Home Page
23:49:05 EDT Wed 22 Oct 2014
Enter Symbol
or Name
USA
CA



MOLINA HEALTHCARE INC
Symbol U : MOH
Recent Sedar Documents

CORRECTING and REPLACING Molina Healthcare Reports Fourth Quarter and Year-End 2012 Results

2013-02-07 22:13 ET - News Release


Company Website: http://www.molinahealthcare.com
LONG BEACH, Calif. -- (Business Wire)

The table entitled “Unaudited Change in Medical Claims and Benefits Payable” on page 15 of the press release presented incorrect amounts in the columns entitled “Three Months Ended December 31, 2012,” and “Year Ended December 31, 2012.” Such incorrect amounts were contained in the rows entitled “Payments for medical care costs related to: Current period,” and “Payments for medical care costs related to: Prior period,” and were due to an inadvertent reversal of signs in the computation. No subtotals or totals in the table were incorrect. As amended, “Payments for medical care costs related to: Current period” for the three months ended December 31, 2012 has been corrected to read $906,108; “Payments for medical care costs related to: Prior period” for the three months ended December 31, 2012 has been corrected to read $409,449; “Payments for medical care costs related to: Current period” for the year ended December 31, 2012 has been corrected to read $4,649,363; and “Payments for medical care costs related to: Prior period” for the year ended December 31, 2012 has been corrected to read $355,343.

The corrected release reads:

MOLINA HEALTHCARE REPORTS FOURTH QUARTER AND YEAR-END 2012 RESULTS

Molina Healthcare, Inc. (NYSE: MOH):

  • Quarterly earnings per diluted share of $0.54
  • Full year earnings per diluted share of $0.21
  • Annual revenue of $6 billion, up 26% over 2011
  • Aggregate membership up 6% over 2011
  • Earnings per diluted share guidance of $1.55 for fiscal year 2013

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results for the fourth quarter and year ended December 31, 2012.

Net income for the quarter was $25.6 million, or $0.54 per diluted share, compared with a net loss of $33.0 million, or $0.72 per diluted share, for the quarter ended December 31, 2011. Net income for the year ended December 31, 2012, was $9.8 million, or $0.21 per diluted share, compared with net income of $20.8 million, or $0.45 per diluted share, for the year ended December 31, 2011. Results for the quarter and year ended December 31, 2011, were affected by an impairment charge of $64.6 million related to the Company’s Missouri health plan.

“While 2012 was a difficult year, our achievements during the fourth quarter have given us confidence as we look forward to 2013 and beyond,” said J. Mario Molina, M.D., chief executive officer of Molina Healthcare, Inc. “We have demonstrated that we can reach fair agreements on premium rates with our state partners and that, in time, our patient care programs will produce both better health outcomes and lower medical costs. The challenges we faced in California and Texas in 2012 may be repeated over the next several years in different states and with different members. Our fourth quarter results demonstrate that Molina Healthcare is able to meet those challenges.”

Earnings Per Share Guidance

The Company expects earnings per diluted share of $1.55 for fiscal year 2013. Additional details regarding the Company’s guidance are provided later in this release.

Fourth Quarter 2012 Compared with Third Quarter 2012

Overview

The Company’s financial performance in the fourth quarter of 2012 improved substantially over the third quarter of 2012, as earnings per diluted share increased to $0.54 from $0.07. Modest premium rate increases in some states, along with decreased medical costs, were the primary reasons for the improved financial performance. The ratio of medical care costs to premium revenue net of premium tax (the medical care ratio, or MCR) decreased approximately 450 basis points between the third and fourth quarter of 2012. Medical care ratios decreased at seven of the Company’s nine health plans, most notably in Texas and California.

The Company has changed its method of calculating the medical care ratio effective with the release of its fourth quarter earnings. The Company now calculates the medical care ratio by dividing total medical care costs by premium revenue, net of premium taxes. Previously, the Company did not adjust premium revenue to remove the impact of premium taxes when calculating the medical care ratio. The Company has made this change for all periods presented to allow better comparability of the medical care ratio between periods for health plans operating in states where premium taxes are either increased or decreased. Two states where the Company operates health plans (Michigan and California) either reduced or eliminated their premium tax during 2012.

Premium Revenue

Premium revenue increased $29.2 million to $1,480.0 million in the fourth quarter of 2012, from $1,450.8 million in the third quarter of 2012. Fourth quarter premium revenue benefited from the following increases in premium rates:

  • An increase to premium rates of approximately 1%, or approximately $200,000 per month, at the Florida health plan effective September 1, 2012;
  • An increase to premium rates of approximately 2%, or approximately $900,000 per month, at the Michigan health plan effective October 1, 2012;
  • An increase to premium rates of approximately 4%, or approximately $4.5 million per month, at the Texas health plan effective September 1, 2012; and
  • An increase to premium rates for the aged, blind or disabled, or ABD, population of approximately 2% at the California health plan retroactive to July 1, 2011. This increase translated to a blended rate increase of approximately 1% for the California health plan’s premium revenue overall. Due to the retroactive nature of this increase, the California health plan recorded approximately $12 million of incremental revenue (net of related costs) in the fourth quarter of 2012. Approximately $4 million of the retroactive revenue related to 2011 and $2 million to each of the four quarters of 2012. Revenue beginning October 1, 2012, increased about $2 million per quarter.

