FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
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 0-14796
FHP INTERNATIONAL CORPORATION
a Delaware Corporation
I.R.S. Employer Identification No. 33-0072502
9900 Talbert Avenue, Fountain Valley, CA 92708-8000
(Address of principal executive offices) (Zip Code)
(714) 963-7233
(Registrant's telephone number, including area code)
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 ___.
The registrant had 39,979,563 shares of common stock, par value
$0.05 per share, outstanding at February 9, 1995.
The Exhibit Index Appears on Page 19
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
FHP INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
(amounts in thousands, December 31, June 30,
except share data) 1994 1994
_____________ ___________
Cash and cash equivalents $ 231,911 $ 60,571
Short-term investments (Note 3) 212,617 186,212
Accounts receivable, net 135,398 112,092
Deferred income taxes 29,500 30,360
Prepaid expenses and other
current assets 63,562 56,708
__________ __________
Total current assets 672,988 445,943
Property and equipment, net 403,493 403,754
Long-term investments (Note 3) 83,688 122,782
Restricted investments (Note 3) 96,368 97,879
Excess purchase price over net assets
acquired, net 1,060,435 1,073,839
Other assets, net 24,453 25,072
__________ __________
Total assets $2,341,425 $2,169,269
========== ==========
__________
See accompanying notes to consolidated financial statements.
<PAGE>
FHP INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
(amounts in thousands, December 31, June 30,
except share data) 1994 1994
_____________ ____________
Current portion of long-term
obligations $ 50,160 $ 25,154
Accounts payable 95,004 94,725
Medical claims payable 315,208 283,612
Accrued salaries and employee
benefits 86,178 84,371
Deferred premiums 178,671 32,738
Income taxes payable and other
current liabilities 31,722 67,203
__________ __________
Total current liabilities 756,943 587,803
Long-term obligations 352,905 377,986
Other liabilities 84,146 90,344
__________ __________
Total liabilities 1,193,994 1,056,133
__________ __________
Commitments and contingencies
(Note 5)
Stockholders' equity:
Series A Convertible and Series B
preferred stock, $0.05 par value;
40,000,000 shares authorized (Note 4) 1,053 1,053
Common stock, $0.05 par value;
100,000,000 shares authorized;
39,936,018 and 39,503,675 shares
issued and outstanding at December 31,
1994 and June 30, 1994, respectively 1,997 1,976
Paid-in capital 920,334 915,816
Unrealized holding loss on available-
for-sale securities, net of tax
effect of $3,874 at
December 31, 1994 and $2,617 at
June 30, 1994 (Note 3) (4,548) (4,392)
Retained earnings 228,595 198,683
__________ __________
Total stockholders' equity 1,147,431 1,113,136
__________ __________
Total liabilities and
stockholders' equity $2,341,425 $2,169,269
========== ==========
__________
See accompanying notes to consolidated financial statements.
<PAGE>
FHP INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For The
(amounts in thousands, Three Months Ended
except per share data) December 31,
1994 1993
________ ________
Revenues $954,407 $591,107
________ ________
Expenses:
Primary health care 759,987 472,349
Other health care 29,681 22,779
General, administrative and
marketing 126,079 82,295
________ ________
Total expenses 915,747 577,423
________ ________
Operating income 38,660 13,684
Interest income 7,263 5,088
Interest expense (6,429) (1,881)
________ ________
Income before income taxes 39,494 16,891
Provision for income taxes 18,167 6,638
________ ________
Net income 21,327 10,253
Preferred stock dividends 6,630
________ ________
Net income attributable to
common stock $ 14,697 $ 10,253
======== ========
Primary earnings per share
attributable to common stock (Note 2) $ 0.36 $ 0.31
======== ========
Weighted average number of common
shares and common share equivalents 41,234 33,533
======== ========
Fully diluted earnings per share
(Note 2) - $ 0.30
======== ========
Fully diluted weighted average number
of common shares and common share
equivalents - 33,762
======== ========
__________
See accompanying notes to consolidated financial statements.
