-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxgxwH1VTA52psiFfdCJb5HfcArsOAofRkZu6TKBk+RHJj0Db+Es2jjP8j/M3xW4 7+BxzNE6eOchgdG7pk2lOQ== 0000950135-96-003468.txt : 19960813 0000950135-96-003468.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950135-96-003468 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHSOURCE INC CENTRAL INDEX KEY: 0000855587 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 020387748 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11538 FILM NUMBER: 96608482 BUSINESS ADDRESS: STREET 1: 2 COLLEGE PARK DRIVE CITY: HOOKSETT STATE: NH ZIP: 03106 BUSINESS PHONE: 6032687000 10-Q 1 HEALTHSOURCE FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- --------- Commission File No. 1-11538 ------------ HEALTHSOURCE, INC. -------------------------------------------------------------- (Exact name or registrant as specified in its charter) New Hampshire 02-0387748 - --------------------------------------- -------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) Two College Park Drive, Hooksett, NH 03106 - --------------------------------------- -------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (603) 268-7000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At August 7, 1996, 63,770,957 shares of $.10 par value common stock of the Registrant were outstanding. 1 2 HEALTHSOURCE, INC. INDEX Page Number ----------- Part I. Financial Information. - ------------------------------ Item 1. Financial Statements -------------------- Condensed Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 3 Condensed Consolidated Statements of Operations for the Three and Six Month Periods ended June 30, 1996 and 1995 4 - 5 Condensed Consolidated Statements of Cash Flows for the Six Month Periods ended June 30, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 - 9 Independent Accountants' Report 10 Item 2. Management's Discussion and Analysis of --------------------------------------- Financial Condition and Results of Operations 11 - 17 --------------------------------------------- Part II. Other Information. - ---------------------------- Item 1. Legal Proceedings ----------------- Not Applicable Item 2. Changes in Securities --------------------- Not Applicable Item 3. Defaults Upon Senior Securities ------------------------------- Not Applicable Item 4. Submission of Matters to a Vote of ---------------------------------- Security Holders ---------------- Not Applicable Item 5. Other Information 18 - 20 ----------------- Item 6. Exhibits and Reports on Form 8-K 20 -------------------------------- Signatures 21 2 3 HEALTHSOURCE, INC. AND SUBSIDIARIES - ----------------------------------- CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1995 - --------------------------------------------------------------------------------
June 30, December 31, 1996 1995 ---------- ------------ (unaudited) ASSETS (in thousands) - ------ Current assets: Cash and cash equivalents . . . . . . . . $ 99,395 $121,467 Marketable securities . . . . . . . . . . 26,475 34,301 Premiums and administrative fees receivable . . . . . . . . . . . . 113,380 117,871 Restricted investments . . . . . . . . . . 116,711 123,871 Other current assets . . . . . . . . . . . 65,551 29,986 -------- -------- Total current assets . . . . . . . . . 421,512 427,496 Long-term assets: Long-term marketable securities . . . . . 118,813 68,357 Property and leasehold improvements, net . 122,962 103,611 Restricted investments . . . . . . . . . . 8,797 8,099 Intangible assets, net . . . . . . . . . . 306,666 254,886 Other assets . . . . . . . . . . . . . . . 16,957 10,590 -------- -------- TOTAL $995,707 $873,039 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Medical claims payable . . . . . . . . . . $172,415 $152,649 Accounts payable and accrued expenses . . 98,099 85,678 Estimated liability under retrospective refund agreements 31,191 35,623 Deferred revenue . . . . . . . . . . . . . 16,549 7,489 Other current liabilities . . . . . . . . 716 1,587 -------- -------- Total current liabilities . . . . . . 318,970 283,026 Long-term liabilities: Revolving note payable . . . . . . . . . . 15,000 95,000 Convertible subordinated notes . . . . . . 247,250 - Other liabilities . . . . . . . . . . . . 5,826 6,931 -------- -------- Total liabilities. . . . . . . . . . . 587,046 384,957 -------- -------- Shareholders' equity: Preferred stock . . . . . . . . . . . . . - 100,000 Common stock . . . . . . . . . . . . . . . 6,377 6,358 Additional paid-in capital . . . . . . . . 224,724 221,048 Retained earnings . . . . . . . . . . . . 180,479 159,547 Unrealized gain (loss)on marketable securities . . . . . . . . . . . . . . . (2,919) 1,129 -------- -------- Shareholders' equity . . . . . . . . . 408,661 488,082 -------- -------- TOTAL $995,707 $873,039 ======== ========
See notes to condensed consolidated financial statements 3 4 HEALTHSOURCE, INC. AND SUBSIDIARIES - ----------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 - --------------------------------------------------------------------------------
