First Health Reports Record Results: 23%
EPS Growth
Investor Contact:
Joseph E. Whitters, CFO
(630) 737-7511
Media Contact:
Erin Gardiner
(630) 737-5016
FOR IMMEDIATE RELEASE
Listen
to Webcast
DOWNERS GROVE, IL - July 28, 2003- Edward L. Wristen, President
and Chief Executive Officer of First Health Group Corp. (NASDAQ:
FHCC), announced today the results of operations for the second
quarter ended June 30, 2003.
Highlights for the quarter include:
- Record revenue of $219 million, up 24% from 2Q 2002
- Record net income of $37 million, up 14% from 2Q 2002
- Record EPS of $.38, up 23% from 2Q 2002
Diluted earnings per share (EPS) and net income for the three
months and six months ended June 30, 2003, increased 23% to
$.38 or $37,171,000 and 23% to $.75 or $74,012,000 respectively,
compared with $.31 or $32,484,000 and $.61 or $63,498,000
respectively, during the same periods last year. Revenues
for the three months and six months ended June 30, 2003, increased
24% to $218,651,000 from $175,923,000 and 25% to $432,404,000
from $345,284,000, respectively, during the same periods last
year.
“The second quarter results reflect a continuing strong
growth in revenue and net income that was led by the group
health and public sector business,” said Wristen. “Group
health revenue increased 32% to $134,145,000 from second quarter
of 2002 primarily due to the Mail Handlers Benefit Plan administration
business. Public sector revenue increased 37% to $44,200,000
from second quarter of 2002 primarily due to new clients.”
Additionally, Mr. Wristen commented that he expects continued
strong growth in 2003 revenue to approximately $875 million
and EPS in the range of $1.55.
Conference Call and Webcast
First Health Group Corp. will be hosting a conference call
and webcast on Monday, July 28 at 9 a.m. Central Daylight
Time to discuss the Company’s second quarter results.
The quarterly conference call will be available on a live
webcast from the Company’s website (www.firsthealth.com).
The webcast is open to all interested parties on a listen-only
basis. Individuals who listen to the call will be presumed
to have read First Health’s Annual Report on Form 10-K
for the year ended December 31, 2002, and Quarterly Report
on Form 10-Q for the three months ended March 31, 2003.
Business Description
First Health, the premier national health-benefits services
company, specializes in providing large payors with integrated
managed care solutions. First Health is a unique national
managed care company serving the group health, workers’
compensation and state agency markets. Using technology to
enable service and managed care innovations, First Health
sets the bar for industry performance. For more information,
visit the company website at www.firsthealth.com.
Forward-Looking Statements Notice
Certain statements herein regarding anticipated financial
results for 2003 and the Company’s business prospects
are forward-looking statements that involve substantial risks
and uncertainties. In accordance with the Private Securities
Litigation Reform Act of 1995, factors that could cause the
Company’s actual results to differ materially from those
expressed or implied by such forward-looking statements include,
among others, the inability of the Company to continue to:
(i) enter into contracts with and successfully implement programs
for new clients within the time frame established by the Company
and achieve the revenue growth expected to result from the
addition of such clients, (ii) expand its group health, workers’
compensation and public sector business, (iii) control health
care benefit expenses, and (iv) successfully integrate the
Mail Handlers Benefit Plan administrative assets. All forward-looking
statements herein are made as of the date hereof, and the
Company undertakes no obligation to update such statements.
First Health Group
Corp.
