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 26, 2010
MOLINA HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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1-31719
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13-4204626
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(State of incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification Number)
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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 26, 2010, Molina Healthcare, Inc. issued a press release announcing its financial results for the third quarter and nine months ended September 30, 2010. 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:
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Exhibit
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No.
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Description
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99.1
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Press release of Molina Healthcare, Inc. issued October 26, 2010, as to financial results for the third quarter and nine months ended September 30, 2010.
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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.
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MOLINA HEALTHCARE, INC.
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Date: October 26, 2010
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By: /s/ Jeff D. Barlow
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Jeff D. Barlow
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| Sr. Vice President – General Counsel, and Secretary |
EXHIBIT INDEX
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Exhibit
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No.
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Description
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99.1
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Press release of Molina Healthcare, Inc. issued October 26, 2010, as to financial results for the third quarter and nine months ended September 30, 2010.
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News Release
Contact:
Juan José Orellana
Investor Relations
562-435-3666, ext. 111143
MOLINA HEALTHCARE REPORTS
THIRD QUARTER 2010 RESULTS
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●
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Earnings per diluted share for third quarter 2010 of $0.57, up 73% over 2009
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Quarterly results include $4.7 million in employee severance and settlement costs
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Quarterly premium revenues of $1 billion, up 10% over 2009
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Quarterly operating income of $30 million, up nearly 100% over 2009
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Quarterly EBITDA of $46.5 million, up 87% over 2009
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186,000 new members enrolled since the third quarter 2009
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Revised 2010 earnings guidance to $1.90 per diluted share
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Long Beach, California (October 26, 2010) – Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the third quarter and nine months ended September 30, 2010.
Net income for the quarter was $16.2 million, or $0.57 per diluted share, compared with net income of $8.6 million, or $0.33 per diluted share, for the quarter ended September 30, 2009.
“During the third quarter, we maintained our focus on medical costs and benefited from enrollment and revenue growth. Our year-to-date performance demonstrates that we continue to make progress in improving our operations while investing in expansion into new markets and new programs,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “Now more than ever our state partners need the value we can add – expanded access to care, better coordination of services and clinical outcomes, as well as cost containment for their Medicaid populations.”
Revised 2010 Earnings Per Share Guidance
The Company has revised its guidance for fiscal year 2010 earnings to $1.90 per diluted share. Additional details regarding the Company’s guidance is provided below.
Overview of Financial Results
Third Quarter 2010 Compared with Second Quarter 2010
Net income for the third quarter of 2010 increased $5.6 million from the second quarter of 2010. Operating income increased 41%, primarily due to lower medical care costs in the third quarter. Medical care costs as a percentage of premium revenue (the medical care ratio) were 84.2% in the third quarter of 2010 compared with 86.0% in the second quarter of 2010.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 2
October 26, 2010
Third Quarter 2010 Compared with Third Quarter 2009
Health Plans
Premium revenue grew 10% in the third quarter of 2010 compared with the third quarter of 2009. The revenue increase was primarily due to a membership increase of 13% as of September 30, 2010, compared with membership as of September 30, 2009. Medicare enrollment exceeded 22,000 members at September 30, 2010, and Medicare premium revenue for the quarter was $70.7 million compared with $33.7 million in the third quarter of 2009.
On a per-member-per-month, or PMPM, basis, consolidated premium revenue was flat, because the impact of premium reductions tied to the elimination of the pharmacy benefit in Ohio and Missouri were offset by increased Medicare enrollment and higher Medicaid rates exclusive of the pharmacy cuts in Ohio and Missouri. Exclusive of the pharmacy cuts, premium revenue PMPM increased approximately 6.4%. Approximately one half of the percentage increase in PMPM revenue exclusive of the pharmacy cuts in Ohio and Missouri was due to an increase in the Company’s Medicare enrollment as a percentage of total enrollment; the other half of the increase was due to higher Medicaid premium rates.
The medical care ratio decreased to 84.2% in the third quarter of 2010 compared with 86.7% for the same period of 2009.
The medical care ratio of the California health plan decreased to 80.3% in the third quarter of 2010 from 92.3% in the third quarter of 2009, primarily due to provider network restructuring and improved medical management. Lower inpatient costs were the greatest contributor to the decrease in the California health plan’s medical care ratio.
The medical care ratio of the Ohio health plan decreased to 81.2% in the third quarter of 2010 from 85.6% in the third quarter of 2009, primarily due to an increase in Medicaid premium PMPM of approximately 6% effective January 1, 2010.
The medical care ratio of the Utah health plan decreased to 84.9% in the third quarter of 2010 from 92.5% in the third quarter of 2009, primarily due to a decrease in provider rates and an increase in Medicaid premium PMPM of approximately 8% effective July 1, 2010.
The medical care ratio of the Washington health plan decreased to 79.4% in the third quarter of 2010 from 83.0% in the third quarter of 2009, primarily due to reduced fee-for-service costs in the inpatient, outpatient and physician categories, and an increase in Medicaid premium PMPM of approximately 2.5% effective July 1, 2010.
The medical care ratio of the Michigan health plan increased to 85.7% in the third quarter of 2010 from 81.2% in the third quarter of 2009, primarily due to higher fee-for-service costs for Medicaid members and a shift in member mix towards high medical care ratio Medicare members.
The medical care ratio of the Missouri health plan increased to 86.7% in the third quarter of 2010 from 82.3% in the third quarter of 2009, primarily due to higher inpatient fee-for-service costs and a slight decrease (approximately 1%) in premium revenue PMPM effective July 1, 2010.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 3
October 26, 2010
Days in medical claims and benefits payable. Beginning January 1, 2010, and for all prior periods presented, the Company is reporting days in medical claims and benefits payable relating to fee-for-service medical claims only. This new computation includes only fee-for-service medical care costs and related liabilities and therefore calculates the extent of reserves for those liabilities that are most subject to estimation.
The days in medical claims and benefits payable amount previously reported included all medical care costs (fee-for-service, capitation, pharmacy, and administrative), and all medical claims liabilities, including those liabilities that are typically paid concurrently, or shortly after the costs are incurred, such as capitation cost and pharmacy costs. Medical claims liabilities used in this calculation do not include accrued costs, such as salaries, associated with the administrative portion of medical costs.
By including only fee-for-service medical costs and liabilities in this computation, the Company’s days in claims payable metric will be more indicative of the adequacy of the Company’s reserves for liabilities subject to a substantial degree of estimation. The days in medical claims and benefits payable, excluding the Company’s new Wisconsin health plan, were as follows:
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(Dollars in thousands)
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Sept. 30,
2010
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June 30,
2010
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Sept. 30,
2009
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|||||||||
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Days in claims payable – fee-for-service only
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42 days
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44 days
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44 days
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|||||||||
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Number of claims in inventory at end of period
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110,200 | 106,700 | 107,700 | |||||||||
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Billed charges of claims in inventory at end of period
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$ | 158,900 | $ | 147,500 | $ | 145,500 | ||||||
Molina Medicaid Solutions (acquired May 1, 2010)
Molina Medicaid Solutions contributed $1.2 million to operating income during the third quarter of 2010, with an operating profit margin of approximately 4%. As the Company expected, the operating profit for this segment has declined as a result of the revenue and cost recognition that commenced in Maine as of its September 1, 2010, “go-live” operational date. In addition, and contrary to our expectations, the consulting and outside service costs for both Idaho and Maine following their respective go-live operational dates have not declined from their pre-operational levels.
