VIRGINIA BEACH, Va., Oct. 27 /PRNewswire-FirstCall/ -- AMERIGROUP Corporation today announced a net loss for the third quarter of 2005 of $2,260,000, or $0.04 per diluted share, compared with net income of $24,333,000, or $0.47 per diluted share, for the third quarter of 2004. Third quarter results include additional estimated medical costs related to services performed in prior periods, primarily in the second quarter of 2005, of $19,957,000, or $0.23 per diluted share, net of income taxes. Excluding the impact of the prior period claims estimates, third quarter earnings would have been $10,014,000, or $0.19 per diluted share.
Total revenues for the third quarter of 2005 increased 24.7 percent to $587,393,000, compared with $470,978,000 for the third quarter of 2004, due to our New York acquisition and a 12.5 percent organic premium revenue growth. For the nine months ended September 30, 2005, revenues totaled $1,709,627,000, up 28.2 percent from $1,333,408,000 for the nine months ended September 30, 2004, reflecting a 15.3 percent organic premium revenue growth.
Membership increased 17.7 percent, or 165,000 members, to 1,099,000 at September 30, 2005, as compared with 934,000 members at September 30, 2004, an increase of approximately 29,000 members, or 2.7 percent, from the second quarter of 2005.
Summary includes: * Sequential membership increased by 29,000 members, or 2.7 percent; * Health benefits ratio of 89.3 percent of premium revenues, or 85.8 percent, excluding the impact of the prior period claims estimates; * Selling, general and administrative expenses of 10.8 percent of total revenues; * Days in claims payable of 51; * Unregulated cash and investments of $174,431,000; and * Cash flow from operations for the nine months ended September 30, 2005 of $55,306,000.
“The higher than expected medical cost estimates that we saw in the second quarter continued and are part of a larger and broader pattern of higher costs and increased utilization, primarily in our AMERICAID Community Care product,” said Jeffrey L. McWaters, Chairman and CEO. “We have begun to develop action plans to return us over time to the financial performance that we and our shareholders expect. These plans will focus on realizing financial improvements from actuarially sound rate setting, as well as targeted re- contracting and disease management.”
Health Benefits
Health benefits were 89.3 percent of premium revenues for the third quarter of 2005 versus 79.9 percent in the third quarter of 2004. Excluding the impact of the prior period claims estimates, third quarter health benefits would have been 85.8 percent compared to 79.9 percent.
Selling, General and Administrative Expenses
The selling, general and administrative expense ratio was 10.8 percent of total revenues for the third quarter of 2005 versus 11.1 percent in the third quarter of 2004.
Balance Sheet and Cash Flow Highlights
Cash and investments at September 30, 2005, totaled $597,183,000, of which $174,431,000 was unregulated. Medical claims liabilities totaled $286,882,000, representing 51 days in claims payable, which remained unchanged from the second quarter.
Cash flow from operations for the nine months ended September, 30 2005 totaled $55,306,000, compared to $68,934,000 for the same period in the prior year. This decrease is due primarily to a significant decrease in accrued liabilities in the period.
2005 Estimates
The Company is revising its 2005 annual earnings estimates to $0.88 to $0.90 per diluted share. Same-store premium growth is expected at the high end of our 12 to 14 percent expected range. This estimate reflects a typical seasonal increase in our medical cost and assumes no improvement in our medical trend from the third quarter. In addition, this includes anticipated costs relative to fourth quarter expenses in connection with the action plans described above.
AMERIGROUP senior management will discuss the Company’s third quarter results on a conference call, Friday, October 28th, at 8:30 a.m. Eastern Time. The conference can be accessed by dialing 800-810-0924 (domestic) or 913-981- 4900 (international) and providing passcode 1444529 approximately ten minutes prior to the start time of the call. A recording of the call may be accessed by dialing 888-203-1112 (domestic) or 719-457-0820 (international) and providing passcode 1444529. The replay will be available beginning Friday, October 28, at 12:00 p.m. Eastern Time until Thursday, November 3, at 11:59 p.m. Eastern Time. The conference call will also be available through the investors page of the Company’s Web site, http://www.amerigroupcorp.com, or through http://www.earnings.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, improves healthcare access and quality for low-income Americans by developing innovative managed healthcare services for the public sector. Through its wholly owned subsidiaries, AMERIGROUP serves more than 1 million people and operates in Florida, Georgia, Illinois, Maryland, New York, New Jersey, Ohio, Texas, Virginia and the District of Columbia. For more information, visit 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 2005 performance such as membership, revenues, same-store premium revenues, rate increases, 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 any pending acquisition 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 Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission on March 9, 2005, 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, 2005 2004 2005 2004 Revenues: Premium $582,784 $468,156 $1,697,403 $1,326,409 Investment income and other 4,609 2,822 12,224 6,999 Total revenues 587,393 470,978 1,709,627 1,333,408 Expenses: Health benefits 520,243 374,085 1,437,718 1,070,747 Selling, general and administrative 63,596 52,124 183,382 141,339 Depreciation and amortization 6,508 4,935 20,260 15,825 Interest 156 165 476 540 Total expenses 590,503 431,309 1,641,836 1,228,451 (Loss) income before income taxes (3,110) 39,669 67,791 104,957 Income tax (benefit) expense (850) 15,336 27,060 41,340 Net (loss) income $(2,260) $24,333 $40,731 $63,617 Weighted average number of common shares and dilutive potential common shares outstanding 51,420,856 51,955,940 53,008,886 51,599,277 Diluted net (loss) income per share $(0.04) $0.47 $0.77 $1.23 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, 2005 2004 2005 2004 Premium revenue 99.2 % 99.4 % 99.3 % 99.5 % Investment income and other 0.8 0.6 0.7 0.5 Total revenues 100.0 % 100.0 % 100.0 % 100.0 % Health benefits (1) 89.3 % 79.9 % 84.7 % 80.7 % Selling, general and administrative expenses 10.8 % 11.1 % 10.7 % 10.6 % (Loss) income before income taxes (0.5)% 8.4 % 4.0 % 7.9 % Net (loss) income (0.4)% 5.2 % 2.4 % 4.8 % (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 our members we served in each state as of September 30, 2005 and 2004.
