THIRD QUARTER EARNINGS CLIMB 32 PERCENT TO $.45 PER SHARE FOR HEALTH SYSTEMS INTERNATIONAL ON 19 PERCENT REVENUE INCREASE.PUEBLO, Colo. and WOODLAND HILLS, Calif.--(BUSINESS WIRE)-- November November: see month. 2, 1994--Continuing a string of record quarterly results, Health Systems International, Inc. (NYSE NYSE See: New York Stock Exchange : HQ) today reported a 32 percent increase in earnings per share for the third quarter ended September September: see month. 30, 1994, to $.45 per share up from $.34 per share in the comparable year earlier period. Net income for the three months ended September 30, 1994 rose 34 percent to $22,415,000, compared with $16,762,000 in the third quarter of 1993. In 1994's third quarter, revenues climbed 19 percent, to $580,837,000, up from $488,373,000 in the three months ended September 30, 1993. The revenue increase was fueled by a 15 percent enrollment increase in the company's health plans, to 1,439,013 at September 30, 1994, compared with 1,256,219 at the end of the same period a year ago. Enrollment increased 7,719 since June June: see month. 30, 1994, and, since the beginning of 1994, Health Systems International has added 140,013 new members. Health Systems International was formed by the January January: see month. 28, 1994 merger involving Health Net, California's second largest health maintenance organization (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, ), and QualMed, the Colorado-based system of HMOs. All of the company's 1993 results are presented on a consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: basis. For the first nine months of 1994, revenues rose 18 percent to $1,716,640,000, from $1,453,061,000 in the comparable period in 1993. Net income for the first nine months of 1994 was $64,196,000, a 52 percent increase over the $42,312,000 earned in the comparable period in 1993. Earnings per share in the first nine months of 1994 were $1.29, again a 52 percent rise over the $.85 per share recorded in the first nine months of 1993. Roger F. Greaves greaves cracklings, an edible raw fat from the meat trade. The skimmings from the preparation of this fat are also called greaves. They represent a low grade of meat meal. , co-chairman, co-president and co-chief executive officer of the company said, "We continue to experience superior profit growth as a result of increased enrollment, reduced selling, general and administrative expenses and modest increases in medical costs." Mr. Greaves noted that Health Systems International 1994 new member growth, year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , is a record for the company. "Last year we saw flat to down enrollment sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen in the second and third quarters, making 1994's performance especially gratifying grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. ," Mr. Greaves added. "Given current pricing pressures in our markets, volume growth is critical to our current and future success. We are very encouraged by the recent results," he said. Health Systems International's Medicare risk contracting Medicare risk contract Managed care An HMO-like format for delivering care under Medicare in which a Pt/client pays a flat fee to a Medicare risk contractor, which is then responsible for delivering health care; a person covered under an MRC receives only listed initiatives resulted in 6,357 new members added in the third quarter, bringing the company's total 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. membership to 72,888 at September 30, 1994. Since the end of the third quarter of 1993, Health Systems has added 32,823 Medicare enrollees. Medicare premiums accounted for 14 percent of total premium revenue in the third quarter. "Medicare is a vitally important market for Health Systems International," Mr. Greaves declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. . "It accounted for the overwhelming majority of enrollment growth in the third quarter. We are devoting significant resources to Medicare and we believe we can increase the rate at which we are adding new members beginning early next year." Greaves said that there are approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 4 million Medicare recipients eligible to enroll TO ENROLL. To register; to enter on the rolls of chancery, or other court's; to make a record. in Medicare MHOs in the six states where the company currently operates. "While our revenue growth is