Business Overview

The Company is engaged in the healthcare management business, and is focused on meeting needs in areas of healthcare that are fast growing, highly complex and high cost, with an emphasis on special population management. The Company provides services to health plans and other MCOs, employers, labor unions, various military and governmental agencies, TPAs, consultants and brokers. The Company's business is divided into three segments, based on the services it provides and/or the customers that it serves. See Item 1-"Business" for more information on the Company's business segments.

Results of Operations

The following table summarizes, for the periods indicated, consolidated operating results (in thousands):




                                             Three Months Ended
                                                 March 31,                Change
Consolidated Results                        2019            2020        '19 vs '20
Statement of Operations Data:
Net revenue                             $  1,739,489    $  1,794,307          3.2%
Cost of Care                                 941,961         951,642          1.0%
Cost of goods sold                           489,793         486,142        (0.7%)
Direct service costs and other
operating expenses (1)(2)                    271,924         287,731          5.8%
Depreciation and amortization                 30,708          28,684        (6.6%)
Interest expense                               9,107           9,029        (0.9%)
Interest and other income                    (4,974)         (3,759)       (24.4%)
Income before income taxes                       970          34,838       3491.5%
Provision for income taxes                       539          16,588       2977.6%
Net income                              $        431    $     18,250       4134.3%

(1) Includes stock compensation expense of $9,607 and $6,057 for the three months

ended March 31, 2019 and 2020, respectively.

(2) Includes changes in fair value of contingent consideration of $144 for the

three months ended March 31, 2019.

Quarter ended March 31, 2020 ("Current Year Quarter") compared to Quarter ended March 31, 2019 ("Prior Year Quarter")

Net revenue, Cost of care, Cost of goods sold and Direct service costs and other operating expenses

Net revenue, cost of care, cost of goods sold and direct service costs and other operating expense variances are addressed within the segment results that follow.

Depreciation and amortization

Depreciation and amortization expense decreased by 6.6 percent or $2.0 million from the Prior Year Quarter to the Current Year Quarter, primarily due to asset maturities, partially offset by normal asset additions after the Prior Year Quarter.

Interest expense

Interest expense was consistent with the Prior Year Quarter.

Interest and other income

Interest income decreased by $1.2 million from the Prior Year Quarter to the Current Year Quarter primarily due to reduction in rates.





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Income taxes

The Company's effective income tax rates were 55.6 percent and 47.6 percent for the Prior Year Quarter and Current Year Quarter, respectively. The effective income tax rate for the Prior Year Quarter is higher than the Current Year Quarter due to recognized stock compensation in excess of tax deductions. The effective income tax rate for the three months ended March 31, 2020 is higher than the federal and state statutory rates primary due to stock compensation expense in excess of tax deductions and the non-deductible HIF fee.

Segment Results

The Company manages and measures operational performance through three segments: Healthcare, Pharmacy Management and Corporate. The Company evaluates performance of its segments based on 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. Stock compensation expense and changes in fair value of contingent consideration recorded in relation to acquisitions are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit.

Healthcare

The Healthcare segment includes the Company's: (i) management of behavioral healthcare services and EAP services, (ii) management of other specialty areas including diagnostic imaging and musculoskeletal management, and (iii) the integrated management of physical, behavioral and pharmaceutical healthcare for special populations, delivered through Magellan Complete Care. The Healthcare segment's Behavioral & Specialty Health division provides management services to health plans, accountable care organizations, employers, state Medicaid agencies, the United States military and various federal government agencies for whom Magellan provides carve-out management services for behavioral health, employee assistance plans, and other areas of specialty healthcare including diagnostic imaging, musculoskeletal management, cardiac, and physical medicine. The MCC division contracts with state Medicaid agencies and CMS to manage care for beneficiaries under various Medicaid and Medicare programs.





