Diluted EPS of $0.58 Per Share Including Charges of $0.17 Per Share
Commercial Membership Growth of 34,000 During the Quarter
TRUMBULL, Conn., Aug. 1 /PRNewswire-FirstCall/ -- Oxford Health Plans,
Inc. (NYSE: OHP) announced today net income of $52.9 million, or $0.58 per
diluted common share, for the quarter ended June 30, 2002, compared to net
income of $74.8 million, or $0.73 per diluted common share, for the same
period last year. The results for the quarter include certain pretax charges
of $26.5 million, or $0.17 per diluted common share, related to termination of
a computer outsource contract with CSC and reduction in the carrying value of
the Company's investment in MedUnite.
Revenue for the quarter was $1.22 billion, compared to $1.11 billion in
the second quarter last year. Fully insured commercial membership for Oxford
increased by approximately 34 thousand members during the second quarter,
excluding recently acquired MedSpan commercial membership. The medical loss
ratio ("MLR") for the quarter was 81.2% compared to 81.7% in the prior year
quarter. The administrative loss ratio was 12.6% for the quarter, including
1.3% related to the computer outsourcing contract termination, compared to
10.8% for the second quarter of last year. "Excellent enrollment gains and
positive underwriting results demonstrate our leadership in our marketplace.
We believe our focus on making quality healthcare accessible and affordable
will lead to continued growth in our health plans," said Chairman and Chief
Executive Officer, Norman C. Payson, M.D.
The Company reported cash flow from operations of $133.6 million for the
quarter, compared to $76.7 million for the prior year period. As of June 30,
2002, the Company had approximately $1.38 billion in current cash and
marketable securities, including approximately $203 million at the Parent
Company. In July, the Parent Company received $53 million in dividends from
its New York and New Jersey health plans based on their financial results for
the first quarter of 2002, bringing year-to-date dividend receipts by the
Parent Company to $190 million. Oxford repurchased 365 thousand shares for
$16.3 million in the second quarter of this year, bringing total open market
repurchases to 15.2 million shares in the past year. "The Company continues
to expect to make open market purchases and purchases of shares in privately
negotiated transactions from time to time dependent on market conditions as
well as other considerations," said Kurt B. Thompson, Chief Financial Officer.
Commenting on the pretax charges, Thompson added, "The charges in the
period included $15.5 million related to the termination of the CSC
computer-outsourcing contract which we discussed during our first quarter
conference call. Approximately $7.7 million represented primarily a non-cash
write-down in carrying value of certain computer systems that will no longer
be used in operations as a result of the termination. The remaining
$7.8 million represented negotiated contract termination payments that will be
made over the next 30 months. The second charge in the period is a result of
an impairment reserve against the cost basis of the Company's investment in
MedUnite, a connectivity technology company." This $11 million non-cash
pre-tax valuation charge has been reflected in investment and other income,
net, in the consolidated statement of income for the period ended June 30,
2002.
As previously announced, the Company will hold a conference call today,
August 1, 2002 at 10 a.m. (Eastern Time) to review these results as well as
discuss the outlook for the remainder of 2002. The conference call can be
accessed by dialing 1-888-677-8170 (using the passcode "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).
A replay of the call will be available from August 1 through August 8, by
dialing 402-998-1719 and using the passcode 0801.
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, third party administration of employer-funded benefits
plans and Medicare plans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements concerning
the Company's future fully-insured commercial enrollment growth, share
repurchase program, 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.
* The impact of the September 11, 2001 terrorist attacks, subsequent
cases of anthrax infection or exposure, and any future acts of
terrorism or war.
* 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 ongoing
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.
* Those factors included in the discussion under the caption "Business -
Cautionary Statement Regarding Forward-Looking Statements" in the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2001 and its Quarterly Report on Form 10-Q for the period ended
March 31, 2002.
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of June 30, 2002 and December 31, 2001
(In thousands, except share data)
June 30, Dec. 31,
2002 2001
Current assets:
Cash and cash equivalents $270,832 $345,530
Investments - available-for-sale, at
market value 1,110,727 961,652
Premiums receivable, net 42,699 37,127
Other receivables 28,046 24,678
Prepaid expenses and other current assets 7,647 3,450
Deferred income taxes 68,552 83,416
Total current assets 1,528,503 1,455,853
Property and equipment, net 23,525 35,084
Deferred income taxes 18,869 8,348
Restricted cash and investments 58,736 58,813
Goodwill and other intangible assets 28,140 3,302
Other noncurrent assets 7,686 15,325
Total assets $1,665,459 $1,576,725
Liabilities and Shareholders' Equity
Current liabilities:
Medical costs payable $691,759 $595,064
Current portion of long term debt 28,438 26,250
Trade accounts payable and accrued expenses 137,810 116,601
Unearned revenue 139,980 201,225
Income taxes payable 10,204 47,789
Total current liabilities 1,008,191 986,929
Long-term debt 112,447 126,876
