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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): February 12, 2018 (February 12, 2018)
______________
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:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicated by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act.
 
¨
 




Item 2.02.    Results of Operations and Financial Condition.
On February 12, 2018, Molina Healthcare, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2017, the Company’s fiscal year 2018 preliminary guidance, and the results of an impairment assessment discussed in Item 2.06 below. The full text of the press release is included as Exhibit 99.1 to this report. The information contained in the website cited in the press release is not part of this report.

Item 2.06.    Material Impairments.
In connection with the preparation of the financial statements required to be included in the Company’s Form 10-K for the year ended December 31, 2017, the Company has determined it will record non-cash impairment losses in the fourth quarter of 2017 of approximately $269 million relating to the impairment of goodwill and other intangible assets of the Company’s Florida, New Mexico, and Illinois health plans. These impairment losses resulted from the following developments:
Florida Health Plan: Under its current Medicaid contract with the Florida Agency for Health Care Administration (“AHCA”) effective through December 31, 2018, the Company’s Florida health plan, Molina Healthcare of Florida, Inc., serves eight of the 11 geographic regions (including Region 11, as discussed below) of the state of Florida, with statewide Medicaid membership of approximately 360,000 as of December 31, 2017. On July 14, 2017, AHCA released an Invitation to Negotiate (“ITN”) to re-procure health plans for the Statewide Medicaid Managed Care program and, on October 31, 2017, the Florida health plan submitted its reply to the ITN. As previously reported in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on February 6, 2018, AHCA notified the Florida health plan that it was only selected as a candidate to negotiate for the award of a managed care contract for Region 11. Region 11, which comprises Miami-Dade and Monroe counties, had Medicaid membership of approximately 59,000 as of December 31, 2017, representing approximately 16% of the statewide Medicaid membership serviced by the Company under the current Medicaid contract as of December 31, 2017. The Company intends to pursue all protest, appeal, and other available remedies as appropriate in order to retain the Florida Medicaid business. In the event the Florida health plan is unsuccessful in its effort to re-procure Region 11, or the efforts of the Florida health plan to retain its business in other regions are unsuccessful, Medicaid membership levels in Florida after December 31, 2018, are likely to decline significantly, possibly to zero. As a result of these events, the Company recorded a non-cash impairment loss of approximately $124 million relating to the goodwill, and approximately $15 million relating to other intangible assets, in the fourth quarter of 2017.
New Mexico Health Plan: Under its current Medicaid contract with the New Mexico Human Services Department (“HSD”) effective through December 31, 2018, the Company’s New Mexico health plan, Molina Healthcare of New Mexico, Inc., served approximately 225,000 Medicaid members as of December 31, 2017. On September 1, 2017, HSD issued a request for proposal (“RFP”) to re-procure contracts for the state’s Medicaid managed care program. As previously reported in the Current Report on Form 8-K filed by the Company with the SEC on January 10, 2018, HSD notified the New Mexico health plan that it was not selected for the tentative award of a contract under the RFP for Centennial Care 2.0. The New Mexico health plan has filed a protest under the RFP, and has also applied for a temporary restraining order in New Mexico state court seeking to stay the RFP. In the event the New Mexico health plan’s protest is unsuccessful, or the other efforts of the New Mexico health plan to retain its Medicaid business are unsuccessful, Medicaid membership levels in New Mexico after December 31, 2018, are likely to decline significantly, possibly to zero. As a result of these events, the Company recorded a non-cash impairment loss of approximately $74 million relating to the goodwill, and approximately $10 million relating to other intangible assets, in the fourth quarter of 2017.
Illinois Health Plan: When the Company conducted its annual impairment evaluation of the goodwill of the Company’s Illinois health plan, Molina Healthcare of Illinois, Inc., the plan’s future cash flow projections were insufficient to produce an estimated fair value in excess of its carrying amount. This was primarily due to the Illinois health plan’s current profit profile, which does not support the purchase prices paid for certain membership years ago. As a result, the Company recorded a non-cash goodwill impairment loss of approximately $45 million in the fourth quarter of 2017.
The information under Item 2.02 of this report and the exhibit attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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, as amended, or the Exchange Act, as amended, 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 February 12, 2018, as to financial results for the fourth quarter and the year ended December 31, 2017, the Company’s fiscal year 2018 preliminary guidance and material impairments.






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:
February 12, 2018
By:
/s/ Jeff D. Barlow
 
 
 
Jeff D. Barlow
 
 
 
Chief Legal Officer and Secretary






EXHIBIT INDEX
Exhibit No.
Description
99.1




Exhibit

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 1
February 12, 2018

https://cdn.kscope.io/6c3f8d8e924a1c5708f070e6909af01b-molinaa03a01a01a16.jpg

News Release

Contact:
Ryan Kubota
Investor Relations
562-435-3666, ext. 119057

MOLINA HEALTHCARE ANNOUNCES FOURTH QUARTER AND YEAR-END 2017 RESULTS AND PROVIDES FISCAL YEAR 2018 PRELIMINARY GUIDANCE
•
Net loss of $4.59 per diluted share for the quarter.
•
Medical care ratio excluding Marketplace declines to 88.8% from 90.9% in the third quarter of 2017.
•
General and administrative expense ratio declines to 7.4% from 7.6% in the third quarter of 2017.
•
Fourth quarter results include $356 million of impairment losses, restructuring and separation costs, and loss on debt extinguishment.
•
Fourth quarter results include $53 million increased medical care costs for termination of cost sharing reduction (CSR) subsidy payments effective October 1, 2017, and other Marketplace reserve adjustments.
•
2018 preliminary guidance of $3.00 - $3.50 net income per diluted share and $3.23 - $3.73 adjusted net income per diluted share. Preliminary guidance has been developed with conservative views of medical cost trends, Marketplace pricing adequacy, and the ultimate outcome of numerous profit improvement initiatives. Preliminary guidance will be updated once the Company has the benefit of first quarter earnings and further insight into the execution of these profit improvement initiatives.
Long Beach, California (February 12, 2018) - Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the fourth quarter and year ended December 31, 2017, and provided its preliminary guidance for fiscal year 2018.
“Our fourth quarter results are emblematic of the significant transition Molina is undertaking,” said Joe Zubretsky, president and CEO. “The disappointment of contract losses and related goodwill charges, continued restructuring costs, and catch up adjustments to unacceptable Marketplace results are legacies of the past. Looking forward, the core business results showed improvement quarter over quarter, and we took steps to strengthen the quality of the balance sheet, all of which serve as a solid platform to achieve our margin recovery and sustainability plan we outlined for investors last month. Medical cost control, administrative cost discipline, and capital strength remain at the fore of our plan.”

