UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): October 22, 2008
MOLINA HEALTHCARE,
INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
1-31719
|
13-4204626
|
|
(State
of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification Number)
|
200
Oceangate, Suite 100, Long Beach, California 90802
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (562) 435-3666
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
| Item 2.02. | Results of Operations and Financial Condition. |
On October
22, 2008, Molina Healthcare, Inc. issued a press release announcing its
financial results for the third quarter and nine months ended September 30,
2008. The full text of the press release is included as Exhibit 99.1
to this report. The information contained in the websites cited in
the press release is not part of this report.
The
information in this Form 8-K and the exhibit attached hereto shall not be deemed
to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934
or otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except as expressly set forth by specific
reference in such a filing.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits: | |
|
Exhibit
No.
|
Description | |
|
99.1
|
Press
release of Molina Healthcare, Inc. issued October 22, 2008, as to
financial results for the third quarter and nine months ended September
30, 2008.
|
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
MOLINA
HEALTHCARE, INC.
|
||
|
Date:
October 22, 2008
|
By: /s/
Mark L. Andrews
|
|
|
Mark
L. Andrews
Chief
Legal Officer, General Counsel,
and
Corporate Secretary
|
||
EXHIBIT
INDEX
|
Exhibit
No.
|
Description |
|
99.1
|
Press
release of Molina Healthcare, Inc. issued October 22, 2008, as to
financial results for the third quarter and nine months ended September
30, 2008.
|
News
Release
Contact:
Juan José
Orellana
Investor
Relations
562-435-3666,
ext. 111143
MOLINA
HEALTHCARE REPORTS
THIRD
QUARTER 2008 RESULTS
|
●
|
Net
earnings of $0.62 per diluted share, consistent with the third quarter of
2007.
|
|
●
|
Year-to-date
earnings of $1.67 per diluted share, up 17% over
2007.
|
|
●
|
Quarterly
premium revenues of $792 million, up 26% over
2007.
|
|
●
|
Aggregate
membership up nearly 16% over 2007.
|
|
●
|
2008
guidance confirmed at range of $2.20 to $2.40 per diluted
share.
|
Long Beach, California (October 22,
2008) – Molina Healthcare, Inc. (NYSE: MOH) today reported its financial
results for the third quarter and nine months ended September 30,
2008.
Net income
for the third quarter ended September 30, 2008 was $17.2 million, or $0.62 per
diluted share, compared with net income of $17.5 million, or $0.62 per diluted
share, for the quarter ended September
30, 2007. Net income for the nine months ended September 30, 2008
increased to $46.9 million, or $1.67 per diluted share, compared with net income
of $40.4 million, or $1.43 per diluted share, for the nine months period ended
September 30, 2007.
In
commenting on the results, J. Mario Molina, M.D., president and chief executive
officer of Molina Healthcare, said, “Our results continue to reflect strong
revenue growth, continued enrollment growth, and consistent administrative
efficiency. In addition, as we have observed during our 28-year history, a
weakening economy is generally accompanied by an increase in the number of
Medicaid beneficiaries. We stand ready to assist our state and
federal partners in providing high quality accessible healthcare to those most
deeply affected by the current economic downturn.”
2008
Earnings Per Share Guidance
The
Company confirms the guidance it had previously issued on July 23, 2008 for
fiscal year 2008 earnings per diluted share of between $2.20 and
$2.40. For the fourth quarter and year ended 2008, the Company
expects its effective tax rate to be approximately 41%. The Company
expects its shares outstanding, for the purpose of calculating diluted EPS, to
be approximately 27.1 million for the quarter ended December 31, 2008 and 27.9
million for the year ended December 31, 2008.
-MORE-
MOH Reports Third Quarter
2008 Results
Page 2
October 22,
2008
Financial
Results – Comparison of Quarters Ended September 30, 2008 and 2007
Premium
revenue for the third quarter of 2008 was $791.6 million, an increase of
$163.2 million, or 26%, over the $628.4 million of premium revenue for the third
quarter of 2007. Medicare premium revenue for the third quarter of
2008 was $28.1 million compared with $12.7 million in the third quarter of
2007. Excluding the impact of the November 1, 2007 acquisition of the
Missouri plan, consolidated membership increased 8.6% between September 30, 2008
and September 30, 2007.
Significant
contributors to the $163.2 million increase in quarterly premium revenue
included the following:
|
●
|
A
$59.2 million increase as a result of the acquisition of the Company’s
Missouri health plan on November 1, 2007. The Missouri health
plan received a blended rate increase of approximately 8.5% effective July
1, 2008.
|
|
●
|
A
$37.1 million increase at the Ohio health plan due to higher enrollment,
particularly in the Covered Families and Children (CFC)
population. Effective September 1, 2008, the Ohio health plan
added approximately 4,000 Aged, Blind or Disabled (ABD) members in the
Central and West Central regions.
|
|
●
|
A
$15.4 million increase in Medicare premium revenue across all health
plans, primarily due to increased enrollment and the recognition of $2.6
million in risk adjustment revenue.
|
|
●
|
An
$8.2 million increase in Medicaid revenue at the California health plan,
primarily due to increased membership. The California health
plan’s Medicaid revenue decreased $1.3 million from the second quarter of
2008. Sequentially, premium revenue on a per member per month
basis declined approximately 3%, reflecting the rate cuts implemented by
the state of California for the period July 1, 2008 through August 17,
2008. Premium revenue for the California health plan has been
recorded at rates in effect immediately prior to July 1, 2008 for the
period August 18, 2008 through September 30, 2008, as the result of a
court injunction issued on August
18, 2008.
|
|
●
|
A
$4.3 million increase in Medicaid premium revenue at the Michigan health
plan, primarily due to $3.7 million in supplemental revenue from the
Michigan Department of Community Health. The supplemental revenue is
intended to offset the unintended effects of the Michigan Business Tax
(MBT) that replaced Michigan’s Single Business Tax (SBT) as of January 1,
2008.
|
The
unintended effect of the MBT is the taxation of both the premiums and the net
income of health plans, driving the effective federal and state combined tax
rate on the Company’s Michigan health plan to nearly 49%. The
supplemental revenue is intended to offset MBT’s taxation of gross receipts for
the nine months ended September 30, 2008.
