Discontinued Operations

9 Months Ended

Sep. 30, 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 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 were subject to termination in connection with the Company’s pending Merger with Centene and will 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 statements of comprehensive income for the three and nine months ended September 30, 2020 and 2021 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2021		2020		2021
Managed care and other revenue	$	744,741	$	—	$	2,200,132	$	—
Costs and expenses:
Cost of care		615,390		—		1,791,298		—
Direct service costs and other operating expenses (1)(2)(3)		89,282		354		265,857		1,555
Depreciation and amortization		5,380		—		16,085		—
Interest expense		—		—		89		—
Interest and other income		(901)		—		(4,919)		—
Gain on sale		—		(8,713)		—		(16,713)
Total costs and expenses		709,151		(8,359)		2,068,410		(15,158)
Income from discontinued operation before income taxes		35,590		8,359		131,722		15,158
Provision for income taxes		6,647		2,309		47,062		3,993
Net income from discontinued operations	$	28,943	$	6,050	$	84,660	$	11,165

(1) Includes stock compensation expense of $397 and $1,023 for the three and nine months ended September 30, 2020, respectively.

(2) Includes divestiture related expenses of $2,195 and $6,154 for the three and nine months ended September 30, 2020, respectively.

(3) Includes changes in estimates and transition support services for the three and nine months ended September 30, 2021.

The Company recognized a gain of $8.7 million and $16.7 million in the three and nine months ended September 30, 2021, respectively, related to the MCC Sale. This gain represents final determination of the working capital receivable pursuant to the Stock and Asset Purchase Agreement with Molina.

The Company has retained corporate overhead expenses previously allocated to MCC of $7.2 million and $21.0 million for the three and nine months ended September 30, 2020, respectively.