The Company had 29,000 fewer members at December 31, 2012, than at September 30, 2012. Most of the membership loss occurred at the Ohio health plan, which saw a decrease of 28,000 members due to the correction of Medicaid eligibility errors made by the state earlier in 2012.

Medical Care Costs

The Company’s consolidated medical care ratio decreased 450 basis points to 86.1% in the fourth quarter of 2012, from 90.6% in the third quarter of 2012. Increased premium rates for the ABD membership of the California and Texas health plans, favorable development of the Texas health plan’s medical claims liability recorded at September 30, 2012, and reduced inpatient utilization (particularly among the California health plan’s ABD population) contributed to this decline. Medical costs per member per month (PMPM) declined approximately 2%. Inpatient utilization decreased approximately 4%, contributing to a decrease of approximately 5% in inpatient facility costs PMPM.

Influenza-related illnesses do not appear to have significantly affected fourth quarter 2012 financial results, but may negatively impact financial results in the first quarter of 2013. The Company estimates that it incurred approximately $5 million more of medical costs for influenza-related illnesses in the fourth quarter than it would have incurred in a fourth quarter with more typical flu activity.

Individual Health Plan Analysis

Texas

The Texas health plan’s financial performance improved significantly in the fourth quarter compared with the third quarter of 2012. The medical care ratio of the Texas health plan was 77.8% in the fourth quarter of 2012, compared with 91.9% in the third quarter of 2012. The Company believes that the reduction to the Texas health plan’s medical care ratio was primarily the result of the following factors:

  • A blended rate increase of approximately 4%, or $4.5 million per month, effective September 1, 2012;
  • The results of medical cost containment initiatives implemented beginning in the second quarter of 2012; and
  • A reduction of approximately $30 million to the estimated amount of medical costs incurred prior to the fourth quarter of 2012. The change in that estimate was recorded in the fourth quarter of 2012.

If the Company were to retroactively adjust for the reduction to estimated medical costs incurred in the second and third quarters of 2012, it believes that the medical care ratio of the Texas health plan would have been approximately 89% in the fourth quarter of 2012, approximately 90% in the third quarter of 2012 and approximately 99% in the second quarter of 2012.

California

The medical care ratio at the California health plan decreased to 89.2% in the fourth quarter of 2012, from 96.1% in the third quarter of 2012, primarily due to a retroactive premium rate increase relating to its ABD membership. As noted above, the California health plan recorded approximately $12 million of incremental revenue (net of related costs) in the fourth quarter of 2012 related to a rate increase for its ABD membership that was retroactive to July 1, 2011. If the Company were to retroactively adjust for that rate increase, it estimates that the medical care ratio of the California health plan would have been approximately 94.5% in the fourth quarter of 2012, approximately 93.5% in the third quarter of 2012, approximately 90% in the second quarter of 2012, and approximately 88% in the first quarter of 2012.

The medical care ratio for the California health plan’s ABD membership was 86.1% in the fourth quarter of 2012, compared with 110.2% in the third quarter of 2012. If the Company were to retroactively adjust for that rate increase, it estimates that the medical care ratio of the California health plan’s ABD members would have been approximately 103% in both the fourth and third quarters of 2012. The Company has consistently stated its belief that, over time, it can improve quality of care and reduce costs among individuals (such as the California health plan’s ABD membership) who have only recently been transitioned from fee-for-service reimbursement to managed care.

Also during the fourth quarter, the Company exited an unprofitable service area in California, reducing enrollment by approximately 5,000 members.

General and Administrative Costs

General and administrative costs increased $25.9 million to $153.4 million in the fourth quarter of 2012, from $127.5 million in the third quarter of 2012, primarily due to approximately $14 million of expense recognized in the fourth quarter of 2012 related to the potential settlement of various claims made upon the Company by government agencies and health care providers. Approximately $11 million of these costs related to matters arising prior to 2012. Absent the $14 million identified above, the Company’s consolidated general and administrative expense ratio would have been approximately 8.8% for the fourth quarter of 2012.

Year Ended December 31, 2012, Compared with Year Ended December 31, 2011

Overview

Earnings decreased in 2012 compared with 2011 because lower margins in the Health Plans segment more than offset higher premium revenue. Net income for the year ended December 31, 2012, was $9.8 million, or $0.21 per diluted share, compared with net income of $20.8 million, or $0.45 per diluted share, for the year ended December 31, 2011. Results for the quarter and year ended December 31, 2011 were affected by an impairment charge of $64.6 million related to the Company’s Missouri health plan.

Lower net income in 2012 was in large part tied to growth in the Company’s ABD membership in California and Texas, where margins were considerably lower than for the Company as a whole. During 2012, both California and Texas transitioned large numbers of ABD members from fee-for-service reimbursement to managed care contracts. It has been the Company’s experience that members transitioning from fee-for-service reimbursement to managed care often bring with them pent up demand for medical services and that the realization of both improved medical outcomes and costs savings from the application of managed care practices takes time as both members and providers acquaint themselves to new ways of accessing and providing care.

The initial reduction to margins associated with the transition of members from fee-for-service reimbursement to managed care was exacerbated by premium rates that assumed unrealistic costs savings from managed care practices. Premium rate increases received later in 2012 at least partially addressed this issue.