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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 2
February 12, 2018

Fourth Quarter 2017 and Full Year Highlights
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
 
(Dollar amounts in millions, except per-share amounts)
Premium revenue
$
4,689

 
$
4,190

 
$
18,854

 
$
16,445

Operating (loss) income
$
(269
)
 
$
(6
)
 
$
(555
)
 
$
306

Net (loss) income
$
(262
)
 
$
(47
)
 
$
(512
)
 
$
52

Net (loss) income per diluted share
$
(4.59
)
 
$
(0.85
)
 
$
(9.07
)
 
$
0.92

 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
57.1

 
55.6

 
56.5

 
56.3

 
 
 
 
 
 
 
 
Operating Statistics:
 
 
 
 
 
 
 
Medical care ratio (1)
90.7
 %
 
91.7
 %
 
90.6
 %
 
89.8
%
G&A ratio (2)
7.4
 %
 
7.9
 %
 
8.0
 %
 
7.8
%
Premium tax ratio (1)
2.2
 %
 
2.9
 %
 
2.3
 %
 
2.8
%
Effective income tax (benefit) expense rate
(17.2
)%
 
54.5
 %
 
(16.4
)%
 
74.8
%
Net (loss) profit margin (2)
(5.3
)%
 
(1.0
)%
 
(2.6
)%
 
0.3
%
__________________
(1)
Medical care ratio represents medical care costs as a percentage of premium revenue; premium tax ratio represents premium tax expenses as a percentage of premium revenue plus premium tax revenue.
(2)
G&A ratio represents general and administrative expenses as a percentage of total revenue. Net (loss) profit margin represents net (loss) income as a percentage of total revenue.
Summary of Significant Items Affecting 2017 Financial Results
 
Three Months Ended December 31,
 
Year Ended December 31,
 
(In millions, except per diluted share amounts)
 
Amount
 
Per Diluted Share (1)
 
Amount
 
Per Diluted Share (1)
Termination of CSR subsidy payments for the fourth quarter of 2017
$
73

 
$
0.81

 
$
73

 
$
0.82

Marketplace adjustments for CSR subsidies, risk adjustment and medical loss ratio (MLR) floor liabilities for January through September 2017 dates of service
50

 
0.55

 
N/A

 
N/A

Marketplace adjustments related to risk adjustment, CSR subsidies, and other items for 2016 dates of service
—

 
—

 
47

 
0.52

Change in Marketplace premium deficiency reserve for 2017 dates of service
(70
)
 
(0.77
)
 
(30
)
 
(0.33
)
Impairment losses
269

 
3.22

 
470

 
6.01

Restructuring and separation costs
73

 
0.81

 
234

 
2.86

Loss on debt extinguishment
14

 
0.24

 
14

 
0.24

Fee received for terminated Medicare acquisition
—

 
—

 
(75
)
 
(0.84
)
 
$
409

 
$
4.86

 
$
733

 
$
9.28

________________________
(1)
Amounts shown are before considering revaluation of related deferred tax assets as a result of the Tax Cuts and Jobs Act of 2017, as applicable, and which is described further below. Except for certain items that are not deductible for tax purposes, per diluted share amounts are generally calculated at a statutory income tax rate of 37%, which is in excess of the effective tax rate recorded in our consolidated statements of operations.


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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 3
February 12, 2018

Fourth Quarter 2017 Compared With Third Quarter 2017
Developments in our business during 2017 limit the value of comparisons to 2016 performance. The Company believes that the comparison of 2017 fourth quarter performance with 2017 third quarter performance provides the most meaningful context for fourth quarter results.
Loss before income tax benefit for the fourth quarter of 2017 was $316 million, compared with a loss before income tax benefit of $113 million for the third quarter of 2017. Net loss per diluted share was $4.59 for the fourth quarter of 2017 compared with net loss per diluted share of $1.70 reported for the third quarter of 2017.
Despite the loss reported for the quarter, the performance of core operations and overall administrative cost efficiency improved in the fourth quarter when compared with the third quarter of 2017.
Marketplace performance deteriorated due to normal seasonality and other matters discussed below. The Company has increased premium rates and reduced its Marketplace presence effective January 1, 2018 as part of its overall program to improve profitability.
Among the key developments affecting fourth quarter 2017 results were:
•
The medical care ratio for the Company’s Medicaid and Medicare programs combined (“core operations”) declined to 88.8% in the fourth quarter of 2017, from 90.9% in the third quarter of 2017.
•
The general and administrative expense ratio declined to 7.4% in the fourth quarter of 2017 from 7.6% in the third quarter of 2017.
•
The decision by the federal government to cease payment of Marketplace CSR subsidies in the fourth quarter of 2017 increased loss before income tax benefit for the quarter by approximately $73 million ($0.81 per diluted share). Despite its decision to record a charge in the fourth quarter for this item, the Company believes that it is legally entitled to these federal payments and will pursue all available means to collect them.
•
Increases to Marketplace risk transfer and CSR liabilities related to the first three quarters of 2017 increased loss before income tax benefit by approximately $50 million ($0.55 per diluted share) in the fourth quarter.
•
The reduction of the Marketplace-related premium deficiency reserve to zero as of December 31, 2017 reduced loss before income tax benefit by $70 million ($0.77 per diluted share) in the fourth quarter.
•
Non-cash goodwill and intangible asset impairment charges of $269 million ($3.22 per diluted share) were incurred at the Florida, Illinois, and New Mexico health plans in the fourth quarter.
•
Approximately $73 million ($0.81 per diluted share) of restructuring costs were recognized in the fourth quarter.
•
Approximately $14 million ($0.24 per diluted share) of non-cash costs were recognized in the fourth quarter in connection with the issuance of our common shares in exchange for $141 million face value of our 1.625% convertible senior notes.
Income Tax (Benefit) Expense
The revaluation of deferred tax assets in connection with the Tax Cuts and Jobs Act of 2017 resulted in $54 million additional income tax expense in the fourth quarter and year ended December 31, 2017 ($0.94 per diluted share and $0.95 per diluted share, respectively). In addition, the effective tax benefit for 2017 is less than the statutory tax benefit due to the relatively large amount of reported expenses that are not deductible for tax purposes, primarily relating to goodwill impairment losses and separation costs.


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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 4
February 12, 2018

2018 Preliminary Guidance
The Company has offered guidance on a preliminary basis because of the inherent uncertainty around achievement and the timing of its numerous profit improvement initiatives. While those initiatives extend across the various dimensions of managed care fundamentals, many are in the early stages of development and implementation.
Therefore, the Company’s guidance should be viewed as a preliminary estimate of what it expects to achieve until the profit improvement initiatives manifest themselves in the earnings stream. Once it has the benefit of first quarter earnings and further insight into the execution of the profit improvement initiatives, the Company will be able to provide a firmer view of 2018 guidance.
To provide for an appropriate amount of execution risk, the Company’s preliminary guidance has been developed with appropriately conservative views of:
•
Medical cost baseline in 2017;
•
Medical cost trend for 2018;
•
Potential rate increases and retained amounts of revenue at risk; and
•
The turnaround of the Marketplace business until the achievement of the margins implicit in 2018 pricing is observed.
The following table summarizes 2018 Preliminary Guidance (1):
Premium revenue
 
~ $17.5B

Service revenue
 
~ $525M

Premium tax revenue
 
~ $410M

Health insurer fees reimbursed
 
~ $295M

Investment income and other revenue
 
~ $85M

Total revenue
 
~ $18.8B

Medical care costs
 
~ $15.6B

Medical care ratio (2)
 
~ 89%

Cost of service revenue
 
~ $480M

General and administrative expenses
 
~ $1.4B

G&A ratio (3)
 
~ 7.3%

Premium tax expenses
 
~ $410M

Health insurer fees
 
~ $310M

Depreciation and amortization
 
~ $115M

Interest expense and other income
 
~ $125M

Income before income taxes
 
$355M - $400M

Net income
 
$202M - $236M

EBITDA (4)
 
$632M - $676M

Effective tax rate
 
41% - 43%

Net profit margin (3)
 
1.1% - 1.3%

Diluted weighted average shares
 
~ 67.3M

Net income per share
 
$3.00 - $3.50

Adjusted net income per share (4)
 
$3.23 - $3.73

End-of-year Marketplace membership
 
303,000

End-of-year Non-Marketplace membership
 
3,738,000

__________________
(1)
All amounts are estimates; actual results may differ materially. See our risk factors as discussed in our Form
10-K and other filings and the statements below in this press release after the heading “Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.”
(2)
Medical care ratio represents medical care costs as a percentage of premium revenue.
(3)
G&A expense ratio represents general and administrative expenses as a percentage of total revenue. Net profit margin represents net income as a percentage of total revenue.
(4)
See reconciliation of non-GAAP financial measures at the end of this release.

