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): May 4, 2006
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)
|
One
Golden Shore Drive, 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
May 4,
2006, Molina Healthcare, Inc. issued a press release announcing its financial
results for the first quarter ended March 31, 2006. 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 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 Act of 1934, except as expressly set forth by specific reference
in
such a filing.
Item
9.01. Financial
Statements and Exhibits.
(d) Exhibits:
Exhibit
No.
Description
99.1
Press release of Molina Healthcare, Inc. issued May 4, 2006, as to financial
results for the first quarter ended March 31,
2006.
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:
May 4, 2006
|
|
By: /s/
Mark L.
Andrews
|
||
|
|
|
Mark
L. Andrews
Chief
Legal Officer, General Counsel
and
Corporate Secretary
|
||
EXHIBIT
INDEX
|
Exhibit
|
|
|
No.
|
Description
|
|
99.1
|
Press
release of Molina Healthcare, Inc. issued May 4, 2006, as to financial
results for the first quarter ended March 31,
2006.
|
Exhibit
99.1
News
Release
Contact:
Juan
José
Orellana
Investor
Relations
Molina
Healthcare, Inc.
562-435-3666,
ext. 111143
MOLINA
HEALTHCARE REPORTS
FIRST
QUARTER 2006 RESULTS
Long
Beach, California (May 4, 2006) — Molina Healthcare, Inc. (NYSE: MOH) today
announced its financial results for the first quarter ended March 31,
2006.
Net
income
for the first quarter ended March 31, 2006, was $8.6 million, or $0.31 per
diluted share, compared with net income of $14.8 million, or $0.53 per diluted
share, for the quarter ended March 31, 2005. Comparability between the
first quarters of 2006 and 2005 is affected by adverse out-of-period claims
development recorded in the second quarter of 2005, which was disclosed in
the
Company’s earnings release announcing results for the second quarter of
2005.
The
Company is not revising guidance at this time. The Company continues to assess
the effectiveness of the medical care cost control initiatives it implemented
during the latter half of 2005. Also, the magintude of a number of growth
opportunities has yet to be determined.
Commenting
on the results, J. Mario Molina, M.D., president and chief executive officer
of
Molina Healthcare, Inc., said, “Our financial results for this quarter, combined
with the positive momentum generated in the previous two quarters, are
indicative of the progress we are making with our medical management
initiatives. However, despite the noticeable improvement in our medical care
cost trends, there is still much to be done. We believe that the results for
the
first half of 2006 will provide a more reliable measure of our
progress.”
Financial
Results - Comparison of Quarters Ended March 31, 2006 and
2005
Premium
revenue
for the
first quarter of 2006 was $449.3 million, an increase of $57.1 million, or
14.6%, over 2005 premium revenue of $392.2 million. Membership growth from
acquisitions in California and from start-up operations in Indiana and Ohio
was
the primary driver of the increase in premium revenue.
-MORE-
MOH
Announces First Quarter Results
Page
2
May
4, 2006
Medical
care costs
as a
percentage of premium and other operating revenue (the medical care ratio)
increased to 85.3% in the first quarter of 2006 from 84.9% in the first quarter
of 2005. Sequentially,
the Company’s medical care ratio increased to 85.3% in the first quarter of 2006
from 84.7% in the fourth quarter of 2005. The Company believes that the increase
in the medical care ratio between the fourth quarter of 2005 and the first
quarter of 2006 was primarily the result of normal seasonality in health care
utilization and costs. The Company further believes that certain medical cost
control initiatives undertaken at the start of the third quarter of 2005 are
having a positive impact upon its medical care ratio.
Sequentially,
the Company’s days in claims payable increased to 57 days at March 31,
2006, compared with 55 days at December 31, 2005, 52 days at September 30,
2005,
50 days at June 30, 2005, and 48 days at March 31, 2005. The increase in days
in
claims payable is the result of the Company’s increasing membership, new markets
entered in 2006 and the Company’s desire to maintain adequate claims reserves
while its medical care cost control initiatives gain further
traction.
Salary,
general and administrative expenses
were
$51.2 million for the first quarter of 2006, representing 11.3% of total
revenue, as compared with $33.5 million, or 8.5% of total revenue, for the
first
quarter of 2005.
