Magellan Health Services Reports Third Quarter 2012 Financial Results


-Updates 2012 Guidance-

<0> Magellan Health Services Inc.David Carter, 860-507-1909orRenie Shapiro877-645-6464 </0>

Magellan Health Services Inc. (NASDAQ: MGLN) today reported financial results for the third quarter of 2012, as summarized below. For the quarter ended September 30, 2012, the company reported net revenue of $798.4 million, segment profit of $69.4 million, and net income of $66.3 million or $2.36 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.

As of September 30, 2012, the company had unrestricted cash and investments of $277.4 million.

“Magellan had strong performance during the quarter and we are well positioned to complete the year,” said René Lerer, M.D., chairman and chief executive officer. “I think it is particularly significant that we have been able to drive improved clinical outcomes for the millions of individuals we serve, invest in our growth strategy, and produce these financial results despite a constantly changing health care environment.

“We are pleased with our recent contract award to administer the Military and Family Life Counseling (MFLC) program for the U.S. Department of Defense, which gives us a stronger foothold in the military and Federal government space. We are also making important strides with our Medicaid strategy, which features our unique model of care and data analytic capabilities. Whether it is expanding our reach into new markets like MFLC, or executing on our Medicaid strategy, Magellan is innovating in order to provide current and potential customers with new solutions.”

“Magellan’s strong financial results during the quarter reflect solid execution across all of our businesses,” said Jonathan N. Rubin, chief financial officer. “We saw continued improvements in cost of care across all geographies in our Commercial Behavioral Health segment. We have good momentum and strong cash flow, which gives us the opportunity to move forward with our plans to invest in our business for continued growth. I would note that our quarterly net income benefitted from the impact of a one-time reversal of tax contingencies, which increased EPS by approximately $1.24.”

“Given these results, we are now expecting our full year segment profit to be at the upper end of the guidance range of $240 million to $260 million. Primarily as a result of our lower effective tax rate, we are increasing our net income guidance to a range of $135 million to $155 million, and our diluted earnings per share guidance to a range of $4.83 to $5.55. Our guidance does not assume the impact of any future share repurchases.

“Looking ahead, after adjusting the current 2012 guidance for approximately $15 million of favorable year-to-date out-of-period adjustments, we expect to see solid growth in segment profit in 2013. This expectation is driven by several factors including the impact of new business and the impact of our care management initiatives, primarily in the Commercial behavioral health segment, which will be partially offset by contract terminations, increased investments in our Pharmacy and Medicaid strategic initiatives, and continued margin pressure resulting from economic strains on health plan and state clients. We will provide detailed guidance during our December call.”

Management will host a conference call at 10:00 a.m. Eastern Time on Friday, October 26, 2012. To participate in the conference call, interested parties should call 1-888-566-8408 and reference the passcode approximately 15 minutes before the start of the call. The conference call will also be available via a live Webcast at Magellan’s investor relations page at .

Headquartered in Avon, Conn., Magellan Health Services Inc. is a leading specialty health care management organization with expertise in managing behavioral health, radiology and specialty pharmaceuticals, as well as public sector pharmacy benefits programs. Magellan delivers innovative solutions to improve quality outcomes and optimize the cost of care for those we serve. As of September 30, 2012, Magellan’s customers include health plans, employers and government agencies, serving approximately 33.8 million members in our behavioral health business, 17.3 million members in our radiology benefits management segment, and 8 million members in our medical pharmacy management product. In addition, the specialty pharmaceutical segment served 40 health plans and several pharmaceutical manufacturers and state Medicaid programs. The company’s Medicaid Administration segment served 24 states and the District of Columbia. For more information, visit .

This release contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, as amended, which involve a number of risks and uncertainties. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements including, without limitation, statements regarding estimates of 2012 net income, segment profit, earnings per share, 2013 segment profit, and strategy. These statements are based on management’s analysis, judgment, belief and expectation only as of the date hereof, and are subject to uncertainty and changes in circumstances. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend” and other similar expressions are intended to identify forward-looking statements. Actual results could differ materially due to, among other things, the possible election of certain of the company’s customers to manage the health care services of their members directly; changes in rates paid to and/or by the company by customers and/or providers; higher utilization of health care services by the company’s risk members; delays, higher costs or inability to implement new business or other company initiatives; the impact of changes in the contracting model for Medicaid contracts; termination or non-renewal of customer contracts; the impact of new or amended laws or regulations; governmental inquiries; litigation; competition; operational issues; health care reform; and general business conditions. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included within the company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on February 28, 2012, and the company’s subsequent Quarterly Report on Form 10-Q expected to be filed with the Securities and Exchange Commission and posted on the company’s website later today. Readers are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this release. Segment profit information referred to herein may be considered a non-GAAP financial measure. Further information regarding this measure, including the reasons management considers this information useful to investors, are included in the company’s most recent Annual Report on Form 10-K and on subsequent Form 10-Qs.