Three Months Ended June 30, ------------------ 1996 1995 -------- -------- (unaudited) (in thousands, except per share data) Revenue: HMO medical premiums . . . . . . . . . . . . . $309,618 $195,081 Other insured medical premiums . . . . . . . . 62,321 48,662 Administrative and managed care fees . . . . . 58,181 43,001 -------- -------- Total operating revenue . . . . . . . . . 430,120 286,744 -------- -------- Expenses: Cost of HMO medical premiums . . . . . . . . . 253,641 151,070 Cost of other insured medical premiums . . . . 51,733 39,432 Selling, general and administrative: HMO and fully insured . . . . . . . . . . . 59,991 37,496 Admin. and managed care fees . . . . . . . . 47,873 36,988 -------- -------- Total selling, general and administrative. 107,864 74,484 -------- -------- Depreciation and amortization . . . . . . . . 9,197 5,816 -------- -------- Total operating expenses . . . . . . . . . 422,435 270,802 -------- -------- Operating income . . . . . . . . . . . . . 7,685 15,942 Interest income . . . . . . . . . . . . . . . . . 5,689 6,141 Interest expense . . . . . . . . . . . . . . . . (3,481) (1,433) -------- -------- Interest income, net . . . . . . . . . . . 2,208 4,708 -------- -------- Income before provision for income taxes . . . . 9,893 20,650 Provision for income taxes . . . . . . . . . . . (3,395) (7,028) -------- -------- Net income . . . . . . . . . . . . . . . . . . . $ 6,498 $ 13,622 ======== ======== Preferred stock dividend . . . . . . . . . . . . - ( 1,042) -------- -------- Net income available to common stockholders. . . $ 6,498 $ 12,580 ======== ======== Net income per common share: $ 0.10 $ .20 Weighted average number of common and common equivalent shares outstanding: 65,293 63,802
See notes to condensed consolidated financial statements 4 5 HEALTHSOURCE, INC. AND SUBSIDIARIES - ----------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 - --------------------------------------------------------------------------------
Six Months Ended June 30, --------------------- 1996 1995 -------- -------- (in thousands, except per share data) Revenue: HMO medical premiums . . . . . . . . . . . . . $600,373 $383,393 Other insured medical premiums . . . . . . . . 130,433 52,373 Administrative and managed care fees . . . . . 118,406 59,085 -------- -------- Total operating revenue . . . . . . . . . 849,212 494,851 -------- -------- Expenses: Cost of HMO medical premiums . . . . . . . . . 481,496 297,392 Cost of other insured medical premiums . . . . 109,439 42,192 Selling, general and administrative: HMO and fully insured . . . . . . . . . . . 116,954 66,340 Admin. and managed care fees . . . . . . . . 95,836 49,780 -------- -------- Total selling, general and administrative. 212,790 116,120 -------- -------- Depreciation and amortization . . . . . . . . 17,906 9,148 -------- -------- Total operating expenses . . . . . . . . . 821,631 464,852 -------- -------- Operating income . . . . . . . . . . . . . 27,581 29,999 Interest and other income . . . . . . . . . . . . 12,309 9,801 Interest expense . . . . . . . . . . . . . . . . (5,854) (1,433) -------- -------- Interest income, net . . . . . . . . . . . 6,455 8,368 -------- -------- Income before provision for income taxes . . . . 34,036 38,367 Provision for income taxes . . . . . . . . . . . (11,976) (12,975) -------- -------- Net income . . . . . . . . . . . . . . . . . . . $ 22,060 $ 25,392 ======== ======== Preferred stock dividend (1,128) (1,042) -------- -------- Net income available to shareholders $ 20,932 $ 24,350 ======== ======== Net income per common share: $ 0.32 $ .38 Weighted average number of common and common 65,623 63,932 equivalent shares outstanding:
See notes to condensed consolidated financial statements 5 6 HEALTHSOURCE, INC. AND SUBSIDIARIES - ----------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 - --------------------------------------------------------------------------------
Six Months Ended June 30, ---------------------- 1996 1995 --------- -------- (unaudited) (in thousands) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . $ 22,060 $ 25,392 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . 17,906 9,148 Changes in assets and liabilities, net of effects of acquisitions: Premiums and administrative fees receivable . . 7,169 (8,976) Other current assets . . . . . . . . . . . . . (34,816) (7,005) Medical claims payable . . . . . . . . . . . . (2,103) 6,075 Accounts payable and accrued expenses . . . . . 5,855 (5,221) Deferred revenue . . . . . . . . . . . . . . . 8,537 8,449 --------- --------- Net cash provided by operating activities . . 24,608 27,862 --------- --------- Cash flows from investing activities: Investment in affiliates/intangible assets, net of cash acquired . . . . . . . . . . . . . . . . (56,104) (147,061) (Increase) decrease in marketable securities . . . (29,532) 84,205 Additions to property and leasehold improvements . (29,001) (20,943) (Increase) decrease in other assets and restricted investments . . . . . . . . . . . 95 (1,321) --------- --------- Net cash used for investing activities . . . (114,542) (85,120) --------- --------- Cash flows from financing activities: Issuance of convertible subordinated notes . . . . 247,250 - Redemption of preferred stock . . . . . . . . . . (100,000) - Net borrowings (repayment) under revolving note payable . . . . . . . . . . . . . (80,000) 130,000 Issuance of common stock . . . . . . . . . . . . . 2,845 2,359 Preferred stock dividends . . . . . . . . . . . . (1,128) (1,042) Increase (decrease) in other liabilities . . . . . (1,105) 89 --------- --------- Net cash provided by financing activities . . . . . . . . . . . 67,862 131,406 --------- --------- Increase (decrease)in cash and cash equivalents . . . (22,072) 74,148 Cash and cash equivalents, beginning of period . . . 121,467 67,193 --------- --------- Cash and cash equivalents, end of period . . . . . . $ 99,395 $ 141,341 ========= ========= Supplemental disclosure of cash flow information: Income taxes paid . . . . . . . . . . . . . . . . 16,567 13,372 Interest paid. . . . . . . . . . . . . . . . . . . 189 - Supplemental disclosure of non-cash transactions: Effective May 1, 1995, the Company acquired the group health, HMO and third party administration business of Provident Life and Accident Insurance Company of America, Inc. In connection with the agreement, the Company issued $100 million in 6.25% cumulative preferred stock.