Effective
October 1, 2008, the Michigan health plan received an estimated blended rate
increase of approximately 5.5%, plus an additional increase of approximately
0.9% for ongoing MBT relief. The rate increase is tied to an
expansion of benefits and coverage that will result in increased medical care
costs for the Michigan health plan in the future.
After
allowing for the supplemental revenue and the aforementioned ongoing MBT relief,
we anticipate our 2008 Michigan tax expense will be approximately $0.5 million
higher (before federal tax benefit) than the amount computed using the SBT
methodology.
-MORE-
MOH Reports Third Quarter
2008 Results
Page 3
October 22,
2008
Medical
care costs as a percentage of premium revenue (the medical care ratio)
increased to 84.6% in the third quarter of 2008 from 83.7% in the third quarter
of 2007. Sequentially, the medical care ratio increased from 84.2%
for the quarter ended June 30, 2008. Excluding Medicare, the
Company’s medical care ratio was 84.9% in the third quarter of 2008, 83.8% in
the third quarter of 2007, and 84.2% in the second quarter of 2008.
|
●
|
The
medical care ratio of the Missouri health plan was 80.6% for the quarter,
down from 83.0% in the second quarter of 2008. The premium
increase discussed above was partially offset by increased unit costs due
to revised provider contracts and a fee schedule increase effective July
1, 2008.
|
|
●
|
The
medical care ratio of the California health plan increased to 89.1% in the
third quarter of 2008 from 82.1% in the third quarter of 2007 and 84.9% in
the second quarter of 2008. The increase in the plan’s medical
care ratio was caused primarily by a decrease in premium rates as
discussed above and higher fee-for-service and pharmacy
costs.
|
|
●
|
The
medical care ratio of the New Mexico health plan increased to 87.4% in the
third quarter of 2008 from 78.6% in the third quarter of 2007 and 78.0% in
the second quarter of 2008. The sequential increase was
primarily due to the reduced benefit from the release of amounts reserved
as a result of the minimum medical cost ratio provision in the New Mexico
health plan’s state contract. The Company recognized $6.2
million under this provision in the second quarter of 2008, and none for
the third quarter of 2008. Additionally, the New Mexico health
plan received a blended rate decrease of approximately 3% effective July
1, 2008 for its non-Medicare
programs.
|
|
●
|
The
medical care ratio of the Ohio health plan, by line of business, was as
follows:
|
|
Three
Months Ended
|
||||||||||||
|
Sept.
30,
2008
|
June
30,
2008
|
Sept.
30,
2007
|
||||||||||
|
Covered
Families and Children (CFC)
|
89.9 | % | 90.7 | % | 85.5 | % | ||||||
|
Aged,
Blind or Disabled (ABD)
|
94.6 | 91.5 | 94.4 | |||||||||
|
Aggregate
|
91.5 | % | 91.0 | % | 88.8 | % | ||||||
Sequentially,
the medical care ratio for the CFC line of business decreased 80 basis points
primarily due to lower capitation and pharmacy costs. The sequential
increase in the medical care ratio for the ABD line of business was due
primarily to higher specialist fee-for-service costs.
Effective
September 1, 2008, the Ohio health plan will receive risk adjustments to its ABD
premium rates. The Company estimates that these adjustments will
result in a net increase to premium revenue of approximately $500,000 per month
from September 1st
onward. Additionally, the Company has re-negotiated certain provider
contracts in the Central region of Ohio, which it believes will reduce unit
costs beginning in the fourth quarter of 2008.
|
●
|
The
medical care ratio of the Texas health plan increased to 79.8% in the
third quarter of 2008 from 76.2% in the third quarter of
2007. This increase was primarily due to higher hospital
fee-for-service costs. During the third quarter of 2008, the
Texas health plan increased revenue $1.3 million to record
adjustments relating to its profit-sharing agreement with the state of
Texas.
|
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
4
October
22, 2008
|
●
|
The
medical care ratio of the Washington health plan decreased to 76.5% in the
third quarter of 2008 from 79.2% in the third quarter of 2007, primarily
due to lower fee-for-service hospital
costs.
|
Days in medical
claims and benefits payable were 44 days at September 30, 2008, a 6%
decrease from the 47 days reported at June 30, 2008, and a 19% decrease from the
54 days reported at September 30, 2007. As of September 30, 2008,
medical claims inventory (measured as the total billed charges of all claims
received but not paid as of the reporting date) has decreased approximately 30%
since June 30, 2008, and 37% since September 30, 2007. The Company’s
reserving methodology is consistently applied across all periods
presented.
General and
administrative expenses were $88.0 million, or 11.1% of total revenue,
for the third quarter of 2008 compared with $74.2 million, or 11.7% of total
revenue, for the third quarter of 2007.