Performance of Molina Medicaid Solutions for the quarter ended September 30, 2010, was as follows:
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(In thousands)
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||||
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Service revenue before amortization
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$ | 34,926 | ||
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Amortization of contract backlog recorded as contra-service revenue
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(2,655 | ) | ||
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Service revenue
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32,271 | |||
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Cost of service revenue
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27,605 | |||
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General and administrative costs
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2,195 | |||
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Amortization of customer relationships intangibles
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1,314 | |||
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Operating income
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$ | 1,157 | ||
-MORE-
MOH Reports Third Quarter 2010 Results
Page 4
October 26, 2010
Consolidated Expenses
General and administrative expenses, or G&A, were $88.7 million, or 8.5% of total revenue, for the third quarter of 2010 compared with $68.6 million, or 7.5% of total revenue, for the third quarter of 2009. Absent the $4.7 million of employee severance and settlement costs indicated below, general and administrative expense would have been 8.1% of total revenue for the third quarter of 2010. The increase in the G&A ratio was the result of higher administrative expenses for the Health Plan segment, driven in part by the cost of the Company’s Medicare expansion, employee severance and settlement costs of $4.7 million for the quarter, and the acquisition of Molina Medicaid Solutions.
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Three Months Ended September 30,
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2010
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2009
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Amount
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% of Total
Revenue
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Amount
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% of Total
Revenue
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|||||||||||||
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(In thousands)
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||||||||||||||||
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Medicare-related administrative costs
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$ | 6,511 | 0.6 | % | $ | 4,288 | 0.5 | % | ||||||||
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Non Medicare-related administrative costs:
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Employee severance and settlement costs
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4,654 | 0.4 | 132 | ― | ||||||||||||
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Molina Medicaid Solutions segment administrative costs
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2,195 | 0.2 | ― | ― | ||||||||||||
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Health Plans segment administrative payroll, including employee incentive compensation
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57,741 | 5.6 | 53,042 | 5.8 | ||||||||||||
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All other Health Plans segment administrative expense
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17,559 | 1.7 | 11,101 | 1.2 | ||||||||||||
| $ | 88,660 | 8.5 | % | $ | 68,563 | 7.5 | % | |||||||||
Premium tax expense increased to 3.5% of premium revenue in the third quarter of 2010 from 3.3% in the third quarter of 2009, primarily due to the imposition of a higher premium tax rate in Ohio effective October 1, 2009.
Depreciation and amortization expense specifically identified as such in the Company’s consolidated statements of income increased $2.1 million in the third quarter of 2010 compared with the third quarter of 2009, primarily due to depreciation of investments in infrastructure and the amortization of certain purchased intangibles associated with the acquisition of Molina Medicaid Solutions. Beginning in the second quarter of 2010, the amortization of contract backlog associated with the acquisition of Molina Medicaid Solutions is recorded as contra-service revenue. Additionally, most of the depreciation associated with Molina Medicaid Solutions is recorded as cost of service revenue. The following table presents all depreciation and amortizati
on recorded in the Company’s consolidated financial statements:
-MORE-
MOH Reports Third Quarter 2010 Results
Page 5
October 26, 2010
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Three Months Ended September 30,
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2010
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2009
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Amount
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% of Total
Revenue
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Amount
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% of Total
Revenue
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(In thousands)
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||||||||||||||||
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Depreciation and amortization
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$ | 11,954 | 1.1 | % | $ | 9,832 | 1.1 | % | ||||||||
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Amortization recorded as contra-service revenue
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2,655 | 0.3 | ― | ― | ||||||||||||
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Depreciation recorded as cost of service revenue
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1,964 | 0.2 | ― | ― | ||||||||||||
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Depreciation and amortization reported in the condensed consolidated statements of cash flows
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$ | 16,573 | 1.6 | % | $ | 9,832 | 1.1 | % | ||||||||
Interest expense increased to $4.6 million for the third quarter of 2010 compared with $3.3 million for the third quarter of 2009.
Income tax expense was recorded at an effective rate of 36.2% in the third quarter of 2010 compared with 27.5% in the third quarter of 2009. The lower rate in 2009 was primarily due to discrete tax benefits of $1.0 million recorded in the third quarter of 2009 primarily related to higher than previously estimated tax credits and a reassessment of liabilities for unrecognized tax benefits.
Through December 31, 2009, the Company’s income tax expense included both the Michigan business income tax, or BIT, and the Michigan modified gross receipts tax, or MGRT. Effective January 1, 2010, the Company has recorded the MGRT as a premium tax and not as an income tax. The Company will continue to record the BIT as an income tax. For the third quarter and nine months ended September 30, 2009, premium tax expense and income tax expense have been reclassified to conform to this presentation.
Nine Months Ended September 30, 2010 Compared with Nine Months Ended September 30, 2009
Health Plans
Premium revenue grew 9% in the nine months ended September 30, 2010, compared with the same period in 2009. The revenue increase was primarily due to a membership increase of 13% as of September 30, 2010, compared with membership as of September 30, 2009. Medicare enrollment exceeded 22,000 members at September 30, 2010, and Medicare premium revenue for the first nine months of 2010 was $188.6 million compared with $95.9 million for the same period in 2009.
On a PMPM basis, however, consolidated premium revenue decreased 1.8% because of declines in premium rates. The impact of premium reductions tied to the elimination of the pharmacy benefit in Ohio and Missouri more than offset increased Medicare enrollment and higher Medicaid rates exclusive of the pharmacy cuts in Ohio and Missouri. Exclusive of the pharmacy cuts, premium revenue PMPM increased approximately 4.6%. Approximately one half of the percentage increase in PMPM revenue exclusive of the pharmacy cuts in Ohio and Missouri was due to an increase in the Company’s Medicare enrollment as a percentage of total enrollment; the other half of the increase was due to higher Medicaid premium rates.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 6
October 26, 2010
The medical care ratio decreased to 85.1% for the first nine months of 2010 compared with 86.5% for the first nine months of 2009.
The medical care ratio of the California health plan decreased to 84.0% for the nine months ended September 30, 2010, from 92.8% for the same period in 2009, primarily due to provider network restructuring and improved medical management. Lower inpatient costs were the greatest contributor to the decrease in the California health plan’s medical care ratio.
The medical care ratio of the Ohio health plan decreased to 80.7% for the nine months ended September 30, 2010, from 85.5% for the same period in 2009, primarily due to an increase in Medicaid premium PMPM of approximately 6% effective January 1, 2010.
The medical care ratio of the Washington health plan increased to 84.2% for the nine months ended September 30, 2010, from 83.7% for the same period in 2009, primarily due to reduced premium rates implemented in the third quarter of 2009 that were only partially offset by the premium rate increase of approximately 2.5% that was received effective July 1, 2010.
The medical care ratio of the Michigan health plan increased to 84.4% for the nine months ended September 30, 2010, from 82.1% for the same period in 2009, primarily due to higher fee-for-service costs for Medicaid members and a shift in member mix towards high medical care ratio Medicare members.
The medical care ratio of the Missouri health plan increased to 86.5% for the nine months ended September 30, 2010, from 82.0% for the same period in 2009, primarily due to higher inpatient fee-for-service costs.
Molina Medicaid Solutions (acquired May 1, 2010)
Molina Medicaid Solutions contributed $6.2 million to operating income from the date of its acquisition on May 1, 2010, through September 30, 2010, with an operating profit margin of approximately 12%. As the Company expected, the operating profit for this segment has declined as a result of the revenue and cost recognition that commenced in Maine as of its September 1, 2010, “go-live” operational date. In addition, and contrary to the Company’s expectations, the consulting and outside service costs for both Idaho and Maine following their respective go-live operational dates have not declined from their pre-operational levels.
