94,100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Significant customers | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of members receiving behavioral healthcare management and other related services | ' | ' | ' | 680,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revenues generated | $966,475,000 | $821,761,000 | ' | ' | $201,000,000 | $182,300,000 | ' | ' | $55,540,000 | $51,641,000 | $42,898,000 | $35,811,000 | $22,652,000 | $15,254,000 | $103,171,000 | $64,312,000 | $12,379,000 | $768,000 | $33,390,000 | $31,361,000 | $12,574,000 | $15,235,000 | $16,552,000 | $16,083,000 | $11,307,000 | $9,759,000 | $28,579,000 | $33,311,000 | $6,029,000 | $15,297,000 | $1,130,000 | $21,641,000 | $18,055,000 | $15,245,000 |
Percentage of investment in joint venture | ' | ' | ' | ' | ' | ' | 80.00% | 20.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Minimum number of contracts per customer | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1 | ' | ' | ' | 1 | ' | ' | ' |
General_Details_3
General (Details 3) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Concentration of Business | ' | ' |
Net revenue | $966,475 | $821,761 |
Minimum | ' | ' |
Concentration of Business | ' | ' |
Term of Contract | '1 year | ' |
Term of renewed contract | '1 year | ' |
Notice period for termination of contract | '60 days | ' |
Maximum | ' | ' |
Concentration of Business | ' | ' |
Term of Contract | '3 years | ' |
Term of renewed contract | '2 years | ' |
Notice period for termination of contract | '180 days | ' |
Pennsylvania Counties | ' | ' |
Concentration of Business | ' | ' |
Net revenue | 90,100 | 86,700 |
Florida Areas | ' | ' |
Concentration of Business | ' | ' |
Net revenue | $31,800 | $33,300 |
General_Details_4
General (Details 4) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Restricted Cash | $264,566,000 | $236,696,000 |
Investments | 208,848,000 | 208,313,000 |
Cash held in bank accounts by the Company, unrestricted | 115,900,000 | 102,200,000 |
Cash held in bank accounts by the Company, restricted | 176,900,000 | 108,400,000 |
Level 1 | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Total assets measured at fair value on a recurring basis | 1,528,000 | 1,129,000 |
Level 2 | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Total assets measured at fair value on a recurring basis | 440,479,000 | 436,530,000 |
Total | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Total assets measured at fair value on a recurring basis | 442,007,000 | 437,659,000 |
Fair value measured on recurring basis | Level 1 | U.S. Government and agency securities | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 1,528,000 | 1,129,000 |
Fair value measured on recurring basis | Level 2 | Other than cash held in bank accounts by Company | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Cash and Cash Equivalents | 145,413,000 | 101,028,000 |
Restricted Cash | 87,746,000 | 128,318,000 |
Fair value measured on recurring basis | Level 2 | Obligations of government-sponsored enterprises | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 6,923,000 | 8,440,000 |
Fair value measured on recurring basis | Level 2 | Corporate debt securities | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 199,247,000 | 198,594,000 |
Fair value measured on recurring basis | Level 2 | Certificates of deposit | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 1,150,000 | 150,000 |
Fair value measured on recurring basis | Total | Other than cash held in bank accounts by Company | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Cash and Cash Equivalents | 145,413,000 | 101,028,000 |
Restricted Cash | 87,746,000 | 128,318,000 |
Fair value measured on recurring basis | Total | U.S. Government and agency securities | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 1,528,000 | 1,129,000 |
