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8-K/A - 8-K/A - MAGELLAN HEALTH INC | mgln-20201231x8ka.htm |
Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Information
On December 31, 2020, Magellan Health, Inc. (the “Company”) completed the sale of its Magellan Complete Care business (the “MCC Business”) to Molina Healthcare, Inc. (“Molina”), pursuant to a Stock and Asset Purchase Agreement, dated as of April 30, 2020, by and between the Company and Molina, for cash in the amount of $850 million plus closing adjustments of $158 million (subject to post-closing adjustments, if any), and the assumption by Molina of liabilities of the MCC Business.
The sale of the MCC Business is considered a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the Company prepared the accompanying unaudited pro forma condensed consolidated financial information in accordance with Article 11 of Regulation S-X.
The Company reported its operations of the MCC Business as discontinued operations in its consolidated financial statements included in Form 10-Q for the quarter and year-to-date periods ended June 30, 2020 and September 30, 2020. The accompanying unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2020 and for the years ended December 31, 2019, 2018 and 2017 give effect to the divestiture as if it had occurred on January 1, 2017. The accompanying unaudited pro forma condensed consolidated balance sheet gives effect to this divestiture as if it had occurred on September 30, 2020, the date of the Company’s most recently filed balance sheet.
The unaudited condensed consolidated pro forma financial information should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020, and (ii) the unaudited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-Q for the three and nine months ended September 30, 2020 filed with the SEC on October 29, 2020.
The unaudited pro forma condensed consolidated financial information is presented based on assumptions, adjustments, and currently available information described in the accompanying notes and is intended for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of what the Company’s results of operations or financial condition would have been had the divestiture been completed on the dates assumed. In addition, it is not necessarily indicative of the Company’s future results of operations or financial condition.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2020
(Unaudited)
(In thousands)
| | | Company | | Pro Forma | | Company | |||
| |
| As Reported |
| Adjustments |
| Pro Forma | |||
ASSETS | | | | | | | | | | |
| | | | | | | | | | |
Current Assets: | | | | | | | | | | |
Cash and cash equivalents | | $ | 152,050 | | $ | 1,013,029 | (a) | $ | 1,165,079 | |
Accounts receivable, net | | | 769,159 | | | - | | | 769,159 | |
Short-term investments | | | 92,686 | | | - | | | 92,686 | |
Pharmaceutical inventory | | | | 37,637 | | | - | | | 37,637 |
Other current assets | | | 95,666 | | | - | | | 95,666 | |
Current portion of assets held for sale | | | | 1,144,032 | | | (1,144,032) | (b) | | - |
Total Current Assets | | | | 2,291,230 | | | (131,003) | | | 2,160,227 |
Property and equipment, net | | | | 131,869 | | | - | | | 131,869 |
Long-term investments | | | 5,623 | | | - | | | 5,623 | |
Deferred income taxes | | | | 25,823 | | | (25,823) | (c) | | - |
Other long-term assets | | | | 67,692 | | | - | | | 67,692 |
Goodwill | | | | 806,421 | | | - | | | 806,421 |
Other intangible assets, net | | | | 52,362 | | | - | | | 52,362 |
Total Assets | | | $ | 3,381,020 | | $ | (156,826) | | $ | 3,224,194 |
| | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |||
| | | | | | | | | | |
Current Liabilities: | | | | | | | | | | |
Accounts payable | | | $ | 122,020 | | $ | - | | $ | 122,020 |
Accrued liabilities | | | | 235,152 | | | 66,290 | (d) | | 301,442 |
Medical claims payable | | | | 119,922 | | | - | | | 119,922 |
Other medical liabilities | | | | 123,205 | | | - | | | 123,205 |
Current debt, finance lease and deferred financing obligations | | | | 4,308 | | | - | | | 4,308 |
Current portion of liabilities held for sale | | | | 496,272 | | | (496,272) | (b) | | - |
Total Current Liabilities | | | | 1,100,879 | | | (429,982) | | | 670,897 |
Long-term debt, finance lease and deferred financing obligations | | | | 637,093 | | | - | | | 637,093 |
Deferred income taxes | | | | - | | | 12,777 | (c) | | 12,777 |
Tax contingencies | | | | 11,724 | | | - | | | 11,724 |
Deferred credits and other long-term liabilities | | | | 52,172 | | | 5,647 | (c) | | 57,819 |
Total Liabilities | | | | 1,801,868 | | | (411,558) | | | 1,390,310 |
| | | | | | | | | | |
Stockholders’ Equity: | | | | | | | | | | |
Ordinary common stock | | | | 553 | | | - | | | 553 |
Additional paid-in capital | | | | 1,455,009 | | | - | | | 1,455,009 |
Retained earnings | | | | 1,588,196 | | | 254,732 | (b) | | 1,842,928 |
Accumulated other comprehensive income | | | | 121 | | | - | | | 121 |
Ordinary common stock in treasury, at cost | | | | (1,464,727) | | | - | | | (1,464,727) |
Total Stockholders’ Equity | | | | 1,579,152 | | | 254,732 | | | 1,833,884 |
Total Liabilities and Stockholders’ Equity | | | $ | 3,381,020 | | $ | (156,826) | | $ | 3,224,194 |
See notes to pro forma condensed consolidated financial statements.
