PacifiCare Seeks Funds for ‘War Chest’ : * Earnings: Officials of county’s largest HMO consider stock offering and look for new acquisitions.

CYPRESS — PacifiCare Health Systems Inc. said Thursday that it is considering a stock offering to raise up to $100 million to pay off old debt and sock cash away in a “war chest” for future takeovers.

“We’re not sure, but we’re thinking about doing it,” said chief executive Terry Hartshorn. “We think it’s an exciting opportunity.”

Hartshorn said the December acquisition of Health Plan of America has given company officials confidence that the HMO can position itself in the near future to become one of the nation’s largest health care providers.

He said PacifiCare officials are keeping an eye out for new acquisitions and believe a stock offering will enable the company to be financially prepared for any opportunities that materialize.

“We want to keep a war chest for future acquisitions,” Hartshorn said.

The announcement that the county’s largest health maintenance organization is mulling a new stock offering accompanied PacifiCare’s report of healthy earnings for its fiscal 1992 second quarter.

For the period ended March 31, PacifiCare’s profits climbed 45% to $10.2 million, or 84 cents a share, from $7 million or 60 cents per share, a year earlier.

Revenue was up, too, increasing 41% to $424.6 million from $302.1 million.

Earnings for the first half of the fiscal year of $16.8 million, or $1.41 a share, were up 77% from $9.5 million, or 81 cents a share, in the first six months of PacifiCare’s fiscal 1991. Revenue for the half was $784.6 million, up 35% from $581.3 million.

Hartshorn attributed the strong showing to the company’s ability to control health care costs and to a 30% increase in the HMO’s membership after the purchase of Health Plan of America.

The $91-million acquisition left PacifiCare with a $50-million debt, and Hartshorn said he wanted to clear it as soon as possible. Interest on the debt drained company coffers of $1.5 million in the second quarter, he said.

He said that if the company decides to go with a secondary offering, which would require approval of the Securities and Exchange Commission, the matter could be placed before PacifiCare stockholders by midsummer.

In plans being discussed within the company, Hartshorn said, the offering would include a new Class B non-voting common stock as the Class A common shares already traded.

Mark Matheson, an analyst with the Irvine-based Cruttenden & Co. Inc. investment banking firm, questioned the plan.

“I personally don’t like to see companies make other classes,” of common stock, Matheson said. “Let’s keep it all in one pot.”

Matheson also said that he doesn’t believe PacifiCare needs to raise additional cash through Wall Street--watering down existing shareholders’ stake in the company in the process.

“They are one of the best cash-raising machines in Orange County,” he said. Unlike its Fountain Valley competitor, FHP Health Care, PacifiCare does not have cash-draining capital assets such as hospitals and medical clinics.

Matheson also said he is concerned that PacifiCare might be embarking on a growth plan that is too aggressive. The company is one of several HMOs considering the purchase of the Los Angeles HMO Medicorp.

“The more you take on, the bigger chance you have to stumble,” Matheson said. “Frankly, I wish more companies would call it quits when they get to a certain level, and not grow for the sake of growth. I hope they keep their money in the war chest and wait for a good deal.”

PacifiCare Health Systems Inc.

In the fiscal 1992 second quarter ended March 31, PacifiCare Health Systems Inc. posted a 45% earnings increase to $10.2 million as revenue rose 41% to $424.6 million. The company attributed a big part of its gains to its December acquisition of Health Plan of America.

Figures are in thousands, except per-share data.

2nd Qtr 2nd Qtr 6 Months 6 Months 1992 1991 1992 1991 Revenue $424,566 $302,100 $784,645 $581,290 Net income (loss) 10,193 7,026 16,825 9,535 Per share (loss) 0.84 0.60 1.41 0.81

Source: PacifiCare Health Systems Inc.