Business Segment Information

9 Months Ended

Sep. 30, 2021

Business Segment Information

Business Segment Information

NOTE C—Business Segment Information

The accounting policies of the Company’s segments are the same as those described in Note A—“General.” The Company evaluates performance of its segments based on profit or loss from operations before stock compensation expense, depreciation and amortization, interest expense, interest and other income, changes in the fair value of contingent consideration recorded in relation to acquisitions, gain on sale of assets, special charges or benefits, and income taxes (“Segment Profit”). Management uses Segment Profit information for internal reporting and control purposes and considers it important in making decisions regarding the allocation of capital and other resources, risk

assessment and employee compensation, among other matters. Healthcare subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Healthcare’s customers. In addition, Pharmacy Management provides pharmacy benefits management for the Company’s employees covered under its medical plan. As such, revenue, cost of goods sold and direct service costs and other related to these arrangements are eliminated. The Company’s segments are defined in Note A—“General.”

The following tables summarize, for the periods indicated, operating results by business segment (in thousands):

					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Three Months Ended September 30, 2020
Managed care and other revenue	$	489,451	$	79,382	$	(145)	$	568,688
PBM revenue		—		606,546		(5,117)		601,429
Cost of care		(364,438)		—		—		(364,438)
Cost of goods sold		—		(565,121)		4,852		(560,269)
Direct service costs and other		(104,610)		(91,012)		(21,148)		(216,770)
Stock compensation expense(1)		833		1,615		2,994		5,442
Segment Profit (Loss)	$	21,236	$	31,410	$	(18,564)	$	34,082

					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Three Months Ended September 30, 2021
Managed care and other revenue	$	580,278	$	88,488	$	(175)	$	668,591
PBM revenue		—		588,851		(3,324)		585,527
Cost of care		(437,308)		—		—		(437,308)
Cost of goods sold		—		(549,472)		3,135		(546,337)
Direct service costs and other		(123,843)		(101,037)		(13,591)		(238,471)
Stock compensation expense(1)		1,465		2,125		2,384		5,974
Segment Profit (Loss)	$	20,592	$	28,955	$	(11,571)	$	37,976

					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Nine Months Ended September 30, 2020
Managed care and other revenue	$	1,459,378	$	211,684	$	(495)	$	1,670,567
PBM revenue		—		1,736,519		(14,515)		1,722,004
Cost of care		(1,035,377)		—		—		(1,035,377)
Cost of goods sold		—		(1,635,380)		13,803		(1,621,577)
Direct service costs and other		(310,996)		(252,960)		(56,811)		(620,767)
Stock compensation expense (1)		4,696		5,661		7,474		17,831
Segment Profit (Loss)	$	117,701	$	65,524	$	(50,544)	$	132,681

					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Nine Months Ended September 30, 2021
Managed care and other revenue	$	1,698,427	$	272,761	$	(480)	$	1,970,708
PBM revenue		—		1,676,158		(10,331)		1,665,827
Cost of care		(1,247,234)		—		—		(1,247,234)
Cost of goods sold		—		(1,568,998)		9,777		(1,559,221)
Direct service costs and other		(365,577)		(310,189)		(37,299)		(713,065)
Legal matter settlement		—		9,000		—		9,000
Stock compensation expense (1)		5,919		7,167		6,298		19,384
Segment Profit (Loss)	$	91,535	$	85,899	$	(32,035)	$	145,399

(1) Stock compensation expense, changes in the fair value of contingent consideration recorded in relation to acquisitions and impairment of intangible assets are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit.

The following table reconciles (loss) income from continuing operations before income taxes to Segment Profit from continuing operations (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2021		2020		2021
(Loss) income from continuing operations before income taxes	$	(19,626)	$	747	$	(4,154)	$	32,502
Stock compensation expense		5,442		5,974		17,831		19,384
Depreciation and amortization		24,730		23,671		71,976		67,613
Interest expense		7,286		5,969		24,239		18,629
Interest and other income		(349)		(299)		(2,119)		(848)
Special charges and other		16,599		1,914		24,908		8,119
Segment Profit from continuing operations	$	34,082	$	37,976	$	132,681	$	145,399