Core
G&A (defined as SG&A expenses less premium taxes) increased to 8.5% of
total revenue in the first quarter of 2006 as compared with 5.9% in the first
quarter of 2005. The increase in core G&A was due to investments in
infrastructure to support the Company’s medical cost control initiatives and the
administrative expenses associated with the Company’s development of its
Medicare Advantage Special Needs Plans. The Company’s adoption of SFAS
No. 123R, Share-Based Payment,
effective
January 1, 2006, reduced earnings per diluted share by approximately $0.02
in
the first quarter of 2006.
Depreciation
and amortization expense
increased
by $1.6 million when compared with the first quarter of 2005. Increased
amortization expense due to the Company’s acquisitions in California (which
closed on June 1, 2005) contributed $0.6 million in additional amortization.
Depreciation increased as a result of investment in infrastructure, principally
at the Company’s corporate offices.
Investment
income during
the
quarter increased by $2.3 million, or 131.3%, as compared with the first quarter
of 2005 as a result of higher invested balances and higher rates of
return.
Income
taxes were
recognized in the first quarter of 2006 based upon an effective tax rate of
37.5% as compared with an effective tax rate of 38.0% in the first quarter
of
2005.
-MORE-
MOH
Announces First Quarter Results
Page
3
May
4, 2006
Cash
Flow
Operating
activities provided $41.0 million in cash for the quarter ended March 31,
2006. Increases in medical claims and benefits payable contributed $18.2 million
to net cash provided by operating activities for the quarter ended March 31,
2006.
At
March
31, 2006, the Company had consolidated cash and investments of approximately
$390.0 million.
Membership
The
following table details the Company’s membership by state at March 31, 2006,
December 31, 2005, and March 31, 2005:
|
March
31,
|
Dec.
31,
|
March
31,
|
||||||||
|
2006
|
2005
|
2005
|
||||||||
|
California
|
312,000
|
321,000
|
254,000
|
|||||||
|
Indiana
|
28,000
|
24,000
|
—
|
|||||||
|
Michigan
|
143,000
|
144,000
|
157,000
|
|||||||
|
New
Mexico
|
59,000
|
60,000
|
61,000
|
|||||||
|
Ohio
|
27,000
|
N/A1
|
—
|
|||||||
|
Utah
|
61,000
|
59,000
|
55,000
|
|||||||
|
Washington
|
288,000
|
285,000
|
276,000
|
|||||||
|
Total
|
918,000
|
893,000
|
803,000
|
|||||||
1
Enrollment
in the Company’s Ohio HMO at December 31, 2005, was less than 250
members.
The
following table details member months (defined as the aggregation of each
month’s membership for the period) by state for the periods
indicated:
|
Quarter
Ended
|
||||||||||
|
March
31,
|
Dec.
31,
|
March
31,
|
||||||||
|
2006
|
2005
|
2005
|
||||||||
|
California
|
947,000
|
971,000
|
753,000
|
|||||||
|
Indiana
|
79,000
|
70,000
|
—
|
|||||||
|
Michigan
|
431,000
|
436,000
|
471,000
|
|||||||
|
New
Mexico
|
178,000
|
181,000
|
187,000
|
|||||||
|
Ohio
|
48,000
|
N/A1
|
—
|
|||||||
|
Utah
|
181,000
|
176,000
|
159,000
|
|||||||
|
Washington
|
868,000
|
862,000
|
823,000
|
|||||||
|
Total
|
2,732,000
|
2,696,000
|
2,393,000
|
|||||||
1
Enrollment in the Company’s Ohio HMO at December 31, 2005, was less than 250
members.
-MORE-
MOH
Announces First Quarter Results
Page
4
May
4, 2006
Conference
Call
The
live
broadcast of Molina Healthcare’s conference call will begin at 5:00 p.m. Eastern
Time, May 4, 2006. The number to call for this interactive conference call
is 212-346-6550. A 30-day online replay will be available beginning
approximately one hour following the conclusion of the live broadcast. A link
to
these events can be found on the Company’s website at www.molinahealthcare.com
or at
www.earnings.com.