(000's Omitted Except EPS and Percentages)
(Unaudited)
|
Three
Months Ended
June 30 |
Six
Months Ended
June 30 |
|
2003 |
2002 |
%
Increase
(Decrease) |
2003 |
2002 |
%
Increase
(Decrease) |
|
| Revenues |
$218,651 |
$175,923 |
24% |
$432,404 |
$345,284 |
25% |
|
| Operating Expenses: |
|
|
|
|
|
|
| Cost of Services |
100,148 |
75,077 |
33% |
196,325 |
148,049 |
33% |
| Selling and Marketing |
21,356 |
17,755 |
20% |
42,392 |
34,833 |
22% |
General and
Administrative |
15,447 |
11,956 |
29% |
30,654 |
23,349 |
31% |
| Health Care
Benefits |
4,389 |
3,903 |
12% |
9,551 |
7,684 |
24% |
|
141,340 |
108,691 |
30% |
278,922 |
213,915 |
30% |
| Operating Income |
77,311 |
67,232 |
15% |
153,482 |
131,369 |
17% |
|
Depreciation and
Amortization |
15,554 |
13,356 |
16% |
30,680 |
26,328 |
17% |
| Interest Income |
(1,359) |
(1,544) |
(12)% |
(2,727) |
(3,172) |
(14)% |
| Interest Expense |
1,421 |
1,503 |
(5)% |
2,688 |
2,819 |
(5)% |
| Income Before Income Taxes |
61,695 |
53,917 |
14% |
122,841 |
105,394 |
17% |
| Income Taxes |
(24,524) |
(21,433) |
14% |
(48,829) |
(41,896) |
17% |
| Net Income |
$ 37,171 |
$ 32,484 |
14% |
$ 74,012 |
$ 63,498 |
17% |
|
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¯¯ |
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¯¯ |
| Share Information |
|
|
|
|
|
|
Weighted Average
Shares
Outstanding -
Basic |
95,273 |
101,217 |
(6)% |
96,174 |
100,759 |
(5)% |
|
¯¯¯¯¯¯ |
¯¯¯¯¯¯¯ |
¯¯ |
¯¯¯¯¯¯ |
¯¯¯¯¯¯¯ |
¯¯ |
Net Income Per
Common
Share -
Basic |
$
.39 |
$
.32 |
22% |
$
.77 |
$
.63 |
22% |
|
¯¯¯¯¯¯ |
¯¯¯¯¯¯ |
¯¯ |
¯¯¯¯¯¯ |
¯¯¯¯¯¯ |
¯¯ |
Weighted Average
Shares
Outstanding -
Diluted |
97,696 |
104,735 |
(7)% |
98,689 |
104,584 |
(6)% |
|
¯¯¯¯¯¯ |
¯¯¯¯¯¯¯ |
¯¯ |
¯¯¯¯¯¯¯ |
¯¯¯¯¯¯¯ |
¯¯ |
Net Income Per
Common
Share -
Diluted |
$
.38 |
$
.31 |
23% |
$
.75 |
$
.61 |
23% |
|
¯¯¯¯¯¯ |
¯¯¯¯¯¯ |
¯¯ |
¯¯¯¯¯¯ |
¯¯¯¯¯¯ |
¯¯ |
|
First Health Group Corp.
(000's Omitted Except Percentages)
(Unaudited)
|
Three
Months Ended
June 30 |
Six
Months Ended
June 30 |
|
2003 |
2002 |
%
Increase
(Decrease) |
2003 |
2002 |
%
Increase
(Decrease) |
| Revenue Information: |
|
| Commercial Revenue |
|
|
|
|
|
|
| Group Health: |
|
|
|
|
|
|
PPO
+
Administration
Services |
$ 91,087 |
$ 32,512 |
180% |
$180,028 |
$ 66,504 |
171% |
| PPO
Services |
38,936 |
65,561 |
(41)% |
79,795 |
128,420 |
(38)% |
| Premiums |
4,122 |
3,810 |
8% |
8,357 |
7,820 |
7% |
| Total Group Health |
134,145 |
101,883 |
32% |
268,180 |
202,744 |
32% |
Workers'
Compensation: |
|
|
|
|
|
|
PPO +
Administration
Services |
25,174 |
27,206 |
(7)% |
50,159 |
53,289 |
(6)% |
| PPO Services |
15,132 |
14,663 |
3 % |
30,284 |
27,780 |
9 % |
Total Workers'
Compensation |
40,306 |
41,869 |
(4)% |
80,443 |
81,069 |
(1)% |
Total Commercial
Revenue |
174,451 |
143,752 |
21% |
348,623 |
283,813 |
23% |
| Public Sector |
44,200 |
32,171 |
37% |
83,781 |
61,471 |
36% |
| Total Revenue |
$218,651 |
$175,923 |
24% |
$432,404 |
$345,284 |
25% |
| |
¯¯¯¯¯¯¯ |
¯¯¯¯¯¯¯ |
¯¯ |
¯¯¯¯¯¯¯ |
¯¯¯¯¯¯¯ |
¯¯ |
|
|
| Operating Income Margins* |
|
| Commercial |
41% |
46% |
|
41% |
45% |
|
| Public Sector |
12% |
4% |
|
12% |
7% |
|
|
| *Excludes Depreciation and Amortization |
| Summary Balance
Sheet Information: |
| Assets: |
June 30,
2003 |
December
31,
2002 |
|
| Cash and Investments |
$ 157,304 |
