<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
------------------------------------------------
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 0-11531
----------------
U.S. Healthcare, Inc.
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2229683
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
980 Jolly Road, P.O. Box 1109, Blue Bell, Pa. 19422-0770
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 628-4800
--------------------
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of April 30, 1996, there were 139,697,992 shares of Common Stock, $.005 par
value, and 14,429,426 shares of Class B Stock, $.005 par value, outstanding.
This document is comprised of 18 pages. The Index to Exhibits is on pages
16-17.
1
<PAGE> 2
U.S. HEALTHCARE, INC.
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Income - Three months
ended March 31, 1996 and 1995 4
Consolidated Statement of Shareholders' Equity -
Three months ended March 31, 1996 5
Consolidated Statements of Cash Flows - Three months
ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
Index to Exhibits 16 - 17
Exhibit 11 - Computation of Net Income Per Common and
Common Equivalent Share - Three months ended
March 31, 1996 and 1995 18
</TABLE>
2
<PAGE> 3
U.S. HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except per share data)
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 353,703 $ 804,631
Marketable securities 952,534 450,006
Receivables 180,408 144,571
Other 35,378 31,945
---------- ----------
Total current assets 1,522,023 1,431,153
Property and equipment, less accumulated depreciation 140,684 142,137
Marketable securities 50,264 50,771
Other long-term assets 46,806 43,083
---------- ----------
Total assets $1,759,777 $1,667,144
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Medical costs payable $ 559,258 $ 505,832
Unearned premiums 23,453 68,655
Accounts payable and accrued liabilities 80,233 77,511
Income taxes payable 64,951 28,179
---------- ----------
Total current liabilities 727,895 680,177
Long-term liabilities 21,859 22,836
---------- ----------
Total liabilities 749,754 703,013
---------- ----------
Shareholders' equity:
Common stock, $.005 par value - 275,000
shares authorized; 149,222 and 148,891
shares issued in 1996 and 1995 746 744
Class B stock, $.005 par value - 50,000 shares
authorized; 14,430 and 14,431 shares issued and
outstanding in 1996 and 1995 72 72
Additional paid-in capital 188,174 169,359
Retained earnings 1,161,319 1,121,616
Net unrealized gains (losses) on marketable
securities, less applicable income taxes (10,720) 4,758
Common stock held in treasury - at cost;
9,710 shares in 1996 and 1995 (311,767) (311,767)
Unearned portion of restricted common stock (17,801) (20,651)
---------- ----------
Total shareholders' equity 1,010,023 964,131
---------- ----------
Total liabilities and shareholders' equity $1,759,777 $1,667,144
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 4
U.S. HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
--------------------------
1996 1995
---------- --------
<S> <C> <C>
Operating revenue:
Commercial premiums $ 826,865 $711,972
Government premiums 202,057 88,940
Other, principally
administrative services fees 22,958 13,117
---------- --------
1,051,880 814,029
Operating expenses:
Medical costs 789,633 584,202
Administrative, marketing
and other operating costs 120,607 94,626
---------- --------
910,240 678,828
---------- --------
Income from operations 141,640 135,201
Investment income, including
net realized gains and losses 21,840 19,801
Costs incurred in connection with
agreement to merge (22,990) -
---------- --------
Income before income taxes 140,490 155,002
Provision for income taxes 58,852 60,450
---------- --------
Net income $ 81,638 $ 94,552
========== ========
Net income per common and common equivalent
share - primary and fully diluted $.53 $.59
Weighted average number of common and common
equivalent shares outstanding:
Primary 155,300 161,218
Fully diluted 155,321 161,304
</TABLE>
See accompanying notes.