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2017
(Unaudited)
(In thousands, except per share amounts)
| | Company | | Pro Forma | | Company | |||
|
| As Reported |
| Adjustments (e) |
| Pro Forma | |||
Net revenue: | | | | | | | | | |
Managed care and other | | $ | 3,479,182 | | $ | (1,104,425) | | $ | 2,374,757 |
PBM | | | 2,359,401 | | | 115,724 | | | 2,475,125 |
Total net revenue | | | 5,838,583 | | | (988,701) | | | 4,849,882 |
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Cost of care | | | 2,413,770 | | | (859,213) | | | 1,554,557 |
Cost of goods sold | | | 2,211,910 | | | 115,238 | | | 2,327,148 |
Direct service costs and other operating expenses | | | 941,883 | | | (166,595) | | | 775,288 |
Depreciation and amortization | | | 115,706 | | | (6,820) | | | 108,886 |
Interest expense | | | 25,977 | | | - | | | 25,977 |
Interest and other income | | | (5,887) | | | 2,945 | | | (2,942) |
Total costs and expenses | | | 5,703,359 | | | (914,445) | | | 4,788,914 |
Income (loss) from continuing operations before income taxes | | | 135,224 | | | (74,256) | | | 60,968 |
Provision (benefit) for income taxes | | | 25,083 | | | (5,453) | | | 19,630 |
Net income | | | 110,141 | | | (68,803) | | | 41,338 |
Less: net loss from non-controlling interest | | | (66) | | | 66 | | | - |
Net Income | | $ | 110,207 | | $ | (68,737) | | $ | 41,338 |
| | | | | | | | | |
Weighted average number of common shares outstanding — basic | | | 23,333 | | | | | | |
Weighted average number of common shares outstanding — diluted | | | 24,440 | | | | | | |
| | | | | | | | | |
Net income (loss) per common share — basic | | $ | 4.72 | | $ | (2.95) | | $ | 1.77 |
Net income (loss) per common share — diluted | | $ | 4.51 | | $ | (2.81) | | $ | 1.70 |
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2018
(Unaudited)
(In thousands, except per share amounts)
| | Company | | Pro Forma | | Company | |||
|
| As Reported |
| Adjustments (e) |
| Pro Forma | |||
Net revenue: | | | | | | | | | |
Managed care and other | | $ | 4,878,442 | | $ | (2,527,866) | | $ | 2,350,576 |
PBM | | | 2,435,709 | | | 171,237 | | | 2,606,946 |
Total net revenue | | | 7,314,151 | | | (2,356,629) | | | 4,957,522 |
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Cost of care | | | 3,762,412 | | | (2,207,721) | | | 1,554,691 |
Cost of goods sold | | | 2,283,022 | | | 169,681 | | | 2,452,703 |
Direct service costs and other operating expenses | | | 1,071,535 | | | (297,620) | | | 773,915 |
Depreciation and amortization | | | 132,660 | | | (20,376) | | | 112,284 |
Interest expense | | | 35,396 | | | (216) | | | 35,180 |
Interest and other income | | | (14,068) | | | 9,184 | | | (4,884) |
Total costs and expenses | | | 7,270,957 | | | (2,347,068) | | | 4,923,889 |
Income (loss) from continuing operations before income taxes | | | 43,194 | | | (9,561) | | | 33,633 |
Provision (benefit) for income taxes | | | 19,013 | | | (7,556) | | | 11,457 |
Net Income | | $ | 24,181 | | $ | (2,005) | | $ | 22,176 |
| | | | | | | | | |
Weighted average number of common shares outstanding — basic | | | 24,349 | | | | | | |
Weighted average number of common shares outstanding — diluted | | | 25,035 | | | | | | |
| | | | | | | | | |
Net income (loss) per common share — basic | | $ | 0.99 | | $ | (0.08) | | $ | 0.91 |
Net income (loss) per common share — diluted | | $ | 0.97 | | $ | (0.08) | | $ | 0.89 |
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2019
(Unaudited)
(In thousands, except per share amounts)
| | Company | | Pro Forma | | Company | |||
|
| As Reported |
| Adjustments (e) |
| Pro Forma | |||
Net revenue: | | | | | | | | | |
Managed care and other | | $ | 5,103,393 | | $ | (2,756,458) | | $ | 2,346,935 |
PBM | | | 2,056,030 | | | 162,648 | | | 2,218,678 |
Total net revenue | | | 7,159,423 | | | (2,593,810) | | | 4,565,613 |
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Cost of care | | | 3,940,531 | | | (2,397,007) | | | 1,543,524 |
Cost of goods sold | | | 1,898,871 | | | 160,414 | | | 2,059,285 |
