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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 30, 1998
OXFORD HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19442 06-1118515
(State or other jurisdiction) (Commission (IRS Employer
of incorporation) File Number) 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)
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ITEM 5. OTHER EVENTS.
The Company's earnings Press Release dated October 30, 1998 is attached
as an Exhibit hereto and incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
99 Press Release dated October 30, 1998
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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.
Date: October 30, 1998 By: /s/YON Y. JORDEN
--------------------------------
YON Y. JORDEN
Chief Financial Officer
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
99 Press Release dated October 30, 1998 5
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EXHIBIT 99
For Further Information:
Investor Contact: Deborah Abraham
(203) 851-2636
Media Contact: Madeline Hardart
(212) 885-0417
Nicole Reilly
(212)885-0338
FOR IMMEDIATE RELEASE
OXFORD HEALTH PLANS, INC. ANNOUNCES THIRD QUARTER RESULTS
Oxford CEO Payson Cites Progress in Turnaround Plan
NORWALK, CONNECTICUT, OCTOBER 30, 1998 - Oxford Health Plans, Inc.
(NASDAQ:OXHP) announced today a net loss of $47.0 million, or $.58 per common
share, for the quarter ended September 30, 1998. The Company also reported that
cash flow used in operations was $9.5 million in the third quarter. "Oxford and
its employees are proud of its achievements to date and our third quarter
results reflect a better-than-expected start to our plan to return to
profitability," said Norman C. Payson, M.D., Oxford's chief executive officer.
"We believe we have made significant strides in implementing our turnaround
plan."
Revenues for the quarter ended September 30, 1998 were $1.17 billion,
an increase of 10.1% from the third quarter of 1997, but down 1.7% from the
second quarter of 1998. For the nine months ended September 30, 1998, revenues
were $3.6 billion, up 15.3 % compared to the year earlier period. As of
September 30, 1998, Oxford's total membership was approximately 1,925,000
compared to 2,008,000 at December 31, 1997 and 2,005,000 at June 30, 1998. The
reductions in membership experienced in the second and third quarters in 1998
primarily resulted from the Company's withdrawal from Medicaid programs and
reductions in commercial members in the tri-state Freedom Plan and non-core
markets.
Health care services expense for the third quarter was $1.02 billion
and the medical loss ratio (health care services as a percentage of premium
revenue) was 88.9%. The medical loss ratio reflects the application of $25.5
million of loss contract reserves established in the second quarter in
anticipation of third quarter losses in Oxford's non-core Medicare and Medicaid
businesses.
Marketing, general and administrative expenses including related
depreciation and amortization were $172.9 million for the third quarter or 15.1%
of operating revenue, compared to $203.7 million for the second quarter of 1998
or 17.6% of operating revenues.
The net loss of $.58 per common share for the quarter was favorably
affected by the application of loss contract reserves specified above as well as
certain other one-time items resulting in an additional aggregate $12.8 million
benefit. EBITDA (earnings (loss) before income taxes, financing charges,
depreciation and amortization and restructuring and unusual charges), as
adjusted by removing the positive effect of the application of loss contract
reserves and the one-time items noted above, was a loss of $41.4 million.
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The Company also reported that at September 30, 1998, it had $1.12
billion in current cash and marketable securities. After giving effect to pro
forma capital contributions to its regulated subsidiaries, Oxford had over $200
million in cash and marketable securities at the Parent Company. "Oxford's
parent company liquidity is better than we anticipated as a consequence of our
operating results and progress on our turnaround plan in the third quarter,"
said Yon Yoon Jorden, Oxford's Chief Financial Officer.
Dr. Payson also commented on specifics of the turnaround plan: "The
restructuring of key Medicare provider contracts and the selective withdrawal
from certain counties for Medicare essentially completes the lion's share of
correcting that important line of business. Similarly, the withdrawal from
certain Medicaid markets and the sale of, or withdrawal from, businesses in
Florida, Illinois, Pennsylvania and New Hampshire now leave us primarily with
our core commercial business. We believe we have made significant progress in
the quarter in our health care and administrative cost structure and are
encouraged by our early success in the important January employer renewal
process."
Oxford's product lines include traditional health maintenance
organizations, point-of-service plans, third-party administration of employer
funded benefit plans, Medicare and Medicaid plans, and dental plans. Oxford
markets its health plans to employers in New York, New Jersey, Pennsylvania,
Connecticut, through its direct sales force and through independent insurance
agents and brokers.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release, such as statements concerning the
January employer renewal process and the Company's plan to return to
profitability, and other statements regarding matters that are not historical
facts, are forward-looking statements (as such term is defined in the Securities
Exchange Act of 1934, as amended); and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to:
- - The Company's ability to develop processes and systems to support its
operations and to improve its service levels.