Those rate increases, together with the improved health outcomes and the gradual reduction in medical costs resulting from the application of managed care practices, produced improved financial results in the fourth quarter of 2012. Nevertheless, the aggregate effect of the ABD membership transitioned in 2012 was a substantial reduction in margins. The Company believes, however, that in time the higher premium revenue associated with ABD members will allow it to earn acceptable returns on a total dollar basis even if percentage margins remain lower than those earned by serving Temporary Assistance for Needy Families, or TANF, members, for whom PMPM revenue is much lower.

Premium Revenue

Premium revenue grew 27% in the year ended December 31, 2012, compared with the year ended December 31, 2011, primarily due to a shift in member mix to populations generating higher premium revenue PMPM, benefit expansions, and an increase in membership. Medicare premium revenue was $468 million in the year ended December 31, 2012, compared with $388 million in the year ended December 31, 2011.

Growth in the Company’s ABD membership led to higher premium revenue PMPM in 2012. ABD membership, as a percent of total membership, has increased approximately 31% year over year. Premium revenue PMPM also increased in the year ended December 31, 2012, as a result of the inclusion of revenue from the pharmacy benefit for the Company’s Ohio health plan effective October 1, 2011, and as a result of the inclusion of revenue for the inpatient facility and pharmacy benefits across all of the Company’s Texas health plan membership effective March 1, 2012.

Medical Care Costs

Medical care costs increased in 2012 primarily due to the same shifts in member mix and the benefit expansions that led to increased premium revenue, particularly in California and Texas.

Individual Health Plan Analysis

Texas

Membership and premium revenue increased significantly at the Texas health plan in 2012 as a result of the transition of large numbers of ABD, TANF and Children’s Health Insurance Program, or CHIP, members from fee-for-service reimbursement into managed care effective March 1, 2012. Also on that date, inpatient facility and pharmacy benefits that had previously been reimbursed through fee for service for managed care members were transitioned into managed care contracts, further increasing premium revenue and related medical costs. As noted above, margins on newly transitioned ABD members were considerably less than those experienced by the Company overall. The medical care ratio for the Texas health plan’s ABD membership in total was approximately 97.8% for all of 2012. Nevertheless, the medical care ratio for the Texas health plan overall decreased to 93.7% for all of 2012 compared with 95.1% for 2011.

California

The medical care ratio at the California health plan increased significantly in 2012, to 91.1% from 86.9% in 2011. As noted above, margins on newly transitioned ABD members were considerably less than those experienced by the Company overall. The medical care ratio for the California health plan’s ABD membership was 96.5% for all of 2012.

Molina Medicaid Solutions Segment

Operating income for the Molina Medicaid Solutions segment improved $21.7 million for the year ended December 31, 2012, compared with 2011. This improvement was primarily the result of stabilization of the newest contracts in Idaho and Maine.

Cash Flow

Cash provided by operating activities was $344.3 million in 2012 compared with $225.4 million in 2011, an increase of $118.9 million. This increase was primarily due to increases in deferred revenue and medical claims and benefits payable at December 31, 2012.

At December 31, 2012, the Company had cash and investments of $1.2 billion, and the parent company had cash and investments of $46.9 million.

       

Reconciliation of Non-GAAP (1) to GAAP Financial Measures

 

EBITDA (2)

 

Three Months Ended
December 31,

Year Ended
December 31,

2012     20112012     2011
(Amounts in thousands)
Net income (loss) $ 25,643 $ (32,960 ) $ 9,790 $ 20,818
Add back:
Depreciation and amortization reported in the consolidated statements of cash flows 20,475 21,969 78,764 74,383
Interest expense 4,348 3,853 16,769 15,519
Provision for income taxes   24,503   13,004     9,275   43,836
EBITDA $ 74,969 $ 5,866   $ 114,598 $ 154,556
 

(1)

GAAP stands for U.S. generally accepted accounting principles.

(2)

EBITDA is not prepared in conformity with GAAP because it excludes depreciation and amortization, as well as interest expense, and the provision for income taxes. This non-GAAP financial measure should not be considered as an alternative to the GAAP measures of net income, operating income, operating margin, or cash provided by operating activities, nor should EBITDA be considered in isolation from these GAAP measures of operating performance. Management uses EBITDA as a supplemental metric in evaluating the Company’s financial performance, in evaluating financing and business development decisions, and in forecasting and analyzing future periods. For these 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 the Company’s industry.

 

Conference Call

The Company’s management will host a conference call and webcast to discuss its fourth quarter and year-end results at 5:00 p.m. Eastern time on Thursday, February 7, 2013. The number to call for the interactive teleconference is (212) 231-2933. A telephonic replay of the conference call will be available from 7:00 p.m. Eastern time on Thursday, February 7, 2013, through 6:00 p.m. on Friday, February 8, 2013, by dialing (800) 633-8284 and entering confirmation number 21643415. A live broadcast of Molina Healthcare’s conference call will be available on the Company’s website, www.molinahealthcare.com, or at www.earnings.com. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast.

