Business Segment Information

9 Months Ended

Sep. 30, 2013

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 income before income taxes, before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, and special charges or benefits ("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. Effective September 1, 2010, Public Sector has subcontracted with Pharmacy Solutions to provide pharmacy benefits management services on a risk basis for one of Public Sector's customers. As such, revenue and cost of care related to this intersegment arrangement are eliminated. The Company's segments are defined above. The Pharmacy Solutions segment contains the operating segments previously defined as the Specialty Pharmaceutical Management segment and the Medicaid Administration segment. Prior period balances have been reclassified to reflect this change.

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

	Commercial			Public Sector			Radiology Benefits Management			Pharmacy Solutions			Corporate and Elimination			Consolidated
Three Months Ended September 30, 2012
Managed care and other revenue	$	176,713		$	407,265		$	88,126		$	54,421		$	(15,433	)	$	711,092
Dispensing revenue		—			—			—			87,345			—			87,345
Cost of care		(100,973	)		(358,959	)		(58,080	)		(13,659	)		15,433			(516,238	)
Cost of goods sold		—			—			—			(81,662	)		—			(81,662	)
Direct service costs and other		(43,007	)		(22,948	)		(14,045	)		(27,565	)		(28,009	)		(135,574	)
Stock compensation expense(1)		293			278			419			238			3,240			4,468
Segment profit (loss)	$	33,026		$	25,636		$	16,420		$	19,118		$	(24,769	)	$	69,431

	Commercial			Public Sector			Radiology Benefits Management			Pharmacy Solutions			Corporate and Elimination			Consolidated
Three Months Ended September 30, 2013
Managed care and other revenue	$	190,655		$	445,260		$	94,125		$	63,008		$	(17,091	)	$	775,957
Dispensing revenue		—			—			—			97,641			—			97,641
Cost of care		(118,022	)		(382,913	)		(65,403	)		(20,940	)		17,091			(570,187	)
Cost of goods sold		—			—			—			(91,853	)		—			(91,853	)
Direct service costs and other		(47,032	)		(27,826	)		(13,990	)		(32,281	)		(35,705	)		(156,834	)
Stock compensation expense(1)		124			259			384			198			3,559			4,524
Segment profit (loss)	$	25,725		$	34,780		$	15,116		$	15,773		$	(32,146	)	$	59,248

	Commercial			Public Sector			Radiology Benefits Management			Pharmacy Solutions			Corporate and Elimination			Consolidated
Nine Months Ended September 30, 2012
Managed care and other revenue	$	535,464		$	1,206,289		$	253,809		$	171,846		$	(53,259	)	$	2,114,149
Dispensing revenue		—			—			—			262,974			—			262,974
Cost of care		(323,992	)		(1,058,384	)		(166,364	)		(47,880	)		53,259			(1,543,361	)
Cost of goods sold		—			—			—			(245,555	)		—			(245,555	)
Direct service costs and other		(127,825	)		(66,850	)		(41,113	)		(83,532	)		(93,176	)		(412,496	)
Stock compensation expense(1)		830			835			1,179			704			10,387			13,935
Segment profit (loss)	$	84,477		$	81,890		$	47,511		$	58,557		$	(82,789	)	$	189,646

	Commercial			Public Sector			Radiology Benefits Management			Pharmacy Solutions			Corporate and Elimination			Consolidated
Nine Months Ended September 30, 2013
Managed care and other revenue	$	578,030		$	1,266,739		$	277,118		$	182,418		$	(48,557	)	$	2,255,748
Dispensing revenue		—			—			—			282,359			—			282,359
Cost of care		(354,520	)		(1,095,694	)		(182,212	)		(59,075	)		48,557			(1,642,944	)
Cost of goods sold		—			—			—			(265,440	)		—			(265,440	)
Direct service costs and other		(129,823	)		(82,403	)		(41,224	)		(93,216	)		(94,292	)		(440,958	)
Stock compensation expense(1)		390			833			1,275			898			11,368			14,764
Segment profit (loss)	$	94,077		$	89,475		$	54,957		$	47,944		$	(82,924	)	$	203,529

(1)

Stock compensation expense is included in direct service costs and other operating expenses, however this amount is excluded from the computation of Segment Profit since it is managed on a consolidated basis.

        The following table reconciles Segment Profit to income before income taxes (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2013			2012			2013
Segment profit	$	69,431		$	59,248		$	189,646		$	203,529
Stock compensation expense		(4,468	)		(4,524	)		(13,935	)		(14,764	)
Depreciation and amortization		(15,239	)		(17,654	)		(45,172	)		(50,770	)
Interest expense		(537	)		(789	)		(1,713	)		(2,191	)
Interest income		350			291			1,619			1,002
Income before income taxes	$	49,537		$	36,572		$	130,445		$	136,806