Earnings Per Share of $0.84 for the Fourth Quarter Including
$0.13 Per Share of Previously Announced Charges
TRUMBULL, Conn., Feb. 4 /PRNewswire-FirstCall/ -- Oxford Health Plans,
Inc. (NYSE: OHP) announced today net income of $0.84 per diluted common share
for the quarter ended December 31, 2002, compared to $1.00 per share for the
prior year quarter. Fourth quarter net income was $73.8 million in 2002
compared to $94.3 million in 2001. Full year net income was $222.0 million,
or $2.45 per diluted share for 2002, compared to $322.4 million, or $3.21 per
diluted share, in 2001. Fourth quarter run rate earnings were $0.97 per share
in 2002 compared to $0.85 per share in 2001. Full year run rate earnings were
$3.37 per share in 2002 compared to $2.97 per share in 2001. See Exhibit 1 to
this release for a reconciliation of earnings reported under generally
accepted accounting principles to run rate earnings for the fourth quarter and
full year 2002 compared to the 2001 periods.
Revenue for the quarter was $1.29 billion compared to $1.12 billion in the
prior year period. Fully insured commercial membership, excluding MedSpan,
increased by over 4 thousand members during the fourth quarter. For the full
year 2002, excluding MedSpan, Oxford's fully insured commercial membership
grew 5.4% over December 2001 levels. The medical loss ratio was 80.2% and
79.3% for the fourth quarter and full year 2002, respectively, compared to
77.8% and 78.9%% in the prior year periods. The run rate administrative loss
ratio was 10.9% and 11.1% for the fourth quarter and full year 2002,
respectively, compared to 11.1% and 11.1% in the prior year periods. These
run rate administrative loss ratios do not include the impact of the net
charge for estimated securities litigation settlement, charges for legal
defense costs related to such litigation or the CSC contract termination and
asset valuation charges reflected in Exhibit 1. Oxford's CEO and President,
Charles G. Berg, commented on the results, "Oxford's strong financial results
in the fourth quarter and 2002 were driven by our ongoing commitment to
quality, affordability and administrative efficiency. We continue to deliver
new products and benefit designs that meet the changing needs of our customers
and members, while staying focused on managing health care costs. We are
enthusiastic about our prospects for 2003."
The Company reported $86.9 million in cash flow from operations for the
quarter ended December 31, 2002, compared to $181.2 million in the prior year
period. The decline for the quarter was primarily due to higher payments for
income taxes and accelerated claims payments compared to the fourth quarter of
2001. Additionally, the fourth quarter of 2001 included $37 million in cash
receipts related to a new pharmacy management contract. Full year 2002
operating cash flows were $344.5 million, essentially in line with the
Company's expectations. As of December 31, 2002, the Company held
approximately $1.4 billion in cash and marketable securities, $124 million of
which was available at the parent company. "During 2002, using cash generated
from operations, we repurchased 6.8 million shares of common stock for
$251.5 million, bringing our total repurchases to 19.8 million shares for
$617.4 million since the inception of our share repurchase program in the
third quarter of 2001. We believe that operating cash flows will continue to
be strong in 2003," said Kurt B. Thompson, Oxford's Chief Financial Officer.
As previously announced, the Company will hold a conference call on
Tuesday, February 4, 2003, at 9:00 am (Eastern Time) to review the results of
the fourth quarter and full year 2002 and discuss the outlook for 2003. The
public is invited to listen to this conference call by dialing 1-888-677-8170
(using the password "Oxford") at least 10 minutes prior to the start of the
call. Individuals who dial in will be asked to identify themselves and their
affiliations. Investors, analysts and the public are also invited to listen to
the conference call over the Internet by visiting our website at
http://www.oxfordhealth.com . To listen to this call live on the Internet,
visit the investor page of Oxford's Web site at least 20 minutes early (to
download and install any necessary audio software).
Founded in 1984, Oxford Health Plans, Inc. provides health plans to
employers and individuals primarily in New York, New Jersey and Connecticut,
through its direct sales force, independent insurance agents and brokers.
Oxford's services include traditional health maintenance organizations,
point-of-service plans, Medicare plans and third party administration of
employer-funded benefits plans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements concerning
the Company's future prospects, future operating cash flows, future healthcare
quality and premium affordability, future administrative efficiency, and other
statements contained herein regarding matters that are not historical facts,
are forward-looking statements as defined in the Securities Exchange Act of
1934; 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:
* Changes in Federal or State regulation relating to health care and
health benefit plans, including proposed patient protection legislation
and mandated benefits.
* The state of the economy.
