<PAGE> 1
UNITED STATES
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 June 30, 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: 0-19442
OXFORD HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1118515
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 Connecticut Avenue - Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
(203) 852-1442
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of common
stock, par value $.01 per share, outstanding on August 9, 1996 was 75,744,097.
<PAGE> 2
OXFORD HEALTH PLANS, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 Financial Statements
PAGE
----
<S> <C>
Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 ...................................... 3
Consolidated Statements of Earnings for the Three Months and Six
Months Ended June 30, 1996 and 1995 ....................... 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 .................................... 5
Notes to Condensed Consolidated Financial Statements ............ 6
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................. 7
PART II - OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders ............. 10
ITEM 5 Other Information ............................................... 10
ITEM 6 Exhibits and Reports on Form 8-K ................................ 11
Signatures
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, Dec. 31,
ASSETS 1996 1995
-------- -------
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents ..................................... $108,361 58,450
Short-term investments - available-for-sale
(at market value) ......................................... 587,679 310,197
Premiums receivable (net of allowance for doubtful
accounts of $2,048 in 1996 and $3,029 in 1995) ............ 123,219 96,278
Other receivables ............................................. 18,611 15,260
Prepaid expenses and other current assets ..................... 4,619 3,563
Deferred income taxes ......................................... 9,701 8,443
-------- -------
Total current assets ................................... 852,190 492,191
Property and equipment, at cost (net of accumulated depreciation and
amortization of $48,386 in 1996 and $30,074 in 1995) .......... 108,382 97,414
Other noncurrent assets ............................................ 23,916 19,171
-------- -------
Total assets ........................................... $984,488 608,776
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical costs payable ......................................... $427,483 300,508
Trade accounts payable and accrued expenses ................... 46,053 36,508
Income taxes payable .......................................... 10,434 1,428
Unearned premiums ............................................. 9,022 50,299
-------- -------
Total current liabilities .............................. 492,992 388,743
-------- -------
Stockholders' equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares .. -- --
Common stock, $.01 par value, authorized 200,000,000
shares; issued and outstanding 75,020,643 in 1996
and 34,390,401 in 1995 .................................... 750 343
Additional paid-in capital .................................... 348,790 116,639
Retained earnings ............................................. 137,142 96,167
Unrealized net appreciation of investments .................... 4,814 6,884
-------- -------
Total stockholders' equity ............................. 491,496 220,033
-------- -------
Total liabilities and stockholders' equity ............. $984,488 608,776
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------- ----------------------
1996 1995 1996 1995
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenues:
Premiums earned .......................... $ 712,768 406,275 1,360,950 734,464
Third-party administration, net .......... 2,346 2,828 5,528 5,694
Investment income, net ................... 10,175 4,336 16,900 7,664
--------- -------- ---------- --------
Total revenues ....................... 725,289 413,439 1,383,378 747,822
--------- -------- ---------- --------
Expenses:
Health care services ..................... 572,016 317,968 1,090,232 570,505
Marketing, general and administrative .... 113,553 74,335 220,313 137,179
--------- -------- ---------- --------
Total expenses ....................... 685,569 392,303 1,310,545 707,684
--------- -------- ---------- --------
Operating profit .............................. 39,720 21,136 72,833 40,138
Equity in net loss of affiliate ............... (1,000) (750) (2,050) (1,623)
Other income (expense), net ................... 39 46 90 12
--------- -------- ---------- --------
Earnings before income taxes .................. 38,759 20,432 70,873 38,527
Provision for income taxes .................... 16,301 9,084 29,898 16,806
--------- -------- ---------- --------
Net earnings .................................. $ 22,458 11,348 40,975 21,721
========= ======== ========== ========
Earnings per common and common equivalent
share-primary and fully diluted .......... $ .28 .16 .53 .30
Weighted average shares of common stock and
common stock equivalents outstanding-
primary and fully diluted ................ 80,791 72,770 77,988 72,596
