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): August 2,
2007
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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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
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item
2.02.
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Results
of Operations and Financial
Condition.
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On
August 2, 2007, Molina
Healthcare, Inc. issued a press release announcing its financial results
for the
second quarter and six months ended June 30, 2007. 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.
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Item
9.01.
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Financial
Statements and
Exhibits.
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(d)
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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 August 2, 2007, as
to financial
results for the second quarter and six months ended June 30,
2007.
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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:
August 2, 2007
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By: /s/
Mark L. Andrews
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||
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Mark
L. Andrews
Chief
Legal Officer, General Counsel,
and
Corporate Secretary
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EXHIBIT
INDEX
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Exhibit
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No.
|
Description
|
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99.1
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Press
release of Molina Healthcare, Inc. issued August 2, 2007, as
to financial
results for the second quarter and six months ended June 30,
2007.
|
News
Release
Contact:
Juan
José
Orellana
Investor
Relations
Molina
Healthcare, Inc.
562-435-3666,
ext. 111143
MOLINA
HEALTHCARE REPORTS SECOND QUARTER 2007 RESULTS
Long
Beach, California (August 2, 2007) – Molina Healthcare, Inc. (NYSE: MOH) today
announced its financial results for the second quarter and six months ended
June
30, 2007.
Net
income
for the quarter ended June 30, 2007, increased to $13.3 million, or $0.47
per
diluted share, compared with net income of $13.2 million, or $0.47 per diluted
share, for the quarter ended June 30, 2006.
Net
of
certain out-of-period items, earnings for the quarter increased to $0.45
per
share from $0.36 per share for the second quarter of 2006. The
out-of-period items affecting comparability between quarters are as follows
(all
amounts are net of taxes):
|
·
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In
the second quarter of 2006, the Company had recorded a benefit
of
approximately $0.11 per diluted share as a result of positive
prior period claims development related to the Company’s claims liability
at December 31, 2005.
|
|
·
|
In
the second quarter of 2007, the Company recorded a benefit of
approximately $0.04 per diluted share (net of premium taxes and
related
medical costs) due to the receipt of a premium increase in San
Diego
County, California, retroactive to July 1,
2006.
|
|
·
|
In
the second quarter of 2007, the Company recorded a charge of approximately
$0.02 per diluted share related to the impairment of certain purchased
software.
|
The
Company’s improved second quarter performance was primarily the result of four
factors:
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·
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A
26.5% increase in premium revenue.
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·
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An
improvement to the combined medical cost performance at the Company’s
legacy health plans in California, Michigan, New Mexico, Utah,
and
Washington. Excluding the retroactive premium rate increase in
San Diego County and the out-of-period claims benefit in 2006,
the
combined medical care ratio of these five legacy plans declined
by 40
basis points, from 84.2% in the second quarter of 2006 to 83.8%
in the
second quarter of 2007.
|
|
·
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An
improvement of 90 basis points in the percentage of revenue spent
on
general and administrative expenses other than premium
taxes.
|
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·
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An
increase to investment income.
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-MORE-
MOH
Reports Second Quarter Results
Page
2
August
2,
2007
Net
income
for the first six months of 2007 was $22.9 million, or $0.81 per diluted
share,
compared with net income of $21.7 million, or $0.77 per diluted share,
for the
first six months of 2006.
Commenting
on the results, J. Mario Molina, M.D., president and chief executive officer
of
Molina Healthcare, Inc., said, “We are pleased with our second quarter
results. Our enrollment increased year-over-year, which helped lower
our core general and administrative expense ratio. We are seeing
continued improvement to our medical care ratio due to our continued focus
on
medical costs.”
Earnings
Per Share Guidance
The
Company also confirmed its previously issued earnings per diluted share guidance
for fiscal year 2007 of between $1.75 and $1.90. The Company believes
that its improved medical cost performance will offset any shortfalls in
anticipated enrollment in its Ohio plan and its Medicare Advantage
plans. The Company will update its guidance for 2007 as future
developments warrant, including the Company’s obtaining additional clarity
regarding various issues such as the following:
|
·
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Proposed
changes to the New Mexico contract that may allow the Company to
increase
income by reducing the amount of revenue previously reserved for
potential
repayment to the state.
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·
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Potential
premium rate increases in California, Michigan and New
Mexico.
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·
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Potential
increases to the medical care costs of the Washington plan due
to changes
to the Medicaid in-patient fee schedule to take effect in that
state on
August 1, 2007.
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Financial
Results – Comparison of Quarters Ended June 30, 2007 and
2006
Premium
revenue for the second quarter of 2007 was $607.1 million, an
increase of $127.3 million, or 26.5%, over premium revenue of $479.8 million
for
the second quarter of 2006. The increase in premium revenue in the
second quarter of 2007 was driven by increased membership in the Company’s Ohio
and Texas start-up health plans and by the acquisition of Cape Health Plan
in
Michigan effective May 15, 2006.
The
Ohio
health plan contributed $111.5 million in premium revenue in the second quarter
of 2007, an increase of $93.0 million from a year ago.
The
Texas
health plan, which commenced operations in September 2006, contributed $25.0
million in premium revenue in the second quarter of 2007.