very positive, so too is our proven ability to control costs," said Malik Noun 1. malik - the leader of a town or community in some parts of Asia Minor and the Indian subcontinent; "maliks rule the hinterland of Afghanistan under the protection of warlords" M. Hasan Hasan (häsän`), c.625–c.669; son of Ali and Fatima (daughter of Muhammad the Prophet). When Ali was killed in 661, Hasan became caliph, but he was not strong enough to withstand the threat of arms of the Umayyads and under pressure , M.D., co-chairman, co-president and co-chief executive officer of Health Systems International. The percent of the company's revenues expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. on selling, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. in the three months ended September 30, 1994 including depreciation and amortization, came to $78,535,000, or 13.5 percent of revenues, compared with $79,738,000 in the third quarter of 1993, or 16.3 percent of revenues. "The benefits of the merger can be clearly seen in these cost trends," Dr. Hasan noted. "Additionally, we have further efficiencies to be realized as a result of the merger and the recent consolidation of our California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). operations." Effective August 1, 1994, Health Systems International, following regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approval from the state of California, merged the California HMO operations of its QualMed subsidiary into those of Health Net. In the future all of the company's California HMO operations will be marketed under the Health Net name. Health Systems International's medical loss ratio (MLR MLR mixed lymphocyte reaction. MLR Myocardial laser revascularization, see there --medical costs as a percent of premium revenue) reached 80.2 percent in 1994's third quarter. In the third quarter of 1993, the MLR was 78.0 percent. In the second quarter of 1994, the company's MLR was 80.6 percent and it was 80.3 percent through the first nine months of 1994. "It is our goal for the MLR to remain relatively stable, while expecting some slight upward pressure as a result of rapid growth in the Medicare products," Dr. Hasan said. "We believe these are appropriate levels of MLR and levels our customers demand." In the third quarter of 1994, the company's MLR on its commercial HMO plans was 78.9 percent, while the MLR on its Medicare plans was 88.4 percent. Also in the third quarter of 1994, Health Systems International announced its intention to acquire M.D. Enterprises of Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). in exchange for $101 million in total consideration, comprised principally of Health Systems International Class A Common Stock. M.D. Enterprises wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , M.D. Health Plan, is the third largest HMO in Connecticut. The company also recently announced that it had completed the purchase of 51 percent of the total equity of Integrated Health Networks (IHN IHN Interfaith Hospitality Network IHN Infectious Hematopoietic Necrosis (Salmon disease) IHN In His Name IHN Integrated Healthcare Network IHN Integrated Habitat Network ) for $1.2 million. The company will be renamed QualMed Plans for Health of Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York and expects to begin HMO operations in the Philadelphia Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. area in early 1995. "These two developments are important moves into underpenetrated northeastern north·east n. 1. Abbr. NE The direction or point on the mariner's compass halfway between due north and due east, or 45° east of due north. 2. An area or region lying in the northeast. 3. markets," Dr. Hasan explained. "Our medical management expertise will help the profitability of both organizations while our proven marketing ability should propel pro·pel tr.v. pro·pelled, pro·pel·ling, pro·pels To cause to move forward or onward. See Synonyms at push. [Middle English propellen, from Latin enrollment growth." Health Systems International, Inc. is one of the largest health maintenance organizations in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . It currently serves more than 1.4 million members in six western states: California, Colorado Colorado, state, United States Colorado (kŏlərăd`ə, –răd`ō, –rä`dō), state, W central United States, one of the Rocky Mt. states. , Idaho Idaho (ī`dəhō), one of the Rocky Mt. states in the NW United States. It is