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ................................................... $ 40,975 21,721
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ........................... 20,124 8,757
Provision for doubtful accounts ......................... 1,028 1,619
Deferred income taxes ................................... 180 (2,722)
Equity in net loss of affiliate ......................... 2,050 1,623
Other, net .............................................. 240 36
Changes in assets and liabilities:
Premiums receivable .................................. (27,969) (51,935)
Other receivables .................................... (3,351) (2,371)
Prepaid expenses and other current assets ............ (1,056) (2,148)
Medical costs payable ................................ 126,975 111,474
Trade accounts payable and accrued expenses .......... 9,553 7,094
Income taxes payable ................................. 14,772 1,170
Unearned premiums .................................... (41,277) 20,558
Other, net ........................................... (402) 695
--------- --------
Net cash provided by operating activities ........ 141,842 115,571
--------- --------
Cash flows from investing activities:
Capital expenditures ........................................... (29,896) (41,293)
Purchases of available-for-sale securities ..................... (446,373) (89,522)
Sales and maturities of available-for-sale securities .......... 163,744 34,709
Maturity of long-term investment ............................... -- 13,505
Investments in unconsolidated affiliates ....................... (6,305) (6,228)
Other, net ..................................................... 115 292
--------- --------
Net cash used by investing activities ............ (318,715) (88,537)
--------- --------
Cash flows from financing activities - proceeds
Proceeds from issuance of common stock ......................... 220,541 --
Proceeds from exercise of stock options ........................ 6,243 4,154
--------- --------
226,784 4,154
--------- --------
Net increase in cash and cash equivalents ........................... 49,911 31,188
Cash and cash equivalents at beginning of period .................... 58,450 35,344
--------- --------
Cash and cash equivalents at end of period .......................... $ 108,361 66,532
========= ========
Supplemental cash flow information - cash paid for income taxes ..... $ 18,640 21,265
Supplemental schedule of noncash investing and financing activities:
Unrealized appreciation (depreciation)
of short-term investments ................................... (3,508) 10,382
Tax benefit realized on exercise of stock options .............. 5,766 6,440
Common stock issued for contingent performance grants .......... 8 35
One-for-one stock dividend ..................................... $ 348 161
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The interim condensed consolidated financial statements included
herein have been prepared by Oxford Health Plans, Inc. ("Oxford") and its
subsidiaries (collectively, the "Company") without audit, in accordance with
the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Certain information and footnote disclosures, normally included in the
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted in accordance with SEC rules and
regulations; nevertheless, management of the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. The condensed consolidated financial statements and notes should be
read in conjunction with the audited consolidated financial statements and
notes thereto as of and for each of the years in the three-year period ended
December 31, 1995, included in the Company's Form 10-K filed with the SEC in
March 1996.
On July 3, 1995, a wholly-owned subsidiary of Oxford merged with and
into OakTree Health Plan, Inc. ("OakTree"), a Philadelphia-based health
maintenance organization. The stockholders of OakTree received 1,177,047 newly
issued shares (2,354,094 shares after giving effect to the March 1996
two-for-one split described below) of Oxford's common stock in exchange for all
of the issued and outstanding shares of OakTree's capital stock. The merger was
accounted for as a pooling of interests and, accordingly, the prior year amounts
in the accompanying financial statements have been restated to include the
financial position and results of operations of OakTree.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the consolidated
financial position of the Company with respect to the interim condensed
consolidated financial statements have been made. The results of operations for
the interim periods are not necessarily indicative of the results to be expected
for the full year.
(2) EARNINGS PER SHARE
On March 15, 1996, the Board of Directors approved a
two-for-one split of the Company's common stock effected by distribution of a
dividend of one share of common stock for each share of common stock outstanding
on March 25, 1996. The two-for-one split was effectuated on April 1, 1996.
Earnings per share amounts in the accompanying consolidated statements of
earnings have been restated to reflect the stock split.