Contingencies
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
104,766,850 shares in 2002
and 100,353,007 shares in 2001 1,048 1,004
Additional paid-in capital 702,763 605,661
Retained earnings 339,481 215,165
Accumulated other comprehensive income 14,469 7,587
Treasury stock, at cost (512,940) (366,497)
Total shareholders' equity 544,821 462,920
Total liabilities and shareholders'
equity $1,665,459 $1,576,725
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Income Statements
For the Three and Six Months Ended June 30, 2002 and 2001
(In thousands, except per share, per member per month and membership
highlights data)
June 30, June 30,
2002 2001 2002 2001
Revenues:
Premiums earned $1,202,593 $1,077,339 $2,346,737 $2,132,627
Third-party
administration, net 4,660 3,306 8,484 6,382
Investment and other
income, net 13,991 29,361 35,155 49,474
Total revenues 1,221,244 1,110,006 2,390,376 2,188,483
Expenses:
Health care services 976,764 879,909 1,891,205 1,719,073
Marketing, general and
administrative 151,979 116,556 282,167 235,087
Interest and other
financing charges 2,760 5,226 5,968 11,285
Total expenses 1,131,503 1,001,691 2,179,340 1,965,445
Earnings before income
taxes 89,741 108,315 211,036 223,038
Income tax expense 36,868 33,516 86,720 80,667
Net earnings $52,873 $74,799 $124,316 $142,371
Earnings per common share
- basic $0.60 $0.76 $1.42 $1.44
Earnings per common share
- diluted $0.58 $0.73 $1.35 $1.38
Weighted-average common
shares - basic 87,978 98,867 87,704 98,660
Dilutive effect of stock
options 3,912 4,124 4,344 4,685
Weighted-average common
shares - diluted 91,890 102,991 92,048 103,345
Selected Information
Medical loss ratio 81.2% 81.7% 80.6% 80.6%
Administrative loss ratio 12.6% 10.8% 12.0% 11.0%
Earnings before income taxes,
financing charges,
depreciation and
amortization ("EBITDA") $97,287 $118,327 $227,165 $242,894
PMPM premium revenue $262.37 $246.83 $260.72 $245.10
PMPM medical expense $213.10 $201.60 $210.11 $197.57
Fully insured member months 4,583.7 4,364.7 9,000.8 8,701.2
As of June 30,
Membership Highlights 2002 2001
Freedom and Liberty Plans 1,236,000 1,151,900
HMO 233,600 219,000
Total Fully Insured Commercial 1,469,600 1,370,900
Medicare 68,900 85,200
Third-party Administration 63,300 55,900
Total Membership 1,601,800 1,512,000
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three and Six Months Ended June 30, 2002 and 2001
(In thousands)
June 30, June 30,
2002 2001 2002 2001
Cash flows from operating
activities:
Net income $52,873 $74,799 $124,316 $142,371
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 5,537 5,844 10,715 9,629
Noncash income (3,804) -- (7,604) --
Noncash charges 26,532 -- 26,532 --
Deferred income taxes (358) 30,199 5,543 76,789
Realized gain on sale of
investments (4,145) (10,764) (6,521) (12,582)
Changes in assets and
liabilities (net of balances
acquired):
Premiums receivable 14,262 10,604 (1,901) 9,309
Other receivables (4,559) 4,740 (3,368) 54,562
Prepaid expenses and other
current assets (1,307) 143 35 (229)
Medical costs payable 60,670 (8,558) 72,168 (4,799)
Trade accounts payable and
accrued expenses (5,737) (14,901) (18,728) (14,689)
Unearned revenue (14,525) (17,880) (56,144) 11,693
Income taxes payable 8,015 -- (1,584) --
Other, net 121 2,325 (2,532) 1,875
Net cash provided by
operating activities 133,575 76,551 140,927 273,929
Cash flows from investing
activities:
Capital expenditures (2,828) (5,568) (6,287) (10,619)
Purchases of investments (385,017) (661,585) (834,638) (850,726)
Sales and maturities of
investments 337,921 653,219 725,356 785,400
Acquisitions, net of cash
acquired 610 (14,317) (1,288) (14,317)
Other, net (24) 274 (24) 274
Net cash used by investing
activities (49,338) (27,977) (116,881) (89,988)
Cash flows from financing
activities:
Proceeds from exercise of stock
options 11,123 8,646 27,327 13,084
Redemption of notes payable (6,563) (5,468) (13,126) (10,937)
Payments under capital leases -- (1,862) -- (3,765)
Payment of withholding tax on
option exercises -- -- (24,056) --
Purchase of treasury shares (16,789) -- (88,889) --
Net cash provided (used) by
financing activities (12,229) 1,316 (98,744) (1,618)
Net increase (decrease) in cash
and cash equivalents 72,008 49,890 (74,698) 182,323
Cash and cash equivalents at
beginning of period 198,824 331,065 345,530 198,632
Cash and cash equivalents at end
of period $270,832 $380,955 $270,832 $380,955
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Changes in Medical Costs Payable
For the Six Months Ended June 30, 2002 and 2001
(In millions)
Amounts Relating to
Six Months Ended June 30, 2002: Claims Incurred During
2001 and
Total 2002 Prior
Balance as of December 31, 2001 $595.1 $-- $595.1
Components of health care services
expense:
Estimated costs incurred 1,905.5 1,905.5 --
Estimate changes (14.3) -- (14.3)
Health care services expense 1,891.2 1,905.5 (14.3)
Payments for health care services(1) (1,794.5) (1,332.0) (462.5)
Balance as of June 30, 2002 $691.8 $573.5 $118.3
(1) Included in 2002 payments are approximately $26.5 million of acquired
MedSpan medical costs payable.
Amounts Relating to
Six Months Ended June 30, 2001: Claims Incurred During
2000 and
Total 2001 Prior
Balance as of December 31, 2000 $612.9 $-- $612.9
Components of health care services
expense:
Estimated costs incurred 1,736.3 1,736.3 --
Estimate changes (17.2) -- (17.2)
Health care services expense 1,719.1 1,736.3 (17.2)
Payments for health care services (1,723.9) (1,257.7) (466.2)
Balance as of June 30, 2001 $608.1 $478.6 $129.5
SOURCE Oxford Health Plans, Inc.
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Related links:
http://www.oxfordhealth.com
CONTACT:
Investors - Gary Frazier, +1-203-459-7331, or
Media - Maria Gordon-Shydlo, +1-203-459-7674, both for Oxford
Health Plans, Inc.
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