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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 5
February 12, 2018

Conference Call
Management will host a conference call and webcast to discuss Molina Healthcare’s fourth quarter and year-end 2017 results at 8:30 a.m. Eastern time on Tuesday, February 13, 2018. The number to call for the interactive teleconference is (888) 317-6003 and entering confirmation number 5278774. A telephonic replay of the conference call will be available through Tuesday, February 20, 2018, by dialing (877) 344-7529 and entering confirmation number 10116226. A live audio broadcast of Molina Healthcare’s conference call will be available on our website, molinahealthcare.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.
About Molina Healthcare
Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health care services under the Medicaid and Medicare programs and through the state insurance marketplaces. Through our health plans operating in 13 states across the nation and in the Commonwealth of Puerto Rico, Molina serves approximately 4.5 million members. For more information about Molina Healthcare, please visit our website at molinahealthcare.com.

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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 6
February 12, 2018

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding our 2018 preliminary guidance, as well as our plans, expectations, and anticipated future events. Actual results could differ materially due to numerous known and unknown risks and uncertainties. Those known risks and uncertainties include, but are not limited to, the following:
•
the success of our profit improvement and maintenance initiatives, including the timing and amounts of the benefits realized, and administrative savings achieved;
•
the numerous political and market-based uncertainties associated with the Affordable Care Act (the “ACA”) or “Obamacare;”
•
the market dynamics surrounding the ACA Marketplaces, including but not limited to uncertainties associated with risk transfer requirements, the potential for disproportionate enrollment of higher acuity members, the discontinuation of premium tax credits, the adequacy of agreed rates, and potential disruption associated with market withdrawal from Utah, Wisconsin, or other states;
•
subsequent adjustments to reported premium revenue based upon subsequent developments or new information, including changes to estimated amounts payable or receivable related to Marketplace risk adjustment/risk transfer, risk corridors, and reinsurance;
•
effective management of our medical costs;
•
our ability to predict with a reasonable degree of accuracy utilization rates, including utilization rates associated with seasonal flu patterns or other newly emergent diseases;
•
significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria;
•
the full reimbursement of the ACA health insurer fee, or HIF;
•
the success of our efforts to retain existing government contracts, including those in Florida, New Mexico, Puerto Rico, Texas, and Washington, including the success of any protest filings;
•
our ability to manage our operations, including maintaining and creating adequate internal systems and controls relating to authorizations, approvals, provider payments, and the overall success of our care management initiatives;
•
our ability to consummate and realize benefits from acquisitions or divestitures;
•
our receipt of adequate premium rates to support increasing pharmacy costs, including costs associated with specialty drugs and costs resulting from formulary changes that allow the option of higher-priced non-generic drugs;
•
our ability to operate profitably in an environment where the trend in premium rate increases lags behind the trend in increasing medical costs;
•
the interpretation and implementation of federal or state medical cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit sharing arrangements, and risk adjustment provisions and requirements;
•
our estimates of amounts owed for such cost expenditure floors, administrative cost and profit ceilings, premium stabilization programs, profit-sharing arrangements, and risk adjustment provisions;
•
the Medicaid expansion cost corridors in California, New Mexico, and Washington, and any other retroactive adjustment to revenue where methodologies and procedures are subject to interpretation or dependent upon information about the health status of participants other than Molina members;
•
the interpretation and implementation of at-risk premium rules and state contract performance requirements regarding the achievement of certain quality measures, and our ability to recognize revenue amounts associated therewith;
•
cyber-attacks or other privacy or data security incidents resulting in an inadvertent unauthorized disclosure of protected health information;
•
the success of our health plan in Puerto Rico, including the resolution of the Puerto Rico debt crisis, payment of all amounts due under our Medicaid contract, the effect of the PROMESA law, the impact of Hurricane Maria and our efforts to better manage the health care costs of our Puerto Rico health plan;
•
the success and renewal of our duals demonstration programs in California, Illinois, Michigan, Ohio, South Carolina, and Texas;
•
the accurate estimation of incurred but not reported or paid medical costs across our health plans;
•
efforts by states to recoup previously paid and recognized premium amounts;

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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 7
February 12, 2018

•
complications, member confusion, or enrollment backlogs related to the annual renewal of Medicaid coverage;
•
government audits and reviews, or potential investigations, and any fine, sanction, enrollment freeze, monitoring program, or premium recovery that may result therefrom;
•
changes with respect to our provider contracts and the loss of providers;
•
approval by state regulators of dividends and distributions by our health plan 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, arbitration, or administrative proceedings;
•
the relatively small number of states in which we operate health plans, including the greater scale and revenues of our California, Ohio, Texas, and Washington health plans;
•
the availability of adequate financing on acceptable terms to fund and capitalize our expansion and growth, repay our outstanding indebtedness at maturity and meet our liquidity needs, including the interest expense and other costs associated with such financing;
•
our failure to comply with the financial or other covenants in our credit agreement or the indentures governing our outstanding notes;
•
the sufficiency of our funds on hand to pay the amounts due upon conversion or maturity of our outstanding notes;
•
the failure of a state in which we operate to renew its federal Medicaid waiver;
•
changes generally affecting the managed care or Medicaid management information systems industries;
•
increases in government surcharges, taxes, and assessments, including but not limited to the deductibility of certain compensation costs;
•
newly emergent viruses or widespread epidemics, public catastrophes or terrorist attacks, and associated public alarm;
•
increasing competition and consolidation in the Medicaid industry;
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 website or on the SEC’s website at 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 February 12, 2018, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in our expectations.



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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 8
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
 
(Dollar amounts in millions, except per-share amounts)
Revenue:
 
 
 
 
 
 
 
Premium revenue (1)
$
4,689

 
$
4,190

 
$
18,854

 
$
16,445

Service revenue
131

 
131

 
521

 
539

Premium tax revenue
107

 
123

 
438

 
468

Health insurer fees reimbursed (1)
—

 
81

 
—

 
292

Investment income and other revenue
22

 
9

 
70

 
38

Total revenue
4,949

 
4,534

 
19,883

 
17,782

Operating expenses:
 
 
 
 
 
 
 
Medical care costs
4,251

 
3,844

 
17,073

 
14,774

Cost of service revenue
123

 
123

 
492

 
485

General and administrative expenses
367

 
359

 
1,594

 
1,393

Premium tax expenses
107

 
123

 
438

 
468

Health insurer fees
—

 
54

 
—

 
217

Depreciation and amortization
28

 
37

 
137

 
139

Impairment losses
269

 
—

 
470

 
—

Restructuring and separation costs
73

 
—

 
234

 
—

Total operating expenses
5,218

 
4,540

 
20,438

 
17,476

Operating (loss) income
(269
)
 
(6
)
 
(555
)
 
306

Other expenses, net:
 
 
 
 
 
 
 
Interest expense
33

 
25

 
118

 
101

Other expense (income), net
14

 
—

 
(61
)
 
—

Total other expenses, net
47

 
25

 
57

 
101

(Loss) income before income tax (benefit)
 expense

(316
)
 
(31
)
 
(612
)
 
205

Income tax (benefit) expense
(54
)
 
16

 
(100
)
 
153

Net (loss) income
$
(262
)
 
$
(47
)
 
$
(512
)
 
$
52

 
 
 
 
 
 
 
 
Net (loss) income per diluted share
$
(4.59
)
 
$
(0.85
)
 
$
(9.07
)
 
$
0.92

 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
57.1

 
55.6

 
56.5

 
56.3

 
 
 
 
 
 
 
 
Operating Statistics:
 
 
 
 
 
 
 
Medical care ratio
90.7
 %
 
91.7
 %
 
90.6
 %
 
89.8
%
G&A ratio
7.4
 %
 
7.9
 %
 
8.0
 %
 
7.8
%
Premium tax ratio
2.2
 %
 
2.9
 %
 
2.3
 %
 
2.8
%
Effective income tax (benefit) expense rate
(17.2
)%
 
54.5
 %
 
(16.4
)%
 
74.8
%
Net (loss) profit margin
(5.3
)%
 
(1.0
)%
 
(2.6
)%
 
0.3
%
______________________
(1)
The Centers for Medicare and Medicaid Services (CMS) incorporates the Health Insurer Fee in our Medicare and Marketplace premium rates. We have therefore reclassified such amounts to premium revenue, from health insurer fees reimbursed, for all applicable periods presented.


