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): April 29, 2009
MOLINA
HEALTHCARE, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
1-31719
|
13-4204626
|
||
|
(State
of incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification
Number)
|
200
Oceangate, Suite 100, Long Beach, California 90802
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (562) 435-3666
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
2.02. Results of Operations and Financial
Condition.
On April 29, 2009, Molina
Healthcare, Inc. issued a press release announcing its financial results for the
first quarter ended March 31, 2009. The full text of the press
release is included as Exhibit 99.1 to this report. The information
contained in the websites cited in the press release is not part of this
report.
The information in this Form 8-K and
the exhibit attached hereto shall not be deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except as expressly set forth by specific reference in such a
filing.
Item
9.01. Financial Statements and
Exhibits.
(d) Exhibits:
|
Exhibit
No.
|
Description |
|
99.1
|
Press
release of Molina Healthcare, Inc. issued April 29, 2009, as to financial
results for the first quarter ended March 31,
2009.
|
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:
April 29, 2009
|
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 April 29, 2009, as to financial
results for the first quarter ended March 31,
2009.
|
News
Release
Contact:
Juan José
Orellana
Investor
Relations
562-435-3666,
ext. 111143
MOLINA
HEALTHCARE REPORTS
FIRST
QUARTER 2009 RESULTS
|
●
|
Net
income for the quarter comparable to prior
year;
|
|
●
|
Cash
flows from operations up $90
million;
|
|
●
|
Quarterly
premium revenues of $857 million, up
18%;
|
|
●
|
Medical
margin (premium revenue minus medical care costs) of $120 million, up
16%;
|
|
●
|
Aggregate
membership up 10% over first quarter of
2008;
|
|
●
|
Results
reflect $3.9 million year-over-year decrease in investment income ($0.09
per diluted share);
|
|
●
|
Repurchase
authorized for up to $25 million in the aggregate of either common stock
or convertible debt; and
|
|
●
|
2009
guidance confirmed at range of $2.20 to $2.40 per diluted
share.
|
Long Beach, California (April 29,
2009) – Molina Healthcare, Inc. (NYSE: MOH) today reported net income for
the quarter ended March 31, 2009, of $12.2 million, or $0.46 per diluted share,
compared with net income of $12.5 million, or $0.44 per diluted share, for the
quarter ended March 31, 2008.
In
commenting on the results, J. Mario Molina, M.D., president and chief executive
officer of Molina Healthcare, said, “Our first quarter results were marked by
higher enrollment, strong growth in premium revenue, and effective management of
our administrative costs. Our results reflect the increasing strength of
our diversified earnings stream, which allows us to continue to perform well
despite the very challenging economic environment for many of our state
government partners. We remain focused on continuing to leverage our
administrative efficiency and on growing our consolidated
earnings.”
Earnings
Per Share Guidance
The
Company confirms its guidance issued on January 22, 2009, for fiscal year 2009
earnings per diluted share of between $2.20 and $2.40 for the full year of
2009.
-MORE-
MOH
Reports First Quarter 2009 Results
Page
2
April
29, 2009
Adoption
of New Convertible Debt Accounting
The
Company’s 2008 results have been recast to reflect the adoption of FASB Staff
Position (FSP) APB 14-1, Accounting for Convertible Debt
Instruments That May be Settled in Cash upon Conversion (Including Partial Cash
Settlement). This adjustment resulted in additional interest
expense of $1.1 million ($0.02 per diluted share) for the quarter ended March
31, 2008.
Overview
of Financial Results
First
Quarter 2009 Compared with First Quarter 2008
First
quarter 2009 net income of $12.2 million was comparable to first quarter 2008
net income of $12.5 million. Strong first quarter growth in premium
revenue, primarily due to higher enrollment, offset a slight increase in the
medical care ratio. Higher premium revenue also provided greater
administrative leverage as core administrative expense (defined as
administrative expenses excluding premium taxes) dropped to 7.6% of total
operating revenue in 2009 from 7.8% in 2008. The $3.9 million, or
52%, quarter-over-quarter drop in investment income in 2009 was partially offset
by a $1.5 million gain from the repurchase of the Company’s convertible senior
notes.
First
Quarter 2009 Compared with Fourth Quarter 2008
Net income
for the first quarter of 2009 was approximately $3 million less than for the
fourth quarter of 2008. Higher enrollment generated sequential
premium revenue growth of approximately 6%, which was offset by an increase in
the medical care ratio associated with typical seasonality. The
Company’s continued efforts to generate administrative expense leverage resulted
in a decrease in core administrative costs as a percentage of total operating
revenue.
Financial
Results – Quarter Ended March 31, 2009
Premium
revenue for the first quarter of 2009 was $857.5 million, an increase of
$127.9 million, or 18%, over the first quarter of 2008, and an increase of $48.6
million, or 6%, sequentially.
Consolidated
membership increased 10% between the quarter ended March 31, 2009, and the
quarter ended March 31, 2008, and 3.7%, sequentially. Excluding
membership at the Florida health plan, consolidated membership increased 2.4%,
sequentially.
Increased
membership contributed approximately 67% of the growth in premium revenue
between the first quarter of 2009 and the first quarter of 2008, and increases
in per member per month revenue, as a result of both rate changes and shifts in
member mix, contributed the other 33%. Similarly, increased
membership contributed approximately 65% of the growth in premium revenue,
sequentially, and increases in per member per month revenue contributed the
other 35%.
