-----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, T5cdkeE6kCyJhr+QtDLdcwufQ4XTwlJfSCx4RJuvJEaIX6tFfhEe/CH4ppqQQOrF vkPpyWLbWnm8MpwPIMbyVw== 0000950123-96-002269.txt : 19960515 0000950123-96-002269.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950123-96-002269 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OXFORD HEALTH PLANS INC CENTRAL INDEX KEY: 0000865084 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 061118515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19442 FILM NUMBER: 96562360 BUSINESS ADDRESS: STREET 1: 800 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 BUSINESS PHONE: 2038512142 MAIL ADDRESS: STREET 1: 800 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Commission File Number: 0-19442 OXFORD HEALTH PLANS, INC. (Exact name of registrant as specified in its charter) Delaware 06-1118515 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 800 Connecticut Avenue - Norwalk, Connecticut 06854 (Address of principal executive offices) (Zip Code) (203) 852-1442 Registrant's telephone number, including area code) 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 ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The number of shares of common stock, par value $.01 per share, outstanding on May 6, 1996 was 74,896,666. 2 OXFORD HEALTH PLANS, INC. INDEX TO FORM 10-Q
Part I - Financial Information Page Item 1 Financial Statements Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 ................................................................ 3 Consolidated Statements of Earnings for the Three Months Ended March 31, 1996 and 1995 ........................................................... 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 ..................................................... 5 Notes to Condensed Consolidated Financial Statements ................................. 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations ......................................................... 7 Part II - Other Information Item 6 Exhibits and Reports on Form 8-K ..................................................... 11 Signatures
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share data)
Mar. 31, Dec. 31, Assets 1996 1995 ----------- ----------- (Unaudited) Current assets: Cash and cash equivalents $ 30,858 58,450 Short-term investments - available-for-sale (at market value) 340,800 310,197 Premiums receivable (net of allowance for doubtful accounts of $3,526 in 1996 and $3,029 in 1995) 134,724 96,278 Other receivables 15,679 15,260 Prepaid expenses and other current assets 3,824 3,563 Deferred income taxes 11,878 8,443 - ------------------------------------------------------------------------------------------------------------------ Total current assets 537,763 492,191 - ------------------------------------------------------------------------------------------------------------------ Property and equipment, at cost (net of accumulated depreciation and amortization of $38,607 in 1996 and $30,074 in 1995) 106,461 97,414 Other noncurrent assets 21,290 19,171 - ------------------------------------------------------------------------------------------------------------------ Total assets $665,514 608,776 ================================================================================================================== Liabilities and Stockholders' Equity Current liabilities: Medical costs payable $365,967 300,508 Trade accounts payable and accrued expenses 35,328 36,396 Income taxes payable 10,578 1,428 Unearned premiums 6,182 50,299 Other current liabilities 104 112 - ------------------------------------------------------------------------------------------------------------------ Total current liabilities 418,159 388,743 - ------------------------------------------------------------------------------------------------------------------ Stockholders' equity: Preferred stock, $.01 par value, authorized 2,000,000 shares -- -- Common stock, $.01 par value, authorized 200,000,000 shares; issued and outstanding 34,793,720 in 1996 and 34,390,401 in 1995 348 343 Additional paid-in capital 127,033 116,639 Retained earnings 114,684 96,167 Unrealized net appreciation of investments 5,290 6,884 - ------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 247,355 220,033 - ------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $665,514 608,776 ==================================================================================================================
See accompanying notes to condensed consolidated financial statements. 3 4 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Three Months Ended March 31, 1996 and 1995 (In thousands, except per share data) (Unaudited)
Revenues: 1996 1995 - ------------------------------------------------------------------------------------------------------------------ Premiums earned $ 648,182 328,189 Third-party administration, net 3,182 2,866 Investment income, net 6,725 3,328 - ------------------------------------------------------------------------------------------------------------------ Total revenues 658,089 334,383 - ------------------------------------------------------------------------------------------------------------------ Expenses: Health care services 518,216 252,537 Marketing, general and administrative 106,760 62,844 - ------------------------------------------------------------------------------------------------------------------ Total expenses 624,976 315,381 - ------------------------------------------------------------------------------------------------------------------ Operating earnings 33,113 19,002 Equity in net loss of affiliate (1,050) (873) Other income (expense), net 51 (34) - ------------------------------------------------------------------------------------------------------------------ Earnings before income taxes 32,114 18,095 Provision for income taxes 13,597 7,722 - ------------------------------------------------------------------------------------------------------------------ Net earnings $ 18,517 10,373 ================================================================================================================== Earnings per common and common equivalent share: Primary $ .25 .14 Fully diluted $ .25 .14 Weighted average common and common equivalent shares outstanding: Primary 75,080 72,506 Fully diluted 75,374 72,768
