Magellan reports net revenue of $773.2 million for first quarter 2012

Magellan Health Services Inc. (NASDAQ: MGLN) today reported financial results for the first quarter 2012, as summarized below. For the quarter ended March 31, 2012, the company reported net revenue of $773.2 million, segment profit of $55.4 million, and net income of $20.8 million or $0.75 per diluted common share. Segment profit represents income from operations before stock compensation expense, depreciation and amortization, interest expense, interest income, gain on sale of assets, special charges or benefits, and income taxes.

Financial Results

As of March 31, 2012, the company had unrestricted cash and investments of $202.7 million.

"During the first quarter, we had solid financial results and made important strides in executing our growth strategy," said René Lerer, M.D., chairman and chief executive officer. "We implemented two new behavioral health customers, Blue Shield of California and the state of Louisiana, and entered into an agreement with Coventry Health Care to extend our existing contract and establish a nationwide preferred radiology management relationship.

"I am particularly pleased with the progress on our two key strategic initiatives in Medicaid and pharmacy. The goal of our Medicaid strategy is to leverage our unique skills to manage specialty populations on a full medical risk basis - not just from a behavioral, pharmacy or radiology perspective. This is initially being implemented in key geographic areas where we have either formed joint ventures or are building physical health capabilities in order to provide integrated care for these individuals. It represents one of the most significant business opportunities to fuel our future growth and profitability. In pharmacy, we are investing in new products to help customers manage the total drug spend for both the medical and pharmacy benefit. We are moving aggressively to pursue growth."

"Among our business segments, the public sector behavioral health and pharmacy segments performed well," said Karen S. Rohan, Magellan's president. "The radiology segment experienced margin contraction as business was repriced, and in the commercial behavioral segment we continue to address cost of care issues, and expect improvement in results over the balance of the year. We have been aggressively pursuing product innovation based on our strong clinical and technical expertise, and during the quarter, began marketing several new products."

Outlook

"Our performance gives us a solid foundation for the rest of the year," said Jonathan N. Rubin, chief financial officer. "We were also pleased that Standard & Poor's increased our counterparty credit rating to BBB-, which is considered investment grade. This upgrade is in recognition of our track record of operating performance and strong cash flows, the financial strength of the organization and future market opportunities. Magellan remains well positioned with sound fundamentals to continue executing our growth strategy.

"We are reaffirming our guidance for 2012, which calls for net revenue in the range of $3.2 billion to $3.4 billion, and net income in the range of $91 million to $109 million, which translates into diluted earnings per share in the range of $3.25 to $3.89. Additionally, we expect segment profit for 2012 to be in the range of $240 million to $260 million, and a net increase in unrestricted cash and investments of between $91 million and $136 million."