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides quality and cost-effective Medicaid-related solutions to meet the health care needs of low-income families and individuals and to assist state agencies in their administration of the Medicaid program. The Company’s licensed health plans in California, Florida, Michigan, New Mexico, Ohio, Texas, Utah, Washington, and Wisconsin currently serve approximately 1.8 million members, and its subsidiary, Molina Medicaid Solutions, provides business processing and information technology administrative services to Medicaid agencies in Idaho, Louisiana, Maine, New Jersey, and West Virginia, and drug rebate administration services in Florida. More information about Molina Healthcare is available at www.molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This earnings release contains “forward-looking statements” regarding the Company’s plans, expectations, and anticipated future events.Actual results could differ materially due to numerous known and unknown risks and uncertainties, including, without limitation, risk factors related to the following:

  • uncertainties associated with the implementation of the Affordable Care Act, including the impact of the health insurance industry excise tax, the expansion of Medicaid eligibility in the states that participate to previously uninsured populations unfamiliar with managed care, the implementation of state insurance exchanges currently expected to become operational by October 1, 2013, the effect of various implementing regulations, and uncertainties regarding the impact of other federal or state health care and insurance reform measures, including the duals demonstration programs in California, Ohio, Michigan, and Texas;
  • the success of our medical cost containment initiatives in Texas, and other risks associated with the expansion of our Texas health plan’s service areas in 2012;
  • significant budget pressures on state governments and their potential inability to maintain current rates, to implement expected rate increases, or to maintain existing benefit packages or membership eligibility thresholds or criteria;
  • management of our medical costs, including seasonal flu patterns and rates of utilization that are consistent with our expectations and our incurred but not reported accruals;
  • the success of our efforts to retain existing government contracts and to obtain new government contracts in connection with state requests for proposals (RFPs) in both existing and new states, and our ability to increase our revenues consistent with our expectations;
  • accurate estimation of incurred but not reported medical costs across our health plans;
  • risks associated with the continued growth in new Medicaid and Medicare enrollees, and the development of actuarially sound rates with respect to such new enrollees, including duals;
  • retroactive adjustments to premium revenue or accounting estimates which require adjustment based upon subsequent developments, including Medicaid pharmaceutical rebates;
  • continuation and renewal of the government contracts of both our health plans and Molina Medicaid Solutions and the terms under which such contracts are renewed;
  • government audits and reviews, and any enrollment freeze or monitoring program that may result therefrom;
  • changes with respect to our provider contracts and the loss of providers;
  • the establishment of a federal or state medical cost expenditure floor as a percentage of the premiums we receive, and the interpretation and implementation of medical cost expenditure floors, administrative cost and profit ceilings, and profit sharing arrangements;
  • interpretation and implementation of at-risk premium rules regarding the achievement of certain quality measures;
  • approval by state regulators of dividends and distributions by our health plan subsidiaries;
  • changes in funding under our contracts as a result of regulatory changes, programmatic adjustments, or other reforms;
  • high dollar claims related to catastrophic illness;
  • the favorable resolution of litigation, arbitration, or administrative proceedings, including our pending litigation against the state of California related to rates paid to our California plan in earlier years that were not actuarially sound;
  • restrictions and covenants in our credit facility;
  • the relatively small number of states in which we operate health plans;
  • the availability of adequate financing to fund and capitalize our expansion and growth activities and to meet our liquidity needs, including the interest expense and other costs associated with such financing;
  • a state’s failure to renew its federal Medicaid waiver;
  • inadvertent unauthorized disclosure of protected health information;
  • changes generally affecting the managed care or Medicaid management information systems industries;
  • increases in government surcharges, taxes, and assessments;
  • changes in general economic conditions, including unemployment rates; and
  • increasing consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in the Company’s periodic reports and filings with the Securities and Exchange Commission.These reports can be accessed under the investor relations tab of the Company’s website or on the SEC’s website at www.sec.gov.Given these risks and uncertainties, we can give no assurances that the Company’s forward-looking statements will prove to be accurate, or that any other results or events projected or contemplated by the Company’s forward-looking statements will in fact occur, and we caution investors not to place undue reliance on these statements.All forward-looking statements in this release represent the Company’s judgment as of February 7, 2013, and we disclaim any obligation to update any forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

     

MOLINA HEALTHCARE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended
December 31,

