Business Segment Information

3 Months Ended

Mar. 31, 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 March 31, 2020
Managed care and other revenue	$	488,906	$	64,435	$	(173)	$	553,168
PBM revenue		—		573,778		(4,567)		569,211
Cost of care		(349,108)		—		—		(349,108)
Cost of goods sold		—		(537,574)		4,333		(533,241)
Direct service costs and other		(105,936)		(81,866)		(16,439)		(204,241)
Stock compensation expense (1)		1,761		2,107		1,929		5,797
Segment Profit (Loss)	$	35,623	$	20,880	$	(14,917)	$	41,586

					Corporate
			Pharmacy		and
	Healthcare		Management		Elimination		Consolidated
Three Months Ended March 31, 2021
Managed care and other revenue	$	533,010	$	93,227	$	(161)	$	626,076
PBM revenue		—		538,972		(3,399)		535,573
Cost of care		(379,191)		—		—		(379,191)
Cost of goods sold		—		(495,593)		3,223		(492,370)
Direct service costs and other		(114,993)		(104,596)		(11,432)		(231,021)
Legal matter settlement		—		9,000		—		9,000
Stock compensation expense (1)		2,519		2,696		1,842		7,057
Segment Profit (Loss)	$	41,345	$	43,706	$	(9,927)	$	75,124

(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 income from continuing operations before income taxes to Segment Profit from continuing operations (in thousands):

	Three Months Ended
	March 31,
	2020		2021
Income from continuing operations before income taxes	$	4,692	$	39,414
Stock compensation expense		5,797		7,057
Depreciation and amortization		23,358		21,417
Interest expense		8,958		6,426
Interest and other income		(1,219)		(341)
Special charges		—		1,151
Segment Profit from continuing operations	$	41,586	$	75,124