Medicare
premium revenue for the first quarter of 2009 was $27.1 million, compared with
$21.3 million in the first quarter of 2008 and $22.7 million in the fourth
quarter of 2008.
-MORE-
MOH
Reports First Quarter 2009 Results
Page
3
April
29, 2009
Significant
contributors to the $127.9 million increase in quarterly premium revenue in 2009
compared with 2008 included the following:
|
●
|
A
$62.6 million increase in Medicaid premium revenue at the Ohio health
plan. Approximately $49 million of the increase in revenue was
due to higher enrollment, and the remainder of $13 million was due to the
increase in per member per month revenue as a result of both rate changes
and shifts in member mix.
|
|
●
|
A
$19.7 million increase in Medicaid premium revenue as a result of the
start-up of Florida health plan operations in December
2008.
|
|
●
|
A
$10.4 million increase in Medicaid premium revenue at the Utah health
plan, primarily due to the increase in revenue associated with higher
medical expenses incurred under the Utah health plan’s cost-plus contract
with the state.
|
Significant
contributors to the $48.6 million sequential increase in quarterly premium
revenue were the start-up of the Florida health plan ($19.7 million) and growth
of the Ohio health plan ($18.7 million). Membership at the Ohio
health plan grew approximately 8%, sequentially. Additionally, the
Ohio health plan received a blended rate increase of approximately 5% effective
January 1, 2009.
The Ohio
health plan was granted a three-year New Health Plan Accreditation by the
National Committee on Quality Assurance (NCQA) effective January 26,
2009.
Investment
income for the first quarter of 2009 decreased $3.9 million to $3.5
million, from $7.4 million earned in the first quarter of 2008. This
52% decline was due to lower interest rates in 2009. The Company’s
annualized portfolio yield decreased to 1.9% for 2009, compared with 4.1% for
2008.
Medical care
costs as a percentage of premium revenue (the medical care ratio, or MCR)
increased to 86.1% in the first quarter of 2009, from 85.8% in the first quarter
of 2008, and 84.7% for the fourth quarter ended December 31,
2008. Excluding Medicare, the Company’s medical care ratio was 86.3%
in the first quarter of 2009, 85.8% in the first quarter of 2008, and 84.3% in
the fourth quarter of 2008. The Company typically experiences its
highest medical care ratio (on a consolidated basis) during the first quarter of
the year. Contributing to the year-over-year and sequential changes
were the following:
|
●
|
Rising
fee-for-service costs combined with flat per member per month revenue
(compared with both the first quarter of 2008 and the fourth quarter of
2008) drove the medical care ratio of the California health plan up to
94.5% for the quarter. The California health plan’s medical
care ratio was 88.2% in the first quarter of 2008 and 86.7% in the fourth
quarter of 2008. The year-over-year and sequential increases in
the plan’s medical care ratio were caused primarily by higher
fee-for-service costs.
|
|
●
|
The
medical care ratio of the Florida health plan was 90.2% for its first full
quarter of operations.
|
|
●
|
The
medical care ratio of the Michigan health plan was 82.9% for the quarter,
up slightly from 82.5% in the first quarter of 2008. The
Michigan health plan’s medical care ratio was 76.4% in the fourth quarter
of 2008. The increase in the medical care ratio between the
fourth quarter of 2008 and the first quarter of 2009 reflected a
combination of normal seasonal cost patterns combined with a return to
more typical per member per month medical
costs.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
4
April
29, 2009
|
●
|
The
medical care ratio of the Missouri health plan was 80.0% for the quarter,
down from 89.7% in the first quarter of 2008 and up from 75.0% in the
fourth quarter of 2008. The increase in the medical care ratio
between the fourth quarter of 2008 and the first quarter of 2009 reflected
a combination of normal seasonal cost patterns combined with a return to
more typical per member per month medical
costs.
|
|
●
|
The
medical care ratio of the New Mexico health plan was 88.0% for the
quarter, up from 81.1% in the first quarter of 2008 and 82.0% in the
fourth quarter of 2008. During the first quarter of 2008, the
New Mexico health plan had recognized $6.7 million of premium revenue due
to the reversal of amounts previously recorded as payable to the state of
New Mexico. Absent this revenue adjustment, the New Mexico
health plan’s medical care ratio would have been 87.8% in the first
quarter of 2008.
The sequential increase was due to a modest decrease in per member
per month premium revenue (due to a change in member mix) between the
fourth quarter of 2008 and the first quarter of 2009, coupled with
increased medical costs associated with normal
seasonality.
|
|
●
|
The
medical care ratio of the Ohio health plan, by line of business, was as
follows:
|
|
Three
Months Ended
|
||||||||||||
|
March
31,
2009
|
Dec.