Year Ended

December 31,

2012   20112012   2011
(Amounts in thousands, except net income (loss) per share)
Revenue:
Premium revenue $ 1,480,014 $ 1,211,013 $ 5,667,500 $ 4,448,818
Premium tax 38,038 43,956 158,991 154,589
Service revenue 55,359 49,157 187,710 160,447
Investment income 1,192 1,735 5,188 5,539
Rental income   3,966     547     9,374     547  
Total revenue   1,578,569     1,306,408     6,028,763     4,769,940  
Expenses:
Medical care costs 1,273,624 1,037,945 5,096,760 3,859,994
Cost of service revenue 43,097 38,967 141,208 143,987
General and administrative expenses 153,419 124,965 532,627 415,932
Premium tax expenses 38,038 43,956 158,991 154,589
Depreciation and amortization   16,258     12,103     63,704     50,690  
Total expenses 1,524,436 1,257,936 5,993,290 4,625,192
Impairment of goodwill and intangible assets       (64,575 )       (64,575 )
Operating income (loss)   54,133     (16,103 )   35,473     80,173  
Other expenses (income):
Interest expense 4,348 3,853 16,769 15,519
Other income   (361 )       (361 )    
Total other expenses (income)   3,987     3,853     16,408     15,519  
Income (loss) before income taxes 50,146 (19,956 ) 19,065 64,654
Provision for income taxes   24,503     13,004     9,275     43,836  
Net income (loss) $ 25,643   $ (32,960 ) $ 9,790   $ 20,818  
Net income (loss) per share:
Basic $ 0.55   $ (0.72 ) $ 0.21   $ 0.45  
Diluted $ 0.54   $ (0.72 ) $ 0.21   $ 0.45  
Weighted average shares outstanding:
Basic   46,617     45,702     46,380     45,756  
Diluted   47,143     45,702     46,999     46,425  
Operating Statistics:
Ratio of medical care costs paid directly to providers to premium revenue 83.9 % 83.6 % 87.6 % 84.5 %
Ratio of medical care costs not paid directly to providers to premium revenue   2.2 %   2.1 %   2.3 %   2.3 %
Medical care ratio (1)   86.1 %   85.7 %   89.9 %   86.8 %
Service revenue ratio (2)   77.9 %   79.3 %   75.2 %   89.7 %
General and administrative expense ratio (3) 9.7 % 9.6 % 8.8 % 8.7 %
Premium tax ratio (1) 2.6 % 3.6 % 2.8 % 3.5 %
Effective tax rate 48.9 % (65.2 )% 48.6 % 67.8 %
 

(1)

Medical care ratio represents medical care costs as a percentage of premium revenue, net of premium taxes; premium tax ratio represents premium taxes as a percentage of premium revenue, net of premium taxes.

(2)

Service revenue ratio represents cost of service revenue as a percentage of service revenue.

(3)

Computed as a percentage of total revenue.

   

MOLINA HEALTHCARE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

 
December 31,
2012     2011
(Amounts in thousands,
except per-share data)
ASSETS
Current assets:
Cash and cash equivalents $ 795,770 $ 493,827
Investments 342,845 336,916
Receivables 149,682 167,898
Income tax refundable 11,679
Deferred income taxes 32,443 18,327
Prepaid expenses and other current assets   28,386     19,435  
Total current assets 1,349,126 1,048,082
Property, equipment, and capitalized software, net 221,443 190,934
Deferred contract costs 58,313 54,582
Intangible assets, net 77,711 101,796
Goodwill and indefinite-lived intangible assets 151,088 153,954
Auction rate securities 13,419 16,134
Restricted investments 44,101 46,164
Receivable for ceded life and annuity contracts 23,401
Other assets   19,621     17,099  
$ 1,934,822   $ 1,652,146  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims and benefits payable $ 494,530 $ 402,476
Accounts payable and accrued liabilities 184,034 147,214
Deferred revenue 141,798 50,947
Income taxes payable 6,520
Current maturities of long-term debt   1,155     1,197  
Total current liabilities 828,037 601,834
Long-term debt 261,784 216,929
Deferred income taxes 37,900 33,127
Liability for ceded life and annuity contracts 23,401
Other long-term liabilities   24,787     21,782  
Total liabilities   1,152,508     897,073  
Stockholders’ equity:

Common stock, $0.001 par value; 80,000 shares authorized; outstanding: 46,762 shares at December 31, 2012 and 45,815 shares at December 31, 2011

47 46

Preferred stock, $0.001 par value; 20,000 shares authorized, no shares issued and outstanding

Additional paid-in capital 285,524 266,022
Accumulated other comprehensive loss (457 ) (1,405 )
Treasury stock, at cost; 111 shares at December 31, 2012 (3,000 )
Retained earnings   500,200     490,410  
Total stockholders’ equity   782,314     755,073  
$ 1,934,822   $ 1,652,146  
       

MOLINA HEALTHCARE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three Months Ended
December 31,

Year Ended

December 31,

2012     20112012     2011
(Amounts in thousands)
Operating activities:
Net income (loss) $ 25,643 $ (32,960 ) $ 9,790 $ 20,818

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 20,475 21,969 78,764 74,383
Deferred income taxes

(11,053

) 5,767 (9,887 ) 13,836
Stock-based compensation 4,570 4,329 20,018 17,052
Non-cash interest on convertible senior notes 1,528 1,417 5,942 5,512
Impairment of goodwill and intangible assets 64,575 64,575
Change in fair value of interest rate swap 37 1,307
Amortization of premium/discount on investments 1,580 1,942 6,746 7,242
Amortization of deferred financing costs 264 367 1,089 2,818
Gain on sale of subsidiary 643 (1,747 )
Gain on acquisition (1,676 ) (1,676 )
Loss on disposal of property and equipment 2,608 2,608
Tax deficiency from employee stock compensation (367 ) (67 ) (526 ) (714 )
Changes in operating assets and liabilities:
Receivables 7,227 (5,059 ) 18,216 352
Prepaid expenses and other current assets 1,616 5,127 (8,958 ) 3,308
Medical claims and benefits payable (41,933 ) 41,421 92,054 48,120
Accounts payable and accrued liabilities

28,888

2,532 19,858 2,778
Deferred revenue (1,503 ) (33,554 ) 90,851 (8,154 )
Income taxes   40,050     (5,898 )   18,172     (24,855 )
Net cash provided by operating activities   80,273     70,232     344,297     225,395  
Investing activities:
Purchases of equipment (25,597 ) (14,660 ) (78,145 ) (60,581 )
Purchases of investments (71,972 ) (87,759 ) (306,437 ) (345,968 )
Sales and maturities of investments 84,341 76,254 298,006 302,667
Net cash paid in business combinations (81,000 ) (84,253 )