Performance of Molina Medicaid Solutions from May 1, 2010, through September 30, 2010, was as follows:
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(In thousands)
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||||
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Service revenue before amortization
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$ | 57,571 | ||
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Amortization of contract backlog recorded as contra-service revenue
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(4,246 | ) | ||
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Service revenue
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53,325 | |||
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Cost of service revenue
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41,859 | |||
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General and administrative costs
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3,161 | |||
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Amortization of customer relationships intangibles
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2,143 | |||
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Operating income
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$ | 6,162 | ||
MOH Reports Third Quarter 2010 Results
Page 7
October 26, 2010
Consolidated Expenses
General and administrative expenses were $245.6 million, or 8.2% of total revenue, for the first nine months of 2010 compared with $199.0 million, or 7.4% of total revenue, for the first nine months of 2009. The increase in the G&A ratio was the result of higher administrative expenses for the Health Plan segment, driven in part by the cost of the Company’s Medicare expansion, employee severance and settlement costs of $5.2 million year to date, and the acquisitions of Molina Medicaid Solutions and the Wisconsin health plan.
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Nine Months Ended September 30,
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2010
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2009
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Amount
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% of Total
Revenue
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Amount
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% of Total
Revenue
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||||||||||||
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(In thousands)
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||||||||||||||||
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Medicare-related administrative costs
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$ | 21,010 | 0.7 | % | $ | 12,842 | 0.5 | % | ||||||||
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Non Medicare-related administrative costs:
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||||||||||||||||
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Employee severance and settlement costs
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5,152 | 0.2 | 538 | ― | ||||||||||||
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Molina Medicaid Solutions segment administrative costs
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3,161 | 0.1 | ― | ― | ||||||||||||
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Molina Medicaid Solutions and Wisconsin plan acquisition costs
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2,688 | 0.1 | ― | ― | ||||||||||||
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Health Plans segment administrative payroll, including employee incentive compensation
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167,150 | 5.6 | 150,952 | 5.6 | ||||||||||||
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All other Health Plans segment administrative expense
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46,458 | 1.5 | 34,649 | 1.3 | ||||||||||||
| $ | 245,619 | 8.2 | % | $ | 198,981 | 7.4 | % | |||||||||
Premium tax expense increased to 3.5% of premium revenue in the first nine months of 2010 from 3.2% in the first nine months of 2009, primarily due to the imposition of a higher premium tax rate in Ohio effective October 1, 2009.
Depreciation and amortization expense specifically identified as such in the Company’s consolidated statements of income increased $4.8 million in the first nine months of 2010 compared with the first nine months of 2009, primarily due to depreciation of investments in infrastructure and the amortization of certain purchased intangibles associated with the acquisition of Molina Medicaid Solutions. Beginning in the second quarter of 2010, the amortization of contract backlog has been recorded as contra-service revenue. Additionally, most of the depreciation associated with Molina Medicaid Solutions is recorded as cost of service revenue. The following table presents all depreciation and amortization recorded in the Company’s f
inancial statements:
-MORE-
MOH Reports Third Quarter 2010 Results
Page 8
October 26, 2010
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Nine Months Ended September 30,
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||||||||||||||||
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2010
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2009
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|||||||||||||||
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Amount
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% of Total
Revenue
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Amount
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% of Total
Revenue
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|||||||||||||
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(In thousands)
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||||||||||||||||
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Depreciation and amortization
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$ | 33,234 | 1.1 | % | $ | 28,468 | 1.1 | % | ||||||||
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Amortization recorded as contra-service revenue
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4,246 | 0.1 | ― | ― | ||||||||||||
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Depreciation recorded as cost of service revenue
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3,005 | 0.1 | ― | ― | ||||||||||||
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Depreciation and amortization reported in the condensed consolidated statements of cash flows
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$ | 40,485 | 1.3 | % | $ | 28,468 | 1.1 | % | ||||||||
Interest expense increased to $12.1 million for the first nine months of 2010 compared with $9.9 million for the first nine months of 2009. The Company incurred interest expense relating to the $105 million draw on its credit facility (beginning May 1, 2010) to fund the acquisition of Molina Medicaid Solutions.
Income tax expense was recorded at an effective rate of 37.3% for the nine months ended September 30, 2010, compared with 26.1% in the same period of 2009. The lower rate in 2009 was primarily due to discrete tax benefits of $5.5 million recorded in the nine months ended September, 30, 2009, as a result of settling tax examinations, a reassessment of the tax liability for unrecognized tax benefits, and higher than previously estimated tax credits.
Cash Flow
Cash provided by operating activities for the first nine months of 2010 was $8.5 million compared with $130.3 million for the first nine months of 2009, a decrease of $121.8 million.
Deferred revenue, which was a source of operating cash totaling $61 million in 2009, was a use of operating cash totaling $64 million in 2010. In 2009, the state of Ohio typically paid premiums in advance of the month the premium was earned. Beginning in January 2010, the state of Ohio has delayed its premium payments to mid-month for the month premium is earned. The Company does not anticipate any advance payments for the Ohio health plan’s premiums during 2010. Cash provided by operating activities was further reduced in the third quarter as a result of the delayed passage of the California state budget for 2010-2011. Accounts receivable at the California health plan increased $65 million between the June 30, 2010 and September 30, 2010.
Cash used in investing activities increased significantly in the first nine months of 2010 compared with the first nine months of 2009, due chiefly to the acquisition of Molina Medicaid Solutions, which totaled $131.3 million.
Cash provided by financing activities increased due to funds generated by the Company’s equity offering in the third quarter of 2010, which totaled $111.6 million, net of the underwriting discount. Amounts borrowed under the Company’s credit facility to fund the acquisition of Molina Medicaid Solutions in the second quarter of 2010 were repaid in the third quarter using proceeds from the equity offering.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 9
October 26, 2010
At September 30, 2010, the Company had cash and investments (not including restricted investments) of $642.1 million, including non-current auction rate securities with a fair value of $20.3 million. At September 30, 2010, the parent company had unrestricted cash and investments of $49.6 million, including auction rate securities with a fair value of $5.9 million.
Reconciliation of Non-GAAP to GAAP Financial Measures
EBITDA (1)
|
Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
|
2010
|
2009
|
2010
|
2009
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|||||||||||||
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(In thousands)
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||||||||||||||||
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Operating income
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$ | 29,953 | $ | 15,089 | $ | 71,569 | $ | 57,738 | ||||||||
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Add back:
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||||||||||||||||
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Depreciation and amortization
|
11,954 | 9,832 | 33,234 | 28,468 | ||||||||||||
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Amortization recorded as contra-service revenue
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2,655 | ― | 4,246 | ― | ||||||||||||
|
Depreciation recorded as cost of service revenue
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1,964 | ― | 3,005 | ― | ||||||||||||
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EBITDA
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$ | 46,526 | $ | 24,921 | $ | 112,054 | $ | 86,206 | ||||||||
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(1)
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The Company calculates EBITDA consistently on a quarterly and annual basis by adding back depreciation and amortization to operating income. EBITDA is not prepared in conformity with GAAP because it excludes depreciation and amortization, as well as interest expense, and the provision for income taxes. This non-GAAP financial measure should not be considered as an alternative to the GAAP measures of net income, operating income, operating margin, or cash provided by operating activities, nor should EBITDA be considered in isolation from these GAAP measures of operating performance. Management uses EBITDA as a supplemental metric in evaluating the Company’s financial performance, in evaluating financing and business development decisions, and in forecasting and analyzing future periods. For these reason
s, management believes that EBITDA is a useful supplemental measure to investors in evaluating the Company’s performance and the performance of other companies in its industry.
|
Equity Offering
The Company issued 4,350,000 shares in connection with the equity offering it conducted in the third quarter of 2010 as described above. The offering added approximately 2.3 million and 0.8 million shares to the weighted average number of common shares outstanding for the three months and nine months ended September 30, 2010, respectively.
