-----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, TXex8VBOHlGuueYF0/5BX0y/a9SpxI/4tv1M/VX2yDPlLmFfvIFJyW5JXWnSW/q3 POCkUM/jwBc0ptROr1SOjw== 0000950123-98-001930.txt : 19980225 0000950123-98-001930.hdr.sgml : 19980225 ACCESSION NUMBER: 0000950123-98-001930 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980224 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980224 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: 8-K SEC ACT: SEC FILE NUMBER: 000-19442 FILM NUMBER: 98548491 BUSINESS ADDRESS: STREET 1: 800 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 BUSINESS PHONE: 2038521442 MAIL ADDRESS: STREET 1: 800 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 8-K 1 OXFORD HEALTH PLANS, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 24, 1998 OXFORD HEALTH PLANS, INC. (Exact name of registrant as specified in its charter) Delaware 0-19442 06-1118515 (State or other jurisdiction) (Commission (IRS Employer of incorporation) File Number) 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) 1 2 ITEM 5. OTHER EVENTS. The Company's Press Release, dated February 24, 1998, is attached as an Exhibit hereto and incorporated herein by reference. The Series A Preferred Stock and the Series B Preferred Stock referred to in the Press Release will not be redeemable by the Company prior to the fifth anniversary of their original issuance. Thereafter, subject to certain conditions, the Series A and Series B Preferred Stock will be redeemable at the option of the Company for an aggregate redemption price of $245 million and $105 million, respectively (in each case, plus accrued and unpaid dividends), and will be subject to mandatory redemption at the same price on the tenth anniversary of their original issuance. The Series A Warrants and the Series B Warrants referred to in the Press Release will expire on the earlier of the tenth anniversary of their original issuance or redemption of the related series of Preferred Stock. The Warrants will be detachable from the Preferred Stock. ITEM 7. Financial Statements and Exhibits (c) Exhibits 99(a) Press Release dated February 24, 1998 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. Date: February 24, 1998 By: /s/ BRENDAN R. SHANAHAN ------------------------------------ BRENDAN R. SHANAHAN Vice President and Controller 2 3 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit Page Number Description of Document Number - ------ ----------------------- ------ 99(a) Press Release dated February 24, 1998 4 3 EX-99.A 2 PRESS RELEASE DATED 2/24/98 RE: TEXAS PACIFIC 1 EXHIBIT 99(a) TEXAS PACIFIC GROUP TO INVEST $350 MILLION IN OXFORD; COMPANY TO RAISE $350 MILLION IN DEBT FINANCING Dr. Norman Payson to Become CEO at Close of Transaction Company Announces 1997 Results Norwalk, CT, February 24, 1998 -- Oxford Health Plans, Inc. (NASDAQ: OXHP) announced today that the investment firm Texas Pacific Group has signed a definitive agreement to invest $350 million in Oxford and that the company intends to raise an additional $350 million in debt financing. The company also announced that Dr. Norman C. Payson, a founder and the former president and chief executive officer of Healthsource, Inc., has agreed to become chief executive officer of Oxford upon finalization of the transaction. Prior to closing, Dr. Payson will work as a consultant to the company. Under Dr. Payson's leadership, New Hampshire-based Healthsource became the sixth largest health care payer in the United States, with approximately 3.5 million enrolled members. The company was acquired by CIGNA Corporation last year. Upon closing, Dr. Payson has also agreed to personally invest $10 million by purchasing shares of common stock from the company. Fred F. Nazem, formerly chairman of the executive committee, has been elected non-executive chairman of the board. Stephen Wiggins, founder and former chairman, will continue as a member of Oxford's board. "I am extremely pleased that Dr. Norm Payson has committed to join in the revitalization of Oxford," said Mr. Wiggins. "Norm is a long-standing leader in the managed care industry who is going to bring significant insight into our current challenges. As a physician, he has a special understanding and rapport with the medical community. I know he will preserve those aspects of Oxford that make it special and unique, while being effective in working to restore confidence in the company," added Mr. Wiggins. In the interim period, serving as a consultant, Dr. Payson will work closely with current President and Chief Executive Officer William M. Sullivan. "Norm Payson brings a wealth of experience to Oxford as we confront our many challenges and look to the future with optimism," said Mr. Sullivan. "I look forward to working closely with him as we develop and implement the turnaround strategy." "Although the challenges facing Oxford are significant and will take time to remedy, I believe we will be successful in re-establishing this company as a national leader in health care," Dr. Payson said. "I plan on spending the next 30 to 60 days analyzing, assessing and observing the business and then implementing the turnaround plan with the Oxford management team. We will be intensely focused on addressing administrative systems and financial issues while concurrently regaining the confidence and support of the medical community. I also plan to actively recruit additional management support," he added. Mr. Nazem stated, "I am also very pleased that we have secured the backing of Texas Pacific, one of the finest investment firms in the country, who no doubt will bring significant talent to Oxford in addition to their capital investment. Its investment is a strong vote of confidence in the company's future." Upon the closing of the transaction, Texas Pacific will be represented with four seats on Oxford's board of directors. Dr. Payson will also join the board at that time. Under the terms of the definitive agreement, Texas Pacific will purchase $350 million in preferred stock issued as Series A and Series B with dividend rates of 8% and 9% respectively. The preferred shares also come with warrants to acquire 22.5 million shares of Oxford common stock with a strike price of $17.75. This price represents a 5% premium over the average trading price of Oxford shares for 30 trading days ended February 20, 1998. The strike price is to become 115% of the average trading price of Oxford common stock for the 20 trading days following the filing of the Company's annual report on Form 10-K for the year ending December 31, 1998, if such adjustment would reduce the strike price. 