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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 9
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
December 31,
 
2017
 
2016
 
(In millions,
except per-share data)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
3,186

 
$
2,819

Investments
2,524

 
1,758

Restricted investments
169

 
—

Receivables
871

 
974

Income taxes refundable
54

 
39

Prepaid expenses and other current assets
185

 
131

Derivative asset
522

 
267

Total current assets
7,511

 
5,988

Property, equipment, and capitalized software, net
342

 
454

Deferred contract costs
101

 
86

Intangible assets, net
69

 
140

Goodwill
186

 
620

Restricted investments
119

 
110

Deferred income taxes
103

 
10

Other assets
40

 
41

 
$
8,471

 
$
7,449

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Medical claims and benefits payable
$
2,192

 
$
1,929

Amounts due government agencies
1,542

 
1,202

Accounts payable and accrued liabilities
366

 
385

Deferred revenue
282

 
315

Current portion of long-term debt
653

 
472

Derivative liability
522

 
267

Total current liabilities
5,557

 
4,570

Long-term debt
1,318

 
975

Lease financing obligations
198

 
198

Deferred income taxes
—

 
15

Other long-term liabilities
61

 
42

Total liabilities
7,134

 
5,800

Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; 150 shares authorized; outstanding: 60 at December 31, 2017 and 57 shares at December 31, 2016
—

 
—

Preferred stock, $0.001 par value; 20 shares authorized, no shares issued and outstanding
—

 
—

Additional paid-in capital
1,044

 
841

Accumulated other comprehensive loss
(5
)
 
(2
)
Retained earnings
298

 
810

Total stockholders’ equity
1,337

 
1,649

 
$
8,471

 
$
7,449


-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 10
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
 
(In millions)
Operating activities:
 
 
 
 
 
 
 
Net (loss) income
$
(262
)
 
$
(47
)
 
$
(512
)
 
$
52

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
39

 
47

 
178

 
182

Impairment losses
269

 
—

 
470

 
—

Deferred income taxes
(26
)
 
2

 
(94
)
 
22

Share-based compensation, including accelerated share-based compensation
8

 
2

 
46

 
26

Non-cash restructuring charges
11

 
—

 
60

 
—

Amortization of convertible senior notes and lease financing obligations
8

 
8

 
32

 
31

Loss on debt extinguishment
14

 
—

 
14

 
—

Other, net
8

 
2

 
21

 
16

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Receivables
131

 
79

 
103

 
(348
)
Prepaid expenses and other assets
(3
)
 
47

 
(56
)
 
(69
)
Medical claims and benefits payable
(286
)
 
58

 
263

 
226

Amounts due government agencies
219

 
(30
)
 
341

 
473

Accounts payable and accrued liabilities
(102
)
 
(5
)
 
(12
)
 
(4
)
Deferred revenue
(187
)
 
(65
)
 
(34
)
 
92

Income taxes
6

 
(58
)
 
(16
)
 
(26
)
Net cash (used in) provided by operating activities
(153
)
 
40

 
804

 
673

Investing activities:
 
 
 
 
 
 
 
Purchases of investments
(822
)
 
(485
)
 
(2,718
)
 
(1,929
)
Proceeds from sales and maturities of investments
233

 
454

 
1,771

 
1,966

Purchases of property, equipment, and capitalized software
(1
)
 
(33
)
 
(86
)
 
(176
)
(Increase) decrease in restricted investments held-to-maturity
(2
)
 
—

 
(12
)
 
4

Net cash paid in business combinations
—

 
—

 
—

 
(48
)
Other, net
(7
)
 
(7
)
 
(28
)
 
(19
)
Net cash used in investing activities
(599
)
 
(71
)
 
(1,073
)
 
(202
)
Financing activities:
 
 
 
 
 
 
 
Proceeds from senior notes offering, net of issuance costs
—

 
—

 
325

 
—

Proceeds from borrowings under credit facility
—

 
—

 
300

 
—

Proceeds from employee stock plans
8

 
8

 
19

 
18

Cash paid for financing transaction fees
(7
)
 
—

 
(7
)
 
—

Other, net
3

 
—

 
(1
)
 
1

Net cash provided by financing activities
4

 
8

 
636

 
19

Net (decrease) increase in cash and cash equivalents
(748
)
 
(23
)
 
367

 
490

Cash and cash equivalents at beginning of period
3,934

 
2,842

 
2,819

 
2,329

Cash and cash equivalents at end of period
$
3,186

 
$
2,819

 
$
3,186

 
$
2,819


-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 11
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED HEALTH PLANS SEGMENT MEMBERSHIP
 
As of December 31,
 
2017
 
2016
 
2015
Ending Membership by Program:
 
 
 
 
 
Temporary Assistance for Needy Families (TANF) and Children’s Health Insurance Program (CHIP)
2,457,000

 
2,536,000

 
2,312,000

Marketplace
815,000

 
526,000

 
205,000

Medicaid Expansion
668,000

 
673,000

 
557,000

Aged, Blind or Disabled (ABD)
412,000

 
396,000

 
366,000

Medicare-Medicaid Plan (MMP) - Integrated
57,000

 
51,000

 
51,000

Medicare Special Needs Plans
44,000

 
45,000

 
42,000

 
4,453,000

 
4,227,000

 
3,533,000

Ending Membership by Health Plan:
 
 
 
 
 
California
746,000

 
683,000

 
620,000

Florida
625,000

 
553,000

 
440,000

Illinois
165,000

 
195,000

 
98,000

Michigan
398,000

 
391,000

 
328,000

New Mexico
253,000

 
254,000

 
231,000

New York
32,000

 
35,000

 
—

Ohio
327,000

 
332,000

 
327,000

Puerto Rico
314,000

 
330,000

 
348,000

South Carolina
116,000

 
109,000

 
99,000

Texas
430,000

 
337,000

 
260,000

Utah
152,000

 
146,000

 
102,000

Washington
777,000

 
736,000

 
582,000

Wisconsin
118,000

 
126,000

 
98,000

 
4,453,000

 
4,227,000

 
3,533,000








-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 12
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
(In millions, except percentages and per-member per-month amounts)
 
Three Months Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
7.4

 
$
1,369

 
$
183.95

 
$
1,250

 
$
168.00

 
91.3
%
 
$
119

Medicaid Expansion
2.0

 
774

 
386.22

 
629

 
313.89

 
81.3

 
145

ABD
1.3

 
1,366

 
1,100.22

 
1,229

 
989.56

 
89.9

 
137

Total Medicaid
10.7

 
3,509

 
328.28

 
3,108

 
290.76

 
88.6

 
401

MMP
0.2

 
363

 
2,142.07

 
341

 
2,006.07

 
93.7

 
22

Medicare
0.1

 
152

 
1,155.15

 
124

 
948.16

 
82.1

 
28

Total Medicare
0.3

 
515

 
1,710.94

 
465

 
1,543.93

 
90.2

 
50

Excluding Marketplace
11.0

 
4,024

 
366.18

 
3,573

 
325.12

 
88.8

 
451

Marketplace
2.4

 
665

 
268.39

 
678

 
273.92

 
102.1

 
(13
)
 
