Business Segment Information

12 Months Ended

Dec. 31, 2014

Business Segment Information

Business Segment Information

10. Business Segment Information

        The accounting policies of the Company's segments are the same as those described in Note 1—"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. Public Sector subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Public Sector'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 care, cost of goods sold and direct service costs and other related to these arrangements are eliminated. The Company's segments are defined previously.

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

	Commercial			Public Sector			Specialty Solutions			Pharmacy Management			Corporate and Elimination			Consolidated
Year Ended December 31, 2012
Managed care and other revenue	$	728,512		$	1,620,875		$	349,133		$	227,669		$	(69,090	)	$	2,857,099
Dispensing revenue		—			—			—			350,298			—			350,298
Cost of care		(437,518	)		(1,413,320	)		(228,383	)		(61,759	)		69,090			(2,071,890	)
Cost of goods sold		—			—			—			(328,414	)		—			(328,414	)
Direct service costs and other		(172,035	)		(89,129	)		(55,418	)		(111,593	)		(129,337	)		(557,512	)
Stock compensation expense(1)		532			1,111			1,567			1,007			13,566			17,783
Segment profit (loss)	$	119,491		$	119,537		$	66,899		$	77,208		$	(115,771	)	$	267,364
Identifiable assets by business segment(3)
Restricted cash	$	18,254		$	147,766		$	—		$	—		$	60,534		$	226,554
Net accounts receivable		39,678			27,415			7,580			65,755			(2,175	)		138,253
Investments		21,273			101,093			—			—			111,324			233,690
Pharmaceutical inventory		—			—			45,727			—			—			45,727
Goodwill		120,485			—			104,549			201,905			—			426,939
Other intangible assets, net		2,152			—			7,877			24,906			—			34,935

	Commercial			Public Sector			Specialty Solutions			Pharmacy Management			Corporate and Elimination			Consolidated
Year Ended December 31, 2013
Managed care and other revenue	$	766,841		$	1,757,933		$	375,818		$	228,705		$	(66,248	)	$	3,063,049
PBM and dispensing revenue		—			—			—			483,268			—			483,268
Cost of care		(469,478	)		(1,523,023	)		(247,496	)		(59,227	)		66,248			(2,232,976	)
Cost of goods sold		—			—			—			(455,601	)		—			(455,601	)
Direct service costs and other		(172,491	)		(122,819	)		(57,334	)		(128,427	)		(138,475	)		(619,546	)
Stock compensation expense(1)		503			1,038			1,630			1,172			16,909			21,252
Segment profit (loss)	$	125,375		$	113,129		$	72,618		$	69,890		$	(121,566	)	$	259,446
Identifiable assets by business segment(3)
Restricted cash	$	25,107		$	196,651		$	—		$	—		$	14,938		$	236,696
Net accounts receivable		50,407			62,977			7,368			115,527			1,906			238,185
Investments		16,491			92,966			—			—			98,856			208,313
Pharmaceutical inventory		—			—			49,609			—			—			49,609
Goodwill		120,485			20,882			104,549			242,290			—			488,206
Other intangible assets, net		1,076			4,590			6,123			57,905			—			69,694

	Commercial			Public Sector			Specialty Solutions			Pharmacy Management			Corporate and Elimination			Consolidated
Year Ended December 31, 2014
Managed care and other revenue	$	673,996		$	1,635,609		$	471,300		$	205,524		$	(18,055	)	$	2,968,374
PBM and dispensing revenue		—			—			—			844,512			(52,768	)		791,744
Cost of care		(364,780	)		(1,385,858	)		(339,714	)		(16,298	)		18,055			(2,088,595	)
Cost of goods sold		—			—			—			(784,758	)		51,809			(732,949	)
Direct service costs and other		(160,341	)		(187,966	)		(71,785	)		(182,833	)		(120,573	)		(723,498	)
Stock compensation expense(1)		618			894			1,387			28,829			8,856			40,584
Changes in fair value of contingent consideration(1)		38			—			—			6,134			—			6,172
Less: non-controlling interest segment profit (loss)(2)		—			(5,087	)		—			—			—			(5,087	)
Segment profit (loss)	$	149,531		$	67,766		$	61,188		$	101,110		$	(112,676	)	$	266,919
Identifiable assets by business segment(3)
Restricted cash	$	9,515		$	204,166		$	—		$	—		$	1,644		$	215,325
Net accounts receivable		56,056			98,480			15,952			180,535			2,690			353,713
Investments		18,133			124,824			—			—			124,697			267,654
Pharmaceutical inventory		—			—			—			39,375			—			39,375
Goodwill		129,042			20,879			104,549			311,636			—			566,106
Other intangible assets, net		2,031			6,471			2,338			122,878			—			133,718

(1)	Stock compensation expense and changes in present value of contingent consideration are included in direct service costs and other operating expenses, however these amounts are excluded from the computation of Segment Profit.
(2)	The non-controlling interest portion of AlphaCare's segment profit (loss) is excluded from the computation of Segment Profit.
(3)	Identifiable assets by business segment are those assets that are used in the operations of each segment. The remainder of the Company's assets cannot be specifically identified by segment.

        The following table reconciles Segment Profit to consolidated income before income taxes for the years ended December 31, 2012, 2013 and 2014 (in thousands):

	2012			2013			2014
Segment Profit	$	267,364		$	259,446		$	266,919
Stock compensation expense		(17,783	)		(21,252	)		(40,584	)
Changes in fair value of contingent consideration		—			—			(6,172	)
Non-controlling interest segment profit (loss)		—			—			(5,087	)
Depreciation and amortization		(60,488	)		(71,994	)		(91,070	)
Interest expense		(2,247	)		(3,000	)		(7,387	)
Interest and other income		2,019			1,985			1,301
Income before income taxes	$	188,865		$	165,185		$	117,920