Wisconsin Health Plan Acquisition
On September 1, 2010, the Company completed its previously announced acquisition of Abri Health Plan, a provider of Medicaid managed care services to BadgerCare Plus and SSI Managed Care enrollees in Wisconsin, for approximately $16 million, subject to adjustments. As of September 30, 2010, Abri Health Plan served approximately 28,000 Medicaid members in 23 counties in Wisconsin.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 10
October 26, 2010
Revised Guidance 2010 Details
The Company is revising its guidance for fiscal year 2010 as follows (all amounts are approximate):
|
Earnings per diluted share
|
$1.90
|
|
Net income
|
$52.7 million
|
|
Premium revenue
|
$4.1 billion
|
|
Service revenue
|
$94.0 million
|
|
Investment income
|
$6.7 million
|
|
Medical care costs
|
$3.4 billion
|
|
Medical care costs as a percentage of premium revenue
|
84.9%
|
|
Cost of service revenue
|
$82.5 million
|
|
Service revenue ratio
|
87.8%
|
|
General and administrative (G&A) expense
|
$333.9 million
|
|
G&A ratio
|
8.1%
|
|
Premium tax expense
|
$140.3 million
|
|
Depreciation
|
$27.1 million
|
|
Amortization
|
$18.5 million
|
|
Interest expense
|
$15.8 million
|
|
Income tax expense
|
$32.3 million
|
|
Effective tax rate for full year
|
38.0%
|
|
Diluted shares outstanding, year ended December 31, 2010
|
27.7 million
|
|
Diluted shares outstanding, quarter ended December 31, 2010
|
30.5 million
|
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 Tuesday, October 26, 2010. The number to call for the interactive teleconference is (212) 231-2939. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Tuesday, October 26, 2010, through 6:00 p.m. on Wednesday, October 27, 2010, by dialing (800) 633-8284 and entering confirmation number 21482029. A live broadcast of Molina Healthcare’s conference call will be available on the Company’s website, www.molinahealthcare.com, or at www.earnings.com. A 30-day online replay will be avail
able approximately an hour following the conclusion of the live broadcast.
About Molina Healthcare
Molina Healthcare, Inc. provides quality and cost-effective Medicaid-related solutions to meet the health care needs of low-income families and individuals and to assist state agencies in their administration of the Medicaid program. Our licensed health plans in California, Florida, Michigan, Missouri, New Mexico, Ohio, Texas, Utah, Washington, and Wisconsin currently serve approximately 1.6 million members, and our subsidiary, Molina Medicaid Solutions, provides business processing and information technology administrative services to Medicaid agencies in Idaho, Louisiana, Maine, New Jersey, and West Virginia, and drug rebate administration services in Florida. More information about Molina Healthcare is available at www.molinahealthcare.com.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 11
October 26, 2010
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding the Company’s plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties, including, without limitation, risk factors related to the following:
|
§
|
budgetary pressures on the federal and state governments and their resulting inability to fully fund Medicaid, Medicare, or CHIP, or to maintain current payment rates, benefit packages, or membership eligibility thresholds and criteria;
|
|
§
|
uncertainties regarding the impact of the recently enacted Patient Protection and Affordable Care Act, including the funding provisions related to health plans, and uncertainties regarding the likely impact of other federal or state health care and insurance reform measures;
|
|
§
|
management of our medical costs, including normal season flu patterns and rates of utilization that are consistent with our expectations;
|
|
§
|
the accurate estimation of incurred but not reported medical costs across our health plans;
|
|
§
|
retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including our ability to retain expected Medicaid pharmaceutical rebates of approximately $800,000 per month through December 2010;
|
|
§
|
the continuation and renewal of the government contracts of our health plans and if renewed, the terms on which such contracts are renewed;
|
|
§
|
our ability and the ability of our providers to maintain state accreditations to participate in certain state Medicaid programs;
|
|
§
|
changes with respect to our provider contracts and the loss of providers;
|
|
§
|
changes in services offered, number of our members, membership mix and membership demographics;
|
|
§
|
performance of our principal vendors pursuant to our vendor contracts;
|
|
§
|
the integration of Molina Medicaid Solutions, including its employees, systems, and operations;
|
|
§
|
the retention and renewal of the Molina Medicaid Solutions’ state government contracts on terms consistent with our expectations;
|
|
§
|
the accuracy of our operating cost and capital outlay projections for Molina Medicaid Solutions;
|
|
§
|
the timing of receipt and recognition of revenue and the amortization of expense under our various state contracts held by Molina Medicaid Solutions, including the state of Idaho’s acceptance of the MMIS, effective November 1, 2010;
|
|
§
|
additional administrative costs and the potential payment of additional amounts to providers as a result of MMIS system issues in Idaho;
|
|
§
|
the implementation of the expected 2% premium rate increase in California, retroactively effective October 1, 2010;
|
|
§
|
the expansion of service into 174 rural counties by our Texas health plan under Texas' CHIP Rural Service Area Program;
|
|
§
|
government audits and reviews, including the audit of our Medicare plans by CMS at the end of July 2010;
|
|
§
|
the establishment of a federal or state medical cost expenditure floor as a percentage of the premiums we receive;
|
|
§
|
the interpretation and implementation of medical cost expenditure floors, administrative cost and profit ceilings, and profit sharing arrangements already included in current state contracts in New Mexico, Florida and Texas;
|
|
§
|
the interpretation and implementation of at-risk premium rules in Ohio, New Mexico, and Texas that require us to meet certain quality measures in order to earn all of our contractual revenue in those states;
|
|
§
|
up-coding by providers or billing in a manner at material variance with historic patterns;
|
|
§
|
approval by state regulators of dividends and distributions by our subsidiaries;
|
|
§
|
changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
|
|
§
|
high dollar claims related to catastrophic illness;
|
|
§
|
the favorable resolution of litigation or arbitration matters;
|
|
§
|
restrictions and covenants in our credit facility;
|
|
§
|
the success of our efforts to leverage our administrative costs to address the needs associated with increased enrollment;
|
|
§
|
the relatively small number of states in which we operate health plans and the impact on the consolidated entity of adverse developments in any single health plan;
|
|
§
|
the availability of financing to fund and capitalize our acquisitions and start-up activities and to meet our liquidity needs;
|
|
§
|
a state’s failure to renew its federal Medicaid waiver;
|
|
§
|
an unauthorized disclosure of confidential member information;
|
|
§
|
changes in laws regarding the transmission, security and privacy of protected health information and costs associated to comply with such changes;
|
|
§
|
changes generally affecting the managed care or Medicaid management information systems industries;
|
|
§
|
increases in government surcharges, taxes and assessments;
|
|
§
|
general economic conditions, including unemployment rates;
|
and numerous other risk factors, including those discussed in our periodic reports and filings with the Securities and Exchange Commission. These reports can be accessed under the investor relations tab of our Company website or on the SEC’s website at www.sec.gov. Given these risks and uncertainties, we can give no assurances that our forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by our forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements. All forward‐looking statements in this release represent our judgment as of October 26, 2010, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.