Proceeds from sale of subsidiary, net of cash surrendered

9,162
(Increase) decrease in deferred contract costs 7,189 (10,065 ) (11,610 ) (42,830 )
(Increase) decrease in restricted investments 387 4,330 (2,647 ) (4,064 )
Change in other noncurrent assets and liabilities   2,862     (1,365 )   (1,913 )   (1,898 )
Net cash used in investing activities   (2,790 )   (114,265 )   (93,584 )   (236,927 )
Financing activities:
Amount borrowed under term loan 48,600 48,600
Amount borrowed under credit facility 60,000
Repayment of amount borrowed under credit facility (20,000 )
Treasury stock purchases (3,000 ) (3,000 ) (7,000 )
Credit facility fees paid (1,125 )
Principal payments on term loan (283 ) (1,129 )
Proceeds from employee stock plans 6,121 1,707 11,692 7,347
Excess tax benefits from employee stock compensation   (31 )   61     3,667     1,651  
Net cash provided by financing activities   2,807     50,368     51,230     49,473  
Net increase in cash and cash equivalents 80,290 6,335 301,943 37,941
Cash and cash equivalents at beginning of period   715,480     487,492     493,827     455,886  
Cash and cash equivalents at end of period $ 795,770   $ 493,827   $ 795,770   $ 493,827  
 

MOLINA HEALTHCARE, INC.

UNAUDITED DEPRECIATION AND AMORTIZATION DATA

Depreciation and amortization related to the Company’s Health Plans segment is all recorded in “Depreciation and amortization” in the consolidated statements of operations. Depreciation and amortization related to the Company’s Molina Medicaid Solutions segment is recorded within three different headings in the consolidated statements of operations as follows:

  • Amortization of purchased intangibles relating to customer relationships is reported as amortization within the heading “Depreciation and amortization;”
  • Amortization of purchased intangibles relating to contract backlog is recorded as a reduction of “Service revenue;” and
  • Depreciation is recorded within the heading “Cost of service revenue.”

The following table presents all depreciation and amortization recorded in the Company’s consolidated statements of operations, regardless of whether the item appears as depreciation and amortization, a reduction of revenue, or as cost of service revenue:

   
Three Months Ended December 31,
2012     2011
Amount    

% of Total
Revenue

Amount    

% of Total
Revenue

(Dollar amounts in thousands)

Depreciation and amortization of capitalized software

$ 11,677 0.7 % $ 8,005 0.6 %
Amortization of intangible assets   4,581 0.3     4,098 0.3  

Depreciation and amortization reported as such in the consolidated statements of operations

16,258 1.0 12,103 0.9

Amortization recorded as reduction of service revenue

729 1,545 0.1

Amortization of capitalized software recorded as cost of service revenue

  3,488 0.2     8,321 0.6  
Total $ 20,475 1.2 % $ 21,969 1.6 %
 
    Year Ended December 31,
2012     2011
Amount    

% of Total
Revenue

Amount    

% of Total
Revenue

(Dollar amounts in thousands)

Depreciation and amortization of capitalized software

$ 43,201 0.7 % $ 30,864 0.7 %
Amortization of intangible assets   20,503 0.3     19,826 0.4  

Depreciation and amortization reported as such in the consolidated statements of operations

63,704 1.0 50,690 1.1

Amortization recorded as reduction of service revenue

1,571 6,822 0.1

Amortization of capitalized software recorded as cost of service revenue

  13,489 0.2     16,871 0.4  
Total $ 78,764 1.2 % $ 74,383 1.6 %
   

MOLINA HEALTHCARE, INC.

UNAUDITED MEMBERSHIP DATA

 
As of December 31,
2012     2011     2010
Total Ending Membership by Health Plan:
California 336,000 355,000 344,000
Florida 73,000 69,000 61,000
Michigan 220,000 222,000 227,000
Missouri (1) 79,000 81,000
New Mexico 91,000 88,000 91,000
Ohio 244,000 248,000 245,000
Texas 282,000 155,000 94,000
Utah 87,000 84,000 79,000
Washington 418,000 355,000 355,000
Wisconsin 46,000 42,000 36,000
Total 1,797,000 1,697,000 1,613,000
 

Total Ending Membership by State for the Medicare Advantage Plans:

California 7,700 6,900 4,900
Florida 900 800 500
Michigan 9,700 8,200 6,300
New Mexico 900 800 600
Ohio 300 200
Texas 1,500 700 700
Utah 8,200 8,400 8,900
Washington 6,500 5,000 2,600
Total 35,700 31,000 24,500
 

Total Ending Membership by State for the Aged, Blind or Disabled Population:

California 44,700 31,500 13,900
Florida 10,300 10,400 10,000
Michigan 41,900 37,500 31,700
New Mexico 5,700 5,600 5,700
Ohio 28,200 29,100 28,200
Texas 95,900 63,700 19,000
Utah 9,000 8,500 8,000
Washington 30,000 4,800 4,000
Wisconsin 1,700 1,700 1,700
Total 267,400 192,800 122,200
 

(1)

The Company’s contract with the state of Missouri expired without renewal on June 30, 2012.

