Diluted EPS of $1.24 Per Share Before $0.98 Per Share
Charge Related to 1997 Securities Class Action Lawsuits
TRUMBULL, Conn., Oct. 29 /PRNewswire-FirstCall/ -- Oxford Health Plans,
Inc. (NYSE: OHP) announced today net income of $23.8 million, or $0.26 per
diluted common share, for the quarter ended September 30, 2002, compared to
net income of $85.7 million, or $0.85 per diluted common share, for the same
period last year. Results for the current year period include a $151.3
million non-cash pretax charge, or $0.98 per diluted share, as previously
disclosed in the Company's October 22, 2002 press release. Third quarter
earnings for 2002 benefited from changes in estimates of prior period reserves
related to medical claims and NY market stabilization pools from 1999 and 2001
of approximately $0.20 per diluted share. Excluding the effect of the
litigation charge and favorable development, net income for the quarter ended
September 30, 2002 was $1.04 per diluted share.
Revenue for the quarter was $1.27 billion, compared to $1.11 billion in
the third quarter last year. Fully insured commercial membership, excluding
MedSpan, increased by approximately 16 thousand members during the third
quarter. The medical loss ratio ("MLR") for the quarter was 76.1% compared to
76.5% in the prior year quarter. The MLR for the third quarter of 2002
benefited approximately 250 basis points from favorable changes in estimates
related to medical costs discussed above. The administrative loss ratio was
10.9% for the quarter, excluding the litigation charge, compared to 11.2% for
the third quarter of last year.
"We believe our enrollment growth and strong underwriting results for the
quarter and year to date demonstrate that our focus on innovative products and
effectively controlling healthcare costs is the right strategy," said Charles
G. Berg, CEO-elect, President and COO.
The Company reported cash flow from operations of $116.7 million for the
quarter compared to $158.7 million for the prior year period. The prior year
period included the benefit of $50 million in cash receipts resulting from an
agreement with a new pharmacy vendor. As of September 30, 2002, the Company
had approximately $1.47 billion in current cash and marketable securities,
including approximately $242 million at the Parent Company. Oxford repurchased
803,700 shares for $30.5 million in the third quarter of this year, bringing
total open market repurchases under its repurchase program to approximately 16
million shares for $485.4 million. "We believe Oxford's existing free parent
cash and expected future operating cash flows will be sufficient to continue
strengthening our infrastructure while maintaining our share repurchase
program during the remainder of 2002 and 2003," said Kurt B. Thompson, Chief
Financial Officer.
As previously announced, the Company will hold a conference call today,
October 29, 2002, at 10 a.m. (Eastern Time) to review these results as well as
discuss the outlook for the remainder of 2002 and 2003. 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. A replay of the call will be
available from October 29 through November 5, by dialing 402-998-1719 and
using the passcode 1029. 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, 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 expected future operating cash flows, future strengthening of
its infrastructure, and future maintenance of its 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 "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 and
June 30, 2002.
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Income Statements
For the Three and Nine Months Ended September 30, 2002 and 2001
(In thousands, except per share, per member per month and membership
highlights data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Revenues:
Premiums earned $1,241,672 $1,084,904 $3,588,409 $3,217,531
Third-party
administration, net 4,692 3,499 13,176 9,881
Investment and other
income, net 28,036 23,478 63,191 72,952
Total revenues 1,274,400 1,111,881 3,664,776 3,300,364
Expenses:
Health care services 944,497 830,105 2,835,702 2,549,178
Marketing, general and
administrative 135,499 132,010 417,666 367,097
Litigation charges, net 151,300 -- 151,300 --
Interest and other