-MORE-
MOH Reports Third Quarter 2010 Results
Page 12
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per-share data)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenue:
|
||||||||||||||||
|
Premium revenue
|
$ | 1,005,115 | $ | 914,805 | $ | 2,947,020 | $ | 2,697,796 | ||||||||
|
Service revenue
|
32,271 | – | 53,325 | – | ||||||||||||
|
Investment income
|
1,760 | 1,707 | 4,880 | 7,336 | ||||||||||||
|
Total operating revenue
|
1,039,146 | 916,512 | 3,005,225 | 2,705,132 | ||||||||||||
|
Expenses:
|
||||||||||||||||
|
Medical care costs
|
845,937 | 792,771 | 2,508,366 | 2,333,865 | ||||||||||||
|
Cost of service revenue
|
27,605 | – | 41,859 | – | ||||||||||||
|
General and administrative expenses
|
88,660 | 68,563 | 245,619 | 198,981 | ||||||||||||
|
Premium tax expenses (1)
|
35,037 | 30,257 | 104,578 | 87,612 | ||||||||||||
|
Depreciation and amortization
|
11,954 | 9,832 | 33,234 | 28,468 | ||||||||||||
|
Total expenses
|
1,009,193 | 901,423 | 2,933,656 | 2,648,926 | ||||||||||||
|
Gain on purchase of convertible senior notes
|
– | – | – | 1,532 | ||||||||||||
|
Operating income
|
29,953 | 15,089 | 71,569 | 57,738 | ||||||||||||
|
Interest expense
|
(4,600 | ) | (3,279 | ) | (12,056 | ) | (9,917 | ) | ||||||||
|
Income before income taxes
|
25,353 | 11,810 | 59,513 | 47,821 | ||||||||||||
|
Income tax expense (1)
|
9,180 | 3,246 | 22,171 | 12,481 | ||||||||||||
|
Net income
|
$ | 16,173 | $ | 8,564 | $ | 37,342 | $ | 35,340 | ||||||||
|
Net income per share:
|
||||||||||||||||
|
Basic
|
$ | 0.58 | $ | 0.34 | $ | 1.41 | $ | 1.36 | ||||||||
|
Diluted
|
$ | 0.57 | $ | 0.33 | $ | 1.39 | $ | 1.36 | ||||||||
|
Weighted average number of common shares and potentially dilutive common shares outstanding
|
28,363 | 25,630 | 26,802 | 26,058 | ||||||||||||
|
Operating Statistics:
|
||||||||||||||||
|
Ratio of medical care costs paid directly to providers to premium revenue
|
82.1 | % | 84.6 | % | 83.0 | % | 84.5 | % | ||||||||
|
Ratio of medical care costs not paid directly to providers to premium revenue
|
2.1 | 2.1 | 2.1 | 2.0 | ||||||||||||
|
Medical care ratio (2)
|
84.2 | % | 86.7 | % | 85.1 | % | 86.5 | % | ||||||||
|
General and administrative expense ratio (3)
|
8.5 | % | 7.5 | % | 8.2 | % | 7.4 | % | ||||||||
|
Premium tax ratio (1), (2)
|
3.5 | % | 3.3 | % | 3.5 | % | 3.2 | % | ||||||||
|
Effective tax rate (1)
|
36.2 | % | 27.5 | % | 37.3 | % | 26.1 | % | ||||||||
|
(1)
|
Effective January 1, 2010, the Company has recorded the MGRT as a premium tax and not as an income tax. For the three months and nine months ended September 30, 2009, premium tax expense and income tax expense have been reclassified to conform to this presentation.
|
|
(2)
|
Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium taxes as a percentage of premium revenue.
|
|
(3)
|
Computed as a percentage of total operating revenue.
|
-MORE-
MOH Reports Third Quarter 2010 Results
Page 13
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per-share data)
|
Sept. 30,
2010
|
Dec. 31,
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 426,455 | $ | 469,501 | ||||
|
Investments
|
195,358 | 174,844 | ||||||
|
Receivables
|
225,547 | 136,654 | ||||||
|
Income and related taxes refundable
|
2,755 | 6,067 | ||||||
|
Deferred income taxes
|
7,580 | 8,757 | ||||||
|
Prepaid expenses and other current assets
|
25,185 | 15,583 | ||||||
|
Total current assets
|
882,880 | 811,406 | ||||||
|
Property and equipment, net
|
91,826 | 78,171 | ||||||
|
Deferred contract costs
|
20,255 | − | ||||||
|
Intangible assets, net
|
115,270 | 80,846 | ||||||
|
Goodwill and indefinite-lived intangible assets
|
213,261 | 133,408 | ||||||
|
Investments
|
20,294 | 59,687 | ||||||
|
Restricted investments
|
45,047 | 36,274 | ||||||
|
Receivable for ceded life and annuity contracts
|
25,134 | 25,455 | ||||||
|
Other assets
|
17,463 | 19,988 | ||||||
| $ | 1,431,430 | $ | 1,245,235 | |||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Medical claims and benefits payable
|
$ | 355,140 | $ | 316,516 | ||||
|
Accounts payable and accrued liabilities
|
117,299 | 71,732 | ||||||
|
Deferred revenue
|
37,648 | 101,985 | ||||||
|
Total current liabilities
|
510,087 | 490,233 | ||||||
|
Long-term debt
|
162,700 | 158,900 | ||||||
|
Deferred income taxes
|
16,773 | 12,506 | ||||||
|
Liability for ceded life and annuity contracts
|
25,134 | 25,455 | ||||||
|
Other long-term liabilities
|
19,004 | 15,403 | ||||||
|
Total liabilities
|
733,698 | 702,497 | ||||||
|
Stockholders’ equity:
|
||||||||
|
Common stock, $0.001 par value; 80,000 shares authorized,
outstanding 30,207 shares at September 30, 2010, and 25,607 shares
at December 31, 2009
|
30 | 26 | ||||||
|
Preferred stock, $0.001 par value; 20,000 shares authorized,
no shares outstanding
|
− | − | ||||||
|
Additional paid-in capital
|
247,845 | 129,902 | ||||||
|
Accumulated other comprehensive loss
|
(2,107 | ) | (1,812 | ) | ||||
|
Retained earnings
|
451,964 | 414,622 | ||||||
|
Total stockholders’ equity
|
697,732 | 542,738 | ||||||
| $ | 1,431,430 | $ | 1,245,235 | |||||
-MORE-
MOH Reports Third Quarter 2010 Results
Page 14
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Operating activities:
|
||||||||||||||||
|
Net income
|
$ | 16,173 | $ | 8,564 | $ | 37,342 | $ | 35,340 | ||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||
|
Depreciation and amortization
|
16,573 | 9,832 | 40,485 | 28,468 | ||||||||||||
|
Unrealized (gain) loss on trading securities
|
(1,310 | ) | 101 | (4,170 | ) | (3,509 | ) | |||||||||
|
Loss (gain) on rights agreement
|
1,196 | (92 | ) | 3,807 | 3,204 | |||||||||||
|
Deferred income taxes
|
3,839 | (923 | ) | 4,463 | 2,322 | |||||||||||
|