Core G&A
expenses (defined as G&A expenses less premium taxes) were 8.0% of
revenue in the third quarter of 2008 compared with 8.4% in the third quarter of
2007 and 8.2% in the second quarter of 2008. The decrease in core
G&A compared with the third quarter of 2007 was primarily due to lower
administrative payroll as a percentage of revenue, as indicated in the table
below.
|
Three
Months Ended September 30,
|
||||||||||||||||
|
(in
thousands)
|
2008
|
2007
|
||||||||||||||
|
Amount
|
%
of Total
Revenue
|
Amount
|
%
of Total
Revenue
|
|||||||||||||
|
Medicare-related
administrative costs
|
$ | 4,112 | 0.5 | % | $ | 2,330 | 0.4 | % | ||||||||
|
Non
Medicare-related administrative costs:
|
||||||||||||||||
|
Administrative
payroll, including
employee incentive
compensation
|
49,429 | 6.2 | 43,326 | 6.8 | ||||||||||||
|
Florida
health plan start up expenses
|
804 | 0.1 | – | – | ||||||||||||
|
All
other administrative expense
|
9,125 | 1.2 | 7,450 | 1.2 | ||||||||||||
|
Core
G&A expenses
|
$ | 63,470 | 8.0 | % | $ | 53,106 | 8.4 | % | ||||||||
Income taxes
were recorded at an effective rate of 39.6% in the third quarter of 2008
compared with 38.1%
in the third quarter of 2007. The increase in the Company’s effective
tax rate was primarily the result of a change in Michigan state taxes effective
January 1, 2008. The Company expects its effective tax rate for the
fourth quarter and all of fiscal year 2008 to be approximately 41%.
Cash
Flow
Cash used
in operating activities for the nine months ended September 30, 2008 was $20.3
million compared with cash provided by operating activities of $112.8 million
for the same period in 2007, a decrease of $133.1
million. Significant contributors to this decrease included the
following:
|
●
|
A
$40.5 million increase in the California health plan receivable as of
September 30, 2008, due to the delayed passage of the California state
budget for 2008-2009. Until the budget was passed on September
23, 2008, the state of California had ceased paying its vendors for the
previous two months’ billings. Substantially all receivables
due the California health plan at September 30, 2008 were collected in
October 2008.
|
-MORE-
MOH Reports Third Quarter
2008 Results
Page 5
October 22,
2008
|
●
|
The
timing of the receipt of premiums recorded as deferred revenue in the Ohio
and Utah health plans, netting to a total decline of $44.9 million
year-over-year.
|
|
●
|
In
2007, the ramp up of operations and medical claims and benefits payable of
the Company’s Texas and Ohio health plans compared with less significant
changes in medical claims and benefits payable for these plans in 2008,
netting to a decline of $31.5 million
year-over-year.
|
|
●
|
The
reversal of $12.9 million of accrued costs relating to the minimum medical
care ratio contract provision in New Mexico in the first six months of
2008.
|
At
September 30, 2008, the Company had cash and investments (not including
restricted investments) of approximately $609.9 million, including auction rate
securities with a fair value of $63.8 million that were reclassified as
non-current assets in the first quarter of 2008. While these auction
rate securities are collateralized by student loan portfolios guaranteed by the
U.S. government, the Company believes that the market for these may take in
excess of 12 months to fully recover. At September 30, 2008, the
parent company had cash and investments of approximately $83.4 million,
including auction rate securities with a fair value of $18.5
million.
EBITDA
(1)
| (in thousands) |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Operating
income
|
$ | 30,429 | $ | 28,815 | $ | 85,138 | $ | 67,694 | ||||||||
|
Add
back:
|
||||||||||||||||
|
Depreciation
and amortization expense
|
8,515 | 7,082 | 24,997 | 20,274 | ||||||||||||
|
EBITDA
|
$ | 38,944 | $ | 35,897 | $ | 110,135 | $ | 87,968 | ||||||||
|
(1)
|
The
Company calculates EBITDA by adding back depreciation and amortization
expense to operating income. EBITDA is not prepared in
conformity
with GAAP since it excludes depreciation and amortization expense,
as well as interest expense, and the provision for income taxes. This
non-GAAP financial measure should not be considered as an alternative
to net income, operating income, operating margin, or cash provided
by operating activities. Management uses EBITDA as a
supplemental
metric in evaluating our financial performance, in evaluating
financing and business development decisions, and in forecasting
and analyzing future periods. For these reasons, management believes
that EBITDA is a useful supplemental measure to investors in evaluating
our performance and the performance of other companies in our industry.
|
Share
Repurchase Program
During the
third quarter of 2008, the Company repurchased approximately 91,000 shares of
its common stock for $2.7 million (average cost of approximately $29.97 per
share). Shares used for computing diluted earnings per share for the
third quarters of 2008 and 2007 were 27.6 million and 28.4 million,
respectively.
Through
October 17, 2008, the Company has repurchased approximately 1.7 million shares
at an aggregate purchase price of $45 million pursuant to the two share
repurchase programs announced during the year.
-MORE-
MOH
Reports Third Quarter 2008 Results
Page 6
October 22,
2008
Conference
Call
The
Company’s management will host a conference call and webcast to discuss its
third quarter results at 5:00 p.m. Eastern Time on Wednesday, October 22,
2008. The telephone number for this interactive conference call is
212-896-6134, and the live webcast of the call can be accessed on the Company’s
website at www.molinahealthcare.com,
or at www.earnings.com. An
online replay will be available beginning approximately one hour following the
conclusion of the call and webcast.