FHP INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For The
(amounts in thousands, Six Months Ended
except per share data) December 31,
1994 1993
__________ __________
Revenues $1,908,747 $1,167,486
__________ __________
Expenses:
Primary health care 1,522,995 934,219
Other health care 55,704 45,831
General, administrative and
marketing 254,152 160,268
__________ __________
Total expenses 1,832,851 1,140,318
__________ __________
Operating income 75,896 27,168
Interest income 14,535 9,412
Interest expense (12,566) (2,081)
__________ __________
Income before income taxes 77,865 34,499
Provision for income taxes 35,818 13,000
__________ __________
Net income 42,047 21,499
Preferred stock dividends 12,135
__________ __________
Net income attributable to
common stock $ 29,912 $ 21,499
========== ==========
Primary earnings per share
attributable to common stock (Note 2) $ 0.73 $ 0.64
========== ==========
Weighted average number of common
shares and common share equivalents 41,044 33,515
========== ==========
Fully diluted earnings per share
(Note 2) $ 0.72 $ 0.64
========== ==========
Fully diluted weighted average number
of common shares and common share
equivalents 58,005 33,695
========== ==========
__________
See accompanying notes to consolidated financial statements.
FHP INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For The
Six Months Ended
(amounts in thousands) December 31,
1994 1993
________ ________
Operating Activities
Net income $ 42,047 $ 21,499
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 41,048 21,104
Increase in allowance for doubtful
accounts 2,589 3,644
Loss on disposal of equipment 1,648 1,285
Loss on sale of available-for-sale
securities 276
Deferred income taxes (522) (1,948)
Effect on cash of changes
in operating assets and
liabilities, net of effects
of purchase of Colorado health
maintenance organization
(HMO - 1993):
Accounts receivable (25,895) (9,350)
Other assets (7,330) (9,159)
Accounts payable 279 (10,671)
Medical claims payable 31,596 17,553
Accrued salaries and
employee benefits 1,807 14,700
Deferred premiums 145,933 125,805
Other liabilities (38,728) 8,386
________ ________
Net cash provided by operating
activities 194,748 182,848
________ ________
Investing Activities
Purchases of available-for-sale
securities (Note 3) (236,197) (55,083)
Proceeds from sales/maturities
of available-for-sale securities
(Note 3) 247,984
Purchases of property and
equipment (26,745) (35,416)
Purchase of Colorado HMO
(net of cash acquired) (3,419)
________ ________
Net cash used in investing
activities (14,958) (93,918)
________ ________
<PAGE>
FHP INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS(continued)
(unaudited)
For The
Six Months Ended
(amounts in thousands) December 31,
1994 1993
________ ________
Financing Activities
Proceeds from issuance of
long-term debt 100,000
Payments on long-term
obligations (75) (20,065)
Exercise of stock options 4,577 1,704
Cash dividends paid to preferred
shareholders (12,952)
________ ________
Net cash (used in) provided by
financing activities (8,450) 81,639
________ ________
Increase in cash and
cash equivalents 171,340 170,569
Cash and cash equivalents at
beginning of period 60,571 2,700
________ ________
Cash and cash equivalents at end
of period $231,911 $173,269
======== ========
Supplemental cash flow information:
Interest payments (net of portion
capitalized) $ 11,191 $ 2,476
Income tax payments (net of
refunds) $ 43,240 $ 17,803
__________
See accompanying notes to consolidated financial statements.
FHP INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. Organization and Accounting Policies
FHP International Corporation (the "Company"), through its direct
and indirect subsidiaries, delivers managed health care services and
sells indemnity medical, group life, and workers' compensation
insurance.
On June 17, 1994, the Company completed its acquisition of
TakeCare, Inc. ("TakeCare"). The results of operations of TakeCare are
included in the accompanying financial statements for the six months
ended December 31, 1994.
