LONG BEACH, Calif.--(BUSINESS WIRE)--May 4, 2006--Molina Healthcare, Inc. (NYSE: MOH) today announced its financial results for the first quarter ended March 31, 2006.
Net income for the first quarter ended March 31, 2006, was $8.6 million, or $0.31 per diluted share, compared with net income of $14.8 million, or $0.53 per diluted share, for the quarter ended March 31, 2005. Comparability between the first quarters of 2006 and 2005 is affected by adverse out-of-period claims development recorded in the second quarter of 2005, which was disclosed in the Company's earnings release announcing results for the second quarter of 2005.
The Company is not revising guidance at this time. The Company continues to assess the effectiveness of the medical care cost control initiatives it implemented during the latter half of 2005. Also, the magnitude of a number of growth opportunities has yet to be determined.
Commenting on the results, J. Mario Molina, M.D., president and chief executive officer of Molina Healthcare, Inc., said, "Our financial results for this quarter, combined with the positive momentum generated in the previous two quarters, are indicative of the progress we are making with our medical management initiatives. However, despite the noticeable improvement in our medical care cost trends, there is still much to be done. We believe that the results for the first half of 2006 will provide a more reliable measure of our progress."
Financial Results-Comparison of Quarters Ended March 31, 2006 and 2005
Premium revenue for the first quarter of 2006 was $449.3 million, an increase of $57.1 million, or 14.6%, over 2005 premium revenue of $392.2 million. Membership growth from acquisitions in California and from start-up operations in Indiana and Ohio was the primary driver of the increase in premium revenue.
Medical care costs as a percentage of premium and other operating revenue (the medical care ratio) increased to 85.3% in the first quarter of 2006 from 84.9% in the first quarter of 2005. Sequentially, the Company's medical care ratio increased to 85.3% in the first quarter of 2006 from 84.7% in the fourth quarter of 2005. The Company believes that the increase in the medical care ratio between the fourth quarter of 2005 and the first quarter of 2006 was primarily the result of normal seasonality in health care utilization and costs. The Company further believes that certain medical cost control initiatives undertaken at the start of the third quarter of 2005 are having a positive impact upon its medical care ratio.
Sequentially, the Company's days in claims payable increased to 57 days at March 31, 2006, compared with 55 days at December 31, 2005, 52 days at September 30, 2005, 50 days at June 30, 2005, and 48 days at March 31, 2005. The increase in days in claims payable is the result of the Company's increasing membership, new markets entered in 2006 and the Company's desire to maintain adequate claims reserves while its medical care cost control initiatives gain further traction.
Salary, general and administrative expenses were $51.2 million for the first quarter of 2006, representing 11.3% of total revenue, as compared with $33.5 million, or 8.5% of total revenue, for the first quarter of 2005.
Core G&A (defined as SG&A expenses less premium taxes) increased to 8.5% of total revenue in the first quarter of 2006 as compared with 5.9% in the first quarter of 2005. The increase in core G&A was due to investments in infrastructure to support the Company's medical cost control initiatives and the administrative expenses associated with the Company's development of its Medicare Advantage Special Needs Plans. The Company's adoption of SFAS No. 123R, Share-Based Payment, effective January 1, 2006, reduced earnings per diluted share by approximately $0.02 in the first quarter of 2006.
Depreciation and amortization expense increased by $1.6 million when compared with the first quarter of 2005. Increased amortization expense due to the Company's acquisitions in California (which closed on June 1, 2005) contributed $0.6 million in additional amortization. Depreciation increased as a result of investment in infrastructure, principally at the Company's corporate offices.
Investment income during the quarter increased by $2.3 million, or 131.3%, as compared with the first quarter of 2005 as a result of higher invested balances and higher rates of return.
Income taxes were recognized in the first quarter of 2006 based upon an effective tax rate of 37.5% as compared with an effective tax rate of 38.0% in the first quarter of 2005.
Cash Flow
Operating activities provided $41.0 million in cash for the quarter ended March 31, 2006. Increases in medical claims and benefits payable contributed $18.2 million to net cash provided by operating activities for the quarter ended March 31, 2006.
At March 31, 2006, the Company had consolidated cash and investments of approximately $390.0 million.
Membership
The following table details the Company's membership by state at March
31, 2006, December 31, 2005, and March 31, 2005:
March 31, Dec. 31, March 31,
2006 2005 2005
---------- ---------- ----------
California 312,000 321,000 254,000
Indiana 28,000 24,000 --
Michigan 143,000 144,000 157,000
New Mexico 59,000 60,000 61,000
Ohio 27,000 N/A(1) --
Utah 61,000 59,000 55,000
Washington 288,000 285,000 276,000
---------- ---------- ----------
Total 918,000 893,000 803,000
========== ========== ==========
(1) Enrollment in the Company's Ohio HMO at December 31, 2005, was
less than 250 members.