(3) PUBLIC OFFERING
On April 8, 1996, the Company completed a registered public
offering of 5,227,272 newly issued post-split shares of common stock from which
the Company realized net proceeds of approximately $220 million.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table shows membership by product:
<TABLE>
<CAPTION>
As of June 30 Increase
------------------- --------------
1996 1995 Amount %
--------- ------- ------- -----
<S> <C> <C> <C> <C>
Membership:
Freedom Plan ....................... 882,000 536,900 345,100 64.3%
HMO ............................... 165,500 101,050 64,450 63.8%
Medicare .......................... 98,000 42,000 56,000 133.3%
Medicaid .......................... 136,000 84,050 51,950 61.8%
--------- ------- -------
Total fully insured ............ 1,281,500 764,000 517,500 67.7%
Third-party administration, net ... 39,600 43,000 (3,400) (7.9%)
--------- ------- -------
Total membership ............... 1,321,100 807,000 514,100 63.7%
========= ======= =======
</TABLE>
The following table provides certain statement of earnings data expressed as a
percentage of total revenues for the three months and six months ended June 30,
1996 and 1995:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------- ---------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned ......................... 98.3% 98.3% 98.4% 98.2%
Third-party administration, net ......... 0.3% 0.7% 0.4% 0.8%
Investment income, net .................. 1.4% 1.0% 1.2% 1.0%
----- ----- ----- -----
Total revenues ....................... 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Expenses:
Health care services .................... 78.9% 76.9% 78.8% 76.3%
Marketing, general and administrative ... 15.7% 18.0% 15.9% 18.3%
----- ----- ----- -----
Total expenses ....................... 94.6% 94.9% 94.7% 94.6%
----- ----- ----- -----
Operating earnings .......................... 5.4% 5.1% 5.3% 5.4%
Equity in net loss of affiliate and other ... (0.1%) (0.2%) (0.1%) (0.2%)
----- ----- ----- -----
Earnings before income taxes ................ 5.3% 4.9% 5.2% 5.2%
Provision for income taxes .................. 2.2% 2.2% 2.2% 2.2%
----- ----- ----- -----
Net earnings ................................ 3.1% 2.7% 3.0% 3.0%
===== ===== ===== =====
Medical-loss ratio .......................... 80.3% 78.3% 80.1% 77.7%
===== ===== ===== =====
Administrative expense as a percent
of operating revenue...................... 15.9% 18.2% 16.1% 18.5%
===== ===== ===== =====
</TABLE>
7
<PAGE> 8
RESULTS OF OPERATIONS
The three months ended June 30, 1996 compared with the three months ended June
30, 1995
Total revenues for the quarter ended June 30, 1996 were $725.3
million, up 75% from $413.4 million during the same period in the prior year.
Net earnings for the second quarter of 1996 totaled $22.5 million, or 28 cents
per share, compared with $11.3 million, or 16 cents per share, for the second
quarter of 1995.
Total commercial premiums earned for the three months ended June
30, 1996 increased 66% to $517.6 million from the same period in the prior year.
This increase is attributable to a 67% increase in member months in the
Company's commercial health care programs, primarily due to a 68% member months
increase in the Freedom Plan. Premium rates of commercial programs were
substantially unchanged from the second quarter of 1995 but were 3.0% higher
than in the fourth quarter of 1995.
Premiums earned from government programs increased 106% to $195.2
million in the second quarter of 1996 compared with $94.6 million in the second
quarter of 1995. Membership growth accounted for most of the change as member
months of Medicare programs increased 147% when compared with the prior year
second quarter, while member months of Medicaid programs increased by 66% over
the level of the prior year second quarter. Premiums per member per month in the
Company's Medicaid programs are now expected to decline at a rate slightly in
excess of 7% for the year. The Medicaid premium declines are largely associated
with significant reductions in reimbursement rates recently announced in New
York. The Company expects that its Medicaid enrollment in New York will be
reduced in future periods as a consequence of these reductions and changes in
eligibility rules.
Net third-party administration revenues for the three months
ended June 30, 1996 declined 17% to $2.3 million from $2.8 million for the same
period in the prior year, attributable to an 8.0% decrease in member months and
a 9.9% decrease in per member per month revenue.
Net investment income for the three months ended June 30, 1996
increased 135% to $10.2 million from $4.3 million for the same period in 1995
due to the increase in invested cash generated by cash flow from operations and
approximately $220 million of net proceeds from the Company's public offering in
April 1996.
The medical-loss ratio (health care services expense stated as a
percentage of premium revenues) was 80.3% for the second quarter of 1996
compared with 78.3% for the second quarter of 1995 and 77.5% for the full year
1995. The increase is attributable to a higher percent of membership in the
Company's Medicare programs, greater than expected pharmacy costs and decreased
per member per month revenue in the Company's Medicaid programs.
