Sierra Reports Year-End, Fourth Quarter 2005 Results; 2006 Guidance Raised to $1.92 to $2.02.LAS VEGAS Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. -- Sierra (company, games) Sierra - (Or "Sierra On-Line") A computer game developer founded in the early 1980s by Ken and Roberta Willams in the small mountain town of Oakhurst California. Sierra was named after the local mountian range, 15 miles from the famous Yosemite National Park. Health Services health services Managed care The benefits covered under a health contract Inc. (NYSE NYSE See: New York Stock Exchange :SIE SIE Sierra Health (stock symbol) SIE Serial Interface Engine SIE Serviciul de Informatii Externe (Romanian: Intelligence Service for the Exterior) SIE Società Italiana di Endocrinologia )
2005 Year Over Year Results
-- Medical Premium Revenues Up 14%
-- Cash Flow from Operations of $167 Million, or 139% of Net
Income
-- Commercial Membership Up 12%
Sierra Health Services Inc. (NYSE:SIE) reported today that net income for the quarter ended Dec. 31, 2005, was $28.3 million, or $0.44 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $28.0 million, or $0.42 per diluted share, for the quarter ended Dec. 31, 2004. All earnings per share amounts reflect the retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a effects of the two-for-one common stock split that was effective Dec. 30, 2005. Net income for the year ended Dec. 31, 2005, was $120.0 million, or $1.81 per diluted share, compared to $122.7 million, or $1.79 per diluted share for the year ended Dec. 31, 2004. During 2004, the company's military health services operations segment contributed 28.4% of operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , compared to 7.6% for 2005. Revenues for the quarter were $353.7 million, a 6.3% increase over the $332.7 million for the same period in 2004. Medical premium revenues from the company's core managed care business were $332.5 million, an increase of 12.1% over the $296.6 million for the same period in 2004. Annual revenues were $1.4 billion, compared to $1.6 billion for 2004, a decrease of 12.1%. Revenues from 2004 included $372.6 million from the company's expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. military health services operations. Annual medical premium revenues from the company's core managed care business were $1.3 billion in 2005, compared to $1.1 billion in 2004, an increase of 14.2%. In the fourth quarter, Sierra purchased, on a split-adjusted basis, 278,000 shares of its common stock in the open market for $10.0 million. During the year 2005, the company purchased, on a split-adjusted basis, 4.65 million shares of its common stock for $154.4 million. At Dec. 31, 2005, the company had $42.1 million authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: and available for share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . Additionally, as previously reported, Sierra's amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility allows for unlimited share repurchases, provided certain covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the ratios are met. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $13.9 million for the fourth quarter of 2005 and $166.8 million for the year ended Dec. 31, 2005. This compares to $69.5 million for the fourth quarter of 2004 and $164.5 million for the year ended Dec. 31, 2004. The reduction in cash flow for the fourth quarter is primarily due to the timing of payments from the Center for Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. Services (CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. ). The company received two monthly payments from CMS during the quarter, compared to four monthly payments in the fourth quarter of 2004. In 2005, average monthly revenue from CMS has been approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $42 million. In the fourth quarter, Sierra's medical care ratio increased 250 basis points to 76.9% from 74.4% for the same period in 2004. The increase in the ratio is primarily due to reserve strengthening and higher bed day utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be . The medical care ratio for the year 2005 increased 120 basis points to 76.5% from 75.3% in 2004. Sierra's medical claims payable balance increased to $135.9 million at Dec. 31, 2005, compared to $119.3 million at Dec. 31, 2004, and $127.0 million at Sept. 30, 2005. Days in claims payable, which is the medical claims payable balance divided by the average medical expenses per day for the period, were 47.2 days for the fourth quarter of 2005, compared to 48.3 days for the same period in 2004 and 45.0 days sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . In the fourth quarter, as a percentage of premium revenue, general and administrative expenses decreased 480 basis points to 13.7% from 18.5% for the same period in 2004. Excluding the general and administrative expenses related to the sold workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. operations, expenses as a percentage of premium revenue would have been 13.5%, an improvement of 110 basis points from 14.6% for the same period in 2004. For the year 2005, general and administrative expenses, as a percentage of premium revenue, decreased 270 basis points to 13.4% from 16.1% for the year 2004. Excluding the general and administrative expenses related to the sold workers' compensation operations, expenses as a percentage of premium revenue would have been 13.2%, an improvement of 100 basis points from 14.2% for the same period in 2004. At Dec. 31, 2005, membership in Sierra's commercial HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, plans grew by 12.4% to 254,200 from 226,200 at Dec. 31, 2004. Membership in the company's Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Advantage plan grew by 5.6% in 2005 to 56,300 from 53,300 in 2004. Membership in the company's Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. plans grew by 9.1% in 2005 to 55,100 from 50,500 in 2004. Total membership in all of Sierra's plans grew by 13.8% to 637,900 at Dec. 31, 2005, from 560,500 at Dec. 31, 2004. As of Jan. 30, 2006, approximately 163,000 members were enrolled in the company's stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." Medicare Prescription Drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, Plan (PDP (1) (Plasma Display Panel) See plasma display. (2) (Policy Decision Point) See COPS and XACML. (3) (Programmed Data P ), which became effective Jan. 1, 2006. "The year 2005 continued a period of exceptional performance from our core operations," said Anthony M. Marlon Marlon may refer to:
Sierra had previously announced it expected to earn between $1.90 and $2.00 per fully diluted share for the year 2006. The company now expects to earn between $1.92 and $2.02 per fully diluted share for 2006. Sierra will host a conference call with investors, analysts and the general public on Wednesday Wednesday: see week. , Feb. 1, 2006, at noon (Eastern time). Interested parties can access the call by dialing 888-988-9162 (using the passcode: EARNINGS). Listeners may also access the conference call free over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by visiting the investors page of Sierra's Web site at www.sierrahealth.com. Sierra Health Services Inc., based in Las Vegas, is a diversified diversified (di·verˑ·s health care services company that operates health maintenance organizations, indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. insurers, preferred provider organizations pre·ferred provider organization n. Abbr. PPO A medical insurance plan in which members receive more coverage if they choose health care providers approved by or affiliated with the plan. and multispecialty medical groups. Sierra's subsidiaries serve more than 600,000 people through health benefit plans for employers, government programs and individuals. For more information, visit the company's Web site at www.sierrahealth.com. Statements in this news release that are not historical facts are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and based on management's projections, assumptions and estimates; actual results may vary materially. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are subject to certain risks and uncertainties, which include but are not limited to: 1) potential adverse changes in government regulations, contracts and programs, including the Medicare Advantage program, the Medicare Prescription Drug Plan, Medicaid and legislative proposals to eliminate or reduce ERISA See Employee Retirement Income Security Act. ERISA See Employee Retirement Income Security Act (ERISA). pre-emption PRE-EMPTION, intern. law. The right of preemption is the right of a nation to detain the merchandise of strangers passing through her territories or seas, in order to afford to her subjects the preference of purchase. 1 Chit. Com. Law, 103; 1 Bl. Com. 287. 2. of state laws that would increase potential managed care litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. exposure; 2) competitive forces that may affect pricing, enrollment, renewals and benefit levels; 3) unpredictable medical costs, malpractice malpractice, failure to provide professional services with the skill usually exhibited by responsible and careful members of the profession, resulting in injury, loss, or damage to the party contracting those services. exposure, reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. costs and inflation; 4) impact of economic conditions; 5) changes in health care reserves; and 6) the amount of actual proceeds to be realized from the note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. related to the sale of the workers' compensation insurance operation. Further factors concerning financial risks and results may be found in documents filed with the Securities and Exchange Commission and which are incorporated herein by reference. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Sierra will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Sierra or its business or operations. Sierra assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.
SIERRA HEALTH SERVICES INC. AND SUBSIDIARIES
Earnings Report
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
------------------- -----------------------
2005 2004 2005 2004
--------- --------- ----------- -----------
Medical premiums $332,462 $296,601 $1,291,296 $1,131,185
Military contract revenues 4 18,296 16,326 372,608
Professional fees 12,084 8,847 43,186 35,115
Investment and other
revenues 9,157 9,005 34,228 36,646
--------- --------- ----------- -----------
Total Revenues 353,707 332,749 1,385,036 1,575,554
--------- --------- ----------- -----------
Medical expenses 264,975 227,339 1,020,754 877,774
Medical Care Ratio 76.9% 74.4% 76.5% 75.3%
(Medical
expenses/premiums and
professional fees)
Military contract expenses 127 4,652 2,392 317,699
General and administrative
expenses 45,391 54,850 172,473 181,764
--------- --------- ----------- -----------
Operating Income From
Continuing Operations 43,214 45,908 189,417 198,317
Interest expense (820) (1,123) (8,791) (4,684)
Other income (expense),
net 271 (10) 1,099 31
--------- --------- ----------- -----------
Income From Continuing
Operations Before Income
Taxes 42,665 44,775 181,725 193,664
Provision for income taxes (14,331) (16,815) (61,708) (70,245)
--------- --------- ----------- -----------
Income From Continuing
Operations 28,334 27,960 120,017 123,419
Loss from discontinued
operations - - - (682)
--------- --------- ----------- -----------
Net Income $28,334 $27,960 $120,017 $122,737
========= ========= =========== ===========
Earnings Per Common
Share: (1)
Income from continuing
operations $0.49 $0.53 $2.16 $2.32
Loss from discontinued
operations - - - (0.02)
--------- --------- ----------- -----------
Net Income $0.49 $0.53 $2.16 $2.30
========= ========= =========== ===========
Earnings Per Common Share
Assuming Dilution: (1)
Income from continuing
operations $0.44 $0.42 $1.81 $1.80
Loss from discontinued
operations - - - ($0.01)
--------- --------- ----------- -----------
Net Income $0.44 $0.42 $1.81 $1.79
========= ========= =========== ===========
Weighted average common
shares outstanding (1) 57,747 52,449 55,556 53,262
Weighted average common
shares outstanding
assuming dilution (1) 65,251 68,039 67,149 69,643
(1) All applicable per share amounts and common shares outstanding
reflect the retroactive effects of the two-for-one common stock
split in the form of a 100% stock dividend that was effective
Dec. 30, 2005.
