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 March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
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 April 30, 1998
--------------------- --------------
$.16 2/3 par value 166,447,494 shares
1 of 17
Humana Inc.
Form 10-Q
March 31, 1998
Page of
Form 10-Q
---------
Part I: Financial Information
- ------------------------------
Item 1.Financial Statements
Condensed Consolidated Statements of Income for
the quarters ended March 31, 1998 and 1997 3
Condensed Consolidated Balance Sheets at March 31, 1998
and December 31, 1997 4
Condensed Consolidated Statements of Cash Flows for the
quarters ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-9
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
Part II: Other Information
- ---------------------------
Items 1 to 6 16-17
Exhibits
- --------
Ratio of Earnings to Fixed Charges
Financial Data Schedule - Three Months Ended March 31, 1998
Restated Financial Data Schedule - Twelve Months Ended December 31, 1995
2
<TABLE>
Humana Inc.
Condensed Consolidated Statements of Income
For the quarters ended March 31, 1998 and 1997
Unaudited
(Dollars in millions, except per share results)
1998 1997
---- ----
<S> <C> <C>
Revenues:
Premiums $ 2,352 $ 1,803
Interest and other income 50 29
-------- --------
Total revenues 2,402 1,832
-------- --------
Operating expenses:
Medical expenses 1,955 1,484
Selling, general and administrative 324 261
Depreciation and amortization 32 24
-------- --------
Total operating expenses 2,311 1,769
-------- --------
Income from operations 91 63
Interest expense 12 3
-------- --------
Income before income taxes 79 60
Provision for income taxes 29 21
-------- --------
Net income $ 50 $ 39
======== ========
Earnings per common share $ .30 $ .24
======== ========
Earnings per common share - assuming dilution $ .30 $ .24
======== ========
See accompanying notes.
3
Humana Inc.
Condensed Consolidated Balance Sheets
Unaudited
(Dollars in millions, except per share amounts)
March 31, December 31,
1998 1997
--------- ------------
Assets
Current assets:
Cash and cash equivalents $ 352 $ 627
Marketable securities 1,427 1,507
Premiums receivable, less allowance for
doubtful accounts
$47 - March 31, 1998 and $48 - December 31, 1997 325 351
Other 317 265
-------- --------
Total current assets 2,421 2,750
Long-term marketable securities 463 512
Property and equipment, net 421 420
Cost in excess of net assets acquired 1,217 1,224
Other 524 512
-------- --------
Total assets $ 5,046 $ 5,418
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Medical and other expenses payable $ 1,427 $ 1,478
Trade accounts payable and accrued expenses 438 471
Unearned premium revenues 43 304
Income taxes payable 27 10
-------- --------
Total current liabilities 1,935 2,263
Long-term medical and other expenses payable 515 597
Long-term debt 847 889
Professional liability and other obligations 161 168
-------- --------
Total liabilities 3,458 3,917
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par; authorized 10,000,000
shares; none issued
Common stock, $.16 2/3 par; authorized
300,000,000 shares; issued and outstanding
166,094,981 shares - March 31, 1998 and
164,058,225 shares - December 31, 1997 28 27
Other 1,560 1,474
-------- --------
Total stockholders' equity 1,588 1,501
-------- --------
Total liabilities and stockholders' equity $ 5,046 $ 5,418
======== ========
See accompanying notes.
4
Humana Inc.
Condensed Consolidated Statements of Cash Flows
For the quarters ended March 31, 1998 and 1997
Unaudited
(Dollars in millions)
1998 1997
---- ----
Net cash flows from operating activities $ (310) $ 64
-------- --------
Cash flows from investing activities:
Purchases of marketable securities (198) (113)
Maturities and sales of marketable securities 271 121
Other (19) (32)
Net cash provided by (used in) investing -------- --------
activities 54 (24)
-------- --------
Cash flows from financing activities:
Repayment of line of credit (300)
Net commercial paper borrowings 258 (22)
Other 23 1
-------- --------
Net cash used in financing activities (19) (21)
-------- --------
(Decrease) increase in cash and cash equivalents (275) 19
Cash and cash equivalents at beginning of period 627 322
-------- --------
Cash and cash equivalents at end of period $ 352 $ 341
======== ========
Interest payments $ 11 $ 2
Income tax refunds, net $ 35
See accompanying notes.