Marketing, general and administrative expenses totaled $113.6
million in the second quarter of 1996 compared with $74.3 million in the second
quarter of 1995 and $102.8 million in the fourth quarter of 1995. The increase
over the second quarter of 1995 is primarily attributable to an $18.9 million
rise in payroll and benefits due to increased staffing, increased costs
associated with the growth in membership in the Company's plans, higher broker
commissions attributable to the increase in premiums earned, and expenses
related to enhancements to management information systems necessary to
accommodate increased transaction volume. These expenses as a percent of
operating revenue were 15.9% during the second quarter of 1996 compared with
18.2% during the second quarter of 1995 and 19.4% during the fourth quarter of
1995.
The Company's profitability is dependent, in part, on its ability
to predict and maintain effective control over health care costs (through, among
other things, appropriate benefit design, utilization review and case management
programs and its risk-sharing agreements with providers) while providing members
with quality health care. Factors such as utilization, new technologies and
health care practices, hospital costs, major epidemics, inability to establish
effective risk-sharing agreements with providers and numerous other external
influences may affect Oxford's ability to control such costs. The Company uses
its medical cost containment capabilities, such as claim auditing systems,
physician tracking systems and utilization review protocols, and improved
channeling to the most cost-effective providers with a view to reducing the rate
of growth in health care services expense. There can be no assurance that Oxford
will be successful in mitigating the effect of any or all of the above listed or
other factors. Accordingly, 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.
8
<PAGE> 9
The six months ended June 30, 1996 compared with the six months ended June 30,
1995
Total revenues for the six months ended June 30, 1996 were $1.38
billion, up 85% from $747.8 million during the same period in the prior year.
Net earnings for the first six months of 1996 totaled $41.0 million, or 53 cents
per share, compared with $21.7 million, or 30 cents per share, for the first six
months of 1995.
Total commercial premiums earned for the six months ended June 30,
1996 increased 75% to $989.3 million from the same period in the prior year.
This increase is attributable to a 75% increase in member months in the
Company's commercial health care programs, including a 78% member months
increase in the Freedom Plan.
Premiums earned from government programs increased 121% to $371.7
million in the first six months of 1996 compared with $167.9 million in the
first six months of 1995. Membership growth accounted for most of the change as
member months of Medicare programs increased 165% when compared with the prior
year second quarter, while member months of Medicaid programs increased by 68%
over the level of the prior year second quarter. Premiums per member per month
in the Company's Medicaid programs are now expected to decline at a rate
slightly in excess of 7% for the year.
Net third-party administration revenues for the six months ended
June 30, 1996 decreased 2.9% to $5.5 million from $5.7 million for the same
period in the prior year, attributable to an 8.5% decrease in member months,
partially offset by a 6.1% increase in per member per month revenue.
Net investment income for the six months ended June 30, 1996
increased 121% to $16.9 million from $7.7 million for the same period last year
due to the increase in invested cash generated by cash flow from operations and
approximately $220 million of net proceeds from the Company's public offering in
April 1996.
The medical-loss ratio was 80.1% for the first six months of 1996
compared with 77.7% for the first six months of 1995. The increase is
attributable to higher medical costs in the Company's Medicare programs, greater
than expected pharmacy costs and decreased per member per month revenues in the
Company's Medicaid programs.
Marketing, general and administrative expenses totaled $220.3
million in the first six months of 1996 compared with $137.2 million in the
first six months of 1995. The increase over the first six months of 1995 is
primarily attributable to a $38.1 million rise in payroll and benefits due to
increased staffing, increased costs associated with the growth in membership in
the Company's plans, higher broker commissions attributable to the increase in
premiums earned, and expenses related to enhancements to management information
systems necessary to accommodate increased transaction volume. These expenses as
a percent of operating revenue were 16.1% during the first six months of 1996
compared with 18.5% during the first six months of 1995 and 19.4% during the
fourth quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations of $141.8 million and the net proceeds
of approximately $220 million from the public offering in April of 1996 of
5,227,272 newly issued post-split shares of common stock contributed to an
increase in cash and cash equivalents and short-term investments to $696.0
million as of June 30, 1996 from $368.6 million at December 31, 1995.
The Company's capital expenditures for the first six months of
1996 totaled $30.0 million. Such funds were used primarily for management
information systems and leasehold improvements related to business expansion. In
the second quarter of 1996, the Company also added approximately $55 million to
the capital reserves of its New York HMO subsidiary and approximately $15
million to the capital reserves of its New Jersey HMO subsidiary to support the
expanding business of those subsidiaries.