Molina
Healthcare, Inc. is a multi-state managed care organization that arranges for
the delivery of healthcare services to persons eligible for Medicaid, Medicare,
and other government-sponsored programs for low-income families and
individuals. Molina Healthcare’s ten licensed health plan
subsidiaries in California, Florida, Michigan, Missouri, Nevada, New Mexico,
Ohio, Texas, Utah, and Washington currently serve approximately 1.2 million
members. More information about Molina Healthcare 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,”
“should,” “believes,” “expects” or ”expectations,” “anticipates,” “plans,”
“projects,” “estimates,” “intends,” and similar words and
expressions. In addition, any statements that explicitly or
implicitly refer to earnings guidance, expectations, projections, or their
underlying assumptions, or other characterizations of future events or
circumstances, are forward-looking statements. All of our
forward-looking statements are based on our current expectations and assumptions
which 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 successful management
of our medical costs and the achievement of our projected medical care ratios in
all health plans in 2008, including the reduction of the medical care ratio of
our Ohio health plan; the achievement of projected growth in both Medicaid and
Medicare enrollment; increased administrative costs in support of the Company’s
efforts to expand its Medicare membership; risks related to our more limited
experience with Ohio, Texas, Florida, and dual eligible members and attendant
claims estimation difficulties; funding decreases in the Medicaid, Medicare, or
SCHIP programs or the failure to fully fund the SCHIP program; the outcome of
the pending litigation regarding cuts in California provider rates, including
the extension of the court injunction regarding those rate cuts; the final
implementation of the Rogers Amendment to the Federal Deficit Reduction Act
regarding the rates to be paid to non-contracting hospitals by our California
health plan; the securing of projected premium rate increases that are
consistent with our expectations; our ability to accurately estimate incurred
but not reported medical costs across all health plans; the successful renewal
and continuation of the government contracts of all of our health plans; the
realization of projected income from invested cash balances; the successful and
cost-effective integration of our acquisitions; earnings seasonality consistent
with our expectations; the availability of adequate financing to fund and/or
capitalize our acquisitions and start-up activities; risks related to our
auction rate securities; risks related to the ceded life and annuity insurance
contracts of our indemnity insurance subsidiary, Molina Healthcare Insurance
Company, Inc.; high profile qui tam matters and negative publicity regarding
Medicaid managed care and Medicare Advantage; changes in funding under our
contracts as a result of regulatory or programmatic adjustments and reforms;
approval by state regulators of dividends and distributions by our subsidiaries;
the imposition of fines or assessments by state or federal regulators for
perceived operating deficiencies; membership eligibility processes and
methodologies; unexpected changes in member utilization patterns, healthcare
practices, or healthcare technologies; high dollar claims related to
catastrophic illness; changes in federal or state laws or regulations or in
their interpretation; failure to maintain effective and efficient information
systems and claims processing technology; the favorable resolution of litigation
or arbitration; competition; epidemics such as the avian flu; and other risks
and uncertainties as detailed in our 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 our judgment as of October
22, 2008. We disclaim any obligation to update any forward-looking
statement to conform the statement to actual results or changes in our
expectations.
-MORE-
MOH Reports Third Quarter
2008 Results
Page 7
October 22,
2008
|
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Amounts
in thousands, except per-share data)
(Unaudited)
|
||||||||||||||||
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Revenue:
|
||||||||||||||||
|
Premium
revenue
|
$ | 791,554 | $ | 628,402 | $ | 2,282,345 | $ | 1,791,764 | ||||||||
|
Investment
income
|
4,775 | 7,632 | 17,517 | 21,061 | ||||||||||||
|
Total
operating revenue
|
796,329 | 636,034 | 2,299,862 | 1,812,825 | ||||||||||||
|
Expenses:
|
||||||||||||||||
|
Medical
care costs
|
669,355 | 525,902 | 1,936,531 | 1,519,244 | ||||||||||||
|
General
and administrative expenses
|
88,030 | 74,235 | 253,196 | 204,831 | ||||||||||||
|
Depreciation
and amortization
|
8,515 | 7,082 | 24,997 | 20,274 | ||||||||||||
|
Impairment
charge on purchased software
|
– | – | – | 782 | ||||||||||||
|
Total
expenses
|
765,900 | 607,219 | 2,214,724 | 1,745,131 | ||||||||||||
|
Operating
income
|
30,429 | 28,815 | 85,138 | 67,694 | ||||||||||||
|
Interest
expense
|
(1,980 | ) | (530 | ) | (6,559 | ) | (2,380 | ) | ||||||||
|
Income
before income taxes
|
28,449 | 28,285 | 78,579 | 65,314 | ||||||||||||
|
Provision
for income taxes
|
11,263 | 10,772 | 31,722 | 24,895 | ||||||||||||
|
Net
income
|
$ | 17,186 | $ | 17,513 | $ | 46,857 | $ | 40,419 | ||||||||
|
Net
Income Per Share:
|
||||||||||||||||
|
Basic
|
$ | 0.63 | $ | 0.62 | $ | 1.68 | $ | 1.43 | ||||||||
|
Diluted
|
$ | 0.62 | $ | 0.62 | $ | 1.67 | $ | 1.43 | ||||||||
|
Weighted
average number of common shares and
potentially dilutive common shares outstanding
|
27,582 | 28,441 | 28,087 | 28,356 | ||||||||||||
|
Operating
Statistics:
|
||||||||||||||||
|
Ratio
of direct medical care costs to premium revenue
|
82.1 | % | 81.0 | % | 82.4 | % | 82.1 | % | ||||||||
|
Ratio
of administrative costs included in medical care costs to premium
revenue
|
2.5 | 2.7 | 2.5 | 2.7 | ||||||||||||
|
Medical
care ratio
(1)
|
84.6 | % | 83.7 | % | 84.9 | % | 84.8 | % | ||||||||
|
General
and administrative expense ratio (2)
excluding premium taxes (core G&A ratio)
|
8.0 | % | 8.4 | % | 8.0 | % | 8.0 | % | ||||||||
|
Premium
taxes included in general and administrative expenses
|
3.1 | 3.3 | 3.0 | 3.3 | ||||||||||||
|
Total
general and administrative expense ratio
|
11.1 | % | 11.7 | % | 11.0 | % | 11.3 | % | ||||||||
|
Depreciation
and amortization expense ratio (2)
|
1.1 | % | 1.1 | % | 1.1 | % | 1.1 | % | ||||||||
|
Effective
tax rate
|
39.6 | % | 38.1 | % | 40.4 | % | 38.1 | % | ||||||||
|
(1)
|
Medical
care ratio represents medical care costs as a percentage of premium
revenue.