financing charges 2,685 4,234 8,653 15,519
Total expenses 1,233,981 966,349 3,413,321 2,931,794
Earnings before income
taxes 40,419 145,532 251,455 368,570
Income tax expense 16,611 59,815 103,331 140,482
Net earnings $23,808 $85,717 $148,124 $228,088
Earnings per common share
- basic $0.27 $0.88 $1.69 $2.32
Earnings per common share
- diluted $0.26 $0.85 $1.62 $2.22
Weighted-average common
shares - basic 87,784 97,248 87,729 98,189
Dilutive effect of stock
options 2,965 3,886 3,881 4,424
Weighted-average common
shares - diluted 90,749 101,134 91,610 102,613
Selected Information
Medical loss ratio 76.1% 76.5% 79.0% 79.2%
Administrative loss ratio 10.9% 12.1% 11.6% 11.4%
Earnings before income
taxes, financing
charges, depreciation
and amortization
("EBITDA") $48,859 $155,069 $276,024 $397,963
PMPM premium revenue $267.49 $249.00 $263.03 $246.40
PMPM medical expense $203.47 $190.52 $207.85 $195.22
Fully insured member
months 4,641.9 4,357.0 13,642.7 13,058.2
As of September 30,
Membership Highlights 2002 2001
Freedom and Liberty Plans 1,249,800 1,149,400
HMO 229,000 217,200
Total Fully Insured Commercial 1,478,800 1,366,600
Medicare 69,600 80,300
Third-party Administration 62,700 61,000
Total Membership 1,611,100 1,507,900
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of September 30, 2002 and December 31, 2001
(In thousands, except share data)
Assets
Sept. 30, Dec. 31,
2002 2001
(Unaudited)
Current assets:
Cash and cash equivalents $273,687 $345,530
Investments - available-for-sale, at
market value 1,194,421 961,652
Premiums receivable, net 44,601 37,127
Other receivables 41,979 24,678
Prepaid expenses and other current
assets 14,482 3,450
Deferred income taxes 117,691 83,416
Total current assets 1,686,861 1,455,853
Property and equipment, net 35,015 35,084
Deferred income taxes 13,639 8,348
Restricted cash and investments 56,374 58,813
Goodwill and other intangible assets,
net 27,879 3,302
Other noncurrent assets 7,311 15,325
Total assets $1,827,079 $1,576,725
Liabilities and Shareholders' Equity
Current liabilities:
Medical costs payable $648,893 $595,064
Current portion of long term debt 29,531 26,250
Trade accounts payable and accrued
expenses 109,097 116,601
Reserve for litigation 161,300 -
Unearned revenue 144,814 201,225
Income taxes payable 57,615 47,789
Current portion of capital lease
obligations 5,402 --
Total current liabilities 1,156,652 986,929
Long-term debt 111,049 126,876
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
104,971,035 shares in 2002
and 100,353,007 shares in 2001 1,050 1,004
Additional paid-in capital 706,381 605,661
Retained earnings 363,289 215,165
Accumulated other comprehensive
income 32,092 7,587
Treasury stock, at cost (543,434) (366,497)
Total shareholders' equity 559,378 462,920
Total liabilities and shareholders'
equity $1,827,079 $1,576,725
Oxford Health Plans, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2002 and 2001
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Cash flows from operating
activities:
Net income $23,808 $85,717 $148,124 $228,088
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and
amortization 6,029 5,578 16,744 15,207
Noncash income (5,207) -- (12,811) --
Noncash charges 151,300 -- 177,832 --
Deferred income taxes (57,403) 2,946 (51,860) 83,053
Realized gain on sale of
investments (7,560) (4,420) (14,081) (17,002)
Changes in assets and
liabilities (net of
balances acquired):
Premiums receivable (1,858) (28,067) (3,759) (18,758)
Other receivables (1,505) 4,060 (4,873) 58,622
Prepaid expenses and other
current assets (6,835) 61 (6,800) (168)
Medical costs payable (43,044) (5,107) 29,124 (9,906)
Trade accounts payable and
accrued expenses 496 23,468 (18,232) 5,461
Unearned revenue 10,041 26,563 (46,103) 38,256
Income taxes payable 49,006 48,324 47,422 48,324
Other, net (583) (398) (3,115) 1,477
Net cash provided by
operating activities 116,685 158,725 257,612 432,654
Cash flows from investing
activities:
Capital expenditures (9,124) (2,728) (15,411) (13,347)
Purchases of investments (342,943) (186,035) (1,177,581) (1,036,761)
Sales and maturities of
investments 275,356 184,420 1,000,712 969,820
Acquisitions, net of cash
acquired -- (5,166) (1,288) (19,483)
Other, net 24 165 -- 439
Net cash used by
investing activities (76,687) (9,344) (193,568) (99,332)