- - Changes in Federal or State regulation relating to health care and health
benefit plans.
- - Rising medical costs or higher utilization of medical services, including
higher out-of-network utilization under point of service plans.
- - Competition from health benefit plan providers and competitive pressure on
pricing Oxford products, including acceptance of premium rate increases by
the Company's commercial groups.
- - High administrative costs in operating the Company's business and the cost
and impact on service of changing technologies.
- - The ability of the Company to complete and operationalize risk transfer and
other provider arrangements and to successfully dispose of certain assets and
businesses.
- - The effect, if any, of recent events at the Company (including any adverse
publicity) on future enrollment in the Company's health benefit plans.
- - Any changes in the Company's estimates of its medical costs and expected cost
trends as a result of information gained in the process of continuing to
reconcile delayed claims or claims paid or denied in error and to pay down
backlogged claims.
- - The impact of litigation (including purported class and derivative actions
filed against the Company and certain officers and directors and proceedings
commenced against the Company and several employees by certain healthcare
providers), regulatory proceedings and other governmental action (including
the ongoing examination, investigation and review of the Company by various
Federal and State authorities).
- - Those factors included in the discussion under the caption "Management's
Discussion and Analysis of the Financial Condition and Results of Operations
- Cautionary Statement Regarding Forward-Looking Statements" in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
-- TABLES FOLLOW -
# # #
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
SEP. 30, Dec. 31,
1998 1997
---- ----
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 228,577 4,141
Short-term investments-available-for-sale, at market value 892,872 635,743
Premiums receivable 169,586 275,646
Other receivables 40,682 45,418
Prepaid expenses and other current assets 10,178 10,097
Refundable income taxes 3,059 120,439
Deferred income taxes 43,385 38,092
- -----------------------------------------------------------------------------------------------------
Total current assets 1,388,339 1,129,576
Property and equipment, at cost, net of accumulated depreciation and
amortization of $152,650 in 1998 and $125,926 in 1997 127,246 147,093
Deferred income taxes 103,267 86,406
Restricted investments-hold-to-maturity, at amortized cost 44,114 --
Other noncurrent assets 46,121 34,914
- -----------------------------------------------------------------------------------------------------
Total assets $ 1,709,087 1,397,989
=====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 7,207 --
Medical costs payable 894,501 762,959
Trade accounts payable and accrued expenses 271,344 152,152
Income taxes payable 2,004 --
Unearned premiums 36,022 124,603
Deferred income taxes 6,096 9,059
- -----------------------------------------------------------------------------------------------------
Total current liabilities 1,217,174 1,048,773
Senior notes payable 200,000 --
Term loan payable 150,000 --
Obligations under capital leases 11,109 --
- -----------------------------------------------------------------------------------------------------
Total liabilities 1,578,283 1,048,773
Redeemable preferred stock 287,933 --
Shareholder's equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares -- --
Common stock, $.01 par value, authorized 400,000,000
shares; issued and outstanding 80,384,642 in 1998
and 79,474,439 in 1997 804 795
Additional paid-in capital 516,063 437,653
Accumulated deficit (685,316) (95,498)
Unrealized net appreciation of investments 11,320 6,266
- -----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,709,087 1,397,989
=====================================================================================================
</TABLE>
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE, PER MEMBER PER MONTH AND MEMBERSHIP HIGHLIGHTS
DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- -----------------------------
Revenues: 1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Premiums earned $ 1,143,064 1,045,185 3,512,101 3,059,810
Third-party administration, net 4,070 3,975 13,383 10,091
Investment and other income (expense), net 24,395 15,355 67,627 45,076
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenues 1,171,529 1,064,515 3,593,111 3,114,977
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Health care services 1,015,780 1,019,509 3,270,482 2,629,267
Marketing, general and administrative 158,896 161,684 529,347 451,890
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,174,676 1,181,193 3,799,829 3,081,157
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes, financing charges,
depreciation and amortization, restructuring and
unusual charges (3,147) (116,678) (206,718) 33,820
Other charges:
Interest and other financing charges 15,679 -- 43,006 --
Depreciation and amortization 15,191 15,506 50,553 42,997
Restructuring charges -- -- 199,266 --
Unusual charges -- -- 111,790 --
Equity in net loss of affiliate -- 120 -- 1,140