* Rising medical costs or higher utilization of medical services,
including higher out-of-network utilization under point-of-service
plans and new drugs and technologies.
* Competitive pressure on the pricing of the Company's products,
including acceptance of premium rate increases by the Company's
commercial groups.
* Higher than expected administrative costs in operating the Company's
business and the cost and impact on service of changing technologies.
* The ability of the Company to maintain risk transfer, risk sharing,
incentive and other provider arrangements and the resolution of
existing and future disputes over the reconciliations and performance
under such arrangements.
* Any changes in the Company's estimates of its medical costs and
expected cost trends.
* The impact of future developments in various litigation (including
pending class and derivative actions filed against the Company and
certain of its officers and directors, and other proceedings commenced
against the Company and several employees by certain healthcare
providers), class actions in Connecticut, New Jersey and New York and
related litigation by the Connecticut Attorney General, regulatory
proceedings and other governmental action (including the periodic
examination, investigation and review of the Company by various Federal
and State authorities).
* The Company's ability to renew existing members and attract new
members.
* The Company's ability to develop processes and systems to support its
operations and any future growth and administer new health care benefit
designs.
* Any future acts or threats of terrorism or war.
* Those factors included in the discussion under the caption "Cautionary
Statement Regarding Forward-Looking Statements" in Part I, Item 1, of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 and Part I, Item 2, of the Company's Quarterly
Reports on Form 10-Q for the periods ended March 31, 2002, June 30,
2002 and September 30, 2002.
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Income Statements
For the Three and Twelve Months Ended December 31, 2002 and 2001
(In thousands, except per share, per member per month and membership
highlights data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Revenues:
Premiums earned $1,262,555 $1,094,860 $4,850,964 $4,312,391
Third-party
administration, net 4,568 3,910 17,744 13,791
Investment and other income,
net 31,495 22,094 94,686 95,046
Total revenues 1,298,618 1,120,864 4,963,394 4,421,228
Expenses:
Health care services 1,013,101 852,153 3,848,803 3,401,331
Marketing, general and
administrative 157,767 122,046 575,433 489,143
Litigation charge for
estimated settlement,
net -- -- 151,300 --
Interest and other
financing charges 2,388 3,484 11,041 19,003
Total expenses 1,173,256 977,683 4,586,577 3,909,477
Earnings before income
taxes 125,362 143,181 376,817 511,751
Income tax expense 51,521 48,848 154,852 189,330
Net earnings $73,841 $94,333 $221,965 $322,421
Earnings per common share -
basic $0.86 $1.04 $2.55 $3.35
Earnings per common share -
diluted $0.84 $1.00 $2.45 $3.21
Weighted-average common
shares - basic 85,393 90,508 87,145 96,269
Dilutive effect of stock
options 2,359 3,715 3,599 4,274
Weighted-average common
shares - diluted 87,752 94,223 90,744 100,543
Selected Information
Medical loss ratio 80.2% 77.8% 79.3% 78.9%
Administrative loss ratio,
excluding litigation
settlement charge 12.5% 11.1% 11.8% 11.3%
Earnings before income taxes,
financing charges,
depreciation and
amortization
("EBITDA") $133,656 $152,568 $409,680 $550,531
PMPM premium revenue $271.16 $252.03 $265.10 $247.80
PMPM medical expense $217.59 $196.16 $210.33 $195.45
Fully insured member
months 4,656.1 4,344.2 18,298.8 17,402.4
As of December 31,
Membership Highlights 2002 2001
POS, PPO and Other Plans 1,252,900 1,154,100
HMO 226,600 218,200
Total Fully Insured Commercial 1,479,500 1,372,300
Medicare 70,100 77,800
Third-party Administration 51,900 60,000
Total Membership 1,601,500 1,510,100
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 2002 and December 31, 2001
(In thousands, except share data)
Assets
Dec. 31, Dec. 31,
2002 2001
Current assets:
Cash and cash equivalents $321,627 $345,530
Investments - available-for-sale, at
market value 1,102,664 961,652
Premiums receivable, net 29,803 37,127
Other receivables 43,919 24,678
Prepaid expenses and other current assets 10,214 3,450
Deferred income taxes 111,652 83,416
Total current assets 1,619,879 1,455,853
Property and equipment, net 34,445 35,084
Deferred income taxes 9,173 8,348
Restricted cash and investments 56,421 58,813
Goodwill and other intangible assets, net 24,691 3,302
Other noncurrent assets 8,907 15,325
Total assets $1,753,516 $1,576,725
Liabilities and Shareholders' Equity
Current liabilities:
Medical costs payable $618,618 $595,064
Current portion of long term debt 30,625 26,250
Trade accounts payable and accrued expenses 135,124 116,601
Reserve for litigation settlement 161,300 --
Unearned revenue 201,045 201,225
Income taxes payable 2,418 47,789
Current portion of capital lease obligations 5,470 --
Total current liabilities 1,154,600 986,929
Obligation under capital lease 5,749 --