4 2 The Series A Preferred Stock will carry a dividend of 8% and will be issued with warrants to purchase 15,800,000 shares of common stock, or 19.9% of the present outstanding voting power of Oxford's common stock. The Series A Preferred Stock will have 16.6% of the combined voting power of Oxford's outstanding common stock and the Series A shares. The Series B Preferred Stock, which will be issued with warrants to purchase non-voting junior participating preferred stock, is non-voting and will carry a dividend of 9%. The Series B Preferred Stock will become voting, the dividend rate will decrease to 8% and the related warrants will be exercisable for 6,730,000 shares of common stock at such time as Oxford's shareholders approve the increase in voting rights of Texas Pacific to 22.1%. The equity financing is subject to various conditions, which include regulatory approvals, completion of the debt financing and expiration of the requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Closing is not subject to shareholder approval. Jonathan Coslet, partner of Texas Pacific, stated, "While Oxford's superb innovation has led to exceptional growth, unfortunately its systems and operations capabilities could not keep pace. With new capital and leadership, we believe we are investing in an excellent turnaround opportunity. Oxford's strong franchise will be the platform for growth and renewed profitability once a turnaround is effected," he added. Oxford also announced year-end results, indicating that the company will post a fourth quarter net loss of $284.7 million, or $3.58 per share, resulting in a net loss of $291.3 million, or $3.70 per share for the year ended December 31, 1997. The fourth quarter loss resulted primarily from approximately $239.0 million added to reserves for payment of medical costs ($200 million of which was included in the company's December announcement) and approximately $75 million in write-offs of accounts receivable and additions to valuation reserves. Fourth quarter results were also adversely affected by high administrative expenses ($245.1 million for the fourth quarter of 1997 compared to $176.6 million for the previous quarter) associated with further supporting the company's operations, as well as a reduction in the value of the company's investment in expansion markets in Florida and Illinois totaling approximately $41.6 million. The fourth quarter results include the recognition of a $25 million gain on the sale of the company's interest in Health Partners, Inc. The company also announced that its enrollment totaled 2,102,000 members at January 1, 1998, an increase of almost 160,000 since September 30, 1997. "Fourth quarter results reflect the steps being taken by the company to address the issues arising from previously disclosed claims payment and billing problems, including a determination to focus on our core businesses in the Northeast," said Al Koch, Oxford's chief financial officer. "We believe high medical and administrative costs will result in losses until the company begins to realize the benefits of its turnaround strategy." * * * * * Certain statements in this press release, such as statements concerning the Company's future results of operations or financial condition, future health care costs and administrative costs, the eventual completion of the transaction referred to herein and other statements regarding matters that are not historical facts, are forward-looking statements (as defined in the Securities Exchange Act of 1934, as amended); and because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to: The Company's ability to obtain debt financing and satisfy the other conditions to closing the equity financing with Texas Pacific. Changes in federal or state regulation relating to health care and health benefit plans. Rising medical costs or higher utilization of medical services, including higher out-of-network utilization under point-of-service plans. Competition from health benefit plan providers and competitive pressure on pricing Oxford products. High administrative costs in operating the Company's business, the Company's ability to develop processes and systems to support its growing operations and the cost and impact on service of changing technologies. The effect, if any, of recent events at the Company (including any adverse publicity) and competitive conditions on future enrollment in the Company's health benefit plans. Any changes in the Company's estimates of its medical costs and expected cost trends as a result of information gained in the process of continuing to reconcile delayed claims and to pay down backlogged claims. The impact of litigation (including purported class actions filed against the Company and certain officers and directors), regulatory proceedings and other governmental action (including the examination, investigation and review of the Company by the New York State Insurance Department and other 5 3 regulatory authorities and the inquiries by the Securities and Exchange Commission and the New York State Attorney General regarding, among other matters, public disclosures by the Company). Those factors included under the caption "Business - Cautionary Statement Regarding Forward-Looking Statements" in the Company's 1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Oxford Health Plans, Inc. is a managed health care company serving more than 2.1 million members. Product lines include traditional health maintenance organizations, point-of-service plans (the company's largest product offering), third-party administration of employer funded benefits plans, Medicare and Medicaid plans, and dental plans. Oxford markets its health plans to employers in New York, New Jersey, Pennsylvania, Connecticut, Illinois, Florida and New Hampshire through direct sales and independent brokers. Texas Pacific Group, sponsor of TPG Partners II, L.P., is based in Fort Worth, Texas