UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-5975
HUMANA INC.
(Exact name of registrant as specified in its charter)
Delaware 61-0647538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 West Main Street, Louisville, Kentucky 40202
(Address of principal executive offices) (Zip Code)
(502) 580-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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, 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.
Outstanding at
Class of Common Stock August 8, 1994
$.16 2/3 par value 160,989,760 shares
1 of 18
HUMANA INC.
FORM 10-Q
June 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Page of
Form 10-Q
Part I: Financial Information
Item 1. Financial Statements
Consolidated Statement of Income for the quarters and
six months ended June 30, 1994 and 1993 3
Condensed Consolidated Balance Sheet at June 30, 1994
and December 31, 1993 4
Condensed Consolidated Statement of Cash Flows for the
six months ended June 30, 1994 and 1993 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
Part II: Other Information
Items 1 to 6 15-17
Exhibit
Ratio of Earnings to Fixed Charges 18
</TABLE>
2
HUMANA INC.
CONSOLIDATED STATEMENT OF INCOME
For the quarters and six months ended June 30, 1994 and 1993
Unaudited
(Dollars in millions except per share results)
<TABLE>
<CAPTION>
<S>
Quarter Six Months
<C> <C> <C> <C>
1994 1993 1994 1993
Revenues:
Premiums $897 $778 $1,750 $1,564
Interest 15 14 28 24
Other 5 3 8 5
Total revenues 917 795 1,786 1,593
Operating expenses:
Medical costs 736 660 1,439 1,322
Selling, general and
administrative 111 91 213 184
Depreciation and
amortization 12 12 24 24
Unusual charge (a) 18 18
Total operating
expenses 877 763 1,694 1,530
Income from operations 40 32 92 63
Interest expense (a) (28) 2 (27) 4
Income before income taxes 68 30 119 59
Provision for
income taxes (a) 14 11 33 22
Net income (a) $ 54 $ 19 $ 86 $ 37
Earnings per
common share (a) $.33 $.12 $ .53 $ .23
Shares used in earnings
per share
computation (000) 160,836 159,040 160,659 158,970
(a) 1994 second quarter and six-month results include the favorable
effect of the settlement of tax disputes with the Internal Revenue
Service partially offset by the write-down of a nonoperational
asset. See Note (B).
</TABLE>
See accompanying notes.
3
HUMANA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, December 31,
1994 1993
Assets
Current assets:
Cash and cash equivalents $ 307 $ 372
Marketable securities 465 427
Premiums receivable, less allowance for loss
of $23 - June 30, 1994 and
$17 - December 31, 1993 51 37
Deferred income taxes 67 129
Other 57 37
Total current assets 947 1,002
Property and equipment, net 317 300
Long-term marketable securities 402 335
Cost in excess of net tangible assets acquired 100 60
Other 55 34
Total assets $1,821 $1,731
Liabilities and Common Stockholders' Equity
Current liabilities:
Medical costs payable $ 528 $ 448
Trade accounts payable and accrued expenses 205 154
Unearned premium revenues 110
Income taxes payable 55 59
Total current liabilities 788 771
Long-term obligations 61 71
Total liabilities 849 842
Common stockholders' equity:
Common stock, 16 2/3 cents par; authorized
300,000,000 shares; issued and outstanding
160,965,386 shares - June 30, 1994 and
160,343,788 shares - December 31, 1993 27 27
Other 945 862
Total common stockholders' equity 972 889
Total liabilities and common
stockholders' equity $1,821 $1,731
See accompanying notes.
</TABLE>
4
HUMANA INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30, 1994 and 1993
Unaudited
(Dollars in millions)
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
Cash flows from operating activities:
Net income $ 86 $ 37
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 24 24
Deferred income taxes 48 3
Unusual charge 18
Changes in operating assets and liabilities (46) (101)
Other 2 13
Net cash provided by
(used in) operating activities 132 (24)
Cash flows from investing activities:
Purchase and disposition of property and equipment, net (11) (6)
Acquisition of health plan assets (37) (5)
Change in marketable securities (123) (19)
Other investing activities (29)
Net cash used in investing activities (200) (30)
Cash flows from financing activities:
Cash contribution from Galen 135
Other 3 (2)
Net cash provided by financing activities 3 133
Increase (decrease) in cash and cash equivalents (65) 79
Cash and cash equivalents at beginning of period 372 233
Cash and cash equivalents at end of period $307 $312
Interest payments, (refunds) net $(20) $ 1
Income tax payments, (refunds) net (13) 15
See accompanying notes.