The
premium revenue from the Company’s Michigan health plan increased $19.6 million
due primarily to the acquisition of Cape Health Plan.
-MORE-
MOH
Reports Second Quarter Results
Page
3
August
2,
2007
The
Indiana health plan, where the Company ceased serving members effective January
1, 2007, contributed no premium revenue in the second quarter of 2007 compared
with $16.7 million in premium revenue in the second quarter of
2006.
As
noted
above, the Company’s California health plan benefited from a rate increase for
its Medicaid membership in San Diego County retroactive to July 1,
2006. This increase of approximately 5% added approximately $2.9
million to premium revenue in the second quarter, of which approximately
$2.2
million related to the last half of 2006 and the first quarter of
2007.
Medical
care costs as a percentage of premium revenue (the medical care
ratio) increased to 85.1% in the second quarter of 2007 from 83.7% in the
second
quarter of 2006. Excluding the impact of the $5.0 million benefit for
favorable out-of-period claims development in the second quarter of 2006,
the
Company’s medical care ratio increased 37 basis points
year-over-year. Excluding the collective impact of the 2006
out-of-period claims development, the retroactive premium rate increase in
San
Diego County, the Company’s discontinued Indiana health plan and the Ohio and
Texas start-up health plans, the Company’s medical care ratio would have been
83.8% for the second quarter of 2007 as compared with 84.2% for the second
quarter of 2006, an improvement of 40 basis points
year-over-year.
The
medical care ratios reported by the Ohio and Texas health plans for the second
quarter of 2007 were 91.1% and 91.3%, respectively. Medical care
ratios for both Ohio and Texas in the second quarter of 2007 improved
sequentially. The Company continues to monitor the development of
medical care costs in both these states. While the Company believes
its claims reserves in Ohio and Texas are appropriate, the limited claims
payment experience for the many members who have been added during 2007 adds
a
degree of uncertainty to these estimates that is not found in the Company’s more
mature health plans.
The
Company’s California health plan continued to make progress in managing its
medical care costs during the second quarter of 2007. Absent the
out-of-period revenue related to the San Diego rate increase, the California
health plan reported a medical care ratio of 82.2% in the second quarter
of 2007
compared with 89.4% a year earlier. The improved medical cost
performance in California is primarily due to the success of provider
re-contracting efforts and stable medical care utilization.
The
Washington health plan reported an increase in its medical care ratio to
80.2%
for the second quarter of 2007 compared with 77.1% for the second quarter
of
2006, primarily due to higher specialty fee for service costs.
The
Michigan health plan reported an increase in its medical care ratio to 83.3%
for
the second quarter of 2007 compared with 78.6% for the second quarter of
2006. The higher medical care ratio is due to higher capitation and
specialty fee-for-service costs. The Company has increased capitation
payments to primary care physicians in Michigan in an effort to increase
enrollment.
-MORE-
MOH
Reports Second Quarter Results
Page
4
August
2,
2007
The
New
Mexico health plan reported an increase in its medical care ratio to 86.3%
in
the second quarter of 2007 compared with 80.7% in the second quarter of
2006. The New Mexico health plan recorded a $3.2 million decrease to
premium revenue during the second quarter of 2007 in order to comply with
contractual terms that require the plan to spend a specified
minimum percentage of premium revenue on direct medical care
costs. No such adjustments were made to revenue during the first half
of 2006. Absent this accrual, the New Mexico health plan’s medical
care ratio in the second quarter of 2007 would have been 82.1%, an increase
of
140 basis points as compared with the second quarter of 2006. The
remaining increase in the medical care ratio is partially due to increased
enrollment in that state’s uninsured adult program (the State Coverage
Initiative), where the Company has experienced a higher medical care ratio
than
in its Medicaid population.
The
Company’s days in claims payable were 54 days at June 30, 2007, March 31, 2007,
and June 30, 2006.
General
and administrative expenses were $67.2 million, or 10.9% of total
revenue, for the second quarter of 2007 as compared with $56.3 million, or
11.6%
of total revenue, for the second quarter of 2006.
Core
G&A expenses (defined as G&A expenses less premium taxes)
increased $5.3 million year-over-year, but decreased as a percentage of revenue
by 0.9%, from 8.6% in the second quarter of 2006 to 7.7% in the second quarter
of 2007, and from 7.9% in the first quarter of 2007. The decline in
Core G&A as a percentage of total revenue is primarily due to higher premium
revenue rather than to a decline in absolute G&A expenses. Core
G&A on a per member per month basis increased slightly (less than 1%) in the
second quarter of 2007 when compared with the second quarter of 2006, while
premium revenue per member per month increased by over 13%.
Financial
Results – Comparison of Six Months Ended June 30, 2007 and
2006
Premium
revenue for the six months ended June 30, 2007, was $1,163.4
million, an increase of $234.3 million, or 25.2%, over premium revenue of
$929.1
million for the six months ended June 30, 2006. The increase in
premium revenue for the first half of 2007 was driven by increased membership
in
the Company’s Ohio and Texas start-up health plans and by the acquisition of
Cape Health Plan in Michigan effective May 15, 2006.