|
$ 152,712 |
|
| Accounts Receivable |
83,499 |
|
69,981 |
|
| Reinsurance Recoverable |
25,959 |
|
27,582 |
|
| Fixed Assets |
207,455 |
|
205,503 |
|
| Goodwill |
283,231 |
|
279,447 |
|
| Intangible Assets |
51,988 |
|
54,086 |
|
| Deferred Taxes |
35,240 |
|
35,255 |
|
| Other Assets |
18,246 |
|
18,795 |
|
| Total
Assets |
$862,922 |
|
$843,361 |
|
|
¯¯¯¯¯¯¯ |
|
¯¯¯¯¯¯¯ |
|
| Liabilities: |
|
|
|
|
|
| Claims Reserves |
$39,700 |
|
$40,420 |
|
| Debt Outstanding |
150,000 |
|
120,000 |
|
| Deferred Taxes |
115,168 |
|
114,692 |
|
| Purchase Reserve |
4,934 |
|
5,795 |
|
| Accounts Payable |
61,185 |
|
50,841 |
|
| Accrued Expenses |
41,931 |
|
47,740 |
|
| Other Liabilities |
65,522 |
|
49,727 |
|
| Total
Liabilities |
478,440 |
|
429,215 |
|
|
|
|
|
|
| Stockholders'
Equity: |
384,482 |
|
414,146 |
|
|
|
|
|
|
Total
Liabilities and
Stockholders' Equity |
$862,922 |
|
$843,361 |
|
|
¯¯¯¯¯¯¯ |
|
¯¯¯¯¯¯¯ |
|
| Consolidated Statement
of Cash Flows: |
| |
Six Months
Ended June 30, |
| |
2003 |
2002 |
| Cash flows
from operating activities: |
|
|
| Net Income |
$ 74,012 |
|
$ 63,498 |
|
| |
|
|
|
|
Adjustments to Reconcile
Net Income to Net Cash |
|
|
|
|
| Provided by Operating
Activities: |
|
|
|
|
| Depreciation
and amortization |
30,680 |
|
26,328 |
|
Change
in allowance for
uncollectible
receivables |
(144) |
|
1,893 |
|
Provision
for deferred
income
taxes |
117 |
|
(111) |
|
Tax
benefits from stock
options
exercised |
6,215 |
|
12,423 |
|
| Other,
net |
(1,248) |
|
103 |
|
| |
|
|
|
|
| Changes in Assets and Liabilities
(net of effects of acquired businesses): |
|
|
|
|
| Accounts
receivable |
(13,866) |
|
1,790 |
|
| Other
current assets |
688 |
|
4,788 |
|
| Reinsurance
recoverable |
1,430 |
|
863 |
|
Accounts
payable and
accrued
expenses |
(2,570) |
|
8,206 |
|
| Claims
reserves |
(720) |
|
574 |
|
| Income
taxes payable |
15,101 |
|
13,574 |
|
Non-current
assets and
liabilities |
748 |
|
(2,541) |
|
| |
|
|
|
|
Net cash provided by
operating activities |
110,443 |
|
131,388 |
|
|
|
|
|
|
| Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
|
| Purchases of investments |
(20,701) |
|
(30,355) |
|
| Sales of investments |
24,349 |
|
27,096 |
|
Acquisition of business,
net
of cash acquired |
(3,442) |
|
(24,027) |
|
| Assets held for sale |
-- |
|
923 |
|
Purchase of property and
equipment |
(30,571) |
|
(27,001) |
|
Net cash used in investing
activities |
(30,365) |
|
(53,364) |
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
| Purchase of treasury stock |
(119,074) |
|
(14,813) |
|
Proceeds from issuance of
long-term debt |
105,000 |
|
150,000 |
|
Repayment of long-term
debt |
(75,000) |
|
(217,500) |
|
Proceeds from issuance of
common stock |
14,703 |
|
21,436 |
|
Stock option loans to
employees |
-- |
|
(2,272) |
|
Stock option loan
repayments |
232 |
|
2,360 |
|
Sales of put options on
common stock |
-- |
|
375 |
|
Net cash used in financing
activities |
(74,139) |
|
(60,414) |
|
|
|
|
|
|
| Net increase in cash and cash equivalents |
5,939 |
|
17,610 |
|
| Cash and cash equivalents, beginning
of period |
20,852 |
|
14,001 |
|
| Cash and cash equivalents, end of period |
$ 26,791 |
|
$ 31,611 |
|
|
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|
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|
|
|
|