|
|
(2)
|
Computed
as a percentage of total revenue.
|
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
8
October
22, 2008
|
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Amounts
in thousands, except per-share data)
|
||||||||
|
Sept.
30,
2008
|
Dec.
31,
2007
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 382,436 | $ | 459,064 | ||||
|
Investments
|
163,676 | 242,855 | ||||||
|
Receivables
|
169,760 | 111,537 | ||||||
|
Deferred
income taxes
|
14,172 | 8,616 | ||||||
|
Prepaid
expenses and other current assets
|
14,402 | 12,521 | ||||||
|
Total
current assets
|
744,446 | 834,593 | ||||||
|
Property
and equipment, net
|
64,633 | 49,555 | ||||||
|
Goodwill
and intangible assets, net
|
200,783 | 207,223 | ||||||
|
Investments
|
63,827 | − | ||||||
|
Restricted
investments
|
36,510 | 29,019 | ||||||
|
Receivable
for ceded life and annuity contracts
|
27,828 | 29,240 | ||||||
|
Other
assets
|
19,846 | 21,675 | ||||||
|
Total
assets
|
$ | 1,157,873 | $ | 1,171,305 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Medical
claims and benefits payable
|
$ | 298,787 | $ | 311,606 | ||||
|
Accounts
payable and accrued liabilities
|
70,918 | 69,266 | ||||||
|
Deferred
revenue
|
19,153 | 40,104 | ||||||
|
Income
taxes payable
|
7,755 | 5,946 | ||||||
|
Total
current liabilities
|
396,613 | 426,922 | ||||||
|
Long-term
debt
|
200,000 | 200,000 | ||||||
|
Deferred
income taxes
|
6,598 | 10,136 | ||||||
|
Liability
for ceded life and annuity contracts
|
27,828 | 29,240 | ||||||
|
Other
long-term liabilities
|
18,740 | 14,529 | ||||||
|
Total
liabilities
|
649,779 | 680,827 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Common
stock, $0.001 par value; 80,000 shares authorized,
outstanding 27,393 shares at
September 30, 2008, and
28,444 shares at December 31,
2007
|
27 | 28 | ||||||
|
Preferred
stock, $0.001 par value; 20,000 shares authorized,
no shares
outstanding
|
− | − | ||||||
|
Additional
paid-in capital
|
163,648 | 185,808 | ||||||
|
Accumulated
other comprehensive (loss) income
|
(4,537 | ) | 272 | |||||
|
Retained
earnings
|
371,617 | 324,760 | ||||||
|
Treasury
stock, at cost; 1,292 shares at September 30, 2008
and 1,201 shares at December
31, 2007
|
(22,661 | ) | (20,390 | ) | ||||
|
Total
stockholders’ equity
|
508,094 | 490,478 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 1,157,873 | $ | 1,171,305 | ||||
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
9
October
22, 2008
|
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
|
||||||||
|
Nine
Months Ended
September
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Operating
activities:
|
||||||||
|
Net
income
|
$ | 46,857 | $ | 40,419 | ||||
|
Adjustments
to reconcile net income to net cash provided
by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
24,997 | 20,274 | ||||||
|
Amortization
of deferred financing costs
|
1,219 | 646 | ||||||
|
Deferred
income taxes
|
(6,135 | ) | (4,139 | ) | ||||
|
Stock-based
compensation
|
5,769 | 5,238 | ||||||
|
Tax
provision from employee stock compensation recorded as
additional paid-in
capital
|
(247 | ) | − | |||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Receivables
|
(58,223 | ) | (13,310 | ) | ||||
|
Prepaid
expenses and other current assets
|
(1,881 | ) | (2,161 | ) | ||||
|
Medical
claims and benefits payable
|
(12,819 | ) | 18,674 | |||||
|
Accounts
payable and accrued liabilities
|
(666 | ) | 14,283 | |||||
|
Deferred
revenue
|
(20,951 | ) | 23,923 | |||||
|
Income
taxes
|
1,809 | 8,989 | ||||||
|
Net
cash (used in) provided by operating activities
|
(20,271 | ) | 112,836 | |||||
|
Investing
activities:
|
||||||||
|
Purchases
of property and equipment
|
(28,314 | ) | (16,514 | ) | ||||
|
Purchases
of investments
|
(181,377 | ) | (85,252 | ) | ||||
|
Sales
and maturities of investments
|
188,896 | 59,292 | ||||||
|
Increase
in restricted cash
|
(7,491 | ) | (7,608 | ) | ||||
|
Cash
paid in business purchase transaction
|
(1,000 | ) | − | |||||
|
Increase
in other assets
|
(578 | ) | (2,921 | ) | ||||
|
Increase
in other long-term liabilities
|
4,211 | 6,569 | ||||||
|
Net
cash used in investing activities
|
(25,653 | ) | (46,434 | ) | ||||
|
Financing
activities:
|
||||||||
|
Treasury
stock purchases
|
(32,237 | ) | − | |||||
|
Repayment
of amounts borrowed under credit facility
|
− | (25,000 | ) | |||||
|
Payment
of credit facility fees
|
− | (551 | ) | |||||
|
Excess
tax benefits from employee stock compensation
|
43 | 554 | ||||||
|
Proceeds
from exercise of stock options and employee stock plan
purchases
|
1,490 | 2,539 | ||||||
|
Net
cash used in financing activities
|
(30,704 | ) | (22,458 | ) | ||||
|
Net
(decrease) increase in cash and cash equivalents
|
(76,628 | ) | 43,944 | |||||
|
Cash
and cash equivalents at beginning of period
|
459,064 | 403,650 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 382,436 | $ | 447,594 | ||||
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
10
October
22, 2008
MOLINA
HEALTHCARE, INC.