Fair value measured on recurring basis | Total | Obligations of government-sponsored enterprises | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 6,923,000 | 8,440,000 |
Fair value measured on recurring basis | Total | Corporate debt securities | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | 199,247,000 | 198,594,000 |
Fair value measured on recurring basis | Total | Certificates of deposit | ' | ' |
Fair value of financial assets and liabilities required to be measured at fair value on a recurring basis | ' | ' |
Investments | $1,150,000 | $150,000 |
General_Details_5
General (Details 5) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Short-term and long-term investments | ' | ' | ' |
Other-than-temporary unrealized losses | $0 | ' | $0 |
Realized gains or losses | -100,000 | 0 | ' |
Amortized Cost | 208,931,000 | ' | 208,468,000 |
Gross Unrealized Gains | 29,000 | ' | 20,000 |
Gross Unrealized Losses | -112,000 | ' | -175,000 |
Estimated Fair Value | 208,848,000 | ' | 208,313,000 |
U.S. Government and agency securities | ' | ' | ' |
Short-term and long-term investments | ' | ' | ' |
Amortized Cost | 1,527,000 | ' | 1,129,000 |
Gross Unrealized Gains | 1,000 | ' | ' |
Estimated Fair Value | 1,528,000 | ' | 1,129,000 |
Obligations of government-sponsored enterprises | ' | ' | ' |
Short-term and long-term investments | ' | ' | ' |
Amortized Cost | 6,924,000 | ' | 8,441,000 |
Gross Unrealized Gains | 2,000 | ' | 2,000 |
Gross Unrealized Losses | -3,000 | ' | -3,000 |
Estimated Fair Value | 6,923,000 | ' | 8,440,000 |
Corporate debt securities | ' | ' | ' |
Short-term and long-term investments | ' | ' | ' |
Amortized Cost | 199,330,000 | ' | 198,748,000 |
Gross Unrealized Gains | 26,000 | ' | 18,000 |
Gross Unrealized Losses | -109,000 | ' | -172,000 |
Estimated Fair Value | 199,247,000 | ' | 198,594,000 |
Certificates of deposit | ' | ' | ' |
Short-term and long-term investments | ' | ' | ' |
Amortized Cost | 1,150,000 | ' | 150,000 |
Estimated Fair Value | $1,150,000 | ' | $150,000 |
General_Details_6
General (Details 6) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Amortized Cost | ' | ' |
Maturity dates, investments, 2014 | $150,273 | ' |
Maturity dates, investments, 2015 | 54,489 | ' |
Maturity dates, investments, 2016 | 4,169 | ' |
Total, Amortized Cost | 208,931 | ' |
Estimated Fair Value | ' | ' |
Maturity dates, investments, 2014 | 150,229 | ' |
Maturity dates, investments, 2015 | 54,460 | ' |
Maturity dates, investments, 2016 | 4,159 | ' |
Total, Estimated Fair Value | $208,848 | $208,313 |
General_Details_7
General (Details 7) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Taxes | ' | ' |
Effective income tax rates (as a percent) | 51.20% | 40.50% |
The ownership percentage for which the entity files a consolidated federal income tax return, low end of range | 80.00% | ' |
General_Details_8
General (Details 8) (USD $) | 3 Months Ended | 3 Months Ended | ||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | |
Stock options | Nonvested restricted stock awards | Nonvested restricted stock awards | Nonvested restricted stock units | |||
Share-based compensation | ' | ' | ' | ' | ' | ' |
Stock compensation expense | $4,472,000 | $5,638,000 | ' | ' | ' | ' |
Estimated forfeitures (as a percent) | 4.00% | 4.00% | ' | ' | ' | ' |
Benefits of tax deductions in excess of recognized stock compensation expenses | 500,000 | 300,000 | ' | ' | ' | ' |
Change to additional paid in capital related to tax net benefits (deficiencies) | 400,000 | -200,000 | ' | ' | ' | ' |
Benefit of tax deductions in recognized stock compensation expenses | 500,000 | 300,000 | ' | ' | ' | ' |
Deficiency of tax deductions in recognized stock compensation expenses | ($100,000) | ($500,000) | ' | ' | ' | ' |
Stock options, nonvested restricted stock awards and nonvested restricted stock units | ' | ' | ' | ' | ' | ' |
Grants in period, weighted average grant date fair value (in dollars per share) | ' | ' | $13.63 | ' | ' | ' |