</TABLE>
5
Humana Inc.
Notes To Condensed Consolidated Financial Statements
Unaudited
(A) Basis of Presentation
The accompanying condensed consolidated 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 the Form 10-K of Humana Inc. (the "Company") for the year ended
December 31, 1997.
The preparation of the Company's condensed consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect (a) the reported
amounts of assets and liabilities, (b) disclosure of contingent assets and
liabilities at the date of the financial statements and (c) reported amounts
of revenues and expenditures during the reporting period. Actual results
could differ from those estimates.
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) Contingencies
The Company's Medicare risk contracts with the federal government are renewed
for a one-year term each December 31 unless terminated 90 days prior thereto.
In 1997, Congress passed legislation which revised the structure of and
reimbursement for private health plan options for Medicare enrollees.
Management is unable to predict the impact the modification of federal
reimbursement will have on the Company's financial position, results of
operations or cash flows. The Company also maintains annual contracts with
various states and a two-year contract with the Commonwealth of Puerto Rico,
expiring March 31, 1999, to provide health care to Medicaid-eligible
individuals. Additionally, the Company's contract with the United States
Department of Defense to administer the TRICARE program is a one-year
contract renewable annually for up to three additional years. The loss of
these contracts or significant changes in these programs as a result of
administrative or legislative action, 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.
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 the Company's financial position, results of
operations or cash flows.
6
<TABLE>
Humana Inc.
Notes To Condensed Consolidated Financial Statements, continued
Unaudited
(C) Earnings Per Common Share
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128")
which specifies the computation, presentation and disclosure requirements for
earnings per share effective for periods ending after December 15, 1997.
In accordance with SFAS No. 128, earnings per share data for the quarter ended
March 31, 1997 have been restated.
Detail supporting the computation of earnings per common share and earnings
per common share-assuming dilution follows:
Dollars in millions, except per share results
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share
Quarter Ended March 31, 1998 Net Income Shares Results
- -----------------------------------------------------------------------------
Earnings per common share $ 50 164,857,526 $ .30
Effect of dilutive stock options 2,331,930
Earnings per common share
- assuming dilution $ 50 167,189,456 $ .30
- -----------------------------------------------------------------------------
Quarter Ended March 31, 1997
- -----------------------------------------------------------------------------
Earnings per common share $ 39 162,800,973 $ .24
Effect of dilutive stock options 2,215,829
Earnings per common share
- assuming dilution $ 39 165,016,802 $ .24
- -----------------------------------------------------------------------------
Options to purchase 2,015,160 and 3,126,531 shares for the quarters ended
March 31, 1998 and 1997, respectively, were not included in the computation
of earnings per common share-assuming dilution because the options' exercise
prices were greater than the average market price of the common shares.
</TABLE>
(D) Long-Term Debt
The Company repaid the outstanding balance under its five-year revolving
credit agreement ("Credit Agreement") during the quarter ended March 31, 1998,
using funds obtained through its commercial paper program. As a result,
borrowings under the commercial paper program, which is backed by the Credit
Agreement, totaled approximately $847 million at March 31, 1998, with an
average interest rate during the quarter of 5.8 percent.
Borrowings under both the Credit Agreement and commercial paper program have
been classified as long-term debt based on management's ability and intent to
refinance borrowings on a long-term basis.
7
Humana Inc.
Notes To Condensed Consolidated Financial Statements, continued
Unaudited
(E) Acquisitions and Dispositions
On February 28, 1997, the Company acquired Health Direct, Inc.
("Health Direct") from Advocate Health Care for $23 million in cash.
This transaction, which was recorded using the purchase method of accounting,
added approximately 50,000 medical members to the Company's Chicago, Illinois,
membership.