Interim periods are viewed as an integral part of the annual period
of the Company. Accordingly, the results for the interim periods
reported are based on the accounting principles and practices followed
by the Company as presented in its Annual Report on Form 10-K for the
year ended June 30, 1994. In the opinion of management, all adjustments
necessary to fairly present the financial position and the results of
operations for the six months ended December 31, 1994 and 1993 are
included in these consolidated financial statements.
NOTE 2. Earnings Per Share
Primary earnings per share attributable to common stock for the six
months ended December 31, 1994 and 1993 are computed by dividing net
income after preferred stock dividends by the weighted average number of
common shares and dilutive common stock options (using average market
price), which are considered common share equivalents, outstanding
during the periods.
Fully diluted earnings per share for the six months ended December
31, 1994 and 1993 assume the conversion of the Series A Cumulative
Convertible preferred stock, the elimination of the related preferred
stock dividend requirement and market price as of the end of the period
for dilutive common stock options. Fully diluted earnings per share
were anti-dilutive for the three months ended December 31, 1994.
NOTE 3. Investments
The Company adopted Statement of Financial Accounting Standards No.
115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity
Securities," as of June 30, 1994. The amounts shown in the Company's
consolidated statements of cash flows for purchases of and proceeds from
sales/maturities of available-for-sale securities for the six months
ended December 31, 1994, are reflected separately as required by SFAS
115. The purchases and sales/maturities for the six months ended
December 31, 1993, are shown net as SFAS 115 does not require
retroactive adoption, and the determination of such information for the
prior period was not practical. For the six months ended December 31,
1994, SFAS 115 had no effect on net income but decreased short-term,
long-term and restricted investments by $8,422,000 representing net
unrealized losses, and decreased stockholders' equity by $4,548,000 (net
unrealized losses less deferred income taxes of $3,874,000).
NOTE 4. Preferred Stock
The issued and outstanding, and aggregate liquidation preference of
the Company's two series of preferred stocks are as follows:
December 31, 1994 June 30, 1994
----------------------- -----------------------
Series B Series B
Series A Adjustable Series A Adjustable
Cumulative Rate Cumulative Rate
Convertible Cumulative Convertible Cumulative
----------- ---------- ------------ ----------
Issued and outstanding 21,031,733 61,757 21,031,733 32,850
Aggregate liquidation
preference $525,963,000 $1,558,000 $526,825,000 $821,000
Additional shares of Series B preferred stock were issued during
the six months ended December 31, 1994 to holders of TakeCare common
stock that redeemed their TakeCare shares subsequent to June 30, 1994.
The acquisition agreement provided for the conversion of each share of
TakeCare common stock into the right to receive, without interest, .48
of a share of the Company's common stock, 1.6 shares of Series A
Preferred Stock and either 1.096 shares of Series B Preferred Stock or,
at the election of the holder of such share, cash equal to $27.40 per
share of TakeCare common stock.
NOTE 5. Commitments, Contingencies, and Other Matters
The Health Care Financing Administration ("HCFA") has notified the
Company and other risk-based contractors that HCFA believes that it has
erroneously made overpayments over the last three years for health care
services provided to dually eligible Medicaid/Medicare beneficiaries.
As a result of these errors, HCFA expects to recoup overpayments from
participating HMOs, including the Company. At this time, the Company's
management is reviewing detailed supporting documentation received from
HCFA and is unable to determine the amounts that may be repaid. However,
management currently believes that after consideration of established
reserves, amounts ultimately required to be paid to HCFA will not have
a material adverse effect on the consolidated financial statements of
the Company.
<PAGE>
During the ordinary course of business, the Company and its
subsidiaries have become party to pending and threatened legal actions
and proceedings, a significant portion of which involve alleged claims
of medical malpractice. Management is of the opinion that the outcome
of such legal actions and proceedings will not have a material effect on
the consolidated financial statements of the Company and its
subsidiaries.