MEMBERSHIP
DATA
(Unaudited)
|
Total
Ending Membership by Health Plan:
|
Sept.
30,
2008
|
June
30,
2008
|
Sept.
30,
2007
|
|||||||||
|
California
|
313,000 | 310,000 | 288,000 | |||||||||
|
Michigan
|
207,000 | 212,000 | 211,000 | |||||||||
|
Missouri
(1)
|
77,000 | 76,000 | – | |||||||||
|
Nevada
(2)
|
– | – | – | |||||||||
|
New
Mexico
|
84,000 | 81,000 | 69,000 | |||||||||
|
Ohio
|
179,000 | 173,000 | 138,000 | |||||||||
|
Texas
|
29,000 | 29,000 | 30,000 | |||||||||
|
Utah
|
55,000 | 57,000 | 50,000 | |||||||||
|
Washington
|
295,000 | 296,000 | 284,000 | |||||||||
|
Total
|
1,239,000 | 1,234,000 | 1,070,000 | |||||||||
|
(1)
|
The
Company’s Missouri health plan was acquired effective November 1,
2007.
|
|
(2)
|
Less
than 1,000 members.
|
|
Total
Ending Membership by State
for the Medicare Advantage
Plans:
|
Sept.
30,
2008
|
June
30,
2008
|
Sept.
30,
2007
|
|||||||||
|
California
|
1,560 | 1,452 | 875 | |||||||||
|
Michigan
|
1,663 | 1,469 | 814 | |||||||||
|
Nevada
|
627 | 680 | 178 | |||||||||
|
New
Mexico
|
249 | 149 | – | |||||||||
|
Texas
|
458 | 430 | – | |||||||||
|
Utah
|
2,162 | 2,056 | 1,802 | |||||||||
|
Washington
|
967 | 911 | 446 | |||||||||
|
Total
|
7,686 | 7,147 | 4,115 | |||||||||
|
Total
Ending Membership by State
for the Aged, Blind or Disabled
Population:
|
Sept.
30,
2008
|
June
30,
2008
|
Sept.
30,
2007
|
|||||||||
|
California
|
12,523 | 12,092 | 10,912 | |||||||||
|
Michigan
|
30,396 | 30,896 | 31,488 | |||||||||
|
New
Mexico
|
6,464 | 6,716 | 6,844 | |||||||||
|
Ohio
|
19,647 | 15,355 | 14,965 | |||||||||
|
Texas
|
16,221 | 15,999 | 16,515 | |||||||||
|
Utah
|
7,025 | 6,993 | 7,056 | |||||||||
|
Washington
|
3,002 | 3,049 | 2,715 | |||||||||
|
Total
|
95,278 | 91,100 | 90,495 | |||||||||
|
Quarter
Ended
|
Nine
Months Ended
|
|||||||||||||||||||
|
Total
Member Months (1)
by Health
Plan:
|
Sept.
30,
2008
|
June
30,
2008
|
Sept.
30,
2007
|
Sept.
30,
2008
|
Sept.
30,
2007
|
|||||||||||||||
|
California
|
936,000 | 921,000 | 859,000 | 2,765,000 | 2,619,000 | |||||||||||||||
|
Michigan
|
627,000 | 639,000 | 640,000 | 1,904,000 | 1,967,000 | |||||||||||||||
|
Missouri
(2)
|
228,000 | 227,000 | – | 678,000 | – | |||||||||||||||
|
Nevada
|
2,000 | 2,000 | – | 6,000 | – | |||||||||||||||
|
New
Mexico
|
249,000 | 239,000 | 200,000 | 716,000 | 589,000 | |||||||||||||||
|
Ohio
|
530,000 | 522,000 | 416,000 | 1,465,000 | 1,155,000 | |||||||||||||||
|
Texas
|
87,000 | 85,000 | 90,000 | 257,000 | 247,000 | |||||||||||||||
|
Utah
|
161,000 | 164,000 | 142,000 | 482,000 | 438,000 | |||||||||||||||
|
Washington
|
884,000 | 879,000 | 854,000 | 2,622,000 | 2,570,000 | |||||||||||||||
|
Total
|
3,704,000 | 3,678,000 | 3,201,000 | 10,895,000 | 9,585,000 | |||||||||||||||
|
(1)
|
Total
member months is defined as the aggregate of each month’s ending
membership for the period.
|
|
(2)
|
The
Company’s Missouri health plan was acquired effective November 1,
2007.
|
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
11
October
22, 2008
MOLINA
HEALTHCARE, INC.