Molina
Healthcare, Inc. is a multi-state managed care organization that arranges for
the delivery of healthcare services to persons eligible for Medicaid and other
programs for low-income families and individuals. Molina Healthcare, Inc.
currently operates health plans in California, Indiana, Michigan, New Mexico,
Ohio, Utah, and Washington. More information about Molina Healthcare, Inc.
can
be obtained at www.molinahealthcare.com.
“Safe
Harbor” Statement under the Private Securities Litigation Reform Act of
1995:
This press release contains “forward-looking statements” identified by words
such as “will,” “expects,” “believes,” “anticipates,” “plans,” “projects,”
“estimates,” “intends,” and similar words and expressions. In addition,
any statements that refer to earnings guidance, expectations, projections,
or
their underlying assumptions, or other characterizations of future events or
circumstances, are forward-looking statements. All of the Company’s
forward-looking statements are based on current expectations and assumptions
that are subject to numerous known and unknown risks, uncertainties, and other
factors that could cause actual results to differ materially. Such factors
include, without limitation, risks related to: the
Company’s ability to identify and address medical care cost issues and to
address them successfully through its medical care cost control initiatives;
the
Company’s ability to accurately estimate incurred but not reported medical
costs; high dollar claims related to catastrophic illness; potential
reductions in funding for Medicaid and other government-sponsored healthcare
programs; receiving the award upon remand of the long-term contracts for
Riverside and/or San Bernardino Counties; the successful renewal and
continuation of the government contracts of the Company’s health plans; the
favorable resolution of pending litigation or arbitration; the implementation
of
announced rate increases; the Company’s ability to obtain timely regulatory
approvals for acquisitions or to successfully integrate its completed
acquisitions, including new members and providers; the ability to enter into
more favorable hospital or provider contracts; the availability of financing
to
fund the Company’s acquisitions; membership eligibility processes and
methodologies; unexpected changes in healthcare practices, technologies, or
utilization patterns; changes in federal or state laws or regulations or in
their interpretation; risks associated with the Company’s start-up operations in
new states; disasters or epidemics; and other risks and uncertainties as
detailed in the
Company’s reports and filings with the Securities and Exchange Commission and
available on its website at www.sec.gov.
All forward-looking statements in this release represent the Company’s judgment
as of May 4, 2006. The Company disclaims any obligation to update any
forward-looking statement to conform the statement to actual results or changes
in the Company’s expectations.
-MORE-
MOH
Announces First Quarter Results
Page
5
May
4, 2006
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED
STATEMENTS OF INCOME
(Dollars
in thousands, except for per share data)
(Unaudited)
|
Three
Months Ended
|
|||||||
|
March
31,
|
|||||||
|
Revenue:
|
2006
|
2005
|
|||||
|
Premium
revenue
|
$
|
449,294
|
$
|
392,187
|
|||
|
Investment
income
|
4,082
|
1,765
|
|||||
|
Total
operating revenue
|
453,376
|
393,952
|
|||||
|
Expenses:
|
|||||||
|
Medical
care costs:
|
|||||||
|
Medical
services
|
74,858
|
63,667
|
|||||
|
Hospital
and specialty services
|
262,870
|
226,532
|
|||||
|
Pharmacy
|
45,519
|
42,915
|
|||||
|
Total
medical care costs
|
383,247
|
333,114
|
|||||
|
Salary,
general and administrative expenses
|
51,213
|
33,546
|
|||||
|
Depreciation
and amortization
|
4,762
|
3,198
|
|||||
|
Total
expenses
|
439,222
|
369,858
|
|||||
|
Operating
income
|
14,154
|
24,094
|
|||||
|
Other
expense:
|
|||||||
|
Interest
expense
|
(414
|
)
|
(289
|
)
|
|||
|
Total
other expense
|
(414
|
)
|
(289
|
)
|
|||
|
Income
before income taxes
|
13,740
|
23,805
|
|||||
|
Income
tax expense
|
5,150
|
9,046
|
|||||
|
Net
income
|
$
|
8,590
|
$
|
14,759
|
|||
|
Net
income per share:
|
|||||||
|
Basic
|
$
|
0.31
|
$
|
0.53
|
|||
|
Diluted
|
$
|
0.31
|
$
|
0.53
|
|||
|
Weighted
average number of common shares and
|
|||||||
|
potentially
dilutive common shares outstanding
|
28,141,000
|
27,964,000
|
|||||
|
Operating
Statistics:
|
|||||||
|
Medical
care ratio (1)
|
85.3
|
%
|
84.9
|
%
|
|||
|
Salary,
general and administrative expense ratio (2),
excluding premium taxes
|
8.5
|
%
|
5.9
|
%
|
|||
|
Premium
taxes included in salary, general and administrative
expenses
|
2.8
|
%
|
2.6
|
%
|
|||
|
Total
salary, general and administrative expense ratio
|
11.3
|
%
|
8.5
|
%
|
|||
|
Members
(3)
|
918,000
|
803,000
|
|||||
|
Days
in claims payable
|
57
|
48
|
|||||
|
(1)
|
Medical
care ratio represents medical care costs as a percentage of premium
revenue.