The
Ohio
health plan contributed $186.4 million in premium revenue in the first half
of
2007, an increase of $157.8 million from a year ago.
The
Texas
health plan, which commenced operations in September 2006, contributed $39.4
million in premium revenue in the first half of 2007.
The
premium revenue from the Company’s Michigan health plan increased $65.7 million
due primarily to the acquisition of Cape Health Plan.
-MORE-
MOH
Reports Second Quarter Results
Page
5
August
2,
2007
The
Indiana health plan, where the Company ceased serving members effective January
1, 2007, contributed no premium revenue in the first half of 2007 compared
with
$30.2 million in premium revenue in the first half of 2006.
Medical
care costs as a percentage of premium revenue (the medical care
ratio) increased to 85.4% in the first half of 2007 from 84.5% in the first
half
of 2006.
The
medical care ratios reported by the Ohio and Texas health plans for the first
half of 2007 were 91.6% and 91.7%, respectively. The Company has
previously disclosed its expectation that Ohio and Texas would experience
medical care ratios higher than those historically experienced by the Company
as
a whole. Additionally, as noted above, the limited claims payment
experience for the many members who have been added during 2007 adds a degree
of
uncertainty to the Ohio and Texas expense estimates that is not found in
the
Company’s more mature health plans.
As
discussed earlier, the medical care costs in the second quarter of 2006 included
$5.0 million of positive reserve development. Excluding the Company’s
Ohio, Texas and Indiana health plans, the retroactive premium rate increase
in
San Diego County and the positive reserve adjustment, the Company’s medical care
ratio would have been 84.1% for the first half of 2007 as compared with 84.6%
for the first half of 2006. The Company attributes the improvement of
50 basis points year-over-year to its various medical care cost control
initiatives.
The
Company’s health plans in California and Washington reported lower medical care
ratios in the first half of 2007 when compared with the same period in 2006,
while the Company’s Michigan health plan reported an increase in its medical
care ratio.
The
California health plan’s medical care ratio declined to 81.3% for the six months
ended June 30, 2007, compared with 86.4% for the same six-month period of
2006. Absent the out-of-period revenue related to the San Diego rate
increase, the California health plan reported a medical care ratio of 82.2%
in
the first half of 2007, an improvement of 420 basis points
year-over-year.
The
Washington health plan reported a decrease in its medical care ratio to 80.6%
in
the first half of 2007 compared with 81.2% in the first half of 2006,
principally due to lower hospital and specialty costs.
The
Michigan health plan reported an increase in its medical care ratio to 83.9%
for
the six months ended June 30, 2007, compared with 77.9% for the six months
ended
June 30, 2006. The higher medical care ratio is due to higher
capitation and specialty fee for service costs.
The
New
Mexico health plan reported an increase in its medical care ratio to 86.2%
in
the first half of 2007 compared with 83.3% in the first half of
2006. The New Mexico health plan recorded a $7.8 million decrease to
premium revenue during the first half of 2007 in order to comply with
contractual terms that require the Company to spend a specified
mimimum percentage of premium revenue on direct medical care
costs. No such adjustments were made to revenue during the first half
of 2006. Absent this accrual, the New Mexico health plan’s medical
care ratio in the first half of 2007 would have been 80.9%, an improvement
of
240 basis points year-over-year.
-MORE-
MOH
Reports Second Quarter Results
Page
6
August
2,
2007
General
and administrative expenses were $130.6 million, or 11.1% of total
revenue, for the first half of 2007 as compared with $107.5 million, or 11.5%
of
total revenue, for the first half of 2006.
Core
G&A expenses decreased to 7.8% of total revenue for the six
months ended June 30, 2007, compared with 8.6% in the same period of
2006. The decline in Core G&A as a percentage of total revenue is
due to higher premium revenue than commensurate G&A
expenses. Core G&A on a per member per month basis increased
slightly (less than 1%) in the first half of 2007 when compared with the
first
half of 2006, while premium revenue per member per month increased by over
10%.
Cash
Flow
Cash
provided by operating activities for the six months ended June 30, 2007,
was
$88.0 million. For the same period in 2006, cash provided by
operating activities was $38.6 million. Net income, increased
deferred revenue at the Company’s Ohio health plan and the timing of payments
for medical claims and benefits payable were the primary sources of cash
provided by operating activities. Medical claims liabilities of the
Indiana health plan, which had no membership effective January 1, 2007, declined
by $18.2 million between December 31, 2006 and June 30, 2007. Absent
the Indiana claims run-out, medical claims liabilities increased by $31.4
million during the six months ended June 30, 2007, as a result of enrollment
growth at the Company’s Ohio and Texas health plans.
During
the
first half of 2007, the Company repaid $15.0 million owed under its $200
million
credit facility. At June 30, 2007, the Company owed $30.0 million
under the facility.
On
a
consolidated basis, at June 30, 2007, the Company had cash and investments
(exclusive of restricted investments) of approximately $550.0
million. The parent company had cash and investments of approximately
$31.9 million.
Conference
Call
The
Company’s management will host a conference call and webcast to discuss its
second quarter results at 5:00 p.m. Eastern Time on Thursday, August 2,
2007. The telephone number for this interactive conference call is
212-676-5392, and the live webcast of the call can be accessed on the Company’s
website at www.molinahealthcare.com, or at
www.earnings.com. A 30-day online replay will be available
beginning approximately one hour following the conclusion of the call and
webcast.
