Discontinued Operations

12 Months Ended

Dec. 31, 2020

Discontinued Operations

Discontinued Operations

9. Discontinued Operations

Magellan Complete Care – Stock and Asset Purchase Agreement

As discussed in Note 1— “General”, on December 31, 2020, the Company completed the sale of its MCC Business to 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.

In connection with the MCC Sale, the Company and Molina are entering into commercial agreements for certain behavioral health, utilization management and related services to be provided by the Company to Molina and the MCC business. In addition, the parties will enter into a transition services agreement pursuant to which the Company and certain of its affiliates will provide, or cause third parties to provide, certain services to accommodate the transition of the MCC business to Molina.

The foregoing description of the Purchase Agreement and the MCC Sale does not purport to be complete and is qualified in its entirety by the terms and conditions of the Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q which was filed with the SEC on May 11, 2020, and any related agreements.

The accounting requirements for reporting a business to be divested as a discontinued operation were met during the second quarter of 2020. Accordingly, the accompanying consolidated financial statements for all periods presented reflect the MCC business as a discontinued operation.

The following table summarizes the major classes of assets and liabilities held for sale that were included in the Company’s consolidated balance sheets as of December 31, 2019 (in thousands):

	December 31,
	2019
Assets Held For Sale
Cash and cash equivalents ($95,202 restricted)	$	209,497
Accounts receivable, net		209,496
Short-term and long-term investments ($243,496 restricted)		243,496
Property and equipment, net		6,710
Goodwill		211,735
Other intangible assets, net		85,669
Other current and long-term assets ($2,387 restricted)		32,386
Total Assets Held For Sale		998,989
Less: current portion		663,276
Total Assets Held For Sale, Less Current Portion	$	335,713
Liabilities Held For Sale
Accounts payable	$	4,625
Accrued liabilities		92,170
Medical claims payable		281,419
Other medical liabilities		31,769
Deferred income taxes		15,063
Tax contingencies		5,388
Deferred credits and other long-term liabilities		16,850
Total Liabilities Held For Sale		447,284
Less: current portion		409,983
Total Liabilities Held For Sale, Less Current Portion	$	37,301

The following table summarizes the components of income from discontinued operations that is included in the Company’s consolidated income statements for the years ended December 31, 2018, 2019 and 2020 (in thousands):

	Year Ended
	December 31,
	2018		2019		2020
Managed care and other revenue	$	2,529,386	$	2,757,511	$	2,924,014
Costs and expenses:
Cost of care		2,207,721		2,397,007		2,377,847
Direct service costs and other operating expenses (1)(2)(3)		300,696		292,351		360,783
Depreciation and amortization		20,376		21,142		20,358
Interest expense		216		285		89
Interest and other income		(9,184)		(12,332)		(5,464)
Gain on sale		—		—		(348,145)
Total costs and expenses		2,519,825		2,698,453		2,405,468
Income from discontinued operation before income taxes		9,561		59,058		518,546
Provision for income taxes		7,556		15,753		140,257
Net income from discontinued operations	$	2,005	$	43,305	$	378,289

(1) Includes stock compensation expense of $536, $828 and $278 for the years ended December 31, 2018, 2019 and 2020 respectively.

(2) Includes changes in fair value of contingent consideration of $199 and $(2,124) for the years ended December 31, 2018 and 2019, respectively.

(3) Includes divestiture related expenses of $9,379 for the year ended December 31, 2020.

The Company has retained corporate overhead expenses previously allocated to MCC of $35.1 million, $33.6 million and $30.4 million for the years ended December 31, 2018, 2019 and 2020, respectively.