On September 8, 1997, the Company acquired Physician Corporation of America
("PCA") for total consideration of $411 million in cash, consisting primarily
of $7 per share for PCA's outstanding common stock and the assumption of
$121 million in debt. The purchase was funded with borrowings under the
Company's commercial paper program. PCA serves approximately 1.1 million
medical members and provides comprehensive health services through its HMOs
in Florida, Texas and Puerto Rico. In addition, PCA provides workers'
compensation third-party administrative management services. Prior to
November 1996, PCA also was a direct writer of workers' compensation
insurance in Florida. Long-term medical and other expenses payable in the
accompanying consolidated balance sheets includes the long-term portion of
workers' compensation liabilities related to this business. This transaction
was recorded using the purchase method of accounting.
On October 17, 1997, the Company acquired ChoiceCare Corporation
("ChoiceCare") for approximately $250 million in cash. The purchase was
funded with borrowings under the Company's commercial paper program.
ChoiceCare provides health services products to approximately 250,000 medical
members in the Greater Cincinnati, Ohio, area. This transaction was recorded
using the purchase method of accounting.
On January 31, 1997, the Company completed the sale of its Washington, D.C.,
health plan to Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc.
Effective April 1, 1997, the Company also completed the sale of its Alabama
operations, exclusive of its small group business and Alabama TRICARE
operations, to PrimeHealth of Alabama, Inc. On October 31, 1997, the Company
also sold The Lexington Hospital in Lexington, Kentucky, to Jewish Hospital
Healthcare Services, Inc. These sale transactions did not have a material
impact on the Company's financial position, results of operations or cash
flows.
(F) Adoption of New Generally Accepted Accounting Principles
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"), issued by the FASB in June 1997. Comprehensive income is
defined therein as all changes in equity during the period except those
resulting from shareholder equity contributions and distributions.
Comprehensive income totaled $51 million and $30 million for the quarters
ended March 31, 1998 and 1997, respectively, and was comprised of net income
and unrealized investment gains and losses.
8
Humana Inc.
Notes To Condensed Consolidated Financial Statements, continued
Unaudited
In addition, effective January 1, 1998, the Company adopted Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"), issued by the AICPA's Accounting
Standards Executive Committee in March 1998. SOP 98-1 specifies the costs to
be capitalized in connection with obtaining or developing computer software
to be used solely to meet the Company's internal needs. The adoption of
SOP 98-1 did not have a material impact on the Company's financial position
or results of operations.
9
Humana Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion and analysis contains both historical and forward-looking
information. The forward-looking statements may be significantly impacted by
risks and uncertainties, and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. There can
be no assurance that anticipated future results will be achieved because
actual results may differ materially from those projected in the forward-
looking statements. Readers are cautioned that a number of factors, which are
described herein and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, could adversely affect the Company's ability to
obtain these results. These include the effects of either federal or state
health care reform or other legislation, renewal of the Company's Medicare
risk contracts with the federal government, renewal of the Company's contract
with the federal government to administer the TRICARE program, renewal of the
Company's Medicaid contracts with various state governments and the
Commonwealth of Puerto Rico, and the effects of other general business
conditions, including but not limited to, the Company's ability to
integrate its acquisitions, the Company's ability to appropriately address
the "Year 2000" computer system issue, government regulation, competition,
premium rate changes, retrospective premium adjustments relating to federal
government contracts, medical cost trends, changes in Commercial and Medicare
risk membership, capital requirements, the ability of health care providers to
assume financial risk, general economic conditions and the retention of key
employees. In addition, past financial performance is not necessarily a
reliable indicator of future performance and investors should not use
historical performance to anticipate results or future period trends.
Introduction
- ------------
The Company offers managed health care products that integrate medical
management with the delivery of health care services through a network of
providers. This network of providers may share financial risk or have
incentives to deliver quality medical services in a cost-effective manner.
These products are marketed primarily through health maintenance organizations
("HMOs") and preferred provider organizations ("PPOs") that encourage or
require the use of contracting providers. HMOs and PPOs control health care
costs by various means, including pre-admission approval for hospital
inpatient services and pre-authorization of outpatient surgical procedures.