Except for anticipated capital expenditures, the Company
currently has no definitive commitments for use of material cash resources,
however, management continually evaluates opportunities to expand the Company's
managed care services and health plan operations.
The Company's medical costs payable, which includes reserves for
incurred but not reported claims ("IBNR"), was $427.5 million as of June 30,
1996 and $300.5 million as of December 31, 1995. The Company estimates the
amount of such reserves using standard actuarial methodologies based upon
historical data, including the average interval between the date services are
rendered and the date claims are paid, expected medical cost inflation,
seasonality patterns and increases in membership. The Company believes that its
reserves for IBNR are adequate in order to satisfy its ultimate claim liability.
However, the
9
<PAGE> 10
Company's rapid growth affects the Company's ability to rely on historical
information in making IBNR reserve estimates.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains certain forward-looking statements, including
statements concerning Medicaid premium rates and future enrollment. Actual
results could differ materially from those discussed. Additional information
concerning factors that could cause actual results to differ materially from
those in such forward-looking statements is contained in the Company's Annual
Report on Form 10-K under the caption "Business-Cautionary Statement Regarding
Forward-Looking Statements."
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May
24, 1996 in connection with which proxies were solicited pursuant of Regulation
14A of the Securities and Exchange Act of 1934, as amended. At the meeting
stockholders were asked to consider and vote upon the following proposals: (a)
election of two directors; (b) adoption of the Oxford Health Plans, Inc. 1996
Management Incentive Compensation Plan; and (c) adoption of the Oxford Specialty
Holdings, Inc. 1996 Equity Incentive Compensation Plan. At the meeting, Fred F.
Nazem and Thomas A. Scully were each elected a director of the Company for a
term to expire in 1999. A total of 61,952,873 votes were cast in favor of, and
193,574 votes were cast to withhold authority for Mr. Nazem's election. A total
of 61,950,773 votes were cast in favor of, and 195,674 votes were cast to
withhold authority for Mr. Scully's election. The Oxford Health Plans, Inc.
1996 Management Incentive Compensation Plan was adopted with 59,611,958 votes
cast for, and 882,251 votes cast against the proposal. In addition, there were
230,932 votes abstaining and 1,421,306 broker nonvotes related to the proposal.
The Oxford Specialty Holdings, Inc. 1996 Equity Incentive Compensation Plan was
adopted with 47,889,125 votes cast for, and 8,769,992 votes cast against the
proposal. In addition, there were 272,184 votes abstaining and 5,205,146 broker
nonvotes related to the proposal.
ITEM 5. OTHER INFORMATION
Recent Federal Legislation
Congress recently passed and the President is expected to sign the
Health Insurance Portability and Accountability Act of 1996, which (i) insures
portability of health insurance to individuals changing jobs or moving to
individual coverage by limiting application of preexisting condition exclusions,
(ii) guarantees availability of health insurance to employees in the small group
market and (iii) prevents exclusion of individuals from coverage under group
plans based on health status. The provisions are effective beginning July 1,
1997. The Company is currently subject to similar state law provisions in New
York limiting preexisting condition exclusions for new group and individual
enrollees who had continuous prior coverage and requiring issuance of group
coverage to small group employers. The Act also permits offering Medical Savings
Account plans on a pilot basis and includes programs targeting fraud and abuse.
Recent New York State Legislation
The New York legislature passed and the Governor is expected to
sign the Health Care Reform Act of 1997. Effective January 1, 1997, the Act
allows all private health care payors to negotiate payment rates for inpatient
hospital services. Previously, only HMOs could negotiate rates for these
services. While non-HMO payors who compete with the Company may pay negotiated
hospital rates beginning next year, the Company expects that it will continue to
have competitive arrangements with hospitals in its network in view of its
position as one of the largest payors in the market. The Act also provides for
direct funding of hospital bad debt and charity care and graduate medical
education by payments to State funding pools rather than through surcharges
on payments for hospital services, and reduced aggregate funding levels. These
changes will require the Company to adjust the payments it makes to network
hospitals to reflect elimination of these surcharges. There can be no assurance
that the Company will reach agreement on these adjustments with all contracted
hospitals in New York or that agreement will be reached by January 1, 1997.