bordered by Montana and Wyoming (E), Utah and Nevada (S), Oregon and Washington (W), and the Canadian province of British Columbia (N). , New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). , Oregon Oregon, city, United States Oregon, city (1990 pop. 18,334), Lucas co., NW Ohio, a suburb adjacent to Toledo, on Lake Erie; inc. 1958. It is a port with railroad-owned and -operated docks. The city has industries producing oil, chemicals, and metal products. and Washington Washington, town, England Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. . It also owns Preferred Health Network, a preferred provider organization 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. (PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there ) with 2.7 million members in 20 states and a majority interest in a managed care start-up Start-up The earliest stage of a new business venture. venture in the Philadelphia area. -0-
Health Systems International, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
Three-Months Ended Nine-Months Ended
September 30, September 30,
1994 1993 1994 1993
Premium revenue $580,837 $488,373 $1,716,640 $1,453,061
Operating expenses:
Health care expenses 465,841 381,103 1,379,239 1,160,422
Marketing, general and
administrative 78,535 79,738 231,116 220,418
Total operating expenses 544,376 460,841 1,610,355 1,380,840
Operating income 36,461 27,532 106,285 72,221
Net investment income 1,837 22 3,033 161
Income before income taxes 38,298 27,554 109,318 72,382
Income taxes 15,883 10,792 45,122 30,070
Net income $ 22,415 $ 16,762 $ 64,196 $ 42,312
Net income per share -
primary and fully diluted $ 0.45 $ 0.34 $ 1.29 $ 0.85
Condensed Consolidated Balance Sheets
(In thousands, except share data)
September 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $199,805 $150,159
Marketable securities held for sale 275,211 315,443
Other current assets 96,555 86,838
Total Current Assets $571,571 $552,440
Property and equipment, net 72,490 71,172
Goodwill and other intangible assets 183,205 193,857
Other assets 5,734 4,752
Total Assets $833,000 $822,221
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Medical claims and
settlements payable $322,888 $295,811
Other current liabilities 119,912 121,872
Total Current Liabilities 442,800 417,683
Notes payable 160,225 219,922
Other liabilities 31,138 30,264
Total liabilities 634,163 667,869
Total Stockholders' Equity 198,837 154,352
Total Liabilities and
Stockholders' Equity $833,000 $822,221
Health Systems International, Inc. and Subsidiaries
Operating Statistics
Three-Months Ended Nine-Months Ended
September 30, September 30,
1994 1993 1994 1993
Medical loss ratio (medical costs
as a percentage of revenue) 80.2% 78.0% 80.3% 79.9%
Income before income taxes as a
percentage of revenue 6.6% 5.6% 6.4% 5.0%
Net income as a percentage of
revenue 3.9% 3.4% 3.7% 2.9%
Enrollment
September 30,
1994 1993
Members by product type
Commercial 1,366,125 1,216,154
Medicare 72,888 40,065
Total 1,439,013 1,256,219
Members by state
California 1,229,774 1,077,315
Colorado 40,749 38,423
New Mexico 30,905 30,776
Washington/Idaho 106,859 90,059
Oregon 30,726 19,646
Total 1,439,013 1,256,219
HEALTH SYSTEMS INTERNATIONAL
STATEMENT OF OPERATIONS
BY QUARTER FOR 1994
(unaudited)
($ 000's except per share amounts)
Qtr. 1 Qtr. 2 Qtr. 3
PREMIUM REVENUE $564,654 $571,148 $580,837
OPERATING EXPENSES:
Health Care Expenses 453,074 460,324 465,841
Marketing, General
and Admin Expenses 67,378 66,318 68,250
Depreciation
and Amortization 9,371 9,514 10,285
TOTAL OPERATING EXPENSES 529,823 536,156 544,376
OPERATING INCOME 34,831 34,992 36,461
INTEREST, NET 372 826 1,837
INCOME BEFORE INCOME TAXES 35,203 35,818 38,298
INCOME TAXES 14,675 14,564 15,883
NET INCOME $ 20,528 $ 21,254 $ 22,415
EPS - PRIMARY $ 0.41 $ 0.43 $ 0.45
SHARES OUTSTANDING - PRIMARY 50,005,000 50,001,000 49,470,000
TOTAL MEMBERS 1,413,010 1,431,294 1,439,013
HEALTH SYSTEMS INTERNATIONAL
STATEMENT OF OPERATIONS
BY QUARTER FOR 1993
($ 000's except per share amounts)
Qtr. 1 Qtr. 2 Qtr. 3
PREMIUM REVENUE $480,683 $484,005 $488,373
OPERATING EXPENSES:
Health Care Expenses 394,545 384,774 381,103
Marketing, General
and Admin Expenses 57,324 66,883 71,280
Depreciation
and Amortization 8,145 8,328 8,458
Merger Related Costs 0 0 0
TOTAL OPERATING EXPENSES 460,014 459,985 460,841
OPERATING INCOME 20,669 24,020 27,532
INTEREST, NET 261 (122) 22
INCOME BEFORE INCOME TAXES 20,930 23,898 27,554
INCOME TAXES 9,345 9,933 10,792
NET INCOME $ 11,585 $ 13,965 $ 16,762
