Hospitals

Magellan Health Services, Inc.

Magellan Health Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGL)") else Response.Write("(NYSE: MGL)") end if %> is one of the country's largest integrated behavioral healthcare companies. In June, Magellan completed a sale-leaseback of 90 facilities to Crescent Real Estate that generated about $200 million in cash for the company. Selling assets for cash was necessary for Magellan to continue its acquisition strategy, which in turn funds the company's extremely high debt load.

The company had a liquidity requirement related to a tender offer for its 11.25% bonds, but with no bonds tendered, the company was free to deploy its cash. The company's return on invested capital of 26% is keeping it afloat, while it is awash in debt (LT Debt to Equity of 2.71). Magellan's 4% profit margins will hinder return on equity, but a torrid pace of acquisitions will keep the cash coming... at least for a while.

Latest Financials

Operating income (net revenue less salaries, supplies and other expenses and bad debt expense) was $48.9 million for the third quarter compared with $53 million for the prior year quarter. Adjusted net income (adjusted for the Crescent transaction loss, stock option expense, and unusual items) was $11.9 million or $0.40 per share for the current quarter, compared with $14.2 million or $0.43 per share for the same quarter a year ago.

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