The New York legislature also recently passed legislation related
to operation of managed care plans, which contains provisions relating to, among
other things, utilization review, consumer disclosure and right of hearing on
termination of physicians from health plan networks.
10
<PAGE> 11
The Company is unable to determine the ultimate impact of the
foregoing legislation or of future legislation and regulatory changes. See the
Company's Annual Report on Form 10-K, Item 1, Business--Government Regulation,
and Cautionary Statement Regarding Forward-Looking Statements--Government
Regulation; Reimbursement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
11 Computation of Net Earnings Per Share
of Common Stock
(b) Reports on Form 8-K
In a report on Form 8-K dated April 2, 1996, and filed on
April 2, 1996, the Company reported, under Item 5, "Other
Events," the form of two underwriting agreements related to
the proposed issuance and sale of approximately $230 million
in aggregate offering price of the Company's common shares.
The securities were registered under the Securities Act of
1933, as amended, pursuant to the Company's Registration
Statement on Form S-3 (File No. 333-2464).
In a report on Form 8-K dated May 7, 1996, and filed May 8,
1996, the Company reported, under Item 5. "Other Events," its
first quarter 1996 earnings press release.
11
<PAGE> 12
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.
OXFORD HEALTH PLANS, INC.
-------------------------------------------
(Registrant)
August 14, 1996 /s/ STEPHEN F. WIGGINS
- --------------------- -------------------------------------------
Date STEPHEN F. WIGGINS, Chairman
and Chief Executive Officer
August 14, 1996 /s/ ANDREW B. CASSIDY
- --------------------- -------------------------------------------
Date ANDREW B. CASSIDY, Chief Financial Officer
12
<PAGE> 13
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Document Number
- ------ ----------------------- ------
<S> <C> <C>
11 Computation of Net Earnings Per Share of Common Stock 14
</TABLE>
13
<PAGE> 1
EXHIBIT 11
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER SHARE OF COMMON STOCK (a)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------ --------------
1996 1995 1996 1995
--------- ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY:
Net earnings ........................................... $ 22,458 11,348 40,975 21,721
========= ====== ====== ======
Weighted average number of shares of common
stock and common stock equivalents:
Weighted average number of shares outstanding .... 74,960 66,958 72,157 66,662
Dilutive effect of stock options ................ 5,831 5,812 5,831 5,932
--------- ------ ------ ------
Weighted average number of common stock
and common stock equivalents ........................ 80,791 72,770 77,988 72,594
========= ====== ====== ======
Earnings per common and common equivalent share ........ $ .28 .16 .53 .30
========= ====== ====== ======
FULLY-DILUTED:
Net earnings ........................................... $ 22,458 11,348 40,975 21,721
========= ====== ====== ======
Weighted average number of shares of common
stock and common stock equivalents:
Weighted average number of shares outstanding .... 74,960 66,958 72,157 66,662
Dilutive effect of stock options ................ 5,831 5,812 5,831 5,932
--------- ------ ------ ------
Weighted average number of common stock
and common stock equivalents ........................ 80,791 72,770 77,988 72,594
========= ====== ====== ======
Earnings per common and common equivalent share ........ $ .28 .16 .53 .30
========= ====== ====== ======
</TABLE>
(a) All share and per share amounts in the earnings per share computation
have been shown giving retroactive effect to the two-for-one stock
split in March 1996.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1996 (Unaudited) and the Consolidated
Statement of Earnings for the Six Months Ended June 30, 1996 (Unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 108,361
<SECURITIES> 587,679
<RECEIVABLES> 125,267
<ALLOWANCES> 2,048
<INVENTORY> 0
<CURRENT-ASSETS> 852,190
<PP&E> 156,768
<DEPRECIATION> 48,386
<TOTAL-ASSETS> 984,488
<CURRENT-LIABILITIES> 492,992
<BONDS> 0
0
0
<COMMON> 750
<OTHER-SE> 490,746
<TOTAL-LIABILITY-AND-EQUITY> 984,488
<SALES> 1,366,378
<TOTAL-REVENUES> 1,383,378
<CGS> 1,090,232
<TOTAL-COSTS> 1,090,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 70,873
<INCOME-TAX> 29,898
<INCOME-CONTINUING> 40,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,995
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
