Magellan reports $750.3 million net revenue for third quarter 2010

Financial Results

"I am quite pleased with our strong third quarter which demonstrates that our value proposition and strategy of diversification is resonating in the marketplace," said René Lerer, M.D., chairman and chief executive officer. "With these year-to-date results we are on track for a robust finish for 2010.

"Our success is based on our ability to improve quality and access to care for our millions of members, and create value for customers. Across the spectrum of our business segments - managed behavioral health, radiology benefits management, specialty pharmaceutical management and Medicaid administration - our customers and consumers look to us as their partner to leverage our clinical and technological expertise to help find solutions to the challenges they face. Our track record of innovation motivates current and potential customers to do business with Magellan.

"As we look to the future, 2011 will present new challenges. Our strategy uniquely positions us with a broad range of products and solutions to help customers deal with emerging health care and fiscal issues. Magellan's abilities and expertise, as well as our long history of dealing with the Medicaid population, will be particularly important given the significant expansion of Medicaid over the next several years."

"We made important strides in our operational execution in the third quarter, positioning the company for future profitable growth," said Karen S. Rohan, Magellan's president. "We implemented new business, expanded our products and capabilities, and continued our focus on care management and clinical initiatives. All of our business segments are focused on generating growth and developing new products to meet the changing needs of our customers, which is especially important given the current economic environment and the changing landscape brought about by health care reform."

Outlook

"As a result of our solid financial results through September 30, Magellan is increasing our full year guidance," said Jonathan N. Rubin, chief financial officer. "We now expect full-year segment profit in the range of $285 million to $300 million and net income of $126 million to $140 million. This equates to diluted earnings per share of $3.66 to $4.07, which reflects the impact of repurchases to date this year, but excludes any impact from repurchases that may occur during the remainder of the year. We now expect full year 2010 cash flow from operations to be in the range of $270 million to $300 million.

"Looking ahead, after adjusting our current 2010 guidance ranges for approximately $22 million of favorable year-to-date out-of-period adjustments, we expect to see moderately lower segment profit in 2011. This expectation is driven by several factors including the impact of previously disclosed contract terminations, and continued margin pressure resulting from economic strains on our health plan and state clients, partially offset by expected new business growth and the continued benefit of our effective care management and other performance improvement initiatives. We will provide detailed guidance in our December call."