-MORE-
MOH
Reports Second Quarter Results
Page
7
August
2,
2007
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
government-sponsored programs for low-income families and
individuals. Molina Healthcare, Inc. currently operates health plans
in California, Michigan, New Mexico, Ohio, Texas, 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” or ”expectations,” “believes,”
“anticipates,” “plans,” “projects,” “estimates,” “intends,” and similar words
and expressions. In addition, any statements that explicitly or
impliedly refer to earnings guidance, expectations, projections, or their
underlying assumptions, or other characterizations of future events or
circumstances, are forward-looking statements. All of our
forward-looking statements are based on 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 continuing
achievement of a decrease in the medical care ratio of our start-up health
plans
in Ohio and Texas; the continuing achievement of projected savings from a
decrease in the medical care ratio of our California health plan; an increase
in
enrollment in our Ohio and Texas health plans and in our dual eligible
population consistent with our expectations; our ability to reduce
administrative costs in the event enrollment or revenue is lower than expected;
higher than expected costs associated with the addition of new members in
Ohio
or Texas or dual eligible members and risks related to our lack of experience
with such members; our ability to accurately estimate incurred but not reported
medical costs; the securing of adequate premium rate increases, particularly
in
the states of California, Michigan, and New Mexico; the rebasing of DRG rates
in
Washington; costs associated with the non-renewal and run-out of the Medicaid
contract of our Indiana health plan; the successful renewal and continuation
of
the government contracts of our health plans; the finalization of a contract
amendment in New Mexico consistent with our expectations; increased
administrative costs in support of the Company’s efforts to expand Medicare
membership; the payment of savings sharing income by the state of Utah to
our
Utah plan consistent with our expectations; the availability of
adequate financing to fund and/or capitalize our acquisitions and start-up
activities; the successful and cost-effective integration of our acquisitions;
membership eligibility processes and methodologies; unexpected changes in
member
utilization patterns, healthcare practices, or healthcare technologies; high
dollar claims related to catastrophic illness; changes in federal or state
laws
or regulations or in their interpretation; failure to maintain effective
and
efficient information systems and claims processing technology; the favorable
resolution of pending litigation or arbitration; funding decreases in the
Medicaid, SCHIP, or Medicare programs or the failure to timely renew the
SCHIP
program; competition; epidemics such as the avian flu; and other risks and
uncertainties as detailed in our reports and filings with the Securities
and
Exchange Commission and available on its website at
www.sec.gov. All forward-looking statements in this release
represent our judgment as of August 2, 2007. We disclaim any
obligation to update any forward-looking statement to conform the statement
to
actual results or changes in our expectations.
-MORE-
MOH
Reports Second Quarter Results
Page
8
August
2,
2007
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars
in thousands, except for per share data)
(Unaudited)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Revenue:
|
||||||||||||||||
|
Premium
revenue
|
$ |
607,127
|
$ |
479,823
|
$ |
1,163,362
|
$ |
929,117
|
||||||||
|
Investment
income
|
6,761
|
4,811
|
13,429
|
8,893
|
||||||||||||
|
Total
revenue
|
613,888
|
484,634
|
1,176,791
|
938,010
|
||||||||||||
|
Expenses:
|
||||||||||||||||
|
Medical
care costs:
|
||||||||||||||||
|
Medical
services
|
117,317
|
86,020
|
228,208
|
160,878
|
||||||||||||
|
Hospital
and specialty services
|
336,587
|
267,689
|
644,729
|
530,559
|
||||||||||||
|
Pharmacy
|
62,961
|
48,006
|
120,405
|
93,525
|
||||||||||||
|
Total
medical care costs
|
516,865
|
401,715
|
993,342
|
784,962
|
||||||||||||
|
General
and administrative expenses
|
67,208
|
56,308
|
130,596
|
107,521
|
||||||||||||
|
Depreciation
and amortization
|
6,749
|
4,870
|
13,192
|
9,632
|
||||||||||||
|
Impairment
charge on purchased software (1)
|
782
|
-
|
782
|
-
|
||||||||||||
|
Total
expenses
|
591,604
|
462,893
|
1,137,912
|
902,115
|
||||||||||||
|
Operating
income
|
22,284
|
21,741
|
38,879
|
35,895
|
||||||||||||
|
Other
expense:
|
||||||||||||||||
|
Interest
expense
|
(725 | ) | (577 | ) | (1,850 | ) | (991 | ) | ||||||||
|
Total
other expense
|
(725 | ) | (577 | ) | (1,850 | ) | (991 | ) | ||||||||
|
Income
before income taxes
|
21,559
|
21,164
|
37,029
|
34,904
|
||||||||||||
|
Income
tax expense
|
8,245
|
8,012
|
14,123
|
13,162
|
||||||||||||
|
Net
income
|
$ |
13,314
|
$ |
13,152
|
$ |
22,906
|
$ |
21,742
|
||||||||
|
Net
income per share:
|
||||||||||||||||
|
Basic
|
$ |
0.47
|
$ |
0.47
|
$ |
0.81
|
$ |
0.78
|
||||||||
|
Diluted
|
$ |
0.47
|
$ |
0.47
|
$ |
0.81
|
$ |
0.77
|
||||||||
|
Weighted
average number of common shares and potentially dilutive common
shares
outstanding
|
28,343,000
|
28,270,000
|
28,309,000
|
28,207,000
|
||||||||||||
|
Operating
Statistics:
|
||||||||||||||||
|
Medical
care ratio (2)
|
85.1 | % | 83.7 | % | 85.4 | % | 84.5 | % | ||||||||
|
General
and administrative expense ratio (3),
excluding
premium taxes
|
7.7 | % | 8.6 | % | 7.8 | % | 8.6 | % | ||||||||
|
Premium
taxes included in general and administrative
expenses
|
3.2 | % | 3.0 | % | 3.3 | % | 2.9 | % | ||||||||
|
Total
general and administrative expense ratio
|
10.9 | % | 11.6 | % | 11.1 | % | 11.5 | % | ||||||||
|
Depreciation
and amortization expense ratio (4)
|
1.1 | % | 1.0 | % | 1.1 | % | 1.0 | % | ||||||||
|
Effective
tax rate
|
38.2 | % | 37.9 | % | 38.1 | % | 37.7 | % | ||||||||
|
(1)
|
Amounts
represent an impairment charge related to commercial software no
longer
used for operations.