</TABLE>
5
HUMANA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
(A) Basis of Presentation
The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting principles
or those normally made in an annual report on Form 10-K. Accordingly, for
further information, the reader of this Form 10-Q may wish to refer to
Humana Inc.'s (the "Company") Form 10-K for the year ended December 31,
1993.
The financial information has been prepared in accordance with the
Company's customary accounting practices and has not been audited. In the
opinion of management, the information presented reflects all adjustments
necessary for a fair statement of interim results. All such adjustments
are of a normal and recurring nature.
(B) Income Tax Settlement and Unusual Charge
During the second quarter ended June 30, 1994, the Company settled certain
income tax disputes with the Internal Revenue Service (the "IRS") and
reduced the net book value of a nonoperational asset to its estimated fair
value. As a result of the two separate events which are more fully
described below, Humana's net income for the second quarter ending June
30, 1994 was increased by $17 million or $.10 per share.
Income Tax Settlement
The Company received $71 million in income tax refunds for the
settlement of disputes with the IRS regarding the timing of medical
claims deductions and the deductibility of intangible amortization for
tax years 1988 through 1991. The Company had previously prepaid tax
and interest for these issues for the 1988 and 1989 tax years to stop
the accrual of interest on the disputed amounts.
As a result of the settlement, the Company recognized a $29 million
($18 million or $.11 per share after tax) reduction of interest
expense and a $10 million ($.06 per share) reduction of tax expense,
both of which represented the cumulative effect from 1988 to present
of amounts provided for the disputed items. The remainder of the
refund reduced the deferred tax asset carried on the Company's balance
sheet.
Unusual Charge
The Company reduced the net book value of a nonoperational asset to its
estimated fair market value. As a result, the Company recorded a pretax
charge totaling $18 million ($11 million or $.07 per share after tax).
6
Notes to Condensed Consolidated Financial Statements, continued
Humana Inc.
Unaudited
(C) Subsequent Event
On August 15, 1994, the Company received notification from the National
Committee for Quality Assurance ("NCQA") that its South Florida health
plan had been denied accreditation. The NCQA denial was based upon a site
visit conducted in July 1993. In anticipation of the denial, the Company
and the State of Florida (the "State") developed a corrective action
process that Humana is implementing under the supervision of Florida's
Agency for Health Care Administration. In additon to assisting in the
development of the corrective action process, the State completed its own
site visit of the South Florida plan in August 1994. The Health Care
Financing Administration ("HCFA") has also undertaken an investigation of
the South Florida plan. The Company expects no material effects on its
operations as a result of the denial of accreditation by NCQA or the HCFA
investigation.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Humana Inc.
The Company offers managed health care products which integrate financing
and management with the delivery of health care services through a network
of providers who share financial risk or who have incentives to deliver
cost-effective medical services. These products are marketed primarily
through health maintenance organizations ("HMOs") and preferred provider
organizations ("PPOs") that encourage, and in most HMO products require,
use of contracting providers. HMOs and PPOs also control health care
costs by various means including the use of utilization controls such as
pre-admission approval for hospital inpatient services and pre-
authorization of outpatient surgical procedures.
The HMO and PPO products of Humana are primarily marketed to employer and
other groups ("Commercial") and Medicare-eligible individuals. The
products marketed to Medicare-eligible individuals are either HMO products
that provide health care services which include all Medicare benefits and,
in certain circumstances, additional health care services that are not
included in Medicare benefits ("Medicare risk") or indemnity insurance
policies that supplement Medicare benefits ("Medicare supplement").
Results of Operations
Second Quarter Ended June 30, 1994 and 1993
The Company's premium revenues increased 15 percent to $897 million for
the quarter ended June 30, 1994, compared to $778 million for the same
period in 1993. The increase in premium revenues is attributable to same-
store Commercial and Medicare risk membership gains, premium rate
increases of 4.3 percent for the Commercial product and 4.2 percent for
the Medicare risk product, and the February 28, 1994 acquisition of Group
Health Association ("GHA"), an HMO located in Washington, D.C. GHA
premium revenues during the second quarter of 1994 totaled $50 million.