Expected volatility (as a percent) | ' | ' | 26.20% | ' | ' | ' |
Stock option activity | ' | ' | ' | ' | ' | ' |
Outstanding, beginning of period (in shares) | ' | ' | 4,010,146 | ' | ' | ' |
Granted (in shares) | ' | ' | 640,636 | ' | ' | ' |
Forfeited (in shares) | ' | ' | -35,244 | ' | ' | ' |
Exercised (in shares) | ' | ' | -152,943 | ' | ' | ' |
Outstanding, end of period (in shares) | ' | ' | 4,462,595 | ' | ' | ' |
Vested and expected to vest end of period (in shares) | ' | ' | 4,409,250 | ' | ' | ' |
Exercisable, end of period (in shares) | ' | ' | 2,679,575 | ' | ' | ' |
Weighted average exercise price of stock options | ' | ' | ' | ' | ' | ' |
Outstanding, beginning of period (in dollars per share) | ' | ' | $47.23 | ' | ' | ' |
Granted (in dollars per share) | ' | ' | $60.28 | ' | ' | ' |
Forfeited (in dollars per share) | ' | ' | $50.40 | ' | ' | ' |
Exercised (in dollars per share) | ' | ' | $46.78 | ' | ' | ' |
Outstanding, end of period (in dollars per share) | ' | ' | $49.10 | ' | ' | ' |
Vested and expected to vest end of period (in dollars per share) | ' | ' | $49.02 | ' | ' | ' |
Exercisable, end of period (in dollars per share) | ' | ' | $45.46 | ' | ' | ' |
Vesting period | ' | ' | '3 years | ' | ' | '3 years |
Life of options (Expiration period) | ' | ' | '10 years | ' | ' | ' |
Nonvested restricted stock awards and units | ' | ' | ' | ' | ' | ' |
Outstanding, beginning of period (in shares) | ' | ' | ' | 192,165 | 192,165 | 194,913 |
Awarded (in shares) | ' | ' | ' | ' | ' | 76,306 |
Vested (in shares) | ' | ' | ' | ' | ' | -90,177 |
Forfeited (in shares) | ' | ' | ' | ' | ' | -2,319 |
Outstanding, ending of period (in shares) | ' | ' | ' | 192,165 | 192,165 | 178,723 |
Weighted average exercise price of nonvested restricted stock award and units | ' | ' | ' | ' | ' | ' |
Outstanding, beginning of period (in dollars per share) | ' | ' | ' | $56.59 | $56.59 | $50.21 |
Awarded (in dollars per share) | ' | ' | ' | ' | ' | $60.39 |
Vested (in dollars per share) | ' | ' | ' | ' | ' | $49.55 |
Forfeited (in dollars per share) | ' | ' | ' | ' | ' | $51.06 |
Outstanding, ending of period (in dollars per share) | ' | ' | ' | $56.59 | $56.59 | $54.88 |
General_Details_9
General (Details 9) (USD $) | 3 Months Ended | ||
In Millions, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 09, 2011 |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Capital lease obligations | $25.60 | $26.70 | ' |
Revolving loan borrowings | ' | ' | ' |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Maximum borrowing capacity | ' | ' | 230 |
Commitment commission (as a percent) | 0.38% | ' | ' |
Amount of borrowings outstanding | 0 | 0 | ' |
Revolving loan borrowings | U.S. dollar denominated loans | Prime rate | ' | ' | ' |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Borrowing margin (as a percent) | 0.75% | ' | ' |
Description of variable rate basis | 'Prime Rate | ' | ' |
Revolving loan borrowings | U.S. dollar denominated loans | Overnight Federal Funds rate | ' | ' | ' |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Borrowing margin (as a percent) | 0.75% | ' | ' |
Description of variable rate basis | 'Overnight Federal Funds Rate | ' | ' |
Basis spread on variable rate (as a percent) | 0.50% | ' | ' |
Revolving loan borrowings | U.S. dollar denominated loans | Eurodollar rate for one month | ' | ' | ' |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Borrowing margin (as a percent) | 0.75% | ' | ' |
Description of variable rate basis | 'Eurodollar rate for one month | ' | ' |
Basis spread on variable rate (as a percent) | 1.00% | ' | ' |
Revolving loan borrowings | Eurodollar denominated loans | Eurodollar rate for selected interest period | ' | ' | ' |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Borrowing margin (as a percent) | 1.75% | ' | ' |