Net income for the three months ended December 31, 1994 includes
approximately $2.6 million received for the negotiated early termination
of a management advisory services agreement with an unrelated health
care contractor upon its acquisition.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended December 31, 1994 Compared to
the Three Months Ended December 31, 1993
Revenue
The Company generates substantially all of its revenue from
premiums received for health care services provided to the health
maintenance organization ("HMO") members of its wholly-owned
subsidiaries. Total revenue for the three-month period ended December
31, 1994, was $954 million increasing 61.4% over revenue of $591 million
for the same period in the previous year. The significant revenue
growth was primarily due to the Company's acquisition of TakeCare, Inc.
("TakeCare") and its HMO subsidiaries (the "TakeCare HMOs") on June 17,
1994, and the inclusion of TakeCare's results of operations for the
current three-month period. Revenue growth for the three-month period
ended December 31, 1994, was impacted by moderate increases in
commercial and senior enrollment off-set by lower revenues in the
Company's workers' compensation subsidiary.
The Company's ability to increase commercial HMO premium rates
continues to be adversely impacted by increasing rate competition among
existing HMOs and insurers in the Company's service areas. In addition,
large employers and other purchasers of healthcare services continue to
demand minimal premium rate increases or reductions in premium rates.
Almost all of the Company's senior HMO revenue is generated from
premiums paid to the Company by the Health Care Financing Administration
("HCFA"). The Company receives senior premium rate increases from HCFA
on January 1 of each year. The Company received an average 5.8% senior
premium rate increase effective January 1, 1995. The Company received
an average rate increase of 2.0% effective January 1, 1994. Revenue per
senior member is substantially higher than revenue per commercial member
because senior members use substantially more health care services.
Revenues from the Company's workers' compensation insurance
subsidiary declined by approximately $6 million for the three-month
period ended December 31, 1994, from the three-month period ended
September 30, 1994. The revenue decline was the result of mandated
premium rate reductions for workers' compensation insurance by the State
of California. Effective January 1, 1995, all workers' compensation
insurance premiums will be deregulated in the State of California.
HMO Membership
Total HMO membership grew 98.1% to approximately 1,737,000 at
December 31, 1994, from approximately 877,000 at December 31 1993,
primarily due to the inclusion of approximately 784,000 TakeCare
members. The TakeCare acquisition and substantial contracted provider
("contracted") expansion in recent years have significantly contributed
to contracted HMO membership increasing to approximately 80% of the
Company's total HMO membership. Immediately prior to the TakeCare
acquisition, contracted HMO members comprised approximately 63% of the
Company's total membership.
From December 31, 1993, to December 31, 1994, total commercial
membership increased 146.4% from approximately 558,000 to approximately
1,375,000 primarily due to the inclusion of approximately 756,000
TakeCare commercial members. Most commercial membership growth has
occurred in the Company's contracted plans. Excluding TakeCare
commercial membership, the Company's commercial membership grew year-
over-year by 61,000 or 10.9% from approximately 558,000 at December 31,
1993, to approximately 619,000 at December 31, 1994. Total commercial
membership grew 0.8% to approximately 1,375,000 at December 31, 1994,
from approximately 1,364,000 at June 30, 1994.
Senior membership (including that resulting from the acquisition
of TakeCare), grew by 43,000 or 13.5% to approximately 362,000 at
December 31, 1994, from approximately 319,000 at December 31, 1993.
Excluding TakeCare senior membership, the Company's senior membership
grew year-over-year by 15,000 or 4.7% from approximately 319,000 at
December 31, 1993, to approximately 334,000 at December 31, 1994.
Delays in marketing the Company's senior products to Medicare-eligible
beneficiaries in Northern California (due partly to delays in obtaining
full regulatory approvals) will continue to adversely impact the rate of
senior membership growth in that market for the remainder of fiscal year
1995.