Same-store Commercial and Medicare risk membership gains for the quarter
ended June 30, 1994, were 6,700 and 4,600, respectively and compare
favorably to the membership declines in the same period a year ago
(decreases of 800 and 400, respectively). For 1994, the Company
anticipates that same-store Commercial and Medicare risk membership gains
will range between 7 and 10 percent. Medicare supplement membership
declined during the quarter ended June 30, 1994, continuing the decline
which resulted from management's decision to increase premiums to more
closely approximate competitive levels and to close certain markets.
The medical loss ratio for the quarter ended June 30, 1994, was 81.9
percent compared to 84.8 percent for the same period in 1993. The loss
ratio improvement was primarily due to decreased hospital utilization in
both the Commercial and Medicare risk products and a reduction in the
Medicare risk product's rate of growth for physician and other medical
services costs. Patient days per thousand members decreased 7 percent to
271 days per thousand for the Commercial product and 12 percent to 1,388
days per thousand for the Medicare risk product. Additional improvements
in hospital and other medical services costs are necessary to achieve
further reductions in the medical loss ratio since premium rate increases
in both the Commercial and Medicare risk products are expected to
approximate 4 percent for the remainder of 1994.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Humana Inc.
The administrative cost ratio was 13.6 percent and 13.1 percent for the
quarters ended June 30, 1994 and 1993, respectively. The increase is the
result of additional spending for the expansion of market service areas,
costs associated with the acquisition of GHA, and increased marketing
efforts. Additional development spending is anticipated for the remainder
of 1994 as the Company continues its strategy of expanding into contiguous
markets.
The Company's income before income taxes totaled $68 million for the
quarter ended June 30, 1994, compared to $30 million for the same period
in 1993. Income before income taxes in 1994 includes $29 million related
to the favorable settlement of tax disputes with the IRS and an $18
million charge related to the write-down of a nonoperational asset. Net
income increased from $19 million or $.12 per share to $54 million or $.33
per share for the quarters ended June 30, 1993 and 1994, respectively.
Included in the second quarter of 1994's net income is $17 million or $.10
per share related to the nonrecurring items described above. The
prospective beneficial effect of these items will approximate $.04 per
share and $.05 per share in 1994 and 1995, respectively.
Six Months Ended June 30, 1994 and 1993
The Company's premium revenues increased 12 percent to $1.8 billion for
the six months ended June 30, 1994 compared to $1.6 billion for the same
period in 1993. The increase in premium revenues is attributable to same-
store Commercial and Medicare risk membership gains of 95,300, premium
rate increases of 3.7 percent for the Commercial product and 4.0 percent
for the Medicare risk product, and the acquisition of GHA. GHA premium
revenues, since the February 28, 1994 acquisition totaled $67 million.
On a same-store basis, Commercial membership increased 57,100 during the
six months ended June 30, 1994 compared to a decrease of 24,600 for the
six months ended June 30, 1993. During this same period, Medicare risk
membership increased 10,400 compared to an increase of 1,900 members in
the same period a year ago. Medicare supplement membership declined
during the six months ended June 30, 1994, continuing the decline which
resulted from management's decision to increase premiums to more closely
approximate competitive levels and to close certain markets.
The medical loss ratio for the six months ended June 30, 1994 was 82.2
percent compared to 84.5 percent for the same period in 1993. The
reduction was primarily attributable to continued improvement in hospital
utilization in both the Commercial and Medicare risk products and a
reduction in the rate of growth for physician and other medical services
costs in the Medicare risk product. Patient days per thousand members
relative to the same six months ended June 30, 1993, decreased 5 percent
to 279 days per thousand for the Commercial product and 8 percent to 1,490
days per thousand for the Medicare risk product. Additional improvements
in hospital and other medical services costs are necessary to achieve
further reductions in the medical loss ratio since premium rate increases
in both the Commercial and Medicare risk products are expected to
approximate 4 percent for the remainder of 1994.
9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Humana Inc.
The administrative cost ratio was 13.5 percent and 13.3 percent for the
six months ended June 30, 1994 and 1993, respectively. The increase is a
result of additional spending for the expansion of market service areas,
costs associated with the acquisition of GHA, and increased marketing
efforts. Additional development spending is anticipated for the remainder
of 1994 as the Company continues its strategy of expanding into contiguous
markets.