Stock-based compensation
|
2,760 | 2,272 | 7,268 | 5,730 | ||||||||||||
|
Non-cash interest on convertible senior notes
|
1,291 | 1,197 | 3,800 | 3,563 | ||||||||||||
|
Gain on purchase of convertible senior notes
|
– | – | – | (1,532 | ) | |||||||||||
|
Amortization of deferred financing costs
|
591 | 344 | 1,278 | 1,040 | ||||||||||||
|
Tax deficiency from employee stock compensation
|
(293 | ) | (157 | ) | (676 | ) | (704 | ) | ||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||||||
|
Receivables
|
(63,298 | ) | 7,311 | (64,896 | ) | (15,567 | ) | |||||||||
|
Prepaid expenses and other current assets
|
(3,159 | ) | (278 | ) | (8,307 | ) | 454 | |||||||||
|
Medical claims and benefits payable
|
4,863 | (5,593 | ) | 33,947 | 10,672 | |||||||||||
|
Accounts payable and accrued liabilities
|
(12,827 | ) | 9,586 | 15,131 | (6,140 | ) | ||||||||||
|
Deferred revenue
|
18,343 | 6,743 | (64,337 | ) | 61,381 | |||||||||||
|
Income taxes
|
(1,583 | ) | (3,464 | ) | 3,327 | 5,561 | ||||||||||
|
Net cash (used in) provided by operating activities
|
(16,841 | ) | 35,443 | 8,462 | 130,283 | |||||||||||
|
Investing activities:
|
||||||||||||||||
|
Purchases of property and equipment
|
(14,395 | ) | (8,466 | ) | (31,918 | ) | (28,390 | ) | ||||||||
|
Purchases of investments
|
(70,852 | ) | (55,153 | ) | (162,620 | ) | (127,335 | ) | ||||||||
|
Sales and maturities of investments
|
68,357 | 67,478 | 185,193 | 149,770 | ||||||||||||
|
Net cash acquired (paid) in business combinations
|
7,169 | (10,900 | ) | (127,231 | ) | (10,900 | ) | |||||||||
|
Increase in deferred contract costs
|
(12,598 | ) | – | (20,616 | ) | – | ||||||||||
|
Increase in restricted investments
|
(3,759 | ) | 2,336 | (8,513 | ) | (4,198 | ) | |||||||||
|
Increase in other assets
|
(57 | ) | 884 | (389 | ) | (1,877 | ) | |||||||||
|
Increase (decrease) in other long-term liabilities
|
1,640 | (16 | ) | 2,729 | (8,788 | ) | ||||||||||
|
Net cash used in investing activities
|
(24,495 | ) | (3,837 | ) | (163,365 | ) | (31,718 | ) | ||||||||
|
Financing activities:
|
||||||||||||||||
|
Amount borrowed under credit facility
|
– | – | 105,000 | – | ||||||||||||
|
Proceeds from common stock offering, net of underwriting discount
|
111,578 | – | 111,578 | – | ||||||||||||
|
Repayment of amount borrowed under credit facility
|
(105,000 | ) | – | (105,000 | ) | – | ||||||||||
|
Treasury stock purchases
|
– | – | – | (27,712 | ) | |||||||||||
|
Purchase of convertible senior notes
|
– | – | – | (9,653 | ) | |||||||||||
|
Equity offering costs paid
|
(332 | ) | – | (332 | ) | – | ||||||||||
|
Credit facility fees paid
|
– | – | (1,671 | ) | – | |||||||||||
|
Excess tax benefits from employee stock compensation
|
241 | 26 | 420 | 26 | ||||||||||||
|
Proceeds from employee stock plans
|
319 | – | 1,862 | 1,081 | ||||||||||||
|
Net cash provided by (used in) financing activities
|
6,806 | 26 | 111,857 | (36,258 | ) | |||||||||||
|
Net (decrease) increase in cash and cash equivalents
|
(34,530 | ) | 31,632 | (43,046 | ) | 62,307 | ||||||||||
|
Cash and cash equivalents at beginning of period
|
460,985 | 417,837 | 469,501 | 387,162 | ||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 426,455 | $ | 449,469 | $ | 426,455 | $ | 449,469 | ||||||||
-MORE-
MOH Reports Third Quarter 2010 Results
Page 15
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED MEMBERSHIP DATA
|
Total Ending Membership By Health Plan:
|
Sept. 30,
2010
|
June 30,
2010
|
Dec. 31,
2009
|
Sept. 30,
2009
|
||||||||||||
|
California
|
349,000 | 348,000 | 351,000 | 355,000 | ||||||||||||
|
Florida
|
57,000 | 54,000 | 50,000 | 43,000 | ||||||||||||
|
Michigan
|
225,000 | 226,000 | 223,000 | 210,000 | ||||||||||||
|
Missouri
|
79,000 | 78,000 | 78,000 | 78,000 | ||||||||||||
|
New Mexico
|
91,000 | 93,000 | 94,000 | 90,000 | ||||||||||||
|
Ohio
|
241,000 | 234,000 | 216,000 | 208,000 | ||||||||||||
|
Texas
|
96,000 | 42,000 | 40,000 | 31,000 | ||||||||||||
|
Utah
|
78,000 | 77,000 | 69,000 | 69,000 | ||||||||||||
|
Washington
|
353,000 | 346,000 | 334,000 | 327,000 | ||||||||||||
|
Wisconsin (1)
|
28,000 | – | – | – | ||||||||||||
| 1,597,000 | 1,498,000 | 1,455,000 | 1,411,000 | |||||||||||||
|
Total Ending Membership By State
for the Medicare Advantage Plans (1):
|
||||||||||||||||
|
California
|
4,300 | 3,600 | 2,100 | 1,900 | ||||||||||||
|
Florida
|
500 | 500 | – | – | ||||||||||||
|
Michigan
|
5,700 | 5,000 | 3,300 | 2,700 | ||||||||||||
|
New Mexico
|
600 | 600 | 400 | 400 | ||||||||||||
|
Texas
|
600 | 600 | 500 | 500 | ||||||||||||
|
Utah
|
8,600 | 8,100 | 4,000 | 3,500 | ||||||||||||
|
Washington
|
2,300 | 1,900 | 1,300 | 1,100 | ||||||||||||
| 22,600 | 20,300 | 11,600 | 10,100 | |||||||||||||
|
Total Ending Membership By State
for the Aged, Blind or Disabled Population:
|
||||||||||||||||
|
California
|
13,500 | 13,600 | 13,900 | 13,700 | ||||||||||||
|
Florida
|
9,500 | 9,300 | 8,800 | 8,700 | ||||||||||||
|
Michigan
|
31,400 | 31,600 | 32,200 | 30,200 | ||||||||||||
|
New Mexico
|
5,700 | 5,800 | 5,700 | 5,700 | ||||||||||||
|
Ohio
|
27,900 | 27,400 | 22,600 | 19,600 | ||||||||||||
|
Texas
|
18,900 | 18,500 | 17,600 | 17,500 | ||||||||||||
|
Utah
|
7,900 | 7,600 | 7,500 | 7,700 | ||||||||||||
|
Washington
|
3,700 | 3,700 | 3,200 | 3,200 | ||||||||||||
|
Wisconsin (1)
|
1,700 | – | – | – | ||||||||||||
| 120,200 | 117,500 | 111,500 | 106,300 | |||||||||||||
|
(1)
|
The Company acquired the Wisconsin health plan on September 1, 2010. As of September 30, 2010, the Wisconsin health plan had approximately 3,000 Medicare Advantage members covered under a reinsurance contract with a third party; these members are not included in the membership tables herein.
