Amerigroup (AGP:US) Inc., a provider of managed-care plans for low-income Americans, cut its earnings estimate for this year because of costs related to an appeal bond for a $344 million whistleblower lawsuit it lost.
The company reduced its 2007 earnings forecast to a range of $1.81 to $1.96 a share, from $1.85 to $2, Amerigroup said in a statement today. The new financing structure will trim earnings by 2 cents to 6 cents a share, the company said.
On March 13 a U.S. district judge in Chicago added $190.4 million in penalties to the $144 million in damages the company was assigned to pay after it lost a whistleblower lawsuit brought by a former employee. In a trial last year, the company's Illinois Medicaid plan, which contracted with the state to care for low-income residents, was found to have improperly denied care to pregnant women.
The Virginia Beach, Virginia-based company has obtained a bond while it appeals the case. Amerigroup will take a non-cash expense in the first quarter of $1.6 million before taxes, or 2 cents a share, to write off its previous credit facility.
The company expects to earn 31 cents to 35 cents a share in the first quarter, said Jeffrey McWaters, Amerigroup's chairman and chief executive officer, in a conference call with investors today. Amerigroup doesn't usually give quarterly earnings estimates.
``It's not our intent to provide quarterly guidance in the future,'' McWaters said. ``Given the unique circumstances, we thought it would be important'' in this instance.
In further commentary on first-quarter earnings, he said selling and administrative costs would be higher than usual because the company is investing in new regions, notably Tennessee. Later quarters in the year will benefit from rate increases, which usually go into effect mid-year, he said.
Amerigroup shares rose 34 cents, or 1 percent, to $33.14 at 4 p.m. in New York Stock Exchange composite trading. They've gained 50 percent in the past 12 months.
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