Cost of Health Care
Health care costs increased 59.6% to $790 million for the three-
month period ended December 31, 1994, from $495 million for the three-
month period ended December 31, 1993, primarily due to the inclusion of
the TakeCare HMOs. Health care costs decreased as a percent of revenue
to 82.8% in the current period from 83.8% in the same period of the last
fiscal year. The decrease as a percent of revenue resulted from a lower
cost of healthcare in the TakeCare HMOs. The Company continues to
experience high costs relative to revenues in certain staff model
operations in Southern California. Management believes this has been
caused primarily by increased competition and substantial permanent
employment reductions in several industry sectors in Southern
California.
General, Administrative and Marketing Costs
General, administrative and marketing ("G & A") expenses increased
53.7% to $126 million for the three-month period ended December 31,
1994, from $82 million for the three-month period ended December 31,
1993. The increase resulted primarily from the acquisition of TakeCare.
G & A expenses for the three-month period ended December 31, 1994,
decreased as a percentage of revenue to 13.2% from 13.9% for the same
period in the prior fiscal year. Excluding amortization of intangible
assets arising from the acquisition of TakeCare, G & A for the three-
month period ended December 31, 1994, was 12.6% of revenue, reflecting
savings achieved from the TakeCare acquisition when certain duplicative
sales and administrative departments were merged and facilities closed.
The Company is planning to implement further cost savings and control
measures through the end of fiscal 1995, including but not limited to
additional facility consolidations and staffing reductions.
Six Months Ended December 31, 1994
Compared to the Six Months Ended December 31, 1993
Revenue
Revenue for the six-month period ended December 31, 1994 totaled
$1,909 million, increasing 63.6% over revenue of $1,167 million for the
same period in the previous fiscal year, primarily due to the
acquisition of TakeCare.
Cost of Health Care
Health care costs increased 61.1% to $1,579 million for the six-
month period ended December 31, 1994, from $980 million for the
comparable six-month period ended December 31, 1993. Health care costs
during the six-month period ended December 31, 1994, decreased to 82.7%
of total revenue from 84.0% of total revenue for the same period last
year. The decrease as a percent of revenue resulted from a lower cost
of health care in the TakeCare HMOs of approximately 1.0 percentage
point.
General, Administrative and Marketing Costs
G & A expenses increased 58.8% to $254 million for the six-month
period ended December 31, 1994, from $160 million for the same period in
the previous year, primarily due to the TakeCare acquisition and
continuing expansion of the Company's operations. G & A expenses were
13.3% of total revenue for the six-month period ended December 31, 1994
versus 13.7% of total revenue for the comparable period in the previous
year. Excluding intangible amortization arising from the acquisition of
TakeCare, G & A for the six-month period ended December 31, 1994, was
12.7% of revenue, reflecting savings achieved when certain duplicative
sales and administrative departments were merged and facilities closed.
Interest Income
Net interest income was $2 million for the six-month period ended
December 31, 1994, compared to $7 million for the same period in the
previous fiscal year. Net interest income declined $5 million year-
over-year primarily as the result of additional interest expense due to
an increase in debt related to the acquisition of TakeCare.
Liquidity and Capital Resources
The Company's consolidated cash, cash equivalents and short-term
investments increased by $198 million to $445 million at December 31,
1994, from $247 million at June 30, 1994. This increase reflects the
receipt in December, 1994, of approximately $152 million of premiums
from HCFA due on January 1, 1995, for medical services to be provided to
senior members in January, 1995. Other major sources of cash during the
six-month period ended December 31, 1994, included cash generated from
operations (net of the early receipt of HCFA premiums) of $43 million,
and net transfers of $40 million from long-term investments. Major uses
of cash during the period included $27 million for capital expenditures
and $13 million for preferred stock dividends.