Cash flows from financing
activities:
Proceeds from exercise of
stock options 2,025 13,155 29,352 26,239
Redemption of notes payable (7,447) (5,469) (20,573) (16,406)
Payments under capital leases (1,227) (1,798) (1,227) (5,563)
Payment of withholding tax on
option exercises -- -- (24,056) --
Purchase of treasury shares (30,494) (233,581) (119,383) (233,581)
Net cash used by
financing activities (37,143) (227,693) (135,887) (229,311)
Net increase (decrease) in
cash and cash equivalents 2,855 (78,312) (71,843) 104,011
Cash and cash equivalents at
beginning of period 270,832 380,955 345,530 198,632
Cash and cash equivalents at
end of period $273,687 $302,643 $273,687 $302,643
Oxford Health Plans, Inc. And Subsidiaries
Supplemental Schedule Reconciling GAAP Earnings to Run Rate Earnings
For the Three and Nine Months Ended September 30, 2002 and 2001
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
Diluted Earnings Per Share 2002 2001 2002 2001
Diluted earnings per common share -
GAAP $0.26 $0.85 $1.62 $2.22
Diluted earnings per share effect
of run rate adjustments
Litigation charges 0.98 0.06 0.97 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 (0.06) (0.04) (0.19) (0.06)
Changes in estimates of NY
stabilization pool
reserves/receivables (0.14) -- (0.14) --
Changes in estimates of income tax
valuation reserves -- -- -- (0.11)
Diluted earnings per common share -
Run Rate $1.04 $0.87 $2.43 $2.11
Diluted common shares 90,749 101,134 91,610 102,613
Three Months Ended Nine Months Ended
September 30, September 30,
Net Earnings 2002 2001 2002 2001
Net earnings - GAAP $23,808 $85,717 $148,124 $228,088
After-tax effect of run rate
adjustments
Litigation charges, net 89,116 5,890 89,116 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 (5,612) (4,225) (17,552) (6,185)
Changes in estimates of NY
stabilization pool
reserves/receivables (12,958) -- (12,958) --
Changes in estimates of income
tax valuation reserves -- -- -- (11,000)
Net earnings - Run Rate $94,354 $87,382 $222,339 $216,793
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.
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Changes in Medical Costs Payable
For the Nine Months Ended September 30, 2002 and 2001
(In millions)
(Unaudited)
Amounts Relating to
Nine Months Ended September 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 2,887.5 2,887.5 --
Estimate changes (1) (51.8) -- (51.8)
Health care services expense 2,835.7 2,887.5 (51.8)
Payments for health care services(2) (2,781.9) (2,320.7) (461.2)
Balance as of September 30, 2002 $648.9 $566.8 $82.1
Amounts Relating to
Nine Months Ended September 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 2,559.7 2,559.7 --
Estimate changes (10.5) -- (10.5)
Health care services expense 2,549.2 2,559.7 (10.5)
Payments for health care services (2,559.1) (2,074.9) (484.2)
Balance as of September 30, 2001 $603.0 $484.8 $118.2
Notes:
(1) Includes approximately $22 million of estimate changes in NY Market
Stabilization Pool reserves and Stop-Loss Pool recoveries for New York
Mandated products.
(2) Included in 2002 payments are approximately $25.7 million of acquired
MedSpan medical costs payable.
Oxford Health Plans, Inc. And Subsidiaries
Components Of Medical Costs Payable
(In millions)
(Unaudited)
Amounts Relating to Claims
Incurred During
As of September 30, 2002 Total 2002 2001 and
Prior
IBNR and medical claims reserves $575.9 $527.7 $48.2
Pharmacy PBM payable 24.2 24.2 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 21.5 14.9 6.6
Other reserves 27.3 -- 27.3
$648.9 $566.8 $82.1
Amounts Relating to Claims
Incurred During
As of September 30, 2001 Total 2001 2000 and
Prior
IBNR and medical claims reserves $525.4 $460.5 $64.9
Pharmacy PBM payable 3.8 3.8 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 34.9 12.7 22.2
Other reserves 38.9 7.8 31.1
$603.0 $484.8 $118.2
Descriptions of Major Types of Reserves and Accruals in Medical Payables
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 NY Market Stabilization and Stop-Loss
Pools, Bad Debt and Charity Care and Graduate Medical Education.
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:
Investor, 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
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