13.4

 
$
4,689

 
$
348.20

 
$
4,251

 
$
315.70

 
90.7
%
 
$
438


 
Three Months Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
7.7

 
$
1,404

 
$
183.96

 
$
1,304

 
$
170.83

 
92.9
%
 
$
100

Medicaid Expansion
2.0

 
768

 
383.19

 
625

 
311.57

 
81.3

 
143

ABD
1.2

 
1,200

 
1,003.09

 
1,104

 
921.69

 
91.9

 
96

Total Medicaid
10.9

 
3,372

 
311.31

 
3,033

 
279.82

 
89.9

 
339

MMP
0.1

 
319

 
2,076.73

 
274

 
1,785.00

 
86.0

 
45

Medicare
0.1

 
150

 
1,114.69

 
130

 
966.81

 
86.7

 
20

Total Medicare
0.2

 
469

 
1,626.50

 
404

 
1,402.09

 
86.2

 
65

Excluding Marketplace
11.1

 
3,841

 
345.40

 
3,437

 
308.91

 
89.4

 
404

Marketplace
1.6

 
349

 
221.05

 
407

 
258.71

 
117.0

 
(58
)
 
12.7

 
$
4,190

 
$
329.96

 
$
3,844

 
$
302.68

 
91.7
%
 
$
346

______________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.




-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 13
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
(In millions, except percentages and per-member per-month amounts)
 
Year Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
30.2

 
$
5,554

 
$
183.75

 
$
5,111

 
$
169.09

 
92.0
%
 
$
443

Medicaid Expansion
8.1

 
3,150

 
388.42

 
2,674

 
329.73

 
84.9

 
476

ABD
4.9

 
5,135

 
1,050.41

 
4,863

 
994.80

 
94.7

 
272

Total Medicaid
43.2

 
13,839

 
320.16

 
12,648

 
292.61

 
91.4

 
1,191

MMP
0.7

 
1,446

 
2,177.72

 
1,317

 
1,982.36

 
91.0

 
129

Medicare
0.5

 
601

 
1,143.63

 
493

 
939.67

 
82.2

 
108

Total Medicare
1.2

 
2,047

 
1,722.47

 
1,810

 
1,523.15

 
88.4

 
237

Excluding Marketplace
44.4

 
15,886

 
357.68

 
14,458

 
325.53

 
91.0

 
1,428

Marketplace
10.8

 
2,968

 
274.47

 
2,615

 
241.84

 
88.1

 
353

 
55.2

 
$
18,854

 
$
341.39

 
$
17,073

 
$
309.14

 
90.6
%
 
$
1,781


 
Year Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
TANF and CHIP
30.2

 
$
5,403

 
$
179.21

 
$
4,950

 
$
164.18

 
91.6
%
 
$
453

Medicaid Expansion
7.8

 
2,952

 
378.58

 
2,475

 
317.37

 
83.8

 
477

ABD
4.7

 
4,666

 
991.24

 
4,277

 
908.39

 
91.6

 
389

Total Medicaid
42.7

 
13,021

 
305.28

 
11,702

 
274.33

 
89.9

 
1,319

MMP
0.6

 
1,321

 
2,160.94

 
1,141

 
1,866.93

 
86.4

 
180

Medicare
0.5

 
558

 
1,063.44

 
515

 
981.36

 
92.3

 
43

Total Medicare
1.1

 
1,879

 
1,653.73

 
1,656

 
1,457.67

 
88.1

 
223

Excluding Marketplace
43.8

 
14,900

 
340.28

 
13,358

 
305.03

 
89.6

 
1,542

Marketplace
6.7

 
1,545

 
231.38

 
1,416

 
212.17

 
91.7

 
129

 
50.5

 
$
16,445

 
$
325.87

 
$
14,774

 
$
292.75

 
89.8
%
 
$
1,671

______________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.


-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 14
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—NON-MARKETPLACE
(In millions, except percentages and per-member per-month amounts)
 
Three Months Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
1.8

 
$
621

 
$
335.46

 
$
531

 
$
286.70

 
85.5
%
 
$
90

Florida
1.1

 
390

 
358.34

 
349

 
320.47

 
89.4

 
41

Illinois
0.5

 
146

 
294.68

 
146

 
295.25

 
100.2

 
—

Michigan
1.1

 
383

 
339.23

 
325

 
287.60

 
84.8

 
58

New Mexico
0.7

 
325

 
465.52

 
279

 
400.84

 
86.1

 
46

New York (3)
0.1

 
46

 
465.75

 
42

 
432.25

 
92.8

 
4

Ohio
1.0

 
532

 
555.50

 
460

 
480.48

 
86.5

 
72

Puerto Rico
0.9

 
179

 
187.49

 
178

 
187.68

 
100.1

 
1

South Carolina
0.4

 
116

 
337.14

 
111

 
320.47

 
95.1

 
5

Texas
0.7

 
558

 
796.86

 
510

 
728.72

 
91.4

 
48

Utah
0.3

 
88

 
319.80

 
71

 
259.95

 
81.3

 
17

Washington
2.2

 
610

 
275.76

 
540

 
243.70

 
88.4

 
70

Wisconsin
0.2

 
30

 
162.36

 
27

 
139.38

 
85.9

 
3

Other (4)
—

 
—

 
—

 
4

 
—

 
—

 
(4
)
 
11.0

 
$
4,024

 
$
366.18

 
$
3,573

 
$
325.12

 
88.8
%
 
$
451

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
1.9

 
$
639

 
$
342.41

 
$
489

 
$
261.60

 
76.4
%
 
$
150

Florida
1.1

 
374

 
348.59

 
335

 
312.59

 
89.7

 
39

Illinois
0.5

 
136

 
234.17

 
154

 
265.84

 
113.5

 
(18
)
Michigan
1.1

 
376

 
323.24

 
326

 
279.55

 
86.5

 
50

New Mexico
0.7

 
270

 
380.36

 
289

 
406.50

 
106.9

 
(19
)
New York (3)
0.1

 
50

 
460.08

 
49

 
451.09

 
98.0

 
1

Ohio
1.0

 
479

 
489.73

 
432

 
442.31

 
90.3

 
47

Puerto Rico
1.0

 
191

 
193.54

 
178

 
179.02

 
92.5

 
13

South Carolina
0.4

 
105

 
318.31

 
88

 
267.65

 
84.1

 
17

Texas
0.7

 
528

 
738.53

 
460

 
643.05

 
87.1

 
68

Utah
0.2

 
87

 
302.48

 
75

 
263.94

 
87.3

 
12

Washington
2.1

 
568

 
268.88

 
505

 
238.99

 
88.9

 
63

Wisconsin
0.3

 
34

 
166.56

 
28

 
131.60

 
79.0

 
6

Other (4)
—

 
4

 
—

 
29

 
—

 
—

 
(25
)
 
11.1

 
$
3,841

 
$
345.40

 
$
3,437

 
$
308.91

 
89.4
%
 
$
404

__________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.
(3)
The New York health plan was acquired on August 1, 2016.
(4)
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 15
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—NON-MARKETPLACE
(In millions, except percentages and per-member per-month amounts)
 