See accompanying notes to condensed consolidated financial statements. 4 5 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (Decrease) in Cash and Cash Equivalents Three Months Ended March 31, 1996 and 1995 (In thousands) (Unaudited)
1996 1995 -------- ------ Cash flows from operating activities: Net earnings $ 18,517 10,373 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 9,675 3,515 Provision for doubtful accounts 728 922 Deferred income taxes (2,327) (3,264) Equity in net loss of affiliate 1,050 873 Other, net 120 193 Changes in assets and liabilities: Premiums receivable (39,174) (61,489) Other receivables (419) (624) Prepaid expenses and other current assets (261) (1,402) Other noncurrent assets (717) (1,911) Medical costs payable 65,459 66,282 Trade accounts payable and accrued expenses (1,068) (1,943) Income taxes payable 14,447 7,260 Unearned premiums (44,117) 22,212 Other, net -- (98) - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 21,913 40,899 - ---------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (18,196) (19,776) Purchases of available-for-sale securities (75,810) (43,100) Sales and maturities of available-for-sale securities 41,949 16,866 Investment in unconsolidated affiliates (2,695) -- Other, net 153 225 - ---------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (54,599) (45,785) - ---------------------------------------------------------------------------------------------------------------- Cash flows from financing activities - proceeds from exercise of stock options 5,094 2,251 - ---------------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (27,592) (2,635) Cash and cash equivalents at beginning of period 58,450 35,344 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 30,858 32,709 ================================================================================================================ Supplemental cash flow information - cash paid for income taxes $ 3,164 5,538 Supplemental schedule of noncash investing and financing activities: Unrealized appreciation (depreciation) of short-term investments (2,702) 5,574 Tax benefit realized on exercise of stock options 5,297 2,667 Common stock issued for contingent performance grants 8 4 One-for-one stock dividend -- 166 Reclassification of long-term investment to short-term investments -- 13,505
See accompanying notes to condensed consolidated financial statements. 5 6 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The interim condensed consolidated financial statements included herein have been prepared by Oxford Health Plans, Inc. ("Oxford") and Subsidiaries (collectively, the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to SEC rules and regulations; nevertheless, management of the Company believes that the disclosures herein are adequate to make the information presented not misleading. The condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for each of the years in the three-year period ended December 31, 1995, included in the Company's Form 10-K filed with the SEC in March 1996. On July 3, 1995, a wholly-owned subsidiary of Oxford merged with and into OakTree Health Plan, Inc. ("OakTree"), a Philadelphia-based health maintenance organization. The stockholders of OakTree received 1,177,047 newly issued shares (2,354,094 shares after giving effect to the March 1996 two-for-one split described below) of Oxford's common stock in exchange for all of the issued and outstanding shares of OakTree's capital stock. The merger was accounted for as a pooling of interests and, accordingly, the prior year amounts in the accompanying financial statements have been restated to include the financial position and results of operations of OakTree. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position of the Company with respect to the interim condensed consolidated financial statements have been made. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. (2) Earnings Per Share On March 15, 1996, the Board of Directors approved a two-for-one split of the Company's common stock effected by distribution of a dividend of one share of common stock for each share of common stock outstanding on March 25, 1996. The two-for-one split was effectuated on April 1, 1996. Earnings per share amounts in the accompanying consolidated statements of earnings have been restated to reflect the stock split. (3) Public Offering On April 8, 1996, the Company completed a registered public offering of 5,227,272 newly issued post-split shares of common stock from which the Company realized net proceeds of approximately $220 million. 6 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following table shows membership by product:
As of March 31 Increase --------------------------------------------------------------- Membership: 1996 1995 Amount % --------------------------------------------------------------- Freedom Plan 806,600 437,700 368,900 84.3% HMO 151,100 90,700 60,400 66.6% Medicare 80,800 29,000 51,800 178.6% Medicaid 123,500 72,400 51,100 70.6% ----------------------------------------------------------------------------------------------------- Total fully insured 1,162,000 629,800 532,200 84.5% Third-party administration, net 38,400 41,300 (2,900) (7.0%) ===================================================================================================== Total membership 1,200,400 671,100 529,300 78.9% =====================================================================================================