SELECTED
FINANCIAL DATA BY HEALTH PLAN
(Dollars
in thousands except PMPM amounts)
(Unaudited)
|
Three
Months Ended September 30, 2008
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 102,383 | $ | 109.37 | $ | 91,224 | $ | 97.45 | 89.1 | % | $ | 2,995 | ||||||||||||
|
Michigan
|
127,535 | 203.39 | 101,596 | 162.03 | 79.7 | 6,412 | ||||||||||||||||||
|
Missouri
|
59,223 | 259.17 | 47,730 | 208.88 | 80.6 | – | ||||||||||||||||||
|
Nevada
|
2,196 | 1,053.04 | 2,499 | 1198.68 | 113.8 | – | ||||||||||||||||||
|
New
Mexico
|
84,386 | 338.65 | 73,723 | 295.86 | 87.4 | 2,838 | ||||||||||||||||||
|
Ohio
|
162,553 | 306.74 | 148,660 | 280.52 | 91.5 | 8,851 | ||||||||||||||||||
|
Texas
|
30,986 | 357.01 | 24,730 | 284.93 | 79.8 | 510 | ||||||||||||||||||
|
Utah
|
41,860 | 260.24 | 36,012 | 223.88 | 86.0 | – | ||||||||||||||||||
|
Washington
|
178,639 | 202.19 | 136,609 | 154.62 | 76.5 | 2,959 | ||||||||||||||||||
|
Other
(1)
|
1,793 | – | 6,572 | – | – | (5 | ) | |||||||||||||||||
|
Consolidated
|
$ | 791,554 | $ | 213.70 | $ | 669,355 | $ | 180.71 | 84.6 | % | $ | 24,560 | ||||||||||||
|
Three
Months Ended September 30, 2007
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 93,154 | $ | 108.39 | $ | 76,443 | $ | 88.95 | 82.1 | % | $ | 2,382 | ||||||||||||
|
Michigan
|
119,752 | 187.19 | 100,378 | 156.90 | 83.8 | 7,069 | ||||||||||||||||||
|
New
Mexico
|
72,543 | 361.23 | 56,984 | 283.76 | 78.6 | 2,828 | ||||||||||||||||||
|
Ohio
|
125,452 | 302.02 | 111,387 | 268.16 | 88.8 | 5,645 | ||||||||||||||||||
|
Texas
|
24,997 | 279.39 | 19,041 | 212.82 | 76.2 | 450 | ||||||||||||||||||
|
Utah
|
27,513 | 193.52 | 26,534 | 186.63 | 96.4 | – | ||||||||||||||||||
|
Washington
|
164,367 | 192.43 | 130,216 | 152.45 | 79.2 | 2,748 | ||||||||||||||||||
|
Other
(1)
|
624 | – | 4,919 | – | – | 7 | ||||||||||||||||||
|
Consolidated
|
$ | 628,402 | $ | 196.29 | $ | 525,902 | $ | 164.27 | 83.7 | % | $ | 21,129 | ||||||||||||
|
Nine
Months Ended September 30, 2008
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 308,139 | $ | 111.44 | $ | 269,328 | $ | 97.40 | 87.4 | % | $ | 9,195 | ||||||||||||
|
Michigan
|
377,669 | 198.36 | 304,769 | 160.08 | 80.7 | 19,976 | ||||||||||||||||||
|
Missouri
|
165,509 | 244.00 | 139,462 | 205.60 | 84.3 | – | ||||||||||||||||||
|
Nevada
|
6,382 | 1,184.30 | 6,632 | 1,230.61 | 103.9 | – | ||||||||||||||||||
|
New
Mexico
|
262,314 | 366.55 | 215,242 | 300.77 | 82.1 | 8,523 | ||||||||||||||||||
|
Ohio
|
434,272 | 296.40 | 395,013 | 269.60 | 91.0 | 21,127 | ||||||||||||||||||
|
Texas
|
80,159 | 311.84 | 62,229 | 242.08 | 77.6 | 1,446 | ||||||||||||||||||
|
Utah
|
114,591 | 237.69 | 100,935 | 209.37 | 88.1 | – | ||||||||||||||||||
|
Washington
|
531,457 | 202.71 | 426,962 | 162.85 | 80.3 | 8,797 | ||||||||||||||||||
|
Other
(1)
|
1,853 | – | 15,959 | – | – | 19 | ||||||||||||||||||
|
Consolidated
|
$ | 2,282,345 | $ | 209.49 | $ | 1,936,531 | $ | 177.75 | 84.9 | % | $ | 69,083 | ||||||||||||
|
Nine
Months Ended September 30, 2007
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 280,796 | $ | 107.22 | $ | 228,952 | $ | 87.42 | 81.5 | % | $ | 8,614 | ||||||||||||
|
Michigan
|
364,945 | 185.54 | 306,163 | 155.66 | 83.9 | 21,942 | ||||||||||||||||||
|
New
Mexico
|
191,073 | 324.23 | 159,152 | 270.07 | 83.3 | 6,438 | ||||||||||||||||||
|
Ohio
|
311,853 | 270.08 | 282,164 | 244.37 | 90.5 | 14,033 | ||||||||||||||||||
|
Texas
|
64,406 | 260.88 | 55,163 | 223.44 | 85.6 | 1,140 | ||||||||||||||||||
|
Utah
|
88,473 | 201.87 | 81,535 | 186.04 | 92.2 | – | ||||||||||||||||||
|
Washington
|
489,254 | 190.36 | 392,201 | 152.60 | 80.2 | 8,117 | ||||||||||||||||||
|
Other
(1)
|
964 | – | 13,914 | – | – | 21 | ||||||||||||||||||
|
Consolidated
|
$ | 1,791,764 | $ | 186.93 | $ | 1,519,244 | $ | 158.50 | 84.8 | % | $ | 60,305 | ||||||||||||
(1)
“Other” medical care costs represent primarily medically related administrative
costs at the parent company.