The Company also offers various specialty and administrative service products
including dental, group life and workers' compensation.
The Company's HMO and PPO products are marketed primarily to employers and
other groups ("Commercial") as well as Medicare- and Medicaid-eligible
individuals. The products marketed to Medicare-eligible individuals are
either HMO products ("Medicare risk") or indemnity insurance policies that
supplement Medicare benefits ("Medicare supplement"). The Medicare risk
product provides managed care services that include all Medicare benefits and,
in certain circumstances, additional managed care services. The Company also
maintains annual contracts with various states and a two-year contract with
the Commonwealth of Puerto Rico, expiring March 31, 1999, to provide health
care to Medicaid-eligible individuals. The Company also offers
10
Humana Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
administrative services ("ASO") to employers who self-insure their employee
health plans. In total, the Company's products are licensed in 47 states,
the District of Columbia and Puerto Rico, with approximately 22 percent of
its membership in the state of Florida.
The Company is in the second year of its managed care support contract with
the United States Department of Defense to administer the TRICARE program.
Under the TRICARE contract, which is renewable annually for up to three
additional years, the Company provides managed care services to the
beneficiaries of active military personnel and retired military personnel and
their beneficiaries located in the southeastern United States.
Comparison of Results of Operations
- -----------------------------------
Income before income taxes totaled $79 million for the quarter ended
March 31, 1998 (the "1998 quarter"), compared to $60 million for the quarter
ended March 31, 1997 (the "1997 quarter"). Net income was $50 million or
$.30 per diluted share in the 1998 quarter, compared to $39 million or $.24
per diluted share in the 1997 quarter. This earnings increase was primarily
a result of growth in the Company's Medicare risk membership, continuing
administrative cost reductions and the 1997 acquisitions of Physician
Corporation of America ("PCA") and ChoiceCare Corporation ("ChoiceCare").
These favorable items were partially offset by the effects of increased
Medicare risk hospital utilization and increased pharmacy costs system wide.
The Company's premium revenues increased 30 percent to $2.4 billion for the
1998 quarter, compared to $1.8 billion for the same period in 1997. The
premium revenue increase was primarily attributable to the combined $423
million of premium revenue from PCA and ChoiceCare, same-plan Medicare risk
membership growth and increased Commercial premium yields. Same-plan
Commercial premium yields increased a net 4.5 percent for the 1998 quarter
and are expected to increase approximately 5 to 6 percent throughout the
remainder of 1998. While the Company's Medicare risk statutory premium rate
increased by slightly less than 2 percent, the changing geographical mix of
the Company's Medicare risk membership resulted in a 1 percent decline in the
Medicare risk premium yield during the 1998 quarter, and is expected to result
in a relatively flat premium yield for all of 1998.
Reflecting the effects of a continued premium pricing discipline intended to
maintain adequate profitability, the Company's same-plan fully insured
Commercial membership declined 15,500 members, or less than 1 percent, during
the 1998 quarter, compared to a decline of 113,400 for the same period
in 1997. Offsetting this modest decline, Commercial same-plan ASO membership
increased 40,700 during the 1998 quarter. The Company's same-plan Medicare
risk membership increased 12,700 during the 1998 quarter, compared to a
same-plan increase of 15,100 members for the same period in 1997. This growth
in Medicare risk membership reflects enrollment gains in both the Company's
newer and base Medicare risk markets.
11
Humana Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
In addition to these same-plan membership results, PCA and ChoiceCare
membership totaled 646,000 Commercial members, 598,000 Medicaid members,
59,000 Medicare risk members and 51,000 ASO members. Same-plan membership
results also exclude the sale of the Washington, D.C. health plan and the
Company's Alabama operations. At March 31, 1998, the Company's medical
membership totaled over 6.2 million. Management expects same-plan Commercial
membership to increase at a low to mid single digit rate during 1998, while
Medicare risk membership is expected to increase approximately 20 percent.