4
<PAGE> 5
U.S. HEALTHCARE, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three months ended March 31, 1996
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Common stock Class B stock
------------------- ----------------- Additional
Number Par Number Par paid-in Retained
of shares value of shares value capital earnings
--------- ----- --------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 148,891 $744 14,431 $72 $169,359 $1,121,616
Exercise of stock options and
related tax benefits 154 1 - - 4,205 -
Net unrealized (losses) on
marketable securities, less
applicable income taxes - - - - - -
Accelerated vesting of restricted
common stock and stock options in
connection with Aetna merger
agreement - - - - 6,004 -
Other restricted common stock
transactions, net 176 1 - - 8,606 -
Conversion of Class B stock
to common stock 1 - (1) - - -
Cash dividends paid:
$.275 per common share - - - - - (38,364)
$.2475 per Class B share - - - - - (3,571)
Net income - - - - - 81,638
------- ---- ------ --- -------- ----------
Balance at March 31, 1996 149,222 $746 14,430 $72 $188,174 $1,161,319
======= ==== ====== === ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Unearned portion
Common stock of restricted
Net unrealized held in treasury common stock
gains (losses) ---------------------- ------------------
on marketable Number Number Shareholders'
securities of shares Cost of shares Amount equity
-------------- --------- --------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 4,758 (9,710) $(311,767) (517) $(20,651) $ 964,131
Exercise of stock options and
related tax benefits - - - - - 4,206
Net unrealized (losses) on
marketable securities, less
applicable income taxes (15,478) - - - - (15,478)
Accelerated vesting of restricted
common stock and stock options in
connection with Aetna merger
agreement - - - 204 8,389 14,393
Other restricted common stock
transactions, net - - - (117) (5,539) 3,068
Conversion of Class B stock
to common stock - - - - - -
Cash dividends paid:
$.275 per common share - - - - - (38,364)
$.2475 per Class B share - - - - - (3,571)
Net income - - - - - 81,638
-------- ------ --------- ---- -------- ----------
Balance at March 31, 1996 $(10,720) (9,710) $(311,767) (430) $(17,801) $1,010,023
======== ====== ========= ==== ======== ==========
</TABLE>
See accompanying notes.
5
<PAGE> 6
U.S. HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating Activities:
Net income $ 81,638 $ 94,552
Adjustments to reconcile net income to cash flow
from operating activities:
Depreciation and amortization 9,406 7,512
Net realized (gains) losses on sales
of marketable securities (2,769) 90
Accelerated vesting of restricted common stock
and stock options in connection with Aetna
merger agreement 14,393 -
Other non-cash charges, net 2,289 4,235
Changes in operating assets and liabilities:
Receivables (35,837) (16,886)
Medical costs payable 53,426 4,211
Unearned premiums (45,202) 11,913
Accounts payable and accrued liabilities 2,722 1,191
Income taxes payable 37,776 40,780
Other, net 6,185 (2,311)
--------- ---------
Cash flow from operating activities 124,027 145,287
--------- ---------
Investing Activities:
Purchase of marketable securities (790,308) (221,245)
Purchase of property and equipment, net (6,262) (4,124)
Proceeds from maturities or sales of marketable securities 265,762 199,090
Other (5,414) (3,461)
--------- ---------
Cash flow from investing activities (536,222) (29,740)
--------- ---------
Financing Activities:
Proceeds from exercise of stock options 3,202 1,253
Cash dividends paid (41,935) (39,672)
--------- ---------
Cash flow from financing activities (38,733) (38,419)
--------- ---------
Increase (decrease) in cash and cash equivalents (450,928) 77,128
Cash and cash equivalents at beginning of period 804,631 123,814
--------- ---------
Cash and cash equivalents at end of period $ 353,703 $ 200,942
========= =========
Supplemental disclosure of cash flow information:
Income taxes paid, net of state income tax refunds $ 15,035 $ 16,433
Supplemental disclosure of non-cash financing activities:
Income tax benefits related to exercise of stock options $ 1,004 $ 893
</TABLE>
See accompanying notes.