and San Francisco. TPG II is a private investment partnership with capital of approximately $2.5 billion. The partnership specializes in significant private equity investments in a wide range of industries and succeeds TPG Partners, L.P. formed in December 1993 with $720 million in capital. TPG's principals include David Bonderman, James G. Coulter, William S. Price and Richard Schifter. The partnerships and its principals have completed significant investments in the healthcare (Genesis ElderCare, Vivra Specialty Partners), energy (Belden & Blake, Denbury Resources), airline (Continental Airlines, America West), food and beverage (Del Monte, Favorite Brands, Beringer) consumer products (J. Crew, Ducati) and telecommunications (GT Com, Paradyne) industries. Media Contacts: OXFORD Nicole Reilly 203-851-1169 TEXAS PACIFIC GROUP OWEN BLICKSILVER 212-303-7603 Visit www.oxhpinfocenter.com for More Information (Tables to follow) ### 6 4 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS THREE MONTHS AND YEARS ENDED DECEMBER 31, 1997 AND 1996 (IN THOUSANDS, EXCEPT PER SHARE AND MEMBERSHIP DATA)
THREE MONTHS YEAR ENDED DECEMBER 31 ENDED DECEMBER 31 ----------------------------------------------------------------- 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------------------- Revenues: Premiums earned $1,107,414 863,595 4,167,224 3,022,168 Third-party administration, net 2,501 2,526 12,592 10,401 Investment and other income, net 16,978 14,417 60,330 42,620 - ------------------------------------------------------------------------------------------------------------------------- Total revenues 1,126,893 880,538 4,240,146 3,075,189 - ------------------------------------------------------------------------------------------------------------------------- Expenses: Health care services 1,286,659 691,018 3,916,742 2,421,167 Marketing, general and administrative 245,078 133,506 737,425 477,373 Unusual charges - write-down of assets 41,618 -- 41,618 -- - ------------------------------------------------------------------------------------------------------------------------- Total expenses 1,573,355 824,524 4,695,785 2,898,540 - ------------------------------------------------------------------------------------------------------------------------- Operating earnings (loss) (446,462) 56,014 (455,639) 176,649 Equity in net loss of affiliate -- (1,050) (1,140) (4,600) Gain on sale of affiliate 25,168 -- 25,168 -- - ------------------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes (421,294) 54,964 (431,611) 172,049 Provision (credit) for income taxes (136,609) 22,966 (140,323) 72,426 - ------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $(284,685) 31,998 (291,288) 99,623 ========================================================================================================================= Earnings (loss) per common and common equivalent share: Basic $ (3.58) .42 (3.70) 1.34 Diluted $ (3.58) .39 (3.70) 1.25 Weighted average common stock and common stock equivalents outstanding: Basic 79,448 76,927 78,635 74,285 Diluted 79,448 81,897 78,635 79,662
Membership at December 31 - ------------------------------------------------------------------------------------------------------- MEMBERSHIP HIGHLIGHTS 1997 1996 Increase - ------------------------------------------------------------------------------------------------------------------------- Freedom Plan 1,333,500 1,015,100 318,400 HMO 270,400 192,300 78,100 Medicare 161,000 125,000 36,000 Medicaid 189,600 162,000 27,600 - ------------------------------------------------------------------------------------------------------------------------- Total Fully Insured 1,954,500 1,494,400 460,100 Self-funded 53,600 41,100 12,500 ========================================================================================================================= Total Membership 2,008,100 1,535,500 472,600 =========================================================================================================================
7 5 OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 1997 1996 ------------- ------------ Current assets: Cash and cash equivalents $ 4,141 72,160 Short-term investments - available-for-sale, at market value 635,743 767,312 Premiums receivable, net 275,646 315,126 Other receivables 45,418 26,343 Prepaid expenses and other current assets 10,097 5,814 Refundable income taxes 120,439 -- Deferred income taxes 38,092 23,429 - -------------------------------------------------------------------------------------------------------------- Total current assets 1,129,576 1,210,184 Property and equipment, at cost, net of accumulated depreciation and amortization of $125,926 in 1997 and $69,739 in 1996 147,093 104,954 Deferred income taxes 86,406 5,700 Other noncurrent assets 34,914 35,559 - -------------------------------------------------------------------------------------------------------------- Total assets $1,397,989 1,356,397 ============================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Medical costs payable $ 762,959 624,359 Trade accounts payable and accrued expenses 152,152 51,256 Income taxes payable -- 9,902 Unearned premiums 124,603 63,052 Deferred income taxes 9,059 9,658 - -------------------------------------------------------------------------------------------------------------- Total current liabilities 1,048,773 758,227 - -------------------------------------------------------------------------------------------------------------- Shareholders' equity: Preferred stock, $.01 par value, authorized 2,000,000 shares -- -- Common stock, $.01 par value, authorized 400,000,000 Shares; issued and outstanding 79,474,439 in 1997 And 77,376,282 in 1996 795 774 Additional paid-in capital 437,653 391,602 Retained earnings (deficit) (95,498) 195,790 Unrealized net appreciation of investments 6,266 10,004 - -------------------------------------------------------------------------------------------------------------- Total shareholders' equity 349,216 598,170 - -------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $1,397,989 1,356,397 ==============================================================================================================
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