Exhibit 99.1
AMERIGROUP CORPORATION REPORTS THIRD QUARTER RESULTS
VIRGINIA BEACH, Va., Oct. 27 /PRNewswire-FirstCall/ -- AMERIGROUP
Corporation (NYSE: AGP) 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.
SOURCE AMERIGROUP Corporation
-0- 10/27/2005
/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/
/Web site: http://www.amerigroupcorp.com/