The Company's income before income taxes totaled $119 million for the six
months ended June 30, 1994 compared to $59 million for the six months
ended June 30, 1993. Pretax income for 1994 includes $29 million related
to the favorable settlement of tax disputes with the IRS and an $18
million charge related to the write-down of a nonoperational asset. Net
income increased from $37 million or $.23 per share to $86 million or $.53
per share for the six months ended June 30, 1993 and 1994, respectively.
Included in net income for the six months ended June 30, 1994, is $17
million or $.10 per share related to the nonrecurring items described
above. The prospective beneficial effect of these items will approximate
$.04 per share and $.05 per share in 1994 and 1995, respectively.
Liquidity
Cash provided by the Company's operations totaled $132 million for the six
months ended June 30, 1994 compared to cash used by operations of $24
million for the six months ended June 30, 1993. The timing of the receipt
of Medicare risk premiums reduced cash provided by operations by $110
million and $102 million for the six months ended June 30, 1994 and 1993,
respectively. Excluding the effect of the timing of Medicare risk
premiums, cash provided by operations was $242 million and $78 million for
the six months ended June 30, 1994 and 1993, respectively. The increase
in cash provided by operations was primarily attributable to increased net
income, the settlement of the tax disputes with the IRS, and the timing of
payments for medical costs and other payables.
The Company's current assets exceeded current liabilities by $159 million
and $231 million at June 30, 1994 and December 31, 1993, respectively.
The reduction in net working capital is primarily attributable to Humana's
policy of classifying unrestricted cash, cash equivalents and marketable
securities as long-term to conform with their intended use.
The Company's subsidiaries operate in states which require certain levels
of equity and regulate the payment of dividends to the parent company. As
a result, the Company's ability to use operating subsidiaries' cash flows
is restricted to the extent that the subsidiaries' ability to pay
dividends to its parent company requires regulatory approval. At June 30,
1994, the Company had approximately $300 million of unrestricted cash,
cash equivalents and marketable securities compared to $247 million at
December 31, 1993.
Management believes that existing working capital, including the
aforementioned unrestricted funds, cash flows from operations and the
availability of the Company's $200 million line of credit will be
sufficient to meet future liquidity needs.
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Humana Inc.
Capital Resources
The Company's ongoing capital expenditures relate primarily to medical
care facilities used by either employed or affiliated physicians as well
as administrative facilities and related computer information systems
necessary for activities such as claims processing, billing and
collections, medical utilization review and customer service.
Excluding acquisitions, planned capital spending in 1994 will approximate
$45 million to $50 million compared to $28 million in 1993. The increase
in 1994 capital spending relates primarily to the refurbishing and
equipping of the Company's staff model primary care facilities, including
those located in Washington D.C. Management believes that its capital
spending program is adequate to expand, improve and equip its existing
business.
Other Information
The Company provides medical services to Medicare risk members under
contracts with the Health Care Financing Administration ("HCFA") that are
renewed for a one-year term each December 31 unless terminated 90 days
prior thereto. The loss of these contracts or significant changes in the
program, including reductions in payments or increases in benefits without
corresponding increases in payments, would have a material adverse effect
on the revenues, profitability and business prospects of the Company.
HCFA's Office of the Actuary recently announced the projected national
average rate of increase for 1995 under these contracts to be 7.9 percent.
The final rate of increase for 1995 will be announced September 7, 1994.
When the final rate increase is determined, geographic and other
adjustments could significantly affect the Company's actual 1995 increase.
Congress is in the process of evaluating a number of legislative proposals
that would effect major changes in the United States health care system.
Legislative reform is not anticipated before the latter part of 1994 and
implementation of any reform package could take several additional years.
In general, managed care is being considered as a means by which health
care costs may be reduced. At this time, it is not possible to predict
the final form these proposals will take or the effect these proposals may
have on the Company, although management believes the Company is well
positioned to take advantage of the opportunities which will be afforded
by health care reform.
In addition to federal reform, various states in which the Company
operates have implemented or are in the process of implementing changes in
the delivery of health care. Again, it is not possible to predict the
final form these proposals will take or the effect these changes may have
on the Company.