See notes to condensed consolidated financial statements 6 7 HEALTHSOURCE, INC. AND SUBSIDIARIES - ----------------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ---------------------------------------------------------------- 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Rule 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. The results of operations for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results of operations to be expected for the full year. 2. SUMMARY OF SIGNIFICANT INCOME STATEMENT POLICIES Revenue - HMO medical premium revenue and other insured medical premiums are recognized in the month in which members are entitled to receive health care services; other insured medical premiums are reported net of retrospective refunds. Medical premiums collected in advance are recorded as deferred revenue. Administrative and managed care fees are recognized in the period that claims processing and other managed care services are provided to self-funded clients. Revenue from management service agreements is recognized in the period the Company performs the services. Cost of HMO Medical Premiums - Cost of HMO medical premiums includes the costs of all medical services delivered to enrolled members of the Company's majority-owned HMOs and for whom the entities have recorded HMO medical premium revenue during the reporting period. These costs include payments for specific medical services and for capitation. The costs of specific medical services include those paid to physicians, hospitals, and other health care providers on a fee-for-service basis. These costs include claims paid, claims in process and pending, estimates of unreported claims, estimates of contractual adjustments pursuant to hospital and other provider contracts, and estimates of charges at the balance sheet date for which the Company will be responsible. The costs of capitation (fixed monthly payments per member) include payments to certain physicians, hospitals, laboratories, pharmaceutical and mental health care providers. Adjustments to prior period estimates are reflected in the current period and are not significant. Cost of Other Insured Medical Premiums - Cost of other insured medical premiums includes the costs of all medical services delivered to enrolled members of the Company's non-HMO medical plans for whom the entities have recorded medical premium revenue during the reporting period. These costs include claims paid, claims in process and claims pending, and estimates of unreported claims and charges at the balance sheet date for which the Company will be responsible. Adjustments to prior period estimates are reflected in the current period and are not significant. Selling, General and Administrative ("SG&A") Expense - HMO and fully-insured SG&A expense includes the costs recognized by the Company and its majority-owned entities: (1) to market and administer the delivery of medical services for which the Company is at risk; (2) to develop and administer its management services agreements; and (3) to develop new product offerings, negotiate new provider agreements and costs incurred to enter new markets. Administrative and managed care fees SG&A includes the costs recognized by the Company and its majority-owned entities to market and administer the delivery of medical services for self-insured clients. Corporate SG&A is included within HMO and other fully-insured SG&A expense. 7 8 Impairment of Long-Lived Assets - The Company adopted Statement of Financial Accounting Standards No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS121") in the period ended June 30, 1996. SFAS 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets. There was no effect of adoption of SFAS 121 on the financial statements. Stock-Based Compensation - Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") became effective in 1996. As permitted by SFAS 123, the Company has elected to continue to account for stock-based compensation to employees under APB Opinion No. 25 and will provide the SFAS 123 required disclosures in its 1996 annual financial statements. Reclassifications - Certain prior year amounts have been reclassified to conform with the current year presentation. Other insured medical premiums, cost of other insured medical premiums and a significant portion of administrative and managed care fees SG&A relate primarily to the Provident Transaction. See Note 3. 3. ACQUISITIONS 1996 Acquisition - Effective February 1, 1996, the Company acquired substantially all of the HMO assets of Central Massachusetts Health Care, Inc. (now called "Healthsource CMHC" ("HSCMHC")) for approximately $46.5 million in cash, subject to post closing purchase price adjustments. 1995 Acquisition - Effective May 1, 1995, the Company acquired the group health, HMO and third party administration business of Provident Life and Accident Insurance Company of America, Inc. (the "Provident Transaction") for $231 million in cash and securities. The cash payment was $131 million and the Company issued to Provident non-convertible Class A cumulative preferred stock with a face value of $100 million (See Note 4). The following unaudited pro forma consolidated statement of operations assumes the Provident and HSCMHC acquisitions occurred on January 1, 1995 (in thousands, except per share data):
Six Months Ended June 30, ---------------------- 1996 1995 -------- -------- Revenue $859,635 $705,146 Operating income 26,284 28,422 Net income 21,213 24,223 Net income per share $0.31 $0.33
4. CONVERTIBLE SUBORDINATED NOTES On March 8, 1996, the Company completed the sale (through a private offering to institutional investors) of $247 million principal amount of 5% Convertible Subordinated Notes due 2003. The proceeds of the sale were used to redeem the outstanding $100 million preferred stock and to repay a portion of the amount owed under the revolving note payable. 5. INCOME TAXES The Company provides for income taxes based upon an estimate of its annual effective tax rate. The estimated effective tax rates for the six months ended June 30, 1996 and 1995 were 35.2% and 33.8%, respectively. 8 9 6. COMMITMENTS AND CONTINGENCIES In June 1996, the Company announced that it had signed an asset purchase agreement with Chubb Life to acquire the remaining 85% interest in Chubb Health. The Company will acquire the stock of Chubb Health for an estimated purchase price of $25 million, subject to adjustments. The agreement is subject to regulatory approval. In June 1996, the Company announced that it had terminated its previously reported agreement to acquire substantially all of the assets of PACC Health Plans and PACC HMO (together "PACC"), a 113,000 member HMO and managed care company based in the Portland, Oregon area. The Company is involved in legal actions in the ordinary course of business. Although the outcome of any such legal actions cannot be predicted, in the opinion of management there are no legal proceedings pending against or involving the Company, the outcome of which is likely to have a material adverse effect upon the consolidated financial position or results of operations of the Company. 7. SUBSEQUENT EVENT On August 2, 1996, the Company reported the adoption of a Rights Agreement pursuant to which each shareholder of record as of August 12, 1996 and subsequently (subject to certain exceptions) will receive one right per share of outstanding common stock. The rights will entitle the holders, upon any person or group acquiring ownership of 20% or greater of the outstanding common stock, to purchase additional shares of common stock at half the market price, except of 20% or greater holder. 