The Company has incurred principal, interest and dividend
obligations arising from (i) the issuance of $100 million of 7% Senior
Notes in September, 1993, (the "Notes"); (ii) borrowings under a $350
million Credit Agreement (the "Credit Agreement") entered into in 1994;
and (iii) the issuance of preferred stock beginning in June 1994. The
Company's ability to make a payment on, or repayment of, its obligations
under the Notes, the Credit Agreement and dividends on its preferred
stock is dependent in part on the receipt of funds by the Company from
the Company's direct and indirect subsidiaries. These subsidiary
payments represent: (a) fees for management services rendered by the
Company to the subsidiaries; (b) the repayment of certain intercompany
debt owed by one of the subsidiaries to the Company; and (c) cash
dividends by the subsidiaries to the Company. Nearly all of the
subsidiaries are subject to HMO regulations or insurance regulations and
may be subject to substantial supervision by one or more HMO regulators
and insurance regulators (the "Regulated Subsidiaries"). Each of the
Regulated Subsidiaries must meet or exceed various fiscal standards
imposed by HMO regulations or insurance regulations or by HMO regulators
or insurance regulators. These fiscal standards may, from time to time,
impact the ability of one or more of the Regulated Subsidiaries to pay
funds to the Company.
The Company believes the payments referred to above by the
subsidiaries, together with other financing sources including the Credit
Agreement, should be sufficient to enable the Company to meet its
payment obligations under the Notes, the Credit Agreement and the
Company's preferred stock (totalling approximately $100 million
annually). The Company believes that cash flow from operations, the
Credit Agreement and existing cash balances will be sufficient to
continue to fund operations and capital expenditures in fiscal year
1995.
Effects of Regulatory Changes and Inflation
Effective January 1, 1995, the Company received an average premium
rate increase from HCFA of approximately 5.8% for its senior HMO
members. Over calendar years 1993 and 1994, annual senior premium
increases from HCFA were approximately 11.6% and 2.0%, respectively.
The Company evaluates the effects of HCFA premium adjustments on its
liquidity and capital resources, and incorporates the actual and
anticipated impact of such adjustments into its planning process.
The Company has been experiencing significant downward pressures on
commercial HMO premium rates, due to competition and counter-
inflationary measures by large commercial employers attempting to hold
their costs down. Also, in recent years health care costs have been
rising at a rate higher than that for consumer goods as a whole, as a
result of inflation, new technology and medical advances. The Company
believes that internal cost control measures and financial risk-sharing
arrangements with its contract medical providers will help to mitigate
the effects of inflation on its operations. However, there can be no
assurance that the Company's efforts to reduce the impact of the
increasing cost of health care will be as successful in the future as
they have been in the past, or that the Company will be able to obtain
premium rate increases in the commercial sector in the short term.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Information relating to certain litigation as set forth in
Note 5 of Notes to Consolidated Financial Statements in Part I of this
report is incorporated herein by this reference.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders was held on November
17, 1994.
(b) Westcott W. Price III, Joseph F. Prevratil and Mark B.
Hacken were elected as Directors to serve three-year
terms ending in 1997. Other Directors whose terms of
office continued after the meeting were Robert Gumbiner,
Burke F. Gumbiner, Warner Heineman, Jack R. Anderson and
Richard M. Burdge, Sr.
(c) The Stockholders elected Westcott W. Price III as a
Director by vote of 31,555,965 for and 366,931 authority
withheld. The Stockholders elected Joseph F. Prevratil
as a Director by a vote of 31,456,520 for and 466,376
authority withheld. The Stockholders elected Mark B.
Hacken as a Director by a vote of 31,365,578 for and
557,318 authority withheld.
(d) The Stockholders approved by a vote of 30,371,333 for,
1,003,746 against, 88,951 abstaining and 458,866 broker
non-votes, the ratification and approval of the Company's
Employee Stock Purchase Plan.
(e) The Stockholders approved by a vote of 31,826,124 for,
37,038 against and 59,734 abstaining the ratification of
the appointment of Deloitte & Touche as independent
auditors of the Company for the fiscal year ending June
30, 1995.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Index to Exhibits at page 19 of this
report.
(b) Reports on Form 8-K. None filed during the second
quarter of Fiscal 1995.
<PAGE>
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.