Description of variable rate basis | 'Eurodollar rate for the selected interest period | ' | ' |
Letter of credit | ' | ' | ' |
Long-Term Debt and Capital Lease Obligations | ' | ' | ' |
Maximum borrowing capacity | ' | ' | 70 |
Stated interest rate (as a percent) | 1.88% | ' | ' |
Letters of credit outstanding | $32.90 | $33.70 | ' |
General_Details_10
General (Details 10) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Redeemable Non-Controlling Interest | ' | ' |
Redeemable non-controlling interest | $9,214,000 | $10,554,000 |
AlphaCare Holdings | ' | ' |
Redeemable Non-Controlling Interest | ' | ' |
Percentage of equity interest acquired | ' | 65.00% |
Percentage of remaining shares which the entity may be required to purchase in the event of exercise of put options by other shareholders | ' | 50.00% |
Redeemable non-controlling interest | 9,200,000 | 10,600,000 |
Increase (Reduction) in carrying value as a result of operating income (losses) | ($1,400,000) | ' |
Net_Income_per_Common_Share_At2
Net Income per Common Share Attributable to Magellan Helath Services, Inc (Details) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Numerator: | ' | ' |
Net income attributable to Magellan Health Services, Inc. | $25,720 | $28,058 |
Denominator: | ' | ' |
Weighted average number of common shares outstanding-basic (in shares) | 27,370,000 | 27,110,000 |
Common stock equivalents-stock options (in shares) | 594,000 | 467,000 |
Common stock equivalents-restricted stock (in shares) | 32,000 | 17,000 |
Common stock equivalents-restricted stock units (in shares) | 54,000 | 52,000 |
Common stock equivalents-employee stock purchase plan (in shares) | 1,000 | 2,000 |
Weighted average number of common shares outstanding-diluted (in shares) | 28,051,000 | 27,648,000 |
Net income attributable to Magellan Health Services , Inc. per common share-basic (in dollars per share) | $0.94 | $1.03 |
Net income attributable to Magellan Health Services , Inc. per common share-diluted (in dollars per share) | $0.92 | $1.01 |
Potential dilutive securities excluded from computation of dilutive securities (in shares) | 300,000 | 1,700,000 |
Business_Segment_Information_D
Business Segment Information (Details) (USD $) | 3 Months Ended | |||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | ||
Operating results by business segment | ' | ' | ||
Managed care and other revenue | $829,591 | $722,589 | ||
PBM and dispensing revenue | 136,884 | 99,172 | ||
Cost of care | -605,708 | -525,027 | ||
Cost of goods sold | -125,298 | -93,512 | ||
Direct service costs and other | -164,722 | [1] | -139,627 | [1] |
Stock compensation expense | 4,472 | 5,638 | ||
Less: Non-controlling interest segment profit (loss) | -1,330 | ' | ||
Segment profit (loss) | 76,549 | 69,233 | ||
Operating segments | Commercial | ' | ' | ||
Operating results by business segment | ' | ' | ||
Managed care and other revenue | 188,891 | 187,837 | ||
Cost of care | -111,202 | -113,271 | ||
Direct service costs and other | -40,276 | -41,392 | ||
Stock compensation expense | 155 | 133 | ||
Segment profit (loss) | 37,568 | 33,307 | ||
Operating segments | Public Sector | ' | ' | ||
Operating results by business segment | ' | ' | ||
Managed care and other revenue | 497,943 | 406,620 | ||
Cost of care | -422,518 | -355,379 | ||
Direct service costs and other | -42,958 | -25,643 | ||
Stock compensation expense | 274 | 307 | ||
Less: Non-controlling interest segment profit (loss) | -1,330 | ' | ||
Segment profit (loss) | 34,071 | 25,905 | ||
Operating segments | Specialty Solutions | ' | ' | ||
Operating results by business segment | ' | ' | ||
Managed care and other revenue | 105,434 | 90,278 | ||
Cost of care | -73,652 | -58,067 | ||
Direct service costs and other | -15,141 | -13,371 | ||
Stock compensation expense | 414 | 434 | ||
Segment profit (loss) | 17,055 | 19,274 | ||
Operating segments | Pharmacy Management | ' | ' | ||
Operating results by business segment | ' | ' | ||