|
|
(2)
|
Medical
care ratio represents medical care costs as a percentage of premium
revenue.
|
|
(3)
|
General
and administrative expense ratio represents such expenses as a
percentage
of total revenue.
|
|
(4)
|
Depreciation
and amortization expense ratio represents such expenses as a percentage
of
total revenue.
|
-MORE-
MOH
Reports Second Quarter Results
Page
9
August
2,
2007
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars
in thousands, except per share data)
|
|
June
30,
|
Dec.
31,
|
|||||||
|
2007
|
2006
|
||||||||
|
(Unaudited)
|
|||||||||
|
ASSETS
|
|||||||||
|
Current
assets:
|
|||||||||
|
Cash
and cash equivalents
|
$ |
471,502
|
$ |
403,650
|
|||||
|
Investments
|
78,492
|
81,481
|
|||||||
|
Receivables
|
106,309
|
110,835
|
|||||||
|
Income
tax receivable
|
2,515
|
7,960
|
|||||||
|
Deferred
income taxes
|
2,708
|
313
|
|||||||
|
Prepaid
expenses and other current assets
|
10,616
|
9,263
|
|||||||
|
Total
current assets
|
672,142
|
613,502
|
|||||||
|
Property
and equipment, net
|
45,503
|
41,903
|
|||||||
|
Goodwill
and intangible assets, net
|
137,274
|
143,139
|
|||||||
|
Restricted
investments
|
23,480
|
20,154
|
|||||||
|
Receivable
for ceded life and annuity contracts
|
31,400
|
32,923
|
|||||||
|
Other
assets
|
12,926
|
12,854
|
|||||||
|
Total
assets
|
$ |
922,725
|
$ |
864,475
|
|||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Medical
claims and benefits payable
|
$ |
303,239
|
$ |
290,048
|
||||
|
Deferred
revenue
|
44,325
|
18,120
|
||||||
|
Accounts
payable and accrued liabilities
|
51,815 | 46,725 | ||||||
|
Total
current liabilities
|
399,379 | 354,893 | ||||||
|
Long-term
debt
|
30,000
|
45,000
|
||||||
|
Deferred
income taxes
|
3,576
|
6,700
|
||||||
|
Liability
for ceded life and annuity contracts
|
31,400
|
32,923
|
||||||
|
Other
long-term liabilities
|
9,723
|
4,793
|
||||||
| Total liabilities | 474.078 | 444,309 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Common
stock, $0.001 par value; 80,000,000 shares authorized; issued
and
outstanding: 28,284,263 shares at June 30, 2007, and 28,119,026
shares at
December 31, 2006
|
28
|
28 | ||||||
|
Preferred
stock, $0.001 par value; 20,000,000 shares authorized, no shares
issued
and outstanding
|
— | — | ||||||
|
Additional
paid-in capital
|
179,815
|
173,990 | ||||||
|
Accunulated
other comprehensive loss
|
(141 | ) | (337 | ) | ||||
|
Retained
earnings
|
289,335
|
266,875 | ||||||
|
Treasury
stock (1,201,174 shares, at cost)
|
(20,390 | ) | (20,390 | ) | ||||
|
Total
stockholders' equity
|
448,647
|
420,166 | ||||||
|
Total
liabilities and stockholders' equity
|
$ |
922,725
|
$ |
864,475
|
-MORE-
MOH
Reports Second Quarter Results
Page
10
August
2,
2007
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars
in thousands)
(Unaudited)
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2007
|
2006
|
|||||||
|
Operating
activities:
|
||||||||
|
Net
income
|
$ |
22,906
|
$ |
21,742
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
13,192
|
9,632