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
12
October
22, 2008
MOLINA
HEALTHCARE, INC.
SELECTED
FINANCIAL DATA BY HEALTH PLAN (Continued)
(Dollars
in thousands except PMPM amounts)
(Unaudited)
The
following tables provide the details of the Company’s medical care costs for the
periods indicated:
|
Three
Months Ended
September
30, 2008
|
Three
Months Ended
September
30, 2007
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 439,699 | $ | 118.71 | 65.7 | % | $ | 339,841 | $ | 106.15 | 64.6 | % | ||||||||||||
|
Capitation
|
113,920 | 30.76 | 17.0 | 95,879 | 29.95 | 18.2 | ||||||||||||||||||
|
Pharmacy
|
88,414 | 23.86 | 13.2 | 67,844 | 21.19 | 12.9 | ||||||||||||||||||
|
Other
|
27,322 | 7.38 | 4.1 | 22,338 | 6.98 | 4.3 | ||||||||||||||||||
|
Total
|
$ | 669,355 | $ | 180.71 | 100.0 | % | $ | 525,902 | $ | 164.27 | 100.0 | % | ||||||||||||
|
Nine
Months Ended
September
30, 2008
|
Nine
Months Ended
September
30, 2007
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 1,262,327 | $ | 115.87 | 65.2 | % | $ | 984,375 | $ | 102.70 | 64.8 | % | ||||||||||||
|
Capitation
|
335,418 | 30.79 | 17.3 | 276,742 | 28.87 | 18.2 | ||||||||||||||||||
|
Pharmacy
|
263,372 | 24.17 | 13.6 | 194,354 | 20.28 | 12.8 | ||||||||||||||||||
|
Other
|
75,414 | 6.92 | 3.9 | 63,773 | 6.65 | 4.2 | ||||||||||||||||||
|
Total
|
$ | 1,936,531 | $ | 177.75 | 100.0 | % | $ | 1,519,244 | $ | 158.50 | 100.0 | % | ||||||||||||
-MORE-
MOH
Reports Third Quarter 2008 Results
Page
13
October
22, 2008
MOLINA
HEALTHCARE, INC.
CHANGE
IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars
in thousands)
(Unaudited)
The
Company’s claims liability includes an allowance for adverse claims development
based on historical experience and other factors 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 is consistently applied across all periods presented. The
negative amounts displayed for “Components of medical care costs
related to: Prior years” represent the amount by which our original
estimate of claims and benefits payable at the beginning of the period exceeded
the actual amount of the liability based on information (principally the payment
of claims) developed since that liability was first reported. The
benefit of this prior period development may be offset by the addition of a
reserve for adverse claims development when estimating the liability at the end
of the period (captured in “Components of medical care costs
related to: Current year”). The following table shows the
components of the change in medical claims and benefits payable for the nine
months ended September 30, 2008 and 2007 (dollar amounts in
thousands):
|
Nine
Months Ended
September
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Balances
at beginning of period
|
$ | 311,606 | $ | 290,048 | ||||
|
Components
of medical care costs related to:
|
||||||||
|
Current
year
|
1,996,385 | 1,568,949 | ||||||
|
Prior
years
|
(59,854 | ) | (49,705 | ) | ||||
|
Total
medical care costs
|
1,936,531 | 1,519,244 | ||||||
|
Payments
for medical care costs related to:
|
||||||||
|
Current
year
|
1,721,191 | 1,278,321 | ||||||
|
Prior
years
|
228,159 | 222,249 | ||||||
|
Total
paid
|
1,949,350 | 1,500,570 | ||||||
|
Balances
at end of period
|
$ | 298,787 | $ | 308,722 | ||||
|
Benefit
from prior period as a percentage of:
|
||||||||
|
Balance
at beginning of period
|
19.2 | % | 17.1 | % | ||||
|
Premium
revenue
|
2.6 | % | 2.8 | % | ||||
|
Total
medical care costs
|
3.1 | % | 3.3 | % | ||||
|
Days
in claims payable
|
44 | 54 | ||||||
|
Number
of members at end of period
|
1,239,000 | 1,070,000 | ||||||
|
Number
of claims in inventory at end of period
|
131,100 | 179,200 | ||||||
|
Billed
charges of claims in inventory at end of period
|
$ | 147,100 | $ | 231,800 | ||||
|
Claims
in inventory per member at end of period
|
0.11 | 0.17 | ||||||
|
Number
of claims received during the period
|
8,234,500 | 6,959,000 | ||||||
|
Billed
charges of claims received during the period
|
$ | 5,754,700 | $ | 4,477,500 | ||||
-END-