The following table details member months (defined as the aggregation
of each month's membership for the period) by state for the periods
indicated:
Quarter Ended
--------------------------------------
March 31, Dec. 31, March 31,
2006 2005 2005
---------- ---------- ----------
California 947,000 971,000 753,000
Indiana 79,000 70,000 --
Michigan 431,000 436,000 471,000
New Mexico 178,000 181,000 187,000
Ohio 48,000 N/A(1) --
Utah 181,000 176,000 159,000
Washington 868,000 862,000 823,000
---------- ---------- ----------
Total 2,732,000 2,696,000 2,393,000
========== ========== ==========
(1) Enrollment in the Company's Ohio HMO at December 31, 2005, was
less than 250 members.
Conference Call
The live broadcast of Molina Healthcare's conference call will begin at 5:00 p.m. Eastern Time, May 4, 2006. The number to call for this interactive conference call is 212-346-6550. A 30-day online replay will be available beginning approximately one hour following the conclusion of the live broadcast. A link to these events can be found on the Company's website at www.molinahealthcare.com or at www.earnings.com.
Molina Healthcare, Inc. is a multi-state managed care organization that arranges for the delivery of healthcare services to persons eligible for Medicaid and other programs for low-income families and individuals. Molina Healthcare, Inc. currently operates health plans in California, Indiana, Michigan, New Mexico, Ohio, Utah, and Washington. More information about Molina Healthcare, Inc. can be obtained at www.molinahealthcare.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This press release contains "forward-looking statements" identified by words such as "will," "expects," "believes," "anticipates," "plans," "projects," "estimates," "intends," and similar words and expressions. In addition, any statements that refer to earnings guidance, expectations, projections, or their underlying assumptions, or other characterizations of future events or circumstances, are forward-looking statements. All of the Company's forward-looking statements are based on current expectations and assumptions that are subject to numerous known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially. Such factors include, without limitation, risks related to: the Company's ability to identify and address medical care cost issues and to address them successfully through its medical care cost control initiatives; the Company's ability to accurately estimate incurred but not reported medical costs; high dollar claims related to catastrophic illness; potential reductions in funding for Medicaid and other government-sponsored healthcare programs; receiving the award upon remand of the long-term contracts for Riverside and/or San Bernardino Counties; the successful renewal and continuation of the government contracts of the Company's health plans; the favorable resolution of pending litigation or arbitration; the implementation of announced rate increases; the Company's ability to obtain timely regulatory approvals for acquisitions or to successfully integrate its completed acquisitions, including new members and providers; the ability to enter into more favorable hospital or provider contracts; the availability of financing to fund the Company's acquisitions; membership eligibility processes and methodologies; unexpected changes in healthcare practices, technologies, or utilization patterns; changes in federal or state laws or regulations or in their interpretation; risks associated with the Company's start-up operations in new states; disasters or epidemics; and other risks and uncertainties as detailed in the Company's reports and filings with the Securities and Exchange Commission and available on its website at www.sec.gov. All forward-looking statements in this release represent the Company's judgment as of May 4, 2006. The Company disclaims any obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
MOLINA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except for per share data)
(Unaudited)
Three Months Ended
March 31,
----------------------
2006 2005
---------- ----------
Revenue:
Premium revenue $449,294 $392,187
Investment income 4,082 1,765
---------- ----------
Total operating revenue 453,376 393,952
Expenses:
Medical care costs:
Medical services 74,858 63,667
Hospital and specialty services 262,870 226,532
Pharmacy 45,519 42,915
---------- ----------
Total medical care costs 383,247 333,114
Salary, general and
administrative expenses 51,213 33,546
Depreciation and amortization 4,762 3,198
---------- ----------
Total expenses 439,222 369,858
---------- ----------
Operating income 14,154 24,094
Other expense:
Interest expense (414) (289)
---------- ----------
Total other expense (414) (289)
---------- ----------
Income before income taxes 13,740 23,805
Income tax expense 5,150 9,046
---------- ----------
Net income $8,590 $14,759
========== ==========
Net income per share:
Basic $0.31 $0.53
========== ==========
Diluted $0.31 $0.53
========== ==========
Weighted average number of common
shares and potentially dilutive
common shares outstanding 28,141,000 27,964,000
========== ==========
Operating Statistics:
Medical care ratio (1) 85.3% 84.9%
Salary, general and administrative expense
ratio (2), excluding premium taxes 8.5% 5.9%
Premium taxes included in salary, general
and administrative expenses 2.8% 2.6%
---------- ----------
Total salary, general and
administrative expense ratio 11.3% 8.5%
========== ==========
Members (3) 918,000 803,000
Days in claims payable 57 48
(1) Medical care ratio represents medical care costs as a percentage
of premium revenue.
(2) Salary, general and administrative expense ratio represents such
expenses as a percentage of total operating revenue.