|
||||||
|
Amortization
of capitalized credit facility fees
|
475
|
429
|
||||||
|
Deferred
income taxes
|
(4,763 | ) | (2,483 | ) | ||||
|
Stock-based
compensation
|
3,644
|
2,747
|
||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Receivables
|
4,526
|
(6,208 | ) | |||||
|
Prepaid
expenses and other current assets
|
(1,353 | ) |
3,098
|
|||||
|
Medical
claims and benefits payable
|
13,191
|
9,919
|
||||||
|
Deferred
revenue
|
26,205
|
—
|
||||||
|
Accounts
payable and accrued liabilities
|
4,736
|
(2,922 | ) | |||||
|
Income
taxes
|
5,232
|
2,634
|
||||||
|
Net
cash provided by operating activities
|
87,991
|
38,588
|
||||||
|
Investing
activities:
|
||||||||
|
Purchases
of property and equipment
|
(10,440 | ) | (7,333 | ) | ||||
|
Purchases
of investments
|
(42,816 | ) | (57,737 | ) | ||||
|
Sales
and maturities of investments
|
46,117
|
66,476
|
||||||
|
Net
cash acquired in purchase transactions
|
—
|
5,820
|
||||||
|
(Increase)
decrease in restricted cash
|
(3,326 | ) |
940
|
|||||
|
Increase
in other long-term liabilities
|
4,484
|
106
|
||||||
|
Increase
in other assets
|
(864 | ) | (1,070 | ) | ||||
|
Net
cash (used in) provided by investing activities
|
(6,845 | ) |
7,202
|
|||||
|
Financing
activities:
|
||||||||
|
Borrowings
under credit facility
|
—
|
20,000
|
||||||
|
Repayment
of amounts borrowed under credit facility
|
(15,000 | ) | (5,000 | ) | ||||
|
Payment
of credit facility fees
|
(475 | ) |
—
|
|||||
|
Repurchase
and retirement of common stock
|
(117 | ) |
—
|
|||||
|
Tax
benefit from exercise of employee stock options
|
||||||||
|
recorded
as additional paid-in capital
|
642
|
653
|
||||||
|
Proceeds
from exercise of stock options and employee stock
purchases
|
1,656
|
1,472
|
||||||
|
Net
cash (used in) provided by financing activities
|
(13,294 | ) |
17,125
|
|||||
|
Net
increase in cash and cash equivalents
|
67,852
|
62,915
|
||||||
|
Cash
and cash equivalents at beginning of period
|
403,650
|
249,203
|
||||||
|
Cash
and cash equivalents at end of period
|
$ |
471,502
|
$ |
312,118
|
||||
-MORE-
MOH
Reports Second Quarter Results
Page
11
August
2,
2007
MOLINA
HEALTHCARE, INC.
MEMBERSHIP
DATA
(Unaudited)
|
June
30,
|
March
31,
|
June
30,
|
||||||||||
|
Total
Ending Membership by Health Plan:
|
2007
|
2007
|
2006
|
|||||||||
|
California
|
291,000
|
294,000
|
307,000
|
|||||||||
|
Michigan
|
217,000
|
221,000
|
232,000
|
|||||||||
|
New
Mexico
|
66,000
|
65,000
|
59,000
|
|||||||||
|
Ohio
|
138,000
|
127,000
|
30,000
|
|||||||||
|
Texas
|
30,000
|
31,000
|
N/A
|
(2) | ||||||||
|
Utah
|
47,000
|
49,000
|
57,000
|
|||||||||
|
Washington
|
287,000
|
287,000
|
286,000
|
|||||||||
|
Subtotal
|
1,076,000
|
1,074,000
|
971,000
|
|||||||||
|
Indiana
|
N/A
|
(1) |
N/A
|
(1) | 37,000 | (1) | ||||||
|
Total
|
1,076,000
|
1,074,000
|
1,008,000
|
|||||||||
|
(1)
|
The
Company’s Indiana health plan ceased serving members effective January
1,
2007.
|
|
(2)
|
The
Company’s Texas health plan commenced operations in September
2006.
