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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 29, 1999
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
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
The Company's Press Releases dated October 29, 1999 and November 2,
1999 are attached as Exhibits hereto and incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
99(a) Press Release dated October 29, 1999
99(b) Press Release dated November 2, 1999
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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: November 2, 1999 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(a) Press Release dated October 29, 1999 5
99(b) Press Release dated November 2, 1999 6
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EXHIBIT 99(a)
For Further Information:
Investor Contact: Deborah Abraham
(203) 851-2636
Media Contact: Francesca Trainor
(212) 885-0450
FOR IMMEDIATE RELEASE
- ---------------------
OXFORD HEALTH PLANS, INC. ANNOUNCES
PRESIDENT WILLIAM M. SULLIVAN RESIGNS
NORWALK, CONNECTICUT, OCTOBER 29, 1999 - Oxford Health Plans,
Inc. (NASDAQ:OXHP) announced today that its President, William M. Sullivan, had
resigned from the Company to pursue other interests. Mr. Sullivan joined Oxford
in 1988 and helped build the Company. He was named President in 1998. "Bill made
an enormous contribution to Oxford through our turnaround and we wish him every
success in his future endeavors," said Dr. Payson. Kevin Hill, Senior Vice
President of Sales and an Oxford employee since 1989, has been promoted to
Executive Vice President and will assume responsibility for sales and marketing.
Mr. Hill and the Company's Executive Vice President for Medical Delivery,
Charles G. Berg, will report directly to Dr. Payson.
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EXHIBIT 99(b)
For Further Information:
Investor Contact: Deborah Abraham
(203) 851-2636
Media Contact: Francesca Trainor
(212) 885-0450
FOR IMMEDIATE RELEASE
- ---------------------
OXFORD HEALTH PLANS, INC. ANNOUNCES THIRD QUARTER RESULTS
EARNINGS PER SHARE OF $.34
ADDITIONAL INSURANCE ACQUIRED FOR PENDING SECURITIES LITIGATION
NORWALK, CONNECTICUT, NOVEMBER 2, 1999 - Oxford Health Plans, Inc.
(NASDAQ:OXHP) announced today net income of $28.3 million, or $0.34 per diluted
common share, for the quarter ended September 30, 1999 ($24.5 million or $0.29
per share, excluding non-recurring items and net favorable changes in prior
period estimates of medical costs). For the nine months ended September 30,
1999, net income was $18.2 million or $0.22 per diluted common share. "We are
enthusiastic about our third quarter results, which were ahead of our
expectations. The quarter's results benefited from the combined effect of our
initiatives to improve health care and administrative efficiencies," said Oxford
Health Plans' Chairman and Chief Executive Officer, Norman C. Payson, M.D.
The quarter's results were impacted by non-recurring items and changes
in prior period estimates of medical costs. The Company recorded a pre-tax gain
of $7.0 million on the sale of its Direct Script, Inc. subsidiary. This gain was
offset by net pre-tax restructuring charges aggregating $19.9 million primarily
relating to (i) severance and other costs associated with previously announced
workforce reductions and consolidation of certain of the Company's office
facilities and (ii) the write-off of certain computer equipment and leases no
longer used in operations as a result of the Company's turnaround plan. "These
steps were taken to further reduce administrative costs and to enhance the
Company's competitive position in light of improvements in service performance
and reductions in claims and correspondence inventories," said Marvin P. Rich,
the Company's Chief Administrative Officer. Health care services
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expense benefited from net favorable changes in prior period estimates of
medical costs aggregating $19.6 million. "Even excluding these net favorable
changes in prior estimates of medical costs, the medical loss ratio was 80.8%,"
said Dr. Payson. "This compares favorably with a medical loss ratio of 88.9% for
the third quarter of last year. Our administrative loss ratio was 13.8% for the
quarter compared to 15.1% for the third quarter of last year."
Revenues for the quarter ended September 30, 1999 were $1.1 billion,
compared to $1.2 billion in the third quarter last year. As of September 30,
1999, Oxford's total membership was approximately 1,629,100 compared to
1,688,700 as of June 30, 1999.
