Discontinued Operations

3 Months Ended

Mar. 31, 2021

Discontinued Operations

Discontinued Operations

NOTE F—Discontinued Operations

Magellan Complete Care – Stock and Asset Purchase Agreement

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 have entered into commercial agreements for certain behavioral health, utilization management and related services to be provided by the Company to Molina and the MCC Business. These commercial agreements are subject to termination in connection with the Company’s pending Merger with Centene and may not be implemented. In addition, the parties entered into a transition services agreement pursuant to which the Company and certain of its affiliates 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 components of income from discontinued operations that is included in the Company’s consolidated income statements for the three months ended March 31, 2020 and 2021 (in thousands):

	Three Months Ended
	March 31,
	2020		2021
Managed care and other revenue	$	720,034	$	—
Costs and expenses:
Cost of care		602,534		—
Direct service costs and other operating expenses (1)(2)(3)		84,497		926
Depreciation and amortization		5,326		—
Interest expense		71		—
Interest and other income		(2,540)		—
Total costs and expenses		689,888		926
Income (loss) from discontinued operation before income taxes		30,146		(926)
Provision (benefit) for income taxes		10,826		(244)
Net income (loss) from discontinued operations	$	19,320	$	(682)

(1) Includes stock compensation expense of $260 for the three months ended March 31, 2020.

(2) Includes divestiture related expenses of $605 for the three months ended March 31, 2020.

(3) Includes changes in estimates and transition support services for the three months ended March 31, 2021.

The Company has retained corporate overhead expenses previously allocated to MCC of $6.7 million for the three months ended March 31, 2020.