|
-MORE-
MOH Reports Third Quarter 2010 Results
Page 16
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN
(Amounts in thousands except per member per month amounts)
|
|
Three Months Ended September 30, 2010
|
|||||||||||||||||||||||||||
|
Premium Revenue
|
Medical Care Costs
|
|
|
|||||||||||||||||||||||||
|
Member
Months (1)
|
Total
|
PMPM
|
Total
|
PMPM
|
Medical
Care Ratio
|
Premium
Tax
Expense (2) |
||||||||||||||||||||||
|
California
|
1,046 | $ | 128,350 | $ | 122.75 | $ | 103,002 | $ | 98.51 | 80.3 | % | $ | 1,888 | |||||||||||||||
|
Florida
|
169 | 43,485 | 256.25 | 42,258 | 249.02 | 97.2 | -14 | |||||||||||||||||||||
|
Michigan (2)
|
675 | 156,609 | 232.05 | 134,238 | 198.90 | 85.7 | 9,655 | |||||||||||||||||||||
|
Missouri
|
236 | 52,952 | 224.63 | 45,930 | 194.84 | 86.7 | – | |||||||||||||||||||||
|
New Mexico
|
274 | 93,602 | 341.38 | 78,121 | 284.92 | 83.5 | 2,170 | |||||||||||||||||||||
|
Ohio
|
715 | 210,651 | 294.55 | 171,051 | 239.18 | 81.2 | 16,734 | |||||||||||||||||||||
|
Texas
|
180 | 48,188 | 267.95 | 43,129 | 239.82 | 89.5 | 861 | |||||||||||||||||||||
|
Utah
|
234 | 67,566 | 289.28 | 57,381 | 245.67 | 84.9 | – | |||||||||||||||||||||
|
Washington
|
1,051 | 195,578 | 186.03 | 155,307 | 147.73 | 79.4 | 3,622 | |||||||||||||||||||||
|
Wisconsin (3)
|
28 | 6,310 | 224.18 | 6,154 | 218.65 | 97.5 | – | |||||||||||||||||||||
|
Other (4)
|
– | 1,824 | – | 9,366 | – | – | 121 | |||||||||||||||||||||
| 4,608 | $ | 1,005,115 | $ | 218.12 | $ | 845,937 | $ | 183.58 | 84.2 | % | $ | 35,037 | ||||||||||||||||
|
|
Three Months Ended Septemer 30, 2009
|
|||||||||||||||||||||||||||
|
Premium Revenue
|
Medical Care Costs
|
|
|
|||||||||||||||||||||||||
|
Member
Months (1)
|
Total
|
PMPM
|
Total
|
PMPM
|
Medical
Care Ratio
|
Premium
Tax
Expense (2) |
||||||||||||||||||||||
|
California
|
1,065 | $ | 122,048 | $ | 114.61 | $ | 112,663 | $ | 105.80 | 92.3 | % | $ | 3,700 | |||||||||||||||
|
Florida
|
109 | 27,292 | 250.27 | 25,931 | 237.80 | 95.0 | 10 | |||||||||||||||||||||
|
Michigan (2)
|
629 | 136,262 | 216.74 | 110,577 | 175.89 | 81.2 | 8,663 | |||||||||||||||||||||
|
Missouri
|
232 | 60,867 | 261.76 | 50,075 | 215.35 | 82.3 | – | |||||||||||||||||||||
|
New Mexico
|
264 | 105,721 | 400.04 | 86,678 | 327.99 | 82.0 | 2,953 | |||||||||||||||||||||
|
Ohio
|
618 | 204,565 | 331.22 | 175,187 | 283.65 | 85.6 | 11,167 | |||||||||||||||||||||
|
Texas
|
93 | 26,299 | 282.13 | 26,904 | 288.61 | 102.3 | 574 | |||||||||||||||||||||
|
Utah
|
203 | 46,849 | 231.14 | 43,346 | 213.86 | 92.5 | – | |||||||||||||||||||||
|
Washington
|
979 | 182,096 | 185.99 | 151,099 | 154.33 | 83.0 | 3,131 | |||||||||||||||||||||
|
Wisconsin (3)
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
Other (4)
|
– | 2,806 | – | 10,311 | – | – | 59 | |||||||||||||||||||||
| 4,192 | $ | 914,805 | $ | 218.17 | $ | 792,771 | $ | 189.07 | 86.7 | % | $ | 30,257 | ||||||||||||||||
|
(1)
|
A member month is defined as the aggregate of each month’s ending membership for the period presented.
|
|
(2)
|
Effective January 1, 2010, the Company has recorded the Michigan gross receipts tax, or MGRT, as a premium tax and not as an income tax. The 2009 amounts have been reclassified to conform to this presentation.
|
|
(3)
|
The Company acquired the Wisconsin health plan on September 1, 2010.
|
|
(4)
|
“Other” medical care costs primarily include medically related administrative costs at the parent company.
|
-MORE-
MOH Reports Third Quarter 2010 Results
Page 17
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN
(Amounts in thousands except per member per month amounts)
|
|
Nine Months Ended September 30, 2010
|
|||||||||||||||||||||||||||
|
Premium Revenue
|
Medical Care Costs
|
|
|
|||||||||||||||||||||||||
|
Member
Months (1)
|
Total
|
PMPM
|
Total
|
PMPM
|
Medical
Care Ratio
|
Premium
Tax
Expense (2) |
||||||||||||||||||||||
|
California
|
3,158 | $ | 376,811 | $ | 119.32 | $ | 316,569 | $ | 100.24 | 84.0 | % | $ | 5,153 | |||||||||||||||
|
Florida
|
483 | 124,035 | 256.70 | 116,079 | 240.23 | 93.6 | -2 | |||||||||||||||||||||
|
Michigan (2)
|
2,029 | 468,723 | 230.98 | 395,450 | 194.87 | 84.4 | 29,305 | |||||||||||||||||||||
|
Missouri
|
704 | 156,874 | 222.83 | 135,766 | 192.85 | 86.5 | – | |||||||||||||||||||||
|
New Mexico
|
834 | 281,149 | 336.93 | 225,346 | 270.06 | 80.2 | 7,161 | |||||||||||||||||||||
|
Ohio
|
2,083 | 641,683 | 308.11 | 517,951 | 248.70 | 80.7 | 50,251 | |||||||||||||||||||||
|
Texas
|
426 | 130,881 | 307.51 | 114,593 | 269.24 | 87.6 | 2,247 | |||||||||||||||||||||
|
Utah
|
685 | 191,040 | 278.99 | 179,816 | 262.60 | 94.1 | – | |||||||||||||||||||||
|
Washington
|
3,080 | 562,836 | 182.75 | 473,609 | 153.78 | 84.2 | 10,278 | |||||||||||||||||||||
|
Wisconsin (3)
|
28 | 6,310 | 224.18 | 6,154 | 218.65 | 97.5 | – | |||||||||||||||||||||
|
Other (4)
|
– | 6,678 | – | 27,033 | – | – | 185 | |||||||||||||||||||||
| 13,510 | $ | 2,947,020 | $ | 218.14 | $ | 2,508,366 | $ | 185.67 | 85.1 | % | $ | 104,578 | ||||||||||||||||
|
|
Nine Months Ended September 30, 2009
|
|||||||||||||||||||||||||||
|
Premium Revenue
|
Medical Care Costs
|
|
|
|||||||||||||||||||||||||
|
Member
Months (1)
|
Total
|
PMPM
|
Total
|
PMPM
|
Medical
Care Ratio
|
Premium
Tax
Expense (2) |
||||||||||||||||||||||
|
California
|
3,076 | $ | 354,001 | $ | 115.09 | $ | 328,386 | $ | 106.76 | 92.8 | % | $ | 10,411 | |||||||||||||||
|
Florida
|
245 | 66,322 | 270.67 | 61,054 | 249.17 | 92.1 | 10 | |||||||||||||||||||||
|
Michigan (2)
|
1,872 | 405,576 | 216.72 | 332,974 | 177.93 | 82.1 | 26,039 | |||||||||||||||||||||
|
Missouri
|
695 | 177,715 | 255.62 | 145,631 | 209.47 | 82.0 | – | |||||||||||||||||||||
|
New Mexico
|
763 | 301,947 | 395.79 | 258,954 | 339.43 | 85.8 | 8,035 | |||||||||||||||||||||
|
Ohio
|
1,774 | 586,672 | 330.73 | 501,606 | 282.77 | 85.5 | 32,090 | |||||||||||||||||||||
|
Texas
|
283 | 93,655 | 330.78 | 79,161 | 279.59 | 84.5 | 1,830 | |||||||||||||||||||||
|
Utah
|
587 | 155,385 | 264.67 | 140,791 | 239.81 | 90.6 | – | |||||||||||||||||||||
|
Washington
|
2,850 | 546,520 | 191.76 | 457,625 | 160.57 | 83.7 | 9,142 | |||||||||||||||||||||
|
Wisconsin (3)
|
– | – | – | – | – | – | – | |||||||||||||||||||||
|
Other (4)
|
– | 10,003 | – | 27,683 | – | – | 55 | |||||||||||||||||||||
| 12,145 | $ | 2,697,796 | $ | 222.08 | $ | 2,333,865 | $ | 192.12 | 86.5 | % | $ | 87,612 | ||||||||||||||||
|
(1)
|
A member month is defined as the aggregate of each month’s ending membership for the period presented.