Managed care and other revenue | 55,378 | 53,099 | ||
PBM and dispensing revenue | 139,624 | 99,172 | ||
Cost of care | -16,391 | -13,555 | ||
Cost of goods sold | -128,031 | -93,512 | ||
Direct service costs and other | -35,551 | -29,561 | ||
Stock compensation expense | 303 | 320 | ||
Segment profit (loss) | 15,332 | 15,963 | ||
Corporate and Eliminations | ' | ' | ||
Operating results by business segment | ' | ' | ||
Managed care and other revenue | -18,055 | -15,245 | ||
PBM and dispensing revenue | -2,740 | ' | ||
Cost of care | 18,055 | 15,245 | ||
Cost of goods sold | 2,733 | ' | ||
Direct service costs and other | -30,796 | -29,660 | ||
Stock compensation expense | 3,326 | 4,444 | ||
Segment profit (loss) | ($27,477) | ($25,216) | ||
[1] | (1) Includes stock compensation expense of $5,638 and $4,472 for the three months ended March 31, 2013 and 2014, respectively. |
Business_Segment_Information_D1
Business Segment Information (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Reconciliation of segment profit to income before income taxes | ' | ' |
Segment profit | $76,549 | $69,233 |
Stock compensation expense | -4,472 | -5,638 |
Non-controlling interest segment profit (loss) | -1,330 | ' |
Depreciation and amortization | -20,229 | -16,170 |
Interest expense | -836 | -610 |
Interest income | 311 | 353 |
Income before income taxes | $49,993 | $47,168 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | 0 Months Ended | 1 Months Ended | 2 Months Ended | 3 Months Ended | 12 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Jul. 24, 2013 | Oct. 25, 2011 | Apr. 25, 2014 | Dec. 31, 2011 | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Commitments and Contingencies | ' | ' | ' | ' | ' | ' | ' |
Amount authorized under stock repurchase plan | $300 | $200 | ' | ' | ' | ' | ' |
Share repurchases made in open market (in shares) | ' | ' | 185,325 | 671,776 | 284,889 | 1,159,871 | 459,252 |
Average price of shares repurchased (in dollars per share) | ' | ' | ' | $48.72 | $59.54 | $51.83 | $50.27 |
Aggregate cost of shares repurchased, excluding broker commissions | ' | ' | 10.3 | 32.7 | 17 | 60.1 | 23.1 |
Remaining authorized repurchase amount | ' | ' | ' | ' | $167.10 | ' | ' |
Commitments_and_Contingencies_2
Commitments and Contingencies (Details 2) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Activity related to restructuring liabilities | ' |
Liability for employee termination costs at beginning of the period | $12,469,000 |
Additions | 720,000 |
Payments | -1,222,000 |
Liability released | -293,000 |
Liability for employee termination costs at end of the period | 11,674,000 |
Commercial | ' |
Restructuring activities | ' |
Projected restructuring cost | 1,300,000 |
Public Sector | ' |
Restructuring activities | ' |
Projected restructuring cost | 2,000,000 |
Employee termination | ' |
Restructuring activities | ' |
Projected restructuring cost | 900,000 |
Activity related to restructuring liabilities | ' |
Additions | 700,000 |
Employee termination | Commercial | ' |
Activity related to restructuring liabilities | ' |
Liability for employee termination costs at beginning of the period | 4,744,000 |
Additions | 202,000 |
Payments | -73,000 |
Liability for employee termination costs at end of the period | 4,873,000 |
Employee termination | Public Sector | ' |
Activity related to restructuring liabilities | ' |
Liability for employee termination costs at beginning of the period | 4,296,000 |
Additions | 518,000 |
Payments | -6,000 |
Liability released | -235,000 |
Liability for employee termination costs at end of the period | 4,573,000 |
Employee termination | Corporate | ' |
Activity related to restructuring liabilities | ' |
Liability for employee termination costs at beginning of the period | 3,429,000 |
Payments | -1,143,000 |
Liability released | -58,000 |
Liability for employee termination costs at end of the period | 2,228,000 |
