aNoNo
01-03-2002, 08:50 AM
PacifiCare Will Cut 15% of Work Force,
Take $60 Million Charge for Restructuring
LOS ANGELES -- PacifiCare Health Systems Inc. plans to consolidate operations, lay off 15% of its work force and outsource certain services, moves the company says will save it $80 million to $90 million a year.
The restructuring, to be implemented at the 23-year-old health insurer during the next three quarters, will result in a fourth-quarter pretax charge of $60
million, or about $1.14 a share on a full-year basis, for severance and
associated facilities and fixed asset impairment costs.
Job cuts would fall in the first quarter of 2002 and are expected to include about 1,300 positions across all eight of the company's health-maintenance organizations. The cuts are in addition to 500 to 600 job cuts announced in the first quarter of 2001.
Howard G. Phanstiel, PacifiCare's chief executive officer and president, said
the company would be left with 7,500 to 7,600 workers after the layoffs.
Gregory W. Scott, chief financial officer of
PacifiCare, Santa Ana, Calif., said 2002 earnings are expected to be in the range of $3.55 to $3.65 a share, including about $1.60 from the positive impact of the elimination of goodwill amortization.
The guidance doesn't include noncash charges
related to changes in accounting for the balance sheet carrying value of goodwill that may be taken in 2002.
Analysts surveyed by First Call/Thomson Financial expect the company to earn
$3.39 a share in 2002, excluding goodwill. For the fourth quarter of 2000, the
company reported net income of $12 million, or 35 cents a share, on operating
revenue of $2.94 billion.
In late September, PacifiCare joined several other major insurers in announcing
plans to limit involvement in the federal government's Medicare+Choice
program, which offers managed care to senior citizens as an alternative to traditional Medicare.
PacifiCare said it planned to drop about 64,000 members, or slightly more than
6% of its one million members in its Secure Horizons plan, which had been a
PacifiCare crown jewel until government payment policies changed in 1997.
PacifiCare says its federal payments will rise only between 2% and 3% in
2002, far short of the 8% to 10% increase it expects for Medicare costs.
As part of the restructuring, the company also said Wednesday it signed a
10-year agreement with International Business Machines Inc. and reached
an agreement in principle with Keane Inc. to outsource its
information-technology operating and software-maintenance functions to those
companies. About 630 additional jobs will be transferred to outside vendors
doing the information-technology work.
As of 4 p.m. in Nasdaq Stock Market trading Wednesday, PacifiCare shares
rose eight cents to $16.08.
Take $60 Million Charge for Restructuring
LOS ANGELES -- PacifiCare Health Systems Inc. plans to consolidate operations, lay off 15% of its work force and outsource certain services, moves the company says will save it $80 million to $90 million a year.
The restructuring, to be implemented at the 23-year-old health insurer during the next three quarters, will result in a fourth-quarter pretax charge of $60
million, or about $1.14 a share on a full-year basis, for severance and
associated facilities and fixed asset impairment costs.
Job cuts would fall in the first quarter of 2002 and are expected to include about 1,300 positions across all eight of the company's health-maintenance organizations. The cuts are in addition to 500 to 600 job cuts announced in the first quarter of 2001.
Howard G. Phanstiel, PacifiCare's chief executive officer and president, said
the company would be left with 7,500 to 7,600 workers after the layoffs.
Gregory W. Scott, chief financial officer of
PacifiCare, Santa Ana, Calif., said 2002 earnings are expected to be in the range of $3.55 to $3.65 a share, including about $1.60 from the positive impact of the elimination of goodwill amortization.
The guidance doesn't include noncash charges
related to changes in accounting for the balance sheet carrying value of goodwill that may be taken in 2002.
Analysts surveyed by First Call/Thomson Financial expect the company to earn
$3.39 a share in 2002, excluding goodwill. For the fourth quarter of 2000, the
company reported net income of $12 million, or 35 cents a share, on operating
revenue of $2.94 billion.
In late September, PacifiCare joined several other major insurers in announcing
plans to limit involvement in the federal government's Medicare+Choice
program, which offers managed care to senior citizens as an alternative to traditional Medicare.
PacifiCare said it planned to drop about 64,000 members, or slightly more than
6% of its one million members in its Secure Horizons plan, which had been a
PacifiCare crown jewel until government payment policies changed in 1997.
PacifiCare says its federal payments will rise only between 2% and 3% in
2002, far short of the 8% to 10% increase it expects for Medicare costs.
As part of the restructuring, the company also said Wednesday it signed a
10-year agreement with International Business Machines Inc. and reached
an agreement in principle with Keane Inc. to outsource its
information-technology operating and software-maintenance functions to those
companies. About 630 additional jobs will be transferred to outside vendors
doing the information-technology work.
As of 4 p.m. in Nasdaq Stock Market trading Wednesday, PacifiCare shares
rose eight cents to $16.08.