Year Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
7.4

 
$
2,392

 
$
321.46

 
$
2,117

 
$
284.53

 
88.5
%
 
$
275

Florida
4.3

 
1,522

 
350.15

 
1,461

 
335.97

 
96.0

 
61

Illinois
2.1

 
593

 
286.69

 
638

 
308.41

 
107.6

 
(45
)
Michigan
4.6

 
1,545

 
334.22

 
1,360

 
294.15

 
88.0

 
185

New Mexico
2.9

 
1,258

 
439.95

 
1,166

 
407.94

 
92.7

 
92

New York (3)
0.4

 
181

 
449.85

 
170

 
424.17

 
94.3

 
11

Ohio
3.9

 
2,130

 
544.98

 
1,894

 
484.66

 
88.9

 
236

Puerto Rico
3.8

 
732

 
190.13

 
691

 
179.65

 
94.5

 
41

South Carolina
1.4

 
445

 
328.41

 
412

 
304.04

 
92.6

 
33

Texas
2.8

 
2,150

 
769.82

 
1,978

 
708.20

 
92.0

 
172

Utah
1.1

 
355

 
316.44

 
290

 
258.96

 
81.8

 
65

Washington
8.9

 
2,445

 
275.64

 
2,143

 
241.55

 
87.6

 
302

Wisconsin
0.8

 
131

 
168.64

 
107

 
136.84

 
81.1

 
24

Other (4)
—

 
7

 
—

 
31

 
—

 
—

 
(24
)
 
44.4

 
$
15,886

 
$
357.68

 
$
14,458

 
$
325.53

 
91.0
%
 
$
1,428

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
7.4

 
$
2,247

 
$
304.83

 
$
1,900

 
$
257.72

 
84.5
%
 
$
347

Florida
4.1

 
1,348

 
329.58

 
1,227

 
299.94

 
91.0

 
121

Illinois
2.3

 
603

 
258.72

 
568

 
243.71

 
94.2

 
35

Michigan
4.7

 
1,517

 
324.18

 
1,339

 
286.00

 
88.2

 
178

New Mexico
2.8

 
1,245

 
440.63

 
1,162

 
411.30

 
93.3

 
83

New York (3)
0.2

 
82

 
446.72

 
79

 
431.73

 
96.6

 
3

Ohio
3.9

 
1,927

 
490.71

 
1,718

 
437.56

 
89.2

 
209

Puerto Rico
4.0

 
726

 
180.65

 
694

 
172.57

 
95.5

 
32

South Carolina
1.3

 
378

 
296.58

 
320

 
250.97

 
84.6

 
58

Texas
2.9

 
2,182

 
744.65

 
1,926

 
657.38

 
88.3

 
256

Utah
1.1

 
344

 
297.68

 
296

 
256.31

 
86.1

 
48

Washington
8.1

 
2,146

 
263.50

 
1,936

 
237.66

 
90.2

 
210

Wisconsin
1.0

 
142

 
165.95

 
106

 
123.44

 
74.4

 
36

Other (4)
—

 
13

 
—

 
87

 
—

 
—

 
(74
)
 
43.8

 
$
14,900

 
$
340.28

 
$
13,358

 
$
305.03

 
89.6
%
 
$
1,542

__________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.
(3)
The New York health plan was acquired on August 1, 2016.
(4)
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 16
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE
(In millions, except percentages and per-member per-month amounts)
 
Three Months Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
0.5

 
$
68

 
$
163.41

 
$
75

 
$
181.70

 
111.2
%
 
$
(7
)
Florida
0.8

 
225

 
283.63

 
251

 
316.67

 
111.6

 
(26
)
Michigan
0.1

 
10

 
153.52

 
11

 
166.49

 
108.5

 
(1
)
New Mexico
0.1

 
28

 
387.65

 
22

 
291.42

 
75.2

 
6

Ohio
—

 
18

 
355.81

 
17

 
317.65

 
89.3

 
1

Texas
0.5

 
146

 
242.38

 
166

 
276.16

 
113.9

 
(20
)
Utah
0.2

 
45

 
238.32

 
43

 
227.77

 
95.6

 
2

Washington
0.1

 
40

 
321.91

 
28

 
233.26

 
72.5

 
12

Wisconsin
0.1

 
85

 
505.67

 
67

 
401.16

 
79.3

 
18

Other (3)
—

 
—

 
—

 
(2
)
 
—

 
—

 
2

 
2.4

 
$
665

 
$
268.39

 
$
678

 
$
273.92

 
102.1
%
 
$
(13
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
0.2

 
$
26

 
$
127.99

 
$
55

 
$
282.83

 
221.0
%
 
$
(29
)
Florida
0.6

 
108

 
183.99

 
129

 
219.31

 
119.2

 
(21
)
Michigan
—

 
3

 
285.50

 
1

 
204.16

 
71.6

 
2

New Mexico
—

 
18

 
353.63

 
15

 
294.95

 
83.3

 
3

Ohio
—

 
11

 
420.48

 
9

 
325.28

 
77.2

 
2

Texas
0.3

 
76

 
245.20

 
51

 
164.54

 
67.1

 
25

Utah
0.3

 
27

 
181.65

 
36

 
232.38

 
127.9

 
(9
)
Washington
0.1

 
18

 
239.89

 
31

 
424.83

 
177.0

 
(13
)
Wisconsin
0.1

 
62

 
366.22

 
82

 
479.24

 
130.9

 
(20
)
Other (3)
—

 
—

 
—

 
(2
)
 
—

 
—

 
2

 
1.6

 
$
349

 
$
221.05

 
$
407

 
$
258.71

 
117.0
%
 
$
(58
)
__________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.
(3)
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 17
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—MARKETPLACE
(In millions, except percentages and per-member per-month amounts)
 
Year Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
1.7

 
$
309

 
$
185.88

 
$
231

 
$
138.61

 
74.6
%
 
$
78

Florida
3.6

 
1,046

 
293.35

 
1,009

 
283.17

 
96.5

 
37

Michigan
0.3

 
51

 
180.26

 
38

 
135.64

 
75.2

 
13

New Mexico
0.3

 
110

 
349.50

 
84

 
264.14

 
75.6

 
26

Ohio
0.2

 
86

 
363.24

 
81

 
340.44

 
93.7

 
5

Texas
2.6

 
663

 
250.08

 
517

 
195.20

 
78.1

 
146

Utah
0.9

 
180

 
215.93

 
178

 
213.33

 
98.8

 
2

Washington
0.5

 
163

 
317.39

 
156

 
304.74

 
96.0

 
7

Wisconsin
0.7

 
360

 
477.53

 
327

 
433.98

 
90.9

 
33

Other (3)
—

 
—

 
—

 
(6
)
 
—

 
—

 
6

 
10.8

 
$
2,968

 
$
274.47

 
$
2,615

 
$
241.84

 
88.1
%
 
$
353

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
0.8

 
$
131

 
$
166.01

 
$
129

 
$
164.35

 
99.0
%
 
$
2

Florida
2.6

 
590

 
228.65

 
538

 
208.53

 
91.2

 
52

Michigan
—

 
10

 
232.88

 
6

 
154.32

 
66.3

 
4

New Mexico
0.2

 
60

 
287.37

 
47

 
223.85

 
77.9

 
13

Ohio
0.1

 
40

 
348.06

 
29

 
254.78

 
73.2

 
11

Texas
1.4

 
279

 
208.48

 
184

 
137.13

 
65.8

 
95

Utah
0.7

 
103

 
166.21

 
127

 
204.14

 
122.8

 
(24
)
Washington
0.3

 
76

 
272.48

 
79

 
284.87

 
104.5

 
(3
)
Wisconsin
0.6

 
256

 
363.54

 
282

 
399.51

 
109.9

 
(26
)
Other (3)
—

 
—

 
—

 
(5
)
 
—

 
—

 
5

 
6.7

 
$
1,545

 
$
231.38

 
$
1,416

 
$
212.17

 
91.7
%
 
$
129

__________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.
(3)
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.