6
<PAGE> 7
U.S. HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial information for the three month periods ended March 31,
1996 and 1995 included herein is unaudited. Such information includes
all adjustments, consisting of adjustments of a normal and recurring
nature, which, in the opinion of management, are necessary for a fair
presentation of the Company's consolidated financial position and the
results of its operations and cash flows. Additionally, such
information should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations included
on pages 9 through 12 herein, the Consolidated Financial Statements
and Notes to Consolidated Financial Statements incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (as amended on April 29, 1996), and discussion
of risk factors contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
2. On March 30, 1996, U.S. Healthcare, Inc. ("U.S. Healthcare"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") with
Aetna Life and Casualty Company ("Aetna"), Butterfly, Inc. (the name
of which subsequently changed to Aetna Inc.) ("Parent"), a Connecticut
corporation owned 50% by Aetna and 50% by U.S. Healthcare, New Merger
Corporation ("U.S. Healthcare Sub"), a wholly-owned subsidiary of
Parent, and Antelope Sub, Inc. ("Aetna Sub"), a wholly-owned
subsidiary of Parent, pursuant to which (x) U.S. Healthcare Sub will
merge with and into U.S. Healthcare, with U.S. Healthcare surviving as
a wholly-owned subsidiary of Parent (the "U.S. Healthcare Merger"),
and (y) Aetna Sub will merge with and into Aetna, with Aetna surviving
as a wholly-owned subsidiary of Parent (the "Aetna Merger," and
together with the U.S. Healthcare Merger, the "Mergers"). As a result
of the Mergers, each of U.S. Healthcare and Aetna will become
wholly-owned subsidiaries of a newly formed holding company, Aetna
Inc. A copy of the Merger Agreement was filed as Exhibit 99.1 to U.S.
Healthcare's Current Report on Form 8-K, dated April 2, 1996.
Pursuant to the U.S. Healthcare Merger and the Merger Agreement, each
share of Common Stock, par value $.005 per share, of U.S. Healthcare
(the "U.S. Healthcare Common Stock") and each share of Class B Stock,
par value $.005 per share, of U.S. Healthcare (the "U.S. Healthcare
Class B Stock," and together with the U.S. Healthcare Common Stock,
the "U.S. Healthcare Stock") outstanding immediately prior to the date
of the Mergers (the "Merger Date") shall (except for shares of U.S.
Healthcare Stock held by U.S. Healthcare as treasury stock, certain
shares held by Aetna or any subsidiary of Aetna and shares for which
dissenters' rights have been properly exercised and perfected in
accordance with and subject to the applicable provisions of
Pennsylvania law) be converted into the right to receive (a) $34.20 in
cash without interest, (b) 0.2246 shares of Common Stock of Parent
(the "Parent Common Stock"), and (c) 0.0749 shares of Class C
Preferred Stock of Parent.
Pursuant to the Aetna Merger and the Merger Agreement, each share of
Common Stock, without par value, of Aetna (the "Aetna Stock")
outstanding immediately prior to the Merger Date (except for shares of
Aetna Stock held by Aetna as treasury stock, shares held by U.S.
Healthcare or any subsidiary of U.S.
7
<PAGE> 8
U.S. HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Healthcare and shares of Aetna Stock for which dissenters' rights have
been properly exercised and perfected in accordance with and subject to
the applicable provisions of Connecticut law) will be converted into
the right to receive one share of Parent Common Stock.
The Merger Agreement has been approved by the Board of Directors of
Aetna and the Board of Directors of U.S. Healthcare. The Mergers are
contingent upon, among other things, the approval by shareholders of
Aetna and U.S. Healthcare and the receipt of required regulatory
approvals. Leonard Abramson, the owner of shares representing in
excess of 80% of the voting power of the outstanding Capital Stock of
U.S. Healthcare, has agreed to vote in favor of the Mergers.
In connection with the Merger Agreement, the Company has incurred
certain costs totaling $20.5 million ($23 million less applicable
income taxes) which are reflected in the accompanying financial
statements. In addition to the merger-related costs recorded in the
first quarter, the Company expects to incur additional costs in
connection with the Mergers, substantially all of which are contingent
upon the consummation of the Mergers. A detailed description of the
terms of the Mergers will be contained in a forthcoming proxy
statement.