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The following table summarizes, for the periods indicated, operating results for the Healthcare segment (in thousands):




                                                     Three Months Ended
                                                         March 31,              Change
Healthcare Segment Results                           2019          2020       '19 vs '20
Behavioral & Specialty Health revenue
Risk-based, non-EAP                               $   361,808   $   349,580       (3.4%)
EAP risk-based                                         89,617        79,939      (10.8%)
ASO                                                    55,203        59,122         7.1%
Magellan Complete Care revenue
Risk-based, non-EAP                                   642,571       703,369         9.5%
ASO                                                    15,054        16,664        10.7%
Managed care and other revenue                      1,164,253     1,208,674         3.8%
Cost of care                                          941,961       951,642         1.0%
                                                      222,292       257,032        15.6%
Direct service costs and other                        179,190       196,909         9.9%
                                                       43,102        60,123        39.5%
Stock compensation expense                              1,750         2,021        15.5%
Changes in fair value of contingent consideration         144             -
Segment Profit                                    $    44,996   $    62,144        38.1%

Direct service cost as % of revenue                     15.4%         16.3%
MLR Behavioral & Specialty Health risk                  86.0%         83.6%
MLR Behavioral & Specialty Health EAP risk              64.8%         71.1%
MLR Magellan Complete Care risk                         89.2%         85.7%

Membership
Behavioral & Specialty Health
Risk (1)                                               11,754        10,329      (12.1%)
EAP risk                                               15,227        14,129       (7.2%)
ASO                                                    26,719        24,529       (8.2%)
Magellan Complete Care
Risk                                                      139           160        15.1%
ASO                                                        23            25         8.7%
                                                       53,862        49,172       (8.7%)

(1) May include some duplicate count of membership for customers that contract

with Magellan for both behavioral and other specialty management services.

Current Year Quarter compared to the Prior Year Quarter

Managed care and other revenue

Net revenue increased by 3.8 percent or $44.4 million from the Prior Year Quarter to the Current Year Quarter. The increase in revenue is primarily due to favorable rate and membership changes of $53.6 million, new contracts implemented after (or during) the Prior Year Quarter of $11.6 million, net revenue recorded for HIF fees in current year of $10.6 million, revenue impact of favorable prior period medical claims development recorded in the Prior Year Quarter of $3.1 million, unfavorable retroactive rate adjustments in the Prior Year Quarter of $3.1 million, revenue impact of favorable prior period medical claims development recorded in the Current Year Quarter of $1.0 million and other net favorable variances of $6.3 million. These increases partially offset by terminated contracts of $42.8 million, program changes of $1.6 million and unfavorable revenue due to membership and risk adjustments of $0.5 million.

Cost of care

Cost of care increased by 1.0 percent or $9.7 million from the Prior Year Quarter to the Current Year Quarter. The increase is primarily due to increased membership of $15.8 million, favorable prior period care development recoded in Prior Year Quarter of $10.5, the care cost for new contracts implemented after (or during) the Prior Year



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Quarter of $5.6 million, the care impact of unfavorable retroactive rate adjustments of $0.2 million in the Current Year Quarter and care trends and other net unfavorable variances of $15.5 million. These increases were partially offset by terminated contracts of $27.1 million and favorable prior period care development recorded in the Current Year Quarter of $10.8 million. For our behavioral specialty health contracts, cost of care as a percentage of risk revenue (excluding EAP business) decreased from 86.0 percent in Prior Year Quarter to 83.6 percent in the Current Year Quarter mainly due to business mix. For our MCC contracts, cost of care decreased as a percentage of risk revenue from 89.2 percent in the Prior Year Quarter to 85.7 percent in the Current Year Quarter mainly due to improvements in utilization and rates, as well as the net impact of prior period medical claims development.

Direct service costs and other

Direct service costs increased 9.9 percent or $17.7 million from the Prior Year Quarter to the Current Year Quarter primarily due to HIF fees in the Current Year Quarter. Direct services costs increased as a percentage of revenue from 15.4 percent in the Prior Year Quarter to 16.3 percent in the Current Year Quarter primarily due HIF fees in the Current Year Quarter.