9 10 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Shareholders of Healthsource, Inc. Hooksett, New Hampshire We have reviewed the accompanying condensed consolidated balance sheet of Healthsource, Inc. and subsidiaries as of June 30, 1996 and the related condensed consolidated statements of operations for the three and six month periods ended June 30, 1996 and 1995 and the condensed consolidated statements of cash flows for the six month periods ended June 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Healthsource, Inc. and subsidiaries as of December 31, 1995 and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 16, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Boston, Massachusetts August 9,1996 10 11 HEALTHSOURCE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General - ------- The Company has experienced substantial growth in both revenues and profitability since its formation in New Hampshire in 1985. Revenue growth has been accomplished through increasing membership and medical premiums per member and administrative and managed care fees from self-insured employers and through acquisitions. The Company has made acquisitions of health maintenance organization ("HMO") companies resulting in wholly-owned subsidiaries in South Carolina, Tennessee, Maine, Indiana, North Carolina, Syracuse, New York and Massachusetts. The Company has formed strategic alliances with hospitals and organized HMOs in Arkansas, Georgia, north central Texas, and southwestern Ohio and has formed additional new HMOs in Connecticut and Louisville, Kentucky. It also formed a strategic alliance with Chubb Life Insurance Company to operate an HMO ("ChubbHealth") in the metropolitan New York City and northern New Jersey areas. Effective May 1, 1995, the Company acquired the group health, third-party administration and HMO business ("the Provident Transaction") from Provident Life and Accident Insurance Company of America, Inc. for $231 million in cash and preferred stock. To conduct the acquired businesses, the Company organized and capitalized Healthsource Provident Insurance Company to assume the insured business and Healthsource Provident Administrators, Inc. to administer the self-insured business. The Company has experienced a decline in average premium yield during the first six months of 1996 of 6.0% as compared to the same period in 1995. Year-to-date 1996 and 1995 average premium yields were as follows:
REGION 6/30/96 6/30/95 % Change ------- ------- -------- North $137.68 $142.61 (3.5)% South 117.00 124.37 (5.9)% Total 124.85 132.78 (6.0)%
The Company continues to experience very strong resistance to premium increases by employers and intense price competition from payors, including new entrants. While the Company expects this pricing environment to continue at least through the renewal season for January 1997 business (and perhaps longer), the Company will attempt to increase premium yield on its 1997 business whenever practicable to reflect higher underlying healthcare costs. Given the difficult premium pricing environment, the Company's medical loss ratio, and ultimately its profitability, will depend upon its ability to control healthcare costs commensurate with a more intense premium pricing environment. Recent Reduction in Profitability; Enrollment Levels; Review of Operations - -------------------------------------------------------------------------- The Company's profitability is significantly lower in the second quarter of 1996 primarily due to a significant increase in medical loss ratio in its insured HMO products which in turn is principally due to reduction in average premium yield. The Company expects that its profitability will remain at this lower level through 1996 since 1996 premium levels are fixed. The Company is therefore focusing on appropriate increases in 1997 premium pricing which may not be achievable due to market conditions and may significantly reduce its enrollment growth rate. Enrollment may decline in some of the Company's markets as it attempts to reprice its products. The Company will also attempt to improve its medical loss ratio through initiatives to reduce inappropriate or excessive health care costs. Such initiatives, which may include lower payment levels to providers, new contracting methodologies, and steerage of members more aggressively to more efficient providers, and other factors, may cause the Company's relationship with health care providers to be strained in certain markets. The Company is exploring other methodologies to contain health care costs and reassessing various lines of business and operating units in a review 11 12 of operations in an attempt to improve profitability in 1997. No assurance can be given that such initiatives will be successful. The following table shows membership for the Company's affiliated health plans as of June 30, 1996 and 1995:
6/30/96 6/30/95 --------- --------- HMOs(1) Northern Region: New Hampshire 132,800 101,600 Massachusetts 80,200 - Indiana 71,300 65,000 Maine 66,800 58,300 New York City 32,800 28,400 New York (Syracuse) 22,000 23,400 New Jersey 15,600 - Kentucky 13,100 - Ohio 900 - --------- --------- Sub-total 435,500 276,700 --------- --------- Southern Region: North Carolina 183,100 122,400 South Carolina 153,900 90,700 Tennessee 75,600 42,900 Arkansas 35,000 21,000 Georgia 14,500 6,000 Texas 7,100 - --------- --------- Sub-total 469,200 283,000 --------- --------- Total HMO 904,700 559,700 --------- --------- MANAGED INDEMNITY (INSURED)(2) 63,100 63,600 --------- --------- SELF AND PARTIALLY INSURED MEDICAL PRODUCTS - ------------------------------------------- Point of Service 210,200 176,000 Workers' Compensation 116,000 117,400 Other Managed Care/Administration(3) 2,134,300 2,286,700 --------- --------- Total Self-Insured 2,460,500 2,580,100 ------------------ --------- --------- TOTAL ADMINISTERED MEDICAL 3,428,300 3,203,400 - -------------------------- --------- --------- DENTAL PRODUCTS(4) - ------------------ Fully Insured 293,100 374,100 Self Insured 2,152,600 2,067,600 --------- --------- TOTAL ADMINISTERED DENTAL 2,445,700 2,441,700 - ------------------------- --------- --------- (1) Includes membership for HMOs owned, co-owned, and/or managed by the Company. Managed indemnity lives previously reported in the Company's HMO membership are now reported separately as managed indemnity lives. At June 30, 1996 and 1995, these lives were 6,200 and 7,600, respectively. (2) Includes managed indemnity business from the Provident acquisition of approximately 56,900 and 56,000 for 1996 and 1995 respectively. (3) Includes self-insured business from the Provident acquisition of approximately 1,901,000 and 2,000,000 members at June 30, 1996 and 1995, respectively. Included in these totals are approximately 237,000 and 367,000 members at June 30, 1996 and 1995, respectively which were covered by minimum premium and experience rated refundable premium products where the Company shares risk with the employers and where the Company receives an insurance premium. Many of these employer accounts have managed care benefit designs. (4) Obtained through the Provident acquisition.