-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 18
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL
(In millions, except percentages and per-member per-month amounts)
 
Three Months Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
2.3

 
$
689

 
$
303.98

 
$
606

 
$
267.49

 
88.0
%
 
$
83

Florida
1.9

 
615

 
326.80

 
600

 
318.86

 
97.6

 
15

Illinois
0.5

 
146

 
294.68

 
146

 
295.25

 
100.2

 
—

Michigan
1.2

 
393

 
329.50

 
336

 
281.26

 
85.4

 
57

New Mexico
0.8

 
353

 
458.22

 
301

 
390.58

 
85.2

 
52

New York (3)
0.1

 
46

 
465.75

 
42

 
432.25

 
92.8

 
4

Ohio
1.0

 
550

 
545.09

 
477

 
471.99

 
86.6

 
73

Puerto Rico
0.9

 
179

 
187.49

 
178

 
187.68

 
100.1

 
1

South Carolina
0.4

 
116

 
337.14

 
111

 
320.47

 
95.1

 
5

Texas
1.2

 
704

 
541.55

 
676

 
520.34

 
96.1

 
28

Utah
0.5

 
133

 
286.70

 
114

 
246.88

 
86.1

 
19

Washington
2.3

 
650

 
278.21

 
568

 
243.15

 
87.4

 
82

Wisconsin
0.3

 
115

 
324.48

 
94

 
263.00

 
81.1

 
21

Other (4)
—

 
—

 
—

 
2

 
—

 
—

 
(2
)
 
13.4

 
$
4,689

 
$
348.20

 
$
4,251

 
$
315.70

 
90.7
%
 
$
438

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
2.1

 
$
665

 
$
321.74

 
$
544

 
$
263.64

 
81.9
%
 
$
121

Florida
1.7

 
482

 
290.53

 
464

 
279.69

 
96.3

 
18

Illinois
0.5

 
136

 
234.17

 
154

 
265.84

 
113.5

 
(18
)
Michigan
1.1

 
379

 
322.91

 
327

 
278.89

 
86.4

 
52

New Mexico
0.7

 
288

 
378.63

 
304

 
399.29

 
105.5

 
(16
)
New York (3)
0.1

 
50

 
460.08

 
49

 
451.09

 
98.0

 
1

Ohio
1.0

 
490

 
487.83

 
441

 
439.09

 
90.0

 
49

Puerto Rico
1.0

 
191

 
193.54

 
178

 
179.02

 
92.5

 
13

South Carolina
0.4

 
105

 
318.31

 
88

 
267.65

 
84.1

 
17

Texas
1.0

 
604

 
590.59

 
511

 
499.56

 
84.6

 
93

Utah
0.5

 
114

 
260.05

 
111

 
252.85

 
97.2

 
3

Washington
2.2

 
586

 
267.92

 
536

 
245.11

 
91.5

 
50

Wisconsin
0.4

 
96

 
256.93

 
110

 
288.94

 
112.5

 
(14
)
Other (4)
—

 
4

 
—

 
27

 
—

 
—

 
(23
)
 
12.7

 
$
4,190

 
$
329.96

 
$
3,844

 
$
302.68

 
91.7
%
 
$
346

__________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.
(3)
The New York health plan was acquired on August 1, 2016.
(4)
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 19
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA—TOTAL
(In millions, except percentages and per-member per-month amounts)
 
Year Ended December 31, 2017
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
9.1

 
$
2,701

 
$
296.68

 
$
2,348

 
$
257.86

 
86.9
%
 
$
353

Florida
7.9

 
2,568

 
324.56

 
2,470

 
312.18

 
96.2

 
98

Illinois
2.1

 
593

 
286.69

 
638

 
308.41

 
107.6

 
(45
)
Michigan
4.9

 
1,596

 
325.43

 
1,398

 
285.11

 
87.6

 
198

New Mexico
3.2

 
1,368

 
430.97

 
1,250

 
393.67

 
91.3

 
118

New York (3)
0.4

 
181

 
449.85

 
170

 
424.17

 
94.3

 
11

Ohio
4.1

 
2,216

 
534.56

 
1,975

 
476.39

 
89.1

 
241

Puerto Rico
3.8

 
732

 
190.13

 
691

 
179.65

 
94.5

 
41

South Carolina
1.4

 
445

 
328.41

 
412

 
304.04

 
92.6

 
33

Texas
5.4

 
2,813

 
516.84

 
2,495

 
458.50

 
88.7

 
318

Utah
2.0

 
535

 
273.55

 
468

 
239.49

 
87.5

 
67

Washington
9.4

 
2,608

 
277.93

 
2,299

 
245.01

 
88.2

 
309

Wisconsin
1.5

 
491

 
320.71

 
434

 
283.14

 
88.3

 
57

Other (4)
—

 
7

 
—

 
25

 
—

 
—

 
(18
)
 
55.2

 
$
18,854

 
$
341.39

 
$
17,073

 
$
309.14

 
90.6
%
 
$
1,781

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2016
 
Member
Months (1)
 
Premium Revenue
 
Medical Care Costs
 
MCR (2)
 
Medical Margin
 
Total
 
PMPM
 
Total
 
PMPM
 
 
California
8.2

 
$
2,378

 
$
291.41

 
$
2,029

 
$
248.70

 
85.3
%
 
$
349

Florida
6.7

 
1,938

 
290.56

 
1,765

 
264.60

 
91.1

 
173

Illinois
2.3

 
603

 
258.72

 
568

 
243.71

 
94.2

 
35

Michigan
4.7

 
1,527

 
323.36

 
1,345

 
284.82

 
88.1

 
182

New Mexico
3.0

 
1,305

 
430.15

 
1,209

 
398.49

 
92.6

 
96

New York (3)
0.2

 
82

 
446.72

 
79

 
431.73

 
96.6

 
3

Ohio
4.0

 
1,967

 
486.66

 
1,747

 
432.36

 
88.8

 
220

Puerto Rico
4.0

 
726

 
180.65

 
694

 
172.57

 
95.5

 
32

South Carolina
1.3

 
378

 
296.58

 
320

 
250.97

 
84.6

 
58

Texas
4.3

 
2,461

 
576.69

 
2,110

 
494.41

 
85.7

 
351

Utah
1.8

 
447

 
251.63

 
423

 
238.03

 
94.6

 
24

Washington
8.4

 
2,222

 
263.80

 
2,015

 
239.21

 
90.7

 
207

Wisconsin
1.6

 
398

 
255.30

 
388

 
248.28

 
97.2

 
10

Other (4)
—

 
13

 
—

 
82

 
—

 
—

 
(69
)
 
50.5

 
$
16,445

 
$
325.87

 
$
14,774

 
$
292.75

 
89.8
%
 
$
1,671

__________________
(1)
A member month is defined as the aggregate of each month’s ending membership for the period presented.
(2)
The MCR represents medical costs as a percentage of premium revenue.
(3)
The New York health plan was acquired on August 1, 2016.
(4)
“Other” medical care costs include primarily medically related administrative costs at the parent company, and direct delivery costs.