Recent Developments - MCC Stock and Asset Purchase Agreement

On April 30, 2020, the Company and Molina entered into the Purchase Agreement pursuant to which the Company has agreed to sell its MCC business to Molina for $850.0 million in cash, subject to certain adjustments, and Molina has agreed to assume liabilities of the MCC business.

The consummation of the MCC Sale is subject to customary closing conditions, including: (i) the expiration of the waiting period applicable to the Purchase Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any law or governmental order prohibiting the MCC Sale, (iii) obtaining all required consents, authorizations, permits and approvals under Health Regulatory Laws (as defined in the Purchase Agreement), (iv) no material adverse effect on the Company having occurred since the signing of the Purchase Agreement, and (v) the accuracy of the representations and warranties of each party (subject to materiality qualifiers) in the Purchase Agreement and the compliance by each party with its covenants in all material respects. The consummation of the MCC Sale is not subject to any financing contingency.

In connection with the MCC Sale, the Company and Molina are entering into commercial agreements for certain behavioral health, utilization management and related services to be provided by the Company to Molina and the MCC business. In addition, the parties will enter into a transition services agreement pursuant to which the Company and certain of its affiliates will provide, or cause third parties to provide, certain services to accommodate the transition of the MCC business to Molina.

The foregoing description of the Purchase Agreement and the MCC Sale does not purport to be complete and is qualified in its entirety by the terms and conditions of the Purchase Agreement attached hereto as Exhibit 2.1 and any related agreements.



Pharmacy Management



The Pharmacy Management segment comprises products and solutions that provide clinical and financial management of pharmaceuticals paid under medical and pharmacy benefit programs. Pharmacy Management's services include: (i) PBM services; (ii) PBA for state Medicaid and other government sponsored programs; (iii) pharmaceutical dispensing operations; (iv) clinical and formulary management programs; (v) medical pharmacy management programs; and (vi) programs for the integrated management of specialty drugs. Pharmacy Management's services are provided under contracts with health plans, employers, state Medicaid programs, Medicare Part D and other government agencies.





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The following table summarizes, for the periods indicated, operating results for the Pharmacy Management segment (in thousands, except state count):




                                              Three Months Ended
                                                  March 31,            Change
Pharmacy Segment Results                       2019        2020      '19 vs '20
Formulary management                        $   17,183   $  22,161        29.0%
PBA and other                                   42,712      42,274       (1.0%)
Managed care and other revenue                  59,895      64,435         7.6%
PBM, including dispensing                      493,224     518,112         5.0%
Medicare Part D                                 63,341      55,666      (12.1%)
PBM revenue                                    556,565     573,778         3.1%
Total net revenue                              616,460     638,213         3.5%
Cost of goods sold                             530,207     537,574         1.4%
                                                86,253     100,639        16.7%
Direct service costs and other                  79,635      81,866         2.8%
                                                 6,618      18,773       183.7%
Stock compensation expense                       1,672       2,107        26.0%
Segment Profit                              $    8,290   $  20,880       151.9%

Direct service cost as % of revenue              12.9%       12.8%
COGS as % of PBM revenue                         95.3%       93.7%

Pharmacy Operational Statistics
Adjusted commercial network claims               6,845       6,740
Adjusted PBA claims                             19,867      17,831
Total adjusted claims                           26,712      24,571

Generic dispensing rate                          87.6%       87.2%
Commercial PBM covered lives                     1,910       1,760
Medical pharmacy covered lives                  13,936      16,046

Total states and DC that participate in PBA 27 26

Current Year Quarter compared to the Prior Year Quarter

Managed care and other revenue

Managed care and other revenue increased by 7.6 percent or $4.5 million from the Prior Year Quarter to the Current Year Quarter primarily due to increased formulary management revenue of $5.0 million mainly due to utilization, increased medical pharmacy revenue of $3.4 million mainly due to increased membership and other net favorable variances of $0.5 million. The increase is partially offset by terminated contracts of $4.4 million.

PBM revenue

PBM revenue increased by 3.1 percent or $17.2 million from the Prior Year Quarter to the Current Year Quarter. The increase is primarily due to increase in membership and utilization of $18.1 million and is partially offset by other net unfavorable variances of $0.9 million.

