VIRGINIA BEACH, Va., Oct. 28 /PRNewswire-FirstCall/ -- AMERIGROUP Corporation today announced that net income for the third quarter of 2004 increased 34 percent to $24,333,000, or $0.94 per diluted share, compared with $18,185,000 or $0.81 per diluted share for the third quarter of 2003. For the nine months ended September 30, 2004, net income increased 28 percent to $63,617,000, or $2.47 per diluted share, compared with $49,856,000, or $2.27 per diluted share for the nine months ended September 30, 2003. Earnings per diluted share in 2004 reflect our public offering of 3.2 million shares completed in October 2003.
Total revenues for the third quarter of 2004 increased 14 percent to $470,978,000, compared with $412,771,000 for the third quarter of 2003. For the nine months ended September 30, 2004, revenues totaled $1,333,408,000, up 11 percent from $1,198,045,000 for the nine months ended September 30, 2003 reflecting approximately 9 percent same-store premium revenue growth.
Membership increased 8 percent, or 68,000 members, to 934,000 at September 30, 2004, as compared with 866,000 members at September 30, 2003. Sequentially, membership increased 32,000 from the second quarter 2004, all of which was same store. The sequential increase included approximately 11,000 members from a competitor exiting the market in Fort Worth, Texas.
Highlights for the third quarter include: * Sequential membership increased 32,000 from second quarter, all of which was same store; * Health benefits ratio of 79.9 percent of premium revenues; * Selling, general and administrative expenses of 11.1 percent of total revenues; * Unregulated cash and investments of $272,885,000; * Return on average equity of 19.3 percent; and * Full-year 2004 guidance increased to the range of $3.27 to $3.30 from previous guidance of $3.21 to $3.25.
“Our commitment to offering access to quality healthcare has resulted in significantly increased membership and revenue while improving the health status of our members,” said Jeffrey L. McWaters, chairman and chief executive officer. “Rate increases are reflected in this quarter at forecasted levels. The continued expansion of our existing health plans, coupled with our recently announced acquisition of CarePlus Health Plan in New York are examples of our ability to execute operationally while growing effectively.”
Health Benefits
Health benefits were 79.9 percent of premium revenues for the third quarter of 2004 versus 79.8 percent in the third quarter of 2003.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 11.1 percent of total revenues for the third quarter of 2004 versus 11.3 percent in the third quarter of 2003.
Balance Sheet and Cash Flow Highlights
Cash and investments at September 30, 2004, totaled approximately $621,408,000, the majority of which is regulated by state requirements. The unregulated portion at September 30, 2004, was $272,885,000. Operating cash flow totaled $68,934,000 for the first nine months of 2004, compared to $69,603,000 for the same period in the prior year. The number of days in claims payable at the end of the third quarter was 58. During the quarter, AMERIGROUP settled two lawsuits disclosed in previous SEC filings with minimal impact to earnings. Excluding the effect of the settlements, days in claims payable at the end of the quarter would have been 61, which is consistent with AMERIGROUP’s previous range.
E. Paul Dunn Jr. Named Executive Vice President and Chief Financial Officer
AMERIGROUP Corporation also announced today that Paul Dunn has been named executive vice president and chief financial officer of the Company, effective November 8, 2004. See separate press release announcing CFO.
Outlook Updated full-year 2004 expectations are as follows: * Earnings per diluted share increased from previous guidance of $3.21 to $3.25 to the range of $3.27 to $3.30, reflecting net income growth of over 25 percent; * Same-store revenue growth at the low-end of 10 to 12 percent range; * Weighted-average rate increases at the high-end of the 3 to 5 percent range; * Health benefits ratio less than or equal to 81.0 percent of premium revenues; * Selling, general and administrative expenses are expected to be at the mid-point of our range of 10.5 to 11.0 percent of total revenues; and * Fully diluted shares outstanding of 25.9 million. Full-year 2005 guidance is as follows: * Same-store revenue growth in the range of 10 to 13 percent; * Net income growth of approximately 15 to 18 percent over 2004 results; and * Earnings per diluted share in the range of $3.65 to $3.75 for 2005, without the effect of the CarePlus or other acquisitions. New York Acquisition
On October 26, 2004 AMERIGROUP entered into a definitive merger agreement to acquire CarePlus in New York City. CarePlus has contracts to arrange for the provision of healthcare benefits to recipients under the State’s Medicaid, Child Health Plus and Family Health Plus programs in Brooklyn, Manhattan, Queens, Staten Island and Putnam County. As of the proposed closing date, CarePlus is expected to serve 114,000 members. AMERIGROUP is acquiring CarePlus for $107 million, a price that reflects a cash payment of approximately $125 million for CarePlus, which will have estimated net assets of $18 million upon closing. Additional payments may be made based on the achievement of specific criteria in subsequent years.