8
<PAGE> 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Substantially all of the Company's revenue is generated from premiums received
for health care coverage provided to its members. These premiums represent
approximately 98% of the Company's operating revenue in each of the three month
periods ended March 31, 1996 and 1995. The Company's operating expenses are
primarily medical costs consisting principally of medical claims and capitation
costs.
The Company's results of operations depend in large part on accurately
predicting and effectively managing medical costs and other operating expenses.
A variety of factors and risks, including competition, changes in health care
practices, changes in federal or state laws and regulations or the
interpretations thereof, inflation, provider contract changes, new
technologies, government imposed surcharges, taxes or assessments, reductions
in provider payments by governmental payors (including Medicare and Medicaid)
(such reductions may cause providers to seek higher payments from private
payors), major epidemics, disasters, changes in product mix and entry into new
geographic markets (both of which may result in an increase in members
obtaining care from providers not under contract with the Company) and numerous
other factors affecting the delivery and cost of health care, may in the future
affect the Company's ability to control its medical costs and other operating
expenses. Governmental action (including downward adjustments to premium rates)
or business conditions (including intensification of competition and the other
factors described above) could result in premium revenues not increasing to
offset increases in medical costs and other operating expenses. Once set,
premiums are generally fixed for one year periods and, accordingly,
unanticipated costs during such periods cannot be recovered through higher
premiums. The expiration, suspension, termination of, or failure to obtain
contracts to provide health coverage for governmental entities or other
significant customers would also negatively impact the Company. Due to these
factors and risks, no assurance can be given with respect to the Company's
premium levels or its ability to control its medical costs.
Legislative and regulatory proposals have been made at the federal and state
government levels related to the health care system, including but not limited
to limitations on managed care organizations (including benefit mandates,
provider contract limitations, restrictions on utilization management, premium
assessments or taxes to pay for uncompensated care and any willing provider
requirements) and changes in the Medicare and Medicaid programs. Legislative or
regulatory action could also have the effect of reducing the premiums paid to
the Company by governmental programs or increasing the Company's medical costs.
Specifically, potential federal legislation would reduce the premiums payable
to the Company under the Medicare program as compared to previously announced
levels; other potential legislation and regulation could have the result of
reducing the premiums payable to the Company under state Medicaid programs.
The Company is unable to predict the specific content of any legislation or
regulation that may be enacted or when or in what jurisdictions any such
legislation or regulation will be adopted. Therefore, the Company cannot
predict the effect of such legislation or regulation on the Company's business.
For additional factors and risks, see the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
9
<PAGE> 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Three months ended March 31, 1996 and 1995
Operations
Operating revenue increased $237,851,000, or 29%, compared to the first quarter
of 1995, principally due to growth in U.S. Healthcare-insured health plan
enrollment (456,000 additional members since March 31, 1995).
Commercial premiums increased $114,893,000, or 16%, over the first quarter of
1995. The principal factor for the increase was a 20% increase in Commercial
member months (the sum of members enrolled in each month during the quarter),
offset by lower average premiums per member. The average premium for the
Commercial plans, which at March 31, 1996 had about 2,053,000 members,
decreased 4% to $134 per member per month, primarily as a result of employers
selecting lower premium plans which produce lower margins on a per member
basis.
Government premiums consist principally of Medicare and Medicaid premiums.
Medicare premiums increased $104,401,000, or 158%, compared to the first
quarter of 1995. The principal factor for the increase was a 159% increase in
Medicare member months. The average premium for the Medicare plans, which at
March 31, 1996 had about 136,000 members, decreased 1% to $440 per member per
month. Medicaid and other premiums increased $8,716,000, or 38%, over the
first quarter of 1995. The principal factor for the increase was a 57%
increase in Medicaid member months offset by the effects of lower premiums per
member. The average premium for the Medicaid plans, which at March 31, 1996 had
about 91,000 members, decreased 9% to $116 per member per month.