The Company reported cash flow from operations of $90.2 million for the
quarter ended September 30, 1999. As of September 30, 1999, the Company had
$1.07 billion in current cash and marketable securities and over $230 million in
cash in the Parent Company. After giving effect to the fourth quarter payment
for additional insurance described below, Oxford's Parent Company cash is still
expected to exceed $200 million at year-end. The Company also noted a $44
million reduction in the amount of outstanding provider advances at September
30, 1999 to $62 million, compared to $106 million at June 30, 1999. The
reduction was attributable to progress in collections and offsets against both
current claims and provider reconciliations. "Improved operating results,
collections of receivables and progress on provider advances, as well as the
divestitures of non-strategic assets, all contributed to the significant
improvement in operating cash flow," said Yon Y. Jorden, Oxford's Chief
Financial Officer. "The Company anticipates positive operating cash flow for the
fourth quarter and next year," added Jorden.
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Oxford also announced today that it has acquired new insurance policies
providing $200 million in additional coverage for certain future defense costs,
judgments and settlements, if any, incurred by the Company and individual
defendants in certain pending lawsuits and investigations, including, among
others, the securities class action pending against the Company and certain of
its directors and officers and the pending stockholder derivative actions.
Subject to the terms of the policies, the insurers have agreed to pay 90% of the
amount, if any, by which covered losses exceed $175 million, inclusive of
approximately $40 million of coverage remaining under preexisting insurance. The
aggregate amount of insurance under these new policies is limited to $200
million and the aggregate amount of new insurance in respect of defense costs
other than judgments and settlements, if any, is limited to $10 million. The
policies do not cover taxes, fines or penalties imposed by law or the cost to
comply with any injunctive or other non-monetary relief. A non-recurring charge
of $24 million for premiums and other costs will be included in Oxford's results
of operations for the fourth quarter of 1999.
"Part of the Company's turnaround plan involved eliminating or
mitigating the problems of the past," said Dr. Payson. "The Company is pleased
to have this new insurance, which should provide comfort to the Company's
shareholders and policyholders that Oxford has added protection against a
significantly adverse development or result in these cases," said Dr. Payson.
Dr. Payson continued, "with the Company's improvements in operations
and systems and improved financial performance, we have reached a major
inflection point. We will now turn our creative energies to our next strategic
initiative, growth. Oxford's growth efforts, as in the past, will focus on
consumer preference, emphasizing outstanding participating physicians, customer
service and consumer-friendly health plans. We are enthusiastic about our
prospects."
Founded in 1984, Oxford Health Plans, Inc. provides health plans to
employers and individuals in New York, New Jersey and Connecticut, through its
direct sales force, independent insurance agents and brokers. Oxford's services
include traditional health maintenance organizations, point-of-service plans,
third-party administration of employer-funded benefits plans and Medicare plans.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release, including statements concerning
future results of operations or financial position, future healthcare and
administrative costs, future operating cash flow, future operational
performance, future Parent Company liquidity, and Oxford's plan and prospects
for future growth, and other statements contained herein 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, including proposed patient protection legislation.
- - 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 any unexpected costs incurred in the
wind-down of the Company's agreement with Heritage New Jersey Medical
Group, P.C., including medical costs, litigation expenses, damages,
administrative costs and other costs.
- - The effect, if any, of events at the Company during the last two years
(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).
- - The Company's ability to renew existing members and attract new members.
- - The Company's ability to develop processes and systems to support any
future growth.
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- - Those factors included in the discussion under the caption "Business -
Cautionary Statement Regarding Forward-Looking Statements" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and
under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations Cautionary Statement Regarding
Forward-Looking Statements" in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1999.