12 13 The following table shows certain income statement data expressed as a percentage of total operating revenue for the three and six month periods ended June 30, 1996 and 1995:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- (unaudited) (unaudited) 1996 1995 1996 1995 ---- ---- ---- ---- Revenue: HMO medical premiums 72.0% 68.0% 70.7% 77.5% Other insured medical premiums 14.5 16.9 15.4 10.6 Administrative and managed care fees 13.5 15.1 13.9 11.9 ----- ----- ----- ----- Total operating revenue 100.0 100.0 100.0 100.0 ----- ----- ----- ----- Expenses: Cost of HMO medical premiums 59.0 52.7 56.7 60.0 Cost of other insured medical premiums 12.0 13.7 12.9 8.6 Selling, general and administrative: HMO and fully-insured 14.0 13.1 13.8 13.4 Admin. and managed care fees 11.1 12.9 11.3 10.1 ----- ----- ----- ----- Total selling, general and admin. 25.1 26.0 25.1 23.5 ----- ----- ----- ----- Depreciation and amortization 2.1 2.0 2.1 1.8 ---- ----- ----- ----- Total operating expenses 98.2 94.4 96.8 93.9 Operating income 1.8 5.6 3.2 6.1 Interest income 1.3 2.1 1.5 2.0 Interest expense (0.8) (0.5) (0.7) (0.3) ----- ----- ----- ----- Interest and other income, net 0.5 1.6 0.8 1.7 Income before provision for income taxes 2.3 7.2 4.0 7.8 Provision for income taxes (0.8) (2.4) (1.4) (2.7) ----- ----- ----- ----- Net income 1.5% 4.8% 2.6% 5.1% ===== ===== ===== =====
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995 - ----------------------------------------------------------------------------- Revenue increased 50% to $430 million from $287 million. This increase was primarily the result of a 59% increase in HMO medical premium revenue to $310 million from $195 million. The change in HMO medical premium revenue was attributable to: (1) the combined effect of a 47% increase in average membership and a 5.3% decrease in average medical premium yield to $125 per member per month ("pmpm") from $132 pmpm at Healthsource New Hampshire, Healthsource Tennessee, Healthsource Indiana, Healthsource South Carolina, Healthsource Maine, Healthsource North Carolina, Healthsource Arkansas, Healthsource Savannah and Healthsource New York(collectively "Existing Plans");(2) a $31 million increase due to the acquisition of Healthsource CMHC ("HSCMHC"); and (3) the commencement of operations of Healthsource North Texas ("HSNTX"), Healthsource Kentucky ("HSKY") and Healthsource Ohio ("HSOH"). In addition, there was a significant increase in revenue resulting from an increase in other insured medical premiums to $62 million from $49 million due to the inclusion of the Provident Transaction for a full quarter in 1996. The acquired business consists of fully-insured managed indemnity products and minimum premium and experience rated refundable premium products with large employer groups. The remaining revenue increase was due to a 35% increase in administrative and managed care fees to $58 million from $43 million which resulted from the inclusion of the Provident Transaction for a full quarter in 1996. Cost of HMO medical premiums ("health care costs") increased 68% to $254 million from $151 million. This increase was due to the combined effect of the 47% increase in average membership with a 1.0% increase in the average cost of 13 14 medical premiums to $102 pmpm from $101 pmpm at Existing Plans, the acquisition of HSCMHC and the commencement of operations of HSNTX, HSKY, and HSOH. This 1.0% increase in costs resulted from higher outpatient hospital, pharmaceutical, and diagnostic costs offset by lower inpatient hospital costs. The cost of HMO medical premiums as a percent of HMO medical premiums (the "medical loss ratio" or "MLR") increased to 81.9% from 77.4% because of the 5.3% decrease in average medical premium yield and the 1.0% increase in average cost of medical premiums at Existing Plans combined with HSKY, HSNTX, and HSOH which in aggregate had higher MLRs than the Existing Plans. The divergence between premium pricing (which significantly declined) and health care costs (which increased) was primarily responsible for the Company's significant reduction in profitability. While the difficult premium pricing environment is expected to continue, the Company will attempt to reverse the premium yield decline in 1997, although there can be no assurance that the Company will be successful. Failure to achieve an increase in premium yield will most likely increase the Company's medical loss ratio and reduce net income. The cost of other insured medical premiums increased to $52 million from $39 million as a result of the inclusion of Provident's fully-insured managed indemnity products and minimum premium and experience rated refundable premium products for a full quarter in 1996. Total selling, general and administrative (SG&A) expenses increased to $108 million from $74 million due to acquisitions and the development of existing operations and new businesses. As a percent of total operating revenue, SG&A expenses decreased to 25.1% from 26% as a result of a number of factors including change in mix of business where SG&A levels as a percentage of revenue are far lower in fully insured business than self-insured business where revenue does not include health care expenses. SG&A expenses related to HMO, fully-insured medical business and corporate administration increased 60% to $60 million from $37 million. This increase resulted from the SG&A expense associated with the insured portion of the Provident business which was included for a full quarter in 1996, the membership increases at existing HMOs, the commencement of operations at HSKY, HSNTX and HSOH, development expenses at start-up HMOs and other business development activities. In future periods, the Company may separately quantify its development expenses. SG&A expenses related to administration and managed care fees increased 29% to $48 million from $37 million because the SG&A expense associated with the self-insured portion of the Provident business was included for a full quarter in 1996. Depreciation and amortization expense increased 58% to $9.2 million from $5.8 million primarily due to the amortization expense associated with the Provident Transaction which was included for a full quarter in 1996, the acquisition of HSCMHC which occurred in the first quarter of 1996 and depreciation associated with increased capital purchases. Interest income decreased 7% to $5.7 million from $6.1 million. This decrease resulted primarily from the decrease in cash, cash equivalents and marketable securities due to acquisitions and increased capital purchases. Interest expense increased 143% to $3.5 million from $1.4 million as result of the convertible subordinated debt issued in March 1996. Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 - ------------------------------------------------------------------------- Revenue increased 72% to $849 million from $495 million. This increase was primarily the result of a 57% increase in HMO medical premium revenue to $600 million from $383 million. The change in HMO medical premium revenue was attributable to: (1) the combined effect of a 47% increase in average membership and a 6.0% decrease in average medical premium yield to $125 per member per month ("pmpm") from $133 pmpm at the Existing Plans. (2) a $53 million increase due to the acquisition of HSCMHC; and (3) the commencement of operations of HSNTX, HSKY and HSOH. 14 15 In addition, there was a significant increase in revenue resulting from an increase in other insured medical premiums to $130 million from $52 million due to the inclusion of the Provident Transaction for a full six months in 1996. The acquired business consists of fully-insured managed indemnity products and minimum premium and experience rated refundable premium products with large employer groups. The remaining revenue increase was primarily due to a 100% increase in administrative and managed care fees to $118 million from $59 million which resulted from the inclusion of the Provident Transaction for a full six months in 1996. Cost of HMO medical premiums ("health care costs") increased 62% to $481 million from $297 million. This increase was due to the combined effect of the 47% increase in average membership with a 2.3% decrease in the average cost of medical premiums to $100 pmpm from $103 pmpm at Existing Plans, the acquisition of HSCMHC and the commencement of operations of HSNTX, HSKY, and HSOH. This 2.3% decrease in costs resulted from lower inpatient hospital costs offset by higher pharmaceutical, diagnostic and outpatient hospital costs. The medical loss ratio increased to 80.2% from 77.6% because the 6.0% decrease in average medical premium yield was more than the 2.3% decrease in average cost of medical premiums at Existing Plans, combined with HSKY, HSNTX, and HSOH which in the aggregate had higher MLRs than the Existing Plans. The divergence between premium pricing (6% decline) and health care costs (2.3% decline) was primarily responsible for the Company's significant reduction in profitability. While the difficult premium pricing environment is expected to continue, the Company will attempt to reverse the premium yield decline in 1997, although there can be no assurance that the Company will be successful. Failure to achieve an increase in premium yield will most likely increase the Company's medical loss ratio and reduce net income. The cost of other insured medical premiums increased to $109 million from $42 million as a result of the inclusion of Provident's fully-insured managed indemnity products and minimum premium and experience rated refundable premium products for a full six months in 1996. Total selling, general and administrative (SG&A) expenses increased to $213 million from $116 million due to acquisitions and the development of existing operations and new businesses. As a percent of total operating revenue, SG&A expenses increased to 25.1% from 23.5% as a result of the self-funded business acquired in the Provident Transaction which has proportionately higher levels of SG&A expense since health care costs are not included in revenue. SG&A expenses related to HMO, fully-insured medical business and corporate administration increased 76% to $117 million from $66 million. This increase resulted from the SG&A expense associated with the insured portion of the Provident business which was included for a full six months in 1996, the membership increases at existing HMOs, the commencement of operations at HSKY, HSNTX and HSOH, development expenses at start-up HMOs and other business development activities. SG&A expenses related to administration and managed care fees increased 93% to $96 million from $50 million because the SG&A expense associated with the self-insured portion of the Provident business was included for a full six months in 1996. Depreciation and amortization expense increased 96% to $17.9 million from $9 million primarily due to the amortization expense associated with the Provident Transaction which was included for a full six months in 1996, the acquisition of HSCMHC which occurred in the first quarter of 1996 and depreciation associated with increased capital purchases. 15 16 Interest income increased 26% to $12.3 million from $9.8 million. This increase resulted primarily from the increase in cash, cash equivalents and marketable securities associated with the Provident Transaction. Interest expense increased 309% to $5.9 million from $1.4 million as result of the interest associated with the convertible subordinated notes. The Company's effective tax rate increased to 35.2% from 33.8% due to the decline of non-taxable interest income as a percentage of total interest income and as a percentage of total operating income. Liquidity and Capital Resources - ------------------------------- At June 30, 1996, cash, cash equivalents and marketable securities totaled approximately $245 million, of which $223 million was held by regulated operating companies and, except for permissible dividends, was restricted to use in those companies. During the first six months of 1996, the Company generated $25 million from operations and invested approximately $29 million in real estate, property and equipment. The acquisition of HSCMHC resulted in a net cash expenditure of $46 million which was funded from borrowings under the Chase Facility described below. On March 8, 1996, the Company completed the sale (through a private offering to institutional investors) of $247 million principal amount of 5% Convertible Subordinated Notes (the "Notes") due 2003. The Notes are convertible into Common Stock of the Company at a price of $46.965 per share. The Company used the net proceeds of the offering to redeem the $100 million face amount of the Company's outstanding 6.25% Class A Cumulative Preferred Stock. The balance of the net proceeds of the offering was used to repay a portion of the outstanding principal balance under the Company's $300 million unsecured revolving credit agreement with Chase Manhattan Bank N.A. as agent ("Chase Facility"). The Chase Facility is committed through March 15, 2000. At June 30, 1996, the Company had $15 million outstanding. Based on current financial conditions and expectations which are subject to change, the Company has the ability to borrow between $150 and $200 million under the Chase Facility. The Company is presently considering amending its understanding with the Chase Facility to allow it more flexibility on the use of borrowed proceeds such as for purchases of the Company's stock in the open market. The principal and interest on the Notes is by their terms subordinated in right of payment to principal and interest on substantially all existing and future debt (including debt under the Chase Facility) incurred by the Company ("Senior Debt"). As of June 30, 1996, the Company had $15 million in Senior Debt. As of such date, the Company's subsidiaries had aggregate liabilities of approximately $312 million, to which the Notes are also structurally subordinated. The Company has signed an asset purchase agreement with Chubb Life to acquire the remaining 85% interest in Chubb Health for an estimated purchase price of $25 million, subject to adjustments. The agreement is subject to regulatory approval. The Company intends to fund the Chubb Health transaction from borrowings under the Chase Facility or other financial resources. The Company believes that its existing cash balances and cash flow generated by its wholly-owned plans coupled with the proceeds of the sale of the Notes and the amounts available for borrowing under the Chase Facility are adequate to fund its existing operations. 