“CarePlus is a great fit for AMERIGROUP because it is consistent with our strategy of serving major metropolitan areas with significant potential for growth,” said McWaters. “New York State has the second highest Medicaid population with 3.7 million recipients and the highest Medicaid expenditures in the nation, spending more than $40 billion annually. A strong New York health plan positions us well to increase our presence in the Northeast when opportunities arise. The acquisition is expected to close in early 2005. The acquisition is expected to be accretive to earnings by $0.15 to $0.20 per share over 12 months. In years subsequent to the integration, the acquisition is expected to be accretive to earnings consistent with AMERIGROUP’s existing business.”
AMERIGROUP senior management will discuss the Company’s third quarter results on a conference call, Friday, October 29th, at 9:30 a.m. Eastern Time. The conference can be accessed by dialing 1-800-289-0528 and entering confirmation code 992237. A recording of this conference call will be available from 12:00 p.m. Eastern Time on Friday, October 29th, until 11:59 p.m. Eastern Time on Thursday, November 4th. To access the recording, dial 1-888-203-1112 and enter passcode 992237. A live webcast of the call also will be available through the investors’ page on the AMERIGROUP Web site at http://www.amerigroupcorp.com/, or through CCBN at http://www.companyboardroom.com/. A 30-day replay of this webcast will be available on these Web sites approximately two hours following the conclusion of the live broadcast.
AMERIGROUP Corporation, headquartered in Virginia Beach, Virginia, is a multi-state managed healthcare company focused on serving people who receive healthcare benefits through publicly sponsored programs including Medicaid, State Children’s Health Insurance Program (SCHIP) and FamilyCare. The Company operates in Texas, New Jersey, Maryland, Illinois, Florida and the District of Columbia. For more information about AMERIGROUP Corporation, please visit the Company’s Web site at http://www.amerigroupcorp.com/.
This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the Securities and Exchange Commission’s Fair Disclosure Regulation. This release contains certain ''forward-looking’’ statements, including statements related to expected 2004 and 2005 performance such as membership, revenues, same-store premium revenues, operating cash flows, health benefits expenses, seasonality of health benefits expenses, selling, general and administrative expenses, days in claims payable, income tax rates, earnings per share, and net income growth, as well as expectations on the effective date and successful integration of acquisitions and debt levels, made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. These risks and uncertainties include, but are not limited to, national, state and local economic conditions, including their effect on the rate-setting process, timing of payments, as well as the availability and cost of labor, utilities and materials; the effect of government regulations and changes in regulations governing the healthcare industry, including our compliance with such regulations and their effect on our ability to manage our medical costs; changes in Medicaid payment levels, membership eligibility and methodologies and the application of such methodologies by the government; liabilities and other claims asserted against the Company; our ability to attract and retain qualified personnel; our ability to maintain compliance with all minimum capital requirements; the availability and terms of capital to fund acquisitions and capital improvements; the competitive environment in which we operate; our ability to maintain and increase membership levels; and demographic changes.
Investors should also refer to our Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission on March 9, 2004, for a discussion of risk factors. Given these risks and uncertainties, we can give no assurances that any forward-looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them. We specifically disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, except for per share data) Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 Revenues: Premium $468,156 $411,277 $1,326,409 $1,193,170 Investment income 2,822 1,494 6,999 4,875 Total revenues 470,978 412,771 1,333,408 1,198,045 Expenses: Health benefits 374,085 328,235 1,070,747 956,069 Selling, general and administrative 52,124 46,781 141,339 137,796 Depreciation and amortization 4,935 6,379 15,825 17,873 Interest 165 465 540 1,561 Total expenses 431,309 381,860 1,228,451 1,113,299 Income before income taxes 39,669 30,911 104,957 84,746 Income tax expense 15,336 12,726 41,340 34,890 Net income $24,333 $18,185 $63,617 $49,856 Weighted average number of common shares and dilutive potential common shares outstanding 25,977,970 22,328,879 25,799,638 21,956,769 Diluted net income per share $0.94 $0.81 $2.47 $2.27
The following table sets forth selected operating ratios. All ratios, with the exception of the health benefits ratio, are shown as a percentage of total revenues.
Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 Premium revenue 99.4% 99.6% 99.5% 99.6% Investment income 0.6 0.4 0.5 0.4 Total revenues 100.0% 100.0% 100.0% 100.0% Health benefits (1) 79.9% 79.8% 80.7% 80.1% Selling, general and administrative expenses 11.1% 11.3% 10.6% 11.5% Income before income taxes 8.4% 7.5% 7.9% 7.1% Net income 5.2% 4.4% 4.8% 4.2% (1) The health benefits ratio is shown as a percentage of premium revenue because there is a direct relationship between the premium received and the health benefits provided.
The following table sets forth the approximate number of members served in each of our service areas as of September 30, 2004 and 2003.
September 30, Market 2004 2003 Texas 384,000 346,000 Florida 242,000 224,000 Maryland 128,000 126,000 New Jersey 105,000 102,000 District of Columbia 39,000 37,000 Illinois 36,000 31,000 Total 934,000 866,000
The following table sets forth the approximate number of members in each of the products we offer as of September 30, 2004 and 2003.
September 30, Product 2004 2003 AMERICAID (Medicaid-TANF) 649,000 578,000 AMERIKIDS (SCHIP) 194,000 195,000 AMERIPLUS (Medicaid-SSI) 78,000 73,000 AMERIFAM (FamilyCare) 13,000 20,000 Total 934,000 866,000 AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2004 2003 (in thousands) Assets Current assets: Cash and cash equivalents $296,123 $407,220 Short-term investments 66,783 8,750 Premium receivables 43,920 38,259 Deferred income taxes 11,641 10,164 Prepaid expenses and other current assets 13,488 15,995 Total current assets 431,955 480,388 Property, equipment and software, net 45,900 42,158 Goodwill and other intangible assets, net 141,481 144,398 Long-term investments, including investments on deposit for licensure 258,502 154,479 Other long-term assets 4,939 4,598 $882,777 $826,021 Liabilities and Stockholders’ Equity Current liabilities: Claims payable $236,224 $239,532 Unearned revenue 30,574 54,324 Accounts payable 2,739 5,523 Accrued expenses, capital leases and other current liabilities 64,026 53,431 Total current liabilities 333,563 352,810 Deferred income taxes, capital leases and other long-term liabilities 10,894 11,497 Total liabilities 344,457 364,307 Stockholders’ equity: Common stock, $.01 par value 250 244 Additional paid-in capital 344,677 331,751 Retained earnings 193,393 129,719 Total stockholders’ equity 538,320 461,714 $882,777 $826,021 AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Nine months ended September 30, 2004 2003 Cash flows from operating activities: Net income $63,617 $49,856 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,825 17,873 Loss on disposal or abandonment of property, equipment and software 951 12 Deferred tax benefit (827) (2,126) Amortization of deferred compensation 57 270 Tax benefit related to option exercises 4,881 3,285 Changes in assets and liabilities increasing (decreasing) cash flows from operations: Premium receivables (5,661) 1,604 Prepaid expenses and other current assets 2,507 185 Other assets (814) (843) Claims payable (3,308) 4,197 Unearned revenue (23,750) 3,733 Accounts payable, accrued expenses and other current liabilities 14,050 (8,702) Other long-term liabilities 1,406 259 Net cash provided by operating activities 68,934 69,603 Cash flows from investing activities: (Purchase of) proceeds from sale of investments, net (159,739) 1,070 Purchase of investments on deposit for licensure, net (2,317) (5,249) Purchase of property, equipment and software (17,176) (9,754) Purchase of contract rights and related assets, net of adjustments 48 (7,550) Cash acquired through Florida acquisition - 27,483 Net cash (used in) provided by investing activities (179,184) 6,000 Cash flows from financing activities: Payment of capital lease obligations (3,583) (3,037) Repayment of borrowings under credit facility - (20,000) Proceeds from exercise of stock options, change in bank overdrafts and other, net 2,736 9,932 Net cash used in financing activities (847) (13,105) Net (decrease) increase in cash and cash equivalents (111,097) 62,498 Cash and cash equivalents at beginning of period 407,220 207,996 Cash and cash equivalents at end of period $296,123 $270,494
CONTACT: Julie Loftus Trudell, Vice President, Investor Relations of AMERIGROUP Corporation, +1-757-321-3535
AMERIGROUP Corporation
CONTACT: Julie Loftus Trudell, Vice President, Investor Relations ofAMERIGROUP Corporation, +1-757-321-3535
Web site: http://www.amerigroupcorp.com/