Resolution of various loss contingencies, including litigation pending
against the Company in the ordinary course of business, is not expected to
have a material adverse effect on its financial position or results of
operations.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Humana Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
Commercial members enrolled at:
March 31 1,381,100 1,196,000
June 30 1,386,100 1,195,200
September 30 1,201,500
December 31 1,214,000
Medicare risk members enrolled at:
March 31 276,600 268,600
June 30 281,200 268,200
September 30 268,400
December 31 270,800
Medicare supplement members enrolled at:
March 31 144,100 178,600
June 30 139,000 168,000
September 30 161,100
December 31 153,600
Total members enrolled at:
March 31 1,801,800 1,643,200
June 30 1,806,300 1,631,400
September 30 1,631,000
December 31 1,638,400
</TABLE>
12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Humana Inc.
Supplemental Consolidated Statement of Income
(Dollars in millions except per share results)
<TABLE>
<CAPTION>
1994
<S> <C> <C> <C>
First Second Total
Premiums:
Commercial $ 480 $ 518 $ 998
Medicare risk 342 350 692
Medicare supplement 31 29 60
853 897 1,750
Interest 13 15 28
Other 3 5 8
869 917 1,786
Medical costs 703 736 1,439
Selling, general
and administrative 102 111 213
Depreciation and amortization 12 12 24
817 859 1,676
Income from operations 52 58 110
Interest expense 1 1 2
Pretax income 51 57 108
Provision for income taxes 19 20 39
Net income $ 32 $ 37 $ 69
Earnings per share $ .20 $ .23 $ .43
Medical loss ratio 82.4% 81.9% 82.2%
Administrative cost ratio 13.4% 13.6% 13.5%
Note: Second quarter and the six-month results exclude the impact of the
favorable settlement of tax disputes with the Internal Revenue
Service and the write-down of a nonoperational asset.
</TABLE>
13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Humana Inc.
Supplemental Consolidated Statement of Income
(Dollars in millions except per share results)
<TABLE>
<CAPTION>
1993
<S> <C> <C> <C> <C> <C>
First Second Third Fourth Total
Premiums:
Commercial $ 426 $ 422 $ 428 $ 433 $1,709
Medicare risk 323 323 322 328 1,296
Medicare supplement 37 33 32 30 132
786 778 782 791 3,137
Interest 10 14 12 12 48
Other 2 3 2 3 10
798 795 796 806 3,195
Medical costs 662 660 654 654 2,630
Selling, general
and administrative 93 91 91 93 368
Depreciation and
amortization 12 12 12 11 47
767 763 757 758 3,045
Income from operations 31 32 39 48 150
Interest expense 2 2 1 2 7
Pretax income 29 30 38 46 143
Provision for
income taxes 11 11 15 17 54
Net income $ 18 $ 19 $ 23 $ 29 $ 89
Earnings per share $ .11 $ .12 $ .15 $ .18 $ .56
Medical loss ratio 84.3% 84.8% 83.7% 82.7% 83.8%
Administrative cost ratio 13.4% 13.1% 13.1% 13.3% 13.2%
</TABLE>
14
Humana Inc.
Part II: Other Information
Item 1: Legal Proceedings
A class action law suit styled Mary Forsyth, et al v. Humana
Inc., et al, Case #CV-5-89-249-PMP (L.R.L.), was filed on March
29, 1989, in the United States District Court for the District of
Nevada (the "Forsyth" case). The claims asserted by the
plaintiffs included an ERISA count seeking $49,440,000 of damages
plus approximately $15,396,000 of interest, a RICO count seeking
$103,562,165 of damages (before trebling) plus approximately
$31,800,000 of interest, and an antitrust count for an
unspecified amount of damages which appeared to be similar to
those sought in the RICO count. Despite allegations made by the
plaintiffs, the Company considered the substance of these claims
to be a dispute concerning the calculation of health insurance
benefits and believed the claimed damages were greatly in excess
of any possible recovery even if the plaintiffs were successful.
On July 21, 1993, summary judgment was entered in favor of the
Company on all counts, although the court granted the co-payer
class until August 24, 1993, to file a third amended complaint in
which its members could seek to recover the difference between
their co-insurance payments and what those payments would have
been if co-insurance obligations of the co-payer class had
originally been based on the discounted payments made by Humana
Health Insurance Company of Nevada to Sunrise Hospital and
Medical Center, Las Vegas, Nevada, (now owned by Columbia/HCA
Healthcare Corporation).