16 17 Effects of Inflation - -------------------- Medical premiums and the costs of medical premiums (healthcare costs) generally increase at higher rates than the overall rates of inflation in the economy. Accordingly, the Company must use strong utilization management techniques and tight provider contracting strategies to counteract inflationary trends in healthcare costs and, given the current phenomenon of declining premium levels, any failure to adequately control healthcare costs can substantially increase the Company's medical loss ratio and decrease the Company's net income. * * * * * * Risks associated with any forward looking statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations are discussed in Item 5, Other Information. 17 18 PART II - OTHER INFORMATION Items 1, 2, 3, & 4. Not Applicable. -------------- Item 5. Other Information ----------------- (i) SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The statements contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations and those contained in the Company's Annual Report on Form 10-K concerning future profitability, premium pricing levels, future levels of medical-loss ratios, the Company's ability to control healthcare and SG&A costs and all other statements that are not historical facts are forward looking statements. Because such statements involve risks and uncertainties, the following factors, among others, could affect the Company's actual results and could cause actual future results to differ materially from those expressed in any forward looking statements either made herein or previously or subsequently made by or on behalf of Healthsource: CONTROL AND PREDICTABILITY OF HEALTH CARE COSTS. The Company's profitability depends in large part on predicting and maintaining effective control of the healthcare costs of its HMOs. The future profitability of the Company's HMOs is dependent upon controlling future healthcare costs in part through appropriate benefit design, utilization control and negotiation of favorable provider contracts, including global capitation arrangements with hospitals which generally link healthcare costs for assigned members to the premiums received for such members. The Company may be unable to predict accurately or to control health care costs because of many factors, including the inherent unpredictability of rates of utilization of services in any given period and the volatility of such use particularly in quarterly periods; major epidemics; undetected increases in costs of units of services (in some cases implemented by providers without prior notice); changes in risk profile of a rapidly increasing membership due to pre-existing medical conditions, changing demographics and other factors; and increased utilization driven by changes in physician practice patterns and new techniques (e.g., use of bone marrow transplants for an increasing number of diagnostic categories). There can be no assurance that the Company will be successful in predicting or mitigating the effect of any of these factors nor that its global capitation agreements will be able to totally buffer these factors or costs for assigned members. COMPETITION AND PREMIUM PRICING. The managed healthcare industry is highly competitive at both the local HMO level and in the regional and national employer markets. The principal competitive factors affecting the Company's products are premium rates and fees, plan design and flexibility, and physician/hospital network and reputation. The Company competes in all of its markets with Blue Cross plans, indemnity insurers, HMOs, TPAs, PPOs and other managed care companies. The Company also faces competition in many of its markets from hospitals and other provider groups who have organized their own networks to contract directly with employer groups. The cost of providing benefits is in many instances the controlling factor in obtaining and retaining employer groups, and in certain markets some competitors are underpricing the Company's products. In many historically under-penetrated markets such as the Carolinas, many new HMOs have been recently licensed which is reflected in premium pressure for new and renewal business. As a result of this competition, the Company experienced a 6.0% decline in average premium yield per member during the first six months of 1996. The Company expects the difficult premium pricing environment to continue and the Company's attempts to reverse the 1996 premium decline may not be successful. 18 19 ACCOUNTING; MIS AND NETWORK DISRUPTION ISSUES. Reserves for incurred but not reported claims ("IBNR") are a large component of the Company's medical claims payable reserve and are based upon an estimation of future claims using traditional actuarial techniques heavily influenced by historical claims experience; rapid growth and changing risk profiles could render the Company's IBNR estimates inaccurate and there can be no assurance as to the ultimate accuracy of such estimates or that subsequent adjustments will not cause fluctuations in the Company's operating results. The ability to predict IBNR, control costs in general and to manage increasingly complicated global capitation arrangements depends upon the use of sophisticated customized MIS systems; there can be no assurance that such systems can be developed quickly enough to effectively manage the increasing complexity of the Company's contractual arrangements nor that facility or equipment problems will not disrupt the Company's ability to effectively provide such MIS support. With the increasing complexity of contractual arrangements comes the potential for disagreements with major hospital providers over the reimbursement under such contracts, which disagreements (if not resolved) could disrupt relations with affiliated physician providers and could potentially affect the perception of the Company's plans in the affected markets. ACQUISITIONS AND NEW PRODUCTS. A significant part of the Company's business strategy is to diversify into new geographic markets through acquisitions or start-up plans and to develop new products. Identifying and pursuing acquisition opportunities, integrating acquired businesses and managing growth requires a significant amount of management time and skill. The Company may be unable to (i) negotiate acceptable terms with suitable acquisition candidates or ensure that, if negotiated, such acquisitions will be either approved by all relevant regulatory authorities or concluded, (ii) assimilate such acquired companies free from hidden risks undetected at the time of closing or (iii) manage future growth effectively. Until start-up HMOs reach a critical mass of membership, they generally produce operating losses (despite capitated provider contracts) and failure to generate sufficient membership in start-up markets could adversely affect operating results. The Company is expanding its product offerings, most notably by developing and seeking a license for Medicare risk products in most of its markets. The Company will expend approximately $5 million in 1996 in developing such Medicare products which will still