The following table shows total premiums earned in the first quarter of 1996
and the increase in premiums compared to the first quarter of 1995 by plan
type:
<TABLE>
<CAPTION>
Three months ended
March 31, 1996 Increase
------------------ --------
<S> <C> <C>
Commercial plans $ 826,865 $114,893
Government plans:
Medicare plans 170,470 104,401
Medicaid and other plans 31,587 8,716
---------- --------
$1,028,922 $228,010
========== ========
</TABLE>
Other operating revenue, which consists principally of administrative services
fees, increased $9,841,000, or 75%, compared to the first quarter of 1995,
primarily due to a 56% increase in employer-funded health plan members. At
March 31, 1996, the Company had about 569,000 members in employer-funded health
plans.
10
<PAGE> 11
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Three months ended March 31, 1996 and 1995
Medical costs increased $205,431,000, or 35%, over the first quarter of 1995,
primarily due to a 25% growth in U.S. Healthcare-insured member months, and
higher costs per member. Compared to the first quarter of 1995, the weighted
average medical cost per member per month increased 8% to $116. The per member
increase was primarily due to changes in product mix, principally an increase
in the proportion of Medicare enrollment to total enrollment.
Compared to the first quarter of 1995, medical costs rose 1% to $102 per member
per month for Commercial plans, 6% to $352 per member per month for Medicare
plans and 1% to $91 per member per month for Medicaid plans.
Administrative, marketing and other operating costs increased $25,981,000, or
27%, over the first quarter of 1995. Personnel costs contributed the largest
increase as a result of higher salaries and an increase in the number of
employees necessitated, in part, by higher business volume and changes in
product mix, and increased marketing capability.
Investment income increased $2,039,000, or 10%, over the first quarter of 1995,
due to realized gains on sales of marketable securities and higher average
portfolio balances, offset by a decrease in the yield on investments.
Costs incurred in connection with the Aetna Merger Agreement, before applicable
income taxes, totaled $23 million. Of this amount, $11 million related to the
accelerated vesting of employee restricted stock (including related tax
reimbursements due certain executive officers under their employment
agreements), $6 million related to the accelerated vesting of employee stock
options with exercise prices less than the market price on the grant date, and
$6 million related to other costs incurred in connection with the Merger
Agreement, primarily advisory fees and expenses. The Company expects to incur
additional costs in connection with the Mergers, substantially all of which are
contingent upon the consummation of the Mergers, including additional advisory
fees and expenses and the acceleration of the unearned portion of restricted
common stock remaining as of the merger date.
The Company's effective tax rate was 41.9% for the first quarter of 1996,
compared to 39% for the first quarter of 1995. Excluding tax benefits
applicable to costs incurred in connection with the Merger Agreement, the
Company's effective tax rate was 37.5% for the first quarter of 1996.
11
<PAGE> 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Three months ended March 31, 1996 and 1995
Costs incurred in connection with the Aetna Merger Agreement reduced the
Company's net income for the first quarter of 1996 by $20.5 million ($23
million less applicable income taxes), or $.13 per share, from $.66 per share
to $.53 per share compared to net income per share of $.59 for the quarter
ended March 31, 1995. Earnings per share in the first quarter of 1996 reflect
the effects of the Company's repurchase of 6.9 million shares of common stock
during the second and third quarters of 1995.
Liquidity and capital resources
The Company's liquidity requirements have been met from cash flows generated by
operating activities. In the first quarter of 1996, net cash flows from such
activities were $124,027,000. The Company believes that its existing financial
resources are sufficient to meet its liquidity needs.
The Company's operations are conducted principally through HMO and insurance
subsidiaries. These subsidiaries are subject to state regulations which
require the subsidiaries to maintain certain levels of equity, as defined.
