On April 28, Magellan Health Services reported results for the first quarter of fiscal year 2005. For the fifth straight quarter, Magellan has produced excellent financial results. Accordingly, the Company has raised its financial guidance for 2005.
“Our performance is testament to our unwavering focus on efficiency and effectiveness in our operations and careful management of expenses,” said Magellan chairman and CEO Steve Shulman. “At the same time, we have made investments in our future through our product development efforts and we are pleased that we were able to bring a number of these offerings to market in the first quarter.”
For the quarter ended March 31, 2005, the Company reported net revenue of $452.8 million and net income of $23.6 million, or $.64 per diluted common share. For the prior year quarter, net revenue was $440.2 million and net income was $12.9 million, or $.35 per diluted common share. Segment profit (net revenue less cost of care, and direct service costs and other operating expenses plus equity in earnings of unconsolidated subsidiaries) for the current year quarter was $61.3 million, compared with $48.1 million in the prior year, an increase of 27 percent.
The Company ended the quarter with unrestricted cash and investments of $388.8 million. Cash flow from operations for the quarter was $37.8 million compared with $(3.7) million in 2004. Prior year quarter cash flow from operations included payments of $61.1 million for liabilities related to the Company’s Chapter 11 proceedings. The Company has not drawn on its $50.0 million revolving credit facility.
As a result of our earnings performance in the first quarter and based on our analysis of trends for the remainder of the fiscal year, including higher than previously estimated membership and lower than previously estimated administrative costs, we have raised our segment profit guidance from our previously announced range of $200 million to $220 million.
The strong financial results experienced over the last several quarters are expected to continue throughout 2005, thus giving the Company a solid basis from which to build for the future and to address the challenges we face in the marketplace.
While we are encouraged by the improved results we expect for 2005 and believe that many of the factors leading to these results will carry into 2006, there have been certain terminations and contract reductions that will adversely affect 2006.
In addition to the previously announced termination of Magellan’s contract with Aetna, other health plan customers, including Blue Cross Blue Shield of Georgia, a WellPoint subsidiary, which together represent approximately $80 million in annualized revenue, have notified the Company that they will not renew all or part of their contracts, and will instead manage behavioral health care services directly for their subscribers.
The Company estimates that the impact of these terminations and reductions will be the loss of approximately $330 million of net revenue in fiscal 2006, of which approximately $250 million relates to the previously disclosed Aetna termination.
Shulman added, “It is important to note that we have a current sales pipeline of approximately $300 million in core business and new product opportunities that have the potential to offset some of the losses we are currently experiencing. We continue to be optimistic about our prospects for sales for 2006.”
This page last updated November 14, 2008