31,
2008
|
March
31,
2008
|
||||||||||
|
Covered
Families and Children (CFC)
|
83.4 | % | 89.2 | % | 88.9 | % | ||||||
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Aged,
Blind or Disabled (ABD)
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85.9 | 95.1 | 92.7 | |||||||||
|
Aggregate
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84.3 | % | 91.5 | % | 90.3 | % | ||||||
The
reduction in the medical care ratio in Ohio during the first quarter was
primarily the result of provider re-contracting, the implementation of an
in-house behavioral healthcare solution, and a blended rate increase of
approximately 5% effective January 1, 2009.
|
●
|
The
medical care ratio of the Texas health plan was 83.0% for the quarter, up
from 76.1% in the first quarter of 2008 and 73.6% in the fourth quarter of
2008. The year-over-year and sequential increases in the plan’s
medical care ratio were primarily due to increases in per member per month
fee-for-service costs.
|
|
●
|
The
medical care ratio of the Utah health plan was 87.5% for the quarter, down
from 88.3% in the first quarter of 2008 and 92.0% in the fourth quarter of
2008. The sequential and year-over-year decreases were
primarily due to higher per member per month premiums from the plan’s
Medicare and Children’s Health Insurance Program (CHIP) lines of
business. These increases more than offset the decrease in the
Utah plan’s cost-plus reimbursement rate effective January 1, 2009, to 8%
from 9%, for its Medicaid line of
business.
|
|
●
|
The
medical care ratio of the Washington health plan was 82.8% for the
quarter, up slightly from 82.5% in the first quarter of 2008 and down
slightly from 83.0% in the fourth quarter of
2008.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
5
April
29, 2009
Days in medical
claims and benefits payable were 42 days at March 31, 2009, 41 days at
December 31, 2008, and 50 days at March 31, 2008.
General and
administrative expenses were $91.5 million, or 10.6% of total revenue,
for the first quarter of 2009, compared with $78.1 million, or 10.6% of total
revenue, for the first quarter of 2008.
Core G&A
expenses (defined as G&A expenses less premium taxes) were 7.6% of
revenue in the first quarter of 2009, compared with 7.8% in the first quarter of
2008 and 8.1% in the fourth quarter of 2008. The decrease in core
G&A compared with the first quarter of 2008 was primarily due to lower
administrative payroll as a percentage of revenue, as indicated in the table
below.
|
Three
Months Ended March 31,
|
||||||||||||||||
|
(in
thousands)
|
2009
|
2008
|
||||||||||||||
|
Amount
|
%
of Total
Revenue
|
Amount
|
%
of Total
Revenue
|
|||||||||||||
|
Medicare-related
administrative costs
|
$ | 4,968 | 0.6 | % | $ | 5,292 | 0.7 | % | ||||||||
|
Non
Medicare-related administrative costs:
|
||||||||||||||||
|
Administrative
payroll, including employee
incentive compensation
|
49,000 | 5.7 | 43,946 | 6.0 | ||||||||||||
|
All
other administrative expense
|
11,439 | 1.3 | 8,502 | 1.1 | ||||||||||||
|
Core
G&A expenses
|
$ | 65,407 | 7.6 | % | $ | 57,740 | 7.8 | % | ||||||||
Interest expense
for both periods presented includes non-cash interest expense relating to
the Company’s convertible senior notes, as a result of the adoption of FSP APB
14-1. The amounts recorded for this additional interest expense
totaled approximately $1.2 million for the first quarter of 2009 ($0.03 per
diluted share) and $1.1 million for the first quarter of 2008 ($0.02 per diluted
share).
Income taxes
were recorded at an effective rate of 41.0% in the first quarter of 2009,
consistent with 40.8%
recorded in the first quarter of 2008.
Cash
Flow
Cash
provided by operating activities for the quarter ended March 31, 2009, was $66.9
million, compared with cash used by operating activities of $23.5 million for
2008, an increase of $90.4 million.
Significant
contributors to this increase included the following:
|
●
|
Increased
deferred revenue of approximately $91 million, primarily due to the timing
of the Ohio health plan’s receipt of premium payments from the state of
Ohio; and
|
|
●
|
Increased
medical claims and benefits payable of approximately $19
million.
|
These
increases were offset by increased receivables of approximately $24 million,
primarily in California and Utah.
-MORE-
MOH
Reports First Quarter 2009 Results
Page
6
April
29, 2009
At March
31, 2009, the Company had cash and investments (not including restricted
investments) of approximately $669.2 million, including non-current auction rate
securities with a fair value of $61.8 million. At March 31, 2009, the
parent company had cash and investments of approximately $70.3 million,
including auction rate securities with a fair value of $18.3
million. At December 31, 2008, the parent company had cash and
investments of approximately $68.9 million.
-MORE-
MOH
Reports First Quarter 2009 Results
Page
7
April
29, 2009
| EBITDA (1) | ||||||||
|
(in
thousands)
|
Three
Months Ended
March
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
Operating
income
|
$ | 24,115 | $ | 24,451 | ||||
|
Add
back:
|
||||||||
|
Depreciation
and amortization expense
|
9,052 | 8,152 | ||||||
|
EBITDA
|
$ | 33,167 | $ | 32,603 | ||||
|
(1)
|
The
Company calculates EBITDA by adding back depreciation and amortization
expense to operating income. EBITDA is not prepared in
conformity with GAAP since it excludes depreciation and amortization
expense, as well as interest expense, and the provision for income
taxes. This non-GAAP financial measure should not be considered
as an alternative to net income, operating income, operating margin, or
cash provided by operating activities. Management uses EBITDA
as a metric in evaluating the Company’s financial performance, in
evaluating financing and business development decisions, and in
forecasting and analyzing future periods. For these reasons,
management believes that EBITDA is a useful supplemental measure to
investors in evaluating the Company’s performance and the performance of
other companies in our industry.
|
Securities
Repurchase Program
Under the
$25 million securities repurchase program announced by the Company in January
2009, the Company repurchased and retired $13.0 million face amount of its
convertible senior notes during the first quarter. The Company
repurchased the notes at an average price of $74.25 per $100 principal amount,
for a total of $9.8 million, including accrued interest. The
pretax gain recognized during the quarter on the repurchase of the notes was
$1.5 million, or approximately $0.04 per diluted share. Also during
the first quarter of 2009, the Company repurchased approximately 808,000 shares
of its common stock for $15 million (average cost of approximately $18.53 per
share). This repurchase increased diluted earnings per share for the
first quarter of 2009 by less than $0.01.