Long-term debt 96,250 126,876
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 105,075,889 shares in 2002 and
100,353,007 shares in 2001 1,051 1,004
Additional paid-in capital 709,258 605,661
Retained earnings 437,130 215,165
Accumulated other comprehensive income 25,038 7,587
Treasury stock, at cost (675,560) (366,497)
Total shareholders' equity 496,917 462,920
Total liabilities and shareholders'
equity $1,753,516 $1,576,725
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three and Twelve Months Ended December 31, 2002 and 2001
(In thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Cash flows from operating
activities:
Net income $73,841 $94,333 $221,965 $322,421
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and
amortization 6,184 6,210 22,928 21,417
Noncash income (4,708) -- (17,519) --
Litigation and other
noncash charges -- -- 177,832 --
Deferred income taxes 15,428 (16,926) (36,432) 66,127
Realized gain on sale of
investments (12,802) (3,785) (26,883) (20,787)
Changes in assets and
liabilities (net of
balances acquired):
Premiums receivable 14,798 38,325 11,039 19,567
Other receivables (4,368) (2,306) (9,241) 56,316
Prepaid expenses and
other current assets 2,384 1,852 (4,416) 1,684
Medical costs payable (28,801) (7,960) 323 (17,866)
Trade accounts payable
and accrued expenses 18,464 (3,166) 232 2,295
Unearned revenue 60,939 74,670 14,836 112,926
Income taxes payable (54,512) (535) (7,090) 47,789
Other, net 10 443 (3,105) 1,920
Net cash provided by
operating
activities 86,857 181,155 344,469 613,809
Cash flows from investing
activities:
Capital expenditures (3,570) (8,039) (18,981) (21,386)
Purchases of investments (283,182) (156,313) (1,460,763) (1,193,074)
Sales and maturities of
investments 385,731 160,991 1,386,443 1,130,811
Acquisitions, net of cash
acquired -- -- (1,288) (19,483)
Other, net (75) 359 (75) 798
Net cash provided (used)
by investing activities 98,904 (3,002) (94,664) (102,334)
Cash flows from financing
activities:
Proceeds from exercise of
stock options 2,193 3,255 31,545 29,494
Redemption of notes payable (6,563) (5,468) (27,136) (21,874)
Payments under capital leases (1,325) (137) (2,552) (5,700)
Payment of withholding tax on
option exercises -- -- (24,056) --
Purchase of treasury shares (132,126) (132,916) (251,509) (366,497)
Net cash used by
financing activities (137,821) (135,266) (273,708) (364,577)
Net increase (decrease) in
cash and cash equivalents 47,940 42,887 (23,903) 146,898
Cash and cash equivalents at
beginning of period 273,687 302,643 345,530 198,632
Cash and cash equivalents at
end of period $321,627 $345,530 $321,627 $345,530
Exhibit 1
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Supplemental Schedule Reconciling GAAP Earnings to Run Rate Earnings
For the Three Months and Twelve Months Ended December 31, 2002 and 2001
(In thousands, except per share data)
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
Diluted Earnings Per Share 2002 2001 2002 2001
Diluted earnings per common share -
GAAP $0.84 $1.00 $2.45 $3.21
Diluted earnings per share effect
of run rate adjustments
Litigation charge for estimated
settlements, net -- -- 0.98 --
Reserves for legal defense costs 0.13 -- 0.13 0.06
MedUnite investment impairment
charge -- -- 0.07 --
CSC contract termination and
asset valuation charges -- -- 0.10 --
Changes in estimates of prior
period medical cost reserves -- -- (0.22) (0.05)
Changes in estimates of NY
stabilization pool reserves/
receivables -- (0.04) (0.14) (0.04)
Changes in estimates of income
tax valuation reserves -- (0.11) -- (0.21)
Diluted earnings per common share -
Run Rate $0.97 $0.85 $3.37 $2.97
Diluted common shares 87,752 94,223 90,744 100,543
Three Months Twelve Months
Ended Ended
December 31, December 31,
Net Earnings 2002 2001 2002 2001
Net earnings - GAAP $73,841 $94,333 $221,965 $322,421
After-tax effect of run rate
adjustments
Litigation charge for estimated
settlements, net -- -- 89,116 --
Reserves for legal defense
costs 11,780 -- 11,780 5,890
MedUnite investment impairment
charge -- -- 6,479 --
CSC contract termination and
asset valuation charges -- -- 9,130 --
Changes in estimates of prior
period medical cost reserves (217) -- (19,605) (4,948)
Changes in estimates of NY
stabilization pool reserves/
receivables -- (3,887) (12,958) (3,887)
Changes in estimates of income
tax valuation reserves -- (10,000) -- (21,000)
Net earnings - Run Rate $85,404 $80,446 $305,907 $298,476
Note: This supplemental table has been presented to provide additional
financial information to readers of our consolidated financial
statements in an effort to help explain the differences between
our consolidated financial statements reported on a basis
consistent with generally accepted accounting principles ("GAAP")
and the run rate financial performance for the respective
historical periods. The adjustments detailed in this schedule
represent the current period impact of changes in the Company's
estimates of prior period medical cost reserves, litigation
charges and other items that management believes may help readers
of our financial statements interpret our financial performance.