The following table provides certain statement of earnings data expressed as a percentage of total revenues for the three months ended March 31, 1996 and 1995: Three Months Ended March 31 ----------------------- 1996 1995 Revenues: ----------------------- Premiums earned 98.5% 98.1% Third-party administration, net 0.5% 0.9% Investment income, net 1.0% 1.0% - -------------------------------------------------------------------------------- Total revenues 100.0% 100.0% - -------------------------------------------------------------------------------- Expenses: Health care services 78.7% 75.5% Marketing, general and administrative 16.2% 18.8% - -------------------------------------------------------------------------------- Total expenses 94.9% 94.3% - -------------------------------------------------------------------------------- Operating earnings 5.1% 5.7% Equity in loss of affiliate and other (0.2%) (0.3%) - -------------------------------------------------------------------------------- Earnings before income taxes 4.9% 5.4% Provision for income taxes 2.1% 2.3% ================================================================================ Net earnings 2.8% 3.1% ================================================================================ 7 8 Results of Operations The three months ended March 31, 1996 compared with the three months ended March 31, 1995 Total revenues for the quarter ended March 31, 1996 were $658.1 million, up 97% from $334.4 million during the same period in the prior year. Net earnings for the first quarter of 1996 totaled $18.5 million, or 25 cents per share, compared with $10.4 million, or 14 cents per share, for the first quarter of 1995. Total commercial premiums earned for the three months ended March 31, 1996 increased 85% to $471.7 million from the same period in the prior year. This increase is attributable to a 86% increase in member months in the Company's commercial health care programs, including a 91% member months increase in the Freedom Plan. Premium rates of commercial programs were substantially unchanged from the first quarter of 1995 but were 1.6% higher than in the fourth quarter of 1995. Premiums earned from government programs increased 141% to $176.5 million in the first quarter of 1996 compared with $73.3 million in the first quarter of 1995. Membership growth accounted for most of the change as member months of Medicare programs increased 189% when compared with the prior year first quarter, while member months of Medicaid programs increased by 71% over the level of the prior year first quarter. Premiums earned in the Company's Medicaid programs are now expected to decline at a rate slightly in excess of 8% for the year, and greater than expected increases in Medicaid membership are increasing the impact of those decreases on the Company's results. Net third-party administration revenues for the three months ended March 31, 1996 increased 10% to $3.2 million from $2.9 for the same period in the prior year, attributable to a 22% increase in per member per month revenue, partially offset, by a 9.0% decrease in member months. Net investment income for the three months ended March 31, 1996 increased 102% to $6.7 million from $3.3 million for the same period last year due to the increase in invested cash generated by cash flow from operations. The medical-loss ratio (health care services expense stated as a percentage of premium revenues) was 79.9% for the first quarter of 1996 compared with 76.9% for the first quarter of 1995 and 77.5% for the full year 1995. The increase is attributable to higher medical costs in the Company's Medicare programs, greater than expected pharmacy costs and increased membership in the Company's Medicaid programs. Marketing, general and administrative expenses totaled $106.8 million in the first quarter of 1996 compared with $62.8 million in the first quarter of 1995 and $102.8 million in the fourth quarter of 1995. The increase over the first quarter of 1995 is primarily attributable to a $19.2 million rise in payroll and benefits due to increased staffing, increased costs associated with the growth in membership in the Company's plans, higher broker commissions attributable to the increase in premiums earned, and expenses related to enhancements to management information systems necessary to accommodate increased transaction volume. These expenses as a percent of operating revenue were 16.4% during the first quarter of 1996 compared with 19.0% during the first quarter of 1995 and 19.4% during the fourth quarter of 1995. The Company's profitability is dependent, in part, on its ability to predict and maintain effective control over health care costs (through, among other things, appropriate benefit design, utilization review and case management programs and its risk-sharing agreements with providers) while providing members with quality health care. Factors such as utilization, new technologies and health care practices, hospital costs, major epidemics, inability to establish effective risk-sharing agreements with providers and numerous other external influences may 8 9 affect Oxford's ability to control such costs. The Company uses its medical cost containment capabilities, such as claim auditing systems, physician tracking systems and utilization review protocols, and improved channeling to the most cost-effective providers with a view to reducing the rate of growth in health care services expense. There can be no assurance that Oxford will be successful in mitigating the effect of any or all of the above listed or other factors. Accordingly, past financial performance is not necessarily a reliable indicator of future performance, and investors should not use historical performance to anticipate results or future period trends. Liquidity and Capital Resources Cash flow from operations of $21.9 million contributed to an increase in cash and cash equivalents and short-term investments to $371.7 million as of March 31, 1996 from $368.6 million at December 31, 1995. The decline in cash flow from operations when compared to the first quarter