The
Company’s Board of Directors has now authorized the repurchase of up to an
additional $25 million in aggregate of either the Company’s common stock or its
convertible senior notes. The repurchase program will be funded with
working capital, and repurchases may be made from time to time on the open
market or through privately negotiated transactions. The repurchase
program extends through December 31, 2009, but the Company reserves the right to
suspend or discontinue the program at any time.
Conference
Call
The
Company’s management will host a conference call and webcast to discuss its
first quarter results at 5:00 p.m. Eastern Time on Wednesday, April 29,
2009. The telephone number for this interactive conference call is
212-231-2906, and the live webcast of the call can be accessed on the Company’s
website at www.molinahealthcare.com,
or at www.earnings.com. An
online replay will be available beginning approximately one hour following the
conclusion of the call and webcast.
-MORE-
MOH
Reports First Quarter 2009 Results
Page
8
April
29, 2009
Molina Healthcare, Inc. is a multi-state managed care organization that arranges for the delivery of healthcare services to persons eligible for Medicaid, Medicare, and other government-sponsored programs for low-income families and individuals. Molina Healthcare’s ten licensed health plan subsidiaries in California, Florida, Michigan, Missouri, Nevada, New Mexico, Ohio, Texas, Utah, and Washington currently serve approximately 1.3 million members. More information about Molina Healthcare can be obtained at www.molinahealthcare.com.
Safe Harbor Statement under the
Private Securities Litigation Reform Act of 1995: This press release
contains “forward-looking statements” identified by words such as “will,”
“should,” “believes,” “expects” or ”expectations,” “anticipates,” “plans,”
“projects,” “estimates,” “intends,” and similar words and
expressions. In addition, any statements that explicitly or
implicitly refer to 2009 earnings guidance, expectations, projections, or their
underlying assumptions, or other characterizations of future events or
circumstances, are forward-looking statements. All of our
forward-looking statements are based on our current expectations and assumptions
which are subject to numerous known and unknown risks, uncertainties, and other
factors that could cause actual results to differ materially. Such
factors include, without limitation, risks related to: budgetary pressures on
the federal and state governments and their resulting inability to fully fund
Medicaid, Medicare, or CHIP or to maintain membership eligibility thresholds and
criteria; the successful management of our medical costs and the achievement of
our projected medical care ratios in all our health plans; the success of our
efforts to leverage our administrative costs to address the needs associated
with increased enrollment; risks related to our limited experience operating in
Florida; growth in our Medicaid and Medicare enrollment consistent with our
expectations; uncertainties regarding the impact of federal healthcare reform
efforts and the new presidential administration; rate increases and the
maintenance of existing rate levels that are consistent with our expectations;
our inability to pass on to our contracted providers any rate cuts under our
governmental contracts; the budget and liquidity crisis in California and the
state's inability to make payment under its contracts with our California health
plan; the successful resolution of pending rate litigation in California; the
renewal of the provider premium tax beyond October 1, 2009; our ability to
accurately estimate incurred but not reported medical costs across all health
plans; the successful renewal and continuation of the government contracts of
all of our health plans, including the re-selection of our Michigan and Missouri
health plans in response to Medicaid RFPs in 2009; risks related to a flu
epidemic; in light of the current turmoil and illiquidity in credit markets, the
availability of financing to fund and capitalize our acquisitions and start-up
activities and to meet our liquidity needs; the illiquidity of our auction rate
securities; the successful and cost-effective integration of our acquisitions;
earnings seasonality; interest rates on invested balances that are lower than
expected; high profile qui tam matters and negative publicity regarding Medicaid
managed care and Medicare Advantage; changes in funding under our contracts as a
result of regulatory and programmatic adjustments and reforms; approval by state
regulators of dividends and distributions by our subsidiaries; 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; the favorable
resolution of litigation or arbitration matters; 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 the date
of this release. 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 First Quarter 2009 Results
Page
9
April
29, 2009
|
MOLINA