Cost of goods sold

Cost of goods sold increased by 1.4 percent or $7.4 million from the Prior Year Quarter to the Current Year Quarter. This increase is primarily due to increase in membership and utilization of $12.4. The increase is partially offset by network penalties in the Prior Year Quarter of $2.7 million and other unfavorable variances of $2.3 million. As a percentage of the portion of net revenue that relates to PBM, cost of goods sold decreased from 95.3 percent in the Prior Year Quarter to 93.7 percent in the Current Year Quarter, mainly due to business mix.



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Direct service costs and other

Direct service costs increased by 2.8 percent or $2.2 million from the Prior Year Quarter to the Current Year Quarter primarily due to higher discretionary benefits. Direct service costs decreased slightly as a percentage of revenue from 12.9 percent in the Prior Year Quarter to 12.8 percent in the Current Year Quarter.

Corporate Segment

The Corporate segment of the Company is comprised primarily of amounts not allocated to the Healthcare and Pharmacy Management segments, and that are largely associated with costs related to being a publicly traded company.

The following table summarizes, for the periods indicated, operating results for the Corporate segment (in thousands):




                                   Three Months Ended
                                       March 31,             Change

Corporate Segment & Eliminations 2019 2020 '19 vs '20 Managed care and other revenue $ (169) $ (173) 2.4% PBM revenue

                        (41,055)     (52,407)        27.7%
Cost of goods sold                   40,414       51,432        27.3%
                                      (810)      (1,148)        41.7%

Direct service costs and other 13,099 8,956 (31.6%)


                                   (13,909)     (10,104)      (27.4%)
Stock compensation expense            6,185        1,929      (68.8%)
Segment Loss                     $  (7,724)   $  (8,175)         5.8%






Current Year Quarter compared to the Prior Year Quarter

The Corporate segment loss increased by 5.8 percent or $0.5 million from the Prior Year Quarter to the Current Year Quarter. As a percentage of revenue, the Corporate segment loss was 0.4 percent in the Prior Year Quarter which is consistent with the Current Year Quarter.

Inter segment revenues and expenses

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 within the Corporate segment.

Non-GAAP Measures

The Company reports its financial results in accordance with GAAP; however, the Company's management also assesses business performance and makes business decisions regarding the Company's operations using certain non-GAAP measures.

In addition to Segment Profit, as defined above, the Company also uses adjusted net income attributable to Magellan ("Adjusted Net Income") and adjusted net income per common share attributable to Magellan on a diluted basis ("Adjusted EPS"). Adjusted Net Income and Adjusted EPS reflect certain adjustments made for acquisitions completed after January 1, 2013 to exclude non-cash stock compensation expense resulting from restricted stock purchases by sellers, changes in the fair value of contingent consideration, amortization of identified acquisition intangibles, as well as impairment of identified acquisition intangibles. The Company believes these non-GAAP measures provide a more useful comparison of the Company's underlying business performance from period to period and are more representative of the earnings capacity of the Company. Non-GAAP financial measures disclosed, such as Segment Profit, Adjusted Net Income and Adjusted EPS, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.





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The following table reconciles income before income taxes to Segment Profit (in
thousands):




                                                       Three Months Ended
                                                           March 31,
                                                       2019         2020
Income before income taxes                           $     970    $  34,838
Stock compensation expense                               9,607        6,057
Changes in fair value of contingent consideration          144            -
Depreciation and amortization                           30,708       28,684
Interest expense                                         9,107        9,029
Interest and other income                              (4,974)      (3,759)
Segment Profit                                       $  45,562    $  74,849

The following table reconciles Adjusted Net Income to net income (in thousands):




                                                        Three Months Ended
                                                            March 31,
                                                       2019         2020
Net income                                           $     431    $  18,250
Adjusted for acquisitions starting in 2013
Changes in fair value of contingent consideration          144            -
Amortization of acquired intangibles                    12,272       14,191
Tax impact                                             (3,282)      (3,816)
Adjusted Net Income                                  $   9,565    $  28,625




