EX-12 9 a2063161zex-12.htm EXHIBIT 12
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Exhibit 12


MAGELLAN HEALTH SERVICES, INC AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERENCE DIVIDENDS
(Dollars in thousands)

 
   Fiscal year ended September 30,
    
    
  
 
   Six months
ended
3/31/2001
   Six months
ended
3/31/2002
  
 
   1996
   1997
   1998
   1999
   2000
   2001
  
EARNINGS:                                                  
Income (loss) from continuing operations before income taxes, minority interest, and extraordinary items   $ (71,645 ) $ (56,163 ) $ (8,931 ) $ 37,457   $ 17,698   $ 69,740   $ 49,753   $ 23,600  
  Less:Equity in (earnings) / loss from unconsolidated subsidiary     2,005     5,567     (12,795 )   (20,442 )   (9,792 )   (36,566 )   (28,223 )   (7,524 )
   
 
 
 
 
 
 
 
 
  Income (loss) from continuing operations before income taxes, minority interest, extraordinary items and equity in (earnings) / loss of unconsolidated subsidiary     (69,640 )   (50,596 )   (21,726 )   17,015     7,906     33,174     21,530     16,076  
Add:                                                  
Interest expense     58,548     55,482     87,290     104,156     106,711     103,783     55,532     48,153  
Portion of rents representative of interest factor     1,797     2,586     7,859     10,765     11,349     11,102     5,275     5,443  
Cash Distributions from uncons subs     —     —     11,441     21,970     14,324     38,353     9,468     6,222  
   
 
 
 
 
 
 
 
 
      60,345     58,068     106,590     136,891     132,384     153,238     70,275     59,818  
   
 
 
 
 
 
 
 
 
Total earnings   $ (9,295 ) $ 7,472   $ 84,864   $ 153,906   $ 140,290   $ 186,412   $ 91,805   $ 75,894  
   
 
 
 
 
 
 
 
 
FIXED CHARGES AND PREFERENCE DIVIDENDS:                                                  
Interest expense   $ 58,548   $ 55,482   $ 87,290   $ 104,156   $ 106,711   $ 103,783   $ 55,532   $ 48,153  
Portion of rents representative of interest factor     1,797     2,586     7,859     10,765     11,349     11,102     5,275     5,443  
Capitalized interest     —     —     513     673     —     —     —     —  
Less:                                                  
Fixed charges of certain unconsolidated subsidiaries                       —     —     —     —     —  
   
 
 
 
 
 
 
 
 
Fixed charges before preference dividends     60,345     58,068     95,662     115,594     118,060     114,885     60,807     53,596  
   
 
 
 
 
 
 
 
 
Preferred dividend requirement     —     —     —     —     3,802     5,049     2,481     2,515  
Effective tax rate (1)     N/A     N/A     N/A     N/A     50.8 %   52.2 %   49.0 %   41.2 %
   
 
 
 
 
 
 
 
 
Preferred dividend factor on pre-tax basis     —     —     —     —     7,731     10,558     4,864     4,277  
   
 
 
 
 
 
 
 
 
Combined fixed charges and preference dividends   $ 60,345   $ 58,068   $ 95,662   $ 115,594   $ 125,790   $ 125,443   $ 65,671   $ 57,873  
   
 
 
 
 
 
 
 
 
Ratio (dollar amount of deficiency)   $ (69,640 ) $ (50,596 ) $ (10,798 )   1.33     1.12     1.49     1.40     1.31  
   
 
 
 
 
 
 
 
 
(1)
Represents income from continuing operations before provision for income taxes divided by income from continuing operations, which adjusts dividends on preferred stock to a pre-tax basis.


Magellan Health Services, Inc.
Fixed Charges
(in thousands)

 
   FY 96
   FY 97
   FY 98
   FY 99
   FY 00
   FY 01
   Six months
ended
3/31/2001
   Six months
ended
3/31/2002
  
I. INTEREST EXPENSE                                  
Net interest per 10-K/Pro Formas   48,584   46,438   76,505   93,752   97,286   93,662   48,897   45,797  
Less interest income   (9,964 ) (9,044 ) (10,785 ) (10,404 ) (9,425 ) (10,121 ) (6,635 ) (2,356 )
   
 
 
 
 
 
 
 
 
  Total interest expense   58,548   55,482   87,290   104,156   106,711   103,783   55,532   48,153  
   
 
 
 
 
 
 
 
 
  Non-Cash Int exp   2,424   1,710   2,935   3,843   4,376   5,078   2,611   2,596  
   
 
 
 
 
 
 
 
 
  Net CASH INT EXPENSE   56,124   53,772   84,355   100,313   102,335   98,705   52,921   45,557  
  EBITDA   767   20,485   132,111   214,718   218,068   245,157   141,813   101,932  
  Ratio   0.01   0.38   1.57   2.14   2.13   2.48   2.68   2.24  

II. RENTS REPRESENTATIVE OF INTEREST FACTOR
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rent expense — continuing ops   5,391   7,759   23,577   32,296   34,046   33,306   15,825   16,328  
   
 
 
 
 
 
 
 
 
Factor (1/3 of rent expense)   1,797   2,586   7,859   10,765   11,349   11,102   5,275   5,443  
   
 
 
 
 
 
 
 
 
Rent expense — uncons.:                                  
  NONE                                  
   
 
 
 
 
 
 
 
 
Total rent expense   —   —   —   —   —   —   —   —  
   
 
 
 
 
 
 
 
 
Factor (1/3 of rent expense)   —   —   —   —   —   —   —   —  
   
 
 
 
 
 
 
 
 
Effective Tax Rate Continuing Oper                                  
Pre-tax income cont ops                   17,698   69,740   49,753   23,600  
Provision for income taxes cont ops                   8,994   36,388   24,377   9,724  
Effective tax rate (ETR)                   50.8 % 52.2 % 49.0 % 41.2 %

Preferred dividend rate (1-ETR)
 
 
 
 
 
 
 
 
 
49.2
%
47.8
%
51.0
%
58.8
%

preferred div
 
 
 
 
 
 
 
 
 
3,802
 
5,049
 
2,481
 
2,515
 
Dividend Requirement                   7,731   10,558   4,864   4,277  
                   
 
 
 
 


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MAGELLAN HEALTH SERVICES, INC AND CONSOLIDATED SUBSIDIARIES COMBINED WITH UNCONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS (Dollars in thousands)
Magellan Health Services, Inc. Fixed Charges (in thousands)