PERIOD END MEMBERSHIP
At Dec. 31,
-------------------
2005 2004
--------- ---------
HMO
Commercial 254,200 226,200
Medicare 56,300 53,300
Medicaid 55,100 50,500
Managed indemnity 27,500 25,900
Medicare supplement 15,300 16,400
Administrative services 229,500 188,200
--------- ---------
Total Members 637,900 560,500
========= =========
SIERRA HEALTH SERVICES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
Dec. 31, Dec. 31,
2005 2004
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $88,059 $207,619
Investments 281,250 147,575
Accounts receivable 14,501 15,150
Military accounts receivable 378 25,452
Current portion of deferred tax asset 23,949 17,555
Prepaid expenses and other current assets 30,218 36,123
--------- ---------
Total Current Assets 438,355 449,474
Property and equipment, net 71,357 71,152
Restricted cash and investments 18,252 21,853
Goodwill 14,782 14,782
Deferred tax asset (less current portion) 13,266 13,275
Note receivable 47,000 47,000
Other assets 65,834 72,244
--------- ---------
Total Assets $668,846 $689,780
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accrued and other current liabilities $97,135 $76,256
Trade accounts payable 2,347 7,123
Accrued payroll and taxes 21,469 27,668
Medical claims payable 135,867 119,337
Unearned premium revenue 10,170 50,763
Military health care payable - 17,061
Current portion of long-term debt 106 100
--------- ---------
Total Current Liabilities 267,094 298,308
Long-term debt (less current portion) 52,307 125,395
Other liabilities 65,193 64,380
--------- ---------
Total Liabilities 384,594 488,083
--------- ---------
Commitments and contingencies
Stockholders' Equity (1):
Common stock 346 310
Treasury stock (377,190) (237,876)
Additional paid-in capital 400,287 286,439
Deferred compensation - (288)
Accumulated other comprehensive loss (1,750) (245)
Retained earnings 262,559 153,357
--------- ---------
Total Stockholders' Equity 284,252 201,697
--------- ---------
Total Liabilities And Stockholders' Equity $668,846 $689,780
========= =========
(1) All applicable share amounts reflect the retroactive effects of
the two-for-one common stock split in the form of a 100% stock
dividend that was effective Dec. 30, 2005.
SIERRA HEALTH SERVICES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For The Years Ended
Dec. 31,
--------------------
2005 2004
--------- ---------
Cash Flows From Operating Activities:
Net Income $120,017 $122,737
Adjustments To Reconcile Net Income To
Net Cash
Provided By Operating Activities:
Loss from discontinued operations - 682
Depreciation 14,951 17,084
Other adjustments 7,298 23,863
Unearned premium revenue (40,593) 4,875
Military accounts receivable 25,171 21,937
Other current liabilities 19,431 (36,149)
Medical claims payable 16,530 15,386
Changes in other assets and
liabilities 4,030 (5,885)
--------- ---------
Net Cash Provided By Operating Activities Of
Continuing Operations 166,835 164,530
--------- ---------
Cash Flows From Investing Activities:
Capital expenditures, net of dispositions (13,027) (23,102)
(Purchase of) proceeds from investments,
net (131,220) 42,686
--------- ---------
Net Cash (Used For) Provided By Investing
Activities Of Continuing Operations (144,247) 19,584
--------- ---------
Cash Flows From Financing Activities:
Payments on debt and capital leases (10,101) (1,760)
Proceeds from other long-term debt - 10,000
Purchase of treasury stock (154,382) (133,809)
Exercise of stock in connection with stock
plans 22,335 26,834
--------- ---------
Net Cash Used For Financing Activities Of
Continuing Operations (142,148) (98,735)
--------- ---------
Net cash provided by discontinued operations - 3,720
--------- ---------
Net (Decrease) Increase In Cash And Cash
Equivalents (119,560) 89,099
Cash And Cash Equivalents At Beginning Of Period 207,619 118,520
--------- ---------
Cash And Cash Equivalents At End Of Period $88,059 $207,619
========= =========
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