|
|
Total
Ending Membership by State for the Company’s
|
June
30,
|
March
31,
|
June
30,
|
|||||||||
|
Medicare
Advantage Special Needs Plans:
|
2007
|
2007
|
2006
|
|||||||||
|
California
|
724
|
623
|
234
|
|||||||||
|
Michigan
|
459
|
183
|
50
|
|||||||||
|
Nevada
|
9
|
-
|
-
|
|||||||||
|
Utah
|
1,646
|
1,533
|
1,385
|
|||||||||
|
Washington
|
413
|
298
|
111
|
|||||||||
|
Total
|
3,251
|
2,637
|
1,780
|
|||||||||
|
Total
Ending Membership by State for the Company’s
|
June
30,
|
March
31,
|
June
30,
|
|||||||||
|
Aged,
Blind and Disabled (“ABD”) Population:
|
2007
|
2007
|
2006
|
|||||||||
|
California
|
10,728
|
10,681
|
10,261
|
|||||||||
|
Michigan
|
31,940
|
32,406
|
22,737
|
|||||||||
|
New
Mexico
|
6,822
|
6,628
|
6,649
|
|||||||||
|
Ohio
|
15,117
|
3,959
|
-
|
|||||||||
|
Texas
|
16,603
|
17,108
|
-
|
|||||||||
|
Utah
|
6,876
|
6,749
|
6,961
|
|||||||||
|
Washington
|
2,693
|
2,674
|
2,679
|
|||||||||
|
Total
|
90,779
|
80,205
|
49,287
|
|||||||||
|
Quarter
Ended
|
Six
Months Ended
|
|||||||||||||||||||
|
Total
Member Months (1)
|
June
30,
|
March
31,
|
June
30,
|
June
30,
|
June
30,
|
|||||||||||||||
|
by
Health Plan:
|
2007
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||||
|
California
|
874,000
|
886,000
|
927,000
|
1,760,000
|
1,874,000
|
|||||||||||||||
|
Michigan
|
658,000
|
669,000
|
565,000
|
1,327,000
|
996,000
|
|||||||||||||||
|
New
Mexico
|
197,000
|
192,000
|
176,000
|
389,000
|
354,000
|
|||||||||||||||
|
Ohio
|
399,000
|
340,000
|
86,000
|
739,000
|
134,000
|
|||||||||||||||
|
Texas
|
91,000
|
66,000
|
N/A
|
(3) |
157,000
|
N/A
|
(3) | |||||||||||||
|
Utah
|
145,000
|
151,000
|
179,000
|
296,000
|
360,000
|
|||||||||||||||
|
Washington
|
860,000
|
856,000
|
858,000
|
1,716,000
|
1,726,000
|
|||||||||||||||
|
Subtotal
|
3,224,000
|
3,160,000
|
2,791,000
|
6,384,000
|
5,444,000
|
|||||||||||||||
|
Indiana
|
N/A
|
(2) |
N/A
|
(2) |
99,000
|
N/A
|
(2) |
178,000
|
||||||||||||
|
Total
|
3,224,000
|
3,160,000
|
2,890,000
|
6,384,000
|
5,622,000
|
|||||||||||||||
|
(1)
|
Total
member months is defined as the aggregate of each month’s ending
membership for the period.
|
|
(2)
|
The
Company’s Indiana health plan ceased serving members effective January
1,
2007.
|
|
(3)
|
The
Company’s Texas health plan commenced operations in September
2006.
|
-MORE-
MOH
Reports Second Quarter Results
Page
12
August
2,
2007
MOLINA
HEALTHCARE, INC.
SELECTED
FINANCIAL DATA BY HEALTH PLAN
(Dollars
in thousands except PMPM amounts)
(Unaudited)
|
Three
Months Ended June 30, 2007
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||
|
California
|
$ |
94,710
|
$ |
108.43
|
$ |
76,185
|
$ |
87.22
|
80.4 | % | $ |
3,202
|
||||||||||||
|
Michigan
|
121,427
|
184.43
|
101,184
|
153.68
|
83.3 | % |
7,364
|
|||||||||||||||||
|
New
Mexico
|
61,337
|
312.44
|
52,949
|
269.71
|
86.3 | % |
1,394
|
|||||||||||||||||
|
Ohio
|
111,457
|
279.18
|
101,515
|
254.28
|
91.1 | % |
5,016
|
|||||||||||||||||
|
Texas
|
24,953
|
273.48
|
22,774
|
249.59
|
91.3 | % |
433
|
|||||||||||||||||
|
Utah
|
30,033
|
206.15
|
26,535
|
182.14
|
88.4 | % |
—
|
|||||||||||||||||
|
Washington
|
162,905
|
189.45
|
130,726
|
152.02
|
80.2 | % |
2,685
|
|||||||||||||||||
|
Other
|
305
|
—
|
4,997
|
—
|
—
|
(19 | ) | |||||||||||||||||
|
Total
|
$ |
607,127
|
$ |
188.30
|
$ |
516,865
|
$ |
160.30
|
85.1 | % | $ |
20,075
|
||||||||||||
|
Three
Months Ended June 30, 2006
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||
|
California
|
$ |
92,032
|
$ |
99.34
|
$ |
82,254
|
$ |
88.79
|
89.4 | % | $ |
2,957
|
||||||||||||
|
Michigan
|
101,822
|
180.32
|
79,999
|
141.67
|
78.6 | % |
6,013
|
|||||||||||||||||
|
New
Mexico
|
53,860
|
305.87
|
43,486
|
246.96
|
80.7 | % |
1,998
|
|||||||||||||||||
|
Ohio
|
18,467
|
214.96
|
16,696
|
194.35
|
90.4 | % |
813
|
|||||||||||||||||
|
Utah
|
43,626
|
243.58
|
40,062
|
223.67
|
91.8 | % |
—
|
|||||||||||||||||
|
Washington
|
153,344
|
178.64
|
118,284
|
137.80
|
77.1 | % |
2,646
|
|||||||||||||||||
|
Indiana
|
16,696
|
167.50
|
15,564
|
156.15
|
93.2 | % |
—
|
|||||||||||||||||
|
Other
|
(24 | ) |
—
|
5,370
|
—
|
—
|
—
|
|||||||||||||||||
|
Total
|
$ |
479,823
|
$ |
166.01
|
$ |
401,715
|
$ |
138.99
|
83.7 | % | $ |
14,427
|