Levels of required equity vary by state and, in some states, vary depending on
premium revenue, medical costs, the cost of care delivered by providers not
under contract to the Company and other factors. As of March 31, 1996, the
amount of equity so required was approximately $88 million. The effect of this
required equity is to limit, for use in the subsidiaries' own respective
operations, assets such as cash, marketable securities and receivables in an
amount equal to the sum of the subsidiaries' liabilities plus their required
equity. As of March 31, 1996, cash and marketable securities limited for such
use in the subsidiaries' operations under these requirements totaled
approximately $574 million. Regulations which were adopted but were not yet
effective would have increased the subsidiaries' required equity (and
increased the amount of assets limited as aforesaid) by approximately $20
million as of March 31, 1996. Other changes in equity requirements are being
considered at the state and federal levels which may cause the amount of equity
required to be maintained by subsidiaries to increase. Changes in the factors
underlying existing equity requirements (such as an increase in premium
revenue, medical costs or the cost of care delivered by providers not under
contract to the Company) and expansion into new geographic markets may also
cause the amount of the subsidiaries' required equity to increase. Most states
also require the subsidiaries to obtain approval or provide notice before funds
in excess of certain thresholds are transferred to affiliates.
12
<PAGE> 13
Part II - Other Information
Item 1. Legal Proceedings
In 1995,two class action complaints were filed in the United States District
Court for the Eastern District of Pennsylvania seeking unspecified damages.
The complaints allege that the Company, one of its executive officers and one
of its former executive officers, through certain misrepresentations and
omissions about the Company, violated federal securities laws and related state
common law. The court has granted the plaintiffs' motion for class
certification as to the federal claims but has denied it as to the state
claims. The litigation is still in the preliminary stages, and merits
discovery has begun. The Company has denied the allegations and continues to
defend the actions vigorously.
The Company is also involved in legal actions concerning benefit plan coverage
and other decisions by the Company, and alleged medical malpractice by
participating providers. If found liable in such actions, which are vigorously
defended on several grounds, the Company may bear financial responsibility.
The Company is also involved in certain other claims and legal actions arising
in the ordinary course of business. In the opinion of management, these claims
and legal actions will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
13
<PAGE> 14
Part II - Other Information
Items 2 through 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) 1. Exhibits required to be filed by Item 601 of Regulation S-K.
Exhibits required to be filed by Item 601 of Regulation S-K,
whether filed herewith or incorporated herein by reference, are
listed on the Index to Exhibits of this filing.
Executive Compensation Plans and Arrangements.
Management contracts and compensatory plans, contracts
and arrangements in which directors or executive officers
participate, whether filed herewith or incorporated herein by
reference, are listed in the Index to Exhibits of this Form
10-Q as Exhibits 10.5, 10.6, 10.7, 10.8, 10.9, and 10.10.
(b) 1. Reports on Form 8-K
On February 2, 1996, the Company filed a Current Report on
Form 8-K for Item 5, Other Events. The Form 8-K was filed to
take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, identifying
important factors that could cause the Company's actual
results to differ materially from those projected in
forward-looking statements of the Company or made on behalf of
the Company.
On April 2, 1996, the Company filed a Current Report on Form
8-K for Item 5, Other Events. The Form 8-K was filed to
announce that the Company had entered into an Agreement and
Plan of Merger, dated as of March 30, 1996, with Aetna Life
and Casualty Company. The Form 8-K included agreements and
other items as shown in the Index to Exhibits of this Form
10-Q.
14
<PAGE> 15
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
U.S. HEALTHCARE, INC.
--------------------------------------
Date: May 10, 1996 By: /s/ JAMES H. DICKERSON, JR.
----------------- ---------------------------------
James H. Dickerson, Jr.
Chief Financial Officer
15
<PAGE> 16
Index to Exhibits
Exhibit 10. Material Contracts
<TABLE>
<S> <C>
10.1 Agreement and Plan of Merger, dated as of March 30, 1996, by
and among U.S. Healthcare, Inc., Aetna Life and Casualty
Company, Butterfly, Inc., New Merger Corporation and Antelope
Sub, Inc. (incorporated by reference to Exhibit 99.1 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
10.2 Voting Agreement, dated as of March 30, 1996, by and among
Aetna Life Insurance Company, Aetna Life Insurance and
Annuity Company and Leonard Abramson (incorporated by
reference to Exhibit 99.2 to U.S. Healthcare's Current Report
on Form 8-K dated April 2, 1996).