Direct service costs and other operating expenses | | | 1,090,731 | | | (289,064) | | | 801,667 |
Depreciation and amortization | | | 131,509 | | | (21,142) | | | 110,367 |
Interest expense | | | 36,153 | | | (285) | | | 35,868 |
Interest and other income | | | (19,189) | | | 12,332 | | | (6,857) |
Total costs and expenses | | | 7,078,606 | | | (2,534,752) | | | 4,543,854 |
Income (loss) from continuing operations before income taxes | | | 80,817 | | | (59,058) | | | 21,759 |
Provision (benefit) for income taxes | | | 24,915 | | | (15,753) | | | 9,162 |
Net Income | | $ | 55,902 | | $ | (43,305) | | $ | 12,597 |
| | | | | | | | | |
Weighted average number of common shares outstanding — basic | | | 24,243 | | | | | | |
Weighted average number of common shares outstanding — diluted | | | 24,563 | | | | | | |
| | | | | | | | | |
Net income (loss) per common share — basic | | $ | 2.30 | | $ | (1.79) | | $ | 0.51 |
Net income (loss) per common share — diluted | | $ | 2.27 | | $ | (1.76) | | $ | 0.51 |
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2020
(Unaudited)
(In thousands, except per share amounts)
| | Company | | Pro Forma | | Company | |||
|
| As Reported |
| Adjustments (f) |
| Pro Forma | |||
Net revenue: | | | | | | | | | |
Managed care and other | | $ | 1,670,567 | | $ | - | | $ | 1,670,567 |
PBM | | | 1,722,004 | | | - | | | 1,722,004 |
Total net revenue | | | 3,392,571 | | | - | | | 3,392,571 |
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Cost of care | | | 1,035,377 | | | - | | | 1,035,377 |
Cost of goods sold | | | 1,621,577 | | | - | | | 1,621,577 |
Direct service costs and other operating expenses | | | 620,767 | | | - | | | 620,767 |
Depreciation and amortization | | | 71,976 | | | - | | | 71,976 |
Interest expense | | | 24,239 | | | - | | | 24,239 |
Interest and other income | | | (2,119) | | | - | | | (2,119) |
Special charges | | | 24,908 | | | - | | | 24,908 |
Total costs and expenses | | | 3,396,725 | | | - | | | 3,396,725 |
Income (loss) from continuing operations before income taxes | | | (4,154) | | | - | | | (4,154) |
Provision (benefit) for income taxes | | | (32,896) | | | - | | | (32,896) |
Net income from continuing operations | | | 28,742 | | | - | | | 28,742 |
Income from discontinued operations, net of tax | | | 84,660 | | | (84,660) | | | - |
Net Income | | $ | 113,402 | | $ | (84,660) | | $ | 28,742 |
| | | | | | | | | |
Weighted average number of common shares outstanding — basic | | | 25,078 | | | | | | |
Weighted average number of common shares outstanding — diluted | | | 25,317 | | | | | | |
| | | | | | | | | |
Net income (loss) per common share — basic | | | | | | | | | |
Continuing operations | | $ | 1.15 | | $ | - | | $ | 1.15 |
Discontinued operations | | | 3.37 | | | (3.37) | | | - |
Consolidated operations | | $ | 4.52 | | $ | (3.37) | | $ | 1.15 |
Net income (loss) per common share — diluted | | | | | | | | | |
Continuing operations | | $ | 1.14 | | $ | - | | $ | 1.14 |
Discontinued operations | | | 3.34 | | | (3.34) | | | - |
Consolidated operations | | $ | 4.48 | | $ | (3.34) | | $ | 1.14 |
MAGELLAN HEALTH, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2020
(a) - Adjustment reflects the net cash proceeds from the sale of the Magellan Complete Care ("MCC") reporting unit as if the closing date were September 30, 2020.
(b) - Adjustment reflects the assets and liabilities of the MCC reporting unit, which were previously classified as held for sale and impact to the related equity.
(c) - Adjustment reflects the tax impact to deferred taxes upon the close of the transaction.
(d) - Adjustment reflects liabilities for income taxes payable and other liabilities generated by the transaction.
(e) - Adjustments reflect the historical operating results of the MCC reporting unit and the impact of intercompany revenue, cost of goods sold and direct service costs previously eliminated on a consolidated basis.
(f) - Adjustment reflects the operating results of the MCC reporting unit reported as discontinued operations.