The Company also experienced membership increases in its specialty product
lines during the 1998 quarter of 207,200, or 8 percent. As a result, at
March 31, 1998, the Company's specialty membership totaled over 2.6 million.
The Company's medical expense ratio for the 1998 quarter was 83.1 percent,
increasing from 82.3 percent for the same period in 1997 as a result of the
PCA and ChoiceCare acquisitions. Excluding the effect of these acquisitions,
the Company's medical expense ratio increased slightly to 82.4 percent. This
increase resulted from increased pharmacy cost trends system wide and higher
Medicare risk days per thousand, reflecting the impact of increased influenza-
related admissions. These medical cost increases were partially offset by
a modest improvement in Commercial days per thousand trends.
During the 1998 quarter, the Company's administrative cost ratio improved to
15.2 percent from 15.8 percent in the 1997 quarter. This year-over-year
improvement in the administrative cost ratio reflects the impacts of the PCA
and ChoiceCare acquisitions and the Company's efforts to rationalize staffing
levels and streamline the organizational structure. Continued improvement is
expected in the administrative cost ratio throughout 1998.
Interest income totaled $41 million and $26 million for the 1998 and 1997
quarters, respectively. The increase is primarily attributable to a larger
investment portfolio resulting from the addition of PCA and ChoiceCare. The
tax equivalent yield on invested assets approximated 8.5 percent and 8 percent
for the 1998 and 1997 quarters, respectively.
Liquidity
- ---------
During the 1998 quarter, $310 million was used in the Company's operating
activities, compared to $64 million being provided by operations in the 1997
quarter. This net cash used in operations during the 1998 quarter can be
attributed in large part to the timing of receipt of unearned premium payments
from the Health Care Financing Administration ("HCFA") ($235 million), the
paydown of claims of acquired companies ($80 million) and the payment of
certain general and administrative accruals, including pension and other
compensation-related obligations ($25 million).
12
Humana Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
The Company's subsidiaries operate in states that require minimum 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 of the subsidiaries' abilities to obtain regulatory
approval to pay dividends.
The Company maintains a five-year revolving credit agreement
("Credit Agreement") which provides a line of credit of up to $1.5 billion.
Principal amounts outstanding under the Credit Agreement bear interest at
rates ranging from LIBOR plus 12 basis points to LIBOR plus 30 basis points,
depending on the ratio of debt to debt plus net worth. The Credit Agreement,
under which there were no outstanding borrowings at March 31, 1998, contains
customary covenants and events of default.
The Company also maintains a commercial paper program and issues debt
securities thereunder. At March 31, 1998, borrowings under the commercial
paper program totaled approximately $847 million, with an average interest
rate during the quarter of 5.8 percent. The commercial paper program is
backed by the Credit Agreement. Borrowings under both the Credit Agreement
and commercial paper program have been classified as long-term debt based on
management's ability and intent to refinance borrowings on a long-term basis.
Management believes that existing working capital, future operating cash flows
and funds available under the existing revolving Credit Agreement and
commercial paper program are sufficient to meet future liquidity needs.
Management also believes the aforementioned sources of funds are adequate to
allow the Company to pursue strategic acquisition and expansion opportunities,
as well as fund capital requirements.
Capital Resources
- -----------------
The Company's ongoing capital expenditures relate primarily to administrative
facilities and related information systems necessary for activities such as
claims processing, billing and collections, medical utilization review and
customer service. Excluding acquisitions, planned capital spending in 1998
will approximate $70 to $80 million for the expansion and improvement of such
items.
Impact of the Year 2000 Issue
- -----------------------------
The Company has conducted an assessment of its computer systems to identify
the systems that could be affected by the "Year 2000" issue, which results
from computer programs having been written to define the applicable year using
two digits rather than four digits. The Company believes that, with
modifications to existing software, the Year 2000 issue will not pose
significant operational problems for its computer system as so modified.
The Company plans to complete the majority of the Year 2000 modifications by
December 31, 1998. At present, the Company anticipates that the incremental
costs incurred in connection with the Year 2000 project will approximate
$12 to $15 million.