HEALTHCARE, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts
in thousands, except share and per-share data)
|
||||||||
|
Three
Months Ended
March
31,
|
||||||||
|
2009
|
2008
(1)
|
|||||||
|
Revenue:
|
||||||||
|
Premium
revenue
|
$ | 857,484 | $ | 729,638 | ||||
|
Investment
income
|
3,547 | 7,404 | ||||||
|
Total operating
revenue
|
861,031 | 737,042 | ||||||
|
Expenses:
|
||||||||
|
Medical
care costs
|
737,888 | 626,347 | ||||||
|
General
and administrative expenses
|
91,508 | 78,092 | ||||||
|
Depreciation
and amortization
|
9,052 | 8,152 | ||||||
|
Total expenses
|
838,448 | 712,591 | ||||||
|
Gain
on retirement of convertible senior notes
|
1,532 | − | ||||||
|
Operating
income
|
24,115 | 24,451 | ||||||
|
Interest
expense (1)
|
(3,415 | ) | (3,368 | ) | ||||
|
Income
before income taxes (1)
|
20,700 | 21,083 | ||||||
|
Income
tax expense (1)
|
8,489 | 8,608 | ||||||
|
Net
income (1)
|
$ | 12,211 | $ | 12,475 | ||||
|
Net
income per share (1):
|
||||||||
|
Basic
|
$ | 0.46 | $ | 0.44 | ||||
|
Diluted
|
$ | 0.46 | $ | 0.44 | ||||
|
Weighted
average number of common shares and potentially dilutive common shares
outstanding
|
26,561,000 | 28,576,000 | ||||||
|
Operating
Statistics:
|
||||||||
|
Ratio
of medical care costs paid directly to providers to premium
revenue
|
84.0 | % | 83.1 | % | ||||
|
Ratio
of medical care costs not paid directly to providers to
premium revenue
|
2.1 | 2.7 | ||||||
|
Medical
care ratio
(2)
|
86.1 | % | 85.8 | % | ||||
|
General
and administrative expense ratio, excluding premium taxes (core
G&A ratio) (3)
|
7.6 | % | 7.8 | % | ||||
|
Premium
taxes included in general and administrative expenses (3)
|
3.0 | 2.8 | ||||||
|
Total general and
administrative expense ratio (3)
|
10.6 | % | 10.6 | % | ||||
|
Depreciation
and amortization expense ratio (3)
|
1.1 | % | 1.1 | % | ||||
|
Effective
tax rate (1)
|
41.0 | % | 40.8 | % | ||||
|
(1)
|
The
Company’s 2008 results have been recast to reflect the adoption of FSP APB
14-1. This resulted in additional interest expense of $1.1
million ($0.02 per diluted share) for the three months ended March 31,
2008.
|
|
(2)
|
Medical
care ratio represents medical care costs as a percentage of premium
revenue.
|
|
(3)
|
Computed
as a percentage of total operating
revenue.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
10
April
29, 2009
|
MOLINA
HEALTHCARE, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Amounts
in thousands, except per-share data)
|
||||||||
|
March
31,
2009
|
Dec.
31,
2008
(1)
|
|||||||
|
(Unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 405,187 | $ | 387,162 | ||||
|
Investments
|
202,194 | 189,870 | ||||||
|
Receivables
|
158,175 | 128,562 | ||||||
|
Income
taxes refundable
|
265 | 4,019 | ||||||
|
Deferred
income taxes (1)
|
3,884 | 9,071 | ||||||
|
Prepaid
expenses and other current assets
|
17,678 | 14,766 | ||||||
|
Total
current assets
|
787,383 | 733,450 | ||||||
|
Property
and equipment, net
|
70,116 | 65,058 | ||||||
|
Goodwill
and intangible assets, net
|
201,706 | 192,599 | ||||||
|
Investments
|
61,828 | 58,169 | ||||||
|
Restricted
investments
|
37,757 | 38,202 | ||||||
|
Receivable
for ceded life and annuity contracts
|
26,714 | 27,367 | ||||||
|
Other
assets (1)
|
21,450 | 33,223 | ||||||
|
Total
assets
|
$ | 1,206,954 | $ | 1,148,068 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Medical
claims and benefits payable
|
$ | 311,627 | $ | 292,442 | ||||
|
Accounts
payable and accrued liabilities
|
67,006 | 66,247 | ||||||
|
Deferred
revenue
|
82,506 | 29,538 | ||||||
|
Total
current liabilities
|
461,139 | 388,227 | ||||||
|
Long-term
debt (1)
|
155,312 | 164,873 | ||||||
|
Deferred
income taxes (1)
|
12,297 | 12,911 | ||||||
|
Liability
for ceded life and annuity contracts
|
26,714 | 27,367 | ||||||
|
Other
long-term liabilities
|
22,797 | 22,928 | ||||||
|
Total
liabilities
|
678,259 | 616,306 | ||||||
|
Stockholders’
equity:
|
||||||||
|
Common
stock, $0.001 par value; 80,000 shares authorized, outstanding 25,991
shares at March 31, 2009, and 26,725 shares at December 31,
2008
|
27 | 27 | ||||||
|
Preferred
stock, $0.001 par value; 20,000 shares authorized, no
shares outstanding
|
− | − | ||||||
|
Additional
paid-in capital (1)
|
170,411 | 170,681 | ||||||
|
Accumulated
other comprehensive loss
|
(2,342 | ) | (2,310 | ) | ||||
|
Retained
earnings (1)
|
395,965 | 383,754 | ||||||
|
Treasury
stock, at cost; 2,009 shares at March 31, 2009 and 1,201 shares at
December
31, 2008
|
(35,366 | ) | (20,390 | ) | ||||
|
Total
stockholders’ equity
|
528,695 | 531,762 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 1,206,954 | $ | 1,148,068 | ||||
|
(1)
|
The
Company’s financial position as of December 31, 2008, has been recast to
reflect adoption of FSP APB 14-1. The cumulative adjustments to
reduce retained earnings were $3.4 million as of January 1, 2009, and
$604,000 as of January 1, 2008.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
11
April
29, 2009
|
MOLINA