(3) Number of members at end of period.
MOLINA HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
March 31, Dec. 31,
2006 2005
---------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $288,347 $249,203
Investments 101,690 103,437
Receivables 73,884 70,532
Income tax receivable -- 3,014
Deferred income taxes 3,039 2,339
Prepaid and other current assets 9,615 10,321
---------- ----------
Total current assets 476,575 438,846
Property and equipment, net 32,716 31,794
Goodwill and intangible assets, net 122,893 124,914
Restricted investments 18,205 18,242
Other assets 8,804 8,018
---------- ----------
Total assets $659,193 $621,814
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Medical claims and benefits payable $235,579 $217,354
Deferred revenue 6,248 803
Accounts payable and accrued liabilities 29,670 31,457
Income taxes payable 3,588 --
---------- ----------
Total current liabilities 275,085 249,614
Deferred income taxes 3,657 4,796
Other long-term liabilities 4,488 4,554
---------- ----------
Total liabilities 283,230 258,964
Stockholders' equity:
Common stock, $0.001 par value; 80,000,000
shares authorized; issued and outstanding:
27,935,134 shares at March 31, 2006, and
27,792,360 shares at December 31, 2005 28 28
Preferred stock, $0.001 par value; 20,000,000
shares authorized, no shares issued
and outstanding -- --
Additional paid-in capital 167,235 162,693
Accumulated other comprehensive loss (648) (629)
Retained earnings 229,738 221,148
Treasury stock (1,201,174 shares, at cost) (20,390) (20,390)
---------- ----------
Total stockholders' equity 375,963 362,850
---------- ----------
Total liabilities and stockholders' equity $659,193 $621,814
========== ==========
MOLINA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
----------------------
2006 2005
---------- ----------
Operating activities:
Net income $8,590 $14,759
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,762 3,198
Amortization of capitalized
credit facility fees 211 734
Deferred income taxes (1,835) 1,472
Tax benefit from exercise of
employee stock options recorded as
additional paid-in capital -- 1,021
Stock-based compensation 1,227 175
Changes in operating assets and liabilities:
Receivables (3,352) (8,685)
Prepaid and other current assets 706 478
Medical claims and benefits payable 18,225 (4,645)
Deferred revenue 5,445 --
Accounts payable and accrued liabilities 391 (4,694)
Income taxes payable (receivable) 6,602 (1,374)
---------- ----------
Net cash provided by operating activities 40,972 2,439
Investing activities:
Purchases of equipment (3,663) (2,189)
Purchases of investments (34,015) (3,969)
Sales and maturities of investments 35,739 18,935
(Increase) decrease in restricted cash 37 (41)
Increase (decrease) in other long-term
liabilities (66) 366
Increase in other assets (997) (4,633)
---------- ----------
Net cash (used in) provided by
investing activities (2,965) 8,469
Financing activities:
Borrowing under credit facility -- 3,100
Tax benefit from exercise of employee
stock options recorded as additional
paid-in capital 467 --
Principal payments on capital lease
obligations and mortgage notes -- (40)
Proceeds from exercise of stock options
and employee stock purchases 670 386
---------- ----------
Net cash provided by financing activities 1,137 3,446
---------- ----------
Net increase in cash and cash equivalents 39,144 14,354
Cash and cash equivalents
at beginning of period 249,203 228,071
---------- ----------
Cash and cash equivalents at end of period $288,347 $242,425
========== ==========
MOLINA HEALTHCARE, INC.
CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in thousands)
(Unaudited)
The following table shows the components of the change in medical
claims and benefits payable for the quarters ended March 31, 2006 and
2005:
Three Months Ended
March 31,
----------------------
2006 2005
---------- ----------
Balances at beginning of period $217,354 $160,210
Components of medical care costs related to:
Current year 407,847 343,065
Prior years (24,600) (9,951)
---------- ----------
Total medical care costs 383,247 333,114
Payments for medical care costs related to:
Current year 218,890 212,959
Prior years 146,132 124,800
---------- ----------
Total paid 365,022 337,759
---------- ----------
Balances at end of period $235,579 $155,565
========== =========
The Company's claims reserving methodology includes an allowance for
adverse claims development at each reporting date based on our
historical experience, and other factors considered by management
including, but not limited to, variation in claims payment patterns,
changes in utilization and cost trends, known outbreaks of disease,
and large claims. The Company's reserving methodology has been
consistently applied across all periods presented. Accordingly, any
benefit recognized in medical care costs resulting from favorable
development of an estimated liability at the start of the period may
be offset by the addition of an allowance for adverse claims
development when estimating the liability at the end of the period.
CONTACT:
Molina Healthcare, Inc.
Investor Relations:
Juan Jose Orellana, 562-435-3666, ext. 111143
SOURCE:
Molina Healthcare, Inc.