   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN

(Amounts in thousands except per-member-per-month amounts)

 

 

Three Months Ended December 31, 2012
Member

Months (1)

  Premium Revenue   Medical Care Costs  

MCR
Excluding
Premium
Tax
Expense (5)

Total   PMPMTotal   PMPM
California 1,021 $ 179,078 $ 175.44 $ 159,800 $ 156.55 89.2 %
Florida 218 57,892 266.06 48,965 225.04 84.6
Michigan 656 166,453 253.54 151,230 230.35 90.9
Missouri (2)
New Mexico 268 83,115 309.59 71,440 266.10 86.0
Ohio 752 267,918 356.60 235,072 312.88 87.7
Texas 856 341,244 398.69 265,391 310.07 77.8
Utah 259 72,859 281.46 61,741 238.51 84.7
Washington 1,248 290,246 232.56 253,335 202.99 87.3
Wisconsin (3) 134 18,469 138.66 13,107 98.41 71.0
Other (4)   2,740   13,543
5,412 $ 1,480,014 $ 273.54 $ 1,273,624 $ 235.40 86.1 %
 
Three Months Ended December 31, 2011

 

Member

Months (1)

Premium RevenueMedical Care Costs

MCR
Excluding
Premium
Tax
Expense (5)

TotalPMPMTotalPMPM
California 1,057 $ 153,653 $ 145.39 $ 133,575 $ 126.39 86.9 %
Florida 200 53,377 266.19 45,486 226.84 85.2
Michigan 658 156,641 238.12 137,827 209.52 88.0
Missouri (2) 237 59,596 251.32 47,697 201.14 80.0
New Mexico 266 96,696 363.71 71,679 269.61 74.1
Ohio 748 272,019 363.45 233,733 312.30 85.9
Texas 462 116,407 252.19 110,667 239.76 95.1
Utah 249 72,085 289.39 56,908 228.46 78.9
Washington 1,067 210,559 197.30 174,744 163.74 83.0
Wisconsin 124 18,070 145.93 16,896 136.45 93.5
Other (4)   1,910   8,733
5,068 $ 1,211,013 $ 238.94 $ 1,037,945 $ 204.79 85.7 %
 

(1)

A member month is defined as the aggregate of each month’s ending membership for the period presented.

(2)

The Company’s contract with the state of Missouri expired without renewal on June 30, 2012.  The Missouri health plan’s claims run-out activity subsequent to June 30, 2012, is reported in “Other.”

(3)

Absent amortization of $1.5 million premium deficiency reserve in the fourth quarter 2012, the Wisconsin health plan’s MCR would have been approximately 79.1%.

(4)

“Other” medical care costs also include medically related administrative costs at the parent company.

(5)

The MCR Excluding Premium Tax Expense represents medical costs as a percentage of premium revenue, where premium revenue is reduced by premium tax expense.

   

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED FINANCIAL DATA BY HEALTH PLAN

(Amounts in thousands except per-member-per-month amounts)

 
Year Ended December 31, 2012
Member

Months (1)

  Premium Revenue   Medical Care Costs  

MCR
Excluding
Premium
Tax
Expense (4)

Total   PMPMTotal   PMPM
California 4,177 $ 665,792 $ 159.40 $ 606,494 $ 145.20 91.1 %
Florida 850 228,832 269.36 195,226 229.80 85.3
Michigan 2,639 646,551 244.97 570,636 216.20 88.3
Missouri (2) 483 113,818 235.63 113,101 234.15 99.4
New Mexico 1,069 330,562 309.22 280,108 262.03 84.7
Ohio 3,065 1,095,137 357.36 970,504 316.69 88.6
Texas 3,245 1,233,621 380.18 1,155,433 356.08 93.7
Utah 1,026 298,392 290.78 245,671 239.41 82.3
Washington 4,600 974,712 211.91 845,733 183.87 86.8
Wisconsin 508 70,678 139.25 67,968 133.91 96.2
Other (3)   9,405   45,886
21,662 $ 5,667,500 $ 261.65 $ 5,096,760 $ 235.30 89.9 %
 
Year Ended December 31, 2011
Member

Months (1)

Premium RevenueMedical Care Costs

MCR
Excluding
Premium
Tax
Expense (4)

TotalPMPMTotalPMPM
California 4,190 $ 567,677 $ 135.48 $ 493,419 $ 117.75 86.9 %
Florida 788 203,904 258.65 187,358 237.66 91.9
Michigan 2,660 623,394 234.35 537,779 202.16 86.3
Missouri (2) 959 229,584 239.38 195,832 204.19 85.3
New Mexico 1,074 336,447 313.29 277,338 258.25 82.4
Ohio 2,966 912,219 307.55 766,949 258.57 84.1
Texas 1,616 402,178 248.99 382,390 236.74 95.1
Utah 972 287,290 295.51 224,513 230.94 78.1
Washington 4,171 808,458 193.85 690,513 165.57 85.4
Wisconsin 488 69,552 142.47 64,346 131.81 92.5
Other (3)   8,115   39,557
19,884 $ 4,448,818 $ 223.74 $ 3,859,994 $ 194.13 86.8 %
 

(1)

A member month is defined as the aggregate of each month’s ending membership for the period presented.