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE, PER MEMBER PER MONTH AND MEMBERSHIP
HIGHLIGHTS DATA)
<TABLE>
<CAPTION>
Three Months
Ended September 30
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Revenues:
Premiums earned $ 1,025,518 $1,143,064
Third-party administration, net 4,419 4,070
Investment and other income, net 22,512 23,857
--------- ---------
Total revenues 1,052,449 1,170,991
========= =========
Expenses:
Health care services 809,219 1,015,934
Marketing, general and administrative 142,578 172,914
Interest and other financing charges 12,009 16,160
Restructuring charges 19,963 -
Write-downs of strategic investments - -
------- ---------
Total expenses 983,769 1,205,008
======= =========
Operating earnings (loss) before income taxes 68,680 (34,017)
Income tax expense (benefit) 28,846 1,905
------ -----
Net earnings (loss) 39,834 (35,922)
Less preferred stock dividends and amortization (11,503) (11,067)
-------- --------
Net earnings (loss) attributable to common stock $ 28,331 $ (46,989)
========= ==========
Earnings (loss) per common share:
Basic $ .35 $ (.58)
Diluted $ .34 $ (.58)
Weighted-average common shares outstanding-basic 81,354 80,384
Effect of dilutive securities:
Stock options 2,867 -
Warrants - -
------ ------
Weighted-average common shares outstanding-diluted 84,221 80,384
====== ======
SELECTED INFORMATION:
Medical loss ratio 78.9% 88.9%
Administrative loss ratio 13.8% 15.1%
Earnings (loss) before income taxes, financing charges, depreciation
and amortization, and restructuring charges ("EBITDA") $ 114,396 $ (3,147)
PMPM premium revenue $ 214.70 $ 202.64
PMPM medical expense $ 169.41 $ 180.10
Fully insured member months 4,776.6 5,640.9
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Ended September 30
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Revenues:
Premiums earned $3,085,774 $3,512,101
Third-party administration, net 12,120 13,383
Investment and other income, net 65,641 66,242
--------- ---------
Total revenues 3,163,535 3,591,726
========= =========
Expenses:
Health care services 2,567,928 3,389,585
Marketing, general and administrative 447,525 601,915
Interest and other financing charges 38,239 43,761
Restructuring charges 19,963 123,500
Write-downs of strategic investments - 38,341
--------- ---------
Total expenses 3,073,655 4,197,102
========= =========
Operating earnings (loss) before income taxes 89,880 (605,376)
Income tax expense (benefit) 37,750 (16,532)
Net earnings (loss) 52,130 (588,844)
Less preferred stock dividends and amortization (33,962) (16,785)
-------- ---------
Net earnings (loss) attributable to common stock $ 18,168 $(605,629)
======== =========
Earnings (loss) per common share:
Basic $ .22 $ (7.57)
Diluted $ .22 $ (7.57)
Weighted-average common shares outstanding-basic 81,098 80,006
Effect of dilutive securities:
Stock options 3,057 -
Warrants - -
------ ------
Weighted-average common shares outstanding-diluted 84,155 80,006
====== ======
SELECTED INFORMATION:
Medical loss ratio 83.2% 96.5%
Administrative loss ratio 14.4% 17.1%
Earnings (loss) before income taxes, financing charges, depreciation
and amortization, and restructuring charges ("EBITDA") $ 189,916 $(349,976)
PMPM premium revenue $ 210.44 $ 199.79
PMPM medical expense $ 175.13 $ 192.82
Fully insured member months 14,663.1 17,579.2
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30
-------------------------
MEMBERSHIP HIGHLIGHTS 1999 1998
- --------------------- -------------------------
<S> <C> <C>
Freedom and Liberty Plans 1,238,900 1,331,600
HMO 238,400 271,500
Medicare 101,100 156,900
Medicaid - 102,900
--------- ---------
Total Fully Insured 1,578,400 1,862,900
Third-party Administration 50,700 62,000
--------- ---------
Total Membership 1,629,100 1,924,900
========= =========
</TABLE>
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEP. 30, Dec. 31,
1999 1998
--------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 289,409 $ 237,717
Investments - available-for-sale, at market value 778,057 922,990
Premiums receivable, net 85,879 110,254
Other receivables 28,589 36,540
Prepaid expenses and other current assets 7,253 9,746
Deferred income taxes 31,361 43,385
--------- ---------
Total current assets 1,220,548 1,360,632
Property and equipment, at cost, net of accumulated depreciation and
amortization of $154,094 in 1999 and $160,431 in 1998 58,104 112,941