September 30, 2005 2004 Texas 405,000 384,000 Florida 215,000 242,000 Maryland 136,000 128,000 New York 130,000 - New Jersey 108,000 105,000 Illinois 44,000 36,000 District of Columbia 41,000 39,000 Virginia 19,000 - Ohio 1,000 - Total 1,099,000 934,000
The following table sets forth the approximate number of our members in each of our products as of September 30, 2005 and 2004.
September 30, Product 2005 2004 AMERICAID (Medicaid-TANF) 775,000 649,000 AMERIKIDS (SCHIP) 196,000 194,000 AMERIPLUS (Medicaid-SSI) 87,000 78,000 AMERIFAM (FamilyCare) 41,000 13,000 Total 1,099,000 934,000 AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2005 2004 (in thousands) Assets Current assets: Cash and cash equivalents $243,647 $227,130 Short-term investments 97,188 176,364 Premium receivables 73,770 44,081 Deferred income taxes 13,228 11,019 Prepaid expenses and other current assets 25,059 18,737 Total current assets 452,892 477,331 Property, equipment and software, net 58,883 50,298 Goodwill and other intangible assets, net 252,645 140,382 Long-term investments, including investments on deposit for licensure 256,348 246,930 Other long-term assets 7,304 4,909 $1,028,072 $919,850 Liabilities and Stockholders’ Equity Current liabilities: Claims payable $286,882 $241,253 Unearned revenue 55,866 34,228 Accounts payable 3,590 4,826 Accrued expenses, capital leases and other current liabilities 36,842 56,842 Total current liabilities 383,180 337,149 Deferred income taxes, capital leases and other long-term liabilities 17,599 13,989 Total liabilities 400,779 351,138 Stockholders’ equity: Common stock, $.01 par value 515 505 Additional paid-in capital 370,434 352,417 Retained earnings 256,344 215,790 Total stockholders’ equity 627,293 568,712 $1,028,072 $919,850 AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2005 2004 (in thousands) Cash flows from operating activities: Net income $40,731 $63,617 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,260 15,825 Loss on disposal or abandonment of property, equipment and software - 951 Deferred tax benefit (2,445) (827) Amortization of deferred compensation - 57 Tax benefit related to option exercises 8,447 4,881 Changes in assets and liabilities increasing (decreasing) cash flows from operations: Premium receivables (23,862) (5,661) Prepaid expenses and other current assets (3,186) 2,507 Other assets (1,121) (814) Claims payable 18,205 (3,308) Unearned revenue 21,545 (23,750) Accounts payable, accrued expenses and other current liabilities (22,538) 14,050 Other long-term liabilities (730) 1,406 Net cash provided by operating activities 55,306 68,934 Cash flows from investing activities: Proceeds from the sale (purchase) of investments, net 87,493 (87,774) Purchase of investments on deposit for licensure, net (9,886) (2,317) Purchase of property, equipment and software (18,058) (17,176) Acquisition, net of cash acquired (103,645) - Purchase price adjustment received - 48 Net cash used in investing activities (44,096) (107,219) Cash flows from financing activities: Payment of capital lease obligations (2,648) (3,583) Payment of debt issuance costs (1,626) - Proceeds from exercise of stock options and change in bank overdrafts, net 9,581 2,736 Net cash provided by (used in) financing activities 5,307 (847) Net increase (decrease) in cash and cash equivalents 16,517 (39,132) Cash and cash equivalents at beginning of period 227,130 84,030 Cash and cash equivalents at end of period $243,647 $44,898
CONTACT: Investors: Julie Loftus Trudell, Vice President, Investor Relations, +1-757-321-3597, or News Media: Kent Jenkins Jr., Vice President, Communications, +1-757-518-3671, both of AMERIGROUP Corporation.
AMERIGROUP Corporation
CONTACT: Investors: Julie Loftus Trudell, Vice President, InvestorRelations, +1-757-321-3597, or News Media: Kent Jenkins Jr., VicePresident, Communications, +1-757-518-3671, both of AMERIGROUP Corporation
Web site: http://www.amerigroupcorp.com//