Lease termination and exit costs | ' |
Restructuring activities | ' |
Projected restructuring cost | $2,400,000 |
Acquisitions_Details
Acquisitions (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Aug. 13, 2013 | 17-May-13 | Oct. 01, 2013 |
AlphaCare Holdings | AlphaCare Holdings | AlphaCare Holdings | AlphaCare Holdings | AlphaCare Holdings | AlphaCare Holdings | AlphaCare Holdings | AlphaCare Holdings | Partners Rx | |||
Cash | Restricted cash | Initial Amounts Recognized at Acquisition Date | Measurement Period Adjustments | Measurement Period Adjustments | AlphaCare | AlphaCare | |||||
Customer contracts | |||||||||||
Acquisitions | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of consideration paid in cash | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $100,000,000 |
Percentage of equity interest acquired | ' | ' | 65.00% | ' | ' | ' | ' | ' | ' | ' | ' |
Equity interest held (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7.00% | ' |
Equity investment in preferred membership units | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000,000 | ' |
Amount previously loaned to acquiree pursuant to a promissory note | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,900,000 | ' |
Amount of additional Series A Preferred purchased | ' | ' | ' | ' | ' | ' | ' | ' | 17,400,000 | ' | ' |
Ownership percentage | ' | ' | 65.00% | ' | ' | ' | ' | ' | ' | ' | ' |
Voting interest of remaining shareholders | ' | ' | 35.00% | ' | ' | ' | ' | ' | ' | ' | ' |
Assets acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Current assets (includes $6,249 of cash and $7,900 of restricted cash) | ' | ' | 14,218,000 | 6,249,000 | 7,900,000 | 14,766,000 | -548,000 | ' | ' | ' | ' |
Property and equipment, net | ' | ' | 376,000 | ' | ' | 310,000 | -39,000 | ' | ' | ' | ' |
Other assets | ' | ' | 436,000 | ' | ' | 475,000 | 66,000 | ' | ' | ' | ' |
Other identified intangible assets | ' | ' | 7,190,000 | ' | ' | 4,590,000 | 2,600,000 | 2,600,000 | ' | ' | ' |
Goodwill | 488,203,000 | 488,206,000 | 20,879,000 | ' | ' | 20,882,000 | -3,000 | ' | ' | ' | ' |
Total assets acquired | ' | ' | 43,099,000 | ' | ' | 41,023,000 | 2,076,000 | ' | ' | ' | ' |
Liabilities assumed | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Current liabilities | ' | ' | 4,178,000 | ' | ' | 3,139,000 | 1,039,000 | ' | ' | ' | ' |
Deferred tax liabilities | ' | ' | 2,867,000 | ' | ' | 1,830,000 | 1,037,000 | ' | ' | ' | ' |
Total liabilities assumed | ' | ' | 7,045,000 | ' | ' | 4,969,000 | 2,076,000 | ' | ' | ' | ' |
Net assets acquired | ' | ' | 36,054,000 | ' | ' | 36,054,000 | ' | ' | ' | ' | ' |
Less: net assets attributable to noncontrolling interest | ' | ' | -10,554,000 | ' | ' | -10,554,000 | ' | ' | ' | ' | ' |
Net consideration | ' | ' | 25,500,000 | ' | ' | 25,500,000 | ' | ' | ' | ' | ' |
Other net changes | ' | ' | ' | ' | ' | ' | ($1,600,000) | ' | ' | ' | ' |
Subsequent_Events_Details
Subsequent Events (Details) (CDMI, Subsequent event, USD $) | 0 Months Ended |
In Millions, unless otherwise specified | Mar. 31, 2014 |
Subsequent events | ' |
Base purchase price | $205 |
Maximum potential contingent payments | 165 |
Cash to be paid at closing of acquisition | 125 |
Amount to be reinvested in restricted common stock by the principal owners and certain key management of acquired entity | 80 |
Vesting period of restricted stock issued | '42 months |
Performance related to Rebate Retention | ' |
Subsequent events | ' |
Maximum potential contingent payments | 65 |
Earn-out Opportunity | ' |
Subsequent events | ' |
Maximum potential contingent payments | 100 |
Earn-out Opportunity-Number of Customers Becoming Full Service PBM Customers | ' |
Subsequent events | ' |
Maximum potential contingent payments | 65 |
Earn-out Opportunity-Gross Profit Performance | ' |
Subsequent events | ' |
Maximum potential contingent payments | $35 |