On August 24, 1993, a third amended complaint styled Marietta
Cade, et al v. Humana Health Insurance of Nevada, Inc., et al was
filed seeking damages as described above. On January 28, 1994,
summary judgment was entered in favor of plaintiffs on this third
amended complaint and the Court subsequently approved a schedule of
damages in the total amount of $1.6 million, plus $700,000 in
prejudment interest. On July 1, 1994, the plaintiff's filed a
Notice of Appeal to the Court of Appeals for the Ninth Circuit,
seeking reinstatement of all previously dismissed counts. The
Company believes the final resolution of this litigation will not
have a material adverse effect on its operations or financial
position.
Items 2-3:
None
Item 4: Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of stockholders of Humana Inc.
was held in Louisville, Kentucky on May 26, 1994 for the
purposes of electing the board of directors and voting on
the proposals described below.
(b) Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities and Exchange Act of 1934 and there
was no solicitation in opposition to management's
solicitations. All of management's nominees for directors
were elected.
15
Humana Inc.
Part II: Other Information, continued
Item 4: Submission of Matters to a Vote of Security Holders, continued
(c) Four proposals were submitted to a vote of security holders
as follows:
(1) The stockholders approved the election of the
following persons as directors of the Company:
<TABLE>
<S> <C> <C>
NAME FOR WITHHELD
K. Frank Austen, M.D. 142,506,678 425,512
Michael E. Gellert 142,491,275 440,915
John R. Hall 139,564,398 3,367,792
David A. Jones 141,564,744 1,367,446
David A. Jones, Jr. 142,453,183 479,007
Irwin Lerner 142,442,802 489,388
W. Ann Reynolds, Ph.D. 142,482,163 450,027
Wayne T. Smith 142,506,439 425,751
(2) The stockholders approved with 119,434,831 affirmative
votes, 22,131,135 negative votes, and 1,366,224
abstentions, the proposal to amend the Company's 1989
Stock Option Plan for Employees.
(3) The stockholders approved with 106,870,801 affirmative
votes, 34,987,015 negative votes and 1,074,374
abstentions, to amend the 1989 Stock Option Plan for
Non-employee Directors.
(4) The stockholders approved with 135,673,458 affirmative
votes, 5,758,235 negative votes and 1,500,497
abstentions to approve a new Executive Management
Incentive Compensation Plan.
Item 5: Other Information
(a) Ratio of Earnings to Fixed Charges
The Company's ratio of earnings to fixed charges was 25.9
and 12.4 for the second quarter ended June 30, 1994 and
1993, respectively, and 23.2 and 12.1 for the six months
ended June 30, 1994 and 1993, respectively.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 12 - Statement re: Computation of Ratio of
Earnings to Fixed Charges
(b) Reports on Form 8-K
A report on Form 8-K dated June 15, 1994, was filed by the
Company stating the Company had received $71 million in tax
refunds for settlement of certain income tax disputes with
the Internal Revenue Service for the tax years 1988 through
1991.
</TABLE>
16
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.
HUMANA INC.
Date: August 15, 1994 /s/ James E. Murray
James E. Murray
Vice President and Controller
(Principal Accounting Officer)
Date: August 15, 1994 /s/ Arthur P. Hipwell
Arthur P. Hipwell
Senior Vice President and
General Counsel
17
Exhibit 12
HUMANA INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the quarters and six months ended June 30, 1994 and 1993
<TABLE>
<S>
Quarter Ended Six Months Ended
June 30, June 30,
<C> <C> <C> <C>
1994 1993 1994 1993
Ratio of earnings to fixed charges 25.9 12.4 23.2 12.1
For the purpose of determining earnings in the calculation of the ratio of
earnings to fixed charges (the "Ratio"), earnings have been increased by the
provision for income taxes and fixed charges. Fixed charges consist of
interest expense on borrowings and one-third (the proportion deemed
representative of the interest portion) of rents. For purposes of calculating
the Ratio, 1994 earnings and interest expense exclude the impact of nonrecurring
items related to the favorable settlement of tax disputes with the Internal
Revenue Service and the write-down of a nonoperational asset.
</TABLE>
18