13
Humana Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
The costs of the project and the date on which the Company plans to complete
the necessary Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those plans. Specific factors
that might cause such material differences include, but are not limited to,
the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, the ability of the Company's
significant suppliers, customers and others with which it conducts business,
including federal and state governmental agencies, to identify and resolve
their own Year 2000 issues and similar uncertainties.
14
<TABLE>
Humana Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
Quarterly Membership
1998 1997
---- ----
<S> <C> <C>
Commercial members at:
March 31 3,249,600 2,577,800
June 30 2,577,600
September 30 3,056,400
December 31 3,258,600
Medicare risk members at:
March 31 495,800 374,200
June 30 389,600
September 30 462,400
December 31 480,800
TRICARE eligible members at:
March 31 1,103,500 1,103,100
June 30 1,107,300
September 30 1,107,300
December 31 1,112,200
Medicaid members at:
March 31 632,200 53,200
June 30 51,000
September 30 638,400
December 31 635,200
Medicare supplement members at:
March 31 64,600 93,500
June 30 74,600
September 30 71,200
December 31 68,800
Administrative services members at:
March 31 682,200 566,300
June 30 555,000
September 30 584,500
December 31 651,200
Total medical members at:
March 31 6,227,900 4,768,100
June 30 4,755,100
September 30 5,920,200
December 31 6,206,800
Specialty members at:
March 31 2,647,800 2,172,900
June 30 2,127,200
September 30 2,358,200
December 31 2,440,600
</TABLE>
15
Humana Inc.
Part II: Other Information
Item 1: Legal Proceedings
-----------------
Damages for claims for personal injuries and medical benefit denials are
usual in the Company's business. Personal injury claims are covered by
insurance from the Company's wholly-owned captive insurance subsidiary
and excess carriers, except to the extent that claimants seek punitive
damages, which may not be covered by insurance if awarded. Punitive
damages generally are not paid where claims are settled and generally
are awarded only where a court determines there has been a willful act
or omission to act.
Management does not believe that any pending legal actions will have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
Items 2 - 5:
None.
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 12 - Statement re: Computation of Ratio of Earnings to
Fixed Charges, filed herewith.
Exhibit 27 - Financial Data Schedule for Three Months Ended
March 31, 1998.
Exhibit 27.1995 - Restated Financial Data Schedule for Twelve Months
Ended December 31, 1995.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
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: May 15, 1998 /s/ James E. Murray
------------ -------------------
James E. Murray
Chief Financial Officer
(Principal Accounting Officer)
Date: May 15, 1998 /s/ Arthur P. Hipwell
------------ ---------------------
Arthur P. Hipwell
Senior Vice President and
General Counsel
17
Humana Inc.
Ratio of Earnings to Fixed Charges
For the quarters ended March 31, 1998 and 1997
Unaudited
(Dollars in millions)
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Earnings:
Income before income taxes $ 79 $ 60
Fixed charges 15 5
------ ------
$ 94 $ 65
====== ======
Fixed charges:
Interest charged to expense $ 12 $ 3
One-third of rent expense 3 2
------ ------
$ 15 $ 5
====== ======
Ratio of earnings to fixed charges 6.1 12.7
====== ======
The one-third of rent expense included in fixed charges is that
proportion deemed representative of the interest portion.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 352
<SECURITIES> 1,427
<RECEIVABLES> 372
<ALLOWANCES> 47
<INVENTORY> 6
<CURRENT-ASSETS> 2,421
<PP&E> 749
<DEPRECIATION> 328
<TOTAL-ASSETS> 5,046
<CURRENT-LIABILITIES> 1,935
<BONDS> 847
0
0
<COMMON> 28
<OTHER-SE> 1,560
<TOTAL-LIABILITY-AND-EQUITY> 5,046
<SALES> 2,352
<TOTAL-REVENUES> 2,402
<CGS> 1,955
<TOTAL-COSTS> 2,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 79
<INCOME-TAX> 29
<INCOME-CONTINUING> 50
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<RESTATED>
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0
0
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</TABLE>