of 1995 is attributable to the fact that a January 1996 Medicare premium of approximately $36 million was received and recognized as unearned premiums in December 1995. The April 1996 Medicare premium was received on April 1, 1996, and accounts for the significant decline in the unearned premiums shown on the consolidated balance sheet. The Company's cash flow from operations has increased substantially over the past five years primarily as a result of increased earnings from operations and increases in items related to growth in membership and revenues such as receipt of premium revenues before payment of health care services expenses. The Company's capital expenditures for the first three months of 1996 totaled $18.2 million. Such funds were used primarily for management information systems and leasehold improvements related to business expansion. On April 9, 1996, the Company completed a registered public offering of 5,227,272 newly issued post split shares of common stock from which the Company realized net proceeds of approximately $220 million. The Company expects to use the net proceeds from the offering to add to its capital base and for general corporate purposes, including expansion of marketing and sales programs and possible future acquisitions, although there are currently no agreements or commitments for any such acquisitions. As part of a plan to add to its capital base, the Company intends to make an addition of approximately $25 million to the capital reserves of the Company's New York HMO subsidiary in conjunction with obtaining regulatory approval for a service area expansion. Except as disclosed above, the Company currently has no other definitive commitments for use of material cash resources, however, management continually evaluates opportunities to expand the Company's managed care services and health plan operations. The Company's medical costs payable, which includes reserves for incurred but not reported claims ("IBNR"), was $366.0 million as of March 31, 1996 and $300.5 million as of December 31, 1995. The Company estimates the amount of such reserves using standard actuarial methodologies based upon historical data, including the average interval between the date services are rendered and the date claims are paid, expected medical cost inflation, seasonality patterns and increases in membership. The Company believes that its reserves for IBNR are adequate in order to satisfy its ultimate claim liability. However, the Company's rapid growth affects the Company's ability to rely on historical information in making IBNR reserve estimates. "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes a forward-looking statement concerning Medicaid premium rates. Actual results could differ materially from those discussed. Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained in the Company's Annual Report on Form 10-K under the caption "Business-Cautionary Statement Regarding Forward-Looking Statements." 9 10 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description of Document ----------- ----------------------- 11 Computation of Net Earnings Per Share of Common Stock (b) Reports on Form 8-K In a report on Form 8-K dated February 6, 1996, and filed February 7, 1996, the Company reported, under Item 5. "Other Events," its fourth quarter 1995 earnings press release. 10 11 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. OXFORD HEALTH PLANS, INC. ------------------------- (Registrant) May 10, 1996 /s/ STEPHEN F. WIGGINS - ------------------------------- ------------------------------- Date Stephen F. Wiggins, Chairman and Chief Executive Officer May 10, 1996 /s/ ANDREW B. CASSIDY - ------------------------------- ------------------------------- Date Andrew B. Cassidy, Chief Financial Officer 11 12 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES Index to Exhibits Exhibit Page Number Description of Document Number - ------ ----------------------- ------ 11 Computation of Net Earnings Per Share of Common Stock 13 27 Financial Data Schedule 12 EX-11 2 COMPUTATION OF NET EARNINGS PER SHARE 1 EXHIBIT 11 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES Computation of Net Earnings Per Share of Common Stock (a) (In thousands, except per share amounts)
Three Months Ended March 31 ------------------------- 1996 1995 ------- ------- Primary: Net earnings $18,517 10,373 ======= ======= Weighted average number of shares of common stock and common equivalent shares outstanding: Weighted average number of shares outstanding 69,354 66,368 Dilutive effect of stock options 5,726 6,138 ------- ------- Weighted average number of common shares and common share equivalents outstanding 75,080 72,506 ======= ======= Earnings per common and common equivalent share $ .25 .14 ======= ======= Fully diluted: Net earnings $18,517 10,373 ======= ======= Weighted average number of shares of common stock and common equivalent shares outstanding: Weighted average number of shares outstanding 69,354 66,368 Dilutive effect of stock options 6,020 6,400 ------- ------- Weighted average number of common shares and common share equivalents outstanding 75,374 72,768 ======= ======= Earnings per common and common equivalent share $ .25 .14 ======= =======
(a) All share and per share amounts in the earnings per share computation have been shown giving retroactive effect to the two-for-one stock split in March 1996. EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at March 31, 1996 (Unaudited) and the Consolidated Statement of Earnings for the Three Months Ended March 31, 1996 (Unaudited) and is qualified in its entirety by reference to such financial statements. 0000865084 Oxford Health Plans, Inc. 1,000 U.S. Dollars 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 30,858 340,800 138,250 3,526 0 537,763 145,068 38,607 665,514 418,159 0 0 0 348 247,007 665,514 651,364 658,089 518,216 518,216 0 0 0 32,114 13,597 18,517 0 0 0 18,517 .25 .25
-----END PRIVACY-ENHANCED MESSAGE-----