|
|
(2)
|
Salary,
general and administrative expense ratio represents such expenses
as a
percentage of total operating revenue.
|
|
(3)
|
Number
of members at end of period.
|
-MORE-
MOH
Announces First Quarter Results
Page
6
May
4, 2006
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED
BALANCE SHEETS
(Dollars
in thousands, except per share data)
Dec.
31,
200
|
March
31,
|
Dec.
31,
|
||||||
|
2006
|
2005
|
||||||
|
|
(Unaudited)
|
||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
288,347
|
$
|
249,203
|
|||
|
Investments
|
101,690
|
103,437
|
|||||
|
Receivables
|
73,884
|
70,532
|
|||||
|
Income
tax receivable
|
—
|
3,014
|
|||||
|
Deferred
income taxes
|
3,039
|
2,339
|
|||||
|
Prepaid
and other current assets
|
9,615
|
10,321
|
|||||
|
Total
current assets
|
476,575
|
438,846
|
|||||
|
Property
and equipment, net
|
32,716
|
31,794
|
|||||
|
Goodwill
and intangible assets, net
|
122,893
|
124,914
|
|||||
|
Restricted
investments
|
18,205
|
18,242
|
|||||
|
Other
assets
|
8,804
|
8,018
|
|||||
|
Total
assets
|
$
|
659,193
|
$
|
621,814
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Medical
claims and benefits payable
|
$
|
235,579
|
$
|
217,354
|
|||
|
Deferred
revenue
|
6,248
|
803
|
|||||
|
Accounts
payable and accrued liabilities
|
29,670
|
31,457
|
|||||
|
Income
taxes payable
|
3,588
|
—
|
|||||
|
Total
current liabilities
|
275,085
|
249,614
|
|||||
|
Deferred
income taxes
|
3,657
|
4,796
|
|||||
|
Other
long-term liabilities
|
4,488
|
4,554
|
|||||
|
Total
liabilities
|
283,230
|
258,964
|
|||||
|
Stockholders’
equity:
|
|||||||
|
Common
stock, $0.001 par value; 80,000,000 shares authorized;
|
|||||||
|
issued
and outstanding: 27,935,134 shares at March 31, 2006, and
|
|||||||
|
27,792,360
shares at December 31, 2005
|
28
|
28
|
|||||
|
Preferred
stock, $0.001 par value; 20,000,000 shares authorized,
|
|||||||
|
no
shares issued and outstanding
|
—
|
—
|
|||||
|
Additional
paid-in capital
|
167,235
|
162,693
|
|||||
|
Accumulated
other comprehensive loss
|
(648
|
)
|
(629
|
)
|
|||
|
Retained
earnings
|
229,738
|
221,148
|
|||||
|
Treasury
stock (1,201,174 shares, at cost)
|
(20,390
|
)
|
(20,390
|
)
|
|||
|
Total
stockholders’ equity
|
375,963
|
362,850
|
|||||
|
Total
liabilities and stockholders’ equity
|
$ | 659,193 | $ |
621,814
|
|||
-MORE-
MOH
Announces First Quarter Results
Page
7
May
4, 2006
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars
in thousands)
(Unaudited)
|
Three
Months Ended
|
|||||||
|
March
31,
|
|||||||
|
Operating
activities:
|
2006
|
2005
|
|||||
|
Net
income
|
$
|
8,590
|
$
|
14,759
|
|||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
|
Depreciation
and amortization
|
4,762
|
3,198
|
|||||
|
Amortization
of capitalized credit facility fees
|
211
|
734
|
|||||
|
Deferred
income taxes
|
(1,835
|
)
|
1,472
|
||||
|
Tax
benefit from exercise of employee stock options
|
|||||||
|
recorded
as additional paid-in capital
|
—
|
1,021
|
|||||
|
Stock-based
compensation
|
1,227
|
175
|
|||||
|
Changes
in operating assets and liabilities:
|
|||||||
|
Receivables
|
(3,352
|
)
|
(8,685
|
)
|
|||
|
Prepaid
and other current assets