HEALTHCARE, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
|
||||||||
|
Three
Months Ended
March
31,
|
||||||||
|
2009
|
2008
(1)
|
|||||||
|
Operating
activities:
|
||||||||
|
Net
income (1)
|
$ | 12,211 | $ | 12,475 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation and
amortization
|
9,052 | 8,152 | ||||||
|
Unrealized gain on trading
securities
|
(3,639 | ) | − | |||||
|
Loss on rights
agreement
|
3,323 | − | ||||||
|
Gain on retirement of
convertible senior notes
|
(1,532 | ) | − | |||||
|
Deferred income taxes (1)
|
4,988 | (4,774 | ) | |||||
|
Stock-based
compensation
|
1,434 | 1,511 | ||||||
|
Amortization of deferred
financing costs (1)
|
352 | 358 | ||||||
|
Non-cash interest expense on
convertible senior notes (1)
|
1,194 | 1,144 | ||||||
|
Tax deficiency from employee
stock compensation recorded as additional paid-in
capital
|
(533 | ) | (14 | ) | ||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Receivables
|
(29,613 | ) | (6,016 | ) | ||||
|
Prepaid
expenses and other current assets
|
(2,912 | ) | (1,257 | ) | ||||
|
Medical
claims and benefits payable
|
19,185 | 170 | ||||||
|
Accounts
payable and accrued liabilities
|
(2,922 | ) | (4,277 | ) | ||||
|
Deferred
revenue
|
52,968 | (38,062 | ) | |||||
|
Income
taxes
|
3,359 | 7,134 | ||||||
|
Net
cash provided by (used in) operating activities
|
66,915 | (23,456 | ) | |||||
|
Investing
activities:
|
||||||||
|
Purchases
of property and equipment
|
(10,367 | ) | (8,177 | ) | ||||
|
Purchases
of investments
|
(48,127 | ) | (95,817 | ) | ||||
|
Sales
and maturities of investments
|
35,627 | 82,353 | ||||||
|
(Increase)
decrease in restricted investments
|
445 | (787 | ) | |||||
|
Increase
in other assets (1)
|
(1,708 | ) | (1,562 | ) | ||||
|
Increase
(decrease) in other long-term liabilities
|
(131 | ) | 363 | |||||
|
Net
cash used in investing activities
|
(24,261 | ) | (23,627 | ) | ||||
|
Financing
activities:
|
||||||||
|
Treasury
stock purchases
|
(14,976 | ) | − | |||||
|
Retirement
of convertible senior notes
|
(9,653 | ) | − | |||||
|
Proceeds
from exercise of stock options and employee stock
purchases
|
− | 172 | ||||||
|
Net
cash (used in) provided by financing activities
|
(24,629 | ) | 172 | |||||
|
Net
increase (decrease) in cash and cash equivalents
|
18,025 | (46,911 | ) | |||||
|
Cash
and cash equivalents at beginning of period
|
387,162 | 459,064 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 405,187 | $ | 412,153 | ||||
|
(1)
|
The
Company’s 2008 cash flows have been recast to reflect the adoption of FSP
APB 14-1.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
12
April
29, 2009
|
MOLINA
HEALTHCARE, INC.
UNAUDITED
MEMBERSHIP DATA
|
||||||||||||
|
Total
Ending Membership By Health Plan:
|
March
31,
2009
|
Dec.
31,
2008
|
March
31,
2008
|
|||||||||
|
California
|
327,000 | 322,000 | 303,000 | |||||||||
|
Florida
(1)
|
17,000 | – | – | |||||||||
|
Michigan
|
207,000 | 206,000 | 216,000 | |||||||||
|
Missouri
|
77,000 | 77,000 | 76,000 | |||||||||
|
Nevada
(2)
|
– | – | – | |||||||||
|
New
Mexico
|
83,000 | 84,000 | 78,000 | |||||||||
|
Ohio
|
190,000 | 176,000 | 140,000 | |||||||||
|
Texas
|
33,000 | 31,000 | 28,000 | |||||||||
|
Utah
|
60,000 | 61,000 | 55,000 | |||||||||
|
Washington
|
309,000 | 299,000 | 289,000 | |||||||||
|
Total
|
1,303,000 | 1,256,000 | 1,185,000 | |||||||||
|
Total
Ending Membership By State
for the Medicare Advantage
Plans:
|
||||||||||||
|
California
|
1,500 | 1,500 | 1,200 | |||||||||
|
Michigan
|
2,000 | 1,700 | 1,400 | |||||||||
|
Nevada
|
400 | 700 | 500 | |||||||||
|
New
Mexico
|
400 | 300 | – | |||||||||
|
Texas
|
400 | 400 | 400 | |||||||||
|
Utah
|
2,800 | 2,400 | 2,000 | |||||||||
|
Washington
|
1,000 | 1,000 | 800 | |||||||||
|
Total
|
8,500 | 8,000 | 6,300 | |||||||||
|
Total
Ending Membership By State
for the Aged, Blind or Disabled
Population:
|
||||||||||||
|
California
|
12,600 | 12,700 | 11,700 | |||||||||
|
Florida
(1)
|
4,200 | – | – | |||||||||
|
Michigan
|
30,100 | 30,300 | 31,800 | |||||||||
|
New
Mexico
|
6,200 | 6,300 | 6,800 | |||||||||
|
Ohio
|
19,700 | 19,000 | 14,700 | |||||||||
|
Texas
|
16,700 | 16,200 | 16,100 | |||||||||
|
Utah
|
7,500 | 7,300 | 6,800 | |||||||||
|
Washington
|
3,000 | 3,000 | 3,000 | |||||||||
|
Total
|
100,000 | 94,800 | 90,900 | |||||||||
|
Total
Member Months (3)
by Health Plan:
|
||||||||||||
|
California
|
980,000 | 956,000 | 908,000 | |||||||||
|
Florida
(1)
|
61,000 | – | – | |||||||||
|
Michigan
|
620,000 | 622,000 | 638,000 | |||||||||
|
Missouri
|
231,000 | 232,000 | 223,000 | |||||||||
|
Nevada
|
1,000 | 1,000 | 2,000 | |||||||||
|
New
Mexico
|
248,000 | 254,000 | 228,000 | |||||||||
|
Ohio
|
560,000 | 533,000 | 413,000 | |||||||||
|
Texas
|
98,000 | 91,000 | 85,000 | |||||||||
|
Utah
|
184,000 | 177,000 | 157,000 | |||||||||
|
Washington
|
919,000 | 892,000 | 859,000 | |||||||||
|
Total
|
3,902,000 | 3,758,000 | 3,513,000 | |||||||||
|
(1)
|
The
Florida health plan began serving members in late December
2008.