The following table reconciles Adjusted EPS to net income per common
share-diluted:


                                                       Three Months Ended
                                                           March 31,
                                                        2019         2020
Net income per common share-diluted                  $     0.02    $   0.73
Adjusted for acquisitions starting in 2013
Changes in fair value of contingent consideration          0.01           -
Amortization of acquired intangibles                       0.50        0.57
Tax impact                                               (0.13)      (0.15)
Adjusted EPS                                         $     0.40    $   1.15




Outlook-Results of Operations

The Company's Segment Profit and net income are subject to significant fluctuations from period to period. These fluctuations may result from a variety of factors such as those set forth under Item 2-"Forward-Looking Statements" as well as a variety of other factors including: (i) changes in utilization levels by enrolled members of the Company's risk-based contracts, including seasonal utilization patterns; (ii) contractual adjustments and settlements; (iii) retrospective membership adjustments; (iv) timing of implementation of new contracts, enrollment changes and contract terminations; (v) pricing adjustments upon contract renewals (and price competition in general); (vi) the timing of acquisitions; (vii) changes in estimates regarding medical costs and IBNR; (viii) the timing of recognition of pharmacy revenues, including rebates and Medicare Part D; and (ix) changes in the estimates of contingent consideration.

A portion of the Company's business is subject to rising care costs due to an increase in the number and frequency of covered members seeking healthcare services and higher costs of such services. Many of these factors are beyond the Company's control. Future results of operations will be heavily dependent on management's ability to obtain customer rate increases that are consistent with care cost increases and/or to reduce operating expenses.



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Interest Rate Risk. Changes in interest rates affect interest income earned on the Company's cash equivalents and investments, as well as interest expense on the variable interest rate borrowings under the 2017 Credit Agreement. In addition, interest rates on the Notes are subject to adjustment upon the occurrence of certain credit rating events. Based on the amount of cash equivalents and investments, the borrowing levels under the 2017 Credit Agreement and the principal amount of the Notes as of March 31, 2020, a hypothetical 10 percent increase or decrease in the interest rate associated with these instruments, with all other variables held constant, would not materially affect the Company's future earnings and cash outflows.

Historical-Liquidity and Capital Resources

Operating Activities. The Company reported net cash provided by operating activities of $35.4 million and $31.7 million for the Prior Year Quarter and Current Year Quarter, respectively. The $3.7 million decrease in operating cash flows from the Prior Year Quarter is mainly attributable to unfavorable working capital changes, partially offset by higher segment profit.

The net unfavorable impact of working capital changes between periods totaled $33.3 million. For the Prior Year Quarter, operating cash flows were impacted by net unfavorable working capital changes of $0.3 million, mainly attributable to timing. For the Current Year Quarter, operating cash flows were impacted by net unfavorable working capital changes of $33.6 million, mainly attributable to the timing of receivables and payables.

Segment Profit for the Current Quarter increased $29.2 million from the Prior Year Quarter.

Investing Activities. The Company utilized $12.6 million and $15.7 million during the Prior Year Quarter and the Current Year Quarter, respectively, for capital expenditures. The additions related to hard assets (equipment, furniture, and leaseholds) and capitalized software for the Prior Year Quarter were $3.6 million and $9.0 million, respectively, as compared to additions for the Current Year Quarter related to hard assets and capitalized software of $4.2 million and $11.5 million, respectively.

During the Prior Year Quarter and the Current Year Quarter the Company used $44.0 million and $11.9 million, respectively, for the net purchase of "available-for-sale" securities.

Financing Activities. During the Prior Year Quarter, the Company paid $4.4 million on debt obligations, $6.2 million for payments on contingent consideration, $4.1 million for the repurchase of treasury stock under the Company's share repurchase program and $2.9 million on finance lease obligations and had other net favorable items of $1.7 million. In addition, the Company received $2.0 million from the exercise of stock options.