||||||||||||
|
Six
Months Ended June 30, 2007
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||
|
California
|
$ |
187,642
|
$ |
106.64
|
$ |
152,509
|
$ |
86.68
|
81.3 | % | $ |
6,232
|
||||||||||||
|
Michigan
|
245,193
|
184.75
|
205,785
|
155.05
|
83.9 | % |
14,873
|
|||||||||||||||||
|
New
Mexico
|
118,530
|
305.11
|
102,168
|
262.99
|
86.2 | % |
3,610
|
|||||||||||||||||
|
Ohio
|
186,401
|
252.13
|
170,777
|
231.00
|
91.6 | % |
8,388
|
|||||||||||||||||
|
Texas
|
39,409
|
250.35
|
36,122
|
229.47
|
91.7 | % |
690
|
|||||||||||||||||
|
Utah
|
60,960
|
205.88
|
55,001
|
185.76
|
90.2 | % |
—
|
|||||||||||||||||
|
Washington
|
324,887
|
189.33
|
261,985
|
152.67
|
80.6 | % |
5,369
|
|||||||||||||||||
|
Other
|
340
|
—
|
8,995
|
—
|
—
|
14
|
||||||||||||||||||
|
Total
|
$ |
1,163,362
|
$ |
182.23
|
$ |
993,342
|
$ |
155.60
|
85.4 | % | $ |
39,176
|
||||||||||||
|
Six
Months Ended June 30, 2006
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
|
Premium
Tax
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
Care
Ratio
|
Expense
|
|||||||||||||||||||
|
California
|
$ |
185,571
|
$ |
99.03
|
$ |
160,316
|
$ |
85.55
|
86.4 | % | $ |
5,984
|
||||||||||||
|
Michigan
|
179,530
|
180.31
|
139,901
|
140.51
|
77.9 | % |
10,754
|
|||||||||||||||||
|
New
Mexico
|
109,440
|
309.09
|
91,124
|
257.36
|
83.3 | % |
3,875
|
|||||||||||||||||
|
Ohio
|
28,578
|
213.62
|
25,733
|
192.36
|
90.1 | % |
1,269
|
|||||||||||||||||
|
Utah
|
87,473
|
242.85
|
79,867
|
221.73
|
91.3 | % |
—
|
|||||||||||||||||
|
Washington
|
308,252
|
178.56
|
250,428
|
145.07
|
81.2 | % |
5,350
|
|||||||||||||||||
|
Indiana
|
30,247
|
169.70
|
27,596
|
154.83
|
91.2 | % |
—
|
|||||||||||||||||
|
Other
|
26
|
—
|
9,997
|
—
|
—
|
—
|
||||||||||||||||||
|
Total
|
$ |
929,117
|
$ |
165.26
|
$ |
784,962
|
$ |
139.62
|
84.5 | % | $ |
27,232
|
||||||||||||
-MORE-
MOH
Reports Second Quarter Results
Page
13
August
2,
2007
MOLINA
HEALTHCARE, INC.
CHANGE
IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars
in thousands)
(Unaudited)
The
following table shows the components of the change in medical claims and
benefits payable for the six months ended June 30, 2007 and 2006:
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2007
|
2006
|
|||||||
|
Balances
at beginning of period
|
$ |
290,048
|
$ |
217,354
|
||||
|
Medical
claims and benefits payable from business acquired during the
period
|
—
|
22,516
|
||||||
|
Components
of medical care costs related to:
|
||||||||
|
Current
year
|
1,036,378
|
819,466
|
||||||
|
Prior
years
|
(43,036 | ) | (34,504 | ) | ||||
|
Total
medical care costs
|
993,342
|
784,962
|
||||||
|
Payments
for medical care costs related to:
|
||||||||
|
Current
year
|
764,638
|
603,585
|
||||||
|
Prior
years
|
215,513
|
171,458
|
||||||
|
Total
paid
|
980,151
|
775,043
|
||||||
|
Balances
at end of period
|
$ |
303,239
|
$ |
249,789
|
||||
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. Accordingly, any benefit recognized in medical care costs resulting from favorable development of an estimated liability at the start of the period (captured as a component of “medical care costs related to prior years”) may be offset by the addition of an allowance for adverse claims development when estimating the liability at the end of the period (captured as a component of “medical care costs related to current year”). During the second quarter of 2006, the Company recognized a net benefit in medical care costs of approximately $5.0 million due to favorable development of its medical claims liability at December 31, 2005.
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2007
|
2006
|
|||||||
|
Days
in claims payable
|
54
|
54
|
||||||
|
Number
of members at end of period
|
1,076,000
|
1,008,000
|
||||||
|
Number
of claims in inventory at end of period (1)
|
254,794
|
279,052
|
||||||
|
Billed
charges of claims in inventory at end of period (1)
|
$ |
260,108
|
$ |
259,015
|
||||
|
Claims
in inventory per member at end of period (1)
|
0.24
|
0.30
|
||||||
|
(1)
|
2006
claims data excludes information for Cape Health Plan membership
of
approximately 88,000 members. Cape membership was processed on
a separate claims platform through December 31,
2006.
|
-END-