|
|
(2)
|
Less
than 1,000 members.
|
|
(3)
|
A
total member month is defined as the aggregate of each month’s ending
membership for the period
presented.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
13
April
29, 2009
|
MOLINA
HEALTHCARE, INC.
UNAUDITED
SELECTED FINANCIAL DATA BY HEALTH PLAN
(Dollars
in thousands except per member per month amounts)
|
||||||||||||||||||||||||
|
Three
Months Ended March 31, 2009
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care
Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 110,035 | $ | 112.29 | $ | 103,973 | $ | 106.10 | 94.5 | % | $ | 3,316 | ||||||||||||
|
Florida
(1)
|
19,691 | 323.89 | 17,768 | 292.25 | 90.2 | – | ||||||||||||||||||
|
Michigan
|
132,765 | 213.98 | 109,995 | 177.28 | 82.9 | 6,884 | ||||||||||||||||||
|
Missouri
|
58,707 | 254.00 | 46,974 | 203.24 | 80.0 | – | ||||||||||||||||||
|
Nevada
|
1,230 | 1,094.70 | 434 | 386.51 | 35.3 | – | ||||||||||||||||||
|
New
Mexico
|
81,818 | 329.68 | 72,021 | 290.20 | 88.0 | 2,093 | ||||||||||||||||||
|
Ohio
|
187,222 | 334.13 | 157,780 | 281.58 | 84.3 | 10,192 | ||||||||||||||||||
|
Texas
|
33,011 | 338.14 | 27,406 | 280.73 | 83.0 | 684 | ||||||||||||||||||
|
Utah
|
50,618 | 275.11 | 44,263 | 240.57 | 87.5 | – | ||||||||||||||||||
|
Washington
|
180,704 | 196.66 | 149,545 | 162.75 | 82.8 | 2,947 | ||||||||||||||||||
|
Other
(2)
|
1,683 | – | 7,729 | – | – | (15 | ) | |||||||||||||||||
|
Consolidated
|
$ | 857,484 | $ | 219.73 | $ | 737,888 | $ | 189.09 | 86.1 | % | $ | 26,101 | ||||||||||||
|
Three
Months Ended March 31, 2008
|
||||||||||||||||||||||||
|
Premium
Revenue
|
Medical
Care Costs
|
Medical
Care
Ratio
|
Premium
Tax Expense
|
|||||||||||||||||||||
|
Total
|
PMPM
|
Total
|
PMPM
|
|||||||||||||||||||||
|
California
|
$ | 101,621 | $ | 111.97 | $ | 89,654 | $ | 98.79 | 88.2 |
%
|
$ | 2,958 | ||||||||||||
|
Florida
(1)
|
– | – | – | – | – | – | ||||||||||||||||||
|
Michigan
|
124,753 | 195.42 | 102,900 | 161.19 | 82.5 | 6,939 | ||||||||||||||||||
|
Missouri
|
52,036 | 233.69 | 46,681 | 209.64 | 89.7 | – | ||||||||||||||||||
|
Nevada
|
1,944 | 1,228.10 | 1,626 | 1,027.36 | 83.7 | – | ||||||||||||||||||
|
New
Mexico
|
88,649 | 388.63 | 71,925 | 315.31 | 81.1 | 1,502 | ||||||||||||||||||
|
Ohio
|
124,605 | 301.68 | 112,538 | 272.46 | 90.3 | 5,605 | ||||||||||||||||||
|
Texas
|
23,432 | 274.60 | 17,830 | 208.95 | 76.1 | 476 | ||||||||||||||||||
|
Utah
|
37,346 | 238.51 | 32,991 | 210.69 | 88.3 | – | ||||||||||||||||||
|
Washington
|
175,199 | 203.84 | 144,513 | 168.14 | 82.5 | 2,845 | ||||||||||||||||||
|
Other
(2)
|
53 | – | 5,689 | – | – | 27 | ||||||||||||||||||
|
Consolidated
|
$ | 729,638 | $ | 207.71 | $ | 626,347 | $ | 178.31 | 85.8 |
%
|
$ | 20,352 | ||||||||||||
|
(1)
|
The
Florida health plan began serving members in late December
2008.
|
|
(2)
|
“Other”
medical care costs represent primarily medically related administrative
costs at the parent company.
|
-MORE-
MOH
Reports First Quarter 2009 Results
Page
14
April
29, 2009
|
|
MOLINA
HEALTHCARE, INC.