During the Current Year Quarter, the Company received $80.0 million from borrowings, due on May 26, 2020, under our revolving line of credit and $10.9 million from the exercise of stock options. In addition, the Company paid $33.3 million on debt obligations, $1.5 million on finance lease obligations and had other net unfavorable items of $1.1 million.

Outlook-Liquidity and Capital Resources

Liquidity. The Company may draw on the 2017 Credit Agreement (discussed further below) as required to meet working capital needs associated with the timing of receivables and payables, fund share repurchases or support acquisition activities. The Company currently expects to have adequate liquidity to satisfy its existing financial commitments over the periods in which they will become due. At March 31, 2020, the Company had a revolving loan of $80.0 million due on May 26, 2020, and the remaining $320.0 million of the revolving credit facility is still available to the Company for additional drawdown. The Company plans to maintain its current investment strategy of investing in a diversified, high quality, liquid portfolio of investments and continues to closely monitor the financial markets. The Company estimates that it has no risk of any material permanent loss on its investment portfolio; however, there can be no assurance the Company will not experience any such losses in the future.

Stock Repurchases. On October 26, 2015, the Company's board of directors approved a stock repurchase plan which authorized the Company to purchase up to $200 million of its outstanding common stock through October 26, 2017. On July 26, 2017, the Company's board of directors approved an extension of the 2015 Repurchase Program through October 22, 2018. On May 24, 2018, the Company's board of directors approved an increase of $200 million to



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the current $200 million stock repurchase plan which will now authorize the Company to purchase up to $400 million of its outstanding common stock. The board also extended the program from October 22, 2018 to October 22, 2020. As of March 31, 2020, the remaining capacity under the 2015 Repurchase Program was $186.3 million. See Part II, Item 2-"Unregistered Sales of Equity Securities and Use of Proceeds" for more information on the Company's share repurchase program.

Off-Balance Sheet Arrangements. As of March 31, 2020, the Company has no material off-balance sheet arrangements.

Credit Agreement. On September 22, 2017, the Company entered into the 2017 Credit Agreement with various lenders that provides for a $400.0 million senior unsecured revolving credit facility and a $350.0 million senior unsecured term loan facility to the Company, as the borrower. On August 13, 2018, the Company entered into an amendment to the 2017 Credit Agreement, which extended the maturity date by one year. On February 27, 2019, the Company entered into a second amendment to the 2017 Credit Agreement, which amended the total leverage ratio covenant, and which was necessary in order for the Company to remain in compliance with the terms of the 2017 Credit Agreement. The 2017 Credit Agreement is scheduled to mature on September 22, 2023. See Note A-"General" for more information on the 2017 Credit Agreement.

Restrictive Covenants in Debt Agreements. The 2017 Credit Agreement contains covenants that potentially limit management's discretion in operating the Company's business by, in certain circumstances, restricting or limiting the Company's ability, among other things, to:

? incur or guarantee additional indebtedness or issue preferred or redeemable

stock;

? pay dividends and make other distributions;

? repurchase equity interests;

? make certain advances, investments and loans;

? enter into sale and leaseback transactions;

? create liens;

? sell and otherwise dispose of assets;

? acquire or merge or consolidate with another company; and

? enter into some types of transactions with affiliates.

These restrictions could adversely affect the Company's ability to finance future operations or capital needs or engage in other business activities that may be in the Company's interest.

The 2017 Credit Agreement also requires the Company to comply with specified financial ratios and tests. Failure to do so, unless waived by the lenders under the 2017 Credit Agreement pursuant to its terms, or amended, would result in an event of default under the 2017 Credit Agreement. As of March 31, 2020, the Company was in compliance with all covenants, including financial covenants, under the 2017 Credit Agreement.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company can include, among other things, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, stock compensation assumptions, tax contingencies and legal liabilities. In addition, the Company also makes estimates in



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relation to revenue recognition under ASC 606 which are explained in more detail in Note A-"General - Revenue Recognition." Actual results could differ from those estimates. Except as noted above, the Company's critical accounting policies are summarized in the Company's Annual Report on Form 10-K, filed with the SEC on February 28, 2020.