(2)

The Company’s contract with the state of Missouri expired without renewal on June 30, 2012. The Missouri health plan’s claims run-out activity subsequent to June 30, 2012, is reported in “Other.”

(3)

“Other” medical care costs also include medically related administrative costs at the parent company.

(4)

The MCR Excluding Premium Tax Expense represents medical costs as a percentage of premium revenue, where premium revenue is reduced by premium tax expense.

     

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED FINANCIAL DATA

(Amounts 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 December 31,
2012   2011
Amount   PMPM   % of

Total

Amount   PMPM% of

Total

Fee for service $ 855,490 $ 158.12 67.2 % $ 713,879 $ 140.85 68.8 %
Capitation 139,444 25.77 10.9 134,880 26.61 13.0
Pharmacy 229,826 42.48 18.1 149,370 29.47 14.4
Other   48,864   9.03 3.8     39,816   7.86   3.8  
Total $ 1,273,624 $ 235.40 100.0 % $ 1,037,945 $ 204.79   100.0 %
 
Year Ended December 31,
20122011
AmountPMPM% of

Total

AmountPMPM% of

Total

Fee for service $ 3,521,960 $ 162.60 69.1 % $ 2,764,309 $ 139.02 71.6 %
Capitation 557,087 25.72 10.9 518,835 26.09 13.4
Pharmacy 835,830 38.59 16.4 418,007 21.02 10.8
Other   181,883   8.39 3.6     158,843   8.00   4.2  
Total $ 5,096,760 $ 235.30 100.0 % $ 3,859,994 $ 194.13   100.0 %
 
The following table provides the details of the Company’s medical claims and benefits payable as of the dates indicated:
 

 

Dec. 31,
2012

Sept. 30,
2012

Dec. 31,
2011

Fee-for-service claims incurred but not paid (IBNP)

$

377,614

$

414,725

$

301,020

Capitation payable

49,066

55,314

53,532

Pharmacy

38,992

42,681

26,178

Other  

28,858

 

23,743

 

21,746

 

 

$

494,530

$

536,463

$

402,476

 
     

MOLINA HEALTHCARE, INC.
UNAUDITED CHANGE IN MEDICAL CLAIMS AND BENEFITS PAYABLE

 

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

 

Three Months Ended
December 31,

Year Ended
December 31,

2012   20112012   2011
(Dollars in thousands, except per-member amounts)
Balances at beginning of period $ 536,463 $ 361,055 $ 402,476 $ 354,356
Components of medical care costs related to:
Current period 1,350,043 1,069,228 5,136,055 3,911,803
Prior period   (76,419 )   (31,283 )   (39,295 )   (51,809 )
Total medical care costs   1,273,624     1,037,945     5,096,760     3,859,994  
Payments for medical care costs related to:
Current period

906,108

708,538

4,649,363

3,516,994
Prior period  

409,449

 

  287,986    

355,343

 

  294,880  
Total paid   1,315,557     996,524     5,004,706     3,811,874  
Balances at end of period $ 494,530   $ 402,476   $ 494,530   $ 402,476  
Benefit from prior period as a percentage of:
Balance at beginning of period 14.2 % 8.7 % 9.8 % 14.6 %
Premium revenue 5.2 % 2.6 % 0.7 % 1.2 %
Total medical care costs 6.0 % 3.0 % 0.8 % 1.3 %
 
Claims Data:
Days in claims payable, fee for service 40 40 40 40
Number of members at end of year 1,797,000 1,697,000 1,797,000 1,697,000
Number of claims in inventory at end of year 122,700 111,100 122,700 111,100

Billed charges of claims in inventory at end of year

$ 255,200 $ 207,600 $ 255,200 $ 207,600
Claims in inventory per member at end of year 0.07 0.07 0.07 0.07
Billed charges of claims in inventory per member at end of year $ 142.01 $ 122.33 $ 142.01 $ 122.33
Number of claims received during the year 5,378,400 4,342,800 20,842,400 17,207,500
Billed charges of claims received during the year $ 5,089,600 $ 3,732,500 $ 19,429,300 $ 14,306,500
 

MOLINA HEALTHCARE, INC.

GUIDANCE 2013 DETAILS

The Company provides the following general commentary regarding its 2013 earnings guidance:

Due to the significant financial impact that items relating to prior periods have had on its fourth quarter 2012 results, the Company believes that fourth quarter results alone are not an appropriate guide to anticipated 2013 full year results. The Company believes, for example, that its consolidated medical care ratio for the second half of 2012 (approximately 88%), is more indicative of 2013 performance than its medical care ratio for just the fourth quarter of 2012.

The following is the Company’s guidance for fiscal year 2013 (all amounts are approximate):

Total Revenue                 $7.0B
Medical Care Costs $5.9B
Medical Care Ratio88%
Service Costs $170M
G&A Expense $600M
G&A Ratio8.6%
Premium Tax Expense $160M
Income Before Tax$128M

Income Tax

$54M
Effective Tax Rate 42.0%
Net Income$74M
Weighted Average Diluted Shares Outstanding 47.7M
Diluted EPS$1.55
EBITDA$245M

Contacts:

Molina Healthcare, Inc.
Juan Jose Orellana, 562-435-3666, ext. 111143
Investor Relations

Source: Molina Healthcare, Inc.

© 2014 Canjex Publishing Ltd. All rights reserved.