|
|
|
UNAUDITED
SELECTED FINANCIAL DATA
|
|
|
(Dollars
in thousands except per member per month
amounts)
|
The
following tables provide the details of the Company’s medical care costs for the
periods indicated:
|
Three
Months Ended
March
31, 2009
|
Three
Months Ended
March
31, 2008
|
|||||||||||||||||||||||
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
Amount
|
PMPM
|
%
of Total
Medical
Care
Costs
|
|||||||||||||||||||
|
Fee-for-service
|
$ | 489,141 | $ | 125.35 | 66.3 | % | $ | 412,009 | $ | 117.29 | 65.8 | % | ||||||||||||
|
Capitation
|
118,414 | 30.34 | 16.1 | 103,791 | 29.55 | 16.6 | ||||||||||||||||||
|
Pharmacy
|
102,638 | 26.30 | 13.9 | 86,282 | 24.56 | 13.8 | ||||||||||||||||||
|
Other
|
27,695 | 7.10 | 3.7 | 24,265 | 6.91 | 3.8 | ||||||||||||||||||
|
Total
|
$ | 737,888 | $ | 189.09 | 100.0 | % | $ | 626,347 | $ | 178.31 | 100.0 | % | ||||||||||||
The
following table provides the details of the Company’s medical claims and
benefits payable as of the dates indicated:
|
March
31,
2009
|
Dec.
31,
2008
|
March
31,
2008
|
||||||||||
|
Fee-for-service
claims incurred but not paid (IBNP)
|
$ | 247,111 | $ | 236,492 | $ | 261,462 | ||||||
|
Capitation
payable
|
31,815 | 28,111 | 30,002 | |||||||||
|
Pharmacy
payable
|
24,047 | 18,837 | 15,997 | |||||||||
|
Other
|
8,654 | 9,002 | 4,315 | |||||||||
|
Total medical claims and
benefits payable
|
$ | 311,627 | $ | 292,442 | $ | 311,776 | ||||||
-MORE-
MOH
Reports First Quarter 2009 Results
Page
15
April
29, 2009
MOLINA
HEALTHCARE, INC.
CHANGE
IN MEDICAL CLAIMS AND BENEFITS PAYABLE
(Dollars
in thousands, except per-member amounts)
(Unaudited)
The
Company’s claims liability includes an allowance for adverse claims development
based on historical experience and other factors including, but not limited to,
variation in claims payment patterns, changes in utilization and cost trends,
known outbreaks of disease, and large claims. The Company’s reserving
methodology is consistently applied across all periods presented. The
negative amounts displayed for “Components of medical care costs
related to: Prior years” represent the amount by which our original
estimate of claims and benefits payable at the beginning of the period exceeded
the actual amount of the liability based on information (principally the payment
of claims) developed since that liability was first reported. The
benefit of this prior period development may be offset by the addition of a
reserve for adverse claims development when estimating the liability at the end
of the period (captured in “Components of medical care costs
related to: Current year”). The following table shows the
components of the change in medical claims and benefits payable as of the
periods indicated:
|
Three
Months Ended
March
31,
|
Year
Ended
Dec.
31
|
|||||||||||
|
2009
|
2008
|
2008
|
||||||||||
|
Balances
at beginning of period
|
$ | 292,442 | $ | 311,606 | $ | 311,606 | ||||||
|
Components
of medical care costs related to:
|
||||||||||||
|
Current year
|
780,112 | 668,968 | 2,683,399 | |||||||||
|
Prior years
|
(42,224 | ) | (42,621 | ) | (62,087 | ) | ||||||
|
Total
medical care costs
|
737,888 | 626,347 | 2,621,312 | |||||||||
|
Payments
for medical care costs related to:
|
||||||||||||
|
Current year
|
510,075 | 423,107 | 2,413,128 | |||||||||
|
Prior years
|
208,628 | 203,070 | 227,348 | |||||||||
|
Total
paid
|
718,703 | 626,177 | 2,640,476 | |||||||||
|
Balances
at end of period
|
$ | 311,627 | $ | 311,776 | $ | 292,442 | ||||||
|
Benefit
from prior period as a percentage of:
|
||||||||||||
|
Balance at beginning of
year
|
14.4 | % | 13.7 | % | 19.9 | % | ||||||
|
Premium revenue
|
4.9 | % | 5.8 | % | 2.0 | % | ||||||
|
Total medical care
costs
|
5.7 | % | 6.8 | % | 2.4 | % | ||||||
|
Days
in claims payable
|
42 | 50 | 41 | |||||||||
|
Number
of members at end of period
|
1,303,000 | 1,185,000 | 1,256,000 | |||||||||
|
Number
of claims in inventory at end of period
|
158,900 | 186,500 | 87,300 | |||||||||
|
Billed
charges of claims in inventory at end of period
|
$ | 208,900 | $ | 217,800 | $ | 115,400 | ||||||
|
Claims
in inventory per member at end of period
|
0.12 | 0.16 | 0.07 | |||||||||
|
Billed
charges of claims in inventory per member at
end of period
|
$ | 160.32 | $ | 183.80 | $ | 91.88 | ||||||
|
Number
of claims received during the period
|
3,051,600 | 2,731,600 | 11,095,100 | |||||||||
|
Billed
charges of claims received during the period
|
$ | 2,280,100 | $ | 1,856,100 | $ | 7,794,900 | ||||||
-END-