|
|
(2)
|
Effective January 1, 2010, the Company has recorded the Michigan gross receipts tax, or MGRT, as a premium tax and not as an income tax. The 2009 amounts have been reclassified to conform to this presentation.
|
|
(3)
|
The Company acquired the Wisconsin health plan on September 1, 2010.
|
|
(4)
|
“Other” medical care costs primarily include medically related administrative costs at the parent company.
|
-MORE-
MOH Reports Third Quarter 2010 Results
Page 18
October 26, 2010
MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED FINANCIAL DATA
(Dollars in thousands except per member per month amounts)
The following tables provide the details of the Company’s medical care costs for the periods indicated:
|
Three Months Ended
September 30, 2010
|
Three Months Ended
September 30, 2009
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
% of Total
Medical
Care Costs
|
Amount
|
PMPM
|
% of Total
Medical
Care Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 601,836 | $ | 130.60 | 71.1 | % | $ | 515,164 | $ | 122.86 | 65.0 | % | ||||||||||||
|
Capitation
|
136,425 | 29.61 | 16.1 | 140,551 | 33.52 | 17.7 | ||||||||||||||||||
|
Pharmacy
|
76,049 | 16.50 | 9.0 | 104,274 | 24.87 | 13.2 | ||||||||||||||||||
|
Other
|
31,627 | 6.87 | 3.8 | 32,782 | 7.82 | 4.1 | ||||||||||||||||||
| $ | 845,937 | $ | 183.58 | 100.0 | % | $ | 792,771 | $ | 189.07 | 100.0 | % | |||||||||||||
|
Nine Months Ended
September 30, 2010
|
Nine Months Ended
September 30, 2009
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
% of Total
Medical
Care Costs
|
Amount
|
PMPM
|
% of Total
Medical
Care Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 1,763,675 | $ | 130.55 | 70.3 | % | $ | 1,521,371 | $ | 125.24 | 65.2 | % | ||||||||||||
|
Capitation
|
410,321 | 30.37 | 16.4 | 413,351 | 34.03 | 17.7 | ||||||||||||||||||
|
Pharmacy
|
241,290 | 17.86 | 9.6 | 306,168 | 25.20 | 13.1 | ||||||||||||||||||
|
Other
|
93,080 | 6.89 | 3.7 | 92,975 | 7.65 | 4.0 | ||||||||||||||||||
| $ | 2,508,366 | $ | 185.67 | 100.0 | % | $ | 2,333,865 | $ | 192.12 | 100.0 | % | |||||||||||||
The following table provides the details of the Company’s medical claims and benefits payable as of the dates indicated:
|
Sept. 30,
2010
|
June 30,
2010
|
Sept. 30,
2009
|
||||||||||
|
Fee-for-service claims incurred but not paid (IBNP)
|
$ | 271,285 | $ | 268,652 | $ | 237,495 | ||||||
|
Capitation payable
|
53,410 | 49,101 | 39,361 | |||||||||
|
Pharmacy payable
|
14,663 | 13,385 | 21,100 | |||||||||
|
Other
|
15,782 | 14,462 | 5,158 | |||||||||
| $ | 355,140 | $ | 345,600 | $ | 303,114 | |||||||
-MORE-
MOH Reports Third Quarter 2010 Results
Page 19
October 26, 2010
MOLINA HEALTHCARE, INC.
CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in thousands, except per-member amounts)
(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 periods” represent the amount by which the Company’s 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 firs
t reported. Claims information presented below does not include the Company’s new Wisconsin health plan. The following table shows the components of the change in medical claims and benefits payable as of the periods indicated:
|
Nine Months Ended
|
||||||||||||||||
|
Sept. 30,
2010
|
Sept. 30,
2009
|
Six Months
Ended
June 30,
2010
|
Year
Ended
Dec. 31,
2009
|
|||||||||||||
|
Balances at beginning of period
|
$ | 316,516 | $ | 292,442 | $ | 316,516 | $ | 292,442 | ||||||||
|
Components of medical care costs related to:
|
||||||||||||||||
|
Current period
|
2,554,579 | 2,381,903 | 1,705,411 | 3,227,794 | ||||||||||||
|
Prior periods
|
(46,213 | ) | (48,038 | ) | (42,982 | ) | (51,558 | ) | ||||||||
|
Total medical care costs
|
2,508,366 | 2,333,865 | 1,662,429 | 3,176,236 | ||||||||||||
|
Payments for medical care costs related to:
|
||||||||||||||||
|
Current period
|
2,219,296 | 2,089,417 | 1,389,307 | 2,919,240 | ||||||||||||
|
Prior periods
|
250,446 | 233,776 | 244,038 | 232,922 | ||||||||||||
|
Total paid
|
2,469,742 | 2,323,193 | 1,633,345 | 3,152,162 | ||||||||||||
|
Balances at end of period
|
$ | 355,140 | $ | 303,114 | $ | 345,600 | $ | 316,516 | ||||||||
|
Benefit from prior period as a percentage of:
|
||||||||||||||||
|
Balance at beginning of period
|
14.6 | % | 16.4 | % | 13.6 | % | 17.6 | % | ||||||||
|
Premium revenue
|
1.5 | % | 1.8 | % | 2.2 | % | 1.4 | % | ||||||||
|
Total medical care costs
|
1.8 | % | 2.1 | % | 2.6 | % | 1.6 | % | ||||||||
|
Days in claims payable, fee for service only
|
42 | 44 | 44 | 44 | ||||||||||||
|
Number of members at end of period
|
1,597,000 | 1,411,000 | 1,498,000 | 1,455,000 | ||||||||||||
|
Number of claims in inventory at end of period
|
110,200 | 107,700 | 106,700 | 93,100 | ||||||||||||
|
Billed charges of claims in inventory
at end of period
|
$ | 158,900 | $ | 145,500 | $ | 147,500 | $ | 131,400 | ||||||||
|
Claims in inventory per member at end of period
|
0.07 | 0.08 | 0.07 | 0.06 | ||||||||||||
|
Billed charges of claims in inventory
per member at end of period
|
$ | 99.50 | $ | 103.12 | $ | 98.46 | $ | 90.31 | ||||||||
|
Number of claims received during the period
|
10,701,900 | 9,427,400 | 7,066,100 | 12,930,100 | ||||||||||||
|
Billed charges of claims received
during the period
|
$ | 8,615,500 | $ | 7,180,800 | $ | 5,605,400 | $ | 9,769,000 | ||||||||
-END-