10.3 Registration Rights Agreement, dated as of March 30, 1996, by
and between Aetna Life and Casualty Company and Leonard
Abramson (incorporated by reference to Exhibit 99.3 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
10.4 Agreement, dated as of March 30, 1996, by and between
Butterfly, Inc. and Leonard Abramson (incorporated by reference
to Exhibit 99.4 to U.S. Healthcare's Current Report on Form
8-K dated April 2, 1996).
10.5 Form of Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and Joseph Sebastianelli
(incorporated by reference to Exhibit 99.5 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
10.6 Form of Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and Michael Cardillo
(incorporated by reference to Exhibit 99.6 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
10.7 Form of Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and David Simon (incorporated
by reference to Exhibit 99.7 to U.S. Healthcare's Current
Report on Form 8-K dated April 2, 1996).
10.8 Form of Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and James Dickerson
(incorporated by reference to Exhibit 99.8 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
10.9 Form of Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and Arthur Leibowitz
(incorporated by reference to Exhibit 99.9 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
</TABLE>
16
<PAGE> 17
Index to Exhibits (Continued)
Exhibit 10. Material Contracts (Continued)
<TABLE>
<S> <C>
10.10 Form of Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and Timothy Nolan
(incorporated by reference to Exhibit 99.10 to U.S.
Healthcare's Current Report on Form 8-K dated April 2, 1996).
10.11 Text of Press Release issued by U.S. Healthcare, Inc. and Aetna
Life and Casualty Company on April 1, 1996 (incorporated by
reference to Exhibit 99.11 to U.S. Healthcare's Current Report
on Form 8-K dated April 2, 1996).
Exhibit 11. Computation of Net Income Per Common and Common Equivalent Share *
Exhibit 27. Financial Data Schedule **
</TABLE>
__________
* Filed herewith.
** Filed in electronic format only.
17
<PAGE> 1
Exhibit 11
----------
U.S. HEALTHCARE, INC.
COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Net income $ 81,638 $ 94,552
======== ========
Weighted average number of common shares:
Shares outstanding at beginning of period 139,181 145,486
Effect of conversion of Class B stock 1 -
Effect of exercise of stock options 87 55
Effect of restricted stock awarded 177 29
Weighted average number of common equivalent shares:
Assumed exercise of stock options 1,424 1,111
Class B stock 14,430 14,537
-------- --------
Weighted average number of common and common equivalent
shares outstanding - primary basis 155,300 161,218
Incremental additional equivalent shares
from application of fully diluted computation 21 86
-------- --------
Weighted average number of common and common equivalent
shares outstanding - fully diluted basis 155,321 161,304
======== ========
Net income per common and common equivalent
share - primary and fully diluted $.53 $.59
==== ====
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31,
1996 FORM 10-Q OF U.S. HEALTHCARE, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 353,703
<SECURITIES> 952,534
<RECEIVABLES> 177,524
<ALLOWANCES> 15,946
<INVENTORY> 0
<CURRENT-ASSETS> 1,522,023
<PP&E> 242,319
<DEPRECIATION> 101,635
<TOTAL-ASSETS> 1,759,777
<CURRENT-LIABILITIES> 727,895
<BONDS> 0
0
0
<COMMON> 746
<OTHER-SE> 1,009,277
<TOTAL-LIABILITY-AND-EQUITY> 1,759,777
<SALES> 0
<TOTAL-REVENUES> 1,073,720
<CGS> 0
<TOTAL-COSTS> 910,240
<OTHER-EXPENSES> 22,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 140,490
<INCOME-TAX> 58,852
<INCOME-CONTINUING> 81,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,638
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