Deferred income taxes 68,456 94,182
Restricted cash and investments 61,532 56,493
Other noncurrent assets 19,118 13,502
---------- ----------
Total assets $1,427,758 $1,637,750
========== ==========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Medical costs payable $ 688,424 $ 850,197
Trade accounts payable and accrued expenses 156,868 176,833
Unearned premiums 44,174 105,993
Current portion of capital lease obligations 12,278 15,938
Deferred income taxes - 2,228
------- ---------
Total current liabilities 901,744 1,151,189
Long-term debt 350,000 350,000
Obligations under capital leases 8,357 18,850
Redeemable preferred stock 332,778 298,816
Shareholder's equity (deficit):
Preferred stock, $.01 par value, authorized 2,000,000 shares - -
Common stock, $.01 par value, authorized 400,000,000 shares;
issued and outstanding 81,410,514 shares in 1999
and 80,515,872 shares in 1998 814 805
Additional paid-in capital 484,696 506,243
Accumulated deficit (640,160) (692,290)
Accumulated other comprehensive earnings (loss) (10,471) 4,137
---------- ----------
Total liabilities and shareholders' equity (deficit) $1,427,758 $1,637,750
========== ==========
</TABLE>
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OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
-------------------------------------------------------------
1999 1998 1999 1998
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 39,834 $ (35,922) $ 52,130 $(588,844)
Adjustments to reconcile net earnings (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 14,233 15,191 43,301 50,553
Noncash restructuring charges and write-downs 15,060 -- 15,060 107,246
Deferred income taxes 28,846 -- 37,750 (18,437)
Provision for doubtful accounts and advances -- 8,000 13,800 41,209
Realized loss (gain) on sale of investments 1,067 (3,023) 4,462 (5,144)
Gain on sale of Direct Script and Ralin (9,500) -- (9,500) --
Other, net 480 1,057 1,751 12,329
Premiums receivable 27,801 35,117 24,375 89,851
Other receivables 9,381 6,516 11,289 4,736
Prepaid expenses and other current assets 1,377 1,323 (865) (81)
Medical costs payable (52,986) (26,826) (175,573) 106,542
Trade accounts payable and accrued expenses 13,516 (4,417) (12,298) 70,767
Income taxes payable/refundable -- 9,976 -- 116,637
Unearned premiums (1,120) (18,441) (61,819) (88,581)
Other, net 2,174 744 (8,119) 5,437
------ ------- ------- -------
Net cash provided (used) by operating activities 90,163 (10,705) (64,256) (95,780)
====== ======= ======= =======
Cash flows from investing activities:
Capital expenditures (3,296) (2,090) (7,443) (38,736)
Purchases of investments (108,304) (487,947) (706,221) (988,218)
Sales and maturities of investments 132,105 252,866 815,182 669,006
Proceeds from sale of Direct Script and Ralin 12,450 -- 12,450 --
Other, net 16,649 (3,165) 5,460 (6,483)
------ -------- ------- --------
Net cash provided (used) by investing activities 49,604 (240,336) 119,428 (364,431)
====== ======== ======= ========
Cash flows from financing activities:
Proceeds from exercise of stock options 908 254 10,673 1,577
Proceeds from sale of redeemable preferred stock, net of expenses -- -- -- 271,148
Proceeds from sale of warrants -- -- -- 67,000
Proceeds from sale of common stock -- -- -- 10,000
Proceeds of notes and loans payable -- -- -- 550,000
Redemption of notes payable -- -- -- (200,000)
Debt issuance expenses -- (442) -- (11,693)
Payments under capital leases (2,173) (1,815) (14,153) (3,385)
------ ------ ------ -------
Net cash provided (used) by financing activities (1,265) (2,003) (3,480) 684,647
====== ====== ====== =======
Net increase (decrease) in cash and cash equivalents 138,502 (253,044) 51,692 224,436
Cash and cash equivalents at beginning of period 150,907 481,621 237,717 4,141
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 289,409 $ 228,577 $ 289,409 $ 228,577
========= ========= ========= =========
Supplemental cash flow information:
Cash payments (refunds) for income taxes, net $ 593 $ 192 $ (851) $(107,685)
Cash payments for interest expense 7,084 9,726 35,488 20,058
Supplemental schedule of noncash investing and financing activities:
Unrealized appreciation (depreciation) of
available-for-sale investments (3,077) 15,376 (16,836) 7,603
Capital lease obligations incurred -- -- -- 21,707
Preferred stock dividends and amortization 11,503 11,067 33,962 16,785
</TABLE>