|
706
|
478
|
|||||
|
Medical
claims and benefits payable
|
18,225
|
(4,645
|
)
|
||||
|
Deferred
revenue
|
5,445
|
—
|
|||||
|
Accounts
payable and accrued liabilities
|
391
|
(4,694
|
)
|
||||
|
Income
taxes payable (receivable)
|
6,602
|
(1,374
|
)
|
||||
|
Net
cash provided by operating activities
|
40,972
|
2,439
|
|||||
|
Investing
activities:
|
|||||||
|
Purchases
of equipment
|
(3,663
|
)
|
(2,189
|
)
|
|||
|
Purchases
of investments
|
(34,015
|
)
|
(3,969
|
)
|
|||
|
Sales
and maturities of investments
|
35,739
|
18,935
|
|||||
|
(Increase)
decrease in restricted cash
|
37
|
(41
|
)
|
||||
|
Increase
(decrease) in other long-term liabilities
|
(66
|
)
|
366
|
||||
|
Increase
in other assets
|
(997
|
)
|
(4,633
|
)
|
|||
|
Net
cash (used in) provided by investing activities
|
(2,965
|
)
|
8,469
|
||||
|
Financing
activities:
|
|||||||
|
Borrowing
under credit facility
|
—
|
3,100
|
|||||
|
Tax
benefit from exercise of employee stock options
|
|||||||
|
recorded
as additional paid-in capital
|
467
|
—
|
|||||
|
Principal
payments on capital lease obligations and mortgage notes
|
—
|
(40
|
)
|
||||
|
Proceeds
from exercise of stock options and employee stock purchases
|
670
|
386
|
|||||
|
Net
cash provided by financing activities
|
1,137
|
3,446
|
|||||
|
Net
increase in cash and cash equivalents
|
39,144
|
14,354
|
|||||
|
Cash
and cash equivalents at beginning of period
|
249,203
|
228,071
|
|||||
|
Cash
and cash equivalents at end of period
|
$
|
288,347
|
$
|
242,425
|
|||
-MORE-
MOH
Announces First Quarter Results
Page
8
May
4, 2006
CHANGE
IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars
in thousands)
(Unaudited)
The
following table shows the components of the change in medical claims and
benefits payable for the quarters ended March 31, 2006 and 2005:
|
Three
Months Ended
|
|||||||
|
March
31,
|
|||||||
|
2006
|
2005
|
||||||
|
Balances
at beginning of period
|
$
|
217,354
|
$
|
160,210
|
|||
|
Components
of medical care costs related to:
|
|||||||
|
Current
year
|
407,847
|
343,065
|
|||||
|
Prior
years
|
(24,600
|
)
|
(9,951
|
)
|
|||
|
Total
medical care costs
|
383,247
|
333,114
|
|||||
|
Payments
for medical care costs related to:
|
|||||||
|
Current
year
|
218,890
|
212,959
|
|||||
|
Prior
years
|
146,132
|
124,800
|
|||||
|
Total
paid
|
365,022
|
337,759
|
|||||
|
Balances
at end of period
|
$
|
235,579
|
$
|
155,565
|
|||
The
Company’s claims reserving methodology includes an allowance for adverse claims
development at each reporting date based on our historical experience, and
other
factors considered by management including, but not limited to, variation in
claims payment patterns, changes in utilization and cost trends, known outbreaks
of disease, and large claims. The Company’s reserving methodology has been
consistently applied across all periods presented. Accordingly, any benefit
recognized in medical care costs resulting from favorable development of an
estimated liability at the start of the period may be offset by the addition
of
an allowance for adverse claims development when estimating the liability at
the
end of the period.
-END-