Exhibit 2
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Changes in Medical Costs Payable
For the Years Ended December 31, 2002 and 2001
(In millions)
Amounts Relating to Claims
Year Ended December 31, 2002: Incurred During
2001 and
Total 2002 Prior
Balance as of December 31, 2001 $595.1 $-- $595.1
Medical payables acquired 25.7 -- 25.7
Components of health care services
expense:
Estimated costs incurred 3,904.1 3,904.1 --
Estimate changes (1) (55.3) -- (55.3)
Health care services expense 3,848.8 3,904.1 (55.3)
Payments for health care services (3,851.0) (3,347.1) (503.9)
Balance as of December 31, 2002 $618.6 $557.0 $61.6
Year Ended December 31, 2001: Amounts Relating to Claims
Incurred During
Total 2001 2000 and
Prior
Balance as of December 31, 2000 $612.9 $-- $612.9
Components of health care services
expense:
Estimated costs incurred 3,416.3 3,416.3 --
Estimate changes (15.0) -- (15.0)
Health care services expense 3,401.3 3,416.3 (15.0)
Payments for health care services (3,419.1) (2,911.3) (507.8)
Balance as of December 31, 2001 $595.1 $505.0 $90.1
Notes:
(1) Includes approximately $22 million of estimate changes in New York
market stabilization pool reserves and stop-loss pool recoveries for
New York mandated products.
Exhibit 3
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
COMPONENTS OF MEDICAL COSTS PAYABLE
As of December 31, 2002 and 2001
(In millions)
Amounts Relating to Claims
Incurred During
As of December 31, 2002 Total 2002 2001 and
Prior
IBNR and medical claims reserves $555.7 $521.8 $33.9
Pharmacy PBM payable 26.7 26.7 --
Stabilization and stop-loss pools, BDCC
and GME reserves, net 13.9 8.5 5.4
Other reserves 22.3 -- 22.3
$618.6 $557.0 $61.6
Amounts Relating to Claims
Incurred During
As of December 31, 2001 Total 2001 2000 and
Prior
IBNR and medical claims reserves $517.9 $472.5 $45.4
Pharmacy PBM payable 19.9 19.9 --
Stabilization and stop-loss pools, BDCC
and GME reserves, net 26.4 3.4 23.0
Other reserves 30.9 9.2 21.7
$595.1 $505.0 $90.1
Descriptions of Major Types of Reserves and Accruals
in Medical Costs Payable
IBNR and medical claims reserves
Represents estimates of liabilities for incurred but unreported medical
claims including in-house inventories, adjudicated but not yet paid
claims, net liabilities under risk sharing arrangements and reserves
for previously denied claims.
Pharmacy PBM payable
Represents the bi-weekly amounts due to the Company's pharmacy benefit
manager based on submissions of pharmacy claims.
Stabilization and stop-loss pools, BDCC and GME reserves, net
Represents estimated net liabilities related to various state programs
including New York market stabilization and stop-loss pools, bad debt and
charity care and graduate medical education surcharges.
Other reserves
Represents estimated liabilities for certain former medical contracts
that are in various stages of resolution.
SOURCE Oxford Health Plans, Inc.
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Related links:
http://www.oxfordhealth.com
CONTACT:
Investors - Gary Frazier, +1-203-459-7331, or
Deborah Abraham, +1-203-459-6674, or Media - Maria Gordon-Shydlo,
+1-203-459-7674, all of Oxford Health Plans, Inc.
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