require a substantial marketing program before the Company generates revenues from such products in any market; the failure to achieve Medicare membership quickly in various markets may further impact operating results as such development expenses are relatively fixed. There can be no assurance that the Company will successfully mitigate any of the foregoing risks. IMPACT OF HEALTHCARE REFORM. Many federal and state proposals have been made in the past to reform the healthcare system. The Company anticipates that federal and state legislatures will continue to assess alternative healthcare systems and payment methodologies as well as mandated coverages, capitation limits, underwriting constraints and other measures that could affect the Company's business. The Company is unable to predict which, if any, of these healthcare reform proposals may be adopted. While the Company does not believe it would be materially adversely impacted by most of the proposed reforms, certain proposals could have such an impact; for example the imposition of a single-payor system in any state could potentially eliminate the Company's business in that state. See "Business - Governmental Regulation" in the Company's Form 10-K. GOVERNMENTAL REGULATION. The Company's HMOs, insurance companies and certain of its other subsidiaries are licensed by and subject to periodic examination and extensive regulation by the states in which they operate and by the federal government. Such state and federal statutes and regulations are subject to change and such changes could adversely impact the Company's operations in the future. There can be no assurance that the Company will be able to obtain any regulatory approvals required to enter new markets or to offer new products. See "Business Governmental Regulation" in the Company's Form 10-K. 19 20 VOLATILITY OF THE COMPANY'S STOCK. The market price for the Company's stock may be affected by investor perception of the Company, by general economic and market conditions, by fluctuations in quarterly earnings, by general trends in the healthcare market, and by regulatory developments especially at the federal level; accordingly, the market price of the Company's stock may be volatile. (ii) NEW DEVELOPMENTS. On August 5, 1996, the Company announced that negotiations with Advocate Health Care, an eight-hospital system, to acquire Health Direct, Inc., a 25,000 member HMO in Chicago, had been mutually terminated. The Company had announced in April 1996 a letter of intent for the proposed transaction with a purchase price of $27 million. On June 26, 1996, the Company announced that it had terminated its previously-reported agreement to acquire substantially all of the assets of PACC Health Plans and PACC HMO (together "PACC"), a 113,000 member HMO and managed care company based in the Portland, Oregon area. In January 1996, the Company signed an agreement to purchase PACC for an estimated cash price of $80 million. Completion of the acquisition was subject to certain closing conditions which were not met. No further discussions with respect to such acquisition are expected. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 11. Statement re: Computation of Net Income Per Share 27. Financial Data Schedule (b) Reports on Form 8-K The following reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended June 30, 1996 and subsequently: 1. On April 17, 1996, the Company reported the signing of a letter of intent to acquire Health Direct, Inc. located in DesPlaines, Illinois, and to enter into a provider agreement with Advocate Health Care and its affiliates for an aggregate consideration of $27 million. The letter of intent was subject to various items, including due diligence and the negotiation of definitive stock purchase and provider agreements. 2. On June 4, 1996, the Company reported the signing of an asset purchase agreement with Chubb Life Insurance Company of America to acquire the remaining 85% interest in ChubbHealth, Inc., an HMO operating in the New York City and northern New Jersey areas, for an estimated purchase price of $25 million. 3. On June 28, 1996, the Company reported the naming of Joseph M. Zubretsky as Chief Financial Officer, to replace Thomas M. Congoran, whose resignation was announced on June 19, 1996. The Company also reported the termination of its previously reported agreement to acquire substantially all of the assets of PACC Health Plans and PACC HMO, due to the failure of certain closing conditions to be met. 4. On August 2, 1996, the Company reported preliminary operating results and the adoption of a Rights Agreement pursuant to which each shareholder of record as of August 12, 1996 and subsequently (subject to certain exceptions) will receive one right per share of outstanding Common Stock. The rights will entitle the holders, upon any person or group acquiring ownership of 20% or greater of the outstanding Common Stock, to purchase additional shares of Common Stock at half the market price, except the 20% or greater holder. 20 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HEALTHSOURCE, INC. Dated: August 9, 1996 By /s/ Norman C. Payson --------------------------------- Norman C. Payson, M.D. President and Chief Executive Officer By /s/ Joseph M. Zubretsky --------------------------------- Joseph M. Zubretsky Chief Financial Officer/Principal Accounting Officer 21 EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 HEALTHSOURCE, INC. EXHIBIT 11 COMPUTATION OF NET INCOME PER SHARE (UNAUDITED)
Three Months Ended June 30, --------------------- 1996 1995 ------- ------- (in thousands except per share data) Net Income ............................... $ 6,498 $13,622 Preferred dividend ....................... - (1,042) ------- ------- Net income available to common stockholders ..................... $ 6,498 $12,580 ======= ======= COMPUTATION OF SHARES OUTSTANDING: - ---------------------------------- Average weighted common shares outstanding .......................... 63,691 62,758 Dilutive effect of stock options issued .. 1,602 1,044 ------- ------- Average weighted common shares and share equivalents outstanding .............. 65,293 63,802 ======= ======= NET INCOME PER SHARE: $ .10 $ .20 - -------------------- Six Months Ended June 30, --------------------- 1996 1995 ------- ------- (in thousands except per share data) Net Income ............................... $22,060 $25,392 Preferred dividend ....................... (1,128) (1,042) ------- ------- Net income available to common stockholders ..................... $20,932 $24,350 ======= ======= COMPUTATION OF SHARES OUTSTANDING: - ---------------------------------- Average weighted common shares outstanding .......................... 63,653 62,682 Dilutive effect of stock options issued .. 1,970 1,250 ------- ------- Average weighted common shares and share equivalents outstanding .............. 65,623 63,932 ======= ======= NET INCOME PER SHARE: $ .32 $ .38 - --------------------
22 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 99,395 145,288 113,380 0 0 421,512 122,962 0 995,707 318,970 247,250 6,377 0 0 402,284 995,707 849,212 861,521 590,935 821,631 0 0 5,854 34,036 11,976 22,060 0 0 0 22,060 .32 .32
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