-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 20
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA
(In millions, except percentages and per-member per-month amounts)

The following tables provide the details of our medical care costs for the periods indicated:
 
Three Months Ended December 31,
 
2017
 
2016
 
Amount
 
PMPM
 
% of
Total
 
Amount
 
PMPM
 
% of
Total
Fee for service
$
3,052

 
$
226.66

 
71.8
%
 
$
2,837

 
$
223.43

 
73.8
%
Pharmacy
659

 
48.88

 
15.4

 
592

 
46.57

 
15.4

Capitation
338

 
25.13

 
8.0

 
317

 
24.93

 
8.2

Direct delivery
11

 
0.80

 
0.3

 
23

 
1.80

 
0.6

Other
191

 
14.23

 
4.5

 
75

 
5.95

 
2.0

 
$
4,251

 
$
315.70

 
100.0
%
 
$
3,844

 
$
302.68

 
100.0
%
 
Year Ended December 31,
 
2017
 
2016
 
Amount
 
PMPM
 
% of
Total
 
Amount
 
PMPM
 
% of
Total
Fee for service
$
12,682

 
$
229.63

 
74.3
%
 
$
10,993

 
$
217.84

 
74.4
%
Pharmacy
2,563

 
46.40

 
15.0

 
2,213

 
43.84

 
15.0

Capitation
1,360

 
24.63

 
8.0

 
1,218

 
24.13

 
8.2

Direct delivery
73

 
1.33

 
0.4

 
78

 
1.55

 
0.5

Other
395

 
7.15

 
2.3

 
272

 
5.39

 
1.9

 
$
17,073

 
$
309.14

 
100.0
%
 
$
14,774

 
$
292.75

 
100.0
%

The following table provides the details of our medical claims and benefits payable as of the dates indicated:
 
December 31,
 
2017
 
2016
Fee-for-service claims incurred but not paid (IBNP)
$
1,717

 
$
1,352

Pharmacy payable
112

 
112

Capitation payable
67

 
37

Other (1)
296

 
428

 
$
2,192

 
$
1,929

______________________
(1)
“Other” medical claims and benefits payable include amounts payable to certain providers for which we act as an intermediary on behalf of various state agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of operations. As of December 31, 2017 and 2016, we had recorded non-risk provider payables of approximately $122 million and $225 million, respectively.


-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 21
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars in millions, except per-member amounts)

Our claims liability includes a provision for adverse claims deviation based on historical experience and other factors including, but not limited to, variations in claims payment patterns, changes in utilization and cost trends, known outbreaks of disease, and large claims. Our reserving methodology is consistently applied across all periods presented. The amounts displayed for “Components of medical care costs related to: Prior period” represent the amount by which our original estimate of claims and benefits payable at the beginning of the period was less (more) than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported. The following table presents the components of the change in medical claims and benefits payable for the periods indicated:

 
Year Ended December 31,
 
2017
 
2016
Medical claims and benefits payable, beginning balance
$
1,929

 
$
1,685

Components of medical care costs related to:
 
 
 
Current period
17,037

 
14,966

Prior period
36

 
(192
)
Total medical care costs
17,073

 
14,774

 
 
 
 
Change in non-risk provider payables
(106
)
 
58

Payments for medical care costs related to:
 
 
 
Current period
15,130

 
13,304

Prior period
1,574

 
1,284

Total paid
16,704

 
14,588

Medical claims and benefits payable, ending balance
$
2,192

 
$
1,929

 
 
 
 
Benefit from prior period as a percentage of:
 
 
 
Balance at beginning of period
(1.9
)%
 
11.4
%
Premium revenue, trailing twelve months
(0.2
)%
 
1.2
%
Medical care costs, trailing twelve months
(0.2
)%
 
1.3
%
 
 
 
 
Days in claims payable, fee for service (1)
54

 
47

______________________
(1)
Claims payable includes primarily IBNP. Additionally, it includes certain fee-for-service payables reported in “Other” medical claims and benefits payable amounting to $99 million and $94 million, as of December 31, 2017 and 2016, respectively.



-MORE-

MOH Reports Fourth Quarter and Year-End 2017 Results
Page 22
February 12, 2018

MOLINA HEALTHCARE, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial measures as supplemental metrics in evaluating our financial performance, making financing and business decisions, and forecasting and planning for future periods. For these reasons, management believes such measures are useful supplemental measures to investors in comparing our performance to the performance of other public companies in the health care industry. These non-GAAP financial measures should be considered as supplements to, and not as substitutes for or superior to, GAAP measures. See further information regarding non-GAAP measures below the tables (in millions, except per diluted share amounts).
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net (loss) income
$
(262
)
 
$
(47
)
 
$
(512
)
 
$
52

Adjustments:
 
 
 
 
 
 
 
Depreciation, and amortization of intangible assets and capitalized software
36

 
43

 
165

 
161

Interest expense
33

 
25

 
118

 
101

Income tax (benefit) expense
(54
)
 
16

 
(100
)
 
153

EBITDA
$
(247
)
 
$
37

 
$
(329
)
 
$
467

 
Three Months Ended December 31,
 
Year Ended December 31,
2017
 
2016
 
2017
 
2016
 
 
 
Amount
 
Per Diluted share
 
Amount
 
Per Diluted share
 
Amount
 
Per Diluted share
 
Amount
 
Per Diluted share
Net (loss) income
$
(262
)
 
$
(4.59
)
 
$
(47
)
 
$
(0.85
)
 
$
(512
)
 
$
(9.07
)
 
$
52

 
$
0.92

Adjustment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
6

 
0.11

 
8

 
0.16

 
30

 
0.55

 
32

 
0.57

Income tax effect (1)
(2
)
 
(0.04
)
 
(3
)
 
(0.06
)
 
(11
)
 
(0.20
)
 
(12
)
 
(0.21
)
Amortization of intangible assets, net of tax effect
4

 
0.07

 
5

 
0.10

 
19

 
0.35

 
20

 
0.36

Adjusted net (loss) income
$
(258
)
 
$
(4.52
)
 
$
(42
)
 
$
(0.75
)
 
$
(493
)
 
$
(8.72
)
 
$
72

 
$
1.28

________________________
(1)
Income tax effect of adjustment calculated at the blended federal and state statutory tax rate of 37%.

The following are descriptions of the adjustments made to GAAP measures used to calculate the non-GAAP measures used in this news release:
Earnings before interest, taxes, depreciation and amortization (EBITDA): Net (loss) income (GAAP) less depreciation, and amortization of intangible assets and capitalized software, interest expense and income tax (benefit) expense. We believe that EBITDA is helpful in assessing our ability to meet the cash demands of our operating units.
Adjusted net (loss) income: Net (loss) income (GAAP) less amortization of intangible assets, net of income tax effect calculated at the statutory tax rate of 37%. We believe that adjusted net (loss) income is helpful in assessing our financial performance exclusive of the non-cash impact of the amortization of purchased intangibles.
Adjusted net (loss) income per diluted share: Adjusted net (loss) income divided by weighted average common shares outstanding on a fully diluted basis.

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MOH Reports Fourth Quarter and Year-End 2017 Results
Page 23
February 12, 2018

MOLINA HEALTHCARE, INC.
2018 PRELIMINARY GUIDANCE

Reconciliation of Non-GAAP Financial Measures
(in millions, except per-share amounts)
 
Low End
 
High End
Net income
$
202

 
$
236

Adjustments:
 
 
 
Depreciation, and amortization of intangible assets and capitalized software
150

 
150

Interest expense
125

 
125

Income tax expense
155

 
165

EBITDA
$
632

 
$
676

 
Low End
 
High End
 
Amount
 
Per share (2)
 
Amount
 
Per share (2)
Net income
$
202

 
$
3.00

 
$
236

 
$
3.50

Adjustments:
 
 
 
 
 
 
 
Amortization of intangible assets
20

 
0.30

 
20

 
0.30

Income tax effect (1)
(5
)
 
(0.07
)
 
(5
)
 
(0.07
)
Amortization of intangible assets, net of tax effect
15

 
0.23

 
15

 
0.23

Adjusted net income
$
217

 
$
3.23

 
$
251

 
$
3.73

________________________
(1)
Income tax effect calculated at the statutory tax rate of 22.5%.
(2)
Computation assumes 67.3 million diluted weighted average shares outstanding.



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