Continuing its turnaround, Magellan Health Services Inc. of Columbia yesterday posted earnings from continuing operations of $11.5 million, or 28 cents a share, for the quarter that ended March 31, compared with $1.9 million, or 3 cents a share, in the year-earlier quarter.
The reversal of fortune is even more dramatic if discontinued operations are included. Magellan lost $45.5 million, or $1.45 a share, in the year-earlier quarter with the inclusion of losses and write-downs from the now-shut specialty health division, which attempted to manage costs for patients with expensive chronic conditions.
"We've made very considerable progress in achieving our key objectives," Magellan President Daniel Messina told analysts in a conference call yesterday. Those objectives, he said, were to get out of noncore businesses and pay down debt.
In addition to stemming the losses in specialty health by closing the division, Magellan sold a profitable subsidiary, bringing in about $100 million, which was used to pay down debt.
Magellan, which built up a heavy debt load in a string of acquisitions, reported paying down long-term debt by $135 million over the year, but its total debt still stands at about $1 billion. The January-March quarter is the second of Magellan's fiscal year.
"The balance sheet trends are quite favorable," said Thomas H. Shinkle, a high-yield debt analyst at Imperial Capital LLC in Beverly Hills, Calif., noting that Magellan's earnings had been "very consistent with, and slightly above, my expectations."
Messina told analysts that the company expected to meet earnings expectations over the next two quarters as well.
In shedding its two smaller divisions, Magellan was left with one business line - insuring mental health benefits. By the end of the quarter, it was covering 69.8 million people, up about 5 percent in the past year.
Dr. Henry Harbin, Magellan's chairman and chief executive officer, said the company continues to renew almost all current contracts and win more than half of its bids for new business. However, he said, the volume of new business is slowing some because fewer state programs are seeking bidders to manage mental health programs.
Messina said the company was making progress in customer service, as measured by reductions in claims backlog.
Revenue in the quarter was $444.1 million, up 8.8 percent from $408.2 million in the year-earlier quarter.
Magellan's shares fell 68 cents yesterday, to $11.09, well up from $2.57 a year earlier.