FHP INTERNATIONAL CORPORATION
Dated: February 10, 1995 By: /s/ Kenneth S. Ord
Senior Vice President and
Chief (Principal) Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
4.1 Registrant agrees to furnish to the Commission upon request a
copy of each instrument with respect to issues of long-term
debt of the Registrant, the authorized principal amount of
which does not exceed 10% of total assets of Registrant.
11.1 Statement Re: Computation of Earnings Per Share.
27.1 Financial Data Schedule.
EXHIBIT 11.1
FHP INTERNATIONAL CORPORATION
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(unaudited)
For The
(amounts in thousands, Three Months Ended
except per share data) December 31,
1994 1993
_______ _______
Primary earnings per share
attributable to common stock:
Net income attributable to
common stock $14,697 $10,253
======= =======
Weighted average number of
common shares and common
share equivalents:
Common stock 39,878 32,992
Assumed exercise of options 1,356 541
_______ _______
Total shares 41,234 33,533
======= =======
Primary earnings per share
attributable to common stock $ 0.36 $ 0.31
======= =======
Fully diluted earnings per share:
Net income attributable to
common stock assuming
conversion of Series A
cumulative convertible
preferred stock $21,300 $10,253
======= =======
Weighted average number of
common shares and common
share equivalents:
Common stock 39,879 32,992
Assumed exercise of options 1,356 770
Assumed conversion of
Series A cumulative
convertible preferred stock 16,961
_______ _______
Total shares, assuming
full dilution 58,196 33,762
======= =======
Fully diluted earnings per share $ 0.37(1) $ 0.30
======= =======
(1) This computation is submitted in accordance with Regulation S-K, Item
601(b)(11) although it is contrary to paragraph 40 of Accounting Principles
Board Opinion No. 15 because it produces an anti-dilutive result.
EXHIBIT 11.1
FHP INTERNATIONAL CORPORATION
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(unaudited)
For The
(amounts in thousands, Six Months Ended
except per share data) December 31,
1994 1993
_______ _______
Primary earnings per share
attributable to common stock:
Net income attributable to
common stock $29,912 $21,499
======= =======
Weighted average number of
common shares and common
share equivalents:
Common stock 39,719 32,926
Assumed exercise of options 1,325 589
_______ _______
Total shares 41,044 33,515
======= =======
Primary earnings per share
attributable to common stock $ 0.73 $ 0.64
======= =======
Fully diluted earnings per share:
Net income attributable to
common stock assuming
conversion of Series A
cumulative convertible
preferred stock $42,003 $21,499
======= =======
Weighted average number of
common shares and common
share equivalents:
Common stock 39,719 32,926
Assumed exercise of options 1,325 769
Assumed conversion of
Series A cumulative
convertible preferred stock 16,961
_______ _______
Total shares, assuming
full dilution 58,005 33,695
======= =======
Fully diluted earnings per share $ 0.72 $ 0.64
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, BALANCE SHEETS AND CASH FLOWS OF FHP
INTERNATIONAL CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH DECEMBER 31, 1994 QUARTERLY REPORT ON FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 231,911
<SECURITIES> 212,617
<RECEIVABLES> 151,435
<ALLOWANCES> 16,037
<INVENTORY> 14,199
<CURRENT-ASSETS> 672,988
<PP&E> 573,970
<DEPRECIATION> 170,477
<TOTAL-ASSETS> 2,341,425
<CURRENT-LIABILITIES> 756,943
<BONDS> 352,905
<COMMON> 396,049
0
527,335
<OTHER-SE> 224,047
<TOTAL-LIABILITY-AND-EQUITY> 2,341,425
<SALES> 1,908,747
<TOTAL-REVENUES> 1,908,747
<CGS> 1,832,851
<TOTAL-COSTS> 1,832,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,589
<INTEREST-EXPENSE> 12,566
<INCOME-PRETAX> 77,865
<INCOME-TAX> 35,818
<INCOME-CONTINUING> 42,047
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,047
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.72
</TABLE>