- ----------------------------------------------------------------------------------------------------------------------------------
Total other charges 30,870 15,626 404,615 44,137
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (34,017) (132,304) (611,333) (10,317)
Income tax expense (benefit) 1,905 (54,147) (22,489) (3,714)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) (35,922) (78,157) (588,844) (6,603)
Less preferred stock dividends and amortization (11,067) -- (16,785) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) attributable to common stock $ (46,989) (78,157) (605,629) (6,603)
==================================================================================================================================
Earnings (loss) per common share-basic and diluted $ (0.58) (.99) (7.57) (.08)
==================================================================================================================================
Weighted average common shares outstanding-basic and diluted 80,384 79,059 80,006 78,363
==================================================================================================================================
Selected information:
Medical-loss ratio 88.9% 97.5% 93.1% 86.0%
Administrative-loss ratio 15.1% 16.8% 16.4% 16.0%
PMPM premium revenue $ 202.64 188.32 199.79 193.92
PMPM medical expense $ 180.10 183.70 186.05 166.69
Fully insured member months 5,640.9 5,550.1 17,579.2 15,778.6
</TABLE>
<TABLE>
<CAPTION>
Membership at
September 30
- -------------------------------------------------------------------------------------------------------- Increase
MEMBERSHIP HIGHLIGHTS 1998 1997 (Decrease)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Freedom Plan 1,331,600 1,286,600 45,000
HMO 271,500 256,600 14,900
Medicare 156,900 154,800 2,100
Medicaid 102,900 187,900 (85,000)
- ----------------------------------------------------------------------------------------------------------------------
Total Fully Insured 1,862,900 1,885,900 (23,000)
Self-funded 62,000 56,700 5,300
- ----------------------------------------------------------------------------------------------------------------------
Total Membership 1,924,900 1,942,600 (17,700)
======================================================================================================================
</TABLE>
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FIRST QUARTER 1998, SECOND QUARTER 1998, THIRD QUARTER 1998 AND NINE MONTHS
ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD NINE
Cash flows from operating activities: QUARTER QUARTER QUARTER MONTHS
------- ------- ------- ------
<S> <C> <C> <C> <C>
Net earnings (loss) $ (45,302) (507,620) (35,922) (588,844)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 16,059 19,303 15,191 50,553
Noncash restructuring and unusual charges -- 205,631 -- 205,631
Deferred income taxes (24,407) (4,749) (1,440) (30,596)
Realized gain on sale of investments (1,372) (749) (3,023) (5,144)
Other, net 1,312 2,084 1,057 4,453
Changes in assets and liabilities:
Premiums receivable (13,903) 74,637 38,117 98,851
Other receivables (8,066) (6,014) 6,516 (7,564)
Prepaid expenses and other current assets (10,752) 9,348 1,323 (81)
Medical costs payable (23,764) 106,132 (21,826) 60,542
Trade accounts payable and accrued expenses 24,110 51,074 2,726 77,910
Income taxes payable/refundable 48,836 68,544 5,459 122,839
Unearned premiums (77,706) 7,566 (18,441) (88,581)
Other, net 378 4,315 744 5,437
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (114,577) 29,502 (9,519) (94,594)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (29,657) (6,989) (2,090) (38,736)
Purchases of available-for-sale securities (154,891) (345,380) (487,947) (988,218)
Sales and maturities of available-for-sale securities 151,110 265,030 252,866 669,006
Investment in unconsolidated affiliates -- (5,405) (5) (5,410)
Other, net 4,597 (2,510) (4,346) (2,259)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (28,841) (95,254) (241,522) (365,617)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of stock options 330 993 254 1,577
Proceeds from preferred stock, net of issuance expenses -- 338,148 -- 338,148
Proceeds of notes and loans payable 200,000 350,000 -- 550,000
Redemption of notes and loans payable -- (200,000) -- (200,000)
Proceeds of sale of common stock -- 10,000 -- 10,000
Debt issuance expenses -- (11,251) (442) (11,693)
Payments under capital leases -- (1,570) (1,815) (3,385)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 200,330 486,320 (2,003) 684,647
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 56,912 420,568 (253,044) 224,436
Cash and cash equivalents at beginning of period 4,141 61,053 481,621 4,141
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 61,053 481,621 228,577 228,577
===============================================================================================================================
Supplemental schedule of noncash investing and financing activities:
Unrealized appreciation (depreciation) of short-term investments $ (5,043) (2,730) 15,376 7,603
Issuance of preferred stock warrants -- 67,000 -- 67,000
Capital lease obligations incurred $ 20,309 1,398 -- 21,707
</TABLE>
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