Forward-Looking Statements

This Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the Company believes that its plans, intentions and expectations as reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include:

? the Company's inability to renegotiate or extend expiring customer contracts,

or the termination of customer contracts;

? the Company's inability to integrate acquisitions in a timely and effective

manner;

risks relating to the Company's proposed sale of the MCC business to Molina,

including the ability of the Company to realize the expected benefits of the

? transaction, the ability of the Company to obtain regulatory approvals for the

transaction and to satisfy other closing conditions, and the ability of the

parties to close the transaction in the anticipated timeframe;

changes in business practices of the industry, including the possibility that

certain of the Company's managed care customers could seek to provide managed

healthcare services directly to their subscribers, instead of contracting with

? the Company for such services, particularly as a result of further

consolidation in the managed care industry and especially regarding managed

healthcare customers that have already done so with a portion of their

membership;

the impact of changes in the contracting model for Medicaid contracts,

? including certain changes in the contracting model used by states for managed

healthcare services contracts relating to Medicaid lives;

? the Company's ability to accurately predict and control healthcare costs, and

to properly price the Company's services;

the Company's ability to accurately underwrite and control healthcare costs

? associated with its expansion into clinically integrated management of special

populations eligible for Medicaid and Medicare, including individuals with

serious mental illness and other unique high-cost populations;

? the Company's ability to maintain or secure cost-effective healthcare provider

contracts;

? the Company's ability to maintain relationships with key pharmacy providers,

vendors and manufacturers;

? fluctuation in quarterly operating results due to seasonal and other factors;

? the Company's dependence on government spending for managed healthcare,

including changes in federal, state and local healthcare policies;

? restrictive covenants in the Company's debt instruments;

? present or future state regulations and contractual requirements that the

Company provide financial assurance of its ability to meet its obligations;




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the impact of the competitive environment in the managed healthcare services

? industry which may limit the Company's ability to maintain or obtain contracts,

as well as its ability to maintain or increase its rates;

? the impact of healthcare reform legislation;

? the Mental Health and Substance Abuse Benefit Parity Law and Regulations;

? government regulation;

? proposed changes to current Federal law and regulations;

? noncompliance with regulations;

? the Company's participation in Medicare Part D is subject to government

regulation;

? failure to maintain satisfactory Medicare and Medicaid quality performance

measures;

? the unauthorized disclosure of sensitive or confidential member or other

information;

? a breach or failure in the Company's operational security systems or

infrastructure, or those of third parties with which it does business;

? risk associated with outsourcing services and functions to third parties;

? the possible impact of additional regulatory scrutiny and liability associated

with the Company's Pharmacy Management segment;

? the inability to realize the value of goodwill and intangible assets;

? pending or future actions or claims for professional liability;

? claims brought against the Company that either exceed the scope of the

Company's liability coverage or result in denial of coverage;

? class action suits and other legal proceedings;

? negative publicity;

? the impact of governmental investigations;

? the impact of varying economic and market conditions on the Company's

investment portfolio;

? the state of the national economy and adverse changes in economic conditions;

? the Company's ability to successfully implement its margin improvement

initiatives and plans;

? tax matters, including changes in corporate tax rates, disagreements with

taxing authorities and imposition of new taxes;

? the impact to contingent consideration as a result of changes in operational

forecasts and probabilities of payment; and

the impact of an epidemic or health crisis such as the COVID-19 pandemic,

? natural disasters, political disruptions, acts of war or terrorism,

cybersecurity attacks or other data breaches or intrusions and other


   extraordinary events.


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Further discussion of factors currently known to management that could cause actual results to differ materially from those in forward-looking statements is set forth under the heading "Risk Factors" in Item 1A of Magellan's Annual Report on Form 10-K for the year ended December 31, 2019. When used in this Quarterly Report on Form 10-Q, the words "estimate," "anticipate," "expect," "believe," "should," and similar expressions are intended to be forward-looking statements. Magellan undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by law.

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