EPS - PRIMARY $ 0.23 $ 0.28 $ 0.34
SHARES OUTSTANDING - PRIMARY 49,566,416 49,455,161 49,516,639
TOTAL MEMBERS 1,259,106 1,253,363 1,256,219
Qtr. 4 Total
PREMIUM REVENUE $504,199 $1,957,260
OPERATING EXPENSES:
Health Care Expenses 406,810 1,567,232
Marketing, General
and Admin Expenses 78,277 273,764
Depreciation
and Amortization 9,256 34,187
Merger Related Costs 29,725 29,725
TOTAL OPERATING EXPENSES 524,068 1,904,908
OPERATING INCOME (19,869) 52,352
INTEREST, NET (275) (114)
INCOME BEFORE INCOME TAXES (20,144) 52,238
INCOME TAXES (1,632) 28,438
NET INCOME $(18,512) $ 23,800
EPS - PRIMARY $ (0.37) $ 0.48
SHARES OUTSTANDING - PRIMARY 49,542,269 49,516,666
TOTAL MEMBERS 1,299,000
HEALTH SYSTEMS INTERNATIONAL
STATEMENT OF OPERATIONS
BY QUARTER FOR 1992
(PROFORMA)
($ 000's except per share amounts)
Qtr. 1 Qtr. 2 Qtr. 3
PREMIUM REVENUE $376,398 $405,203 $429,774
OPERATING EXPENSES:
Health Care Expenses 308,286 334,981 347,014
Marketing, General
and Admin Expenses 38,923 45,423 48,830
Depreciation
and Amortization 8,911 8,895 10,356
Merger Related Costs 0 0 0
TOTAL OPERATING EXPENSES 356,120 389,299 406,200
OPERATING INCOME 20,278 15,904 23,574
INTEREST, NET (243) (538) 96
INCOME BEFORE INCOME TAXES 20,035 15,366 23,670
INCOME TAXES 7,046 6,325 9,722
NET INCOME/a $ 12,989 $ 9,041 $ 13,948
EPS - PRIMARY $ 0.27 $ 0.18 $ 0.28
SHARES OUTSTANDING - PRIMARY 49,498,889 49,476,034 49,325,416
TOTAL MEMBERS 1,096,672 1,190,556 1,207,352
Qtr. 4 Total
PREMIUM REVENUE $445,944 $1,657,319
OPERATING EXPENSES:
Health Care Expenses 353,921 1,344,202
Marketing, General
and Admin Expenses 67,993 201,169
Depreciation
and Amortization 7,731 35,893
Merger Related Costs 0 0
TOTAL OPERATING EXPENSES 429,645 1,581,264
OPERATING INCOME 16,299 76,055
INTEREST, NET (218) (903)
INCOME BEFORE INCOME TAXES 16,081 75,152
INCOME TAXES 7,581 30,674
NET INCOME/a $ 8,500 $ 44,478
EPS - PRIMARY $ 0.17 $ 0.90
SHARES OUTSTANDING - PRIMARY 49,504,373 49,455,817
TOTAL MEMBERS 1,227,911
(a) Historical--10K Net Income=$40,276
Health Systems International, Inc.
Membership by State
At Period Ended
1994
September 30 June 30 March 31
HSI
Commercial 1,366,125 1,364,763 1,350,378
Medicare 72,888 66,531 62,632
Total 1,439,013 1,431,294 1,413,010
California
Commercial 1,166,274 1,171,300 1,162,022
Medicare 63,500 57,016 53,753
Total 1,229,774 1,228,316 1,215,775
Colorado
Commercial 33,352 30,121 30,617
Medicare 7,397 7,674 7,315
Total 40,749 37,795 37,932
New Mexico
Commercial 29,395 30,134 29,872
Medicare 1,510 1,448 1,279
Total 30,905 31,582 31,151
Washington/Idaho
Commercial 106,378 104,802 102,747
Medicare 481 393 285
Total 106,859 105,195 103,032
Oregon
Commercial 30,726 28,406 25,120
Medicare -- -- --
Total 30,726 28,406 25,120
At Period Ended
1993
December 31 September 30 June 30 March 31
HSI
Commercial 1,246,519 1,216,154 1,219,387 1,230,362
Medicare 52,481 40,065 33,976 28,744
Total 1,299,000 1,256,219 1,253,363 1,259,106
California
Commercial 1,064,497 1,043,278 1,059,265 1,072,341
Medicare 44,810 34,037 29,648 25,391
Total 1,109,307 1,077,315 1,088,913 1,097,732
Colorado
Commercial 36,565 33,564 27,327 26,803
Medicare 6,238 4,859 3,540 2,998
Total 42,603 38,423 30,867 29,801
New Mexico
Commercial 29,256 29,712 28,838 27,860
Medicare 1,259 1,064 776 355
Total 30,515 30,776 29,614 28,215
Washington/Idaho
Commercial 94,393 89,954 85,048 84,399
Medicare 174 105 12 --
Total 94,567 90,059 85,060 84,399
Oregon
Commercial 21,808 19,646 18,909 18,959
Medicare -- -- -- --
Total 21,808 19,646 18,909 18,959
At Period Ended
1992
December 31 September 30 June 30 March 31
HSI
Commercial 1,207,515 1,188,208 1,172,605 1,095,306
Medicare 20,396 19,144 17,951 1,366
Total 1,227,911 1,207,352 1,190,556 1,096,672
California
Commercial 1,051,940 1,033,471 1,026,913 951,798
Medicare 17,843 16,808 16,199 --
Total 1,069,783 1,050,279 1,043,112 951,798
Colorado
Commercial 25,434 26,252 25,404 24,637
Medicare 2,366 2,197 1,680 1,366
Total 27,800 28,449 27,084 26,003
New Mexico
Commercial 27,662 27,451 24,715 24,044
Medicare 187 139 72 --
Total 27,849 27,590 24,787 24,044
Washington/Idaho
Commercial 82,773 80,238 74,880 73,789
Medicare -- -- -- --
Total 82,773 80,238 74,880 73,789
Oregon
Commercial 19,706 20,796 20,693 21,038
Medicare -- -- -- --
Total 19,706 20,796 20,693 21,038
CONTACT: Health Systems International, Inc., Woodland Hills
Don Prial, 818/593-7304 (media contact)
David Olson, 818/719-6978 (investor contact)
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